1) When using the high-low method, the “low” point should be chosen as the data point
with the lowest volume (not the lowest cost).
2) Cost distortion occurs when some products are overcosted while other products are
undercosted by the cost allocation system.
3) The profitability index equals the present value of net cash inflows from the
investment divided by the cost of the investment.
4) The total cost of a product equals the total fixed costs plus the total variable costs.
5) Machine set-up would be considered a batch-level cost.
6) Outsourcing decisions are best made by comparing the total manufacturing costs,
both fixed and variable, allocated to the product versus the total unit cost charged by the
outsourcing company.
7) One key to analyzing short-term business decisions is to focus on relevant revenues,
costs and profits.
8) A flexible budget is a budget prepared for multiple volume levels.
9) Relevant information is future data that do not differ among alternatives.
10) Price variances for direct materials shows how much of the total variance is due to
paying higher or lower prices than expected for the direct materials purchased.
11) Managerial accountants only need a solid understanding of managerial accounting,
and not financial accounting.
12) Shamrock Manufacturing budgeted fixed overhead costs of $2.75 per unit at an
anticipated production level of 1,350 units. In July Shamrock incurred actual fixed
overhead costs of $4,400 and actually produced 1,300 units.
What is Shamrock’s fixed overhead volume variance for July?
A) $687.50 favorable
B) $687.50 unfavorable
C) $137.50 favorable
D) $137.50 unfavorable
13) All of the following are considered when preparing the cash budget except
A) payments for inventory
B) cash receipts from customers
C) depreciation expense
D) cash payments to suppliers
14) A performance report for a ________ compares only actual revenues and budgeted
revenues.
A) revenue center
B) cost center
C) investment center
D) All of the above
15) Sander Enterprises prepared the following sales budget:
The expected gross profit rate is 40% and the inventory at the end of February was
$10,000. Desired inventory levels at the end of the month are 20% of the next month’s
cost of goods sold.
What is the budgeted cost of goods sold for May?
A) $7,200
B) $4,800
C) $2,400
D) $8,400
16) A joint production process at Sunny Brooks Dairy results in two products, cherry
jelly and cherry jam. The following cost and activity data relate to these two products:
Cherry jelly can be sold as-is (at the split-off point) for $2.50 per unit, or it can be
processed further into a specialty cherry smoothie and then sold for $5.00 per unit. If
cherry jelly is processed further into the specialty cherry smoothie, what would be the
overall effect on operating income?
A) $2,800 net decrease in operating income
B) $5,000 net decrease in operating income
C) $5,000 net increase in operating income
D) $2,800 net increase in operating income
17) Which of the following is an example of the IMA’s confidentiality standard?
A) Provide decision support that is accurate, clear, concise and timely
B) Keep information confidential, except when disclosure is legally required
C) Communicate information fairly and objectively
D) Abstain from engaging in or supporting any activity that might discredit the
profession
18) Country Furniture Company manufactures furniture at its Akron, Ohio, factory.
Some of its costs from the past year include:
Manufacturing overhead costs for Country Furniture Company totaled
A) $130,000
B) $260,000
C) $236,000
D) $330,500
19) An equation of a line for total costs is
A) y = vx – f
B) y = fx + v
C) y = f
D) none of the above
20) Jerry Enterprises is considering whether to discontinue a division that generates a
total contribution margin of $65,000 per year. Fixed manufacturing overhead allocated
to this division is $50,000, of which 18,000 is unavoidable. If Jerry Enterprises were to
eliminate this division, the effect on the company’s operating income would be a(n):
A) increase in total operating income of $33,000
B) decrease in total operating income of $33,000
C) increase in total operating income of $47,000
D) decrease in total operating income of $47,000
21) A company’s manager would consider which of the following in deciding whether
to discontinue its electronics product line?
A) The costs it could save by discontinuing the product line
B) The revenues it would lose from discontinuing the product line
C) How discontinuing the electronics product line would affect sales of its other
products (like CDs)
D) All of the above
22) Company growth rates (compared to industry growth rates) would be an example of
measuring which perspective?
A) Financial
B) Customer
C) Internal business
D) Learning and growth
23) Hummingbird Manufacturing manufactures small parts and uses an activity-based
costing system.
The following parts were produced in October with the following information:
Total unit costs for Part A is closest to (round to two decimal points)
A) $4.64
B) $12.14
C) $7.63
D) $4.71
24) Jim Bean Company has three product lines: D, E, and F. The following information
is available:
DEF
Sales revenue$80,000$42,000$20,000
Variable expenses$40,000$21,000$12,000
Contribution margin$40,000$21,000$8,000
Fixed expenses$12,000$15,000$17,000
Operating income (loss)$28,000$46,000$(9,000)
Jim Bean Company is thinking of discontinuing product line F because it is reporting an
operating loss. All fixed costs are unavoidable. Assume Jim Bean Company is able to
increase the sale price of product F to $32,000 with no change in volume of units sold
and no change in variable costs or fixed costs. What affect will this have on operating
income?
A) Increase $37,000
B) Increase $12,000
C) Decrease $12,000
D) Decrease $20,000
25) In comparing companies of different sizes, which of the following is most helpful?
A) Ratio analysis
B) Using common-sized statements
C) Neither ratio analysis or common-sized statements
D) Both ratio analysis and using common-sized statements
26) What standard(s) do(es) direct materials and direct labor have when calculating
standard costs?
A) Quantity/Efficiency standard
B) Price standard
C) Flexible standard
D) Both A and B
27) You win the lottery and must decide how to take the payout. Use an 8% discount
rate for all parts of this question.
Required:
a.What is the present value of $12,000 a year received at the end of each of the next six
years?
b.What is the present value of taking a $60,000 lump sum now?
c.What is the present value of a $90,000 lump sum taken in 7 years?
28) Which type of analysis would reveal a sales increase of $5000 from Year 1 to Year
2?
A) Horizontal
B) Capital
C) Profitability
D) Vertical
29) Which of the following is not an advantage of an ERP system?
A) Streamlining operations
B) Allowing faster response to changes
C) Eliminating separate software systems across the company
D) Lower initial cost than traditional systems
30) ________ laws , or “take-back” laws, create future costs associated with each job
and require manufacturers of electronic devices to take back their products at the end of
their useful lives.
A) Extended Producer Responsibility (EPR)
B) Manufacturing Overhead (MOH)
C) Work in Process (WIP)
D) None of the above
31) Gomez Corporation is considering two alternative investment proposals with the
following data:
What is the accounting rate of return for Proposal Y?
A) 5.24%
B) 4.17%
C) 29.17%
D) 16.67%
32) June sales were $6,000 while projected sales for July and August were $8,500 and
$7,000, respectively. All credit sales are collected in the month following the sale. Sales
are 75% credit and 25% cash. What are the expected collections for July?
A) $8,375
B) $7,875
C) $7,375
D) $6,625
33) Fabian Fabrication machines heavy-duty brake rotors that are used on commercial
airliners. Fabian’s management developed the following standard costs:
Actual activity for October:
What is the variable manufacturing overhead rate variance for October?
A) $17,550 unfavorable
B) $8,550 unfavorable
C) $17,550 favorable
D) $8,550 favorable
34) Cave Hardware’s forecasted sales for April; May; June; and July are $200,000;
$230,000; $190,000; and $240,000; respectively. Sales are 65% cash and 35% credit
with all accounts receivables collected in the month following the sale. Cost of goods
sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the
following month’s cost of goods sold. All inventory purchases are paid 22% in the
month of purchase and 78% in the following month.
What is the balance of accounts payable on the June 30 budgeted balance sheet?
A) $32,175
B) $108,225
C) $146,250
D) $114,075
35) Lucas Family Orange Groves processes a variety of fresh juices. The company has
the following expenses for July:
What is the total cost for the customer service category of the value chain?
A) $2,000
B) $35,000
C) $80,000
D) $ 9,000
36) For each of the following transactions, indicate the section in which it will be
included. Use O for the operating section, I for the investing activities section, F for the
financing section, S for a separate schedule of noncash investing and financing
activities, and N for items not disclosed on the statement of cash flows.
________a.Paid cash dividends
________b.Paid interest on a short-term note payable
________c.Sold treasury stock for cash
________d.Converted debt to common stock
________e.Paid accounts payable
________f.Paid salaries
________g.Received cash dividends
________h.Sold merchandise for cash
________i.Acquired a patent by issuing common stock
________j.Purchase of land using preferred stock
________k.Received stock dividends
37) Job 590 has an ending balance of $28,500. It has been charged manufacturing
overhead costs of $7,000. The rate is 70% of direct labor. What was the amount of
direct materials charged to the job?
A) $21,500
B) $11,500
C) $26,400
D) $19,950
38) Management by exception would dictate that the manager investigate which of the
following variances?
A) Variances which are less than a certain dollar amount or percentage
B) Variances which are greater than a certain dollar amount or percentage
C) All unfavorable variances
D) All favorable and unfavorable variances
39) Budgets are a way for managers to communicate their
A) control
B) decision-making
C) hiring practices
D) plans
40) The cost of fabric to produce reusable grocery bags would be categorized as what
type of cost by an environmental management accounting system (EMA)?
A) Materials cost of product outputs
B) Materials cost of non-product outputs
C) Waste and emissions cost
D) Prevention cost
41) Harvey Automobiles uses a standard part in the manufacture of several of its trucks.
The cost of producing 40,000 parts is $120,000, which includes fixed costs of $60,000
and variable costs of $60,000. By outsourcing the part, the company can avoid 30% of
the fixed costs.
If Harvey Automobiles buys the part, what is the most Harvey Automobiles can spend
per unit so that operating income equals the operating income from making the part?
A) $1.30
B) $1.95
C) $4.05
D) $2.33
42) Back Porch Company manufactures lawn chairs using an activity-based costing
system to allocate all manufacturing conversion costs. The following information is
provided for the month of June:
Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is
$10.00.
What is the total cost of packaging per lawn chair?
A) $13.00
B) $11.20
C) $ 8.00
D) $ 3.00
43) Fixed costs that are allocated among all departments are known as
A) direct fixed costs
B) relevant fixed costs
C) general fixed costs
D) common fixed costs
44) If a company uses the indirect method to prepare the statement of cash flows, how
will a loss from the sale of equipment be presented on the statement?
A) A loss from the sale of equipment will be added to net income in the operating
activities section
B) A loss from the sale of equipment will be an addition in the financing activities
section
C) A loss from the sale of equipment will be deducted from net income in the operating
activities section
D) A loss from the sale of equipment will be an addition in the investing activities
section
45) All About Animals has two product lines: Cat food and Dog food. Contribution
margin income statement data for the most recent year follow:
If $12,000 of fixed costs will be eliminated by discontinuing the Dog food line, how
will operating income be affected?
A) Increase $123,000
B) Increase $45,000
C) Decrease $33,000
D) Decrease $57,000
46) Sandy’s Sauces, which produces stir-fry sauces, is developing direct material
standards. Each bottle of sauce requires 0.70 kilograms of base. The allowance for
waste is 0.05 kilograms per bottle, while the allowance for rejects is 0.09 kilograms per
bottle. What is the standard quantity of base per bottle?
A) 0.70 kilograms
B) 0.79 kilograms
C) 0.75 kilograms
D) 0.84 kilograms
47) There are several reasons an organization might pursue sustainable initiatives. At
one organization, employees approached management about implementing green
practices throughout the business. This situation is an example of which type of reason
to implement sustainable initiatives?
A) Cost reduction
B) Regulatory compliance
C) Stakeholder influence
D) Competitive strategy
48) Challenge Tennis & Recreation’s operating activities for the year are listed below.
What is the cost of goods available for sale?
A) $164,000
B) $201,000
C) $97,000
D) $174,000
49) Perfect Pigments has 3,500 gallons of paint in WIP inventory, with 80% of
materials already added. The paint is 50% through the process. Assuming all conversion
costs are added evenly throughout the process, what are the equivalent units for
conversion costs?
A) 0
B) 1,050
C) 2,800
D) 1,750
50) Serena Corporation uses estimated manufacturing overhead costs of $880,000 and
estimated direct labor hours of 200,000 in establishing manufacturing overhead rates.
Allocated manufacturing overhead was $1,012,000 and actual manufacturing overhead
was $970,000. What were the number of actual direct hours worked?
A) 230,000
B) 200,000
C) 181,443
D) 208,660