1) Managerial accounting has its roots in the industrial age of manufacturing.
2) The benefits of adopting ABC/ABM are higher for companies in more competitive
markets.
3) Benchmarking is the comparison of year-to-year results of the company.
4) The production equivalent unit report summarizes all costs.
5) Cost center performance reports typically focus on the static budget variance.
6) If production remains within the relevant range for the period, fixed costs are
expected to remain fixed.
7) IFRS stands for “important financial reporting standards.”
8) The cost per equivalent unit for direct materials will always be equal to the cost per
equivalent unit for conversion costs.
9) Product differentiation allows companies to become more of a price-setter, and less
of a price-taker.
10) To assign costs to the units in ending WIP inventory, the company multiplies the
cost per equivalent unit by the number of equivalent units for direct materials and
conversion costs separately, and then sums the two amounts.
11) The direct materials price variance is (actual price-standard price) times actual
quantity purchased.
12) At a service company, the indirect costs of serving the client include manufacturing
overhead.
13) The key to allocating indirect manufacturing costs to jobs is to identify an
appropriate allocation base.
14) The net present value method does not incorporate the time value of money.
15) Scranton Printer Company would like to estimate its total manufacturing costs
using regression analysis but is unsure whether machine hours or units produced would
be a better predictor of total manufacturing costs.
Output from regression analysis using machine hours as the volume (cost driver)
follows. Note: the results are excerpts so not all of the regression analysis results are
presented.
Output from a regression analysis using units produced as the volume (cost driver)
follows. Again, the results are excerpts so not all of the regression analysis results are
presented.
Required:
a.What is the cost equation if machine hours is used as the volume (cost driver)?
b.Predict total manufacturing costs using machine hours as the volume (cost driver) if
Scranton Paper Company uses 18,000 hours.
c.What is the cost equation if units produced is used as the volume (cost driver)?
d.Predict total manufacturing costs using units produced as the volume (cost driver) if
Scranton Paper Company produces 65,000 units.
e.Which volume (cost driver) is a better predictor of total manufacturing costs? Why?
16) A product line at PepsiCo (such as the Pepsi Max product line) is most likely treated
as a(n)
A) cost center
B) profit center
C) investment center
D) revenue center
17) Rubino Corporation desires a December 31 ending inventory of 900 units.
Budgeted sales for December are 2,650 units. The November 30 inventory was 850
units. What are budgeted purchases in units?
A) 3,550
B) 2,600
C) 2,700
D) 4,400
18) Washington Bottling Company provides the following information about its single
product.
What is the breakeven point in units?
A) 329,965
B) 8,565
C) 56,100
D) 50,376
19) Which of the following positions report to the audit committee of the Board of
Directors?
A) The CFO and internal audit department
B) The internal audit department and the independent CPA firm
C) The CFO and the independent CPA firm
D) The treasurer and controller
20) The total amount of water consumed by an organization is an example of physical
information that may be collected by an EMA.
21) Blue Technologies manufactures and sells DVD players. Great Products Company
has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue
Technologies’ normal selling price is $30 per DVD player. The total manufacturing cost
per DVD player is $18 and consists of variable costs of $14 per DVD player and fixed
overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on
regular sales.)
Should Blue Technologies accept or reject the special sales order?
A) Accept, because operating income would increase $360,000
B) Reject, because operating income would decrease $80,000
C) Accept, because operating income would increase $80,000
D) Reject, because operating income would decrease $160,000
22) What will happen to the internal rate of return (IRR) of a project if the discount rate
is decreased from 9% to 7%?
A) IRR will always increase
B) The discount rate change will not affect IRR
C) IRR will always decrease
D) We cannot determine the direction of the effect on IRR from the information
provided
23) Which of the following can be used in conjunction with activity-based costing?
A) Job costing
B) Process costing
C) Both A and B
D) Neither A nor B
24) Perry Moldings has the following estimated costs for the upcoming year:
The company estimates that 1,200 direct labor hours will be worked in the upcoming
year, while 2,000 machine hours will be used during the year. The predetermined
manufacturing overhead rate per direct labor hour is closest to
A) $162
B) $55
C) $50
D) $89
25) The contribution margin ratio explains the percentage of each sales dollar that
A) contributes towards variable costs
B) contributes towards sales revenue
C) contributes towards period expenses
D) contributes towards fixed costs and generating a profit
26) Use the following information to do a horizontal analysis of Marcus Corporation’s
income statement for the current year and prior year:
What is the dollar change in gross profit?
A) $22,000
B) $(4,840)
C) $179,400
D) $25,800
27) The cost of wages of workers needed to comply with new EPA standards is included
in the Payroll account for all employees. This scenario is an example of which type of
EMA implementation challenge?
A) Historical orientation of accounting
B) Communication issue
C) Newness of EMA
D) Aggregated accounting information
28) When using the income statement approach to finding breakeven, which of the
following is TRUE?
A) (variable expenses number of units) – fixed expenses = operating income
B) sales revenue – variable expenses – fixed expenses = operating income
C) fixed expenses + variable expenses + sales revenue = operating income
D) fixed expenses + variable expenses – sales revenue = operating income
29) 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 are the total purchases budgeted for May?
A) $8,640
B) $7,680
C) $6,960
D) $7,440
30) On a production cost report, where would current costs added during the period
appear?
A) After any beginning WIP inventory cost
B) As part of unit output for the period
C) After any ending WIP inventory cost
D) As part of beginning WIP inventory cost
31) Which of the following is an example of a cost item that should be classified as an
internal failure cost?
A) Inspection costs
B) Employee training costs
C) Rework costs
D) Product return costs
32) Which of the following is a weakness of the internal rate of return (IRR)?
A) IRR assumes that the cash inflows from the project are immediately reinvested at the
minimum required rate of return
B) IRR ignores the time value of money
C) IRR assumes that the cash inflows from the project are immediately reinvested at the
internal rate of return
D) IRR is not a percentage rate, but is expressed in dollars
33) Razzle Baking Company gathered the following actual results for the current
month:
Budgeted production and standard costs were:
What is the direct materials price variance?
A) $2,500 unfavorable
B) $2,500 favorable
C) $2,750 favorable
D) $2,750 unfavorable
34) Hummingbird Manufacturing manufactures small parts and uses an activity-based
costing system.
The following parts were produced in October with the following information:
Total manufacturing costs for part A is
A) $7,450
B) $5,200
C) $10,450
D) $8,200
35) The Top Hat Division of Blandon’s Fine Menswear had the following results last
year (in thousands).
Management’s target rate of return is 12% and the weighted average cost of capital is
9%.
What is the Top Hat Division’s capital turnover?
A) 6.7
B) 4.4
C) 1.5
D) 18.0
36) Brittany Furniture manufactures two products: Couches and Beds. The following
data are available:
The company can manufacture two couches per machine hour and one bed per machine
hour. The company’s production capacity is 900 machine hours per month.
What is the contribution margin per machine hour for beds?
A) $325
B) $1,075
C) $650
D) $975
37) The ________ budget is part of the financial budgets.
A) cash
B) sales
C) direct materials
D) operating expense
38) Wallace Industrial sells two products, large forklifts and small forklifts. A large
forklift sells for $50,000 per unit with variable costs of $26,000 per unit. Small forklifts
sell for $30,000 per unit with variable costs of $12,000 per unit. Total fixed costs for the
company are $1,600,000. Wallace Industrial typically sells one large forklifts for every
two smalls. What is the breakeven point in total units?
A) 80 units
B) 400 units
C) 30 units
D) 27 units
39) Jackie’s Snacks sells fudge, caramels, and popcorn. It sold 12,000 units last year.
Popcorn outsold fudge by a ratio of 2 to 1 . Sales of caramels were the same as sales of
popcorn. Fixed costs for Jackie’s Snacks are $14,000. Additional information follows:
The sales mix percentage of caramel corn based upon units is
A) 20%
B) 40%
C) 75%
D) 44%
40) The balance sheet for Blineberry Corporation follows:
Operating income for the period was $18,000, while cash dividends paid were $17,400.
The overall total of the uses of cash for Blineberry Corporation for the year was
A) $28,500
B) $48,050
C) $8,200
D) $39,850
41) Manufacturing overhead has an underallocated balance of $6,200; raw materials
inventory balance is $50,000; work in process inventory is $30,000; finished goods
inventory is $20,000; and cost of goods sold is $100,000.
Which of these accounts would have an ending credit balance?
A) Raw materials inventory
B) Finished goods inventory
C) Work in process inventory
D) None of the above