1) Rent on a factory building would likely be classified as a fixed cost.
2) The total cost of a cost object can only include the direct costs that are directly traced
to that cost object.
3) Budgets are the quantitative expression of management’s plans.
4) For a product, revenue at market price plus desired operating profit equals target total
cost.
5) One condition that favors using plantwide overhead rates, rather than departmental
overhead rates, is that different jobs or products use the departments to a different
extent.
6) The financial statements of a merchandiser are more complex than those of a
manufacturer.
7) Overallocated overhead costs occur when the overhead costs allocated are greater
than the amount actually incurred.
8) Total variable costs change in direct proportion to changes in volume.
9) A service firm’s costs are comprised of direct materials, direct labor and
manufacturing overhead.
10) Fixed costs affect product mix considerations.
11) Variable costs are $17 per unit and the sales price is $20 per unit. If volume would
triple as a result of decreasing the sales price to $16 per unit, the business should
strongly consider decreasing the sales price to $16 per unit.
12) The weighted-average method of process costing is simpler than the FIFO method.
13) All of the following would be considered in evaluating product or sales mix
allocations, except
A) deciding which product offers the lowest contribution margin per unit
B) deciding whether fixed costs would change as a result of the product sales mix
C) deciding upon any and all constraints associated with the product/sale mix
D) deciding which products will contribute the highest contribution margin per unit
14) In making the decision whether to sell a product as is or process the product further,
the expected income from selling the product as is may be defined as which of the
following?
A) The opportunity cost of processing the product further
B) A sunk cost of processing the product further
C) The opportunity cost of selling the product as is
D) A limiting factor in processing the product further
15) Cartman Enterprises management has budgeted the following amounts for its next
fiscal year:
If Cartman Enterprises can reduce fixed expenses by $16,000, how will breakeven sales
in units be affected?
A) Increase by 400 units
B) Increase by 1,600 units
C) Decrease by 400 units
D) Decrease by 1,600 units
16) The Stemple Corporation data for the current year:
What would a horizontal analysis report with respect to selling/general expenses?
A) A 13.64% increase
B) Selling/general expenses as 7.39% of net sales revenue
C) A current ratio of 1.24
D) A 12% decrease
17) In addition to cost of goods manufactured, which of the following is needed to
compute the cost of goods sold for a manufacturer?
A) Beginning work in process inventory less ending work in process inventory
B) Ending work in process inventory less beginning work in process inventory
C) Ending finished goods less beginning finished goods
D) Beginning finished goods less ending finished goods
18) According to SOX, a company’s financial statements must be certified by the
company’s
A) CEO
B) CFO
C) Controller
D) CFO and CEO
19) 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 selling/general expenses?
A) $(4,840)
B) $81,000
C) $22,000
D) $102,000
20) Hilltop Manufacturing uses a predetermined manufacturing overhead rate based on
machine hours to allocate manufacturing overhead to jobs. Selected data about the
company’s operations follows:
By how much was manufacturing overhead overallocated or underallocated for the
year?
A) $118,750 underallocated
B) $118,750 overallocated
C) $112,500 underallocated
D) $112,500 overallocated
21) Which type of system integrates ALL of the company’s departments, functions, and
data?
A) TQM System
B) ERP System
C) ISO System
D) QuickBooks
22) The lowest possible operating leverage factor for a company is:
A) zero
B) -1
C) +1
D) somewhere between zero and +1
23) Bilingsly Limited, a manufacturer of a variety of products, uses an activity-based
costing system. Information from its system for the year for all products follows:
Bilingsly Limited makes 450 of its product B63 a year, which requires a total of 53
machine hours, 13 inspection hours, and 19 orders. Product B63 requires $45.70 in
direct materials per unit and $58.20 in direct labor per unit. Product B63 sells for $265
per unit. What is the product margin in total for Product B63?
A) $80.20
B) $36,090.00
C) $116,986.60
D) $70,335.50
24) A pizza company produces frozen pizzas in three departments: assembly, freezing,
and packaging. In assembly, crust ingredients are added at the beginning of the process.
After the crust is made, the sauce, cheese, and toppings are added at the end of the
process. Conversion costs are added evenly. Data for the assembly department includes:
The cost per equivalent unit for crust ingredients would be closest to
A) $1.30
B) $1.00
C) $1.20
D) $1.01
25) Brigg’s Breakfast Appliances manufactures two products: Waffle Makers and
Coffee Makers. The following data are available:
The company can manufacture two waffle makers per machine hour and three coffee
makers per machine hour. The company’s production capacity is 1,200 machine hours
per month.
What is the contribution margin per machine hour for coffee makers?
A) $195
B) $1,095
C) $130
D) $65
26) Joe’s Bottling Company provided the following expense information for July:
What is the total cost of research and development?
A) $55,000
B) $68,000
C) $65,000
D) $188,000
27) Common-sized financial statements are included in which type of analysis?
A) Vertical analysis
B) Trend analysis
C) Ratio analysis
D) Horizontal analysis
28) A company uses the indirect method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?
A) The increase of $2,000 will be added to cost of goods sold
B) The increase of $2,000 will be added to net income
C) The increase of $2,000 will be subtracted from cost of goods sold
D) The increase of $2,000 will be subtracted from net income
29) Boots Plus has two product lines: Hiking boots and Fashion boots. Income
statement data for the most recent year follow:
If $25,000 of fixed costs will be eliminated by discontinuing the Fashion line, how will
operating income be affected?
A) Increase $5,000
B) Decrease $45,000
C) Increase $54,000
D) Increase $103,000
30) Classify each of the following business costs into one of the six value chain
elements.
A.cost of a commercial during a TV program
B.cost of shipping goods to customers
C.costs associated with repairing products under warranty
D.costs of developing a new product
E.cost of making a prototype of a new product
F.cost of labor for machine operator in factory
31) An amusement park’s games department which reports revenues and expenses is
likely to be classified as a(n)
A) profit center
B) investment center
C) cost center
D) revenue center
32) Job 365 has an ending balance of $28,500. The rate is 80% of direct labor. It has
been charged manufacturing overhead costs of $7,000. What was the amount of direct
materials charged to the job?
A) $22,800
B) $27,100
C) $21,500
D) $12,750
33) The direct materials price variance is calculated as
A) the difference in quantities multiplied by the actual price of the input
B) the actual amount of direct materials purchased divided by the actual quantity
C) the difference in prices multiplied by the actual quantity of the input purchased
D) the actual quantity of direct materials purchased divided by the per unit price
34) Which type of analysis compares the data of the current year to the data of the
previous year in both percentage and dollar amount of increase or decrease?
A) Vertical analysis
B) Trend analysis
C) Horizontal analysis
D) Benchmarking
35) How is the direct labor rate variance calculated?
A) The difference between the standard labor rate and the actual labor rate multiplied
by the actual labor hours used
B) The difference between the standard labor rate and the actual labor rate multiplied by
the standard allowable hours
C) The difference between the standard labor hours and the allowable labor hours
D) The difference between the standard labor rate and the actual labor rate
36) Here are selected data for Tyler Corporation:
What is the balance in work in process inventory at the end of the year?
A) $30,300
B) $27,700
C) $49,200
D) $23,800
37) The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an
activity-based costing system to allocate all manufacturing conversion costs. Each chair
consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of
machine time to produce. Additional information follows:
What is the cost of assembling per chair?
A) $4.00
B) $5.50
C) $7.50
D) $26.25
38) Earning more income on borrowed money than on the related interest expense is an
example of
A) trading on assets
B) trading on equity
C) trading on liabilities
D) all of the above
39) Potter & Weasley Company had the following activities, estimated indirect activity
costs, and allocation bases:
Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
What is the cost per driver unit for the account inquiry activity?
A) $1.75
B) $8.64
C) $8.00
D) $32.00
40) Overseeing the day-to-day operations of a company is an example of which of the
following management functions?
A) Directing
B) Planning
C) Analyzing
D) Controlling
41) Coltrane Music manufactures musical instrument for sale to students and
professionals. The information for one of Coltrane’s most popular products,
professional saxophones, follows:
What is the labor rate variance for saxophones?
A) $1,600 favorable
B) $1,040 favorable
C) $1,600 unfavorable
D) $1,040 unfavorable