Each value chain function should focus on activities that ________.
A) create profits for the seller
B) create bonuses for top management
C) create higher stock prices for the company’s stock
D) create value for the customer
When preparing segmented income statements, fixed costs controllable by others, and
not the segment manager, include ________.
A) depreciation on building used by a segment
B) local advertising costs for a segment
C) local promotion costs for a segment
D) salary of supervisor of sales staff for a segment
As the minimum required rate of return increases for an investment project, the net
present value of the project ________.
A) increases
B) does not change
C) decreases
D) becomes positive
For a corporation, the excess of assets over liabilities are called ________.
A) retained earnings
B) paid-in capital
C) common stock
D) stockholders’ equity
Oroz Company had the following information available:
Expected Costs and Selling Price Based on 5,000 units:
Variable manufacturing costs per unit $32
Fixed manufacturing costs per unit $20
Selling price per unit $70
Expected production level 5,000 units
In the flexible budget at 10,000 units, what is the total manufacturing cost?
A) $250,000
B) $420,000
C) $520,000
D) $700,000
Barber Company produces 2,500 units. Each unit was expected to require 2 labor hours
at a cost of $10 per hour. Total labor cost was $52,250 for 4,750 hours worked. Direct
labor is measured in labor hours. What is the direct labor price variance?
A) $2,500 Favorable
B) $2,500 Unfavorable
C) $4,750 Favorable
D) $4,750 Unfavorable
An unfavorable production volume variance ________ a company’s operating income.
A) increases
B) decreases
C) does not affect
D) it depends on the size of the variance
A merchandising firm reports ________ as a current asset on the balance sheet.
A) Raw Materials Inventory
B) Finished Goods Inventory
C) Work-in-Process Inventory
D) Merchandise Inventory
The following information is presented for the Maybeel Manufacturing Company.
— Direct labor rate standard is $11.55.
— Direct labor efficiency standard is 2.5 hours per unit.
— Budgeted production is 1,200 units.
— Production required 2,910 direct labor hours at a cost of $33,174.
— Actual production is 1,150 units.
What is the direct labor efficiency variance?
A) $404.25 Favorable
B) $404.25 Unfavorable
C) $1,039.50 Favorable
D) $1,039.50 Unfavorable
The classic balanced scorecard developed by Robert Kaplan and David Norton includes
four categories of key performance indicators. Which of the following items is NOT
one of the categories used by Kaplan and Norton?
A) financial
B) customers
C) innovation and learning
D) quality control
Whitney Company is contemplating three different equipment investments. The
relevant data follows:
Proposal D Proposal O Proposal G
Cost $200,000 $300,000 $830,000
Annual cash savings (end of year) $40,000 $70,000 $150,000
Terminal salvage value $10,000 $5,000 $20,000
Estimated useful life in years 10 10 10
Minimum desired rate of return 12% 12% 12%
Method of depreciation Straight-line Straight-line Straight-line
The present value factor of an ordinary annuity of one for 10 periods at 12% is 5.6502.
The present value factor of one for 10 periods at 12% is 0.322.
Required:
A) Compute the net present value of each investment. Ignore income taxes.
B) If only one investment can be acquired, which investment should be chosen?
Assume Hull Company has the following information available:
Selling price per unit $100
Variable cost per unit $40
Fixed costs per year $400,000
Expected sales per year (units) 20,000
If fixed costs increase by $200,000, what is the break-even point in units?
A) 6,667
B) 10,000
C) 12,000
D) 13,000
Two conventional ways of allocating joint costs to products are ________.
A) physical units and incremental revenues
B) physical units and incremental expenses
C) separable costs and relative sales values
D) physical units and relative sales values
Jorgensen Company has determined the following variances at the end of the current
year:
Variances
Production Volume Variance $200,000 Favorable
Flexible Budget Variance for Direct Materials $10,000 Unfavorable
Flexible Budget Variance of Direct Labor $2,000 Unfavorable
Flexible Budget Variance for Fixed Overhead $3,000 Favorable
Flexible Budget Variance for Variable Overhead $2,000 Unfavorable
Before consideration of the above variances, the company has operating income of
$1,000,000. What is the operating income after considering the above variances?
A) $986,000
B) $989,000
C) $1,189,000
D) $1,200,000
Relevant information refers to ________ that will differ among the alternative courses
of action.
A) future costs only
B) future revenues only
C) past costs and revenues
D) future costs and revenues
A company has 100,000 hours of capacity and manufactures two products, Product X
and Product Z. Neither product has enough demand to utilize the entire capacity, but the
combined demand of both products exceeds the capacity of the plant. It takes one hour
to make one unit of Product X and two hours to make one unit of Product Z. The
following information is available:
Product X Product Z
Units produced from capacity available 100,000 50,000
Contribution margin per unit $20 $30
What product or products should be made?
A) only make Product X
B) only make Product Z
C) make Product X to meet customer demand and then make Product Z
D) make Product Z to meet customer demand and then make Product X
A company is setting the price on a special order of a manufactured product routinely
made. What type of information is needed to set the price?
A) scorekeeping
B) attention directing
C) problem-solving
D) interim reports
A major benefit of effective budgeting is that ________.
A) it compels managers to think ahead
B) it aids managers in communicating objectives to employees
C) it provides benchmarks to evaluate subsequent performance
D) all of the above
Which of the following statements is FALSE?
A) Flexible budgets are prepared for a range of activity.
B) Flexible budgets are matched to actual levels of activity.
C) A flexible budget is also called a variable budget.
D) Flexible budgets are based on different assumptions about cost behavior than those
used for static budgets.
Gokey Company has a contribution-margin ratio of 0.30. Targeted net income is
$76,800 and targeted sales volume in dollars is $480,000. What are total fixed costs?
A) $23,000
B) $44,160
C) $67,200
D) $144,000
Naperville Corporation has a joint process that produces three products: P, G and A.
Each product may be sold at split-off or processed further and then sold.
Joint-processing costs for a year amount to $25,000. The production level for each
product is 10,000 units. Other data follows:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs after Split-Off at Completion
P $12 $8 $21
G 10 4 17
A 15 6 19
Processing Product P beyond the split-off point will cause profits to ________.
A) be unchanged
B) increase by $10,000
C) increase by $80,000
D) increase by $90,000
Division Big does have excess capacity to produce Product XX. The division can sell
Product XX for $10 per unit outside the company. Variable costs are $6 per unit.
Division Small wants to purchase Product XX from Division Big to use in Product ZZ.
The selling price of Product ZZ is $25 per unit and variable costs to finish the product
after the transfer are $12 per unit. An outside supplier will sell Product XX for $12.
What is the minimum transfer price for Division Big?
A) $4 per unit
B) $6 per unit
C) $10 per unit
D) $12 per unit
The ________ account is supported by a file of job-cost records for completed jobs.
A) Direct Materials Inventory
B) Work-in-process Inventory
C) Finished Goods Inventory
D) Factory Overhead Control
When companies develop cost management systems, which of the following purposes
of cost allocation usually dominates?
A) to predict the economic effects of strategic and operational control decisions
B) to provide the desired motivation and to give feedback for performance evaluation
C) to compute income and asset valuations for financial reporting
D) to justify costs or obtain reimbursement
Which statement would NOT be a reason for a flexible budget variance?
A) Material prices were different than expected.
B) Labor prices were different than expected.
C) Actual volume of activity was different than expected.
D) Amount of labor used per unit of output was different than expected.
When developing cost functions, which of the following statements is FALSE?
A) The cost function must be believable.
B) The cost function should explain past cost behavior.
C) Personal observations of costs and activities provide the best evidence of a plausible
relationship between a cost and its cost driver.
D) The cost function does not have to be plausible.
In job-order costing, the journal entry to record the application of factory overhead
costs to jobs includes a Debit to ________.
A) Factory Department Overhead Control
B) Factory Department Overhead Applied
C) Finished Goods Inventory
D) Work-In-Process Inventory
In general, many more costs are direct costs instead of indirect costs when the cost
object is a ________ instead of a(n) ________.
A) product; department
B) product; activity
C) product; resource
D) department; product
In two-stage activity-based costing systems, the cost objects in the first stage are
________ and the cost objects in the second stage are ________.
A) departments; products or services
B) departments; territories
C) resources; departments
D) activities; products or services
With mixed costs, the ________ element is unchanged over the relevant range and the
________ element varies proportionately with cost-driver activity.
A) variable cost; fixed cost
B) fixed cost; variable cost
C) fixed cost; step cost
D) step cost; variable cost
Which of the following statements about management accounting is FALSE?
A) Management accounting is the process of identifying, measuring, accumulating,
analyzing, preparing, interpreting and communicating information.
B) Management accounting helps managers fulfill organizational objectives.
C) Management accounting is used by managerial accountants to make strategic and
operational decisions.
D) Management accounting produces information for managers in an organization.