1) The following is information about the units produced and the total manufacturing
costs for Rose’s Rug Company for the past six months.
Rose’s Rug Company uses the high-low method to estimate its costs. Answer the
following questions:
a.What is the variable cost per unit?
b.What is the monthly fixed manufacturing cost?
c.Write the cost equation that could be used to predict Rose’s Rug Company’s total
manufacturing costs.
d. What will the total monthly manufacturing costs be if the company produces 28,000
units?
2) Which is TRUE about a scatter plot?
A) If there is a strong relationship between cost and volume, the points will fall in a
linear pattern
B) If there is a strong relationship between cost and volume, the points will fall in a
scattered pattern
C) Cost and volume have no effect on the pattern of the points on a scatter plot
D) A strong relationship between production and inventory is shown by a linear pattern
3) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was manufacturing overhead for the quarter?
A) $230
B) $450
C) $570
D) $580
4) Company A has a higher margin of safety while Company B has a lower margin of
safety. Company A would be considered ________ Company B when considering only
margin of safety:
A) more risky than
B) less risky than
C) to have the same level of risk as
D) Unable to judge based on margin on safety
5) 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:
How much of the correspondence cost will be assigned to Department P?
A) $16,000
B) $9,000
C) $8,000
D) $1,500
6) The following information relates to current production of outdoor chaise lounges at
Backyard Posh:
The regular selling price per chaise lounge is $300.00. The company is analyzing the
opportunity to accept a special sales order for 800 chaise lounge at a price of $250.00
per unit. Fixed costs would remain unchanged. The company has the capacity to
produce 15,000 chaise lounges per year, but is currently producing and selling 10,000
chaise lounges per year. Regular sales will not be affected by the special order. If the
company were to accept this special order, how would operating income be affected?
A) Decrease by $94,400
B) Decrease by $118,400
C) Increase by $94,400
D) Increase by $118,400
7) Neil’s Service Shop performs routine vehicle maintenance. One such service is tire
rotations. Neil’s reports the following budgeted and actual amounts for tire rotations for
the month of August.
What is the labor efficiency variance for the month of August?
A) $900 favorable
B) $900 unfavorable
C) $510 favorable
D) $510 unfavorable
8) (Present value tables are required.) Calby Enterprises is evaluating the purchase of a
new computer network system. The new system would cost $25,000 and have a useful
life of 6 years. At the end of the system’s life, it would have a residual value of $3,000.
Annual operating cost savings from the new system would be $8,800 per year for each
of the six years of its life. Calby Enterprises has a minimum required rate of return of
12% on all new projects. The net present value of the new network system would be
closest to
A) $9,656
B) $12,698
C) $11,177
D) $37,698
9) Comfort Cloud manufactures seats for airplanes. The company has the capacity to
produce 100,000 seats per year, but is currently producing and selling 75,000 seats per
year. The following information relates to current production:
If a special sales order is accepted for 6,500 seats at a price of $325 per unit, and fixed
costs remain unchanged, how would operating income be affected? (NOTE: Assume
regular sales are not affected by the special order.)
A) Decrease by $357,500
B) Increase by $357,500
C) Increase by $2,112,500
D) Increase by $5,500,000
10) A typical manufacturing overhead cost would be
A) direct labor
B) depreciation on the plant
C) net income
D) direct materials
11) The Armstrong Corporation developed a flexible budget for its production process.
Armstrong budgeted to use 16,000 pounds of direct material with a standard cost of $18
per pound to produce 12,000 units of finished product. Armstrong actually purchased
18,000 pounds and used 17,000 pounds of direct material with a cost of $21 per pound
to produce 12,000 units of finished product.
Given these results, what is Armstrong’s direct material quantity variance?
A) $36,000 favorable
B) $18,000 favorable
C) $36,000 unfavorable
D) $18,000 unfavorable
12) Jean’s Fitness Club provides monthly memberships as well as personal training
sessions. The personal trainers earn 50% of the revenue for all personal training
sessions. The Fitness Club also sells nutrition products. Jean’s general ledger accounts
indicate the following for the year. The front desk staff wages expense remains the same
throughout the year.
If a contribution margin income statement is prepared for the year, what is operating
income?
A) $207,500
B) $280,000
C) $175,500
D) $384,500
13) In Step 1 of the process costing procedure, the “total units accounted for” is the sum
of
A) the units completed and transferred out plus the units in ending WIP
B) the units in ending WIP plus the units started in production during the month
C) the units in beginning WIP plus the units in ending WIP
D) the units in beginning WIP plus the units completed and transferred out
14) The difference between the actual revenues and expenses and the master budget is
known as a
A) capital budget variance
B) flexible budget variance
C) static budget variance
D) master budget variance
15) The study of percentage changes in comparative financial statements is an example
of
A) vertical analysis
B) trend analysis
C) benchmarking
D) horizontal analysis
16) How is the fixed overhead volume variance calculated?
A) The difference between the standard fixed overhead rate and the actual fixed
overhead rate multiplied by the actual hours used
B) The difference between the standard fixed overhead costs allocated and the budgeted
fixed overhead costs
C) The difference between the actual fixed overhead costs incurred and the budgeted
fixed overhead costs
D) The difference between the actual fixed overhead costs incurred and the standard
fixed overhead costs allocated
17) Maryland Incorporated produces toys. Total manufacturing costs are $350,000
when 50,000 toys are produced. Of this amount, total variable costs are $100,000. What
are the total production costs when 75,000 toys are produced? (Assume the same
relevant range for both production levels.)
A) $150,000
B) $400,000
C) $500,000
D) $525,000
18) Ringo Corporation had the following results last year (in thousands). Management’s
target rate of return is 15% and the weighted average cost of capital is 10%. Its effective
tax rate is 35%.
What is the division’s Return on Investment (ROI)?
A) 500.00%
B) 20.00%
C) 50.00%
D) 32.80%
19) (Present value tables are needed.) Family Fun Park is evaluating the purchase of a
new game to be located on its Midway. Family Fun has narrowed their choices down to
two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about
the two choices follows.
What is the total present value of future cash inflows from the Wacky Water Race
game?
A) $1,306
B) $23,367
C) $33,306
D) $31,690
20) The cost to a corporation’s image and goodwill as a result of an oil spill would be
categorized as what type of cost by an environmental management accounting system
(EMA)?
A) Intangible cost
B) Prevention cost
C) Waste and emission control cost
D) Materials cost of production outputs
21) Manufacturers consider selling and administrative costs to be
A) period costs
B) conversion costs
C) inventoriable costs
D) prime costs
22) The ________ variance “measures how well the business keeps prices of direct
labor inputs within standards”.
A) production volume
B) overhead flexible budget
C) rate
D) efficiency
23) Sea Side Enterprises is trying to predict the cost associated with producing its
anchors. At a production level of 5,000 anchors, Sea Side Enterprises’ average cost per
anchor is $52.00. What is the total cost of producing 5,000 anchors?
A) $260,000
B) $5,052
C) $52.00
D) $96
24) Under SOX, a CPA firm is permitted to perform which of the following services for
an audit client with pre-approval from the client’s audit committee?
A) Tax
B) Financial information design
C) Bookkeeping
D) Consulting
25) Newtowne Bakery bakes fresh pies that are very popular with the local residents.
For July, Newtowne Bakery budgeted 750 direct labor hours to produce 500 pies. In
July, Newtowne Bakery actually produced 520 pies and actually used 800 direct labor
hours. The standard hours allowed during July would have been closest to
A) 832
B) 750
C) 780
D) 721
26) Pro-Am Audio is a company that is contracted to DJ private events. Due to a recent
increase in bookings, Pro-Am is considering the purchase of another mobile DJ unit.
Pro-Am uses the payback method to evaluate its investments. The mobile DJ unit will
cost $12,000, has a useful life of 10 years, and will generate $2,000 in net cash inflows
per year. The residual value of the unit is $1,000. What is the payback period for the
mobile DJ unit?
A) 6.50 years
B) 5.50 years
C) 6.00 years
D) 4.00 years
27) The following information relates to Woolf Unlimited for the past two years.
What is the current ratio for the current year?
A) 1.00
B) 13.00
C) 1.75
D) 2.30
28) An unfavorable direct labor rate variance indicates which of the following?
A) Both actual quantity and actual cost of direct labor hours exceeded standard quantity
and standard cost of hours for actual output
B) The actual quantity of direct labor hours worked exceeded the standard quantity of
hours for actual output
C) The actual direct labor cost per hour exceeded the standard direct labor cost per hour
for actual quantity of direct labor hours
D) The actual cost of direct labor per hour was less than the standard cost of direct labor
per hour
29) Which of the following is a lean strategy?
A) Group like machines together
B) Produce in smaller batches than a traditional system
C) Maintain a higher level of inventory than a traditional system
D) Lengthen setup times relative to a traditional system
30) On the line in front of each statement, enter the letter corresponding to the term that
best fits that statement. An item may be used more than once or not at all.
A. relevant costs E. opportunity costs
B. sunk costs F. full cost of product or service
C. constraint G. sales mix
D. contribution margin H. variable costing
____Costs that were incurred in the past and cannot be changed
____Benefits foregone by choosing a particular alternative course of action
____Expected future costs that differs among alternatives
____Costs of developing, producing and delivering a product or service
____A factor that restricts production or sales of a product