In job-order costing, the journal entry to record the transfer of completed goods from
the production area would include a Credit to ________.
A) Cost of Goods Sold
B) Finished Goods Inventory
C) Factory Department Overhead Control
D) Work-In-Process Inventory
Under absorption costing, fixed manufacturing overhead costs appear on two places on
the income statement that include ________ and ________.
A) usage variance for fixed overhead costs; cost of goods sold
B) production volume variance; cost of goods sold
C) efficiency variance for fixed overhead costs; production volume variance
D) efficiency variance for fixed overhead costs; cost of goods sold
In nonprofit organizations, the challenge is to apply the costs from various departments
to different ________.
A) service organizations
B) nonprofit revenue accounts
C) nonprofit expense accounts
D) programs
In a manufacturing firm, which inventory account is NOT used?
A) Raw Materials Inventory
B) Work-In-Process Inventory
C) Finished Goods Inventory
D) Merchandise Inventory
________ performance measures are often ________ indicators that arrive too late to
prevent problems in organizations.
A) Nonfinancial; leading
B) Nonfinancial; lagging
C) Financial; leading
D) Financial; lagging
The direct method of allocating service department costs to producing departments
ignores ________.
A) services provided by service departments to central corporate offices
B) services provided by service departments to user departments
C) services provided by service departments to other service departments
D) services provided by service departments to producing departments
Julie Company’s revenues for the year are $300 and average invested capital for the
year is $240. Expenses are currently 50% of revenues. Julie Company’s current return
on investment is ________.
A) 50%
B) 62.5%
C) 80%
D) 100%
The activity-level variance for fixed costs equals zero when ________.
A) the actual level of output equals the static budget level of output
B) the actual level of output is greater than the static budget level of output
C) the actual level of output is less than the static budget level of output
D) all of the above
The following data has been assembled for Robert Company. Use the high-low method.
Month Cost Hours
January $24,400 2,000
February $39,000 2,200
March $35,280 2,750
April $36,400 3,500
May $40,000 4,000
The cost function is ________ where Y = Total cost and X = Number of hours.
A) Y = $3,600 + $10.40X
B) Y = $8,800 + $7.80X
C) Y = $21,360 + $1.52X
D) Y = $26,672 + $1.84X
Multinational companies use transfer prices to minimize worldwide income taxes,
________ and ________.
A) tariffs; financial restrictions imposed by U.S. government
B) tariffs; import duties
C) financial restrictions imposed by U.S. government; import duties
D) foreign bribes; import duties
Factors that affect employee acceptance of budgets include ________.
A) perceived attitude of top management towards budgeting
B) level of participation by employees in budget process
C) degree of alignment between budget and employees’ performance goals
D) all of the above
An ideal performance metric would measure and reward the manager for ________
factors, and neither reward nor punish the manager for ________ factors.
A) allocated; unallocated
B) controllable; uncontrollable
C) unallocated; allocated
D) uncontrollable; controllable
When considering the replacement of old equipment, which of the following item is
relevant?
A) loss on disposal of old equipment
B) book value of old equipment
C) accumulated depreciation on old equipment
D) future maintenance costs of old equipment
Accountants require investors without significant influence over the decisions of an
investee firm to use the ________ method.
A) equity
B) cost
C) market value
D) lower of cost or market
Freund Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead 20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the product cost per unit?
A) $40.00
B) $42.00
C) $45.00
D) $54.09
Margaret Duffy Company has the following information available:
Budgeted cost of direct materials at 900,000 units $900,000
Budgeted cost of direct materials at 820,000 units $820,000
Actual cost of direct materials at 820,000 units $840,000
Actual level of output(units) 820,000
Planned level of output(units) 900,000
The cost driver of product costs is units of output. What is the flexible budget variance
for direct material costs?
A) $20,000 Unfavorable
B) $20,000 Favorable
C) $60,000 Favorable
D) $60,000 Unfavorable
Which of the following statements regarding process costing is TRUE?
A) Process-costing systems use a single Work-In-Process Inventory account.
B) Process costing is used for products that are easily separated and individually
identifiable.
C) The unit cost for process costing is found by accumulating the costs for all the
manufacturing departments and dividing the total by the number of units produced.
D) The process-costing approach does not distinguish between individual units of
product.
Stickel Company has the following sales budget:
Month Cash Sales Credit Sales
September $100,000 $200,000
October 125,000 190,000
November 207,000 199,000
December 67,000 144,000
Collection of credit sales are 50% in the month of sale, 40% in the month following
sale, and 10% two months following sale. No uncollectible accounts are expected. What
is the expected balance of Accounts Receivable at October 31?
A) $95,000
B) $110,000
C) $115,000
D) $180,000
The following information is available for a company:
Sales $1,000,000
Variable Selling Expenses 23,000
Fixed Selling Expenses 33,000
Variable Administrative Expenses 39,000
Fixed Administrative Expenses 10,000
Variable Cost of Goods Sold 300,000
Fixed Cost of Goods Sold 100,000
What is the contribution margin for this company?
A) $500,000
B) $600,000
C) $638,000
D) $700,000
To evaluate the financial performance of a segment, and not the financial performance
of the segment’s manager, use ________.
A) income before taxes
B) contribution by segment
C) contribution controllable by segment managers
D) contribution margin by segment
In engineering analysis, cost analysts estimate cost functions using ________.
A) past experience and experiments with prototypes
B) accounting and industrial engineering literature
C) advice of management consultants
D) all of the above
The Quinn Company makes tables for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 10 pounds $4 per pound
Direct Labor 3 hours $16 per hour
Production of 200 tables was expected in June, but 220 tables were actually completed.
Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per
pound. Direct labor cost for the month was $10,620, and the actual pay per hour was
$18.00. What is the direct labor quantity variance for the month of June?
A) $1,120 Favorable
B) $1,120 Unfavorable
C) $1,260 Favorable
D) $1,260 Unfavorable
Planning refers to ________.
A) the implementation of organizational plans
B) the use of performance reports to evaluate the attainment of organizational
objectives
C) setting organizational objectives and establishing the path to attain them
D) an analysis of alternative courses of action
Stelloh Company reported the following information about the production and sale of
its only product during the first month of operations:
Selling price per unit $65
Sales $78,000
Direct materials used $25,000
Direct labor $35,000
Variable factory overhead $15,000
Fixed factory overhead $10,000
Variable selling and administrative expenses $3,000
Fixed selling and administrative expenses $5,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the product cost per unit?
A) $30.00
B) $31.25
C) $35.42
D) $39.00
Which of the following statements about period costs is FALSE?
A) Period costs refer to distribution costs and design costs.
B) Period costs include R&D expenses, marketing costs and customer service costs.
C) Merchandising and manufacturing firms treat period costs differently.
D) For merchandising firms, Cost of Goods Sold is not a period cost.
In a small construction firm, a crew supervisor is added for every ten workers
employed. The salaries of the crew supervisors are a ________.
A) variable cost
B) mixed cost
C) step cost
D) fixed cost
The following information was compiled by Gorgeous Incorporated:
Expected volume of production 50,000 units
Actual volume of production 47,500 units
Budgeted fixed overhead costs(for 50,000 budgeted units) $400,000
Actual fixed overhead costs $415,000
Actual variable overhead costs $790,000
Budgeted variable overhead costs(for 50,000 budgeted units) $855,000
Assume the cost-allocation base for overhead costs is units of production. What is the
production volume variance?
A) $15,000 Favorable
B) $15,000 Unfavorable
C) $20,000 Favorable
D) $20,000 Unfavorable
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
To evaluate the financial performance of a segment, and not the financial performance
of the segment’s manager, use ________.
A) income before taxes
B) contribution by segment
C) contribution controllable by segment managers
D) contribution margin by segment
Selected data for two divisions of the Ramble Company are given below:
South Division North Division
Net sales $4,000,000 $7,000,000
Average total assets $2,000,000 $2,000,000
Net operating income after taxes $360,000 $420,000
Average plant assets $950,000 $800,000
Average cost of capital 10% 12%
Each division is considering a capital investment of $1,000,000. The annual return on
the capital investment is 11%. Invested capital is defined as total assets.
Required:
A) The South Division’s manager is evaluated using residual income. Should South
Division accept the capital investment? Why?
B) The North Division’s manager is evaluated using residual income. Should North
Division accept the capital investment? Why?
C) The South Division’s manager is evaluated using return on investment. Should South
Division accept the capital investment? Why?
According to the Financial Executives Institute, a function of the treasurer is ________.
A) reporting and interpreting
B) short-term financing
C) protection of assets
D) government reporting
Using absorption costing, the primary classifications of costs on the income statement
are by ________.
A) cost behavior patterns
B) manufacturing departments
C) major management functions
D) manufacturing segments
Which of the following statements is FALSE?
A) The higher the minimum desired rate of return, the lower the present value of each
future cash flow.
B) Higher required rates of return lead to lower net present values for capital
investments.
C) Higher required rates of return lead to higher net present values for capital
investments.
D) The net present value for a project can be negative or positive depending on the
minimum desired rate of return used.
In a master budget, the schedule of cash disbursements for purchases of inventory is
used to prepare the ________.
A) operating expense budget
B) purchases budget
C) capital budget
D) cash budget
Falls Company has budgeted sales of $120,000 based on 80,000 units. The margin of
safety is $1,000. What is the break-even point in dollars?
A) $81,000
B) $119,000
C) $120,000
D) $121,000
