1) Which of the following types of costing is used for many similar products?
A) Process costing
B) Batch costing
C) Service costing
D) Job costing
2) In a particular department, 8,200 units were started and all but 800 were completed at
the end of the period. These 800 were 80% complete for materials and 30% for
conversion costs. Costs added were $55,400 for materials and $52,100 for conversion
costs. What is the total number of equivalent units for direct materials?
A) 8,040
B) 8,840
C) 7,640
D) 7,400
3) The Bedford Corporation reported the following income statement and balance sheet
amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the times-interest-earned ratio for the current year?
A) 1.46 times
B) 1.00 times
C) 5.12 times
D) 4.12 times
4) A “constraint” is best described by which of the following?
A) The distribution of all products to be sold
B) A factor that restricts production or sales of a product
C) Benefits foregone by choosing a particular alternative course of action
D) Expected future costs that differ among alternatives
5) Boots Plus has two product lines: Hiking boots and Fashion boots. Income statement
data for the most recent year follow:
Assuming the Fashion line is discontinued, total fixed costs remain unchanged, and the
space formerly used to produce the Fashion line is used to increase the production of
Hiking boots by 250%, how will operating income be affected?
A) Increase $137,500
B) Increase $235,500
C) Increase $186,500
D) Decrease $137,500
6) Warshaw Company budgets payroll at $3,600 per month plus a percentage of
monthly sales. The June operating expense budget includes total payroll of $13,200
with budgeted sales of $160,000. Sales for July are budgeted at $180,000 while
purchases of inventory for July are budgeted at $95,000. Depreciation and insurance for
July are estimated at $1,000 and $600, respectively. Office and administrative expenses
related to purchasing inventory are budgeted at 10% of purchases for the month. The
purchase of $2,500 in equipment and $1,500 in furniture is expected in July.
The July payroll should be budgeted at
A) $14,400
B) $13,200
C) $22,500
D) $15,300
7) How is the cost of indirect materials used in the factory recorded?
A) Credit to manufacturing overhead
B) Credit to raw materials inventory
C) Credit to work in process inventory
D) Credit to direct materials expense
8) On the line in front of each statement, enter the letter corresponding to the term that
best fits that statement. You may use a letter more than once and some letters may not
be used at all.
a. Direct costs e. Variable costs
b. Marginal cost f. Indirect cost
c. Average cost g. Sunk cost
d. Conversion costs h. Differential cost
___The total cost divided by the total volume.
___The difference in cost between two alternative courses of action.
___The combination of direct labor and manufacturing overhead costs.
___The cost of producing one more unit.
___Costs that can be traced to the cost object.
9) The cost of evaluating potential raw material suppliers is an example of what type of
cost?
A) Prevention cost
B) Internal failure cost
C) External failure cost
D) Appraisal cost
10) The McCumber Corporation data for the current year:
With respect to long-term liabilities, what would a horizontal analysis report?
A) Long-term liabilities decreased by 6.15%
B) Long-term liabilities increased by $8,000
C) Long-term liabilities increased by 6.15%
D) Long-term liabilities decreased by $1,800
11) Fosnight Enterprises prepared the following sales budget:
The expected gross profit rate is 30% 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) $8,120
B) $8,960
C) $8,680
D) $10,080
12) The following information is provided by Arrow Company:
The units in ending WIP inventory were 80% complete for materials and 40% complete
for conversion costs.
What are the total equivalent units for direct materials?
A) 2,400
B) 6,400
C) 3,000
D) 7,000
13) A shampoo manufacturer offers the following information:
The units in ending WIP inventory were 60% complete for materials and 40% complete
for conversion costs.
On December 31, the cost per equivalent unit for materials would be closest to
A) $14.28
B) $ 9.39
C) $12.71
D) $12.00
14) Tasty Treats is a snow cone stand near the local park. To plan for the future, Tasty
Treats wants to determine its cost behavior patterns. It has the following information
available about its operating costs and the number of snow cones served.
The variable cost per snow cone using the high-low method is
A) $1.43
B) $0.70
C) $0.90
D) $0.94
15) Cost of goods sold is shown at which of the following on a standard cost income
statement?
A) Standard cost
B) Actual cost
C) Neither A nor B
D) Both A and B
16) The Bedford Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the price-earnings ratio for the current year?
A) 4.05
B) 0.25
C) 4.94
D) 5.12
17) Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales
patterns throughout the year. To plan for the future, Mr. Jones wants to determine its
cost behavior patterns. He has the following information available about the ice cream
stand’s operating costs and the number of soft serve cones served.
Using the high-low method, the fixed costs for a month are
A) $ 300
B) $2,200
C) $ 500
D) $ 750
18) Which of the following could be a constraint for selling a product?
A) Store hours
B) Available labor hours for employees
C) Shelf space
D) All of the above could be constraints
19) The Box Manufacturing Division of the Allied Paper Company reported the
following results from the past year. Shareholders require a return of 7%. Management
calculated a weighted-average cost of capital (WACC) of 5%. Allied’s corporate tax rate
is 30%.
What is the division’s capital turnover?
A) 0.47
B) 4.00
C) 8.57
D) 2,50
20) If a company uses the indirect method to prepare the statement of cash flows, which
of the following items would be subtracted from net income in determining the net cash
flow from operating activities?
A) A loss on the sale of equipment would be subtracted from net income
B) An increase in dividends payable would be subtracted from net income
C) Amortization of a premium on bonds payable would be subtracted from net income
D) Depreciation expense would be subtracted from net income
21) Lily’s Pastries produces cupcakes, which sell for $5 each. During the current month,
Lily produced 2,800 cupcakes, but only sold 2,700 cupcakes. The variable cost per
cupcake was $3 and the sales commission per cupcake was $0.50. Total fixed
manufacturing costs were $1,400 and total fixed marketing and administrative costs
were $1,200. What is the product cost per cupcake under absorption costing?
A) $3.50
B) $5.50
C) $5.00
D) $3.00
22) Chicago Steel’s operating activities for the year are listed below.
What is the gross profit for the year?
A) $50,000
B) $750,000
C) $1,500,000
D) $100,000
23) Myles Company budgeted 10,500 pounds of direct materials costing $23.50 per
pound to make 5,300 units of product. The company actually purchased 11,000 pounds
of direct materials costing $25.00 per pound to make the 5,300 units. What is the direct
materials price variance?
A) $16,500 favorable
B) $16,500 unfavorable
C) $15,750 unfavorable
D) $15,750 favorable
24) Toshiba Corporation makes computer chips. Toshiba Corporation would be
classified as a
A) merchandising company
B) manufacturing company
C) service company
D) simple company
25) How will the amount of cash paid for interest expense be computed for a company
that uses the direct method to prepare the statement of cash flows?
A) The change in interest payable plus interest expense
B) The change in interest payable minus interest expense
C) Ending balance of interest payable plus interest expense
D) Ending balance of interest payable minus interest expense
26) A “relevant cost” is best described by which of the following?
A) A factor that restricts production or sales of a product
B) Cost of developing, producing, and delivering a product or service
C) Costs that were incurred in the past and can not be changed
D) Expected future costs that differ among alternatives
27) On the statement of cash flows, which of the following sections includes the
issuance of stock and the payment of dividends?
A) Financing section
B) Investing section
C) Operating section
D) None of the above
28) ________ gathers, summarizes, and reports on the financial impact of changes to
business operations.
A) Managerial accounting
B) Planning
C) Directing
D) Controlling
29) The current accounting system for Moss Company does not include an estimate of
the cost of losing access to markets with environmental-related product restrictions.
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) Hidden Cost
30) Subtracting the costs of one alternative from the costs of the other alternative would
be called the ________ cost.
A) sunk
B) imported
C) alternative
D) differential
31) At Sunrise Corporation, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What are the total equivalent units for direct materials?
A) 139,700
B) 130,500
C) 135,900
D) 143,500
32) The Box Manufacturing Division of the Allied Paper Company reported the
following results from the past year. Shareholders require a return of 7%. Management
calculated a weighted-average cost of capital (WACC) of 5%. Allied’s corporate tax rate
is 30%.
What is the division’s Residual Income (RI)?
A) $70,000
B) $77,500
C) $100,000
D) 126,000
33) A cash flow statement shows $25,000 from financing, ($9,200) from investing and
$21,000 from operations. The cash balance must have increased or decreased by
A) $46,000
B) $55,200
C) $36,800
D) $15,800
34) Using account analysis, what type of cost is the local phone service which charges a
flat fee for unlimited local calls?
A) Step
B) Mixed
C) Fixed
D) Variable
35) All of the following would be included in the operating activities section of a direct
method statement of cash flow except
A) changes in accounts payable
B) changes in accounts receivable
C) changes in depreciation
D) changes in inventory