1) Manufacturers follow four steps to implement a manufacturing overhead allocation
system. Which step is not performed before the year begins?
A) Allocate some manufacturing overhead to each individual job
B) Select an allocation base and estimate the total amount that will be used during the
year
C) Estimate total manufacturing overhead costs for the coming year
D) Calculate a predetermined manufacturing overhead rate
2) Assuming an interest rate of 6%, if you invest a lump sum of $6,500 now, the
balance of your investment in 7 years will be closest to
A) $45,500
B) $11,642
C) $36,283
D) $9,776
3) To follow is selected information about The Boston Company for the current year
and prior year.
What is the current year’s net income percentage (as would be found on a vertical
analysis of the income statement for the current year)?
A) 8.60%
B) 9.80%
C) 9.00%
D) 108.60%
4) Which of the following types of companies has raw materials, work in process and
finished goods inventory?
A) Retailers
B) Manufacturers
C) Wholesalers
D) Service companies
5) Martinson Company adds direct materials at the beginning of the process and adds
conversion costs throughout the process. Data for the finishing department follows:
What are the equivalent units for conversion costs?
A) 59,000
B) 49,200
C) 54,750
D) 52,200
6) The ability of a company to sell inventory is measured by which of the following
ratios?
A) Acid-test ratio
B) Inventory turnover ratio
C) Current ratio
D) Day’s sales in receivables
7) By multiplying ________ and then subtracting fixed costs, managers can quickly
forecast the operating income.
A) projected sales units by the contribution margin ratio
B) projected sales revenue by the contribution margin ratio
C) projected sales revenue by the unit contribution margin
D) projected sales units by the variable cost ratio
8) Process costing would likely be used by which of the following?
A) Clear Channel Advertising
B) PIP Printing
C) DBA Management Consultants
D) PepsiCo
9) DirectCall offers a calling plan that charges $5.00 per month plus $0.02 per minute
of call time. Under this plan, what is your monthly cost if you talk for a total of 200
minutes?
A) $4.00
B) $9.00
C) $(1.00)
D) $5.00
10) Two Brothers Moving prepared the following sales budget:
Credit collections are 25% in the month of sale, 60% in the month following the sale,
and 10% two months following the sale. The remaining 5% is expected to be
uncollectible.
What are the total cash collections in May?
A) $62,600
B) $20,600
C) $65,000
D) $76,100
11) The selling price of a particular product is $85.00 per unit, the variable expense is
$49.00 per unit, and the breakeven sales in dollars is $340,000, what are total fixed
expenses?
A) $111
B) $144,000
C) $4,000
D) $249,796
12) Golden Corporation has operating income of $336,000, a sales margin of 16%, and
capital turnover of 3.0 . The return on investment (ROI) for Golden Corporation would
be closest to
A) 5%
B) 48%
C) 2%
D) 160%
13) DogDayz Company has two products: Doggyz and Pupz. A March sales forecast
projects 22,000 units of Doggyz and 15,000 units of Pupz are going to be sold at prices
of $17.50 and $12.00, respectively. The desired ending inventory of Doggyz is 20%
higher than the beginning inventory, which was 2,000 units. How much are total March
sales for Doggyz anticipated to be?
A) $180,000
B) $385,000
C) $264,000
D) $110,000
14) Which of the following terms is defined as an analysis of a financial statement that
reveals the relationship of each statement item to a specific base?
A) Benchmarking
B) Horizontal analysis
C) Vertical analysis
D) Capital analysis
15) Presented are the income statements of Knopf and Simon Publications companies
for the current year:
Which company has the best inventory turnover rate?
A) Both have the same rate
B) Impossible to determine
C) Simon
D) Knopf
16) Philadelphia Swim Club is planning for the coming year. Investors would like to
earn a 10% return on the company’s $30 million of assets. The company primarily
incurs fixed costs to maintain the swimming pools. Fixed costs are projected to be
$12,500,000 for the year. About 500,000 members are expected to swim each year.
Variable costs are about $10 per swimmer. Philadelphia Swim Club is a price-taker and
won’t be able to charge more than its competitors who charge $37.00 per hour of court
time. What profit will it earn as a percent of assets?
A) Profit of 3.33%
B) Loss of 3.33%
C) Loss of 58.17%
D) Profit of 36.67%
17) PotatoState Manufacturing is preparing its cash payments budget for the coming
month. The following information pertains to the cash payments:
a.PotatoState Manufacturing pays for 70% of its direct materials purchases in the month
of purchase and the remainder the following month. Last month’s direct material
purchases were $40,000, while FirstState Manufacturing anticipates $45,000 of direct
material purchases this coming month.
b.Direct labor for the upcoming month is budgeted to be $25,000 and will be paid at the
end of the upcoming month.
c.Overhead is estimated to be 150% of direct labor cost each month and is paid in the
month in which it is incurred. This monthly estimate includes $8,000 of depreciation on
the plant and equipment.
d.Monthly operating expenses for next month are expected to be $27,500, which
includes $1,500 of depreciation on office equipment and $2,000 of bad debt expense.
These monthly operating expenses are paid during the month in which they are
incurred.
e.PotatoState Manufacturing will be making an estimated tax payment of $6,000 next
month.
Required:
Prepare a cash payments budget for the month.
18) Which of the following is a fixed cost?
A) Direct materials cost
B) Direct labor cost
C) Straight-line depreciation expense
D) Sales commissions expense
19) Disadvantages of using standard costs include all of the following except
A) the cost of keeping standards up-to-date
B) the shift towards salaried employees means that labor costs are now fixed rather than
variable
C) practical standards can discourage employees and decrease productivity
D) traditional standards can promote unfavorable employee behavior
20) The standards of the IMA Statement of Ethical Professional Practice include which
of the following?
A) Objectivity
B) Fairness
C) Honesty
D) Integrity
21) Job 543 started on June 1 and finished on July 15 . Total cost on July 1 was
$10,800, and the costs added in July were $164,300. The product was sold. What is the
debit to cost of goods sold?
A) $153,500
B) $ 10,800
C) $175,100
D) $164,300
22) Schrute Farm Sales buys portable generators for $450 and sells them for $720. He
pays a sales commission of 5% of sales revenue to his sales staff. Mr. Schrute pays
$2,000 a month rent for his store, and also pays $1,700 a month to his staff in addition
to the commissions. Mr. Schrute sold 200 generators in June. If Mr. Schrute prepares a
traditional income statement for the month of June, what would be his gross profit?
A) $234,000
B) $144,000
C) $90,000
D) $54,000
23) Neon Company manufactures widgets. The following data is related to sales and
production of the widgets for last year.
Using absorption costing, what is gross profit for last month?
A) $233,200
B) $143,000
C) $104,800
D) $52,800
24) Ribelin Corporation is adding a new product line that will require an investment of
$138,000. The product line is estimated to generate cash inflows of $25,000 the first
year, $23,000 the second year, and $18,000 each year thereafter for ten more years.
What is the payback period?
A) 7.26 years
B) 5.52 years
C) 7.00 years
D) 7.67 years
25) Litchfield Industries gathered the following information for the month ended June
31:
The static budget volume is 5,500 units:
Overhead flexible budget:
Actual production was 12,000 units. Actual overhead costs were $28,000 for variable
costs and $37,000 for fixed costs. Actual machine hours worked were 16,000 hours.
What is the standard variable overhead rate per machine hour?
A) $3.50
B) $4.31
C) $2.47
D) $3.86
26) Page’s sells books. The following information summarizes the company’s operating
expenses for the year:
What is operating income?
A) $12,000
B) $102,000
C) $108,000
D) $9,000