Net operating profit is defined as
a. Operating income minus income taxes.
b. Sales minus variable costs.
c. Contribution margin minus traceable fixed costs.
d. Contribution margin minus traceable and allocated fixed costs.
Actual direct labor costs may differ from the flexible budget amounts because
a. The company may set a standard wage rate, but the market forces may require a
change in that rate.
b. Employees do not always operate at the desired efficiency level.
c. The company may set a standard wage rate, but the market forces may require a
change in that rate or employees do not always operate at the desired efficiency level.
d. None of these answer choices are correct.
Jasmine Manufacturing produces the glass vases used by florists. Each vase requires 15
minutes of direct labor time for which glass blowers are paid $30 per hour. During
November, Jasmine produced 10,000 glass vases which required 2,550 hours of direct
labor. Jasmine paid wages to the glass blowers of $74,500 during November. What is
Jasmine’s direct labor efficiency variance for November?
a. $2,000 unfavorable
b. $2,000 favorable
c. $1,500 favorable
d. $1,500 unfavorable
The sales volume variance is the difference between
a. The static budget and the flexible budget.
b. The flexible budget and actual results.
c. The actual quantity and budgeted quantity.
d. The actual price and the standard price.
Brooke Bundi, president of the Seco Corporation, has mandated a minimum 10% return
on investment for any project undertaken by the company. Given the company ‘s
decentralization, Brooke leaves all investment decisions to the divisional managers as
long as they anticipate a minimum rate of return of at least 12%. The Flavored Water
division, under the direction of manager Karl Martin, has achieved a 14% return on
investment for the past three years. This year in not expected to be different from the
past three. Martin has just received a proposal to invest $1,700,000 in a new line of
flavored water that is expected to generate $221,000 in operating income.
Required
a. Calculate the residual income for the proposed new line of flavored water.
b. If Karl Martin is evaluated based on residual income, will he choose to invest in the
new line of flavored water? Why or why not?
Bemis Corporation’s Assembly Department had 2,000 units in beginning inventory that
were 70% complete with respect to conversion. An additional 60,000 units were
transferred into Assembly during the period. Assembly had 12,000 units remaining in
work in process at the end of the period. These units were 60% complete with respect to
conversion. What were the equivalent units for conversion?
a. 54,800
b. 57,200
c. 64,800
d. 72,000
When using a standard costing system, which of the following should be recorded when
finished goods are sold?
a. Debit cost of goods sold for actual cost and credit finished goods for actual cost
b. Debit cost of goods sold for standard cost and credit finished goods for actual cost
c. Debit cost of goods sold for standard cost and credit finished goods for standard cost
d. Debit cost of goods sold for actual cost and credit finished goods for standard cost
In a responsibility accounting environment, which of the following managers has his or
her performance typically measured based on the unit ‘s overall profit compared to the
flexible budget?
a. Cost center manager
b. Profit center manager
c. Investment center manager
d. Revenue center manager
Stegman, Ltd., provides nationwide passenger train service on 21,000 miles of routes.
Selected operating data for fiscal 2014 are shown below.
Required:
a.The above data provide three possible activity measures that could influence fuel
expense. Use the high-low method to develop a cost formula for fuel expense for each
of the three measures.
b.Do any of the cost formulas you developed in (a) appear to be a poor choice for
estimating future train operations expense? Why?
c.Which formula do you think will make the most accurate predictions? Why?
A company’s taxes payable account decreased by $1,000 during the year. Which of the
following would appear on the statement of cash flows prepared using the indirect
method?
a. An addition under investing activities
b. A deduction under investing activities
c. An addition under operating activities
d. A deduction under operating activities
The IMA Statement of Ethical Professional Practice includes which of the following
components?
a.Articles that express members ‘ ethical requirements.
b.Standards that guide members ‘ conduct.
c.Both articles that express members ‘ ethical requirements and standards that guide
members ‘ conduct.
d.Neither articles that express members ‘ ethical requirements nor standards that guide
members ‘ conduct.
Cody Corporation ‘s Southern region operates as an investment center. The division ‘s
director is considering investing in machinery which costs of $100,000 and is expected
to generate $32,000 in additional operating income. If the residual income for the
equipment is $12,000, what is the division ‘s required rate of return?
a. 12%
b. 20%
c. 32%
d. None of these answer choices are correct
Austin Company manufactures 2 products, Flacca and Gordo. Overhead costs are
comprised of machine set-ups $1,600,000; machining $3,600,000; and inspecting
$1,200,000. Recent data are shown below:
Overhead assigned to Flacca using a single overhead rate based on direct labor hours
and using ABC, respectively, would be:
a. $4,000,000 and $2,400,000
b. $4,000,000 and $3,072,000
c. $2,400,000 and $3,328,000
d. $2,400,000 and $3,072,000