If a company allocates costs of central services to products based on sales, ________
should be used as the allocation base.
A) actual usage
B) estimated usage
C) actual sales
D) budgeted sales
A manager has several forecasts of sales corresponding to different levels of
advertising. The manager decides to implement $1 million of advertising in the next
fiscal year. At this level of advertising, the manager uses the ________ in the ________.
A) sales goal; sales forecast
B) sales budget; sales forecast
C) sales forecast; sales goal
D) sales forecast; sales budget
Decreases in ownership claims arising from the delivery of goods are called ________.
A) revenues
B) profits
C) liabilities
D) expenses
Dakota Company has been producing and selling 42,000 hats a year. There are no
beginning and ending inventories. The Dakota Corporation has the capacity to produce
52,000 hats. The following data is available:
Selling price per unit $30
Variable manufacturing costs per unit $13
Variable selling and administrative costs per unit $7
Total fixed manufacturing costs $126,000
Total fixed selling and administrative costs $84,000
If a special order is accepted for 10,000 hats at a price of $25 per unit, net income
would ________.
A) increase by $20,000
B) increase by $50,000
C) increase by $90,000
D) decrease by $24,000
Given below are the activities of the Phoenix Company:
Owners invested cash in business $20,000
Credit sales $80,000
Cash sales $20,000
Cash collections from credit customers $56,000
Purchased inventory on account $37,000
Using the accrual basis of accounting, the total revenues for Phoenix Company are
________.
A) $46,000
B) $90,000
C) $100,000
D) $173,000
On a cost-volume-profit graph, the vertical distance between the Revenue line and the
Total Cost line represents ________ or ________.
A) mixed cost; step cost
B) variable cost; fixed cost
C) net profit; net loss
D) step cost; fixed cost
The manufacturing division of an electronics company uses activity-based costing. The
company has identified three activities and the related cost drivers for indirect
production costs.
Activity Cost Driver
Activity 1 Direct materials cost
Activity 2 Direct labor cost
Activity 3 Kilowatt hours
Three types of products are produced. Direct costs and cost-driver activity for each
product for a month are as follows:
Product A Product B Product C
Direct materials cost $75,000 $50,000 $125,000
Direct labor cost $6,000 $1,000 $3,000
Direct labor hours 2,000 1,000 2,000
Kilowatt hours 150,000 200,000 150,000
Indirect production costs for the month are as follows:
Activity 1 $30,000
Activity 2 20,000
Activity 3 16,000
Total $66,000
Required:
A) Compute the indirect production costs allocated to each product using the ABC
system.
B) Compute the indirect production costs allocated to each product using a traditional
costing system. Assume indirect production costs are allocated to each product using
the cost driver: direct labor hours.
The Penquin Company has obtained the following data:
Month Indirect Production Costs Direct Labor Hours
July $92,095 4,900
August $105,056 5,480
September $80,000 3,000
October $99,400 4,400
November $110,000 6,000
December $97,404 3,900
Required:
A) Using the high-low method, determine the cost function for the above data. Round
to two decimal places.
B) If direct labor hours equal 10,000, what are the total expected indirect production
costs?
Hewlett Company is considering the following investment:
Estimated capital investment $220,000
Estimated useful life 3 years
Estimated disposal value in 3 years $10,000
Estimated annual savings in cash operating costs(end of year) $120,000
Minimum desired rate of return 12%
Present value of ordinary annuity of one, 3 periods at 12% 2.4018
Present value of one, 3 periods at 12% 0.7118
Assume straight-line depreciation is used. Ignore income taxes. The net present value of
the investment is ________.
A) $68,216
B) $75,334
C) $78,216
D) $150,229
What item is NOT a line item on the purchases and cost of goods sold budget?
A) purchases of inventory
B) sales
C) beginning inventory
D) desired ending inventory
In process costing, goods are moved from the Assembly Department to the Packaging
Department. Costs incurred in the Assembly Department for the goods received by the
Packaging Department are called ________ by the Packaging Department.
A) equivalent units
B) finished goods
C) transferred-in costs
D) factory overhead applied
Under the immediate write-off method of disposing of underapplied or overapplied
overhead costs, current net income is ________ by underapplied overhead costs and
current net income is ________ by overapplied overhead costs.
A) increased, decreased
B) decreased, increased
C) not affected, not affected
D) none of the above
When estimating the cost of the maintenance department in a hospital for a month, what
cost driver should be used?
A) number of patients per month
B) number of nurses working per month
C) number of operations per month
D) number of patients per month times the length of stay per patient
Monster Company is required to pay taxes of 25% on income up to $20,000 and 30%
on any income in excess of $20,000. The company has pretax income of $80,000. What
is the average tax rate for Monster Company?
A) 25.0%
B) 26.5%
C) 28.75%
D) 32.5%
The detailed design and engineering of products, services or processes is called the
________ function in the value chain.
A) research and development
B) design
C) engineering
D) production
An IMA ethical standard states, “Each member has a responsibility to disclose delays or
deficiencies in information, timeliness, processing or internal controls in conformance
with organizational policy and or applicable law.” This statement comes from the
________ standard.
A) integrity
B) confidentiality
C) competence
D) credibility
BEE Company is considering the replacement of a machine that is presently used in
production. Which of the following items are irrelevant to the replacement decision?
A) annual operating cost of the old machine (2 years left)
B) original cost of the new machine
C) disposal value of the old machine at time of replacement
D) original cost of old machine
For management purposes, managers trace and allocate the costs from value-chain
functions to ________.
A) products only
B) customers only
C) products and customers
D) none of the above
Warbel Company is preparing a cash budget for the month of June. The following
information is available:
Cash Balance, May 31, 2015 $11,000
Cash collections from customers in June 43,000
Cash paid for merchandise in June 20,000
Cash paid for operating expenses in June 20,000
Paid cash dividend in June 5,000
The minimum cash balance desired is $5,000. What is the cash balance on June 30,
2015?
A) $8,000
B) $9,000
C) $10,000
D) $13,000
Which of the following adjustments to after-tax operating income is used to
approximate cash income for EVA?
A) expensing research and development costs
B) using LIFO inventory method
C) deducting after tax interest expense
D) using taxes paid rather than tax expense
Utah Corporation reports the following data:
12/31/14 12/31/15
Fixed Assets $330 $581
Less: Accumulated Depreciation (110) (127)
Net Fixed Assets $220 $454
Depreciation expense for the year ending December 31, 2015 is $27. The company sold
a fixed asset for $10 cash on December 1, 2015. The cost of the fixed asset sold was
$20 and the accumulated depreciation on the fixed asset sold was $10. What is the net
cash flow from investing activities for the year ending December 31, 2015?
A) $241 cash outflow
B) $251 cash outflow
C) $261 cash outflow
D) $271 cash outflow
When managers graph a linear cost function with one cost driver, the intercept
represents the ________ cost and the slope represents the ________ cost.
A) variable; fixed
B) fixed; variable
C) fixed; mixed
D) variable; mixed
When the variable costing method is used, fixed factory overhead appears on the
income statement as a ________.
A) component of cost of goods sold
B) component of cost of goods sold and production volume variance
C) production volume variance
D) fixed expense
Inverness Company is considering the replacement of a machine that is presently used
in production. The following data are available:
Old Machine New Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000 –
Disposal value now $8,000 –
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
Adding all five years together, what is the difference in total relevant costs between the
old machine and the new machine?
A) $12,000
B) $15,000
C) $22,000
D) $37,000
The cash paid for dividends is included in the ________ section of the statement of cash
flows.
A) operating
B) investing
C) financing
D) noncash
Companies produce most ________ and ________ information on a routine basis such
as every day, every month or every quarter.
A) scorekeeping; problem-solving
B) scorekeeping; attention directing
C) problem-solving; attention directing
D) interim reports; problem-solving
Williams Company uses a job-order costing system and has the following data
available:
Beginning Direct Materials Inventory $26,000
Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 125%
The journal entry to record the cost of goods completed would include a ________.
A) Credit to Finished Goods Inventory for $292,000
B) Credit to Cost of Goods Sold for $256,000
C) Debit to Work-In-Process Inventory for $256,000
D) Credit to Work-In-Process Inventory for $292,000
Which of the following events do NOT affect cash flows from operating activities?
Assume the direct method is used.
A) cash sale of merchandise inventory
B) cash purchase of equipment
C) cash purchase of inventory
D) cash paid for employees’ wages
The annual after-tax cash operating inflows of a newly purchased machine are expected
to be $60,000. The expected useful life of the machine is 5 years. The after-tax
minimum desired rate of return, including an inflation factor, is 25%. The inflation rate
is 10% per year. What is the annual after-tax cash operating inflow for year 1 for the
machine?
A) $54,000
B) $60,000
C) $66,000
D) $75,000
Bombard Company manufactures plastic cups in one department. The following
information is available:
Work-In-Process Inventory, beginning 0
Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000
Direct materials added $240,000
Direct labor $164,780
Factory overhead $82,000
The units in the ending Work-In-Process Inventory are 100 percent complete with
respect to direct materials and 50 percent complete with respect to conversion costs.
The cost of the ending Work-In-Process Inventory is ________.
A) $61,200
B) $72,200
C) $75,420
D) $102,000
