In capital budgeting decisions, the riskiness of a project may be shown by ________.
A) the size of the future cash inflows from the project
B) the size of the future cash outflows from the project
C) the timing of the cash flows from the project
D) the project’s sensitivity to changes in predictions of cash flows
All service organizations are similar in that ________.
A) they are labor intensive
B) output is easy to measure
C) major inputs and outputs can be stored
D) they are capital intensive
Why is variable costing used for internal reports?
A) It can also be used for external reports.
B) It is readily available through most computer systems.
C) It removes the impact of changing inventory levels from the financial results.
D) B and C
Which of the following variance(s) is(are) computed for fixed overhead costs?
A) production volume variance
B) flexible budget variance
C) efficiency variance
D) production volume variance and flexible budget variance
Johannes Corporation uses a budgeted factory overhead rate to apply overhead to
production. Direct labor costs are the cost driver for overhead costs. The following data
are available for the year ending December 31, 2015:
Budgeted factory overhead costs $675,000
Actual factory overhead costs $1,200,000
Budgeted direct labor costs $250,000
Actual direct labor costs $482,000
Cost of goods sold $150,000
Direct materials inventory, December 31, 2015 $120,000
Work-in-process inventory, December 31, 2015 $100,000
Finished goods inventory, December 31, 2015 $250,000
Required:
A) Compute the budgeted factory overhead rate.
B) Compute the applied overhead costs.
C) What is the overhead variance?
D) Prorate the overhead variance to the appropriate accounts.
Variances should be investigated if they ________.
A) are favorable
B) are unfavorable
C) are smaller than the variances in the prior period
D) exceed certain dollar amounts or percentage deviations from the budget
The following information is available for Bargain Books and its two divisions,
Textbooks and Fiction Books.
Whole Fiction
Company Textbooks Books
Net sales $100,000 $60,000 $40,000
Fixed costs controllable by
Division Manager 16,500 12,500 4,000
Fixed costs controlled by others 8,000 5,000 3,000
Variable costs:
Cost of merchandise sold 24,500 17,500 7,000
Operating expenses 16,400 10,000 6,400
Unallocated costs 8,000
What is the contribution by segment for the Textbooks Division?
A) $15,000
B) $20,000
C) $32,500
D) $42,500
Suppose a Super 9 Hotel has annual fixed costs applicable to its rooms of $1.0 million
for its 300-room hotel. Average daily room rents are $60 per room and average variable
costs are $10 for each room rented. It operates 365 days per year. If the hotel is one-half
full throughout the entire year, what is the amount of net income for one year?
A) $1,737,500
B) $4,475,000
C) $5,475,000
D) $5,570,000
Uptown Company purchases $4,000 of inventory on account. Uptown Company should
debit ________.
A) Cash for $1,000, and credit Accounts Payable for $4,000
B) Cash for $1,000, and credit Note Payable for $4,000
C) Inventory for $4,000, and credit Cash for $4,000
D) Inventory for $4,000, and credit Accounts Payable for $4,000
According to agency theory, employment contracts will balance three factors that
include ________.
A) cost-benefit, risk and uncontrollable factors
B) goal congruence, incentive and risk
C) cost of measuring performance, cost-benefit and risk
D) incentive, risk and cost of measuring performance
A plant asset with a book value of $50,000 is sold for $40,000. The applicable tax rate
is 50%. What is the tax effect of the loss on sale?
A) $5,000 cash outflow
B) $5,000 cash inflow
C) $20,000 cash inflow
D) $25,000 cash inflow
Account analysis ________.
A) is less expensive than engineering analysis
B) is more expensive than engineering analysis
C) cannot be used for mixed costs
D) does not require accounts from the accounting system
Presented below is the balance sheet of Harry Company at January 1, 2015:
Cash $100
Net Fixed Assets 400
Total Assets $500
Accounts Payable $20
Long-term Bonds Payable 220
Stockholders’ Equity 260
Total Liabilities and Stockholders’ Equity $500
The balance sheet of Marvelous Company at January 1, 2015 is below:
Cash $400
Net Fixed Assets 380
Total Assets $780
Accounts Payable $120
Long-term Bonds Payable 280
Stockholders’ Equity 380
Total Liabilities and Stockholders’ Equity $780
On January 1, 2015, Marvelous Company acquired 100 percent of the outstanding
common stock of Harry Company for $260 cash. The book value and fair value of
Harry’s assets and liabilities were equal.
What is the amount of Total Stockholders’ Equity on the consolidated balance sheet
immediately after the acquisition of Harry Company’s stock? (Assume elimination
entries are completed.)
A) $0
B) $260
C) $380
D) $640
The production volume variance appears when ________.
A) the actual production volume equals the expected production volume used in
computing the fixed overhead rate
B) the actual production volume deviates from the expected production volume used in
computing the fixed overhead rate
C) the actual production volume deviates from the expected production volume used in
computing the variable overhead rate
D) the actual production volume equals the expected production volume used in
computing the variable overhead rate
It may be difficult to trace costs to products or services if the costs are ________.
A) volume-driven
B) driven by activities directly related to volume
C) driven by multiple cost drivers
D) none of the above
A compensation plan where the sales force is paid salary plus commission is a
________.
A) purely variable cost
B) mixed cost
C) step cost
D) fixed cost
________ costs are costs of manufacturing two or more products that are not separately
identifiable as individual products until their split-off point.
A) Separable
B) Joint
C) Incremental
D) Sunk
Factory overhead does NOT include ________.
A) electricity bill in factory
B) insurance Expense on factory building
C) supplies used in factory
D) wages of janitors in corporate headquarters
The Conner Company reports the following information:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $52,350
Net income for the year ended December 31, 2012 $7,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Total common shares outstanding, December 31, 2012 1,000
Market price per share, December 31, 2012 $75.00
Dividends per share, for the year ended December 31, 2012 $5.00
What is the gross profit percentage for the year ended December 31, 2012?
A) 6.8%
B) 12.6%
C) 16.2%
D) 48.9%
When an upholstered chair is the cost object, minor materials, such as tacks and nails,
used to manufacture the chair would probably be classified as a(n) ________.
A) direct production cost
B) direct nonproduction cost
C) indirect production cost
D) indirect nonproduction cost
When examining the output from regression analysis, the goodness of fit measure is
labeled ________ by most computer programs.
A) X coefficient
B) constant
C) standard error of estimate
D) R2
If a company faces declining sales over time, it must restructure its costs to break-even
at a lower volume. In order to carry this out, what costs can be reduced?
A) variable costs only
B) fixed costs only
C) variable and fixed costs
D) step costs only
Intangible assets are ________.
A) assets with a physical presence
B) assets that can be seen and touched
C) rights to expected future benefits
D) assets with definite lives only
On January 1, 2012, a parent company acquired all of the stock of a subsidiary. The
following data is available:
Parent Company Subsidiary
Total assets $650 $400
Total liabilities $200 $190
Total stockholders’ equity $450 $210
The acquisition by the parent company represents a 100 percent interest in the
subsidiary. On January 1, 2012, the fair value of the subsidiary’s assets and liabilities
are equal to their book value. The parent company paid $250 for the 100 percent
interest in the subsidiary. What amount of goodwill is implied in the purchase?
A) $0
B) $10
C) $40
D) $200
Which of the following purposes of cost allocation provides information for operational
control in an organization?
A) to compute income and asset valuations for financial reports
B) to compute Cost of Goods Sold for financial reports
C) to determine the number of cost drivers for a product
D) to provide the desired motivation and to give feedback for performance evaluation
Durante Company reported the following information about the production and sale of
its only product during the first month of operations:
Selling price per unit $300
Sales $480,000
Direct materials used $220,000
Direct labor $200,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under variable costing, the cost of finished goods ending inventory is ________.
A) $64,000
B) $68,000
C) $80,000
D) $96,000
As cost-driver level decreases in the relevant range, fixed costs per unit of cost driver
________, but total fixed costs ________.
A) increase; do not change
B) decrease: do not change
C) do not change; increase
D) do not change; decrease
Johnson Company’s capital stock is currently trading for $22 per share. The following
accounts appear on the balance sheet:
Common stock, $6.00 par value per share, 10,000 shares issued $60,000
Paid in capital in excess of par value $200,000
The only transaction affecting the accounts was one issue of the company’s common
stock. What was the original selling price of the common stock?
A) $6.00 per share
B) $20.00 per share
C) $22.00 per share
D) $26.00 per share
Segal Company has the following data:
Month Budgeted Sales
May $46,000
June 50,000
July 52,000
August 49,000
The cost of goods sold percentage is 80% of sales and the desired ending inventory
level is 25% of next month’s sales at cost. What is the beginning inventory on August 1?
A) $4,200
B) $8,450
C) $9,800
D) $10,400
El Rey Company manufactures generic notebooks. Material is introduced at the
beginning of the process in the Printing Department. Conversion costs are applied
uniformly throughout the process. The weighted-average method of process costing is
used. Data for the Printing Department for the month of June follow:
Work-In-Process Inventory, June 1:
Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $8,400
Units started in June 65,000
Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000
Direct materials added in June $285,000
Conversion costs added in June $210,000
With regard to the Work-In-Process Inventory on June 30, materials are 100 percent
complete and conversion costs are 60 percent complete. The total cost of the ending
Work-In-Process Inventory is ________.
A) $104,400
B) $111,996
C) $122,175
D) $127,260