A transfer price exists when two segments of the same organization sell ________.
A) a product to the same customer
B) a product to each other
C) a product in a foreign country
D) the same service to customers
In accordance with Generally Accepted Accounting Principles in the United States, the
________ must be reported on the financial statements.
A) price-earnings ratio
B) dividend payout ratio
C) earnings per share
D) dividend yield ratio
When examining the output from regression analysis, with one independent variable,
the variable cost measure is labeled the ________ by most computer programs.
A) coefficient of determination
B) X coefficient
C) standard error of estimate
D) constant or intercept
The various stages through which a product passes are called the ________.
A) value chain
B) product life cycle
C) performance plan
D) product performance plan
A company is considering whether to change the mix of products sold. They think it
would be more profitable to emphasize the products with the highest profit per unit.
What type of information is needed to answer this question?
A) scorekeeping
B) attention directing
C) problem-solving
D) internal auditing
Franklin Company produces only one product. The selling price is $100 per unit and the
variable cost is $60 per unit. Total fixed costs are $120,000.
Required:
A) Compute break-even point in units.
B) Compute break-even point in dollars.
The ________ approach is useful for short-run pricing decisions and the ________
approach is useful for long-run pricing decisions.
A) contribution; absorption
B) absorption; contribution
C) full costing; target costing
D) full costing; contribution
Marjorie Company has an idle machine that originally cost $200,000. The book value
of the machine is $100,000. The company is considering three alternative uses of the
idle machine:
Alternative 1: Disposal of machine. Disposal value of machine is $50,000.
Alternative 2: Use the idle machine to increase production of Product A. Contribution
margin from additional sales of Product A is estimated to be $60,000.
Alternative 3: Use the idle machine to increase production of Product B. Contribution
margin from additional sales of Product B is estimated to be $70,000.
When considering Alternative 3, what is the opportunity cost of the idle machine?
A) $50,000
B) $60,000
C) $70,000
D) $110,000
Under accrual basis accounting, we record revenue when ________.
A) cash is received from customers
B) cash is received for any reason
C) it meets the criteria for revenue recognition
D) a company receives cash from a customer on account
The primary users of management accounting information are ________.
A) bankers
B) governmental regulatory bodies
C) managers in organizations
D) managerial accountants
Danworth Company is contemplating whether to use MACRS depreciation or
straight-line depreciation for a plant asset. The following information is available:
MACRS Straight-line Present Value of
Depreciation Depreciation One At 12%
Year 1 $13,333 $10,000 0.8929
Year 2 $17,780 $10,000 0.7972
Year 3 $5,924 $10,000 0.7118
Year 4 $2,964 $10,000 0.6355
Over the four years examined, how much did Danworth Company gain by using
MACRS depreciation instead of straight-line depreciation for the plant asset? The tax
rate is 40%. (Find the present value.)
A) $722
B) $1,806
C) $2,976
D) $9,178
Fixed overhead costs that will continue regardless of a make-or-buy decision are
________ to the make-or-buy decision.
A) relevant
B) irrelevant
C) opportunity costs
D) incremental costs
To identify defective products, companies incur inspection costs or ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
New Hampshire Company is considering two investments. The relevant data follows:
Project A Project B
Cost $200,000 $300,000
Annual cash savings(end of year) $50,692 $60,995
Terminal salvage value $50,000 $70,000
Estimated useful life in years 5 5
Minimum desired rate of return 10% 10%
Method of depreciation Straight-line Straight-line
Present Value Present Value
Of $1 of Ordinary
for 5 periods Annuity of $1
for 5 periods
5% 0.7835 4.3295
6% 0.7473 4.2124
7% 0.713 4.1002
8% 0.6806 3.9927
10% 0.6209 3.7908
12% 0.5674 3.6048
14% 0.5194 3.4331
Ignore taxes. Using the net present value method, which project should be accepted?
A) Project A only
B) Project B only
C) both Project A and Project B
D) neither Project A nor Project B
Rework costs for manufactured products are a form of ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
Presented below is the balance sheet of Hansen 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 Monty 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, Monty Company acquired 100 percent of the outstanding common
stock of Hansen Company for $260 cash. The book value and fair value of Hansen’s
assets and liabilities were equal.
What is the amount of Total Liabilities on the consolidated balance sheet immediately
after the acquisition of Hansen Company’s stock? (Assume elimination entries are
completed.)
A) $0
B) $380
C) $400
D) $640
Paula Inc. manufactures phones in a two-department process that involves Assembly
and Finishing. The Assembly Department reported the follow data for the past month:
Direct materials added $336,000
Direct labor 460,800
Factory overhead 230,400
Total costs to account for $1,027,200
Units started 80,000
Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 75 percent complete with respect to conversion costs. The cost
of a finished unit is ________.
A) $12.84
B) $13.20
C) $15.29
D) $17.20
When comparing traditional costing systems to activity-based costing systems, the
analysis reveals that ________.
A) high volume products are undercosted with traditional costing systems
B) high volume products are overcosted with traditional costing systems
C) low volume products are overcosted with traditional costing systems
D) both high volume and low volume products are undercosted with traditional costing
systems
Sharpie Company will purchase a van for $75,000. The van’s depreciable life is 5 years.
The van has no terminal salvage value. Assume a tax rate of 30% and a required
after-tax rate of return of 12%. The company uses the straight-line method of
depreciation for tax purposes. What is the annual after-tax cash flow from depreciation
expense?
A) $4,500 cash outflow
B) $4,500 cash inflow
C) $10,500 cash outflow
D) $10,500 cash inflow
The process of collecting costs by some natural classification is called ________.
A) cost accounting
B) cost allocation
C) cost accumulation
D) cost assignment
Jimmy Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $65.00
Sales $78,000
Direct materials used $25,000
Direct labor $42,000
Variable factory overhead $17,000
Fixed factory overhead ?
Variable selling and administrative expenses $3,000
Fixed selling and administrative expenses $5,000
Gross profit $30,000
Production volume variance 0
The company sold one-half of the units it produced. The company uses absorption
costing. Fixed factory overhead costs included in the ending inventory of finished
goods are ________.
A) 0
B) $6,000
C) $8,400
D) $12,000
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
Butters Company produces 2,500 units. Each unit was expected to require 2 labor hours
at a cost of $10 per hour. Total labor cost was $52,250 for 4,750 hours worked. Direct
labor is measured in labor hours. What is the direct labor quantity variance?
A) $2,500 Favorable
B) $2,500 Unfavorable
C) $2,750 Favorable
D) $2,750 Unfavorable
When preparing a budgeted balance sheet, the balance in the cash account is found on
the ________.
A) sales budget
B) cash budget
C) operating expense budget
D) capital budget
Bart Company acquired 10 percent of the voting stock of Ernie Company for $10
million. Bart Company plans to keep the investment for several years. At the end of
Year 1, Ernie Company reports net income of $15 million and pays cash dividends of
$5 million. At the end of Year 1, the market value of Bart Company’s investment in
Ernie Company is $11 million. What entry is necessary at the end of Year 1 to account
for the change in market value of Bart Company’s investment in Ernie Company?
A) No entry is needed.
B) Cash increases $11 million and Stockholders’ equity increases $11 million.
C) Investments increase $11 million and Stockholders’ equity increases $11 million.
D) Investments increase $1 million and Stockholders’ equity increases $1 million.
Residual income is defined as ________.
A) sales less operating expenses
B) operating income divided by revenue
C) net operating profit after tax less a capital charge
D) net operating profit after tax
The section of the annual report that explains major changes in the income statement,
changes in liquidity and capital resources and the impact of inflation is called the
________.
A) notes to the financial statements
B) appendix to the financial statements
C) internal control report
D) management’s discussion and analysis
The flexible budget variance for fixed overhead costs equals the ________ variance.
A) efficiency
B) spending
C) static budget
D) operating budget
Details about Property, Plant and Equipment, such as the age of plant assets and the
types of plant assets, are typically reported ________.
A) on the balance sheet
B) on the income statement
C) on the statement of cash flows
D) in a footnote
On January 1, 2014, Jeff Company purchased common stock in Garcia Company for
$1,000,000. Jeff Company treats the investment as available-for-sale securities. During
2014, Garcia Company earned $4,000,000 and paid dividends of $1,000,000. Assume
that Jeff Company owns 10% of the outstanding shares of Garcia Company. The market
value of the investment at December 31, 2014 is $1,100,000. What is the balance in the
Investment account at December 31, 2014?
A) $1,000,000
B) $1,100,000
C) $1,400,000
D) $1,500,000
An unfavorable production volume variance ________ manufacturing costs on the
________ income statement.
A) decreases; variable costing
B) increases; variable costing
C) decreases; absorption costing
D) increases; absorption costing
Bally Company has three product lines: A, B and C. The following annual information
is available:
Product A Product B Product C
Sales $60,000 $90,000 $24,000
Variable costs 36,000 48,000 20,000
Contribution margin 24,000 42,000 4,000
Avoidable fixed costs 9,000 18,000 3,000
Unavoidable fixed costs 6,000 9,000 2,400
Operating income(loss) $9,000 $15,000 $(1,400)
Assume Bally Company drops Product C. What will happen to operating income?
A) increase by $1,400
B) increase by $3,800
C) decrease by $1,000
D) decrease $1,400