When managers make decisions, the decision process used has the following steps in
the order of occurrence:
A) Historical and Other Information, Prediction Model, Prediction, Decision Model,
Decision, Implementation, Feedback
B) Historical and Other Information, Decision Model, Prediction Method,
Implementation, Decision, Feedback
C) Historical and Other Information, Decision Model, Prediction Method, Decision,
Implementation, Feedback
D) Historical and Other Information, Prediction Method, Prediction, Decision Model,
Decision, Implementation, Feedback
In deciding whether to add or delete a product, the insurance expense associated with
the custom-built equipment used to produce the product is an ________ cost. Assume
the equipment will be sold if the company discontinues the product.
A) avoidable fixed
B) avoidable variable
C) unavoidable fixed
D) unavoidable variable
In perfect competition, all firms charge the same market price. The only decision for
managers is ________.
A) how to minimize costs
B) how to maximize average revenue
C) how much to produce
D) how to minimize marginal costs
Absorption costing assigns ________ to the product.
A) variable manufacturing costs only; not fixed manufacturing costs
B) fixed manufacturing costs only; not variable manufacturing costs
C) variable manufacturing costs and variable selling costs
D) variable and fixed manufacturing costs
The phrase “cost application” refers to the allocation of the total departmental costs to
________.
A) service departments
B) service departments and producing departments
C) revenue-producing departments
D) revenue-producing products
Downstairs Company has the following sales budget for the last six months of 2010:
July $100,000
August 80,000
September 110,000
October 80,000
November 100,000
December 94,000
Historically, the cash collection of sales has been as follows:
65% of sales collected in month of sale
25% of sales collected in month following sale
8% of sales collected in second month following sale
2% of sales uncollectible
What are the expected cash collections of sales in October?
A) $79,500
B) $85,900
C) $92,400
D) $99,500
Information is relevant if it has ________ and ________.
A) verifiability; comparability
B) timeliness; materiality
C) predictive value; confirmatory value
D) reliability; feedback value
Assume the following facts for two products, Zip and Zap:
Zip Zap
Sales mix 3 units 1 unit
Selling price per unit $21.00 $28.00
Variable costs per unit $14.00 $16.00
If total fixed costs are $132,000, the break-even point in units would be ________.
A) 4,000 units of Zip and 12,000 units of Zap
B) 1,200 units of Zip and 400 units of Zap
C) 12,000 units of Zip and 4,000 units of Zap
D) 8,400 units of Zip and 2,800 units of Zap
Goyette Company processes copper ore into two products, C and U. The ore costs $5
per pound and conversion costs are $15 per pound. Goyette Company plans to produce
40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of
ore. Product C sells for $30 per pound and Product U sells for $40 per pound. Assume
the company uses the relative-sales-value method of allocating joint costs. What
amount of joint costs is allocated to Product C?
A) $400,000
B) $514,286
C) $720,000
D) $800,000
For costs that accountants cannot directly trace to products or services, accountants use
________ or ________.
A) ABC methods; payback method
B) cost-budgeting methods; ignore remaining costs
C) sensitivity analysis; financial planning models
D) cost-allocation methods; leave costs unallocated
Jones Company manufactures greeting cards. 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 September follow:
Work-In-Process Inventory, September 1:
Units 22,500
Direct materials (100% complete) $51,000
Conversion costs (30% complete) $20,472
Units started in September 127,500
Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000
Direct materials added in September $427,500
Conversion costs added in September $315,000
With regard to the Work-In-Process Inventory on September 30, materials are 100
percent complete and conversion costs are 60 percent complete. The equivalent units
for materials are ________.
A) 125,000
B) 145,500
C) 150,000
D) 154,500
The greatest benefit of activity analysis is that it directs management accountants to the
________.
A) relevant costs for decision making
B) most accurate product cost
C) appropriate cost driver for each cost
D) most accurate product price
Steve Harvey Company uses absorption costing and reports the following information:
Variances
Production Volume Variance $70,000 Unfavorable
Flexible Budget Variance for Fixed Factory Overhead $100,000 Unfavorable
Flexible Budget Variance for Variable Overhead $40,000 Favorable
Flexible Budget Variance for Direct Materials $20,000 Favorable
Before consideration of the above variances, the company has operating income of
$1,500,000. What is the operating income after considering the above variances?
A) $1,330,000
B) $1,390,000
C) $1,400,000
D) $1,560,000
For next year, David Company has budgeted sales of 8,000 units, target ending
inventory of 1,000 units and a beginning inventory of 300 units. How many units
should be purchased?
A) 5,700
B) 6,300
C) 7,700
D) 8,700
Flajovich Company manufactures tape dispensers. The Assembly Department reported
the follow data for the past month:
Units started and completed 70,000
Units started and not complete 10,000
Units in beginning inventory 0
Direct materials costs $480,000
Conversion costs $240,000
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 50 percent complete with respect to conversion costs. The total
cost of units completed and transferred is ________.
A) $630,000
B) $644,000
C) $690,000
D) $720,000
Due to the use of statistics, least squares regression analysis estimates a cost function
more ________ than other cost measurement methods.
A) easily
B) rapidly
C) reliably
D) subjectively
For nonprofit organizations, the income statement is ________.
A) used
B) replaced with the statement of stockholders’ equity
C) replaced with the statement of activities
D) replaced with the statement of cash flows
Adam Company has two service departments, Maintenance and Human Resources.
Adam Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,200 2,400
Number of employees 16 24 48 64
Assume the step-down method is used to allocate service department costs and the
Human Resources Department is allocated first. Then the amount of cost allocated from
the Maintenance Department to the Human Resources Department is ________.
A) $0
B) $5,040
C) $6,300
D) $6,825
In an economic downturn, a company could temporarily reduce or eliminate a(n)
________.
A) lease payment
B) salaries of key personnel
C) employee training program
D) insurance on corporate offices
In a manufacturing company, product costs used for external reporting include
________.
A) direct material costs plus direct labor cost only
B) indirect production costs only
C) direct material costs plus direct labor cost plus indirect production costs
D) direct material costs plus nonproduction costs
Investments of large amounts of cash in plant assets are called ________.
A) cash outflows
B) capital budgeting
C) capital projects
D) capital outlays
Ambrose 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 $225.00
Sales $360,000
Direct materials used $176,000
Direct labor $100,000
Variable factory overhead $44,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Production volume variance 0
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under absorption costing, what is the Gross Profit?
A) $0
B) $40,000
C) $84,000
D) $104,000
Gnat Company, a producer of electronic devices, has the following information:
Selling price per unit $5.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
The contribution-margin ratio is ________.
A) 30%
B) 40%
C) 60%
D) 100%
Assume you are preparing income statements for different segments. Which of the
following is NOT a fixed cost controllable by a segment manager?
A) salespersons’ salaries for segment
B) advertising costs in local paper to promote segment
C) training costs for new employees at segment
D) segment manager’s salary
Oroz Company had the following information available:
Expected Costs and Selling Price Based on 5,000 units:
Variable manufacturing costs per unit $32
Fixed manufacturing costs per unit $20
Selling price per unit $70
Expected production level 5,000 units
In the flexible budget at 10,000 units, what is the total manufacturing cost?
A) $250,000
B) $420,000
C) $520,000
D) $700,000
The following information is available for the Paul Ryan Company:
Sales for year $150,000
Average invested capital for year $156,250
Return on investment 10%
What is the return on sales?
A) 10.00%
B) 10.42%
C) 62.50%
D) 100.00%
Where does a company find forecasted financial statements for a five to ten year
period?
A) strategic plan
B) master budget
C) rolling budget
D) long-range plan
Lonestar Company pays taxes of 25% on their first $25,000 of taxable income and 30%
on any taxable income in excess of $25,000. The company’s current taxable income is
$30,000. What is the marginal tax rate?
A) 25%
B) 30%
C) 40%
D) 65%
To assess the ________ of estimates from regression analysis, we use the ________.
A) objectivity; coefficient of determination
B) plausibility; sign on the intercept
C) reliability; sign on the coefficient of determination
D) plausibility; sign of the variable cost estimate
Many managers set prices by cost plus pricing. What is cost plus pricing? Assume it is a
long run decision.
A) average cost per unit plus markup per unit
B) average target cost plus markup per unit
C) average cost per unit minus markup per unit
D) average target cost minus markup per unit
The master budget is a detailed and comprehensive analysis of the ________ of the
________ plan.
A) first month; activity-based strategic
B) first month; strategic
C) first year; continuous
D) first year; long-range
Potential problems that can limit the benefits of budgeting do NOT include ________.
A) low levels of employee participation in the budget process
B) incentives to lie and cheat in the budget process
C) difficulties in obtaining accurate sales forecasts
D) an emphasis on functional budgeting
For most organizations, an effective management control system requires performance
measures that are ________ and ________.
A) rolling; static
B) flexible; static
C) strategic; continuous
D) financial; nonfinancial
Which statement about JIT is FALSE?
A) JIT minimizes inventories of raw materials, work in process and finished goods.
B) JIT eliminates non-value-added activities such as inspection.
C) JIT decreases the amount of time products spend in the production process.
D) JIT focuses on customer satisfaction and the prevention of defects.
A mixed-cost function is graphed as a ________.
A) nonlinear line
B) curved line
C) line with a break for fixed costs
D) straight-line
