Service departments in organizations exist to support ________.
A) other service departments and customers only
B) producing departments and suppliers only
C) other service departments, producing departments and customers
D) producing departments and customers only
The following information is available for the Tyson Company:
Sales for year $1,000,000
Average invested capital for year $500,000
Return on investment for year 25%
Required:
A) Compute capital turnover.
B) Compute operating income.
C) Compute return on sales.
The time it will take to recoup in the form of cash inflows the initial dollars invested in
an investment project is called the ________.
A) payback period
B) accounting rate of return
C) internal rate of return period
D) recovery period
The Technical Services Department of Georgia State University leased a photocopy
machine for $1,500 per month plus $0.04 per copy. Additional budgeted variable
operating costs were $0.02 per copy. The Technical Services Department estimated the
machine would produce 30,000 copies per month. The Accounting Department
estimated it would make 6,000 copies per month but it actually made 5,000 copies.
Assume fixed and variable cost pools are allocated separately. What is the amount of
variable cost allocated to the Accounting Department for the month?
A) $200
B) $240
C) $300
D) $360
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
Godwin Company has identified the following activities related to indirect production
costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Godwin Company has obtained the following data concerning two products:
Product A Product B
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using activity-based costing, what is the total production cost per unit for Product B?
A) $1.12 per unit
B) $2.25 per unit
C) $3.00 per unit
D) $3.37 per unit
________ have no obvious relationship to levels of output activity, but are determined
as part of the periodic planning process.
A) Discretionary fixed costs
B) Committed fixed costs
C) Capacity costs
D) Engineered costs
When the actual overhead costs exceed the amount of applied overhead costs, the
overhead costs are ________. At the end of the accounting period, accountants dispose
of the underapplied or overapplied overhead using ________ or ________.
A) overapplied; proration; immediate write-off
B) underapplied; proration; immediate write-off
C) overapplied; flexible budget variance; proration
D) underapplied; flexible budget variance; immediate write-off
Assume the following information for Richard Company:
Selling price per unit $100
Variable cost per unit $80
Total fixed costs $80,000
After-tax net income $40,800
Tax rate 40%
How many units must be sold to achieve the after-tax net income?
A) 6,040
B) 7,400
C) 7,770
D) 7,800
What is an example of a tool or technique that is used in a cost management system?
A) retail method
B) lower of cost or market rule
C) conservatism principle
D) cost-volume-profit analysis
A factor that contributes to recording goodwill when acquiring control of another
company is ________.
A) outstanding management skills of parent company
B) unique product manufactured by parent company
C) established brand names by investee company
D) all of the above
________ is the additional cost resulting from producing and selling one additional
unit.
A) Marginal cost
B) Common cost
C) Opportunity cost
D) Target cost
A machine that costs $180,000 is expected to generate $40,000 in cost savings annually
for five years. The terminal value at the end of five years is $10,000. Assume
straight-line depreciation is used. Ignore income taxes. What is the payback period?
A) 3.00 years
B) 4.00 years
C) 4.20 years
D) 4.50 years
A sole proprietorship has ________ owner’s equity account(s). A partnership with three
partners has ________ owners’ equity account(s).
A) one; one
B) two; one
C) one; three
D) one; four
Corrao Company had a static budgeted operating income of $8.6 million. Actual
operating income was $6.4 million. The flexible budget operating income at the actual
level of output is $7,000,000. What is the static-budget variance of operating income?
A) $1.6 million Favorable
B) $1.6 million Unfavorable
C) $2.2 million Favorable
D) $2.2 million Unfavorable
For the current year, LeBombard Company’s static budget sales were $225,000. Actual
sales for the current year were $220,000. Actual sales last year were $219,000.
Expected sales last year were $225,000. What is the static budget variance for sales in
the current year?
A) $5,000 Favorable
B) $5,000 Unfavorable
C) $6,000 Favorable
D) $6,000 Unfavorable
In activity-based costing systems, the budgeted overhead rate for products is developed
after considering indirect costs for ________.
A) production only
B) production and distribution only
C) all value chain functions
D) production and customer service only
Planning in the management control system does NOT include ________.
A) defining goals
B) establishing plans to achieve goals
C) carrying out plans to achieve goals
D) measuring performance measures
If perfectly accurate and relevant information is not available for decision making, the
accountant should consider using information that is ________.
A) precise but irrelevant
B) imprecise but irrelevant
C) imprecise but relevant
D) imprecise but timely
________ is the field of accounting that develops information for external parties such
as stockholders, suppliers, banks and governmental regulatory bodies.
A) Auditing
B) Internal auditing
C) Management accounting
D) Financial accounting
________ summarizes the results of the basic operating activities of a company.
A) Gross margin
B) Gross profit
C) Net profit
D) Operating income
Jackson Company manufactures three products from a joint process. Joint costs for the
year amounted to $300,000. The following data was available:
Product Units Produced Sales Value at Split-off
X 5,000 $70,000
Y 3,000 $30,000
Z 2,000 $100,000
Assume the physical-units method of allocating joint costs is used. What amount of
joint costs is allocated to Product Y?
A) $30,000
B) $37,500
C) $90,000
D) $300,000
Rodney Company has the following sales budget:
Month Cash Sales Credit Sales
September $100,000 $250,000
October 125,000 180,000
November 130,000 210,000
December 135,000 190,000
Collections of credit sales are 50% in the month of sale, 40% in the month following
sale, and 10% two months following sale. No uncollectible accounts are expected. What
are the estimated cash collections in September from September sales?
A) $100,000
B) $200,000
C) $225,000
D) $250,000
In nonprofit organizations, the challenge is to apply the costs from various departments
to different ________.
A) service organizations
B) nonprofit revenue accounts
C) nonprofit expense accounts
D) programs
Barenz Builders had the following information available for the past twelve months:
Budgeted factory overhead costs $80,000
Actual factory overhead costs $82,000
Budgeted machine hours 40,000
Actual machine hours 39,500
Assume the cost driver for factory overhead costs is machine hours and a job uses
10,000 machine hours. The job was budgeted to use 11,000 machine hours. What
amount of factory overhead is applied to the job?
A) $20,000
B) $20,250
C) $22,000
D) $22,278
A unit of ending inventory has a cost of $100 per unit. The selling price per unit is
$200. The replacement cost per unit is $90. What value is reported for this inventory on
the balance sheet?
A) $90
B) $100
C) $110
D) $200
Rambo Company acquired 40% of the voting stock of Boulder Company for $40
million. At the end of Year 1, Boulder Company reports net income of $15 million and
pays cash dividends of $5 million. At the end of Year 1, the market value of Rambo
Company’s investment in Boulder Company is $44 million. At the time of the
acquisition, what accounts would be affected on the books of Rambo Company?
A) Cash decreases $40 million and Investments increase $40 million
B) Cash decreases $40 million and Stockholders’ Equity increase $40 million
C) Investments increase $40 million and Accounts Payable increase $40 million
D) No entry
Why do some companies prefer the use of economic profit over return on investment in
decision-making?
A) The calculations for economic profit are easier.
B) The data needed to calculate return on investment are not always available.
C) Return on investment can motivate managers to make investment decisions that are
not in the best interests of the company as a whole.
D) The concept behind economic profit is more logical.
The following is a useful rule of thumb when making operational decisions. Managers
should NOT use ________.
A) variable cost per unit
B) total variable costs
C) fixed cost per unit
D) total fixed costs
The following information was obtained from the accounting records of Stevenson
Incorporated:
Direct materials purchased $80,000
Direct materials used $54,000
Direct manufacturing labor costs $12,000
Indirect manufacturing labor costs $11,000
Selling expenses $16,000
Administrative expenses $22,000
Factory utilities costs $20,000
Rental cost of factory machines $50,000
Work in process inventory, beginning 0
Work in process inventory, end 0
Finished goods inventory, beginning $10,000
Finished goods inventory, end $30,000
What is Cost of Goods Sold?
A) $57,000
B) $77,000
C) $127,000
D) $147,000
An investor in available-for-sale securities has the following information available at
December 31, 2012:
Market value of available-for-sale securities $8,000
Acquisition cost of available-for-sale securities $9,000
How does the investor report the change in market value on the available-for-sale
securities at December 31, 2012?
A) unrealized loss of $1,000 on income statement
B) unrealized gain of $1,000 on income statement
C) $1,000 is added to accumulated other comprehensive income account on the balance
sheet
D) $1,000 is subtracted from the accumulated other comprehensive income account on
the balance sheet
Yesterday Company’s accountant recorded a debit to Accounts Payable and a credit to
Cash. This transaction will ________.
A) increase Cash and decrease Accounts Payable
B) decrease Cash and increase Accounts Payable
C) increase Cash and increase Accounts Payable
D) decrease Cash and decrease Accounts Payable
Indian Company has the following information available for variable overhead costs.
Direct labor hours are the cost driver for variable overhead costs.
Actual variable overhead costs $5,120
Standard variable overhead costs $3.00 per hour
Actual direct labor hours 2,000 hours
Standard direct labor hours per unit 3 hours
Units produced 1,000
What is the variable overhead spending variance?
A) $880 Favorable
B) $1,000 Unfavorable
C) $3,880 Favorable
D) $3,880 Unfavorable
