1) Self-check-in machines at airports are an example of capital assets.
2) Costs that differ between alternatives are irrelevant.
3) The intercept-coefficient in regression analysis yields the fixed cost portion of the
total costs.
4) Total mixed cost graphs slope upward but do not begin at the origin.
5) A production schedule indicates the quantity and types of inventory that are
scheduled to be manufactured during the period.
6) The total cost of a job shown on the job cost record is the sum of the direct materials
and direct labor traced to the job and the manufacturing overhead allocated to the job.
7) If all direct materials are added at the end of the production process, and the units
have made it 50% of the way through the production process, then the percentage
completion for direct materials is 0%.
8) The IMA suggests that, when faced with an ethical dilemma, the first thing
management accountants should do is call the IMA’s ethics hotline.
9) Unique or custom-made goods use a process costing system.
10) The amount of overallocation or underallocation is typically corrected by adjusting
cost of goods sold.
11) Regression analysis is found by using only the two data points of the highest and
lowest volume.
12) External failure costs occur when the company detects and corrects poor-quality
goods or services after delivery to customers.
13) A company reported the following amounts of net income:
Which of the following is the percentage change from Year 2 to Year 3?
A) 24.00%
B) 55.00%
C) 124.00%
D) 25.00%
14) Moon Appliance manufactures a variety of appliances which all use Part B89 .
Currently, Moon Appliance manufactures Part B89 itself. It has been producing 9,000
units of Part B89 annually. The annual costs of producing Part B89 at the level of 9,000
units include:
All of the fixed manufacturing overhead costs would continue whether Part B89 is
made internally or purchased from an outside supplier. Moon Appliance has no
alternative use for the manufacturing facilities. Nadal Parts Company has offered to sell
9,000 units of Part B89 to Moon Appliance for $20.00 per unit. What is the highest
price per unit that Moon Appliance should be willing to pay for the part?
A) $7
B) $15
C) $11
D) $18
15) Page’s sells books. The following information summarizes the company’s operating
expenses for the year:
What is gross profit?
A) $62,000
B) $9,000
C) $65,000
D) $117,000
16) Which of the following would not be included in the value chain?
A) Website development costs
B) Costs to deliver product to retail outlets
C) Costs of print advertisements
D) All of these costs would be included as part of the value chain
17) How do you calculate the predetermined manufacturing overhead rate used to
allocate manufacturing overhead costs?
A) By multiplying the total estimated manufacturing overhead costs by the total
estimated amount of the allocation base
B) By dividing the total estimated amount of the allocation base by the total estimated
manufacturing overhead costs
C) By dividing the total estimated manufacturing overhead costs by the total actual
amount of the allocation base
D) By dividing the total estimated manufacturing overhead costs by the total estimated
amount of the allocation base
18) If a company’s overhead cost equation is y = $8.80x + $120,020. The “x” is
A) the cost driver in units
B) total fixed costs
C) total overhead costs
D) the variable costs
19) Alexander Industries, in Chicago, plans to take advantage of the winds blowing in
from Lake Michigan. Alexander is developing a project to install a wind turbine that
would generate electricity and reduce energy costs. The turbine would have an initial
cost of $500,000 and would provide a net cost savings of $57,000 per year. The turbine
will have a life of 25 years.
If Alexander assigns a discount rate of 10% to this project, what is the net present value
(NPV) of the wind turbine?
A) $17,389
B) $(494,756)
C) $517,389
D) $5,244
20) A company should ________ when projecting cash receipts for a given month.
A) include only cash collections from sales made in that month
B) only list COD sales made in that month
C) only list credit sales made in that month
D) include cash to be collected in that month regardless of when the sale was made
21) For each of the following transactions indicate the effect on the cash balance. Use +
for increase, – for decrease, and 0 for no effect.
________a.Payment of cash dividends
________b.Payment of interest
________c.Sale of treasury stock
________d.Conversion of debt to common stock
________e.Payment of accounts payable
________f.Payment of salaries
________g.Receipt of cash dividends
________h.Sale of merchandise for cash
________i.Acquisition of a patent by issuing common stock
________j.Purchase of land
________k.Receipt of stock dividends
22) The entry to record the use of direct materials in production would include a
A) debit to finished goods inventory
B) debit to raw materials inventory
C) debit to WIP inventory
D) credit to finished goods inventory
23) Sykes Company has sales revenue of $585,000. Cost of goods sold before
adjustment is $335,000. The company’s actual manufacturing overhead is $91,000,
while allocated manufacturing overhead is $104,400. What is the actual gross profit?
A) $159,000
B) $236,600
C) $250,000
D) $263,400
24) How is the variable manufacturing overhead efficiency variance calculated?
A) The difference between the actual overhead rate and the standard overhead rate
multiplied by the standard overhead rate
B) The difference between the standard hours allowed and the actual hours used
multiplied by the standard overhead rate
C) The difference between the standard hours allowed and the actual hours used
D) The difference between the standard hours allowed and the actual hours used
multiplied by the actual overhead rate
25) The benefits of adopting ABC/ABM are higher for companies in competitive
markets because:
A) accounting/information system expertise is inexpensive to develop
B) ABM can pinpoint opportunities for cost savings
C) accurate product cost information is not as relevant for price setting
D) companies in competitive markets have low indirect costs
26) Fixed costs that are the result of previous management decisions that current
managers have no control over in the short run are called ________ fixed costs.
A) discretionary
B) committed
C) standard
D) past
27) “Sets the targeted revenue and expenses for the period” is best described by which
of the following terms?
A) Responsibility center
B) Capital budget
C) Operating budget
D) Sensitivity analysis
28) Assume the Air Conditioning division of the General Appliance Corporation had the
following results last year (in thousands). Management’s target rate of return is 15% and
the weighted average cost of capital is 10%. Its effective tax rate is 35%.
What is the division’s Residual Income (RI)?
A) $1,625,000
B) $1,132,364
C) $1,750,000
D) $500,000
29) A shampoo manufacturer offers the following information:
The units in ending WIP inventory were 60% complete for materials and 40% complete
for conversion costs.
On December 31, what are the total equivalent units for conversion costs?
A) 21,760
B) 23,040
C) 19,200
D) 28,160
30) ________ is designed to meet the needs of internal decision makers.
A) Tax accounting
B) Managerial accounting
C) Financial accounting
D) Audit accounting
31) (Present value tables are needed.) Family Fun Park is evaluating the purchase of a
new game to be located on its Midway. Family Fun has narrowed their choices down to
two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about
the two choices follows.
Using the net present value model, which alternative(s) should Family Fun Park select?
A) The Wacky Water Race game should be selected
B) Neither investment should be selected
C) Both investments should be selected
D) The Whack-A-Mole game should be selected
32) Which of the following is/are created by operating activities?
A) An increase in long-term debt
B) An increase in common stock
C) Revenues and expenses
D) Both A and B
33) London Plastics has monthly fixed costs of $84,000, while its variable costs are
$4.00 per unit. If the sales price of a unit is $15.00 and London Plastics sell 14,000
units, the company’s total sales revenue will be
A) $154,000
B) $210,000
C) $84,000
D) $70,000
34) The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an
activity-based costing system to allocate all manufacturing conversion costs. Each chair
consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of
machine time to produce. Additional information follows:
What is the number of finished coffee tables?
A) 20
B) 100
C) 250
D) Cannot be determined from the information given
35) Which of the following entries would be made to record the requisition of $11,000
of direct materials and $6,000 of indirect materials?
A)
B)
C)
D)
36) The manager of the Northeast sales region at General Mills would be in charge of
a(n)
A) cost center
B) investment center
C) revenue center
D) profit center
37) MacBeth Fabrics budgeted to manufacture 1,400 curtains in February. Actual output
for March was 1,575 curtains with total direct materials cost of $3,400 and total direct
labor cost of $5,250. The direct labor standard is 20 minutes per curtain at a direct labor
rate of 17.50 per hour. The direct material standard is 0.75 yards of direct materials per
curtain at a cost of $13 per pound. Actual direct labor hours were 275 . A variance
analysis for February would show a direct labor rate variance of
A) $2,506 favorable
B) $2,506 unfavorable
C) $438 favorable
D) $438 unfavorable
38) A requirement of SOX is that publicly traded companies must have which of the
following assessed annually?
A) Financial reporting system
B) Internal control system
C) Internal control system and financial reporting system
D) There is no annual assessment required under SOX
39) Porches, Inc., sells lawn furniture. Selected financial information for the most
recent year follows.
Beginning merchandise inventory on January 1 was $33,000.
Ending merchandise inventory on December 31 was $35,000.
Purchases during the year were $92,000.
Selling and administrative expenses were $75,000.
Sales for year were $262,000.
What was gross profit?
A) $(165,000)
B) $170,000
C) $187,000
D) $172,000
40) To the left of the breakeven point on a CVP graph, the area between the total
expense line and the sales revenue line representing which of the following?
A) Operating loss
B) Operating income
C) Slope of variable costs per unit
D) Slope of fixed costs per unit
41) How is the variable overhead rate variance calculated?
A) The difference between the actual overhead rate and the standard overhead rate
multiplied by the actual hours
B) The difference between the actual overhead rate and the standard overhead rate
multiplied by the standard hours allowed
C) The difference between the standard hours allowed and the actual hours used
multiplied by the standard overhead rate
D) The difference between the standard hours allowed and the actual hours used
multiplied by the actual overhead rate
42) The Stemple Corporation data for the current year:
What would a horizontal analysis report with respect to net sales revenue?
A) Cost of goods sold as 80.67% of net sales revenue
B) A sales return of 9.16%
C) An increase of 19.00% in net sales revenue
D) Accounts receivable turnover of 8.06 times
43) Calculate the unknowns for the following independent situations.
1> Selected data for Lion Corporation:
Allocated manufacturing overhead is based on 50% of direct labor cost.
a) Calculate the allocated manufacturing overhead cost.
b) Calculate the direct labor cost.
2> Selected data for Tiger Corporation:
Manufacturing overhead is allocated at $15 per machine hour.
a) Calculate the allocated manufacturing overhead cost.
b) Calculate the number of machine hours incurred.
44) Mountaintop golf course is planning for the coming season. Investors would like to
earn a 12% return on the company’s $50 million of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be
$25,000,000 for the golfing season. About 400,000 golfers are expected each year.
Variable costs are about $8 per golfer. The Mountaintop golf course has a favorable
reputation in the area and therefore, has some control over the price of a round of golf.
Using a cost-plus approach, what price should Mountaintop charge for a round of golf?
45) Differentiate between relevant and irrelevant costs and give an example using both.
46) Patty’s Mailbox Company produces a standard mailbox with variable manufacturing
costs of $18 per unit. The selling price of the standard mailbox is $25 per unit. The
fixed manufacturing overhead cost is $67,000. A normal production run includes
100,000 units. Patty’s Mailbox Company has discovered an additional process to
change the standard mailbox into a deluxe mailbox. Additional costs are estimated at $4
per unit. The deluxe mailbox would sell for $35. Additional fixed manufacturing
overhead cost of $23,000 would be incurred if the deluxe mailbox is produced. There
would be no change in the number of units produced.
Make an analysis to determine if Patty’s Mailbox Company should continue producing
and selling the standard mailbox or change the standard mailbox into a deluxe mailbox.
47) Carlton Cookie Company produces a hand-processed gourmet cookie that is made
with organic sugar. Five (5) pounds of organic sugar are required per batch of gourmet
cookies. The organic sugar costs $2.40 per pound. The company needs to have 20% of
the following month’s production needs of organic sugar in ending inventory so it is on
hand to start each month. A total of 120 pounds of organic sugar are expected to be on
hand on April 1 .
1> Budgeted production of the gourmet cookies for the first four months of the
upcoming year is as follows:
Required:
Prepare a direct materials budget for organic sugar for each of the months in the second
quarter and for the second quarter in total. Include both the quantity of sugar to be
purchased and the cost of the purchases in each month.
48) Pristine Yards Manufacturing produces weed whackers. On March 31, Pristine
Yards Manufacturing had 144 weed whackers in inventory. The company has a policy
that the ending inventory in any month must be 12% of the following month’s expected
sales. Pristine Yards Manufacturing expects to sell the following number of weed
whackers in each of the next four months:
Required:
Prepare a production budget for the second quarter, with a column for each month and
for the quarter.
49) The income statement and a partial balance sheet for Vespoint Company is
presented below. Prepare the operating activities section of the statement of cash flows
using the indirect method.
Vespoint Company
Income Statement
For the Current Year
Vespoint Company
Partial Balance Sheet
End of this year
50) Kitch Company sells collectibles. The following information summarizes Dino’s
operating activities for the most recent year:
Required: Prepare an income statement for the most recent year.