1) Generally Accepted Accounting Principles (GAAP) mandates the type of product
costing system (job costing or process costing) that must be used by a manufacturer.
2) Direct labor hours would be the most appropriate cost allocation base for a
Machining Department that uses machine robotics extensively.
3) Total assets is used in the denominator when calculating ROI.
4) Opportunity costs should be factored into outsourcing decisions.
5) Responsibility accounting performance reports compare budgets with actual results
for each responsibility center.
6) Total variable costs can be expressed as y = vx, where y = total mixed cost, v =
mixed cost per unit of activity, and x = volume of activity.
7) The master budget includes both the operating budgets and the financial budgets.
8) The underallocation or overallocation of overhead is a direct result of using a
predetermined manufacturing overhead rate rather than the actual manufacturing
overhead rate.
9) For retailers and service companies without inventory, operating income is different
if a traditional income statement or a contribution margin income statement is prepared.
10) An opportunity cost is a past cost.
11) Under variable costing, fixed manufacturing costs are treated as inventoriable
product costs.
12) All of the following are considerations for discontinuing a product or product line,
except
A) whether the product has a positive or negative contribution margin
B) not having any free capacity
C) if discontinuing the product or product line will affect sales of remaining products
D) determining if direct fixed costs could be avoided if the product or product line is
discontinued
13) Total hours of continuing professional education taken by employees would be an
example of measuring which perspective?
A) Financial
B) Customer
C) Internal business
D) Learning and growth
14) Accepting a job that you know can be better performed by someone else with the
required skills would violate the ethical conduct standard of
A) credibility
B) integrity
C) competency
D) confidentiality
15) Standards should be reviewed and updated at least
A) yearly
B) monthly
C) weekly
D) daily
16) Davy Company had a beginning work in process inventory balance of $32,000.
During the year, $54,500 of direct materials was placed into production. Direct labor
was $63,400, and indirect labor was $19,500. Manufacturing overhead is allocated at
125% of direct labor costs. Actual manufacturing overhead was $86,500, and jobs
costing $225,000 were completed during the year. What is the ending work in process
inventory balance?
A) $172,400
B) $11,400
C) $4,150
D) $79,250
17) (Present value tables are required.) Maersk Metal Stamping is analyzing a special
investment project. The project will require the purchase of two machines for $30,000
and $8,000 (both machines are required). The total residual value at the end of the
project is $1,500. The project will generate cash inflows of $11,000 per year over its
8-year life. If Maersk requires a 6% return, what is the net present value (NPV) of this
project?
A) $30,310
B) $8,332
C) $2,456
D) $31,250.50
18) Managers may intentionally build slack into the budget
A) to have the resources they need in the event of budget cuts
B) to make their performance look worse
C) because of certainty about the future
D) because of all of the above
19) The income statement of a retailer would include which of the following?
A) Cost of goods sold
B) Value of inventory
C) Accounts payable
D) Accounts receivable
20) The McCumber Corporation data for the current year:
With respect to common stock, what would a horizontal analysis report?
A) Stockholder’s equity as 7.75% of total capital
B) Sales return of $11.17
C) 87.72% increase from prior to current year of cost of goods sold
D) Increase of $5,880 in common stock
21) A company is deciding whether to purchase production equipment which can
produce units more quickly than the current equipment. Which of the following costs
would be relevant to its decision?
A) The original purchase price of the current machinery
B) The additional labor required to run the new equipment
C) The accumulative repairs costs of the current machinery over the years
D) The cost of raw materials
22) Dozen Bakery makes cupcakes and cookies. Dozen gathered the following
information for the current year regarding its use of flour and butter (flour is a direct
material for cupcakes and butter is a direct material for cookies):
The actual direct material quantity used per batch for Cupcakes would be closest to
A) 2.9 lb
B) 1.7 lbs
C) 2.0 lbs
D) 0.4 lbs
23) Vintage Fun reproduces old-fashioned style roller skates and skateboards. The
annual production and sales of roller skates is 950 units, while 1,750 skateboards are
produced and sold. The company has traditionally used direct labor hours to allocate its
overhead to products. Roller skates require 2.5 direct labor hours per unit, while
skateboards require 1.25 direct labor hours per unit. The total estimated overhead for
the period is $114,300. The company is looking at the possibility of changing to an
activity-based costing system for its products. If the company used an activity-based
costing system, it would have the following three activity cost pools:
The overhead cost per skateboard using an activity-based costing system would be
closest to
A) $45.00
B) $65.31
C) $59.26
D) $32.17
24) An accurate description of horizontal analysis would be which of the following?
A) Study of percentage changes in various financial statement amounts from year to
year
B) Study of changes in individual financial statement amounts as a percentage of a
related base amount
C) Study of changes in key financial ratios from year to year
D) None of the above
25) All of the following activities are included in the value chain except
A) customer service
B) design
C) safety
D) production
26) Baron Corporation has two sequential processing departments: Assembly then
Shaping. The Shaping Department reports the following information. Conversion costs
are applied evenly throughout the process.
The total cost of units transferred out to finished goods would be closest to
A) $949,000
B) $958,990
C) $423,800
D) $1,040,250
27) Cave Hardware’s forecasted sales for April, May, June, and July are $200,000,
$230,000, $190,000, and $240,000, respectively. Sales are 65% cash and 35% credit
with all accounts receivables collected in the month following the sale. Cost of goods
sold is 75% of sales and ending inventory is maintained at $60,000 plus 10% of the
following month’s cost of goods sold. All inventory purchases are paid 22% in the
month of purchase and 78% in the following month.
What are the budgeted cash payments in June for inventory purchases?
A) $495,000
B) $315,750
C) $164,385
D) $167,415
28) Which of following statements is TRUE?
A) Managerial accounting focuses on historical transactions
B) Financial accounting focuses on future data
C) Management accounting focuses on relevant data
D) Managerial accounting uses the cash basis for recording transactions
29) Taylor Company reported the following information for the current year:
What would a vertical analysis report with respect to current year income tax expense?
A) A decrease of $24,768
B) A decrease of 144.80% from prior to current year
C) Income tax expense is 2.00% of net sales revenue
D) A decrease of $4,344
30) A company uses sugar in producing its product. If the price of sugar doubles, which
variance is directly impacted?
A) Materials quantity variance
B) Materials price variance
C) Labor rate variance
D) Labor efficiency variance
31) (Present value tables are needed.) Cleveland Cove Enterprises is evaluating the
purchase of an elaborate hydraulic lift system for all of its locations to use for the boats
brought in for repair. The company has narrowed their choices down to two: the B14
Model and the F54 Model. Financial data about the two choices follows.
What is the net present value of the B14 Model?
A) $15,260 positive
B) $48,605 negative
C) $5,800 negative
D) $335,260 positive
32) Which of the following sections from the statement of cash flows would include the
acquisition of a building by issuing common stock?
A) Investing section
B) Financing section
C) Operating section
D) None of the above
33) Twinkle Ornaments Company uses job costing. Twinkle Ornaments Company has
two departments, Trimming and Finishing. Manufacturing overhead is allocated based
on direct labor cost in the Trimming Department and direct labor hours in the Finishing
Department. The following additional information is available:
Actual data for completed Job No. 650 is as follows:
What is the total manufacturing overhead cost for Job No. 650?
A) $81,750
B) $89,600
C) $65,820
D) $72,500
34) Sparky the Electrician specializes in rewiring historic houses. Sparky recently
purchased a new wire-pulling device that will decrease the time to complete each job
and increase total revenues. The device will cost $4,375 and will increase net cash
flows by $1,750 per year. The new device has a useful life of 7 years and a residual
value of $250. What is the payback period for the new wire-pulling device?
A) 2.64 years
B) 2.50 years
C) 2.36 years
D) 2.19 years
35) The following information is provided by Adametz Company:
The units in ending WIP inventory were 90% complete for materials and 50% complete
for conversion costs.
At the end of the year, what are the equivalent units for conversion costs?
A) 3,750
B) 3,300
C) 5,400
D) 2,100
36) The actual cost of direct labor per hour is $16.00 and the standard cost of direct
labor per hour is $15.50. The direct labor hours allowed per finished unit is 0.5 hour.
During the current period, 5,500 units of finished goods were produced using 3,000
direct labor hours. How much is the direct labor efficiency variance?
A) $3,875 unfavorable
B) $3,875 favorable
C) $4,000 favorable
D) $4,000 unfavorable
37) Computing cash generated from operating activities is
A) the same for both the direct and indirect methods
B) different in that the indirect method considers depreciation
C) different in that the direct method considers depreciation
D) none of the above
38) Work in process inventory is debited for which of the following when recording the
use of direct materials in the production process?
A) Standard quantity of direct materials used for actual production output times actual
cost per pound
B) Standard quantity of direct materials used for actual production output times
standard cost per pound
C) Actual quantity of direct materials used times standard cost per pound
D) Actual quantity of direct materials used times actual cost per pound
39) To find the number of units that need to be sold in order to breakeven or generate a
target profit, the formula used is
A) (fixed expenses + operating income) contribution margin per unit
B) (fixed expenses + operating income) contribution margin ratio
C) (fixed expenses – operating income) contribution margin ratio
D) (fixed expenses – operating income) contribution margin per unit
40) A tennis ball maker gives us its data for the year:
Units in ending WIP inventory were 90% complete for materials and 60% complete for
conversion costs.
On December 31, the cost per equivalent unit for direct materials would be closest to:
A) $2.01
B) $1.80
C) $1.33
D) $1.65
41) Gabe Industries sells two products, Basic models and Deluxe models. Basic models
sell for $42 per unit with variable costs of $30 per unit. Deluxe models sell for $50 per
unit with variable costs of $40 per unit. Total fixed costs for the company are $75,400.
Gabe Industries typically sells four Basic models for every Deluxe model. What is the
breakeven point in total units?
A) 6,500 units
B) 3,900 units
C) 9,921 units
D) 5,953 units
42) Culinary Kitchen Supply produces bamboo cutting boards. The standard material
cost for the bamboo used in each lamp is $18 per square foot. Each board requires 3
square feet of bamboo. In August, the company produced 1,200 cutting boards. There
were 3,400 square feet of bamboo used during the month. The bamboo used had an
actual cost $20 per square foot. What was the materials quantity variance in August for
bamboo?
A) $3,600 favorable
B) $3,600 unfavorable
C) $4,000 favorable
D) $4,000 unfavorable
43) All of the following describe an ABC system except
A) ABC systems may only be used by service companies
B) ABC systems can create more accurate product costs
C) ABC systems are more complex and costly than traditional costing systems
D) ABC systems are used in both manufacturing and nonmanufacturing companies
44) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Which account is credited when the frisbees are totally
completed?
A) WIP inventoryfinishing
B) Finished goods inventory
C) Manufacturing overhead
D) WIP inventorycoloring
45) If conversion costs are added evenly throughout 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
A) 0%
B) 100%
C) 50%
D) cannot determine