1) Direct materials are often added at a particular point in the production process.
2) The predetermined manufacturing overhead rate is calculated by dividing the total
estimated manufacturing overhead costs by the total estimated amount of the allocation
base.
3) To find the “cost per equivalent unit,” the “total costs to account for” are divided by
the “total equivalent units.”
4) The journal entry to record the ultimate completion of the units would include a
credit to Finished Goods Inventory.
5) External failure costs occur when poor-quality goods or services are not detected
until after delivery to customers.
6) When evaluating capital investment projects, if the internal rate of return is less than
the required rate of return, the project will be accepted.
7) When a merchandiser prepares a contribution margin income statement, Cost of
Goods Sold is always a variable cost.
8) A paper mill company like International Paper would most likely use job costing.
9) Financial performance measures are known as lag indicators. A lag indicator is a
performance measure that predicts future performance.
10) When units are sold, Cost of Goods Sold is debited.
11) Physical information has not been a traditional component of managerial
accounting systems.
12) Regression analysis uses all data points, not just the highest and lowest volume data
points.
13) The breakeven point can either be calculated in terms of number of units or in terms
of sales revenue.
14) Paulo Company has reengineered its production process and should now review and
potentially revise its activity-based costing system.
15) The master budget is the set of budgeted financial statements and supporting
schedules for the entire organization.
16) Benchmarking is a valid analysis measure of performance.
17) When making product mix decisions, companies are most profitable when they
maximize production of the product with the greatest sales price.
18) CVP analysis assumes that the only factor that affects costs is a change in sale price.
19) The income statements for both a merchandiser and manufacturer would include
which of the following?
A) Operating expenses
B) Direct labor incurred
C) Direct materials used
D) Cost of goods manufactured
20) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. The purchase of materials includes a
A) debit to WIP inventory-molding
B) debit to raw materials inventory
C) credit to manufacturing overhead
D) credit to raw materials inventory
21) For most businesses, annual straight line depreciation expense on the company’s
building is what type of cost?
A) Variable
B) Mixed
C) Fixed
D) Step
22) Which of the following sections from the statement of cash flows includes
purchases and sales of long-term assets?
A) Financing section
B) Investing section
C) Operating section
D) None of the above
23) Indicate whether each of the following costs is a product cost or a period cost.
Assume a manufacturer.
A)________direct materials used in factory
B)________factory utilities
C)________salespersons’ commissions
D)________salary of plant manager
E)________indirect materials used in factory
F)________depreciation expense on store equipment
G)________indirect labor incurred in factory
H)________advertising expense
I)________direct labor incurred in factory
J)________factory machinery repairs and maintenance
K)________depreciation expense on factory machinery
L)________supplies used in store
M)________plant insurance expired
24) 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 conversion costs is
A) 0%
B) 50%
C) 100%
D) none of the above
25) At Sunrise Corporation, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What are the total equivalent units for conversion costs?
A) 126,300
B) 139,700
C) 128,200
D) 130,500
26) Assuming an interest rate of 6%, the present value of $22,000 to be received 9 years
from now would be closest to
A) $16,434
B) $13,024
C) $37,162
D) $35,068
27) Regarding a standard cost income statement, which of the following is TRUE?
A) Operating income is shown at standard cost
B) Variances are listed separately
C) Cost of goods sold is shown only at standard cost
D) Sales revenue is shown only at standard revenue
28) Label each item below as relevant or irrelevant in making a decision.
A.____cost of insurance on a new vehicle when evaluating purchase of new vehicle
B.____cost of roof repair made on rental property last year when evaluating sale of
rental property
C.____original cost of old equipment that is being evaluated for replacement
D.____cost of new equipment that is under evaluation to replace used equipment
E.____accumulated depreciation on old equipment being evaluated for replacement
F.____cost of previous year’s insurance policy on old equipment being evaluated for
replacement
29) Renting a scooter and paying $30 per day plus $.20 per mile driven is an example
of what type of cost?
A) Mixed cost
B) Fixed cost
C) Conversion cost
D) Variable cost
30) Best Birdies produces ornate birdcages. The company’s average cost per unit is
$18.00 at a production level of 2,200 birdcages. What is the total cost of producing
2,200 birdcages?
A) $39,600
B) $18.00
C) $2,218
D) $122
31) In the United States, the fastest growing type of company is
A) merchandising
B) service
C) manufacturing
D) none of the above
32) Before the year began, Murphy Manufacturing estimated that manufacturing
overhead for the year would be $175,500 and that 13,000 direct labor hours would be
worked. Actual results for the year included the following:
The predetermined manufacturing overhead rate per direct labor hour is closest to
A) $12.10
B) $12.69
C) $13.50
D) $14.15
33) Tina’s Interior Design expects its designers will work a total of 14,000 direct labor
hours during the upcoming year. Tina’s estimated total indirect costs are $170,000. The
indirect cost allocation rate is based on direct labor hours.
A) What is the indirect cost allocation rate?
B) What indirect costs will be allocated to client 332, if one designer works 25 hours?
34) Sea Side Enterprises is trying to predict the cost associated with producing its
anchors. At a production level of 5,000 anchors, Sea Side Enterprises’ average cost per
anchor is $52.00. If $15,000 of the total costs are fixed, what is the variable cost of
producing each anchor?
A) $3.00
B) $49.00
C) $245.00
D) $52.00
35) Which of the following persons or groups would be least likely to receive detailed
managerial accounting reports?
A) CEO
B) Plant managers
C) Current shareholders
D) Sales territory managers
36) Rivera Publishing reported the following results for its Trade Paperback Division:
Rivera’s target rate of return is 12% and the weighted average cost of capital is 10%.
What is the Trade Paperback Division’s Return on Investment (ROI)?
A) 20.00%
B) 50.00%
C) 40.00%
D) 200.00%
37) Hushovd Iron Works has collected the following data for its Thunderbolt line of
products:
What is the direct material price variance?
A) $4,000 favorable
B) $4,000 unfavorable
C) $3,500 favorable
D) $3,500 unfavorable
38) Under which of the following situations is raw materials inventory credited and
work in process inventory debited?
A) We ship goods to the customer
B) Material is transferred to the factory
C) We transfer goods to the storeroom
D) We purchase goods on account
39) 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 cost pool activity rate for Engineering Costs would be closest to
A) $15.00 per engineering hour
B) $10.00 per engineering hour
C) $20.00 per engineering hour
D) $7.54 per engineering hour
40) Which of the following would be considered a committed fixed cost?
A) Depreciation
B) Research and Development
C) Office holiday party
D) Advertising
41) A company reported the following amounts of net income:
Which of the following is the percentage change from Year 1 to Year 2?
A) 150.00%
B) 110.00%
C) 40.00%
D) 50.00%
42) The cost of direct labor used in production is recorded as a
A) debit to work in process inventory
B) debit to manufacturing overhead
C) debit to wages expense
D) debit to wages payable
43) All of the following are outsourcing considerations, except
A) Are any fixed costs avoidable if we outsource?
B) How do our fixed costs compare to the outsourcing cost?
C) What could we do with the freed capacity?
D) How do our variable costs compare to the outsourcing cost?
44) Sneider Family Orange Groves processes a variety of fresh juices. The company has
the following expenses for July:
What is the total cost for the production category of the value chain?
A) $462,000
B) $60,000
C) $302,000
D) $201,000
45) The Hummel Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $28,000 of the current year’s current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company’s price-earnings ratio for the current year?
A) 2.00
B) 3.50
C) 12.50
D) 0.08
46) Dire Corporation uses the following standard costs for a single unit of product:
Actual data for the month showed overhead costs of $425,000 for 22,500 units
produced. What is the difference between actual overhead costs and standard overhead
costs allocated to products?
A) $329,375 favorable
B) $329,375 unfavorable
C) $53,125 favorable
D) $53,125 unfavorable
47) Boss Enterprises currently sells its products for $40 per unit. Management is
contemplating a 40% increase in the selling price for the next year. Variable costs are
currently 40% of sales revenue and are not expected to change next year. Fixed
expenses are $120,000 per year.
What is the breakeven point in units at the current selling price?
A) 5,000 units
B) 2,143 units
C) 24 units
D) 7,500 units
48) The manager of the accounting department at Adidas would be in charge of a(n)
A) investment center
B) cost center
C) profit center
D) revenue center
49) Salvatore LLC provides a wide variety of legal services and uses an activity-based
costing system. Data from its activity-based costing system for all services follows:
The cost pool activity rate for client meetings is
A) $56 per meeting hour
B) $ 8 per meeting hour
C) $27 per meeting hour
D) $87 per meeting hour
50) Inventoriable product costs for a manufactured product include
A) the costs of direct materials, direct labor and manufacturing overhead
B) marketing and research and development costs
C) the costs of direct materials and direct labor only
D) none of the above
51) Showboat Corporation had actual manufacturing overhead costs for the most recent
year of $29,500. Manufacturing overhead is allocated using a predetermined
manufacturing overhead rate of $1.50 per direct labor hour. Direct labor cost is $19 per
hour. At the end of the year, Cabaret Corporation found it had overallocated
manufacturing overhead by $1,250. How much manufacturing overhead was allocated
in total during the year?
A) $28,250
B) $29,500
C) $30,750
D) $1,250
52) 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 is a price-taker and
won’t be able to charge more than its competitors who charge $75 per round of golf.
What profit will it earn? State your answer in dollars and as a percent of assets. Will
investors be happy with the profit level?
53) Describe the position of the CFO, the treasurer, and the controller within the
organization. Describe the main functions of the treasurer and the controller.
54) On the line in front of each statement, enter either a D for debit or a C for credit to
indicate the normal entry that would be needed for each account named.
____added purchases to raw materials inventory account
____added indirect materials to manufacturing overhead account
____requisitioned raw materials from raw materials inventory account
____added direct raw materials to work in process inventory account
55) On the line in front of each statement, enter either a D for debit or a C for credit to
indicate the normal entry that would be needed for each account named.
____direct labor was incurred on a job: work in process inventory account
____indirect labor was incurred: wages payable
____indirect labor was added to a job: manufacturing overhead account
____direct labor was incurred: wages payable
56) A corporation reported net income for the year of $28,500. The following items
were reported on the income statement and balance sheet.
Compute cash flows from operating activities using the indirect method.
57) Use the following information to do a horizontal analysis of Carlin Corporation’s
balance sheet for the end of the current and prior years. Fill in the table.
58) What are three methods used to estimate cost behavior? What are the advantages
and disadvantages of each method?
59) Green Pastures golf course is planning for the coming season. Investors would like
to earn a 12% return on the company’s $40 million of assets. The company primarily
incurs fixed costs to groom the greens and fairways. Fixed costs are projected to be $20
million for the golfing season. About 500,000 golfers are expected each year. Variable
costs are about $12 per golfer. The Green Pastures course has a favorable reputation in
the area and therefore, has some control over the price of a round of golf.
Based on these numbers, what are Green Pasture’s total costs?
