If the discount rate that is used to evaluate a project is equal to the project’s internal rate
of return, the project’s ____ is zero.
a. profitability index
b. internal rate of return
c. present value of the investment
d. net present value
A strategic alliance is a
a. packaged software.
b. way for two companies to jointly contribute to the supply chain.
c. way to downsize.
d. method of examining processes.
A ____ system of production control is paced by product demand.
a. EOQ
b. ABC
c. push
d. pull
The difference between the reported income under absorption and variable costing is
attributable to the difference in the
a. income statement formats.
b. treatment of fixed manufacturing overhead.
c. treatment of variable manufacturing overhead.
d. treatment of variable selling, general, and administrative expenses.
The profitability index is
a. the ratio of net cash flows to the original investment.
b. the ratio of the present value of cash flows to the original investment.
c. a capital budgeting evaluation technique that doesn’t use discounted values.
d. a mandatory technique when capital rationing is used.
In the variable costing income statement, which line separates the variable and fixed
costs?
a. selling expenses
b. general and administrative expense
c. product contribution margin
d. total contribution margin
If the chief accountant of a firm has to prepare an operating budget for the coming year,
the first budget to be prepared is the
a. sales budget.
b. cash budget.
c. purchases budget.
d. capital budget.
Financial accounting and cost accounting are both highly concerned with
a. preparing budgets.
b. determining product cost.
c. providing managers with information necessary for control purposes.
d. determining performance standards.
Which of the following is not a step in benchmarking procedures?
a. analyze the “positive gap”
b. engage in continuous improvement
c. analyze the “negative gap”
d. identify “best-in-class” companies
All costs related to the manufacturing function in a company are
a. prime costs.
b. direct costs.
c. product costs.
d. conversion costs.
Savannah Motors
Savannah Motors is trying to decide whether it should keep its existing car washing
machine or purchase a new one that has technological advantages (which translate into
cost savings) over the existing machine. Information on each machine follows:
Refer to Savannah Motors. The estimated $500 salvage value of the existing machine in
10 years represents a(n)
a. sunk cost.
b. opportunity cost of selling the existing machine now.
c. opportunity cost of keeping the existing machine for 10 years.
d. opportunity cost of keeping the existing machine and buying the new machine.
Refer to Wyatt Corporation. Based on variable costing, the income before income taxes
for the year was
a. $570,600.
b. $560,000.
c. $562,600.
d. $547,500.
All other things being equal, as the time period for receiving an annuity lengthens,
a. the related present value factors increase.
b. the related present value factors decrease.
c. the related present value factors remain constant.
d. it is impossible to tell what happens to present value factors from the information
given.
The information below relates to costs, revenues, and assets anticipated in the Shoe
Division of DKY Footwear Corporation:
How would each of the following measures be affected if sales rise by $5,000 in the
Shoe Division?
a. increase increase increase
b. increase no change increase
c. increase increase no change
d. no change no change increase
If the level of activity increases,
a. variable cost per unit and total fixed costs increase.
b. fixed cost per unit and total variable cost increase.
c. total cost will increase and fixed cost per unit will decrease.
d. variable cost per unit and total cost increase.
Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a FIFO method of process costing, compute
EUP for conversion.
a. 2,240
b. 2,180
c. 2,280
d. 2,700
Hunnicutt Company is a construction company that builds greenhouses on special
request. What is the proper classification of the carpenters’ wages?
a. yes yes
no
b. yes no
yes
c. no no
no
d. no yes
yes
Residual income is an example of a ____ performance measurement.
a. long-term
b. short-term
c. qualitative
d. profit center
For a CPA firm, how would the costs of continuing education for audit managers be
classified?
a. Yes No
b. No Yes
c. Yes Yes
d. No No
An example of a fixed cost is
a. total indirect material cost.
b. total hourly wages.
c. cost of electricity.
d. straight-line depreciation.
Successful product development should include
a. kaizen costing.
b. value engineering.
c. kanban implementation.
d. all of the above.
Morrison Company
Morrison Company manufactures two products: digital cameras and video cameras. The
company uses an activity-based costing system. The annual production and sales
volume of digital cameras is 10,000 units and of video cameras is 8,000 units. Direct
costs for the digital cameras are $122; for the video cameras, direct costs are $153.
For overhead costs, there are three activity cost pools with the following expected
activities and estimated total costs:
Refer to Morrison Company. Using ABC, the total cost per digital camera is
approximately:
a. $126.82
b. $127.11
c. $130.55
d. $131.50
Refer to Commodore Company. Using the four-variance approach, what is the variable
overhead spending variance?
a. $2,525U
b. $4,075 F
c. $4,075 U
d. $4,325 U
A favorable fixed overhead spending variance indicates that
a. budgeted fixed overhead is less than actual fixed overhead.
b. budgeted fixed overhead is greater than applied fixed overhead.
c. applied fixed overhead is greater than budgeted fixed overhead.
d. actual fixed overhead is less than budgeted fixed overhead.
Budgeted sales for the first six months the year for Stewart Corporation are listed
below:
Stewart Corporation has a policy of maintaining an inventory of finished goods equal to
35 percent of the next month’s budgeted sales. How many units has Stewart Corporation
budgeted to produce in the first quarter of the year?
a. 18,350 units
b. 17,650 units
c. 22,000 units
d. 22,050 units
Charleston Company
Charleston Company has two departments (Processing and Packaging) and uses a
job-order costing system. Charleston applies overhead in Processing based on machine
hours and on direct labor cost in Packaging. The following information is available for
July:
Refer to Charleston Company. What is the overhead application rate per machine hour
for Processing?
a. $ 0.81
b. $ 1.24
c. $17.80
d. $22.00
Which of the following is usually perceived as being the master budget’s greatest
advantage to management?
a. performance analysis
b. increased communication
c. increased coordination
d. required planning
Which ethical standard is violated when an accountant uses information from a
financial statement he is preparing to advise a relative of a stock purchase?
a. Competence
b. Confidentiality
c. Integrity
d. Credibility
Crosby Corporation
Crosby Corporation has two service departments: Data Processing and
Administration/Personnel. The company also has three divisions: X, Y, and Z. Data
Processing costs are allocated based on hours of use and Administration/Personnel costs
are allocated based on number of employees.
Assume that Data Processing provides more service than Administration/Personnel.
Refer to Crosby Corporation. Using the direct method, what amount of Data Processing
costs is allocated to X (round to the nearest dollar)?
a. $180,000
b. $129,661
c. $0
d. $84,706
An operations flow document
a. tracks the cost and quantity of material through an operation.
b. tracks the network of control points from receipt of a customer’s order through the
delivery of the finished product.
c. specifies tasks to make a unit and the times allowed for each task.
d. charts the shortest path by which to arrange machines for completing products.
Which of the following statements is true?
a. A good cost management system is a key consideration in determining an
organization’s mission.
b. The organization’s mission is a critical success factor in assessing how to react to
competition.
c. Knowledge of an organization’s critical success factors help to clarify organizational
mission and develop a cost management system.
d. An organization must establish a position of cost leadership to compete in a global
business environment.
The operation of a management control system is readily observable.
The difference between the standard hours worked for a specific level of production and
the actual hours worked is the labor efficiency variance.
The number of completed units that could have been produced from the inputs applied
is referred to as ______________________________.
When can a discretionary fixed cost be subjected to control methods that are used for
engineered costs?
Whitmore Corporation
Whitmore Corporation predicts it will produce and sell 40,000 units of its sole product
in the current year. At that level of volume, it projects a sales price of $30 per unit, a
contribution margin ratio of 40 percent, and fixed costs of $5 per unit.
Refer to Whitmore Corporation. What would the company’s projected profit be if it
produced and sold 30,000 units?
The difference between actual and budgeted fixed factory overhead is referred to as a
fixed overhead spending variance.
A cost management system should use cost driver information to trace costs to products
and services.
Having sufficient cash to pay liabilities as they become due is referred to as an
organization’s ________________________.
Burns Corporation
Information relating to the current operations of Burns Corporation follows:
Refer to Burns Corporation. Compute Burns’s degree of operating leverage.
Why is “standard cost” a better measure for a transfer price than “actual cost”?
In an open-book management setting, financial information is often shared with
employees who have little knowledge of accounting concepts.
The two costs of noncompliance are ___________________________________ and
___________________________________.
In computing a transfer price, the maximum price should be no higher than the lowest
market price at which the buying segment can obtain the good or service externally.
For an annuity due, the first cash flow occurs at the end of the period.
A packaged business software system that allows an organization to improve the quality
and timeliness of information as well as integrate and standardize information is
referred to as a(n) _____________________________________________.
A calendar of scheduled budgetary activities helps to coordinate the budgeting process.
In a normal job-order costing system, factory overhead is applied using
rates times input.
Hodges Company uses a job-order costing system and has the following information for
the first week of June:
Required:
What are three reasons that overhead must be allocated to products?