Sharpie Company has variable costs of 75% of total revenues and fixed costs of $40
million per year. What is the break-even point in dollars?
A) $40 million
B) $53.33 million
C) $100 million
D) $160 million
Marketing is the function of the value chain that involves ________.
A) the mechanism by which a company delivers products or services to the customer
B) the manner by which individuals or groups learn about the value and features of
products or services
C) selling activities and delivery activities
D) selling activities and customer service
Presented below is the balance sheet of Holman Company at January 1, 2015:
Cash $100
Net Fixed Assets 400
Total Assets $500
Accounts Payable $20
Long-term Bonds Payable 220
Stockholders’ Equity 260
Total Liabilities and Stockholders’ Equity $500
The balance sheet of Beck Company at January 1, 2015 is below:
Cash $400
Net Fixed Assets 380
Total Assets $780
Accounts Payable $120
Long-term Bonds Payable 280
Stockholders’ Equity 380
Total Liabilities and Stockholders’ Equity $780
On January 1, 2015, Beck Company acquired 100 percent of the outstanding common
stock of Holman Company for $260 cash. The book value and fair value of Holman’s
assets and liabilities were equal. Holman Company generated net income of $30 during
the year ended December 31, 2015. There were no intercompany sales. What is the
balance in the Investment in Holman Company account on December 31, 2015 before
elimination entries are prepared?
A) $0
B) $30
C) $230
D) $290
Sandy Company manufactures three products from a joint process. Joint costs for the
year amounted to $250,000. 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 relative-sales-value method of allocating joint costs is used. What amount
of joint costs is allocated to Product Z?
A) $50,000
B) $100,000
C) $125,000
D) $250,000
One of the primary purposes of an activity-based costing system is to ________.
A) focus on quality improvements in the production process
B) focus on cost reduction in the production process
C) eliminate all overhead costs for manufactured products
D) increase the accuracy of product costs so managers can make better decisions
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
Which of the following costs is NOT an appraisal cost for quality control?
A) inspection of purchased materials
B) testing of purchased materials
C) warranty
D) product quality audit
An investor holds 5% of the outstanding stock of an investee. Securities that the
investor company buys only with the intent to resell them shortly are called ________.
A) available-for-sale securities
B) equity method securities
C) trading securities
D) options
The following information is available for the Christian Company:
Net income for the year ended December 31, 2014 $127.4
Retained earnings, December 31, 2014 150.0
Retained earnings, December 31, 2013 180.0
$5 par Common stock, December 31, 2014 80.0
$5 par Common stock, December 31, 2013 80.0
Total liabilities, December 31, 2014 240.0
Total liabilities, December 31, 2013 182.0
What is the earnings per share for the year ended December 31, 2014?
A) $1.04
B) $1.56
C) $7.50
D) $7.96
A cash payment on accounts payable will ________.
A) increase assets and increase liabilities
B) increase assets and increase stockholders’ equity
C) decrease assets and decrease liabilities
D) decrease assets and increase stockholders’ equity
In activity-based costing systems, the system first accumulates indirect costs for
________, and then assigns these costs to ________.
A) products; departments
B) products; territories
C) cost objects; types of customers
D) activities; cost objects
Which of the following is an example of a value-added cost to a manufactured product?
A) the cost of handling inventory
B) the cost of storing inventory
C) changing the setup of production-line operations
D) the depreciation expense of robots that assemble the product
The cost of the Maintenance Department at Forest Manufacturing has always been
charged to the production departments based on the number of employees. Recently, an
activity analysis of possible cost drivers was performed which indicated that the square
feet of space may also be a predictor of costs to be assigned to each production
department. The Maintenance Department cost is $500,000. The following data is
available:
Production Departments
Dept. A Dept. B Dept. C
Number of Employees 300 25 50
Square Feet of Space 5,000 10,000 25,000
Required:
1. Determine the amount of the maintenance department cost that should be allocated to
Department A and Department B if the cost driver used is: (A) number of employees
and (B) square feet of space.
2. Does the choice of the cost driver affect the costs assigned to each department?
Starbucks generates many financial reports to evaluate the operating performance of
each store at the end of each quarter. The financial reports are an example of ________.
A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing
Margaret Company has the following information:
Month Budgeted Purchases
January $26,800
February 29,000
March 30,520
April 29,480
May 27,680
Purchases are paid as follows:
10% in the month of purchase
50% one month after purchase
40% two months after purchase
What is the expected balance in Accounts Payable on May 31?
A) $2,948
B) $11,792
C) $24,912
D) $36,704
A plant asset of $270,000 is expected to generate $180,000 in operating cash savings
(excluding depreciation expense) annually for three years. Assume straight-line
depreciation is used. The useful life is three years. The asset has no expected residual
value. Ignore income taxes. The accounting rate of return based on the average
investment is ________.
A) 11.11%
B) 33.33%
C) 44.44%
D) 66.67%
Vanduser Company is considering the purchase of a labor saving piece of equipment
with the following information:
Purchase cost of equipment $432,000
Annual cost savings, excluding depreciation(end of year) $80,000
Terminal salvage value $10,000
Useful life of equipment 12 years
Required rate of return 10%
Tax rate 30%
Depreciation method for tax purposes Straight-line
Present value of ordinary annuity of one
at 10% for 12 periods 6.8137
Present value of one at 10% for 12 periods 0.3186
What is the net present value of the equipment?
A) $(50,433)
B) $23,155
C) $24,638
D) $124,458
Comerowski Industries Inc. reported the following information about the production
and sale of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead $20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the total contribution margin?
A) $10,500
B) $31,500
C) $49,500
D) $53,000
Decentralization is more successful in organizations when ________.
A) multiple segments buy from the same outside suppliers
B) multiple segments sell to the same customers
C) there are frequent purchases and sales made between segments of the organization
D) an organization’s segments are relatively independent of each other
What is the after-tax amount of annual cash operating savings associated with a
proposed machine?
A) operating savings times the tax rate
B) operating savings times (1 minus the tax rate)
C) $0
D) operating savings
The purpose of depreciation is to ________.
A) establish the current replacement cost of a fixed asset
B) accumulate funds to replace a fixed asset
C) set aside cash to replace a fixed asset
D) allocate the original cost of a fixed asset to the periods that benefit from the use of
the fixed asset
Paquin Company has the following information available for the most current year:
Paid-in capital, January 1, 2014 $475,000
Retained earnings, January 1, 2014 $50,000
Total revenues in 2014 $890,000
Total expenses in 2014 $550,000
Dividend declared in 2014 $70,000
What was the balance in Retained Earnings at December 31, 2014?
A) $270,000
B) $320,000
C) $390,000
D) $405,000
In job-order costing, all the costs for a particular product or batch of products are
recorded on the ________.
A) materials requisition form
B) labor time ticket
C) time card
D) job-cost record
________ is the system that applies costs to similar products that are mass-produced in
continuous fashion through a series of production processes.
A) Job-order costing
B) JIT costing
C) Activity-based costing
D) Process costing
Absorption costing assigns ________ to the product.
A) variable manufacturing costs only; not fixed manufacturing costs
B) fixed manufacturing costs only; not variable manufacturing costs
C) variable manufacturing costs and variable selling costs
D) variable and fixed manufacturing costs
The following information was extracted from the accounting records of Kristie
Company:
Paid-in Capital, December 31, 2014 $87,000
Retained Earnings, December 31, 2014 $211,000
Total Assets, December 31, 2014 $455,000
Revenues for year ended December 31, 2015 $200,000
Expenses for year ended December 31, 2015 $165,000
Cash Dividends Declared $0
Total Assets, December 31, 2015 $605,000
Additional investments by owners in 2015 $0
At December 31, 2015, what is the total amount of liabilities?
A) $45,000
B) $150,000
C) $157,000
D) $272,000
Christian Corporation sells desks at $480 per desk. The variable costs are $300 per
desk. Total fixed costs for the period are $540,000. The break-even point in desks is
________.
A) 1,125
B) 1,800
C) 3,000
D) 4,230
Christian Company reported a flexible budget variance for direct materials costs of
$10,000 Favorable for the current year. If the direct materials price variance was $2,000
Favorable, what was the direct materials quantity variance?
A) $8,000 Unfavorable
B) $8,000 Favorable
C) $12,000 Favorable
D) $12,000 Unfavorable
This is a statement from the IMA’s Statement of Ethical Professional Practice: “Each
member has a responsibility to communicate information fairly and objectively.” This
statement comes from the ________ standard.
A) competence
B) confidentiality
C) integrity
D) credibility
Misuse of budgets can lead to incentives to cheat and lie. Cheating and lying may take
the form of ________.
A) making short-run decisions to increase profits that are not in the company’s best
long-run interests
B) budgetary slack
C) decreasing profits when actual profits significantly exceed the profit target
D) all of the above
Stonefield Company pays taxes of 25% on their first $30,000 of pretax income and 30%
on any taxable income in excess of $30,000. The current pretax income is $45,000.
What is the marginal tax rate for Stonefield Company?
A) 25%
B) 30%
C) 40%
D) 65%
What are transferred-in costs?
A) costs that can be ignored in calculating the cost of ending Work-in-Process Inventory
B) costs that can be ignored in calculating the cost of beginning Work-in-Process
Inventory
C) costs that can be ignored in calculating the cost of units transferred to the next
department
D) costs incurred in a previous department for units that have been received by a
subsequent department
Why do changes in business process management affect management accounting?
A) Management accountants are experts in designing plant layout changes.
B) Management accountants specialize in designing manufacturing cells to streamline
production processes.
C) They all affect product costs and management accountants measure product costs.
D) They all affect the number of workers employed and management accountants are
involved in human resources.