1) (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 total present value of future cash inflows from the B14 Model?
A) $15,260
B) $335,260
C) $383,980
D) $191,395
2) “Management’s minimum desired rate of return on an investment” is best described
by which of the following terms?
A) Payback return
B) Internal rate of return
C) Discount rate
D) Net present value
3) The variable overhead rate variance is also known as which of the following?
A) Variable overhead efficiency variance
B) Variable overhead usage variance
C) Variable overhead spending variance
D) Variable overhead price variance
4) Manufacturing overhead would include
A) all manufacturing costs except direct materials and direct labor
B) indirect labor costs only
C) all manufacturing costs
D) indirect materials only
5) A company uses the indirect method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?
A) The decrease of $15,000 will be subtracted from net income
B) The decrease of $15,000 will be subtracted from cost of goods sold
C) The decrease of $15,000 will be added to net income
D) The decrease of $15,000 will be added to cost of goods sold
6) Bonneville Manufacturing is considering an investment that would require an initial
net investment of $650,000. The following revenues/expenses relate exclusively to the
investment:
The investment will have a residual value of $50,000 at the end of its 15 year useful
life. What is the payback period for this investment?
A) 1.86 years
B) 3.07 years
C) 2.93 years
D) 2.48 years
7) If the contribution margin ratio is 45%, target operating income is $50,000, and the
sales revenue needed to achieve the target operating income is $300,000, what are total
fixed expenses?
A) $22,500
B) $85,000
C) $185,000
D) $135,000
8) What would a project’s profitability index be if the project has an internal rate of
return which is equal to the company’s discount rate?
A) It would be 0.5
B) It would be 0.0
C) It would be 1.0
D) It cannot be determined from information provided
9) Tasty Treats is a snow cone stand near the local park. To plan for the future, it wants
to determine its cost behavior patterns. It has the following information available about
its operating costs and the number of snow cones served.
Using the high-low method, the monthly operating costsif Sunny sells 8,000 snow
cones in a monthare
A) $7,100
B) $5,600
C) $10,920
D) $1,500
10) Kennedy Enterprises has budgeted sales for the months of September and October
at $120,000 and $150,000, respectively. Monthly sales are 70% credit and 30% cash. Of
the credit sales, 20% are collected in the month of sale and 80% are collected in the
following month. What are the October cash collections from customers?
A) $133,200
B) $66,000
C) $189,000
D) $88,200
11) Pablo was reviewing the water bill for his carwash business and determined that the
highest bill, $5,000, occurred in July when 2,200 cars were washed and the lowest bill,
$3,200, occurred in February when 1,400 cars were washed. What was the variable cost
per carwash?
A) $2.25
B) $2.27
C) $0.44
D) $2.29
12) Fun Stuff Manufacturing produces frisbees using a three-step sequential process
that includes molding, coloring and finishing. When the frisbees and associated costs
are transferred from the molding process to the coloring process, which account is
credited?
A) WIP inventory-molding
B) WIP inventory-coloring
C) Raw materials inventory
D) WIP inventory-finishing
13) Country Western Clothing Outfitters is considering investing in an inventory
tracking system. It will have $10,000 in software costs and $8,000 in employee training
costs. Computer hardware also needs to be upgraded for the system; the hardware
upgrades are expected to be $12,000. The expected benefits from the inventory tracking
system should be $28,000. Do the benefits outweigh the costs or do the costs outweigh
the benefits, and by how much?
A) Costs outweigh benefits by $2,000
B) Benefits outweigh costs by $2,000
C) Costs outweigh benefits by $10,000
D) Benefits outweigh costs by $10,000
14) Matthew’s Fish Fry has a monthly target operating income of $7,200. Variable
expenses are 60% of sales and monthly fixed expenses are $1,800. What is the monthly
margin of safety as a percentage of target sales in dollars?
A) 120.00%
B) 40.00%
C) 80.00%
D) 400.00%
15) Tuity Fruity Beverage Company’s operating activities for the year are listed below.
What is the cost of goods available for sale?
A) $140,000
B) $152,000
C) $80,000
D) $134,000
16) Vandalay Industries manufactures two products: toasters and blenders. The annual
production and sales of toasters is 2,200 units, while 1,500 units of blenders are
produced and sold. The company has traditionally used direct labor hours to allocate its
overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders
require 1 direct labor hours per unit. The total estimated overhead for the period is
$149,115. 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 Blenders using the traditional costing system would be closest to
A) $28.86
B) $38.48
C) $99.41
D) $21.55
17) A favorable direct labor efficiency variance might indicate that
A) higher skilled workers were used that performed the task slower than expected
B) higher skilled workers were used that performed the task faster than expected
C) lower skilled workers were paid a higher wage than expected
D) lower skilled workers were paid a lower wage than expected
18) How often should managerial accounting reports be prepared?
A) Annually
B) Quarterly
C) Monthly
D) As often as necessary
19) Which of the following pertains to a lean company?
A) An individual does fewer tasks than under a traditional production system
B) Product costs attached to units are tracked as units move through production
C) Rather than many individual journal entries, summary journal entries are made when
units are completed
D) Units are produced in larger batches than under a traditional production system
20) A manager wants to know which investment decision will affect the bottom line of
the financial statements according to Generally Accepted Accounting Principles. Which
capital budgeting method would he choose?
A) Payback method
B) Accounting rate of return method
C) Net present value method
D) Profitability index
21) If the variable cost per unit decreases while the sales price per unit and total fixed
costs remain constant, which of the following statements is TRUE?
A) The contribution margin decreases and the breakeven point increases
B) The contribution margin decreases and the breakeven point decreases
C) The contribution margin increases and the breakeven point increases
D) The contribution margin increases and the breakeven point decreases
22) Four Guys Company has in its inventory 5,000 damaged televisions that cost
$50,000. The televisions can be sold in their present condition for $32,000, or repaired
at a cost of $43,000 and sold for $76,000. What is the opportunity cost of selling the
televisions in their present condition?
A) $82,000
B) $119,000
C) $33,000
D) $75,000
23) Razzle Baking Company gathered the following actual results for the current
month:
Actual amounts:
Budgeted production and standard costs were:
What is the direct labor efficiency variance?
A) $9,000 favorable
B) $5,300 favorable
C) $9,000 unfavorable
D) $5,300 unfavorable
24) Page’s sells books. The following information summarizes the company’s operating
expenses for the year:
What is cost of goods available for sale?
A) $116,000
B) $65,000
C) $119,000
D) $108,000
25) Jackson Industries has collected the following data for one of its products:
What is the actual cost of the direct materials used per pound?
A) $2.79
B) $2.45
C) $2.11
D) $0.55
26) Gluck Metal Works stamps sheet metal into blanks that are used in a variety of
consumer products. The average cost for sheet metal is $75 per ton. Gluck’s waste
disposal company charges $50 per ton to dispose of manufacturing waste. The stamping
process currently employed by Gluck generates an average of 120 tons of waste per
month.
What is the net amount Gluck would save per year if stamping waste could be sold to a
recycler for $30 per ton?
A) $115,200
B) $9,600
C) $72,000
D) $43,200
27) Johnson Trucking Company wants to determine a fuel surcharge to add to its
customers’ bills based on the number of miles driven to each area. It wants to separate
the fixed and variable portion of the truck’s operating costs so it has a better idea of how
distance affects these costs. Johnson Trucking Company has the following data
available.
Using the high-low method, the monthly operating costs if Johnson Trucking Company
drives 20,000 miles in a month will be
A) $28,650
B) $10,500
C) $25,500
D) $15,000
28) The breakeven point may be defined as the number of units a company must sell to
do which of the following?
A) Generate a net loss
B) Generate a zero profit
C) Earn more net income than the previous accounting period
D) Generate a net income
29) If selling and administrative expenses decrease while everything else remains the
same, what will happen to return on investment (ROI)?
A) ROI will decrease
B) ROI will increase
C) ROI will not be affected
D) We cannot determine the direction of the effect from the information provided
30) Non-value added activities are
A) also called waste activities
B) activities that neither enhance the customer’s image of the product or service nor
provide a competitive advantage
C) activities that could be reduced or removed from the process with no ill effect on the
end product or service
D) All of the above
31) Beartowne Enterprises uses an activity-based costing system to assign costs in its
auto-parts division.
The following units were produced in December with the following information:
Total unit costs for Part 001 is closest to (round to two decimal points)
A) $5.70
B) $14.84
C) $9.37
D) $5.36
32) A company uses the indirect method to prepare the statement of cash flows. Which
of the following items would be subtracted from net income in determining the net cash
flow from operating activities?
A) An increase in dividends payable would be subtracted from net income
B) A loss on the sale of equipment would be subtracted from net income
C) A gain on the sale of equipment would be subtracted from net income
D) Depreciation expense would be subtracted from net income
33) If target sales in units is 80,000, total fixed expenses are $10,000, and the unit
contribution margin is $0.30, what is the target operating income?
A) $34,000
B) $14,000
C) $24,000
D) $3,000
34) All of the following are cash outflows from an operating activity except
A) payment of interest on a loan
B) payment for purchasing inventory
C) payments to the government for taxes
D) owner withdrawal from the company
35) To record the requisition of direct materials, which of the following would be
debited?
A) Finished goods inventory
B) Work in process inventory
C) Raw materials inventory
D) Cost of goods manufactured