Liabilities are economic resources.
A disadvantage of decentralization in organizations is higher overhead costs due to
duplication.
The operating budget is a better measure of a company’s long-term performance than
the financial budget.
If actual expenses are less than expected expenses, the expense variance will be
unfavorable.
Dividends paid are reported on the Retained Earnings Statement.
Many companies derive their competitive advantage from their information, not their
physical facilities.
A code of conduct is a document specifying the ethical standards of an organization.
In a regression analysis, the constant from the linear cost function is a measure of
reliability.
Target costing is most effective at reducing costs if used during the product design
phase.
The rate of return on net book value for equipment decreases as the equipment ages.
Property taxes on a building used by a segment are not considered when evaluating the
performance of the segment manager.
Possible definitions of invested capital for purposes of calculating return on investment
include total assets and total stockholders’ equity.
One cause of a flexible budget variance for direct labor may be a difference between
standard and actual hourly wage rates for factory workers.
Some companies use hybrid costing, which blends the ideas from both job costing and
process costing.
Managers in decentralized units may waste time negotiating with other units about
goods or services one unit transfers to the other.
Nonfinancial performance measures are often lagging indicators that arrive too late to
help prevent problems.
Value-added costs are not necessary for most products.
Fixed costs not controllable by a segment manager usually include depreciation and
property taxes on the building used by the segment.
Management by exception is the practice of ignoring areas that deviate from the plan.
Activity-based budgets are an example of functional budgeting.
If an investor uses the equity method to account for a long-term equity investment, then
the investor records income when the investee pays a dividend.
Managers evaluated using net book value for plant assets will tend to replace assets
sooner than managers evaluated using gross book value.
EVA equals adjusted after-tax operating income minus capital turnover.
In imperfect competition, a firm must decrease the sales price to generate additional
sales.
Nonoperating items on a multiple-step income statement include interest expense and
interest income.
The most widely used approach in disposing of an overhead variance is proration to the
affected accounts.
When the actual production volume exceeds the expected production volume, fixed
overhead is underapplied.
Some management experts have said that the only sustainable competitive advantage is
the rate at which a company’s managers learn.
The essence of the just-in-time philosophy is to eliminate waste.
Qualitative factors do not affect a make-or-buy decision.
Indirect manufacturing costs are the same as manufacturing overhead costs.
Cost accounting is that part of the cost management system that measures costs for the
sole purpose of financial reporting.
Cash collections from customers in any given month include the current month’s cash
sales and expected collections on credit sales.
Each job has its own job-cost record in a job-costing system.
For a corporation, assets must equal liabilities plus paid-in capital.
Total quality management is the application of quality principles to the most important
of an organization’s departments to satisfy customers.
Which of the following is an example of a strategic management decision that uses cost
information?
A) determining the ending balance of Merchandise Inventory for financial reporting to
external users
B) determining the product mix
C) assessing a cost control program in a factory
D) determining the amount of Cost of Goods Sold for financial reporting to external
users
Michael Company has a sales budget for next month of $300,000. Cost of goods sold is
expected to be 50% of sales. All units are paid for in the month following purchase. The
beginning inventory is $10,000 and an ending inventory of $12,000 is desired.
Beginning accounts payable is $76,000. The purchases for next month are ________.
A) $138,000
B) $140,000
C) $150,000
D) $152,000
What is the general rule for determining transfer prices on transferred products between
segments of a company? The transfer price equals ________ plus ________.
A) fixed costs; opportunity costs
B) outlay cost; sunk cost
C) outlay cost; variable cost
D) outlay cost; opportunity cost
On the cash budget, how do we obtain the available cash balance?
A) beginning cash balance
B) minimum cash balance desired
C) total cash increase from financing plus net cash receipts and disbursements
D) beginning cash balance minus minimum cash balance desired
Who is the primary user of performance reports used to plan and control operations?
A) management accountants
B) CPAs
C) operating managers
D) chartered accountants
________ are profitability ratios.
A) Price earnings ratio and current ratio
B) Dividend payout and rate of return on invested capital
C) Earnings per share and dividend yield
D) Gross profit rate and return on sales
In process costing, how many Work-In-Process Inventory accounts are used?
A) none
B) only one
C) one for each processing department
D) at least two for each processing department
Atkinson Company has the following information:
Month Budgeted Sales
January $76,000
February 85,000
March 92,000
April 80,000
Budgeted Operating Expenses Per Month
Wages $15,000
Advertising 12,000
Depreciation 3,000
Other expenses 4% of sales
All cash expenses are paid as incurred. What are the total operating expenses budgeted
for the month of April?
A) $3,160
B) $30,000
C) $33,200
D) $33,680
The most recent income statement for the Venetian Branch of Palm Harbor Bank is
presented below:
Sales $57,000
Variable costs 31,500
Contribution margin 25,500
Avoidable fixed costs 13,500
Unavoidable fixed costs 20,000
Operating loss $(8,000)
Palm Harbor Bank is thinking about eliminating the Venetian Branch. If the branch is
eliminated, Palm Harbor Bank’s operating income will ________.
A) increase by $8,000
B) increase by $25,500
C) decrease by $12,000
D) decrease by $31,500
Christian 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 at March 31?
A) $2,900
B) $18,312
C) $30,520
D) $39,068
Camile Company has no beginning and ending inventories, and reports the following
data about its only product:
Direct materials used $100,000
Direct labor $80,000
Fixed indirect manufacturing $50,000
Fixed selling and administrative $220,000
Variable indirect manufacturing $20,000
Variable selling and administrative $75,000
Selling price(per unit) $84
Units produced and sold 10,000
Camile Company uses the absorption approach to prepare the income statement. What
is the product cost per unit?
A) $20
B) $25
C) $27.50
D) $32.50
Little Rock Corporation and Memphis Corporation are movie companies. Comparative
data for 20X0 and 20X1 are given below:
Little Rock Memphis
Corporation Corporation
Sales revenue 20X0 $8,000,000 $4,400,000
20X1 9,600,000 6,175,000
Number of employees 20X0 10,000 5,500
20X1 9,000 6,500
Assume that each 20X0 dollar is equivalent to 1.60 of each 20X1 dollar, due to
inflation. Taking inflation into account, what is Little Rock Corporation’s 20X0
productivity measure in terms of revenue per employee?
A) $1,083.08
B) $1,280.00
C) $1,422.22
D) $1,600.00
A(n) ________ is a review to determine whether the policies and procedures specified
by top management have been implemented by lower managers.
A) management audit
B) internal audit
C) internal control
D) internal accounting control
The amortization of intangible assets applies to ________.
A) Research and Development Costs
B) Goodwill
C) intangible assets with definite lives
D) intangible assets with indefinite lives
The following data are available for Atkinson Company for the year ended December
31, 2015:
Sales 38,000 units
Sales price $50 per unit
Actual variable manufacturing costs $1,400,000
Actual fixed manufacturing costs $228,000
Actual variable nonmanufacturing costs $76,000
Actual fixed nonmanufacturing costs $135,000
Work-in-process inventory, January 1, 2015 0
Finished goods inventory, January 1, 2015 0
Direct materials inventory, January 1, 2015 0
Work-in-process inventory, December 31, 2015 0
Direct materials inventory, December 31, 2015 0
Expected production 40,000 units
Actual production 40,000 units
Required:
A) Using the variable-costing approach, prepare an income statement for the year ended
December 31, 2015. Assume actual fixed costs were equal to budgeted fixed costs.
B) Using the absorption-costing approach, prepare an income statement for the year
ended December 31, 2015. Assume actual fixed costs were equal to budgeted fixed
costs.
The use of high technology equipment to manufacture products instead of highly skilled
labor usually results in ________.
A) higher discretionary fixed costs
B) higher discretionary variable costs
C) lower risk
D) higher operating leverage
The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit.
The part is produced in Country Z and transferred to a plant in Country B. Country Z
has a 10% income tax rate. Country B has a 50% income tax rate and an import duty
equal to 10% of the price of the item. Part X can be transferred at full cost or variable
cost. Assume Part X is transferred at full cost. By using full cost instead of variable cost
for the transfer price, the net savings is ________.
A) $3 per unit
B) $6 per unit
C) $9 per unit
D) $15 per unit
Thompson Company currently produces 10,000 units of a key part at a total cost of
$512,000 annually. Annual variable costs are $300,000. Of the annual fixed costs,
$140,000 relate specifically to this part. The remaining fixed costs are unavoidable.
Another manufacturer has offered to supply the part for $48 per unit. The facilities
currently used to manufacture the part could be used to manufacture a new product with
an expected contribution margin of $60,000 annually. Alternatively, the facilities could
be rented out at $70,000 annually. If Thompson Company makes the part, what is the
annual opportunity cost of the facilities?
A) $13,000
B) $28,000
C) $60,000
D) $70,000
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
For next year, David Company has budgeted sales of 8,000 units, target ending
inventory of 1,000 units and a beginning inventory of 300 units. How many units
should be purchased?
A) 5,700
B) 6,300
C) 7,700
D) 8,700
To assign indirect costs to cost objects, which of the following methods is used?
A) cost pooling
B) cost accumulation
C) cost allocation
D) cost tracing
For external financial reporting, ________ costs are assigned to products or services.
A) some production
B) all production
C) all value chain function
D) all production and some value chain function
Paula Inc. manufactures phones in a two-department process that involves Assembly
and Finishing. The Assembly Department reported the follow data for the past month:
Direct materials added $336,000
Direct labor 460,800
Factory overhead 230,400
Total costs to account for $1,027,200
Units started 80,000
Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 75 percent complete with respect to conversion costs. The cost
of a finished unit is ________.
A) $12.84
B) $13.20
C) $15.29
D) $17.20
The present value of tax savings from depreciation deductions from an accelerated
depreciation method will be ________ those from the straight-line method.
A) the same as
B) greater than
C) less than
D) none of the above
In an efficient capital market, the role of accounting information is to ________.
A) help investors find underpriced securities
B) help investors find overpriced securities
C) help investors find low risk securities
D) help investors identify the different degrees of risk among different securities
Gerald Corporation and Nell Corporation are two companies in the same industry.
Comparative data for two years are given below:
Gerald Nell
Corporation Corporation
Sales revenue 20X1 $905,520 $1,090,000
20X6 1,950,000 2,962,500
Number of employees 20X1 1,750 2,500
20X6 2,250 4,375
Assume each 20X1 dollar is equivalent to 2.00 dollars in 20X6 due to inflation.
Required:
A) After considering inflation, compute the revenue per employee for each company for
20X1 and 20X6.
B) What is the change in productivity between the five years for each company?
When undertaking a capital budgeting problem with taxes, the total cash effect of
depreciation expense on a long-term asset is equal to ________.
A) $0
B) depreciation expense times the tax rate
C) depreciation expense times (1 minus the tax rate)
D) depreciation expense divided by the tax rate
Consider the following activity: The manufacturer in a commercial airplane. What is an
appropriate cost driver for the cost of the seats?
A) number of seats installed
B) number of labor hours used to install seats
C) number of mechanic hours
D) number of engineering hours
Which of the following is(are) a deficiency(deficiencies) of cash-basis accounting?
A) it omits key revenues and expenses from the balance sheet
B) it fails to match revenues and expenses to measure economic performance
C) it omits key assets and key liabilities from the balance sheet
D) B and C
A cost function with one independent variable is estimated with least squares
regression. The coefficient of determination for the equation is 0.50. This statistic
indicates that ________.
A) the independent variable does not explain changes in the dependent variable very
well
B) the dependent variable does not explain changes in the independent variable very
well
C) the cost estimates are correct 50 percent of the time
D) the cost estimates are not correct 50 percent of the time
The Brucker Company makes mugs for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 5 ounces $2 per ounce
Direct Labor 1.5 hours $8 per hour
Production of 400 mugs was expected in July, but 440 mugs were actually completed.
Direct materials purchased and used were 2,100 ounces at an actual price of $2.30 per
ounce. Direct labor cost for the month was $5,310, and the actual pay per hour was
$9.00. What is the direct material price variance for July?
A) $400 Favorable
B) $400 Unfavorable
C) $630 Favorable
D) $630 Unfavorable
Which of the following statements about management control systems is FALSE?
A) In designing management control systems, top managers must consider the system’s
impact on the employee behavior desired by the organization.
B) The management control system should be designed to achieve the best possible
alignment between managerial effort and goal congruence.
C) The design of a management control system should consider the responsibilities of
managers and the amount of autonomy they have.
D) Profit-center managers always have more decentralized decision-making authority
than cost-center managers.
For fixed overhead costs, the spending variance is ________ equal to the
flexible-budget variance.
A) always
B) sometimes
C) never
D) indeterminate
The Technical Services Department of Wichita State University leased a photocopy
machine for $2,000 per month plus $0.04 per copy. Additional budgeted variable
operating costs were $0.02 per copy. The Technical Services Department estimated the
machine would produce 30,000 copies per month. The Accounting Department
estimated is would make 6,000 copies per month but it actually made 4,000 copies.
Assume fixed and variable cost pools are allocated separately. What is the amount of
fixed cost allocated to the Accounting Department for the month?
A) $200
B) $267
C) $360
D) $400