1) Companies often try to gain more control over pricing by attempting to differentiate
their products.
2) The operating activities section of the statement of cash flows is the most important
section.
3) One advantage of the internal rate of return is that it considers the time value of
money.
4) The high-low method is theoretically better than regression analysis because the
high-low method uses more data points than regression analysis.
5) Product cost reports are done only for the final department in process costing.
6) The direct method lists the receipt and payment of cash for specific operating
activities.
7) Management accountants rarely interact with employees from other business
functions such as marketing and customer service.
8) Conversion costs are usually incurred evenly throughout productions.
9) Both process costing and job costing assign costs to units as they proceed through the
process.
10) It is easier to allocate indirect costs to the products that actually caused those costs
if an ABC system is used rather than a traditional costing system.
11) The cost of depreciation, insurance, and property tax on the entire production plant
would be considered a facility-level cost.
12) Directing means setting goals and objectives for the company and determining how
to achieve them.
13) Managers often reap benefits by using ABC data in ABM to pinpoint opportunities
to cut costs.
14) The operating activities section of the statement of cash flows includes paying
dividends and paying off loans.
15) An example of an appraisal cost is the cost of automating the production process.
16) In process costing, manufacturing costs are usually combined into two categories:
direct materials and conversion costs.
17) The concept of the lean thinking philosophy is generally credited to General
Motors.
18) All of the following statements regarding total quality management are TRUE
except
A) TQM emphasizes educating, training, and cross training employees to increase and
broaden their skills
B) TQM is a formal effort to improve quality throughout an organization’s value chain
C) TQM extends horizontally across business functions in the value chain
D) TQM increases time spent on rework and warranty work
19) A shampoo manufacturer offers the following information:
The units in ending WIP inventory were 60% complete for materials and 40% complete
for conversion costs.
On December 31, what is the total cost of units completed and transferred?
A) $ 1,036,800
B) $ 853,527
C) $ 1,050,353
D) $ 1,071,254
20) In a particular department, 8,200 units were started and all but 800 were completed
at the end of the period. These 800 were 80% complete for materials and 30% for
conversion costs. Costs added were $55,400 for materials and $52,100 for conversion
costs. What is the total number of equivalent units for conversion costs?
A) 8,200
B) 8,040
C) 8,440
D) 7,640
21) Manufacturing overhead (consisting of costs like factory rent, factory utilities,
factory maintenance, and other similar costs) is usually what type of cost?
A) Variable
B) Fixed
C) Step
D) Mixed
22) Which of the following is not one of the primary responsibilities of management?
A) Adhering to GAAP
B) Planning
C) Directing
D) Controlling
23) A CFO would have all of the following responsibilities except
A) investing in new production equipment
B) managing corporate financing
C) preparing all corporate tax returns
D) providing reports to creditors as required
24) Which type of cost behavior is indicated by the following graph?
A) Fixed
B) Step
C) Mixed
D) Variable
25) The ________ approach recognizes that both financial and operational performance
measures should be considered when evaluating company performance.
A) financial and operational
B) total
C) complete
D) balanced scorecard
26) An “opportunity cost” is best described by which of the following?
A) Benefits foregone by choosing a particular alternative course of action
B) Costs that were incurred in the past and cannot be changed
C) The distribution of all products to be sold
D) Expected future costs that differ among alternatives
27) Variable costs
A) are fixed per unit and vary in total as production levels change
B) are fixed in total as production levels change
C) decrease per unit as production volume increases
D) vary per unit of output as production levels change
28) All of the following would be considered a direct material for a kitchen cabinet
except
A) wood
B) stain
C) sand paper
D) hinges
29) Maintenance costs at Wilmington Manufacturing over the past six months are listed
in the following table.
Using the high-low method, what would the total maintenance costs be if 17,500
machine hours were used?
A) $15,200
B) $14,000
C) $27,680
D) $ 1,200
30) The following information relates to current production of outdoor chaise lounges at
Backyard Posh:
The regular selling price per chaise lounge is $300.00. The company is analyzing the
opportunity to accept a special sales order for 500 chaise lounges at a price of $200.00
per unit. Variable marketing and administrative costs would be $10 per unit lower than
on regular sales. Fixed costs would increase by $15,000. The company has the capacity
to produce 15,000 chaise lounges per year, but is currently producing and selling 10,000
chaise lounges per year. Regular sales will not be affected by the special order. If the
company were to accept this special order, how would operating income be affected?
A) Decrease by $39,000
B) Decrease by $24,000
C) Increase by $39,000
D) Increase by $24,000
31) Brittany Furniture manufactures two products: Couches and Beds. The following
data are available:
The company can manufacture two couches per machine hour and one bed per machine
hour. The company’s production capacity is 900 machine hours per month.
To maximize profits, what product and how many units should the company produce in
a month?
A) 1,800 couches and 900 beds
B) 900 beds
C) 1,800 couches
D) 600 couches and 325 beds
32) 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 predetermined overhead allocation rate using the traditional costing system would
be closest to
A) $52.25 per direct labor hour
B) $48.13 per direct labor hour
C) $42.33 per direct labor hour
D) $25.05 per direct labor hour
33) 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 cost pool activity rate for Engineering Costs would be closest to
A) $13.00 per engineering hour
B) $42.00 per engineering hour
C) $18.00 per engineering hour
D) $63.09 per engineering hour
34) Puget Company has gathered the following information about its purchase and use
of raw materials for December:
Puget Company uses a standard cost system. What is the materials price variance?
A) $ 575 favorable
B) $ 575 unfavorable
C) $ 500 favorable
D) $ 500 unfavorable
35) Target total cost is described by which of the following?
A) Total cost plus desired profit
B) Revenue at market price plus desired profit
C) Revenue at market price minus desired profit
D) Total cost minus actual cost
36) Heavenly Cupcakes has a monthly target operating income of $12,000. Variable
expenses are 40% of sales and monthly fixed expenses are $8,000.
Requirements:
a.What is the monthly margin of safety in dollars if the business achieves its operating
income goal?
b.What is the monthly margin of safety as a percentage of target sales in dollars?
c.What is Heavenly Cupcakes’ operating leverage factor at the target level of operating
income?
37) Garrett Company manufactures coffee tables and uses an activity-based costing
system to allocate all manufacturing conversion costs. Each coffee table consists of 15
separate parts totaling $125 in direct materials, and requires 2.0 hours of machine time
to produce. Additional information follows:
What is the total manufacturing cost per chair?
A) $165.50
B) $40.50
C) $162.75
D) $30.00
38) Which of the following statements would be TRUE if actual units produced exceed
the budgeted units to be produced?
A) Production volume variance is expected to be unfavorable
B) Overhead flexible budget variance is expected to be favorable
C) Production volume variance is expected to be favorable
D) Overhead flexible budget variance is expected to be unfavorable
39) A company’s income statement reports depreciation expenses of $30,000. If the
company uses the direct method to prepare the statement of cash flows, how will the
depreciation expense be reported on the statement?
A) Depreciation expense would be an addition under investing activities
B) Depreciation expense would be an addition under financing activities
C) Depreciation expense would be a deduction under operating activities
D) Depreciation would not be reported on the statement of cash flows
40) Which variance is directly impacted if the employees who build the product go on
strike and temporary workers who are slower and not as skilled are hired?
A) Materials price variance
B) Materials quantity variance
C) Labor efficiency variance
D) Labor rate variance
41) The Perry Corporation recorded the following budgeted and actual information
relating to fixed overhead costs for its Z-Line of products:
What is Perry’s fixed manufacturing overhead volume variance?
A) $756.25 unfavorable
B) $168.75 unfavorable
C) $756.25 favorable
D) $168.75 favorable
42) Smithson Corporation had the following selected balance sheet changes for the past
year:
The company’s operating income for the year was $35,000. What is the net cash
provided by operating activities for last year on the statement of cash flows for
Smithson Corporation (using the indirect method)?
A) $25,000
B) $45,000
C) $92,000
D) $10,000
43) Icy Peaks Sports makes snowboards. The company wants to add a new machine
that would cost $80,000 and have a useful life of 5 years and no residual value. The
company expects the machine will generate $24,000 annual cash inflows for 5 years.
The discount rate is 10%. What is the net present value of the investment?
44) Explain the difference between raw materials inventory, work in process inventory,
and finished goods inventory.
45) Heinz Manufacturing produces Item Q with variable manufacturing costs of
$12/unit. The selling price of Item Q is $15/unit. The fixed manufacturing overhead
cost is $72,000. A normal production run includes 100,000 units. Heinz Manufacturing
has discovered an additional process to change Item Q into Item QR. Additional costs
are estimated at $7/unit. Item QR would sell for $24/unit. Additional fixed
manufacturing overhead costs of $4,500 would be incurred if Item QR is produced.
There would be no change in the number of units produced.
By what percent would Heinz Manufacturing’s operating income improve if the change
is made?
46) Civic Corporation provided the following partially completed monthly flexible
budget. Complete the flexible budget.
47) What is the difference between relevant and irrelevant information for making
decisions. Provide examples of each.
48) How are average cost and marginal cost computed?
49) 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 is Green Pasture’s target revenue?
50) Heinz Manufacturing produces Item Q with variable manufacturing costs of
$12/unit. The selling price of Item Q is $15/unit. The fixed manufacturing overhead
cost is $72,000. A normal production run includes 100,000 units. Heinz Manufacturing
has discovered an additional process to change Item Q into Item QR. Additional costs
are estimated at $7/unit. Item QR would sell for $24/unit. Additional fixed
manufacturing overhead costs of $4,500 would be incurred if Item QR is produced.
There would be no change in the number of units produced.
What would be the operating income for Item Q?