1) The Top Hat Division of Blandon’s Fine Menswear had the following results last year
(in thousands).
Management’s target rate of return is 12% and the weighted average cost of capital is
9%.
What is the Top Hat Division’s Residual Income (RI)?
A) $ 135,000
B) $ 405,000
C) $ 225,000
D) $ 315,000
2) Nixon’s Diner bakes pies in large batches. One batch of pies has the following
standard costs and amounts:
Nixon’s Diner baked 425 batches of pies in the most recent month. Actual costs and
usage levels were as follows:
Required:
a.Calculate the material price variance.
b.Calculate the material quantity variance.
c.Calculate the labor rate variance.
d.Calculate the labor efficiency variance.
3) Jean’s Fitness Club provides monthly memberships as well as personal training
sessions. The personal trainers earn 50% of the revenue for all personal training
sessions. The Fitness Club also sells nutrition products. Jean’s general ledger accounts
indicate the following for the year. The front desk staff wages expense remains the same
throughout the year.
If a traditional income statement is prepared for the year, what is operating income?
A) $175,500
B) $280,000
C) $207,500
D) $245,500
4) George Company has a relevant range of 150,000 units to 400,000 units. The
company has total fixed costs of $525,000. Total fixed and variable costs are $612,500
at a production level of 175,000 units. The variable cost per unit at 300,000 units is
A) the same as at 175,000 units
B) greater than at 175,000 units
C) less than at 175,000 units
D) dependent upon fixed costs per unit
5) On the statement of cash flows, which of the following items would be reported in
the financing activities section?
A) Cash paid for interest
B) Cash received from customers
C) Cash received from a sale of treasury stock
D) Cash paid for operating expenses
6) Total fixed costs for Purple Figs Company are $52,000. Total costs, both fixed and
variable are $160,000 if 80,000 units are produced. The fixed cost per unit at 80,000
units would be
A) $1.35/unit
B) $0.65/unit
C) $2.00/unit
D) $2.65/unit
7) The Settler’s Chuck Wagon sells tickets for dinner and a show for $50 each. The cost
of providing dinner is $23 per ticket and the fixed cost of operating the theater is
$115,000 per month. The company can accommodate 13,500 patrons each month. What
is the contribution margin ratio?
A) 46%
B) 185%
C) 27%
D) 54%
8) Extreme Sports received a special order for 1,000 units of its extreme motorbike at a
selling price of $250 per motorbike. Extreme Sports has enough extra capacity to accept
the order. No additional selling costs will be incurred.
Unit costs to make and sell this product are as follows: Direct materials, $100; direct
labor, $50; variable manufacturing overhead, $14; fixed manufacturing overhead, $10,
and variable selling costs, $2.
A) List the relevant costs.
B) What will be the change in operating income if Extreme Sports accepts the special
order?
C) Should Extreme Sports accept the special order?
9) The four perspectives of the balanced scorecard include all of the following except
A) financial
B) customer
C) cost
D) learning and growth
10) For each of the following statements, determine if manufacturing overhead was:
A)underallocated
B)overallocated
Put the correct letter on the line in front of each statement.
____cost of goods sold is increased
____actual manufacturing overhead is less than allocated manufacturing overhead
____cost of goods sold is decreased
____actual manufacturing overhead is more than allocated manufacturing overhead
11) The following account balances at the beginning of January were selected from the
general ledger of Ocean City Manufacturing Company:
Additional data:
1> Actual manufacturing overhead for January amounted to $62,000.
2> Total direct labor cost for January was $63,000.
3> The predetermined manufacturing overhead rate is based on direct labor cost. The
budget for the year called for $250,000 of direct labor cost and $350,000 of
manufacturing overhead costs.
4> The only job unfinished on January 31 was Job No. 151, for which total direct labor
charges were $5,200 (800 direct labor hours) and total direct material charges were
$14,000.
5> Cost of direct materials placed in production during January totaled $123,000. There
were no indirect material requisitions during January.
6> January 31 balance in raw materials inventory was $35,000.
7> Finished goods inventory balance on January 31 was $34,500.
What is the cost of goods manufactured for January?
A) $274,200
B) $231,000
C) $247,720
D) $204,520
12) The system used for the identification, collection, analysis, and use of monetary and
physical information is known as?
A) Environmental management accounting (EMA)
B) Materials flow accounting (MFA)
C) Triple bottom line
D) Sustainability
13) The fixed expenses of Greg’s Snowboards are $800,000. The selling price for one
snowboard is $150. The variable cost per unit is $68. If the company sells 9,300
snowboards, its operating income is a
A) gain of $1,227,400
B) loss of $167,600
C) loss of $37,400
D) gain of $1,562,600
14) The sales price of a particular unit is $19.00. The company plans to sell 7,500 units.
The variable costs are $6.00 per unit and monthly fixed costs are $112,500. Given this
information what is the company’s total variable cost?
A) $45,000
B) $112,500
C) $142,500
D) $97,500
15) Inventoriable product costs are best described by which of the following
statements?
A) They are expensed on the income statement when incurred
B) They include marketing and distribution costs
C) They are used for external reporting purposes
D) Both A and C are correct
16) Process costing is most likely used in which of the following industries?
A) Chemicals
B) Aircraft
C) Construction
D) Printing
17) Which of the following tasks are performed by management accountants?
A) Help design information systems
B) Provide decision support
C) Ensure financial records are correct
D) All of the above
18) 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 are the total equivalent units for direct materials?
A) 25,600
B) 29,440
C) 21,760
D) 23,040
19) To whom would the vice-president of operations typically directly report?
A) The COO
B) The Board of Directors
C) The CFO
D) The CEO
20) A(n) ________ cost is a cost whose total amount changes in direct proportion to a
change in volume.
A) variable
B) fixed
C) mixed
D) irrelevant
21) Porches, Inc., sells lawn furniture. Selected financial information for the most
recent year follows.
Beginning merchandise inventory on January 1 was $33,000.
Ending merchandise inventory on December 31 was $35,000.
Purchases during the year were $92,000.
Selling and administrative expenses were $75,000.
Sales for year were $262,000.
What was the value of goods available for sale?
A) $125,000
B) $127,000
C) $170,000
D) $ 90,000
22) Underallocated manufacturing overhead results when
A) production is greater than last year
B) actual overhead is greater than expected
C) actual overhead is greater than allocated overhead
D) estimated overhead is greater than actual overhead
23) Best Birdies produces ornate birdcages. The company’s average cost per unit is
$18.00 when it produces 2,200 birdcages. If $5,500 of the total costs are fixed, what is
the variable cost of producing each birdcage?
A) $2.50
B) $34,100
C) $18.00
D) $15.50
24) Federer Company is debating the use of direct labor cost or direct labor hours as the
cost allocation base for allocating manufacturing overhead. The following information
is available for the most recent year:
If Federer Company uses direct labor cost as the allocation base, what would the
predetermined manufacturing overhead rate be?
A) 70%
B) 75%
C) 91%
D) 85%
25) The type of standard that provides allowances for normal waste and inefficiency in
the production process is referred to as a(n)
A) ideal standard
B) perfection standard
C) realistic standard
D) practical standard
26) Manufacturing overhead is underallocated if the amount
A) estimated for the period is greater than the actual amount incurred
B) estimated for the period is less than the actual amount incurred
C) allocated during the period is less than the actual amount incurred
D) allocated during the period is greater than the actual amount incurred
27) Snowy Mountain Company has the following selected data for the past year:
There were no units in beginning inventory.
Required:
a. Prepare an income statement for last year using absorption costing.
b. Calculate the value of the ending inventory using absorption costing.
c. Prepare an income statement for last year using variable costing.
d. Calculate the value of the ending inventory using variable costing.
28) Belle Auto Detailing reported the following results for the past week:
What is Belle’s direct labor rate variance?
A) $250 favorable
B) $150 favorable
C) $250 unfavorable
D) $150 unfavorable
29) All About Animals has two product lines: Cat food and Dog food. Contribution
margin income statement data for the most recent year follow:
Assuming total fixed costs remain unchanged, how would discontinuing the Dog food
line affect operating income?
A) Increase in total operating income of $33,000
B) Increase in total operating income of $159,000
C) Decrease in total operating income of $45,000
D) Decrease in total operating income of $111,000
30) Common Paper Supply produces paper cups for a national chain of coffee shops.
Twenty-five percent of the paper used to produce the cups comes from post-consumer
(recycled) paper. This satisfies the demands of the national coffee chain, which, for
public relations reasons, requires a certain percentage of recycled content.
Common Paper has developed a new method that will allow it to increase the
percentage of post-consumer material per cup, while reducing the total paper needed
per cup. This is a selling feature for the coffee chain and also reduces Common Paper’s
costs.
The proposed method will reduce the total quantity of paper required per cup of .004
pounds by 15%, but will increase the overall cost of paper per pound from $1.20 per
pound to $1.30 per pound. The new method also requires a one-time charge of $9,000
for re-tooling.
Beginning inventory for the year will be 240 pounds and desired ending inventory is
1,200 pounds. Total production for the year is projected at 3,000,000 cups.
If Common Paper implements the new system, what is the expected cost savings for
paper purchased during the year?
A) $1,044
B) $15,552
C) $14,508
D) $45,000
31) An accountant who does not understand “accrual accounting” fails which ethical
standard?
A) Credibility
B) Competence
C) Integrity
D) Confidentiality
32) There are several reasons an organization might pursue sustainable initiatives.
“Increasing pressure from customers has pushed a utility company to maintain average
rates for electricity that are lower than the national average.” This situation is an
example of which type of reason to implement sustainable initiatives?
A) Cost reduction
B) Regulatory compliance
C) Stakeholder influence
D) Competitive strategy
33) The focus of management accounting is on
A) tax preparation
B) external reporting
C) internal reporting
D) auditing
34) Total fixed costs for Diamond Enterprises are $800,000. Total costs, including both
fixed and variable, are $890,000 if 120,000 units are produced. The fixed cost per unit
at 200,000 units would be
A) $4.00/unit
B) $7.42/unit
C) $4.45/unit
D) $0.45/unit
35) The number of repeat customers would be an example of measuring which
perspective?
A) Customer
B) Financial
C) Internal business
D) Learning and growth
36) The percentage of products with schematics and detailed operating instructions
available within the company’s information system for use by customer service
representatives would be an example of measuring which perspective?
A) Financial
B) Customer
C) Learning and growth
D) Internal business
37) The cost of indirect labor used in the factory is recorded as a
A) credit to work in process inventory
B) debit to manufacturing overhead
C) credit to wages payable
D) debit to wages expense
38) 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 rate variance?
A) $40,700 unfavorable
B) $40,700 favorable
C) $37,000 unfavorable
D) $37,000 favorable