The cash paid to purchase equipment is included in the ________ section of the
statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Which of the following statements about depreciation is FALSE?
A) Depreciation does not generate cash.
B) Depreciation is an allocation of the original cost of an asset to the periods in which
the asset is used.
C) Depreciation does not entail an outflow of cash.
D) Depreciation is a means of setting aside cash for the replacement of an asset.
Total quality management (TQM) ________.
A) does not advocate high quality levels for all products
B) is not used in the development of organizational goals
C) promotes maximizing the cost of quality
D) focuses on the prevention of defects and on the achievement of customer satisfaction
The cash payment for the maturity value of bonds payable is included in the ________
section of the statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Buddy Company manufactures a part for its production cycle. The costs per unit for
5,000 units of the part are as follows:
Per Unit
Direct materials $3.00
Direct labor 5.00
Variable factory overhead 4.00
Fixed factory overhead 4.00
Total costs $16.00
The fixed factory overhead costs are avoidable. Spalding Company has offered to sell
5,000 units of the same part to Buddy Company for $15 per unit. Assuming no other
use for the facilities, Buddy Company should ________.
A) make the part to save $5,000
B) make the part to save $15,000
C) buy the part from Spalding Company to save $5,000
D) buy the part from Spalding Company to save $15,000
USA Bank held a party. USA Bank expected attendance of 100 people and prepared the
following budget:
Hotel room rental $600
Food 500
Entertainment 800
Decorations 300
Total Costs $2,200
One hundred people attended the party. The following costs were incurred:
Hotel room rental $575
Food 640
Entertainment 750
Decorations 350
Total Costs $2,315
What is the variance for the cost of food?
A) $115 Unfavorable
B) $140 Favorable
C) $115 Favorable
D) $140 Unfavorable
In order for the board of directors of a corporation to declare a cash dividend, there
must be sufficient ________ and ________.
A) revenues; expenses
B) net income; cash
C) retained earnings; cash
D) revenues; cash
Companies produce most ________ and ________ information on a routine basis such
as every day, every month or every quarter.
A) scorekeeping; problem-solving
B) scorekeeping; attention directing
C) problem-solving; attention directing
D) interim reports; problem-solving
Naples Company acquired all of the shares of Tampa Company for $80 cash. At the
time of the acquisition, the fair values of Tampa Company’s assets were $200. At the
time of acquisition, the fair values of Tampa Company’s liabilities were $120. On the
date of acquisition, what is the amount of goodwill on the consolidated balance sheet?
A) $0
B) $20
C) $80
D) $100
Which company is NOT a service organization?
A) Affiliated Dermatologists
B) Michael Flynn Dentistry
C) Lowe’s Home Improvement Store
D) United Internists
On June 1, 2012, a company borrows $100,000 on a 10% note due to a bank in one
year. What amount of interest expense is reported for the year ending December 31,
2012?
A) $5,000
B) $5,833
C) $1,000
D) $10,000
Which of the following departments is NOT a service department?
A) laundry department in a hospital
B) maintenance department in a hospital
C) housekeeping department in a hospital
D) surgery floor in a hospital
The acquisition of inventory for cash will ________.
A) increase liabilities and decrease stockholders’ equity
B) decrease assets and decrease liabilities
C) increase assets and decrease liabilities
D) increase assets and decrease assets
Scott is a management accountant in a large company. Scott observed unethical
behavior by a coworker who is also a management accountant. The coworker is a
relative of the company’s president and he always receives preferential treatment. Scott
observed the coworker putting office supplies and small pieces of electronic equipment
in his briefcase. The company does not have a code of ethics or a set of policies for
ethical problems. According to the IMA, what course of action should Scott take?
A) He should report the observation to the police. The coworker is stealing from the
company.
B) He should report the observation to his immediate supervisor.
C) He should report the observation to the Securities and Exchange Commission.
D) He should do nothing.
Backflush costing provides reasonably accurate product costs if materials inventories
are ________.
A) high and production cycle times are short
B) high and production cycle times are long
C) low and production cycle times are short
D) low and production cycle times are long
During the month of May, Lucas Clothing transferred 140,000 shirts to Finished Goods
Inventory. There was no beginning work-in-process inventory. The company had
40,000 shirts in process at May 31 and the shirts were 75 percent complete with respect
to conversion costs. All direct materials are added at the beginning of the production
process. The equivalent units for conversion costs for May are ________.
A) 140,000
B) 150,000
C) 170,000
D) 180,000
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
The amount of actual operating income may differ from the static budget amount for
operating income because ________.
A) actual output levels were not the same as in the static budget
B) actual variable costs were higher than expected variable costs
C) actual fixed costs were higher than expected fixed costs
D) all of the above
Details about Property, Plant and Equipment, such as the age of plant assets and the
types of plant assets, are typically reported ________.
A) on the balance sheet
B) on the income statement
C) on the statement of cash flows
D) in a footnote
With mixed costs, the ________ element is unchanged over the relevant range and the
________ element varies proportionately with cost-driver activity.
A) variable cost; fixed cost
B) fixed cost; variable cost
C) fixed cost; step cost
D) step cost; variable cost
Book value on a depreciable asset is defined as ________.
A) residual value less cost
B) residual value less accumulated depreciation
C) cost less accumulated depreciation
D) residual value
A reason for using capacity available instead of capacity used when allocating budgeted
fixed costs from service departments to user departments is ________.
A) actual usage by user departments does not affect short run allocations to other user
departments
B) actual usage by user departments does not affect long run allocations to other user
departments
C) that the allocation methods to assign service department costs to producing
departments are inaccurate
D) that the allocation methods to assign service department costs to producing
departments are not available
A direct-costing income statement has a subtotal for ________ whereas an
absorption-costing income statement has a subtotal for ________.
A) gross profit; contribution margin
B) contribution margin; gross profit
C) cost of goods sold; variable cost of goods sold
D) cost of goods manufactured; variable cost of goods manufactured
Sahara Industries has three product lines: A, B and C. The following annual information
is available:
Product A Product B Product C
Sales $100,000 $90,000 $88,000
Variable costs 76,000 48,000 79,000
Contribution margin 24,000 42,000 9,000
Avoidable fixed costs 9,000 18,000 3,000
Unavoidable fixed costs 6,000 9,000 9,400
Operating income(loss) $9,000 $15,000 $(3,400)
Sahara Industries is thinking about dropping Product C because it is reporting a loss.
Assume Sahara Industries drops Product C and the space formerly used to produce
Product C is rented out for $15,000 per year. What will happen to operating income?
A) increase by $6,600
B) increase by $9,000
C) increase by $14,400
D) increase by $15,000
The static budget variance is the difference between the ________ and the ________.
A) amounts for the flexible budget; amounts for the static budget
B) flexible budget variance; activity level variance
C) actual results; amounts for the static budget
D) actual results; amounts for the flexible budget
When manufacturing multiple products that are not initially separately identifiable,
manufacturing costs incurred after the split-off point are known as ________ costs.
A) joint
B) product
C) split-off
D) separable
Cesar Company has three product lines: A, B and C. The following annual information
is available:
Product A Product B Product C
Sales $100,000 $90,000 $44,000
Variable costs 76,000 48,000 35,000
Contribution margin 24,000 42,000 9,000
Avoidable fixed costs 9,000 18,000 3,000
Unavoidable fixed costs 6,000 9,000 7,700
Operating income(loss) $9,000 $15,000 $(1,700)
Assume Cesar Company drops Product C. Cesar Company then doubles the production
and sales of Product B without increasing fixed costs. What will happen to operating
income?
A) increase by $15,000
B) increase by $24,000
C) increase by $36,000
D) increase by $42,000
FIFO provides inventory valuations that approximate the actual ________ of inventory
at the balance sheet date.
A) cost
B) market value
C) average cost
D) sales value
Which of the following is NOT a valid step when designing an activity-based cost
accounting system?
A) Determine the key components of the system.
B) Determine the relationships between cost objects, activities, and resources.
C) Collect relevant data concerning costs and cost drivers.
D) Use a process map to identify areas for operational improvement.
Xerox Company produces plastic cups in a one-department process. The following data
is available for the past month:
Work-in-process inventory, beginning 0
Units started 60,000
Units completed and transferred 48,000
Work-in-process inventory, ending 12,000
The units in process at the end of the month are 100 percent complete with respect to
materials and 50 percent complete with respect to conversion costs. What are the
equivalent units for materials for the month?
A) 12,000
B) 48,000
C) 54,000
D) 60,000
The following information is available for a company:
Sales $1,000,000
Variable Selling Expenses 23,000
Fixed Selling Expenses 33,000
Variable Administrative Expenses 39,000
Fixed Administrative Expenses 10,000
Variable Cost of Goods Sold 300,000
Fixed Cost of Goods Sold 100,000
What is the contribution margin for this company?
A) $500,000
B) $600,000
C) $638,000
D) $700,000
Hope Company has the following data available:
Retained Earnings, January 1, 2011 $12,000
Net income for the year ending December 31, 2011 $3,000
Dividends declared in 2011 $2,000
Paid-in Capital, January 1, 2011 $50,000
Total liabilities, January 1, 2011 $40,000
What is the retained earnings balance on December 31, 2011?
A) $12,000
B) $13,000
C) $14,000
D) $63,000
Green Company 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 460,000
Factory overhead 204,000
Total costs to account for $1,000,000
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
journal entry to record the requisition of direct materials for the Assembly Department
includes a Debit to ________.
A) Direct Materials Inventory for $336,000
B) Work-in-Process Inventory, Finishing for $336,00
C) Work-in-Process Inventory, Assembly for $336,000
D) Finished Goods Inventory for $336,000
The West and East Divisions are divisions in the same company. Currently the East
Division buys a part from West Division for $384 per unit. The West Division wants to
increase the price of the part it sells to East Division by $96 to $480. The manager of
the East Division has stated that he cannot pay that much insofar as the division’s profit
goes below zero. The manager of the East Division can buy the part from an outside
supplier for $440 per unit. The cost data pertaining to the part is supplied by the West
Division:
Direct materials $136
Direct labor 200
Variable overhead 40
Fixed overhead 42
If West Division does not produce the parts for the East Division, it will be able to
avoid one-third of the fixed manufacturing overhead costs. The West Division has
excess capacity but no alternative uses for the facilities. From the standpoint of the
company as a whole, should the East Division buy the part from the West Division or
the outside supplier?
A) East Division should buy the part from the West Division because the company’s
profit will be $14.00 per unit larger.
B) East Division should buy the part from the West Division because the company’s
profit will be $40.00 per unit larger.
C) East Division should buy the part from the West Division because the company’s
profit will be $50.00 per unit larger.
D) East Division should buy from an outside supplier at $440 per unit.
