The following information was gathered for all the products made by the Ringaling
Company:
Budgeted direct labor hours 31,000
Actual direct labor hours 32,400
Budgeted factory overhead costs $147,250
Actual factory overhead costs $149,980
Assume the cost driver for factory overhead costs is direct labor hours. What is the
amount of overapplied or underapplied overhead?
A) $2,730 underapplied
B) $2,730 overapplied
C) $3,920 underapplied
D) $3,920 overapplied
Three types of costs are accumulated on job-cost records that include direct materials,
________ and ________.
A) direct labor; actual factory overhead
B) direct labor; applied factory overhead
C) variable factory overhead; fixed factory overhead
D) direct labor; budgeted factory overhead
Robert Company has two production departments called Assembly and Finishing. The
maintenance department serves both production departments. Maintenance costs are
allocated based on labor hours. Budgeted fixed costs for the maintenance department
are $30,000. Budgeted variable costs for the maintenance department are $5.00 per
labor hour. Actual maintenance department costs are $36,000 fixed and $100,000
variable. Other relevant data follow:
Assembly Finishing
Capacity available 20,000 labor hours 15,000 labor hours
Capacity used 15,000 labor hours 9,000 labor hours
The amount of variable maintenance department costs allocated to the Assembly
Department should be ________.
A) $48,000
B) $62,500
C) $75,000
D) $100,000
Ambrose Industries Inc. reported the following information about the production and
sale of its only product during the first month of operations:
Selling price per unit $225.00
Sales $360,000
Direct materials used $176,000
Direct labor $100,000
Variable factory overhead $44,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Production volume variance 0
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under absorption costing, what is the Gross Profit?
A) $0
B) $40,000
C) $84,000
D) $104,000
A multiple step income statement ________.
A) lists all the expenses together and calculates a total
B) has a subtotal for gross profit
C) has a subtotal for total assets
D) has a subtotal for total retained earnings
Benjamin Company has the following information available:
Income tax rate 30%
Selling price per unit $5.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
If Benjamin Company wants a targeted after-tax net income of $14,000, how many
units must be sold?
A) 45,000
B) 52,000
C) 55,000
D) 60,000
________ expense is driven by sales volume.
A) Rent
B) Insurance
C) Depreciation
D) Sales commission
The following information was taken from the accounting records of Henry
Manufacturing Company:
Direct materials purchased $75,000
Direct materials used $56,000
Direct manufacturing labor costs $20,000
Indirect manufacturing labor costs $10,000
Sales Salaries Expense $35,000
Miscellaneous Factory Expenses $5,000
Administrative Expenses $40,000
Finished Goods Inventory, beginning $10,000
Finished Goods Inventory, end $12,000
Work-In-Process Inventory, beginning 0
Work-In-Process Inventory, end 0
What is Cost of Goods Manufactured?
A) $86,000
B) $89,000
C) $91,000
D) $96,000
Differences between the actual results and the flexible budget at the actual level of
output achieved are ________ variances.
A) static budget
B) activity budget
C) flexible budget
D) operating budget
Yemen Company has the following information available:
Selling price per unit $100
Variable cost per unit $45
Fixed costs per year $420,000
Expected sales per year (units) 20,000
If variable costs increase to $65 per unit and fixed costs increase by $200,000, what is
the break-even point in units?
A) 11,273
B) 12,000
C) 20,000
D) 17,714
When a firm meets a sales goal, it is said to be ________. When a firm incurs more
direct material costs to manufacture products than expected, the firm is said to be
________.
A) effective; ineffective
B) efficient; inefficient
C) effective; inefficient
D) efficient; ineffective
A company has the following information available about one of its products:
Standard price per pound of input $25
Actual price per pound of input $24
Standard inputs per unit of output 3 pounds
Actual units of output 2,770
Direct Materials Quantity Variance $250 F
How many pounds of material were used?
A) $8,300
B) $8,310
C) $8,320
D) $8,330
What type of managers is directly involved with making and selling an organization’s
products?
A) staff managers
B) line managers
C) management accountants
D) accounting managers
The cash paid to settle a long-term note payable is included in the ________ section of
the statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
On March 1, a landlord received $10,000 rent for the month of April. On April 1, the
landlord will ________.
A) decrease Cash and increase Rent Revenue
B) decrease Cash and increase Unearned Rent Revenue
C) decrease Paid-in Capital and increase Interest Revenue
D) decrease Unearned Rent Revenue and increase Rent Revenue
Monday Company has two departments. Relevant information is presented below:
Department 1 Department 2
Budgeted total assets $500,000 $200,000
Actual total assets $600,000 $400,000
Budgeted sales $400,000 $2,000,000
Actual sales $200,000 $2,100,000
Total company-wide advertising costs are $360,000. The advertising costs are allocated
based on sales using the preferred approach. What amount of advertising costs is
allocated to Department 2?
A) $37,500
B) $50,000
C) $262,500
D) $300,000
The following information is available for Half Price Books Inc. and its two divisions,
Books and Periodicals:
Whole Books Periodicals
Company Division Division
Net Sales $100,000 $50,000 $50,000
Fixed Costs Controllable
By Division Manager 26,500 22,500 4,000
Fixed Costs Not Controlled
By Division Manager 18,000 15,000 3,000
Variable Costs:
Cost of Merchandise Sold 24,500 17,500 7,000
Operating Expenses 17,400 10,000 7,400
Unallocated Costs 4,000
What is the contribution margin for the Periodicals Division?
A) $29,600
B) $32,600
C) $35,600
D) $43,000
Under absorption costing, fixed manufacturing costs are used to calculate ________ on
the income statement.
A) contribution margin
B) manufacturing cost of goods sold
C) total variable costs
D) total fixed costs
If individual cost steps are uniform and the decision being made spans a number of
steps, the step costs are treated as a ________.
A) fixed cost
B) mixed cost
C) incremental cost
D) variable cost
Sue is considering leaving her current position to open a coffee shop. Sue’s current
annual salary is $83,000. Annual coffee shop revenue and costs are estimated at
$260,000 and $210,000, respectively. What is Sue’s opportunity cost of staying at her
current work position?
A) $50,000
B) $83,000
C) $210,000
D) $343,000
Wehr Corporation produces one product. Total fixed costs are $600,000.
The unit selling price is $60.00 and the unit variable cost is $45.00.
Required:
A) Compute the contribution margin per unit.
B) Compute the contribution-margin ratio.
C) Compute the break-even point in units.
D) Compute the break-even point in dollars.
When allocating indirect production costs to cost objects, most cost-allocation bases are
________.
A) assigned to a cost object
B) accumulated for a cost object
C) traced to the cost object
D) cost drivers
Which budget is used to develop the schedule of cash disbursements for operating
expenses?
A) purchases and cost of goods sold budget
B) cash disbursements budget
C) operating expense budget
D) cash budget
Brady Division has operating income of $200,000 for the year ending December 31,
2011. Average invested capital is $1,000,000 and the weighted-average cost of capital is
10%. The division is considering a new investment that would cost $500,000 and earn
15% annually. If return on investment is the performance metric, should the manager of
the Brady Division accept the new investment?
A) No, because the return on investment of the division decreases with the new
investment.
B) No, because the return on investment of the division increases with the new
investment.
C) Yes, because the return on investment of the division decreases with the new
investment.
D) Yes, because the return on investment of the division increases with the new
investment.
Accountants require investors with significant influence, but not control, over the
decisions of an investee firm to use the ________ method.
A) equity
B) cost
C) market value
D) lower of cost or market
The concentration of decision-making authority only at the highest levels of the
organization is called ________.
A) management by objective
B) balanced scorecard
C) decentralization
D) centralization
Hewlett Company is considering the following investment:
Estimated capital investment $220,000
Estimated useful life 3 years
Estimated disposal value in 3 years $10,000
Estimated annual savings in cash operating costs(end of year) $120,000
Minimum desired rate of return 12%
Present value of ordinary annuity of one, 3 periods at 12% 2.4018
Present value of one, 3 periods at 12% 0.7118
Assume straight-line depreciation is used. Ignore income taxes. The net present value of
the investment is ________.
A) $68,216
B) $75,334
C) $78,216
D) $150,229
Variable overhead efficiency variances are unfavorable when actual cost driver activity
exceeds the ________.
A) standard cost-driver activity allowed for the actual output
B) activity allowed for the expected output
C) activity allowed for the planned output
D) activity allowed for last period’s output
Paul Satorius is the controller at ANEW Corporation. The company is not publicly
traded. ANEW Corporation just received a patent on a new product that is supposed to
revolutionize the music industry. As the moment, however, ANEW Corporation is
experiencing financial difficulties and is on the verge of defaulting on a note held by the
bank.
At the end of the most recent fiscal year, the company’s president instructed Paul to
ignore recording some invoices. Paul objected because the invoices represented true
liabilities at fiscal year end. However, the president insisted that the invoices should be
recorded next year so that current liabilities reported on the balance sheet at the end of
the current year are lower. The bank is closely following the amount of current
liabilities reported by ANEW Corporation as an indicator of solvency.
Required:
What should Paul do? Follow the guidelines offered by the IMA.
To prepare common size income statements, percentages for line items are usually
based on ________. To prepare common size balance sheets, percentages for line items
are usually based on ________.
A) net income; total stockholders’ equity
B) net operating profit; total stockholders’ equity
C) sales; total assets
D) expenses; total liabilities
________ performance measures are often ________ indicators that arrive too late to
prevent problems in organizations.
A) Nonfinancial; leading
B) Nonfinancial; lagging
C) Financial; leading
D) Financial; lagging
The ________ assumption implies that a company will continue to use existing
resources and pay existing liabilities at maturity in an orderly manner.
A) conservatism
B) relevance
C) going concern
D) materiality
Which statement is TRUE regarding the high-low method to approximate a linear cost
function?
A) The second step in the high-low method is to plot the historical data points on a
graph.
B) Outliers should not be removed from the analysis.
C) Draw a line through all the data points using judgment to fit the line as close as
possible to all the plotted points.
D) The point at which the line intersects the Y-axis is the estimate of fixed costs.
Andrea Company manufactures a part for its production cycle. The annual costs per unit
for 20,000 units of this part are as follows:
Direct materials $15
Direct labor 12
Variable indirect production costs 19
Fixed indirect production costs 16
Total cost $62
Andrea Company has been approached by a supplier who will sell 20,000 units of the
same part for $940,000. All the fixed indirect production costs are unavoidable if
Andrea Company ceases production of the part.
Required:
A) Assuming there is no alternative use for the facilities, should Andrea Company buy
or make the part?
B) Assume the facilities can be rented out for $100,000 per year. Should Andrea
Company buy the part? If so, how much money will be saved?