Which of the following is a disadvantage of decentralization?
a. Decisions made by one manager may negatively affect the profitability of the entire
company.
b. Decentralization helps retain quality managers.
c. Managers closest to the operations make decisions.
d. Managers are able to acquire expertise in their areas of responsibility.
A budget performance report compares actual results with the budgeted amounts and
reports differences for possible investigation.
a. True
b. False
Davis Manufacturing Company had the following data:
Collections on account were $625,000.
Cost of goods sold was 68% of sales.
Direct materials purchased amounted to $90,000. Factory overhead was 300% of the
cost of direct labor.
Compute:
a) Sales revenue (all sales were on account)
b) Cost of goods sold
c) Cost of goods manufactured
d) Direct labor used
e) Direct materials incurred
f) Factory overhead incurred
The management of Nebraska Corporation is considering the purchase of a new
machine costing $490,000. The company’s desired rate of return is 10%. The present
value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826,
0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the
following data in determining the acceptability:
The average rate of return for this investment is a. 18%
b. 16%
c. 58%
d. 10%
Which of the following would be considered a sunk cost?
a. purchase price of new equipment
b. equipment rental for the production area
c. net book value of equipment that has no market value
d. warehouse lease expense
In calculating the present value of an investment in equipment, the present value of the
residual value should be added to the cash inflows.
a. True
b. False
Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000
units of Y. Related data are:
What was Rusty Co.’s weighted average unit contribution margin?
a. $60.00
b. $20.00
c. $40.00
d. $22.50
Maximum effectiveness and efficiency are reached when the lean philosophy is used by
both manufacturers and their suppliers.
a. True
b. False
Moon Company uses the variable cost concept of applying the cost-plus approach to
product pricing. The costs and expenses of producing and selling 75,000 units of
Product T are as follows:
Variable costs:
Moon desires a profit equal to an18% rate of return on invested assets of $1,440,000.
(a) Determine the amount of desired profit from the production and sale of Product T.
(b) Determine the total variable costs for the production and sale of 75,000 units of
Product T.
(c) Determine the markup percentage for Product T.
(d) Determine the unit selling price of Product T.
Round your markup percentage to one decimal place and other intermediate
calculations and final answer to two decimal places.
Operating expenses directly traceable to or incurred for the sole benefit of a specific
department and usually subject to the control of the department manager are termed
direct operating expenses.
a. True
b. False
Activity-based costing is a method of accumulating and allocating costs by department.
a. True
b. False
The balance sheets at the end of each of the first two years of operations indicate the
following:
If net income is $250,000 and interest expense is $30,000 for Year 2, what are the
earnings per share on common stock for Year 2?
a. $4.16
b. $4.32
c. $4.02
d. $2.49
Care must be taken involving capital investment decisions, since normally a long-term
commitment of funds is involved and operations could be affected for many years.
a. True
b. False
Mandy Corporation sells a single product. Budgeted sales for the year are anticipated to
be 640,000 units, estimated beginning inventory is 98,000 units, and desired ending
inventory is 80,000 units. The quantities of direct materials expected to be used for each
unit of finished product are given below.
Material A 0.50 lb. per unit @ $0.60 per pound
Material B 1.00 lb. per unit @ $1.70 per pound
Material C 1.20 lb. per unit @ $1.00 per pound
The dollar amount of Material B used in production during the year is
a. $1,057,400
b. $1,193,400
c. $1,026,800
d. $1,224,000
typically used by companies that make custom products
Match the following phrases with the term (a-g) that it most closely describes.
a. job order cost system
b. process cost system
c. activity-based costing
d. under applied overhead
e. over applied overhead
f. finished goods ledger
g. materials ledger
An extraordinary item must be either unusual in nature or infrequent in occurrence.
a. True
b. False
For purposes of analysis, mixed costs can generally be separated into their variable and
fixed components.
a. True
b. False
The excess of the cash flowing in from revenues over the cash flowing out for expenses
is termed net cash flow.
a. True
b. False
Managerial information is for external as well as internal stakeholders.
a. True
b. False
the process by which factory overhead is assigned to a cost object
Match the following phrases with the term (a-e) that it most closely describes it. Each
term will be used only once.
a. job cost sheets
b. materials requisitions
c. receiving report
d. time tickets
e. cost allocation
All of the following should be considered in a make-or-buy decision except
a. cost savings
b. quality issues with the supplier
c. future growth in the plant and other production opportunities
d. whether the supplier will make a profit that would no longer belong to the business