Wetzel Company has the following information available for the past quarter:
Division A Division B Division C
Sales $250,000 $400,000 $350,000
Variable expenses 52% 30% 40%
Fixed expenses controllable by division manager $60,000 $200,000 $175,000
Fixed expenses controllable by others $10,000 $5,000 $7,500
Unallocated expenses for all three divisions are $22,000. What is the contribution
controllable by the division manager in Division C?
A) $5,500
B) $27,500
C) $35,000
D) $210,000
From the view of the company as a whole, managers should accept investment projects
that earn more than the ________. ________ should not be used for investment
decisions.
A) return on investment; Return on sales
B) return on sales; Capital turnover
C) cost of capital; Return on investment
D) capital turnover; Return on sales
Donahue currently produces 120,000 units at a cost of $400,000. Of the $400,000 cost,
$200,000 is a fixed cost. Next year Donahue expects to produce 145,000 units.
Donahue’s relevant range for production activities is 100,000 to 150,000 units. If
145,000 units are produced next year, what is the expected fixed cost for next year?
A) $200,000
B) $241,667
C) $441,667
D) $483,333
Barber Company manufactures tape dispensers. The Assembly Department reported the
follow data for the past month:
Units started and completed 70,000
Units started and not complete 10,000
Units in beginning inventory 0
Direct materials costs $480,000
Conversion costs $240,000
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 50 percent complete with respect to conversion costs. The cost
of one completed unit in the Assembly Department is ________.
A) $9.00
B) $9.20
C) $9.42
D) $10.29
A plant asset with a book value of $160,000 is sold for $100,000. The applicable tax
rate is 20%. What is the net after-tax cash inflow resulting from the sale?
A) $12,000 cash inflow
B) $88,000 cash inflow
C) $100,000 cash inflow
D) $112,000 cash inflow
Bruder Company produces one type of product. Total fixed costs are $100,000. Unit
variable costs are $6.00. The break-even point is 25,000 units. Planned unit sales are
30,000.
Required:
A) Compute the selling price per unit.
B) Compute the contribution-margin ratio.
C) Compute the break-even point in dollars.
All of the following are differences between GPK and activity-based costing systems
EXCEPT for ________.
A) GPK applies only variable costs to products. Activity-based costing systems apply
fixed and variable costs to products.
B) GPK focuses on cost centers. Activity-based costing systems focus on activities.
C) GPK may have thousands of cost centers. Activity-based costing systems may have
only a few activities.
D) GPK uses many cost pools. Activity-based costing systems use one cost pool.
The following information is available for Kinsner Corporation:
Total fixed costs $313,500
Variable costs per unit $99
Selling price per unit $154
If management has a targeted net income of $46,200, then the number of units that must
be sold is ________.
A) 2,036 units
B) 2,336 units
C) 5,700 units
D) 6,540 units
In practice, companies generally prorate overhead variances when it would materially
affect ________ and ________.
A) inventory valuations; stock dividends
B) inventory valuations; cash dividends
C) inventory valuations; net income
D) stock option plans; manager bonuses
Sandler Company manufactures electronic devices. The company is considering three
cost drivers for measuring maintenance costs in the factory. The following cost
functions have been estimated using each cost driver:
Cost Driver Cost Function R 2
1. X = number of parts Y = $20,000 + $5X R2 = 0.40
2. X = number of labor hours Y = $13,000 + $10X R2 = 0.95
3. X = number of machine hours Y = $15,000 + $7X R2 = 0.30
Which cost driver should be chosen?
A) number of parts
B) number of labor hours
C) number of machine hours
D) none of the above
To determine the cost of a manufactured product, a normal costing system uses
________.
A) actual direct material, actual direct labor and actual overhead costs
B) applied direct material, applied direct labor and applied overhead costs
C) applied direct material, applied direct labor and actual overhead costs
D) actual direct materials, actual direct labor and normal applied overhead costs
Goy Company has a break-even point of 88,000 units. The contribution margin per unit
is $9.60. The desired target profit is $18,096. How many units must be sold to achieve
the desired profit?
A) 1,885 units
B) 88,000 units
C) 89,885 units
D) 106,096 units
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
Which of the following is an example of a strategic management decision that uses cost
information?
A) determination of Cost of Goods Sold for the income statement
B) identification of value-chain function to outsource
C) evaluation of operational cost control program
D) assessment of process improvement efforts in quality control
In most organizational settings, superior ________ performance usually follows from
superior ________ performance.
A) financial; nonfinancial
B) nonfinancial; financial
C) financial; strategic
D) nonfinancial; strategic
Research and development is the function of a value chain that involves ________.
A) the detailed design and engineering of products, services or processes
B) the generation of ideas related to new products, services or processes
C) the generation of ideas related to new products only
D) the detailed design and engineering of new processes
Cash payments for interest expense are reported in the ________ section of the
statement of cash flows. The direct method is used.
A) operating activities
B) investing activities
C) financing activities
D) noncash investing and financing activities
Lantern Company reported sales of $200,000, an increase in accounts receivable of
$5,000, and a decrease in cash of $20,000. How much cash was collected from
customers?
A) $185,000
B) $195,000
C) $200,000
D) $220,000
The Hermanski Company held a Christmas party. The company 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 costs incurred were:
Hotel room rental $575
Food 640
Entertainment 750
Decorations 350
Total Costs $2,315
What is the primary reason for the variance in total costs?
A) Hotel room rent cost more than expected.
B) Food cost more than expected.
C) Entertainment cost more than expected.
D) Decorations cost less than expected.
California Company opened for business on April 1. Given below is the activity of the
company for the month of April.
Owners invested cash in business $40,000
Credit sales $160,000
Cash sales $20,000
Cost of goods sold $124,000
Cash purchases of inventory $50,000
Credit purchases of inventory $100,000
Cash collections from credit customers $72,000
Cash payment for credit purchases of inventory $44,000
Cash borrowed on note payable $54,000
Equipment purchased for cash $18,000
Cash dividend paid $14,000
Wages earned and paid $28,000
Wages earned and unpaid $4,000
Rent paid for April, May and June $6,000
Under accrual basis accounting, what is the net income for the month of April?
A) $8,000
B) $12,000
C) $18,000
D) $22,000
When adjusting for inflation in a capital budgeting problem, which of the following
items should be adjusted for inflation?
A) required rate of return only
B) operating cash flows only
C) required rate of return and operating cash flows
D) depreciation expense
Fast Company has just decided to outsource the production of a part for a product.
Assume Fast Company leaves the area of the manufacturing plant idle where it was
producing the outsourced part. It has no alternative uses of the plant. What is the
opportunity cost of the idle area of the manufacturing plant to Fast Company?
A) zero
B) definitely a negative number
C) the disposal value of the entire manufacturing plant
D) none of the above
Machine usage in a department causes most of the overhead costs such as depreciation
expense, maintenance expense and repair expense. What is the most appropriate
cost-allocation base for applying overhead costs to products?
A) the number of machines
B) the salvage value of the machines
C) the average age of the machines
D) the number of machine hours
On a cash budget, if available cash balance plus net cash receipts and disbursements is
negative, ________.
A) repayment of loan is suggested
B) repayment of loan is required
C) borrowing is necessary
D) borrowing is not necessary
As the cost-driver level increases in the relevant range, variable costs per unit of cost
driver ________ but total variable costs ________.
A) do not change; increase in direct proportion to the cost-driver activity level
B) do not change; decrease in direct proportion to the cost-driver activity level
C) increase; do not change
D) decrease; do not change
Division Big does have excess capacity to produce Product XX. The division can sell
Product XX for $10 per unit outside the company. Variable costs are $6 per unit.
Division Small wants to purchase Product XX from Division Big to use in Product ZZ.
The selling price of Product ZZ is $25 per unit and variable costs to finish the product
after the transfer are $12 per unit. An outside supplier will sell Product XX for $12.
What is the minimum transfer price for Division Big?
A) $4 per unit
B) $6 per unit
C) $10 per unit
D) $12 per unit
The following information pertains to the East Division of Saturn Company:
Net sales $21,000
Variable costs:
Cost of merchandise sold 10,300
Operating expenses 3,700
Fixed costs:
Controllable by segment manager 2,400
Controllable by others 1,000
Unallocated costs 600
The contribution margin of the East Division is ________.
A) $7,000
B) $7,700
C) $8,000
D) $10,700
Perez Company uses activity-based costing. The company is trying to estimate the costs
of the processing activity in the factory. The company has developed the following
flexible budget formula:
Y = $10.50X + $13,000
Where: Y = Total processing cost per quarter and X = Number of machine hours
If 10,000 machine hours are used next quarter, total variable costs are ________ and
total fixed costs are ________.
A) $105,000; $13,000
B) $105,000; $130,000,000
C) $113,000; $130,000,000
D) $10.50; $13,000
In designing an activity-based cost accounting system, what is the first step?
A) Collect data about costs and the physical flow of the cost-driver units.
B) Determine the relationships among cost objects, activities, and resources.
C) Determine the key components of the activity-based cost accounting system.
D) Calculate and interpret the new activity-based cost information.
Sunday Company reports the following information on December 31, 2014:
Cash $20,000
Accounts receivable 112,000
Accounts payable 91,000
Accrued wages payable 6,000
Unearned revenue 2,000
Paid-in capital 59,000
Retained earnings 80,000
Inventory 30,000
Prepaid rent 4,000
Equipment (net) 12,000
What are total assets at December 31, 2014?
A) $162,000
B) $166,000
C) $178,000
D) $180,000
A company that has an activity-based costing system with multiple cost drivers will
prepare a(n) ________ budget.
A) financial planning
B) short-range planning
C) activity-based flexible
D) strategic