After conducting a market research study, Magnificent Manufacturing decided to
produce a new interior door to complement its exterior door line. It is estimated that the
new interior door can be sold at a target price of $240. The annual target sales volume
for interior doors is 21,000. Magnificent has target operating income of 20% of sales.
What is the target cost?
A) $6,048,000
B) $5,040,000
C) $4,032,000
D) $1,008,000
Fixed overhead costs for March for a factory were Salaries of $44,000, depreciation of
$10,000, and property taxes of $4,000. Which of the following journal entries would be
correct?
Jane Industries manufactures plastic toys. During October, Jane’s Fabrication
Department started work on 10,300 models. During the month, the company completed
11,900 models, and transferred them to the Distribution Department. The company
ended the month with 1100 models in ending inventory. There were 2700 models in
beginning inventory. All direct materials costs are added at the beginning of the
production cycle and conversion costs are added uniformly throughout the production
process. The FIFO method of process costing is being followed. Beginning work in
process was 25% complete as to conversion costs, while ending work in process was
50% complete as to conversion costs.
How many of the units that were started and completed during October?
A) 14,600
B) 9200
C) 8825
D) 10,300
For February, the cost components of a picture frame include $0.40 for the glass, $0.67
for the wooden frame, and $0.83 for assembly. The assembly desk and tools cost $570.
Two hundred fifty frames are expected to be produced in the coming year. What cost
function best represents these costs?
A) y = 1.90 + 570X
B) y = 570 + 1.90X
C) y = 570 + 1.07X
D) y = 1.07 + 570X
Which of the following methods of capital budgeting divides the average annual accrual
accounting income of a project by a measure of the investment in it?
A) net present value
B) internal rate of return
C) payback method
D) accrual accounting rate of return
Which of the following is the fundamental purpose of responsibility accounting?
A) to penalize managers for inefficiency
B) to gather information that will enable future improvement
C) to create an efficient and centralized organization
D) to evaluate the performance of managers
Which of the following is a sign that an ABC system will provide benefits?
A) There are relatively few indirect cost pools associated with the product and the
indirect costs are a small percentage of total product cost
B) All the products produced are similar and sell in equal proportions (sales mix)
C) Operations staff has no substantial disagreements with the reported costs of
manufacturing and marketing products and services.
D) All or most indirect costs are treated as output-unit level costs.
Globe Inc. is a distributor of DVDs. DVD Mart is a local retail outlet which sells blank
and recorded DVDs. DVD Mart purchases DVDs from Globe at $28.00 per DVD;
DVDs are shipped in packages of 68. Globe pays all incoming freight, and DVD Mart
does not inspect the DVDs due to Globe’s reputation for high quality. Annual demand is
321,000 DVDs at a rate of 6100 DVDs per week. DVD Mart earns 11% on its cash
investments. The purchase-order lead time is one week. The following cost data are
available:
What are the relevant total costs?
A) $18,758
B) $84,917
C) $15,471
D) $13,124
Each of the following items pertains to one of these companies: Bedell Electronics (a
manufacturing company), Gregory Food Retailers (a merchandising company), and
Larson Real Estate (a service sector company). Classify each item as either
inventoriable (I) costs or period (P) costs.
Management accountants use the cost hierarchy to first calculate the ________.
A) labor costs of each product and then they compute material costs
B) overhead costs of each product and then they compute prime costs
C) factory costs of each product and then they compute labor costs
D) total costs of each product and then they compute per-unit costs
Under which allocation method are one-way reciprocal support services recognized?
A) direct method
B) artificial cost method
C) reciprocal method
D) step-down method
If breakeven point is 1,000 units, each unit sells for $31, and fixed costs are $30,000,
then on a graph the ________.
A) total revenue line and the total cost line will intersect at $31,000 of revenue
B) total cost line will be zero at zero units sold
C) revenue line will start at $30,000
D) total revenue line and the total cost line will intersect at $61,000 of revenue
Which of the following entries reflects the original cost assignment to spoiled units
before considering rework cost?
A)
B)
C)
D)
Which of the following is a fixed cost for an automobile manufacturing plant?
A) administrative salaries
B) electricity used by assembly-line machines
C) sales commissions
D) tires
Discontinuing unprofitable products will ________.
A) increase profitability if the resources no longer required by the discontinued product
can be eliminated
B) increase profitability if capacity constraints are adjusted
C) decrease profitability if the fixed costs does not change after discontinuing the
particular business segment
D) increase profitability when a large portion of the fixed costs are unavoidable
The contribution margin per unit equals .
A) fixed cost – contribution margin ratio
B) selling price – fixed costs per unit
C) selling price – variable costs per unit
D) selling price – costs of goods sold
The top management at Groundsource Company, a manufacturer of lawn and garden
equipment, is attempting to recover from a fire that destroyed some of their accounting
records. The main computer system was also severely damaged. The following
information was salvaged:
What is the value of the operating assets belonging to the Tractor Division?
A) $15,000,000
B) $2,179,487
C) $13,300,000
D) $7,727,273
Fish Fillet Incorporated obtains fish and then processes them into frozen fillets and then
prepares the frozen fish fillets for distribution to its retail sales department. Direct
materials are added at the initiation of the cycle. Conversion costs are incurred evenly
throughout the production cycle. Before inspection, some fillets are spoiled due to
undetectable defects. Inspection occurs when units are 45% converted. Spoiled fillets
generally constitute 6% of the good fillets. Data for April 2017 are as follows:
What is the total cost per equivalent unit using the weighted-average method of process
costing? (Round any cost per unit calculations to the nearest cent.)
A) $3.38
B) $2.02
C) $2.03
D) $4.05
To improve customer profitability, companies should track which of the following?
A) only the final invoice price of a sale
B) the volume of the products purchased by each customer
C) the location of each customer
D) the customer profile
Which of the following is true of unit costs of normal and abnormal spoilage when they
are detected at the same inspection point?
A) Unit cost of normal spoilage is more than unit cost of abnormal spoilage.
B) Unit cost of normal spoilage is equal to unit cost of abnormal spoilage.
C) Unit cost of abnormal spoilage is more than unit cost of normal spoilage.
D) Addition of unit cost of normal spoilage and unit cost of abnormal spoilage is equal
to unit cost of good units produced and transferred.
LaserLife Printer Cartridge Company is a decentralized organization with several
autonomous divisions. The division managers are evaluated, in part, on the basis of the
change in their return on invested assets. Operating results for the Packer Division for
2018 are budgeted as follows:
Operating assets for the division are currently $3,600,000. For 2018, the division can add a
new product line for an investment of $600,000. The new product line will generate sales
of $1,600,000 and will incur fixed expenses of $600,000 annually. Variable costs of the
new product will average 60% of the selling price.
Required:
a. What is the effect on ROI of accepting the new product line?
b. If the company’s required rate of return is 6% and residual income is used to evaluate
managers, would this encourage the division to accept the new product line? Explain and
show computations.
Which cost estimation method uses a formal statistical method such as regression
analysis to develop cost functions based on past data?
A) the cash accounting method
B) the conference method
C) the accrual accounting method
D) the quantitative analysis method
Which of the following statements is true of fixed overhead cost variances?
A) The difference between actual costs and flexible budget costs will give the
production volume variance.
B) The difference between actual costs and static budget costs will give the production
volume variance.
C) The difference between flexible budget costs and allocated overhead costs will give
the production volume variance.
D) The difference between static budget costs and flexible budget costs will give the
production volume variance.
Which option provides the greatest operating income if 600 people attend?
A) Option one
B) Option two
C) Operating incomes are identical.
D) It depends on how many donations it receives.
Midend’s Camera Shop has prepared the following flexible budget for September and is
in the process of interpreting the variances. F denotes a favorable variance and U
denotes an unfavorable variance.
The actual amount spent for Material A was ________.
A) $30,200
B) $26,200
C) $27,800
D) $23,800
Which of the following is an example of an extrinsic reward?
A) receiving a high rating on customer service
B) appreciation mail from a customer
C) promotions based on performance
D) verbal appreciation from CEO
Francis Corporation is having trouble selling its inventory because of its ongoing
dispute with its logistical partner. The company was not able to sell any inventory in the
month of January because of the dispute. It manufactured 8,000 units in January.
Francis had no other fixed costs commitment other than fixed manufacturing costs of
$100,000. It follows absorption costing. If actual production in January was equal to the
denominator level, what is the amount of sales required to attain breakeven point?
A) 1250 units
B) 125 units
C) 10 units
D) 0 units
Which of the following is a component of sales-volume variance?
A) Net-income volume variance
B) Operating-income volume variance
C) Taxable-income volume variance
D) Budgeted revenue variance
The balance sheet of a service-sector companies would show ________.
A) work-in-process inventory, and finished goods inventory accounts
B) only finished goods inventory
C) direct materials inventory, work-in-process inventory, and finished goods inventory
accounts
D) no inventory accounts
The actual indirect-cost rate is calculated by ________.
A) dividing actual total indirect costs by the actual total quantity of the cost-allocation
base
B) multiplying actual total indirect costs by the actual total quantity of the
cost-allocation base
C) dividing the actual total quantity of the cost allocation base by actual total indirect
costs
D) multiplying the actual total quantity of the cost allocation base by actual total
indirect costs
Illumination Corporation operates one central plant that has two divisions, the
Flashlight Division and the Night Light Division. The following data apply to the
coming budget year:
Practical Capacity 3000 hours
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1400 hours and by the Night
Light Division was 700 hours. If a single-rate cost-allocation method is used, what amount
of operating costs will be budgeted for the Flashlight Division?
A) $1,440,000
B) $1,344,000
C) $1,424,000
D) $1,360,000
Which of the following entries is used to record the standard costs of direct materials
assigned to units worked on and total direct materials variances?
A) Work in Process (at standard costs)
Direct Materials Variances
Direct Materials Control
B) Work in Process (at actual costs)
Direct Materials Variances
Direct Materials Control
C) Direct Materials Variances
Direct Materials Control
Work in Process (at standard costs)
D) Direct Materials Variances
Direct Materials Control
Work in Process (at actual costs)
The ending balance in the Work-in-Process Control account represents the costs of all
jobs that ________.
A) have not been completed
B) have been completed but not sold
C) have been completed and sold to customers
D) are reported on the income statement
If a company does not use one of its limited resources in the best possible way, the lost
contribution to income could be called a(n) ________.
A) business function cost
B) carrying cost
C) opportunity cost
D) sunk cost
