1) Goal congruence is a system for evaluating the performance of each responsibility
center and its manager.
2) Merchandising companies prepare a direct materials budget.
3) The flexible budget total cost formula applies only to a specific relevant range.
4) Just as in job costing, the manufacturing costs flow through the inventory accounts in
the following order: raw materials work in process cost of goods sold finished goods.
5) In the equation y = vx + f, the x represents the fixed costs.
6) Costs are transferred, along with the units, from one WIP inventory to the next.
7) In a horizontal analysis, the actual dollar change is a better analytical tool than
knowing the percentage change.
8) Managerial accounting reports are always prepared on a quarterly and annual basis.
9) All variances discovered by management must be investigated.
10) When a company uses the indirect method to present the statement of cash flows,
depreciation expense must be subtracted from net income to reconcile to net cash
provided by operating activities.
11) The variable overhead efficiency variance tells management how efficiently
manufacturing overhead was used during the period.
12) If the standard quantity allowed for direct labor is less than the actual quantity used,
the efficiency variance is favorable.
13) In the equation y = vx + f, the f represents the volume of activity.
14) The contribution margin ratio is the unit contribution margin divided by the variable
cost per unit.
15) Possible future liabilities related to pollution may negatively affect an organization’s
ability to access credit.
16) Horizontal analysis allows the comparison of companies with different amounts of
net sales and net assets.
17) Lean thinking involves carrying large amounts of inventory “just in case”
something goes wrong.
18) The budgeted cash collections from credit customers generally only reflect sales
made in the current month.
19) Equivalent units should be computed separately for direct materials and conversion
costs.
20) The “total physical units accounted for” is the sum of the units completed and
transferred out during the period plus the units in ending WIP inventory.
21) Costs incurred to detect poor quality goods or services are
A) activity-based costing
B) appraisal costs
C) value engineering
D) prevention costs
22) A factory janitor’s wages would be classified as ________ when determining the
cost of a manufactured product.
A) an indirect cost
B) a direct cost
C) a period cost
D) none of the above
23) All of the following factors affect the amount a customer is willing to pay for a
product, except
A) the selling company’s costs
B) the competition’s price
C) the product’s uniqueness
D) general economic conditions
24) Communicating information fairly and objectively is an example of which ethical
standard?
A) Credibility
B) Integrity
C) Competence
D) Confidentiality
25) Pete’s Cola Company is investigating the possibility of adopting a lean thinking
philosophy throughout their organization. Estimated costs to set up the computer system
are $1,650,000; training employees in lean operations is estimated to cost $175,000;
and the general expenses of establishing the program are estimated at $315,000. The
estimated value of the potential savings is $1,975,000. Do the benefits outweigh the
costs or do the costs outweigh the benefits, and by how much?
A) Costs outweigh benefits by $150,000
B) Benefits outweigh costs by $150,000
C) Costs outweigh benefits by $165,000
D) Benefits outweigh costs by $165,000
26) Goddard’s Department Store has budgeted cost of goods sold of $44,000 for its
men’s shorts in March. Management also wants to have $8,000 of men’s shorts in
inventory at the end of March to prepare for the summer season. Beginning inventory of
men’s shorts for March is expected to be $5,500. What dollar amount of men’s shorts
should be purchased in March?
A) $46,500
B) $41,500
C) $57,500
D) $30,500
27) On the statement of cash flows, which of the following sections would include the
purchase of a building paid for with cash?
A) Investing section
B) Operating section
C) Financing section
D) None of the above
28) (Present value tables are required.) Hincapie Manufacturing evaluating investing in
a new metal stamping machine costing $30,924. Hincapie estimates that it will realize
$12,000 in annual cash inflows for each year of the machine’s 3-year useful life. The
internal rate of return (IRR) for the machine is approximately
A) 8%
B) 10%
C) 5%
D) 6%
29) The factor that restricts production or sale of a product is which of the following?
A) Demanding factor
B) Constraint
C) Sunk factor
D) Relevant factor
30) In job costing, the journal entry to record the use of direct materials on jobs is to
debit work in process inventory and credit
A) raw materials inventory
B) finished goods inventory
C) manufacturing overhead
D) wages payable
31) Job 123 requires $12,000 of direct materials, $5,500 of direct labor, 500 direct labor
hours, and 300 machine hours. It also requires 6 hours of inspection at $40 per hour.
Manufacturing overhead is computed at $30 per direct labor hour used and $40 per
machine hour used.
The total amount charged for inspection
A) is $40
B) is $40 budgeted hours
C) is $240
D) does not figure into the total cost of the job
32) Evaluating results against the plan is an example of which of the following
management functions?
A) Planning
B) Controlling
C) Analyzing
D) Directing
33) Inventoriable product costs for a product are described by which of the following?
A) Inventoriable product costs are narrower in scope than total costs
B) Inventoriable product costs include all costs of the value chain
C) Inventoriable product costs consist of direct materials, direct labor and
manufacturing overhead
D) Both A and C are correct
34) When using the high-low method, the variable cost per unit can be found as
A) rise over run
B) run over rise
C) change in volume over change in cost
D) vertical intercept
35) An oil company received poor publicity after an oil spill in Lake Erie. The cost of
the future lost sales resulting from the bad publicity are not included in the results of
operations provided to management even though the loss in sales was substantial. This
scenario is an example of which type of EMA implementation challenge?
A) Historical orientation of accounting
B) Communication issue
C) Newness of EMA
D) Hidden Cost
36) A company’s purchasing department negotiates all of the purchasing contracts for
raw materials. Which variance is most useful in assessing the performance of the
purchasing department?
A) Materials quantity variance
B) Materials price variance
C) Labor rate variance
D) Labor efficiency variance
37) Managers should consider which of the following when predicting costs at different
volumes?
A) The relevant range of the cost
B) The type of cost behavior
C) Both of the above should be considered
D) Neither of the above should be considered
38) If a company uses the indirect method to prepare the statement of cash flows, how
will depreciation be presented on the statement?
A) Depreciation expense will be added to net income in the financing activities section
B) Depreciation expense will be subtracted from net income in the operating section
C) Depreciation expense will be added to net income in the investing activities section
D) Depreciation expense will be added to net income in the operating activities section
39) When manufacturing products, direct labor and direct materials are classified as
A) period costs and expensed when incurred
B) product costs and expensed when the goods are sold
C) product costs and expensed when incurred
D) period costs and expensed when the goods are sold
40) What would be included in the entry to record actual manufacturing overhead costs
incurred in a process department?
A) Debit to WIP inventory
B) Debit to manufacturing overhead
C) Credit to manufacturing overhead
D) Credit Finished Goods inventory
41) Which term listed below describes costs incurred for rework when the company
detects poor quality goods before delivery to the customer?
A) Lean production
B) Value added activity
C) Internal failure costs
D) External failure costs
42) The Hummel Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $28,000 of the current year’s current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company’s acid-test ratio for the current year?
A) 0.35
B) 1.27
C) 5.38
D) 0.77
43) Oakland Company is debating the use of direct labor cost or direct labor hours as
the cost allocation base for allocating manufacturing overhead. The following
information is available for the most recent year:
Estimated direct labor cost$560,000
Actual direct labor cost$475,000
Estimated manufacturing overhead costs$420,000
Actual manufacturing overhead costs$353,000
Estimated direct labor hours200,000
Actual direct labor hours280,000
Determine the following:
a)Predetermined manufacturing overhead rate using direct labor cost as the allocation
base
b)Predetermined manufacturing overhead rate using direct labor hours as the allocation
base
c)Allocated manufacturing overhead costs based on direct labor cost for the year
d)Allocated manufacturing overhead costs based on direct labor hours for the year
44) If the purchasing manager purchased a greater quantity of raw materials than
budgeted, but paid the standard price, which variance would be affected?
A) Materials price variance
B) Materials quantity variance
C) Both of the variances would be affected
D) Neither of the variances would be affected
45) Barbara’s Candles provides the following information about its single product.
What is the contribution margin per unit?
A) $60.00
B) $0.40
C) $160.00
D) $40.00
46) Fixed costs that may be avoided in the future are referred to as
A) relevant costs
B) opportunity costs
C) replacement costs
D) sunk costs
47) The primary goal of financial accounting is to provide information for
A) governmental regulators
B) creditors
C) potential investors
D) all of the above
48) When auto manufacturer BMW purchased the Rolls-Royce brand name, BMW had
to hire and train a new staff of assembly workers. The new workers were paid $25 per
hour, worked a total of 7,500 hours, and produced 2,000 cars. BMW budgeted for a
standard labor rate of $27 per hour and 1.25 direct labor hours per car. What is the
direct labor rate variance for the Rolls-Royce division?
A) $4,000 favorable
B) $15,000 favorable
C) $4,000 unfavorable
D) $15,000 unfavorable