1) Businesses are now viewing sustainability and social responsibility as opportunities
for innovation and business development.
2) An example of management by exception occurs when a manager investigates a large
variance in a performance report to assign responsibility.
3) The performance reports of cost centers only include those costs incurred within each
individual cost center.
4) Revenue center performance reports are reports that list the variances between actual
sales and budgeted sales.
5) A company sends an employee to a conference to update the employee’s job-related
skills. It is a violation of the IMA’s Statement of Ethical Professional Practice standards
if the employee decides to skip the afternoon session and decides to go sightseeing.
6) A segment margin is the operating income generated by a profit or investment center
before subtracting common allocated fixed costs to the center.
7) Decentralized companies often struggle to achieve goal congruence in an
organization.
8) A rolling budget is useful because the organization can continue to budget its
operations 12 months into the future.
9) Rubber City Cycles manufactures carbon fiber bicycle frames for professional racing
and avid amateur cyclists. Rubber City has found a CNC (computer numerical control)
machine that will significantly reduce manufacturing waste while improving the quality
of the frames. The new CNC machine will increase annual fixed costs by $13,750, but
will decrease variable cost per unit by $150. Rubber City expects to sell 750 frames
next year.
Annual data for the current system are as follows:
By what amount will the breakeven point in units increase (decrease) if Rubber City
purchases the new CNC machine?
A) (50)
B) 50
C) 250
D) (250)
10) Boat Hull Manufacturing produces boat parts at the manufacturing facility in
Virginia. The managerial accountant reported that Boat Hull Manufacturing
manufactures parts to repair the container ships that import products from China. The
main part that Boat Hull Manufacturing produces is the T24 part. The Port Department
produces the T24 part at the Boat Hull Manufacturing facility in Virginia. The
managerial accountant reported that the Deport Department could also produce the T24
part because there is excess capacity at the facility. The managerial accountant reported
the current market price of the T24 part is $825 and reported the following
manufacturing cost and expenses data:
What is the highest transfer price the selling division would receive, and the buying
division would pay, for the T24 part?
A) $935
B) $825
C) $136
D) $145
11) The McCumber Corporation data for the current year:
With respect to net income before income tax expense and net income, what would a
horizontal analysis report?
A) There was an increase in both net income before income tax expense and net income
of 15.00%.
B) Both net income before income tax expense and net income increased by $129,000.
C) The current ratio is 0.92.
D) Both net income before tax expense and net income were 11.17% of net sales
revenue.
12) Selected information about The Staccato Company for the current year and prior
year is given below.
The current year’s income tax percentage (as would be found on a vertical analysis of
the income statement for the current year) is
A) 142.11%.
B) 42.11%.
C) 5.00%.
D) 5.45%.
13) The Bedford 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 $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the days’ sales in receivables for the current year?
A) 27.11 days
B) 20 days
C) 1.107 days
D) 13.4631 days
14) The following information relates to Woolf Unlimited for the past two years.
What is the current ratio for the current year?
A) 1.00
B) 13.00
C) 1.75
D) 2.30
15) Which of the following is a benefit to an organization that implements a budget?
A) Budgets help managers focus their attention on the future needs in an organization.
B) Budgets help managers improve their decision-making processes in an organization.
C) Budgets help the manager improve the motivation of employees in the workplace.
D) All of the above
16) Maintenance costs at Wilmington Manufacturing over the past six months are listed
in the following table.
Using the high-low method, what would the total maintenance costs be if 17,500
machine hours were used?
A) $15,200
B) $14,000
C) $27,680
D) $1,200
17) The new managerial accountant at the Recycle Shoppe proposed a method to
eliminate waste, recycle a variety of products to enhance sales, and generate profits.
The operations manager attended a meeting with the creative manager and proposed
that the staff recycle the wood out of the 1,000 old chairs in the warehouse and convert
the wood backing into custom picture frames. The operations manager stated that the
old wooden chairs in the basement are a fire hazard. The managerial accountant
believes that the cost to convert the old wood into custom picture frames is $75,000.
The managerial accountant forecasts earnings from the sale of the custom picture
frames at $50,000.
Compute the payback period, in years. Which of the following illuminates both internal
and external costs to give the manager a complete set of information about how to
generate cost-effective solutions to environmental and social concerns?
A) $1.2; internal costs
B) $1.3; external costs
C) $1.4; cost of goods sold
D) $1.5; life-cycle assessment
18) 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 book value per share of common stock on the last day of the
current year?
A) $4.33
B) $6.50
C) $25.00
D) $42.00
19) Serenity Now Industries manufactures custom fiberglass hulls for luxury yachts and
pleasure boats. The current cost accounting system uses machine hours to allocate
manufacturing overhead to each job. Serenity estimates that in the coming year it will
incur $600,000 in manufacturing overhead costs and use 8,000 machine hours.
Depending on the specifications requested by the customer, the hull may use hazardous
chemicals that incur greater disposal costs. Serenity’s traditional accounting system
includes the cost of hazardous waste disposal in with total manufacturing overhead.
Serenity is planning to implement an activity based costing system to more accurately
assign hazardous waste disposal costs to each job.
Expected usage and costs for manufacturing overhead are as follows:
During the year, Yacht #633 was started and completed:
Requirements:
a.Calculate the cost of Yacht #633 using the Serenity’s current method of allocating
manufacturing overhead.
b.Calculate the cost of Yacht #633 using the proposed activity based costing system.
How is this information useful to an environmental management accounting (EMA)
system?
20) The Stemple Corporation data for the current year:
What would a horizontal analysis report with respect to common stock show?
A) An increase of 6.89 in sales revenue
B) Increase of $6,000 in common stock
C) An increase of 85.37% from prior to current year
D) Sales return of $9.16
21) The individuals at Page Manufacturing perform the following duties:
Identify Employee C and Employee D.
A) CEO: COO
B) Treasurer; Controller
C) Internal Audit Function; Audit Committee
D) Cross-Functional Team; Treasurer
E) Audit Committee; CEO
22) (Present value of annuity table required) Velocity Tire Company’s managerial
accountant assesses the net present value of two different types of tread repair machines
in order to ascertain the better investment option. The Retreadit-2000 will require an
investment of $320,000 while the Econ-4760 will require an investment of $280,000.
Each piece of equipment has a useful life of 10 years with no residual value. The
Retreadit-2000 annual net cash inflow has a static value of $72,000 annually whereas
the Econ-4760 has a static cash inflow predicted at $49,500. The revenue generated by
the chosen product will be invested in an annuity at 12%, compute the net present value
of the two pieces of equipment and state which will be the better investment according
to their respective NPVs.
23) A corporation reported net income during the year of $28,500. The following items
were reported on the income statement and balance sheet.
Compute cash flows from operating activities using the indirect method.
24) List the operating budgets in order of use and describe the purpose of each budget
on the list below Describe the relationship between each budget.
25) For each of the following transactions, indicate the section in which it may be
included. Use O for the operating section, I for the investing activities section, F for the
financing section, S for a separate schedule of noncash investing and financing
activities, and N for items not disclosed on the statement of cash flows.
26) Use the direct method of cash flows to answer the question.
Calculate the cost of merchandise purchased during the year.
27) The managerial accountant at Company A, a small retailer, reviews information
about Company B, a large national firm. Review the following information listed below
about Company A and Company B:
Why does the managerial accountant at Company A review the income statement at
Company B? What is the name of this statement? Which company is most profitable?
Why?
28) Match the term on the right with the appropriate definition provided on the right.
29) Papa’s Pastries sells regular donuts and large donuts. For every six regular donuts
sold the manager at Papa’s Pastries sell four large donuts.
Calculate the weighted average contribution margin per unit.
30) Hill Manufacturing is a large manufacturer that produces a part that inserts into
diesel engines. The company has several large divisions and the managerial accountant
reported the part is currently produced in the assembly department. The managerial
accountant reported that the variable selling expenses and manufacturing costs related
to the production of this part include the following:
Another department at Hill Manufacturing is set up to produce the diesel part and could
produce the part internally rather than purchase the part from an outside supplier. The
managerial accountant reported that the other department has excess capacity and could
produce the part in that department. There is a significant amount of competition in the
marketplace and the current price to produce the part at the other internal department
and a competitor is $1,500.
What is the highest transfer price that the managerial accountant should pay to purchase
the part from a competitor? Calculate the lowest acceptable transfer price if the part was
produced by the internal operations at the other department at Hill Manufacturing.
31) Use the following information to do a horizontal analysis of Boyce Corporation’s
income statement for the current year and prior year:
