1) A payment of interest on a loan would be considered a
A) cash outflow from investing activities
B) cash outflow from operating activities
C) cash outflow from financing activities
D) cash outflow from depreciation
2) The manager at Wheeling Mulch has been trying to calculate the portion of the
company’s overhead expenses that is fixed and the portion that is variable. Over the past
twelve months, the number of yards of mulch processed was highest in July, when the
total monthly overhead costs totaled $28,000 for 32,000 yards of mulch processed. The
lowest number of yards of mulch processed in the last twelve months occurred in
October, when total overhead costs were $26,000 for 28,000 yards of mulch processed.
What is the fixed portion of the monthly overhead expenses?
A) $0
B) $12,000
C) $16,000
D) $26,000
3) Not disclosing sensitive information is an example of which ethical standard?
A) Credibility
B) Integrity
C) Competence
D) Confidentiality
4) The HF Corporation manufactures and sells toy gyroscopes. The following data is
related to sales and production of the toy gyroscopes for last year.
Using variable costing, what is the contribution margin for last year?
A) $1,200,000
B) $274,500
C) $258,000
D) $2,142,000
5) Youngstown Rubber reports the following data for its first year of operation.
What is the cost of goods sold?
A) $395,000
B) $455,000
C) $265,000
D) $1,265,000
6) 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 accounts receivable turnover for the current year?
A) 27.11 times
B) 0.04 times
C) 20 times
D) 13.4631 times
7) On a cost of quality report, which of the following cost items should be classified as
an internal failure cost?
A) Customer returns of defective products
B) Net cost of scrap
C) Training for quality control employees
D) Patent cost for a new product
8) A potential advantage of decentralization is which of the following?
A) Benchmarking
B) Promotes goal congruence and coordination
C) Provides training
D) Provides feedback
9) Which of the following is the first step of the 5-step process costing procedure?
A) Compute output in terms of equivalent units
B) Summarize total costs to account for
C) Summarize the flow of physical units
D) Compute the cost per equivalent unit
10) Morgan Corporation uses estimated direct labor hours of 200,000 and estimated
manufacturing overhead costs of $920,000 in establishing manufacturing overhead
rates. Actual manufacturing overhead was $970,000, and allocated manufacturing
overhead was $1,012,000. What were the number of actual direct hours worked?
A) 200,000
B) 208,660
C) 189,691
D) 220,000
11) Fun Stuff Manufacturing produces frisbees using a three-step process that includes
molding, coloring and finishing. Which of the following accounts is debited for
conversion costs?
A) WIP inventory-finishing
B) Finished goods inventory
C) Raw materials inventory
D) Cost of goods sold
12) When do inventoriable costs become expenses?
A) When direct materials are purchased
B) When the manufacturing process begins
C) When the manufacturing process is completed
D) None of the above
13) Kramer Company manufactures coffee tables and uses an activity-based costing
system to allocate all manufacturing conversion costs. Each coffee table consists of 20
separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time
to produce. Additional information follows:
What is the total manufacturing cost per coffee table?
A) $316.75
B) $ 76.75
C) $313.75
D) $ 55.00
14) A manager should always reject a special order if
A) the special order price is less than the variable costs of the order
B) there is available excess capacity
C) the special order price is less than the regular sales price
D) the special order will require variable nonmanufacturing expenses
15) In deciding whether to accept a special sales order, any fixed costs that would
remain unchanged are considered relevant data.
16) Winner’s Sporting Equipment manufactures sporting goods. Selected costs from the
past year include:
Product costs for Winner’s Sporting Equipment totaled
A) $724,000
B) $744,500
C) $612,000
D) $806,500
17) The costs of training production personnel on their job tasks is an example of which
of the following types of costs?
A) Internal failure costs
B) External failure costs
C) Appraisal costs
D) Prevention costs
18) Gomez Corporation is considering two alternative investment proposals with the
following data:
What is the accounting rate of return for Proposal X?
A) 2.88 %
B) 14.71 %
C) 26.62 %
D) 2.79%
19) The Hanna Company uses straight-line depreciation and is considering a capital
expenditure for which the following relevant cash flow data have been estimated:
The total depreciation expense over the life of the asset is
A) $150,000
B) $550,000
C) $450,000
D) $585,000
20) The Jazz Division of Heights Recording Corporation had the following results last
year.
Management’s target rate of return is 12% and the weighted average cost of capital is
9%. Its effective tax rate is 40%.
Required:
a.Calculate the return on investment (ROI).
b.Calculate the residual income.
21) Jim Bean Company has three product lines: D, E, and F. The following information
is available:
DEF
Sales revenue$80,000$42,000$20,000
Variable expenses$40,000$21,000$12,000
Contribution margin$40,000$21,000$8,000
Fixed expenses$12,000$15,000$17,000
Operating income (loss)$28,000$46,000$(9,000)
Jim Bean Company is thinking of discontinuing product line F because it is reporting an
operating loss. All fixed costs are unavoidable. Jim Bean Company discontinues
product line F and rents the space formerly used to produce product F for $20,000 per
year, what affect will this have on operating income?
A) Increase $29,000
B) Increase $12,000
C) Decrease $12,000
D) Increase $37,000
22) A sunk cost is described as which of the following?
A) One that is relevant to a decision because it changes depending on the alternative
course of action selected
B) A historical cost that is always irrelevant
C) An outlay expected to be incurred in the future
D) A historical cost that may be relevant
23) All variable costs are listed ________ on a contribution margin income statement.
A) above the gross profit line
B) above the contribution margin line
C) below the contribution margin line
D) below the gross profit line
24) Chicago Steel’s operating activities for the year are listed below.
What is the cost of goods available for sale?
A) $1,400,000
B) $750,000
C) $50,000
D) $1,750,000
25) In Step 1 of the process costing procedure, the “total units to account for” is the sum
of
A) the units in beginning WIP plus the units in ending WIP
B) the units in ending WIP plus the units started in production during the month
C) the units in beginning WIP plus the units started in production during the month
D) the units completed and transferred out plus the units started in production during
the month
26) Which of the following items is not a characteristic of a lean company?
A) Machines are arranged by function
B) Machine setup times are reduced
C) Production is in small batches
D) Employees are trained to operate more than one machine
27) Selected information regarding a company’s most recent quarter follows (all data in
thousands).
What was manufacturing overhead for the quarter?
A) $260
B) $ 40
C) $500
D) $140
28) The Pasta Division of Whole Grain Corporation had sales of $5,500,000 and
operating income of $1,375,000 last year. The total assets of the Pasta Division were
$2,750,000, while current liabilities were $330,000. Whole Grain Corporation’s target
rate of return is 12%, while its weighted average cost of capital is 8%. The effective tax
rate for the company is 30%.
What is the Pasta Division’s Return on Investment (ROI)?
A) 25.00%
B) 6.00%
C) 50.00%
D) 200.00%
29) At Onyx Incorporated, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the cost per equivalent unit for direct materials?
A) $3.00
B) $3.48
C) $3.67
D) $2.68
30) XYZ uses job costing. Actual manufacturing overhead for the period is $20,000
while allocated manufacturing overhead is $18,000. What entry will close the
manufacturing overhead balance?
A) Debit manufacturing overhead and credit work in process for $2,000
B) Debit manufacturing overhead and credit cost of goods sold for $2,000
C) Debit cost of goods sold and credit finished goods inventory for $2,000
D) Debit cost of goods sold and credit manufacturing overhead for $2,000
31) Here is some basic data for Honey Dukes Corporation:
The journal entry to record the cost of jobs sold would include a
A) debit to finished goods inventory for $255,000
B) credit to finished goods inventory for $287,000
C) debit to cost of goods sold for $287,000
D) credit to finished goods inventory for $255,000
32) Which of these documents authorizes the purchase of specific raw materials from a
specific supplier?
A) Labor time record
B) Materials inventory requisition form
C) Job cost record
D) Purchase order
33) The balance sheet for Bostick Corporation follows:
Operating income for the period was $13,650, while cash dividends paid were $3,770.
The overall total of the uses of cash for Bostick Corporation for the year was
A) $32,320
B) $13,800
C) $2,450
D) $54,970
34) The following account balances at the beginning of January were selected from the
general ledger of Ocean City Manufacturing Company:
Additional data:
1> Actual manufacturing overhead for January amounted to $62,000.
2> Total direct labor cost for January was $63,000.
3> The predetermined manufacturing overhead rate is based on direct labor cost. The
budget for the year called for $250,000 of direct labor cost and $350,000 of
manufacturing overhead costs.
4> The only job unfinished on January 31 was Job No. 151, for which total direct labor
charges were $5,200 (800 direct labor hours) and total direct material charges were
$14,000.
5> Cost of direct materials placed in production during January totaled $123,000. There
were no indirect material requisitions during January.
6> January 31 balance in raw materials inventory was $35,000.
7> Finished goods inventory balance on January 31 was $34,500.
What is the cost of goods sold for January?
A) $253,220
B) $314,200
C) $213,586
D) $236,500
35) A joint production process at Happy Days Farms results in two products, blackberry
syrup and blackberry jam. The following cost and activity data relate to these two
products:
Blackberry syrup can be sold as-is (at the split-off point) for $2.50 per unit, or it can be
processed further into a specialty blackberry juice and then sold for $5.00 per unit. If
blackberry syrup is processed further into the specialty blackberry juice, what would be
the overall effect on operating income?
A) $1,750 net increase in operating income
B) $1,750 net decrease in operating income
C) $3,750 net increase in operating income
D) $3,750 net decrease in operating income
36) Michael Corporation manufactures railroad cars, which is its only product. The
standards for the railroad cars are as follows:
During the month of March, the company produced 1,650 cars. Related production data
for the month follows:
What is the direct materials price variance for the month?
A) $ 850 favorable
B) $ 850 unfavorable
C) $ 1,950 favorable
D) $ 1,950 unfavorable