1) Goal congruence is more likely to be achieved at a centralized organization rather
than a decentralized organization.
2) Managers use a variety of financial ratios to evaluate a company’s performance.
3) Total mixed costs increase as volume increases because of the variable cost
component.
4) The overhead allocation base should be the cost driver of manufacturing overhead
costs.
5) A food and beverage company like Coca-Cola would most likely use job costing.
6) Qualitative factors play an important part in make or buy decisions.
7) Merchandising companies do not prepare a direct materials budget.
8) When units are transferred from Processing Department #1 to Processing Department
#2, a debit is made to WIP-Processing Department #2 to reflect the transferred-in costs.
9) The local Burger King restaurant is likely to be considered to be a revenue center.
10) Conversion costs are the sum of direct labor and direct materials.
11) When job costing is used at a service company, direct costs of serving the client are
traced to the job, whereas the indirect costs of serving the client are allocated to the job.
12) Budgeting is the process of evaluating the results of business operations against a
plan and then making adjustments to that plan.
13) There are several reasons an organization might pursue sustainable initiatives. “A
legislative act requires retailers to take back old batteries and electronic devices for
recycling or reuse.” This situation is an example of which type of reason to implement
sustainable initiatives?
A) Cost reduction
B) Regulatory compliance
C) Stakeholder influence
D) Competitive strategy
14) Which of the following examples would lead directly to a favorable fixed overhead
volume variance?
A) A decrease in county property taxes for the factory
B) Producing more units than anticipated
C) A decrease in wages paid to factory maintenance workers
D) Receiving a volume discount on indirect materials purchased
15) Telecom uses activity-based costing to allocate all manufacturing conversion costs.
Telecom produces cellular telephones; each phone has $40.00 of direct materials,
includes 30 parts and requires 3 hours of machine time. Additional information follows:
What is the cost of assembling per phone?
A) $6.00
B) $42.00
C) $15.00
D) $30.00
16) An organization faces many challenges when implementing an environmental
accounting (EMA) system. Which of the following inherent challenges is an accountant
facing when he is having difficulty finding literature regarding “best practices” for
environmental accounting?
A) Hidden Cost
B) Communication issue
C) Newness of EMA
D) Historical orientation of accounting
17) Back Porch Company manufactures lawn chairs using an activity-based costing
system to allocate all manufacturing conversion costs. The following information is
provided for the month of June:
Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is
$10.00.
What is the total cost of materials handling and assembling for each lawn chair?
A) $32.20
B) $19.20
C) $21.20
D) $11.20
18) The ________ budget is the only budget stated ONLY in units, not dollars.
A) production
B) sales
C) direct materials
D) manufacturing overhead
19) The actual cost of direct labor per hour is $14.75. Two and one half standard direct
labor hours are allowed per unit of finished goods. During the current period, 2,700
units were produced using 6,500 direct labor hours. The direct labor efficiency variance
is $2,500 favorable. Calculate the standard direct labor rate per hour.
A) $14.75
B) $10.00
C) $36.88
D) $10.80
20) Selected information about The Staccato Company for the current year and prior
year is given below.
The current year’s cost of goods sold percentage (as would be found on a vertical
analysis of the income statement for the current year) is
A) 94.53%
B) 67.52%
C) -5.47%
D) 62.00%
21) Contribution margin less fixed costs yields
A) sales
B) operating income
C) variable costs
D) none of the above
22) The ________ is needed to prepare the statement of cash flows.
A) accounts receivable ledger
B) accounts payable ledger
C) general journal
D) balance sheet from the beginning and ending of the period
23) Historic Restoration Company budgeted 2.5 hours of direct labor per unit at $14.75
per hour to produce 600 replica door knobs. The 600 knobs were completed using 1,200
hours of direct labor at $14.00 per hour. What is the direct labor rate variance?
A) $900 favorable
B) $1,125 favorable
C) $900 unfavorable
D) $1,125 unfavorable
24) The production line at Morningstar Farms is most likely treated as a(n)
A) investment center
B) cost center
C) profit center
D) revenue center
25) If a company uses the direct method to prepare the statement of cash flows, how
will the amount of cash payments to employees be computed?
A) The amount of cash payments to employees is computed as salary expense plus the
ending balance salaries payable
B) The amount of cash payments to employees is computed as salary expense plus the
decrease in salaries payable
C) The amount of cash payments to employees is computed as salary expense plus the
increase in salaries payable
D) The amount of cash payments to employees is computed as salary expense plus the
beginning balance in salaries payable
26) The tennis club where you play tennis charges $50.00 per month and $10.00 per
hour of court time. If your current bill is $100.00, how many hours did you use?
A) 5 hours
B) 10 hours
C) 8 hours
D) 2 hours
27) For the most recent year, Robin Company reports operating income of $650,000.
Robin’s sales margin is 10%, and capital turnover is 2.0 .
What is Robin’s return on investment (ROI)?
A) 5%
B) 1%
C) 100%
D) 20%
28) The city of Pittsburgh, Pennsylvania is reviewing proposals for the demolition of
historic, but dilapidated, homes in its “Old East End” neighborhood. The homes, many
dating back 150 years, contain lead paint, lead pipes, and asbestos insulation that must
be taken to a special landfill at a cost of $50,000.
A second option for the city is to reclaim the old woodwork, and bricks of the historic
homes and repurpose the materials for use in new construction. This Old Crib
Deconstruction submitted the lowest bid of $450,000 to properly dismantle the old
homes. Construction Junction, which specializes in the sale of reclaimed building
materials, has offered to purchase the materials for $375,000.
Which of the following is a qualitative factor that Pittsburgh should consider in its
analysis?
A) Repurposing the building materials will reduce hazardous waste entering landfills
B) The cost to recycle the building materials is $25,000 greater than the cost to dispose
of the materials
C) The price offered by Construction Junction may be too low given the cost to
deconstruct the buildings
D) The bid submitted by This Old Crib is too high for the prevailing economic
conditions
29) Michael Corporation manufactures railroad cars, which is its only product. The
standards for railroad cars are as follows:
During the month of March, the company produced 1,650 railroad cars. Related
production data for the month follows:
What is the direct labor efficiency variance for the month?
A) $15,000 favorable
B) $15,000 unfavorable
C) $10,000 favorable
D) $10,000 unfavorable
30) You have been awarded a scholarship that will pay you $500 per semester at the end
of each of the next 8 semesters that you earn a GPA of 3.5 or better. You are a very
serious student and you anticipate receiving the scholarship every semester. Using a
discount rate of 3% per semester, which of the following is the correct calculation for
determining the present value of the scholarship?
A) PV = $500 3% 8
B) PV = $500 (Annuity PV factor, i = 3%, n = 8)
C) PV = $500 (Annuity FV factor, i = 6%, n = 4)
D) PV = $1,000 (PV factor, i = 3%, n = 4)
31) You recently won a contest sponsored by a local radio station. The radio station will
pay you $2,500 at the end of each of the next 15 years. Assuming an interest rate of 3%,
what is the present value of this prize?
A) $46,498
B) $29,845
C) $28,240
D) $42,715
32) In using an ABC system, all of the following steps are performed before the
company’s year begins except
A) identify the primary activities and estimate a total cost pool for each
B) select an allocation base for each activity
C) allocate the costs to the cost object using the activity cost allocation rates
D) calculate an activity cost allocation rate for each activity
33) Cruise Company produces a part that is used in the manufacture of one of its
products. The unit
manufacturing costs of this part, assuming a production level of 6,000 units, are as
follows:
Suri Company has offered to sell 6,000 units of the same part to Cruise Company for
$14 per unit. Assuming the company has no other use for its facilities, what should
Cruise Company do?
A) Make the part and save $3 per unit
B) Make the part and save $6 per unit
C) Buy from Suri and save $2 per unit
D) Make the part and save $10 per unit
34) 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
35) Which of the following entries would be made to record $20,000 of labor80% of
which is direct, and 20% of which is indirect to jobs?
A)
B)
C)
D)
36) Your client’s company wants to determine the relationship between its monthly
operating costs and a potential cost driver. The output of regression analysis showed the
following information:
Intercept Coefficient = 75,828
X Variable 1 Coefficient = 52.61
R-square = 0.9756
Should your client use this information to predict monthly operating costs?
A) No, because R-square is so high
B) Yes, because R-square is so high
C) Yes, because regression analysis can be relied upon
D) There is not enough information to make this prediction
37) The costing system used by a company producing custom fireplace mantels would
be
A) process costing
B) job costing
C) equivalent units costing
D) conversion cost costing
38) Electric Jet Skis operates a jet ski rental business. Assume the jet skis rent for $55
for 6 hours. The variable costs are $33 per 6 hour rental, and its fixed costs are $80,000
each month. What is the contribution margin per 6 hour jet ski rental?
A) $33.00
B) $0.40
C) $22.00
D) $2.50
39) For maximum effectiveness sustainable strategies are often implemented at which
stage of an organization’s value chain?
A) Design
B) Production
C) Distribution
D) Research
40) Which of the following industries would be most likely to use a job costing system?
A) Chemicals
B) Food and beverage
C) Commercial building construction
D) Pharmaceuticals
41) The selling price of a RoadKing bicycle is $700, unit variable costs are $350, and
total fixed costs are $12,600. What are breakeven sales in dollars?
A) $8,400
B) $36
C) $12,600
D) $25,200
42) Timber Run Company has prepared the following forecasts of monthly sales:
Timber Run Company has decided that the number of units in its inventory at the end of
each month should equal 80% of next month’s sales. The budgeted cost per unit is $10.
How many units should be in January’s beginning inventory?
43) Use the indirect method of preparing a statement of cash flows to answer the
question.
Ending balances for Sunday Hut are listed below:
Net income for this year was $97,000 and dividends of $24,000 were declared and paid
this year.
What was the net cash used for investing activities?
44) Costanza Manufacturing gathered the following information for the year ended
December 31:
Prepare a standard cost income statement for Costanza for the year ended December
31 .
45) Discuss potential problems associated with decentralization.
46) A company’s flexible budget for 93,000 units of production showed sales of
$300,000; variable costs of $150,000; and fixed costs of $90,000. What net operating
income would you expect the company to earn if it produces and sells 98,000 units?
(Assume 98,000 units is in the relevant range.)
47) North Pacific Company used $65,000 of direct materials and incurred $43,000 of
direct labor costs during 2011 . Indirect labor amounted to $1,700 while indirect
materials used totaled $1,800. Other operating costs pertaining to the factory included
utilities of $4,300; maintenance of $6,800; supplies of $1,500; depreciation expense of
$8,900; and property taxes of $2,400. There was no beginning or ending finished goods
inventory, but work in process inventory began the year with a $6,400 balance and
ended the year with a $7800 balance.
Required: Prepare a schedule of cost of goods manufactured for South State Company
for the year ended December 31 .
48) The income statement and a partial balance sheet for Jetson Company is presented
below. Prepare the operating activities section of the statement of cash flows using the
direct method.
Jetson Company
Income Statement
For the Current Year
Jetson Company
Partial Balance Sheet
End of this year
