On January 1, 2014, a parent company purchased 90 percent of the stock in a
subsidiary. On January 1, 2010, no goodwill was recorded and the book value of the
subsidiary’s assets equals the market value of the subsidiary’s assets. On December 31,
2014, the two companies report the following data:
Parent Company Net Income for Past Year $100 million
Subsidiary Company Net Income for Past Year $50 million
What is the consolidated net income for the year ended December 31, 2014?
A) $100 million
B) $135 million
C) $145 million
D) $150 million
Besides financial statements, alternative sources of financial information about a
company is(are) ________.
A) company press releases
B) trade association publications
C) brokerage house analyses
D) all of the above
Which of the following is NOT a new direction in business process management?
A) JIT philosophy
B) XBRL
C) Six Sigma
D) TQM
The preferred guidelines for allocating service department costs to user departments
include ________.
A) combining variable-cost and fixed-cost pools
B) establishing details about cost allocation after providing services
C) using actual costs for allocation of fixed costs and variable costs
D) allocating variable-cost and fixed-cost pools separately
When evaluating short-term special order decisions, which of the following types of
income statements should be used?
A) method used for external reporting
B) method that follows U.S. Generally Accepted Accounting Principles
C) absorption approach
D) contribution approach
Fixed factory overhead costs appear on the absorption-costing income statements as
________.
A) a fixed expense
B) part of cost of goods sold
C) a production volume variance
D) part of cost of goods sold and a production volume variance
A grocery store manager is responsible for the operating performance of a grocery
store. From the manager’s point of view, which of the following is NOT a controllable
cost?
A) temporary stocking staff hired to reorganize products in every aisle
B) supplies in break room that include coffee, cups, donuts, cookies and stirring sticks
C) fee charged by pest management company to apply pesticide
D) rent expense on store building
Winston Company has variable costs of $5 per unit and a selling price of $10 per unit.
Fixed costs are $100,000. Planned unit sales for 2015 are 25,000 units. Actual unit sales
for 2014 were 22,000 units. What is the margin of safety in units for 2015?
A) 2,000 units
B) 3,000 units
C) 5,000 units
D) 7,000 units
Johnsen Company reported a flexible budget variance for direct labor of $8,000
Favorable for the current year. If the direct labor price variance was $2,000
Unfavorable, what was the direct labor efficiency variance?
A) $6,000 Unfavorable
B) $6,000 Favorable
C) $10,000 Favorable
D) $10,000 Unfavorable
The Collander Company reports the following information:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $45,150
Net income for the year ended December 31, 2012 $7,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $5,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Total common shares outstanding, December 31, 2012 1,000
Market price per share, December 31, 2012 $75.00
Dividends per share, for the year ended December 31, 2012 $5.00
What is the current ratio at December 31, 2012?
A) 0.90
B) 1.00
C) 2.32
D) 3.34
The most important contributor to the variance between actual and applied overhead
costs is ________.
A) poor forecasting
B) inefficient use of overhead items
C) price changes in overhead items
D) operating at a different level of volume than the level used as a denominator in
calculating the budgeted overhead rate
Kaprelian Company reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $300
Sales $480,000
Direct materials used $220,000
Direct labor $200,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under variable costing, the variable manufacturing cost of goods sold is ________.
A) $256,000
B) $272,000
C) $320,000
D) $384,000
In a merchandising firm, the computation of Cost of Goods Sold does NOT use
________.
A) Merchandise Inventory, beginning balance
B) Merchandise Inventory, ending balance
C) purchases of raw materials
D) purchases of merchandise inventory
The following information was extracted from the accounting records of Brankov
Company:
Beginning Paid-in Capital $90,000
Beginning Retained Earnings $300,000
Beginning Assets $455,000
Contributions by Owners $0
Cash dividends declared $0
Revenues $200,000
Expenses $155,000
At the end of the period, what is the total amount of stockholders’ equity?
A) $65,000
B) $135,000
C) $390,000
D) $435,000
Union Company reported the following information about the production and sale of its
only product during the first month of operations:
Selling price per unit $225.00
Sales $315,000
Direct materials used $160,000
Direct labor $100,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $30,000
Production volume variance 0
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 600 units
Under absorption costing, what is the product cost per unit?
A) $130.00
B) $160.00
C) $200.00
D) $225.00
In an economic recession, a company could NOT eliminate ________.
A) employee training program
B) research and development projects
C) public relations department
D) depreciation expense on factory machines
The variable overhead spending variance combines ________ and ________ effects.
A) price; quantity
B) price; efficiency
C) efficiency; sales activity
D) rate; sales activity
Increases in ownership claims arising from the delivery of goods are called ________.
A) expenses
B) profits
C) assets
D) revenues
Assume Unicorn Company has the following information available:
Selling price per unit $100
Variable cost per unit $45
Fixed costs per year $420,000
Expected sales per year 20,000 units
If variable costs increase to $65 per unit, what is the expected net income for one year?
A) $280,000
B) $700,000
C) $880,000
D) $1,580,000
Missouri Company has a current production capacity level of 200,000 units per month.
At this level of production, variable costs are $0.60 per unit and fixed costs are $0.50
per unit. Current monthly sales are 173,000 units. Gates Company has contacted
Missouri Company about purchasing 20,000 units at $1.00 each. Current sales would
not be affected by the special order and no additional fixed costs would be incurred on
the special order. If the order is accepted, what is Missouri Company’s change in
profits?
A) $8,000 increase
B) $8,000 decrease
C) $10,000 increase
D) $10,000 decrease
The direct method of allocating service department costs to producing departments
ignores ________.
A) services provided by service departments to central corporate offices
B) services provided by service departments to user departments
C) services provided by service departments to other service departments
D) services provided by service departments to producing departments
Which of the following costs is a direct cost for a manufactured product?
A) Depreciation Expense on factory equipment used for several products
B) Wages Expense of an assembly worker who works specifically on the product
C) Accountants who determine the product costs for all the products manufactured
D) Factory Supervisor Salary Expense where the supervisor oversees the production of
several different types of products
Marianne Company has an idle machine that originally cost $200,000. The book value
of the machine is $100,000. The company is considering three alternative uses of the
idle machine:
Alternative 1: Disposal of machine. Disposal value of machine is $50,000.
Alternative 2: Use the idle machine to increase production of Product A. Contribution
margin from additional sales of Product A is estimated to be $60,000.
Alternative 3: Use the idle machine to increase production of Product B. Contribution
margin from additional sales of Product B is estimated to be $70,000.
When considering Alternative 2, what is the opportunity cost of the idle machine?
A) $50,000
B) $60,000
C) $70,000
D) $110,000
Abbott Company sells desks at $480 per desk. The variable costs are $372 per desk.
Total fixed costs for the period are $456,840. The break-even volume in dollars is
________.
A) $456,840
B) $589,471
C) $1,573,560
D) $2,030,400
Assume you are preparing an income statement with different segments. To calculate
the contribution by segment, take contribution controllable by segment manager minus
________.
A) unallocated costs
B) variable operating expenses
C) fixed costs controllable by others(not segment manager)
D) fixed costs controllable by segment manager
The Dorkin Company used regression analysis to predict the annual cost of indirect
materials. The results were as follows:
Indirect Materials Cost
Explained by Units Produced
Constant 4,200
Standard error of Y estimate 2,300
R-Squared 0.78
No. of observations 22
Degrees of freedom 20
X Coefficient 250.25
Standard error of coefficient 22.25
The total fixed cost is ________.
A) $22.25
B) $250.25
C) $2,300
D) $4,200
Which of the following is NOT an appraisal cost for quality control?
A) inspection and testing of purchased materials
B) product quality audits
C) maintenance of test equipment
D) training program for material suppliers
Managers trace ________ to service departments. Managers allocate ________ to
service departments.
A) producing department costs; service department costs
B) producing department costs; producing department costs
C) direct costs; indirect costs
D) direct costs; producing department costs
Jeffrey Company wants to double production of Product X from 1,000 units to 2,000
units. The variable manufacturing cost per unit is $10. The variable nonmanufacturing
cost per unit is $20. There are no fixed costs. The selling price per unit is $50. What is
the incremental revenue of the proposed change?
A) $10,000
B) $20,000
C) $30,000
D) $50,000
If we account for a product as a by-product, we allocate ________ to it.
A) joint costs
B) separable costs
C) avoidable costs
D) separable and joint costs
It is December 31, 2014. A Note Payable is due in five annual installments beginning on
December 31, 2015. On the balance sheet dated December 31, 2014, the Note Payable
is classified as ________.
A) current liability only
B) long-term liability only
C) current and long-term liability
D) owners’ equity
If the direct labor price variance is $800 Favorable and the direct labor usage variance
is $700 Unfavorable, then ________.
A) the flexible budget variance for direct labor is $100 Favorable
B) actual total wages paid were $800 more than expected
C) actual labor hours were less than expected
D) actual material prices were less than expected
Decentralization is more successful in organizations when ________.
A) multiple segments buy from the same outside suppliers
B) multiple segments sell to the same customers
C) there are frequent purchases and sales made between segments of the organization
D) an organization’s segments are relatively independent of each other
Denise Company manufactures three products from a joint process. Joint costs for the
year amounted to $250,000. The following data was available:
Product Units Produced Sales Value at Split-off
X 5,000 $70,000
Y 3,000 $30,000
Z 2,000 $100,000
Assume the relative-sales-value method of allocating joint costs is used. What amount
of joint costs is allocated to Product X?
A) $70,000
B) $87,500
C) $125,000
D) $250,000
Helen Company’s records reveal the following:
Division A
Market price of finished part to outsiders $75 per unit
Variable costs per part $51 per unit
Division B
Sale price of finished product per unit $105 per unit
Variable costs:
Division A (1 part) ?
Division B Processing 27 per unit
Division B Selling 12 per unit
Division B wants to buy the part from Division A. The variable costs of Division B will
be incurred whether it buys the part from Division A or from an outside supplier.
Division B can buy the parts from an outside supplier at $70 per unit. Division A has no
excess capacity. What is the highest price that Division B should pay to Division A for
the parts per unit?
A) $51
B) $66
C) $70
D) $75