1) Barrey, Inc. is subject to a 40% income tax rate. The following data pertain to the
period just ended when the company produced and sold 45,000 units:
How many units must Barrey sell to earn an after-tax profit of $180,000?
A.42,000
B.45,000
C.51,000
D.61,000
E.None of the other answers is correct
2) Dreyson Manufacturing sells a number of goods whose selling price is heavily
influenced by cost. A recent study of product no. 519 revealed a traditionally-derived
total cost of $1,019, a selling price of $1,850 based on that figure, and a newly
computed activity-based total cost of $1,215. Which of the following statements is true?
A.All other things being equal, the company should consider a drop in its sales price
B.The company may have been extremely competitive in the marketplace from a price
perspective
C.Product no. 519 could be labeled as being overcosted by the firm’s traditional costing
procedures
D.If product no. 519 is undercosted by traditional accounting procedures, then all of the
company’s other products must be undercosted as well
E.Generally speaking, the activity-based cost figure is “less accurate” than the
traditionally-derived cost figure
3) Consider the following statements about performance reports:
I. Performance reports provide feedback to managers and allow them to better control
operations.
II. Many performance reports have budget, actual, and variance data.
III. Performance reports are often structured around a firm’s organizational
hierarchythat is, data relating to lower-level units (e.g., departments) are combined and
flow into higher-level units (e.g., stores).
Which of the above statements is (are) true?
A.I only
B.I and II
C.I and III
D.II and III
E.I, II, and III
4) Universal Manufacturing uses a weighted-average process-costing system. All
materials are introduced at the start of manufacturing, and conversion costs are incurred
evenly throughout the process. The company’s beginning and ending work-in-process
inventories totaled 10,000 units and 15,000 units, respectively, with the latter units
being 2/3 complete at the end of the period. Universal started 30,000 units into
production and completed 25,000 units. Manufacturing costs follow.
Beginning work in process: Materials, $60,000; conversion cost, $150,000
Current costs: Materials, $180,000; conversion cost, $480,000
Universal’s equivalent-unit cost for materials is:
A.$4.50
B.$6.00
C.$8.00
D.$9.60
E.None of the answers is correct
5) Which of the following tools is sometimes used to rank investment proposals?
A.Profitability index
B.Annuity index
C.Project assessment guide (PAG)
D.Investment opportunity index
E.Capital ranking index
6) Hreck, Inc. has two service departments (Human Resources and Building
Maintenance) and two production departments (Machining and Assembly). The
company allocates Building Maintenance cost on the basis of square footage and
believes that Building Maintenance provides more service than Human Resources. The
square footage occupied by each department follows.
Assuming use of the step-down method, over how many square feet would the Building
Maintenance cost be allocated (i.e., spread)?
A.18,000
B.48,000
C.55,000
D.66,000
E.More information is needed to judge
7) Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct
professional labor hours. Overhead was estimated to be $150,000, direct professional
labor hours were estimated to be 15,000, and direct professional labor cost was
projected to be $225,000. During the year, Media incurred actual overhead costs of
$146,000, actual direct professional labor hours of 14,500, and actual direct labor cost
of $222,000. By year-end, the firm’s overhead was:
A.$1,000 underapplied
B.$1,000 overapplied
C.$4,000 underapplied
D.$4,000 overapplied
E.$5,000 underapplied
8) The following data pertain to Waters Corporation’s residential humidifier:
To achieve a target price of $450 per humidifier, the markup percentage on total unit
cost is 12%.
Required:
A. Calculate the fixed selling and administrative cost allocated to each humidifier.
B. For each of the following bases, determine the appropriate percentage markup on
cost that will result in a target price of $450 per humidifier: (1) variable manufacturing
cost, (2) absorption manufacturing cost, and (3) total variable cost. (Round percentages
to the nearest one-hundredth of a percent.)
9) The following data relate to Ventura Company, a new corporation, during a period
when the firm produced and sold 100,000 units and 90,000 units, respectively:
The company met its original planned production target of 100,000 units. There were
no variances during the period, and the firm’s selling price is $15 per unit.
Required:
A. What is the cost of Ventura’s end-of-period finished-goods inventory under the
variable-costing method?
B. Calculate the company’s variable-costing income.
C. Calculate the company’s absorption-costing income.
10) The chief managerial and financial accountant of an organization is the:
A.chief executive officer (CEO)
B.treasurer
C.vice-president of accounting
D.internal auditor
E.chief financial officer (CFO)
11) Managerial accountants:
A.rarely become involved in an organization’s decision-making activities
B.make decisions that focus solely on an organization’s accounting matters
C.collect data and provide information so that decisions can be made
D.often serve as a cross-functional team member, making a wide range of decisions
E.collect data and provide information so that decisions can be made and often serve as
a cross-functional team member, making a wide range of decisions
12) Michaella, Inc. uses a process-costing system. A newly-hired accountant identified
the following procedures that must be performed by the close of business on Friday:
1Calculation of equivalent units
2Analysis of physical flows of units
3Assignment of costs to completed units and units still in process
4Calculation of unit costs
Which of the following choices correctly expresses the proper order of the preceding
tasks?
A.1, 2, 3, 4
B.1, 2, 4, 3
C.1, 4, 3, 2
D.2, 1, 4, 3
E.2, 1, 3, 4
13) Which of the following employees would be considered as holding a line position?
A.Exxon Corporation’s vice-president for government relations
B.The controller of General Motors
C.A secretary employed by Verizon Communications
D.The manager of food and beverage services at Disney’s Magic Kingdom
E.None of the other answers are correct
14) The hurdle rate that is used in a net-present-value analysis is the same as the firm’s:
A.discount rate
B.internal rate of return
C.minimum desired rate of return
D.objective rate of return
E.discount rate and minimum desired rate of return
15) Tae Franklin is the sales manager of Darius Enterprises, a very profitable distributor
of office furniture to local businesses. A recent economic downturn has created an
extremely tight cash position, and the company has been hurt by the bankruptcy of two
key customers.
In late October, anticipating an economic recovery, Franklin began an extensive
remodeling of the company’s sales floor. Construction costs, decorating, and equipment
purchases are projected to cost $250,000.
Darius has a policy that individual expenditures in excess of $200,000 must be
approved by the firm’s board of directors. Franklin, unfortunately, missed the deadline
to have the board consider this project at its regular September meeting. Not wanting to
wait until the next meeting in December, he subdivided the project in two
partsconstruction and decorating ($190,000) and equipment purchases ($60,000)neither
of which needed board approval because of the dollar amounts involved.
The project was recently completed and sales have begun to recover. Customers have
raved about the new sales area, noting that it is far superior to those of Darius’s
competitors.
Required:
A. Would Franklin’s approach of subdividing the project in two parts have any effect on
the company’s financial statements? Briefly explain.
B. Briefly discuss whether Franklin behaved in an ethical manner.
C. Which, if any, of the following standards of conduct would have applicability to
Franklin’s conduct: competence, confidentiality, integrity, or credibility? Briefly
explain.
16) Star Manufacturing, contemplating the adoption of an activity-based costing
system, has established three activity-cost pools: machine setup, quality assurance, and
engineering. These cost pools, the appropriate cost driver, and the percentage of each
cost driver consumed by the company’s products (H15, H16, and H17) follow.
Estimated costs for these three activities, which account for 80% of the firm’s total
overhead, are $400,000, $500,000, and $120,000, respectively. Star currently applies
manufacturing overhead to products on the basis of machine hours.
Required:
A. Will activity-based costing systems require more or fewer cost pools than traditional
costing systems? No explanation is necessary.
B. Calculate the cost of machine setup, quality assurance, and engineering to be charged
to product H17 .
C. Consider the company’s current overhead application procedure.
1> Is Star emphasizing unit-level activities, batch-level activities, product-sustaining
activities, or facility-level activities? Explain.
2> How accurate will the current costing procedure be given the nature of most of the
company’s activities? Briefly discuss.
3> How accurate will the current costing procedure be given the consumption ratios of
the firm? Briefly discuss.
17) Property taxes are an example of a (n):
A.committed fixed cost
B.committed variable cost
C.discretionary fixed cost
D.discretionaryvariable cost
E.engineered cost
18) Which of the following statements regarding the Sarbanes-Oxley Act is (are) true?
A.Management must establish and maintain a system of internal controls over financial
reporting
B.Management must periodically assess a company’s system of internal controls over
financial reporting
C.Management must include in the company’s annual report a separate report that
assesses internal controls
D.A company’s auditors are required to report on management’s assessment of internal
controls
E.All of the other answers are correct
19) Swamp Fox has the following sales forecasts for its hip waders next year:
What is Swamp Fox’s estimated sales in units for next year?
A.41,485 pairs
B.38,300 pairs
C.40,000 pairs
D.40,685 pairs
E.None of the other answers are correct
20) Bravo Manufacturing is a relatively new customer of Haxton Enterprises. In the
short period that the two companies have done business with each other, Haxton has
found Bravo to be, in management’s words, “an expensive proposition.” Numerous
sales visits are typically required to “close a deal,” with selling prices and discounts
offered being among the most attractive in the industry. Complicating matters, Bravo is
slow to settle its account, orders in small quantities, and often has numerous specialized
shipping and handling needs.
A recent customer profitability analysis has painted a very negative picture of Bravo
Manufacturing, and Haxton’s managers are questioning whether an on-going
relationship with the firm is warranted.
Required:
A. Briefly explain why the customer profitability analysis painted a negative picture of
Bravo Manufacturing.
B. What actions are available to Haxton Enterprises to improve Bravo profitability?
21) Which of the following statements about the ethical climate of business is false?
A.Greedy corporate executives are, in part, to blame for the rash of corporate scandals
that occurred not too long ago
B.Unethical business behavior can have a negative impact on our economy
C.The Sarbanes-Oxley Act strives to improve the overall quality of corporate reporting
D.The Robinson-Patman Act strives to improve the overall quality of corporate
reporting
E.Corporate scandals have served as the accounting profession’s wake-up call to pay
increased attention to ethical issues in the conduct of business
22) Seymore Company has two service departments (Cafeteria and Human Resources)
and two production departments (Machining and Assembly). The number of employees
in each department follows.
Seymore uses the step-down method of cost allocation and allocates cost on the basis of
employees. Human Resources cost amounts to $1,200,000, and the department provides
more service to the firm than Cafeteria. How much Human Resources cost would be
allocated to Machining?
A.$0
B.$428,572
C.$444,444
D.$480,000
E.None of the other answers are correct
23) Management of Children Are Precious (CAP), an operator of day-care facilities,
wants the company’s profit to be subdivided by center. The firm’s accountant has
provided the following data:
CAP’s advertising, which is handled by the home office, is not reflected in the
preceding figures and amounted to $60,000.
If advertising expense were allocated to centers based on actual center profitability, the
amount of advertising expense allocated to the Irvine center would be closest to:
A.$19,800
B.$21,000
C.$30,000
D.$40,543
E.None of the other answers are correct
24) An organization’s budgets will often be prepared to cover:
A.one month
B.one quarter
C.one year
D.periods longer than one year
E.all of the other answers are correct
25) All of the following entities would have a need for managerial accounting
information except:
A.the state of Michigan
B.Google
C.Abercrombie & Fitch
D.H&R Block
E.None of these responses is correct, as all of these entities would use managerial
accounting information
26) A direct-labor efficiency variance cannot be caused by:
A.inexperienced employees
B.poor quality raw materials
C.employee inefficiency
D.an out-of-date labor time standard
E.producing fewer finished units than originally planned
27) Trenton worked on four jobs during its first year of operation: nos. 401, 402, 403,
and 404 . A review of job no. 403’s cost record revealed direct material charges of
$40,000 and total manufacturing costs of $50,000. If Trenton applies overhead at 150%
of direct labor cost, the overhead applied to job no. 403 must have been:
A.$0
B.$6,000
C.$4,000
D.$3,333
E.$5,000
28) Alexis Company recently completed 10,600 units of its single product, consuming
32,000 labor hours that cost the firm $480,000. According to manufacturing
specifications, each unit should have required 3 hours of labor time at $15.40 per hour.
On the basis of this information, determine Alexis’s total labor variance.
A.$15,880U
B.$9,720F
C.$15,720F
D.$9,720U
E.$15,880F
29) Throughout the accounting period, the credit side of the Manufacturing Overhead
account is used to accumulate:
A.actual manufacturing overhead costs
B.overhead applied to Work-in-Process Inventory
C.overapplied overhead
D.underapplied overhead
E.predetermined overhead
30) Marcellus Corporation, which uses the weighted-average method of process
costing, reported the following as of February 1:
Conversations with the production supervisor revealed that materials are introduced at
the start of the process and conversion cost is incurred evenly throughout
manufacturing. The company started 29,000 units during the month. Goods in process
at the beginning and end of February totaled 3,000 units and 5,000 units, respectively,
the latter batch being 60% complete.
Just prior to leaving on vacation, a trusted staff assistant was asked to compute the cost
of February’s ending work-in-process inventory. Her calculations showed a huge rise in
unit cost when compared with the February 1 figures, soaring to $250 [($470,000 +
$280,000) 3,000 units (5,000 units 60%)].
Required:
A. Did the staff assistant make any errors in her calculations? Explain.
B. Analyze the company’s production volume and determine the proper equivalent-unit
figures for February.
C. Calculate the proper unit costs for February.
D. Calculate the cost of the February 28 work-in-process inventory.
31) Which of the following does not typically appear on a contribution income
statement?
A.Net income
B.Gross margin
C.Contribution margin
D.Total variable costs
E.Total fixed costs
32) Signature Scents has two divisions: the Cologne Division and the Bottle Division.
The Bottle Division produces containers that can be used by the Cologne Division. The
Bottle Division’s variable manufacturing cost is $2, shipping cost is $0.10, and the
external sales price is $3. No shipping costs are incurred on sales to the Cologne
Division, and the Cologne Division can purchase similar containers in the external
market for $2.60.
The Bottle Division has sufficient capacity to meet all external market demands in
addition to meeting the demands of the Cologne Division. Using the general rule, the
transfer price from the Bottle Division to the Cologne Division would be:
A.$2.00
B.$2.10
C.$2.60
D.$2.90
E.$3.00
33) Riverside Company manufactures G and H in a joint process. The joint costs
amount to $80,000 per batch of finished goods. Each batch yields 20,000 liters, of
which 40% are G and 60% are H. The selling price of G is $8.75 per liter, and the
selling price of H is $15.00 per liter.
Required:
A. If the joint costs are allocated on the basis of the products’ sales value at the split-off
point, what amount of joint cost will be charged to each product?
B. Riverside has discovered a new process by which G can be refined into Product GG,
which has a sales price of $12 per liter. This additional processing would increase costs
by $2.10 per liter. Assuming there are no other changes in costs, should the company
use the new process? Show calculations.
34) A piece of equipment costs $30,000, and is expected to generate $8,500 of annual
cash revenues and $1,500 of annual cash expenses. The disposal value at the end of the
estimated 10-year life is $3,000. Ignoring income taxes, the payback period is:
A.3.53 years
B.3.86 years
C.4.29 years
D.6.98 years
E.some other period of time not noted
35) Which of the following costs should be ignored when choosing among alternatives?
A.Opportunity costs
B.Sunk costs
C.Out-of-pocket costs
D.Differential costs
E.None of the other answers are correct