Activity-based costing refines the cost allocation process even more than traditional
allocation costing systems.
Production cost reports prepared using the first-in, first-out (FIFO) method determine
the cost of equivalent units of production by accounting for beginning inventory costs
separately from current period costs.
The sales volume variance is the difference between the expected results in the flexible
budget for the actual units sold and the static budget.
The flexible budget variance is the difference between the actual results and the
expected results in the flexible budget for the actual units sold.
The static budget is used to compute flexible budget variances as well as cost and
efficiency variances for direct materials and direct labor.
The combined production costs from all departments for completed products are
transferred to the Cost of Goods Sold account immediately after the completion of all
production processes.
In addition to considering both the division’s operating income and its average total
assets, residual income incorporates top management’s target rate of return.
Use of advanced technology makes it more cost effective for managers to conduct
sensitivity analysis.
When evaluating a potential investment, managers should use only one measure for
making a sound investment decision.
The cost of direct materials cannot easily be traced to the manufactured product, and
therefore, it is a component of manufacturing overhead.
While calculating the budgeted cash payments for selling and administrative expenses,
noncash expenses like depreciation are also considered.
The last step in the preparation of the master budget is the budgeted income statement.
The last step in the preparation of the master budget is the budgeted balance sheet.
The breakeven point is the point where the sales revenues are equal to the total variable
costs plus the total fixed costs.
Purchases on account are recorded in the purchases journal.
Which of the following is true of the traditional format of the income statement?
A) It is prepared under the variable costing method.
B) It shows contribution margin as a line item.
C) It is not allowed under GAAP.
D) It is prepared under the absorption method.
When production is greater than sales, the operating income will be higher under
absorption costing than variable costing. Assume zero beginning and ending
inventories. Which of the following gives the correct reason for the above statement?
A) All costs incurred have been recorded as expenses.
B) A portion of the fixed manufacturing overhead is still in the ending Finished Goods
Inventory account.
C) All selling and administrative expenses have been recorded as period costs.
D) Fixed manufacturing costs have not been considered when calculating the operating
profits.
Flamingo, Inc. has the following budgeted figures:
Calculate cost of goods sold for the month of February.
A) $16,750
B) $30,120
C) $29,370
D) $40,200
Lakeside Manufacturing provided the following information for the month ended
March 31:
Compute cost of goods available for sale.
A) $15,600
B) $29,100
C) $23,600
D) $10,100
Costs assigned to goods sold are transferred to the Cost of Goods Sold account from the
________.
A) Finished Goods Inventory account
B) Work-in-Process Inventory account
C) Raw Materials Inventory account
D) Sales Revenue account
How is the management of a company accountable to its employees?
A) The management must provide products that are safe and free of defects.
B) The management must provide a safe workplace.
C) The management must ensure that it earns a net positive return on its investments.
D) The management must ensure the business is environmentally responsible to its
community.
Gabriel Metalworks produces a special kind of metal ingots that are unique, which
allows Gabriel to follow a cost-plus pricing strategy. Gabriel has $11,000,000 of assets
and shareholders expect approximately a 9% return on assets. Assume all products
produced are sold. Additional data are as follows:
Using the cost-plus pricing approach, what should be the sales price per unit? (Round
your answer to the nearest cent.)
A) $16.00
B) $19.33
C) $21.53
D) $2.20
Global Engineering’s actual operating income for the current year is $56,000. The
flexible budget operating income for actual sales volume is $51,000, while the static
budget operating income is $54,000. What is the sales volume variance for operating
income?
A) $3,000 favorable
B) $2,000 unfavorable
C) $3,000 unfavorable
D) $2,000 favorable
Which of the following is used to calculate the number of units accounted for under
first-in, first-out (FIFO) method of inventory valuation of process costing?
A) Accounted for = Beginning balance + Started and completed + In process
B) Accounted for = Beginning balance + Started and completed
C) Accounted for = Beginning balance + In process
D) Accounted for = Beginning balance + Amount transferred in
Madison Company has provided the following information:
What is the amount of sales in dollars required for Madison to break even? (Round any
percentages to two decimal places and your final answer to the nearest dollar.)
A) $711
B) $23,273
C) $582
D) $12,800
Which of the following is an input device in an accounting information system?
A) keyboard
B) internet protocol
C) printer
D) router
Elsie Moving Company is considering purchasing new equipment that costs $726,000.
Its management estimates that the equipment will generate cash flows as follows:
The company’s required rate of return is 10%. Using the factors in the table below,
calculate the present value of the cash inflows. (Round all calculations to the nearest
whole dollar.)
Present value of $1:
A) $793,414
B) $797,481
C) $828,406
D) $808,971
Kevin Couriers Company prepared the following static budget for the year:
If a flexible budget is prepared at a volume of 7,800, calculate the amount of operating
income. The production level is within the relevant range.
A) $43,800
B) $27,000
C) $7,800
D) $3,000
