1) Narchie sells a single product for $50. Variable costs are 60% of the selling price,
and the company has fixed costs that amount to $400,000. Current sales total 16,000
units.
In order to produce a target profit of $22,000, Narchie’s dollar sales must total:
A.$8,440
B.$21,100
C.$1,000,000
D.$1,055,000
E.None of the other answers is correct
2) A manufacturing firm produces goods in accordance with customer specifications,
commencing production upon receipt of a purchase order. To accumulate the cost of
each order, the company would use a:
A.job-cost record
B.cost allocation matrix
C.production log
D.overhead sheet
E.manufacturing cost record
3) The difference between budgeted sales revenue and break-even sales revenue is the:
A.contribution margin
B.contribution-margin ratio
C.safety margin
D.target net profit
E.operating leverage
4) Garage Specialty Corporation manufactures joint products P and Q. During a recent
period, joint costs amounted to $80,000 in the production of 20,000 gallons of P and
60,000 gallons of Q. Garage can sell P and Q at split-off for $2.20 per gallon and $2.60
per gallon, respectively. Alternatively, both products can be processed beyond the
split-off point, as follows:
The joint cost allocated to P under the relative-sales-value method would be:
A.$17,600
B.$16,400
C.$24,000
D.$25,600
E.None of the other answers are correct
5) Process costing would likely be used in all of the following industries except:
A.petroleum refining
B.chemicals
C.truck tire manufacturing
D.wood pulp production
E.automobile repair
6) Leisure Time owns six hotels in Hawaii, collectively known as the Hawaiian
Division. The various hotels, including the Surf & Sun, have operating departments
(such as Maintenance, Housekeeping, and Food and Beverage) that are evaluated as
either cost centers or profit centers. The Food and Beverage Department, for example,
is a profit center, with activities divided into three segments: Banquets and Catering,
Restaurants, and Kitchen. If Leisure Time uses a performance-reporting system that is
based on responsibility accounting, which of the following disclosures is likely to
occur?
A.The detailed operating costs of the Surf & Sun’s Kitchen Department will appear on
the Hawaiian Division’s performance report
B.The Food and Beverage Department’s profit will appear on Kitchen’s performance
report
C.The profit of the Surf & Sun hotel will appear on the Hawaiian Division’s
performance report
D.The Food and Beverage profit at the Surf & Sun will appear on Leisure Time’s
performance report
E.The profit of the Surf & Sun hotel will appear on Food and Beverage’s performance
report
7) Brooke-lyn makes all purchases on account, subject to the following payment
pattern:
Paid in the month of purchase: 30%
Paid in the first month following purchase: 65%
Paid in the second month following purchase: 5%
If purchases for April, May, and June were $200,000, $160,000, and $250,000,
respectively, what was the firm’s budgeted payables balance on June 30?
A.$175,000
B.$179,000
C.$183,000
D.$189,000
E.None of the other answers are correct
8) What is price skimming?
A.The initial price is set low and kept constant
B.The initial price is set low and then raised
C.The initial price is set high and later lowered
D.The initial price is set high and kept constant
E.The initial price is set high and then raised
9) Kim, Inc. began business at the start of the current year and maintains its accounting
records on an absorption-cost basis. The following selected information appeared on the
company’s income statement and end-of-year balance sheet:
Kim achieved its planned production level for the year. The company’s fixed
manufacturing overhead totaled $141,000, and the firm paid a 10% commission based
on gross sales dollars to its sales force.
Required:
A. How many units did Kim plan to produce during the year?
B. How much fixed manufacturing overhead did the company apply to each unit
produced?
C. Compute Kim’s cost of goods sold.
D. How much variable cost did the company attach to each unit manufactured?
10) You desire to invest $3,000 at the end of each year for the next five years to
accumulate the funds needed for a down payment on a home. Which table factor(s)
should be used to most efficiently determine the amount accumulated by the end of the
five-year period?
A.Future value of $1
B.Future value of a $1 annuity
C.Present value of $1
D.Present value of a $1 annuity
E.Both Future value of $1 and Future value of a $1 annuity
11) Thurmond, Inc. has two divisions, one located in New York and the other located in
Arizona. New York sells a specialized circuit to Arizona and just recently raised the
circuit’s transfer price. This price hike had no effect on either the volume of circuits
transferred or on Arizona’s decision of whether to acquire the circuit from either New
York or from an external supplier. On the basis of this information, which of the
following correctly shows the effect of the transfer price on divisional profit and overall
company profit?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
12) Interspace Merchandising anticipated selling 29,000 units of a major product and
paying sales commissions of $6 per unit. Actual sales and sales commissions totaled
31,500 units and $182,700, respectively. If the company used a static budget for
performance evaluations, Interstate would report a cost variance of:
A.$6,300U
B.$6,300F
C.$8,700U
D.$8,700F
E.None of the other answers are correct
13) Ojai Chemical manufactures two industrial chemicals in a joint process. In October,
$200,000 of direct materials wereprocessed at a cost of $300,000, resulting in 16,000
pounds of Pentex and 4,000 pounds of Glaxco. Pentex sells for $35 per pound and
Glaxco sells for $60 per pound. Management generally processes each of these
chemicals further in separable processes to manufacture more refined products. Pentex
is processed separately at a cost of $7.50 per pound, with the resulting product,
Pentex-R, selling for $45 per pound. Glaxco is processed separately at a cost of $10 per
pound, and the resulting product, Glaxco-R, sells for $100 per pound.
Required:
A. Compute the company’s total joint production costs.
B. Assuming that total joint production costs amounted to $500,000, allocate these costs
by using:
1> The physical-units method.
2> The relative-sales-value method.
3> The net-realizable-value method.
14) An opportunity cost may be described as:
A.a forgone benefit
B.a historical cost
C.a specialized type of variable cost
D.a specialized type of fixed cost
E.a specialized type of semivariable cost
15) Consider the following statements about variance investigation:
I. Variance investigation involves a look at only unfavorable variances.
II. Variance investigation is typically based on a cost-benefit analysis.
III. Variance investigation is often performed by establishing guidelines similar to the
following: Investigate variances that are greater than $X or greater than Y% of standard
cost.
Which of the above statements is (are) true?
A.I only
B.II only
C.III only
D.II and III
E.I, II, and III
16) Widely varying consumption ratios:
A.are reflective of product-line diversity
B.indicate an out-of-control production environment
C.dictate a need for traditional costing systems
D.work against the implementation of activity-based costing
E.create an unsolvable product-costing problem
17) Which of the following is a predetermined estimated cost that can be used in the
calculation of a variance?
A.Product cost
B.Actual cost
C.Standard cost
D.Differential cost
E.Marginal cost
18) The value chain of a manufacturer would tend to include activities related to:
A.manufacturing
B.research and development
C.product design
D.marketing
E.All of the other answers are correct
19) Which of the following statements regarding work in process is not correct?
A.Work in process is partially completed inventory
B.Work in process consists of direct labor, direct material, and manufacturing overhead
C.Work-in-Process Inventory is debited to record direct material used and direct labor
incurred
D.Work-in-Process Inventory appears on the year-end balance sheet
E.Work-in-Process Inventory is credited when goods are sold
20) Coleman, Inc. anticipates sales of 50,000 units, 48,000 units, and 51,000 units in
July, August, and September, respectively. Company policy is to maintain an ending
finished-goods inventory equal to 40% of the following month’s sales. On the basis of
this information, how many units would the company plan to produce in July?
A.46,800
B.49,200
C.49,800
D.52,200
E.None of the other answers are correct
21) Inventory holding costs typically include:
A.clerical costs of purchase-order preparation
B.costs of deterioration, theft, or spoilage
C.costs associated with lost sales to customers
D.forgone interest on money tied up in inventory
E.both costs of deterioration, theft, or spoilage and forgone interest on money tied up in
inventory
22) Wolverine, Inc. began operations on January 1 of the current year with a $12,000
cash balance. Forty percent of sales are collected in the month of sale; 60% are
collected in the month following sale. Similarly, 20% of purchases are paid in the
month of purchase, and 80% are paid in the month following purchase. The following
data apply to January and February:
If operating expenses are paid in the month incurred and include monthly depreciation
charges of $2,500, determine the change in Wolverine’s cash balance during February.
A.$2,000 increase
B.$4,500 increase
C.$5,000 increase
D.$7,500 increase
E.None of the other answers are correct
23) Of the following organizations, activity-based costing (ABC) cannot be used by:
A.manufacturers
B.financial-services firms
C.book publishers
D.hotels
E.None of these are correct, as all these organizations can use ABC
24) Consider the following statements about activity-based costing and its use in
pricing:
I. A company that uses target costing generally would have little need for activity-based
costing.
II. Companies that use cost-plus pricing methods would have little need for
activity-based costing.
III. The use of activity-based costing will often lead to better pricing decisions by
managers.
Which of the above statements is (are) true?
A.I only
B.II only
C.III only
D.I and III
E.I, II, and III
25) Darling Company, which applies overhead to production on the basis of machine
hours, reported the following data for the period just ended:
Actual units produced: 12,000
Actual fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Darling estimates four hours to manufacture a completed unit, the company’s
standard fixed overhead rate per machine hour would be:
A.$12.00
B.$14.40
C.$14.60
D.$15.00
E.None of the other answers are correct
26) The Fitzhugh Division of General Enterprises has a negative residual income of
$540,000. Fitzhugh’s management is contemplating an investment opportunity that will
reduce this negative amount to $400,000. The investment:
A.should be pursued because it is attractive from both the divisional and corporate
perspectives
B.should be pursued because it is attractive from the divisional perspective although not
from the corporate perspective
C.should be pursued because it is attractive from the corporate perspective although not
from the divisional perspective
D.should not be pursued because it is unattractive from both the divisional and
corporate perspectives
E.should not be pursued because it is unattractive from the divisional perspective
although it is attractive from the corporate perspective
27) The four tasks that follow take place with the concept known as target costing:
1Value engineering.
2Establish a target selling price.
3Establish a target cost.
4Establish a target profit.
Which of the following choices depicts the correct sequence of these tasks?
A.1, 3, 4, 2
B.3, 1, 4, 2
C.2, 4, 3, 1
D.2, 3, 1, 4
E.Some other sequence not listed
28) Which of the following statements about managerial accountants is false?
A.Managerial accountants more and more are considered “business partners”
B.Managerial accountants often are part of cross-functional teams
C.An increasing number of organizations are segregating managerial accountants in
separate managerial-accounting departments
D.In a number of companies, managerial accountants make significant business
decisions and resolve operating problems
E.The role of managerial accountants has changed considerably over the past decade
29) In regression analysis, the variable that is being predicted is known as the:
A.independent variable
B.dependent variable
C.explanatory variable
D.interdependent variable
E.functional variable
30) Which of the following choices correctly depicts the proper classification of direct
materials used and management salaries?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
31) Storch Corporation takes eight hours to complete the setup process for a certain
electrical component, with the setup cost averaging $150 per hour. If the company’s
competitor can accomplish the same process in six hours, Stanley’s non-value-added
cost would be:
A.$0
B.$150
C.$300
D.$900
E.$1,200
32) Cloverleaf, Inc. produces glass shelves that are used in furniture. Each shelf
requires 3.6 pounds of raw material at a cost of $2 per pound. Unfortunately, given the
nature of the manufacturing process, one out of every five shelves is chipped, scratched,
or broken at the beginning of production and has to be scrapped.
On average, 20 good shelves are completed during each hour. Laborers who work on
these units are paid $15 per hour.
Required:
A. Distinguish between perfection standards and practical standards.
B. Who within an organization would be in the best position to assist in setting the:
1> direct-material price standard?
2> direct-material quantity standard?
3> direct-labor efficiency standard?
C. Calculate a practical direct-material and direct-labor standard for each good shelf
produced.
33) Under an activity-based costing system, what is the per-unit overhead cost of
Economy?
A.$141
B.$164
C.$225
D.$228
E.None of the other answers is correct
34) Holden Industries began July with a finished-goods inventory of $48,000. The
finished-goods inventory at the end of July was $56,000 and the cost of goods sold
during the month was $125,000. The cost of goods manufactured during July was:
A.$104,000
B.$125,000
C.$117,000
D.$133,000
E.None of the other answers are correct
35) Which of the following would likely be considered an internal user of accounting
information rather than an external user?
A.Stockholders
B.Consumer groups
C.Lenders
D.Middle-level managers
E.Government agencies
36) Which of the following statements is/are correct concerning the application of
overhead in a standard costing system driven by process hours?
A.A predetermined overhead rate is allowed only for fixed overhead
B.Overhead application is based on standard process hours allowed
C.Overhead application is based on actual process hours incurred
D.Only prime costs are considered to be product costs in a standard costing system
E.Only variable overhead costs are applied to production
37) Economic value added (EVA) analysis indicates:
A.the amount of income generated by each dollar of capital investment
B.the number of sales dollars generated by each dollar of capital investment
C.the percentage of each sales dollar that remains as profit after all expenses are
covered
D.the amount of increased capital generated by each dollar of income
E.how much shareholder wealth is being created
38) Roberto Ventura operates a commercial painting business in Sacramento, which has
a very tight labor market. Much of his work focuses on newly constructed apartments
and townhouses.
The following data relate to crew no. 5 for a recently concluded period when 85
apartment units were painted:
Three new employees were assigned to crew no. 5 . Wages averaged $18.80 per hour
for each employee; the crew took 2,550 hours to complete the work.
Based on his knowledge of the operation, articles in trade journals, and conversations
with other painters, Ventura established the following standards:
Typical hourly wage rate of crew personnel: $15
Anticipated crew time for each unit: 34 hours
The paint quantity variance was $6,070F.
The operation did not go as smoothly as planned, with customer complaints and
problems being much higher than expected.
Required:
A. Compute Ventura’s direct-labor variances.
B. Is the direct-labor rate variance consistent with what you might expect in a tight
labor market? Explain.
C. Analyze the information given and that you calculated, and determine what likely
happened that would give rise to customer complaints.