1) Aloha Hotels owns numerous hotels on each of the Hawaiian Islands. The company’s
performance reporting system is structured around the firm’s organizational structure,
with information flowing from operating departments at a particular property and later
respectively grouped by individual hotel, island operation (i.e., division), and the
company as a whole. Which of the following best depicts the detail level of the
information given to a department manager versus that reported to a company
vice-president?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
2) Beach Bum Corporation has fixed manufacturing cost of $12 per unit. Consider the
three independent cases that follow.
Case A: Absorption- and variable costing income each totaled $240,000 in a period
when the firm produced 18,000 units.
Case B: Absorption-costing income totaled $320,000 in a period when finished-goods
inventory levels rose by 7,000 units.
Case C: Absorption-costing income and variable-costing income respectively totaled
$220,000 and $250,000 in a period when the beginning finished-goods inventory was
14,000 units.
Required:
A. In Case A, how many units were sold during the period?
B. In Case B, how much income would Beach Bum report under variable costing?
C. In Case C, how many units were in the ending finished-goods inventory?
3) When making investment decisions that involve advanced manufacturing systems,
the use of net present value:
A.presents no special problems for the analyst
B.often gives rise to net-present-value figures that are negative despite a manager’s
belief that the investment is beneficial for the firm
C.should be coupled with Pareto diagrams
D.often omits a number of factors that are difficult to quantify (e.g., greater
manufacturing flexibility, improved product quality, and so forth)
E. Both often gives rise to net-present-value figures that are negative despite a
manager’s belief that the investment is beneficial for the firm and often omits a number
of factors that are difficult to quantify (e.g., greater manufacturing flexibility, improved
product quality, and so forth)
4) Which of the following is not an issue in the collection of data for cost estimation?
A.Outliers
B.Missing data
C.Mismatched time periods
D.Inflation
E.All of the other answers are issues in data collection
5) Prudence Corporation manufactures two products: X and Y. The company has 4,000
hours of machine time available and can sell no more than 800 units of product X.
Other pertinent data follow.
Which of the following is a constraint function of Prudence?
A.Maximize Z = 5X + 14Y
B.Minimize Z = 6.50X + 11.25Y
C.X 800
D.2X 4,000; 3Y 4,000
E.2X + 3Y 4,000
6) A recent income statement of Black Corporation reported the following data:
If these data are based on the sale of 20,000 units, the contribution margin per unit
would be:
A.$40
B.$150
C.$290
D.$360
E.None of the other answers is correct
7) Scotch Company plans to sell 400,000 units of finished product in July 20×1 .
Management (1) anticipates a growth rate in sales of 5% per month thereafter and (2)
desires a monthly ending finished-goods inventory (in units) of 80% of the following
month’s estimated sales. There are 300,000 completed units in the June 30, 20×1
inventory.
Each unit of finished product requires four pounds of direct material at a cost of $1.50
per pound. There are 1,600,000 pounds of direct material in inventory on June 30,
20×1 .
Required:
A. Prepare a production budget for the quarter ended September 30, 20×1 . Note: For
both part “A” and part “B” of this problem, prepare your budget on a quarterly (not
monthly) basis.
B. Independent of your answer to part “A,” assume that Scotch plans to produce
1,200,000 units of finished product for the quarter ended September 30. If the firm
desires to stock direct materials at the end of this period equal to 25% of current
production usage, compute the cost of direct material purchases for the quarter.
8) Roberts Corp., which began business at the start of the current year, had the
following data:
Planned and actual production: 40,000 units
Sales: 37,000 units at $15 per unit
Production costs:
Variable: $4 per unit
Fixed: $260,000
Selling and administrative costs:
Variable: $1 per unit
Fixed: $32,000
The contribution margin that the company would disclose on a variable-costing income
statement is:
A.$97,500
B.$147,000
C.$166,500
D.$370,000
E.None of the other answers are correct
9) Goldman Corporation uses time and material pricing. The repair department expects
20,000 direct labor hours of activity and has the following selected data:
The company’s time charge per hour is:
A.$11
B.$24
C.$40
D.$64
E.$75
10) Colonial Products employs a process-costing system for its manufacturing
operations. All materials are added at the beginning of the process, and conversion costs
are incurred uniformly throughout production. The information that follows relates to
September.
Required:
A. Calculate equivalent units of direct material for September.
B. Calculate equivalent units of conversion activity for September.
11) Verna’s makes all sales on account, subject to the following collection pattern: 20%
are collected in the month of sale; 70% are collected in the first month after sale; and
10% are collected in the second month after sale. If sales for October, November, and
December were $70,000, $60,000, and $50,000, respectively, what was the budgeted
receivables balance on December 31?
A.$40,000
B.$46,000
C.$49,000
D.$59,000
E.None of the other answers are correct
12) The unit contribution margin is calculated as the difference between:
A.selling price and fixed cost per unit
B.selling price and variable cost per unit
C.selling price and product cost per unit
D.fixed cost per unit and variable cost per unit
E.fixed cost per unit and product cost per unit
13) In a manufacturing company, the cost of goods completed during the period would
include which of the following elements?
A.Raw materials used
B.Beginning finished goods inventory
C.Marketing costs
D.Depreciation of delivery trucks
E.All of the other answers are correct
14) Assume that a managerial accountant regularly communicates with business
associates to avoid conflicts of interest and advises relevant parties of potential
conflicts. In so doing, the accountant will have applied the ethical standard of:
A.objectivity
B.confidentiality
C.integrity
D.credibility
E.unified behavior
15) Young Corporation has a high probability of operating at 40,000 activity hours
during the upcoming period, and lower probabilities of operating at 30,000 hours and
50,000 hours. The company’s flexible budget revealed the following:
Young’s flexible-budget formula, where Y is defined as total cost and AH represents
activity hours, is:
A.Y = $4.50AH + $24AH
B.Y = $4.50AH + $720,000
C.Y = $22.50AH
D.Y = $180,000 + $18AH
E.Y = $945,000
16) A company’s sales forecast would likely consider all of the following factors except:
A.past sales levels and trends
B.the company’s intended pricing policy
C.the company’s product costing policy
D.market research studies
E.planned advertising and promotions
17) The Dopler Manufacturing Company has two production departments (Assembly
and Finishing) and two service departments (Human Resources and Janitorial). The
projected usage of the two service departments is as follows:
The budgeted costs in the service departments are: Human Resources, $90,000 and
Janitorial, $50,000.
Using the step-down method and assuming the Human Resources Department is
allocated first, the total amount of service department cost allocated to the Finishing
Department is:
A.$58,947
B.$61,158
C.$74,000
D.$78,842
E.$81,053
18) Puck Company received $18,000 cash from the sale of a machine that had a
$13,000 book value. If the company is subject to a 30% income tax rate, the net cash
flow to use in a discounted-cash-flow analysis would be:
A.$3,500
B.$6,500
C.$12,600
D.$16,500
E.$19,500
19) If the head of a hotel’s food and beverage operation is held accountable for revenues
and costs, the food and beverage operation would be considered a (n):
A.cost center
B.revenue center
C.profit center
D.investment center
E.contribution center
20) A recent income statement of Suni Corporation reported the following data:
If these data are based on the sale of 20,000 units, the break-even point would be:
A.7,500 units
B.11,628 units
C.12,500 units
D.33,333 units
E.None of the other answers is correct
21) A variable cost that has a definitive physical relationship to the activity measure is
called a (n):
A.discretionary cost
B.engineered cost
C.managed cost
D.programmed cost
E.committed cost
22) The assignment of direct labor cost to individual jobs is based on:
A.an estimate of the total time spent on the job
B.actual total payroll cost divided equally among all jobs in process
C.estimated total payroll cost divided equally among all jobs in process
D.the actual time spent on each job multiplied by the wage rate
E.the estimated time spent on each job multiplied by the wage rate
23) Which of the following statements about joint-cost allocation is false?
A.Joint-cost allocation is useful in deciding whether to further process a product after
split-off
B.Joint-cost allocation is useful in making a profit determination about individual joint
products
C.Joint-cost allocation is helpful in inventory valuation
D.Joint-cost allocation can be based on the number of units produced
E.Joint-cost allocation can be accomplished by using several different methods that
focus on sales value and product “worth”
24) Which of the following would occurs if a company increases its variable cost per
unit?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
25) Howard Manufacturing’s overhead at year-end was underapplied by $5,800, a small
amount given the firm’s size. The year-end journal entry to record this amount would
include:
A.a debit to Cost of Goods Sold
B.a debit to Manufacturing Overhead
C.a debit to Work-in-Process Inventory
D.a credit to Cost of Goods Sold
E.a credit to Work-in-Process Inventory
26) The following selected information was extracted from the 20×3 accounting records
of Medina Products
*Seventy percent of the company’s building was devoted to production activities; the
remaining 30% was used for selling and administrative functions.
Medina’s beginning and ending work-in-process inventories amounted to $306,000 and
$245,000, respectively. The company’s beginning and ending finished-goods
inventories were $450,000 and $440,000, respectively.
Required:
A. Calculate Medina’s manufacturing overhead for the year.
B. Calculate Medina’s cost of goods manufactured.
C. Compute Medina’s cost of goods sold.
27) The division of activities into unit-level, batch-level, product-sustaining level, and
facility-level categories is commonly known as a cost:
A.object
B.application method
C.hierarchy
D.estimation method
E.classification scheme that is useful in traditional, volume-based systems
28) The accounting records of Georgia Company revealed the following costs: direct
materials used, $250,000; direct labor, $425,000; manufacturing overhead, $375,000;
and selling and administrative expenses, $220,000. Georgia’s product costs total:
A.$1,050,000
B.$830,000
C.$895,000
D.$1,270,000
E.None of the other answers are correct
29) Fogg Company, which uses labor hours to apply overhead to manufacturing, may
have increased amounts of underapplied overhead at month-end if:
A.suppliers of direct materials have an across-the-board price increase
B.an accountant failed to record the period’s charges for plant maintenance and security
C.employees are hit hard with a widespread outbreak of the flu
D.direct laborers are granted a wage increase
E.outlays for advertising expenditures are increased
30) Which of the following manufacturers would most likely not use a process-cost
accounting system?
A.A producer of computer monitors
B.A paint manufacturer
C.A producer of frozen orange juice
D.A builder of customized yachts
E.A lumber mill
31) Vanderhaus Corporation manufactures a variety of liquid lawn fertilizers, including
a very popular product called Lush ‘N Green. Data about Lush ‘N Green and Proctol, a
major ingredient, follow.
Expected operations:
Proctol is purchased in 55-gallon drums at a cost of $65 per drum. A 2% cash discount
is offered by Proctol’s manufacturer for prompt payment of invoices, and Vanderhaus
takes advantage of all discounts offered.
Vanderhaus normally purchases 200 drums of Proctol at a time, paying shipping fees of
$2,660 per shipment.
Each gallon of Lush ‘N Green requires three quarts of Proctol; however, because of
evaporation and spills, Vanderhaus loses 4% of all Proctol that enters production.
(Recall that there are four quarts in a gallon.)
Actual operations:
For the period just ended, Vanderhaus purchased 1,500 drums of Proctol at a total cost
of $118,100, which reflects discounts and shipping. There was no beginning inventory,
but an end-of-period inventory revealed that 30 drums were still on hand.
Manufacturing activity output totaled 104,000 gallons of Lush ‘N Green.
Assume that the company computes variances at the earliest point in time.
Required:
A. Compute the standard purchase price for one gallon of Proctol.
B. Compute the standard quantity of Proctol to be used in producing one gallon of Lush
‘N Green. Express your answer in quarts.
C. Compute the direct-material price variance for Proctol.
D. How much Proctol was used in manufacturing activity and how much should have
been used? Express your answer in quarts.
32) An examination of Shorter Corporation’s inventory accounts revealed the following
information:
Raw materials, June 1: 46,000 units
Raw materials, June 30: 51,000 units
Purchases of raw materials during June: 185,000 units
Shorter’s finished product requires four units of raw materials. On the basis of this
information, how many finished products were manufactured during June?
A.45,000
B.47,500
C.57,750
D.70,500
E.None of the other answers are correct
33) A machine was sold in December 20×3 for $9,000. It was purchased in January
20×1 for $15,000, and depreciation of $12,000 was recorded from the date of purchase
through the date of disposal. Assuming a 40% income tax rate, the after-tax cash inflow
at the time of sale is:
A.$3,600
B.$6,600
C.$8,400
D.$9,000
E.$11,400
34) Torrey Pines is studying whether to outsource its Human Resources (H/R)
activities. Salaried professionals who earn $390,000 would be terminated; in contrast,
administrative assistants who earn $120,000 would be transferred elsewhere in the
organization. Miscellaneous departmental overhead (e.g., supplies, copy charges,
overnight delivery) is expected to decrease by $30,000, and $25,000 of corporate
overhead, previously allocated to Human Resources, would be picked up by other
departments. If Torrey Pines can secure needed H/R services locally for $410,000, how
much would the company benefit by outsourcing?
A.$10,000
B.$35,000
C.$130,000
D.$155,000
E.Nothing, as it would be cheaper to keep the department open
35) Wesley Enterprises has determined that three variables play a key role in
determining company revenues. To arrive at an objective forecast of revenues for the
next accounting period, Wesley should use:
A.simple regression
B.multiple regression
C.a scatter diagram
D.complex regression
E.the high-low method
36) When considering whether to investigate a variance, managers should consider all
of the following except the variance’s:
A.size
B.pattern of recurrence
C.trends over time
D.nature, namely, whether it is favorable or unfavorable
E.controllability
37) A controller is normally involved with:
A.preparing financial statements
B.managing investments
C.raising capital
D.safeguarding assets
E.managing the firm’s credit policy