1) Which of the following situations would cause variable-costing income to be higher
than absorption-costing income?
A.Units sold equaled 39,000 and units produced equaled 42,000
B.Units sold and units produced were both 42,000
C.Units sold equaled 55,000 and units produced equaled 49,000
D.Sales prices decreased by $7 per unit during the accounting period
E.Selling expenses increased by 10% during the accounting period
2) Sand Box Company is choosing new cost drivers for its accounting system. One
driver is labor hours; the other is a combination of machine hours for unit variable costs
and number of setups for a pool of batch-level costs. Data for the past year follow.
Assume that both cost pools are combined into a single pool, and labor hours is the
driver. The total flexible budget for the actual level of labor hours and the total variance
for the combined pool are:
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
3) Which of the following entities would most likely have raw materials, work in
process, and finished goods?
A.Exxon Corporation
B.Macy’s Department Store
C.Wendy’s
D.Southwest Airlines
E.Columbia University
4) Weston Company had sales revenue and operating expenses of $5,000,000 and
$4,200,000, respectively, for the year just ended. If invested capital amounted to
$6,000,000, the firm’s ROI was:
A.13.33%
B.83.33%
C.120.00%
D.750.00%
E.None of the other answers are correct
5) An investment center manager:
A.does not have the ability to produce revenue
B.may be involved with the sale of new marketing programs to clients
C.would normally be held accountable for producing an adequate return on invested
capital
D.often oversees divisional operations
E.may be the manager who oversees the operations of a retail store
6) Strong Company applies overhead based on machine hours. At the beginning of
20×1, the company estimated that manufacturing overhead would be $500,000, and
machine hours would total 20,000. By 20×1 year-end, actual overhead totaled $525,000,
and actual machine hours were 25,000. On the basis of this information, the 20×1
predetermined overhead rate was:
A.$0.04 per machine hour
B.$0.05 per machine hour
C.$20 per machine hour
D.$21 per machine hour
E.$25 per machine hour
7) Given that ROI measures performance over a period of time, invested capital would
most appropriately be figured by using:
A.beginning-of-year assets
B.average assets
C.end-of-year assets
D.total assets
E.only current assets
8) Which of the following data are needed to calculate total equivalent units under the
weighted-average method?
A.Work-to-date on ending work in process, units started during the period
B.Units completed during the period, work-to-date on ending work in process
C.Work to complete beginning work in process, work-to-date on ending work in
process
D.Work to complete beginning work in process, units completed, and work done on
ending work in process
E.Units completed, work to complete beginning work in process
9) The fixed costs per unit are $10 when a company produces 10,000 units of product.
What are the fixed costs per unit when 8,000 units are produced?
A.$12.50
B.$10.00
C.$8.00
D.$6.50
E.$5.50
10) Westside Hospital has two service departments (Patient Records and Accounting)
and two “production” departments (Internal Medicine and Surgery). Which of the
following allocations would not take place under the reciprocal-services method of cost
allocation?
A.Allocation of Accounting cost to Patient Records
B.Allocation of Patient Records cost to Internal Medicine
C.Allocation of Surgery cost to Accounting
D.Allocation of Internal Medicine cost to Surgery
E.Both Allocation of Surgery cost to Accounting and Allocation of Internal Medicine
cost to Surgery
11) Northcutt’s production data for a new deluxe product were taken from the most
recent quarterly production budget:
In addition, Northcutt produces 5,000 units a month of its standard product. It takes two
direct labor hours to produce each standard unit and 2.25 direct labor hours to produce
each deluxe unit. Northwest’s cost per labor hour is $15. Direct labor cost for the
quarter would be budgeted at:
A.$519,075
B.$533,125
C.$547,750
D.$553,950
E.None of the other answers are correct
12) Which of the following journal entries definitely contains an error?
A.
B.
C.
D.
E.
13) Sanderson sells a single product for $50 that has a variable cost of $30. Fixed costs
amount to $5 per unit when anticipated sales targets are met. If the company sells one
unit in excess of its break-even volume, profit will be:
A.$15
B.$20
C.$50
D.an amount that cannot be derived based on the information presented
E.an amount other than $15, $20, or $50 and one that can be derived based on the
information presented
14) Consider the following statements about goal congruence:
I. Goal congruence is obtained when managers of subunits throughout an organization
strive to achieve the goals set by top management.
II. Managers are often more concerned about the performance of their own subunits
rather than the performance of the entire organization.
III. Achieving goal congruence in most organizations is relatively straightforward and
easy to accomplish.
Which of the above statements is(are) true?
A.I only
B.II only
C.I and II
D.II and III
E.I, II, and III
15) Shields carries a part that is popular in the manufacture of automatic sprayers.
Demand for this part is 4,000 units per year; order costs amount to $30 per order, and
holding costs total $1.50 per unit. The company is considering the implementation of an
economic order quantity model in an effort to better manage its inventories.
Required:
A. Compute the economic order quantity.
B. Compute total annual inventory costs if Shields follows the EOQ policy.
16) An increased number of companies are investing in advanced manufacturing
systems.
Required:
A. Many proposed advanced manufacturing systems have a negative net present value
when discounted-cash-flow analysis is used. Explain several causes of this situation.
B. Two major benefits of advanced systems are greater flexibility in the manufacturing
process and improvements in product quality. Explain how these benefits can create
problems when performing discounted-cash-flow analysis.
17) Which of the following is true concerning cost drivers for the predetermined
overhead rate in a process-costing system?
A.Predetermined overhead rates are not used in a process-costing system
B.If direct material cost is the cost driver, direct labor and direct materials may be
combined into the single element of prime cost
C.If direct labor hours is the cost driver, direct labor and manufacturing overhead may
be combined into the single element of conversion cost
D.If direct labor cost is the cost driver, direct labor and manufacturing overhead may be
combined into the single element of conversion cost
E.Cost drivers are irrelevant in process-costing systems
18) The following information relates to Joplin Company for the period just ended:
All of the company’s overhead is variable or fixed in nature.
Required:
A. Calculate the spending and efficiency variances for variable overhead.
B. Calculate the budget and volume variances for fixed overhead.
19) A direct-material quantity variance can be caused by all of the following except:
A.improper employee training
B.changes in sales volume
C.acquisition of materials that are below standard quality
D.adjustment problems with machines
E.disgruntled workers
20) 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
21)
Refer to the figure above. At a given sales volume, the vertical distance between the
fixed cost line and the total cost line represents:
A.fixed cost
B.variable cost
C.profit or loss at that volume
D.semivariable cost
E.the safety margin
22)
Refer to the figure above. The triangular area between the horizontal axis and Line A, to
the left of 4,000, represents:
A.fixed cost
B.variable cost
C.profit
D.loss
E.sales revenue
23) Laskey uses a weighted-average process-costing system. Material A is added at the
start of production; packaging material is introduced at the end. Conversion costs are
incurred evenly throughout manufacturing.
The following selected data were extracted from the company’s production report:
Required:
A. Compute the equivalent-unit cost for conversion cost.
B. How far into the manufacturing process is the ending work-in-process inventory?
C. Would the total equivalent units for Material A and the packaging material be the
same? Why?
D. Compute the cost of goods completed during the period.
E. Compute the cost of the ending work-in-process inventory.
F. What account would be debited to record the cost of goods completed during the
period?
24) Given the following information, what is the cost of unused capacity? Cost of
material supplied is $3,200; Cost of material used is $3,000; Cost of material used per
cake is $3; Cost of material supplied per cake is $3.20 .
A.$0.20
B.$200
C.$2,000
D.$1,000
E.There is no unused capacity
25) Blarney Company applies manufacturing overhead by using a predetermined rate of
50% of direct labor cost. The data that follow pertain to job no. 764:
If Blarney adds a 40% markup on total cost to generate a profit, which of the following
choices depicts a portion of the accounting needed to record the sale of job no. 764?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
26) Fedora, Inc., uses a weighted-average process-costing system and has one
production department. All materials are introduced at the start of manufacturing; in
contrast, conversion cost is incurred uniformly throughout production. The company
had respective work-in-process inventories on May 1 and May 31 of 62,000 units and
70,000 units, the latter of which was 40% complete. The production supervisor noted
that Federal completed 100,000 units during the month.
Costs in the May 1 work-in-process inventory were subdivided as follows: materials,
$40,000; conversion, $90,000. During May, Fedora charged production with $300,000
of material and $710,000 of conversion, resulting in a material cost per equivalent unit
of $2.
Required:
A. Determine the number of units that Fedora started during May.
B. Compute the number of equivalent units with respect to conversion cost.
C. Determine the conversion cost per equivalent unit.
D. Compute the cost of the May 31 work-in-process inventory.
E. What account would have been credited to record Fedora’s completed production?
27) Song, Inc., uses the high-low method to analyze cost behavior. The company
observed that at 22,000 machine hours of activity, total maintenance costs averaged
$33.40 per hour. When activity jumped to 25,000 machine hours, which was still within
the relevant range, the average total cost per machine hour was $30.40.
On the basis of this information, what were total maintenance costs when the company
experienced 23,000 machine hours?
A.$193,200
B.$550,000
C.$734,800
D.$743,200
E.$760,000
28) Which of the following balanced-scorecard perspectives is influenced by a
company’s vision and strategy?
A.Financial
B.Customer
C.Internal operations
D.Learning and growth
E.All of the other answers are correct
29) CVP analysis can be used to study the effect of:
A.changes in selling prices on a company’s profitability
B.changes in variable costs on a company’s profitability
C.changes in fixed costs on a company’s profitability
D.changes in product sales mix on a company’s profitability
E.All of the other answers are correct
30) Consider the following comments about absorption- and variable-costing income
statements:
I. A variable-costing income statement discloses a firm’s contribution margin.
II. Cost of goods sold on an absorption-costing income statement includes fixed costs.
III. The amount of variable selling and administrative cost is the same on absorption-
and variable-costing income statements.
Which of the above statements is (are) true?
A.I only
B.II only
C.I and II
D.II and III
E.I, II, and III
31) The provisions of sections 302 and 404 of the Sarbanes-Oxley Act (as originally
enacted) have proved especially troublesome for:
A.Small businesses
B.Private universities
C.Cities and municipalities
D.Healthcare providers
E.Individual taxpayers
32) Which of the following statements is true?
A.Product costs affect only the balance sheet
B.Product costs affect only the income statement
C.Period costs affect only the balance sheet
D.Neither product costs nor period costs affect the Statement of Retained Earnings.
This can also be a true statement if the period costs were prepaid (i.e., prepaid
advertising, depreciation)
E. Product costs eventually affect both the balance sheet and the income statement
33) Bowman, Inc., has only variable costs and fixed costs. A review of the company’s
records disclosed that when 200,000 units were produced, fixed manufacturing costs
amounted to $800,000 and the cost per unit manufactured totaled $11. On the basis of
this information, how much cost would the firm anticipate at an activity level of
205,000 units?
A.$2,235,000
B.$2,222,000
C.$2,214,000
D.$2,200,000
E.None of the other answers is correct
34) Gajewski began operations on January 1 of the current year. The company uses a
process-costing system, and conversion cost is incurred evenly throughout
manufacturing. By January 31, the firm had completed 56,000 units. Which of the
following statements is true about the ending work-in-process inventory if equivalent
units for conversion cost totaled 59,000 units?
A.There is no ending work-in-process inventory
B.The ending work-in-process inventory totaled 3,000 physical units
C.The ending work-in-process inventory of 10,000 physical units was 30% complete
D.The ending work-in-process inventory of 20,000 physical units was 85% complete
E.More than one of the other answers is true
35) 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