1) Which of the following is not a type of quality cost?
A.External failure costs
B.Internal failure costs
C.All of the answers are correct
D.Prevention costs
E.Appraisal costs
2) Johnstone Company makes two products: Carpet Kleen and Floor Deodorizer.
Operating information from the previous year follows.
Fixed costs of $20,000 per year are presently allocated equally between both products.
If the product mix were to change, total fixed costs would remain the same.
The contribution margin per machine hour for Floor Deodorizer is:
A.$0.25
B.$2.00
C.$4.00
D.$5.00
E.$20.00
3) Jamal & Co. makes and sells two types of shoes, Plain and Fancy. Data concerning
these products are as follows:
Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
Assuming that the sales mix remains constant, the total number of units that Jamal must
sell to break even is:
A.2,432
B.2,647
C.4,737
D.5,000
E.None of the other answers is correct
4) 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
5) Lead indicators guide management to:
A.take actions now that will have positive effects on organizational performance now
B.take actions now that will have positive effects on organizational performance in the
future
C.take actions in the future that will have positive effects on organizational performance
now
D.take actions in the past that will have positive effects on organizational performance
in the future
E.pursue identical strategies as those implemented with lag indicators
6) The contribution income statement differs from the traditional income statement in
which of the following ways?
A.The traditional income statement separates costs into fixed and variable components
B.The traditional income statement subtracts all variable costs from sales to obtain the
contribution margin
C.Cost-volume-profit relationships can be analyzed more easily from the contribution
income statement
D.The effect of sales volume changes on profit is readily apparent on the traditional
income statement
E.The contribution income statement separates costs into product and period categories
7) 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
8) The optimum level of product quality is where:
A.external failure costs are at a minimum
B.total quality costs are at a minimum
C.prevention costs are at a minimum
D.internal failure costs are at a minimum
E.All of the other answers are correct
9) Costs of determining whether defects exist are called:
A.appraisal costs
B.external failure costs
C.internal failure costs
D.prevention costs
E.defects costs
10) Chen Corporation, a new company, adds material at the beginning of its production
process; conversion cost, in contrast, is incurred evenly throughout manufacturing.
During May, the firm completed 15,000 units and had ending work in process of 2,000
units, 60% complete. Equivalent-unit costs were: materials, $15; conversion, $22.
The cost of the company’s ending work-in-process inventory is:
A.$26,640
B.$44,400
C.$56,400
D.$74,000
E.None of the answers is correct
11) Within the relevant range, a curvilinear cost function can sometimes be graphed as
a:
A.sloping straight line
B.jagged line
C.vertical straight line
D.curved line
E.horizontal straight line
12) Given the following information, what is the cost of unused capacity? Cost of
material supplied is $8,600; Cost of material used is $8,000; Cost of material used per
shelf is $8; Cost of material supplied per shelf is $8.60.
A.$600
B.$6,000
C.$0.60
D.$1,000
E.There is no unused capacity
13) Indirect costs:
A.can be traced to a cost object
B.cannot be traced to a particular cost object
C.are not important
D.are always variable costs
E.may be indirect with respect to Disney World but direct with respect to one of its
major components, Epcot Center
14) The following information pertains to Bishop Concrete:
The company’s imputed interest rate is 8%.
The sales margin is:
A.6%
B.15%
C.20%
D.30%
E.40%
15) Coastal Corporation, which uses throughput costing, began operations at the start of
the current year. Planned and actual production equaled 20,000 units, and sales totaled
17,500 units at $95 per unit. Cost data for the year were as follows:
Required:
A. Compute the company’s total cost for the year.
B. How much of this cost would be held in year-end inventory under (1) absorption
costing and (2) variable costing?
C. How much of the company’s total cost for the year would appear on the period’s
income statement under (1) absorption costing and (2) variable costing?
16) If a firm has no excess capacity, which of the following is a sensible bidding
strategy?
A.Set a price to cover all costs
B.Base the bid on the incremental costs incurred because the job will contribute toward
the company’s profit
C.Base the bid solely on direct labor hours
D.Downplay the potential impact of competitors
E.Try to minimize the company’s tax liability
17) Which of the following characteristic(s) relate(s) more to managerial accounting
than to financial accounting?
A.A focus on reporting to personnel within an organization
B.A focus on reporting to external parties
C.An area of accounting that is heavily regulated
D.A focus on providing information that is relevant for planning, decision making,
directing, and control
E.A focus on reporting to personnel within an organization and a focus on providing
information that is relevant for planning, decision making, directing, and control
18) Thomlinson Company is considering the development of two products: no. 65 or
no. 66 . Manufacturing cost information follows.
Regardless of which product is introduced, the anticipated selling price will be $50 and
the company will pay a 10% sales commission on gross dollar sales. Thomlinson will
not carry an inventory of these items.
Required:
A. What is the break-even sales volume (in dollars) on product no. 66?
B. Which of the two products will be more profitable at a sales level of 25,000 units?
C. At what unit-volume level will the profit/loss on product no. 65 equal the profit/loss
on product no. 66?
19) Brice Publications, Inc. produces and sells business books. The results of the
company’s operations for the year ended December 31, 20×1, are given below.
Required:
A. Prepare a traditional income statement for the company.
B. Prepare a contribution income statement for the company.
C. Which income statement (traditional or contribution) would an operating manager
most likely use to study changes in operating income that are caused by changes in
sales? Why?
20) Which of the following choices correctly denotes factors that can influence a
company’s pricing practices for goods and services?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
21) Overland Shipping Company is involved in a competitive bidding situation.
Variable costs related to the project total $520,000, and allocated fixed cost is $95,000.
Which of the following cost figures should be used in setting a minimum bid price if
Overland has (1) excess capacity and (2) no excess capacity?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
22) Glass Industries reported the following data for the year just ended: sales revenue,
$1,750,000; cost of goods sold, $980,000; cost of goods manufactured, $560,000; and
selling and administrative expenses, $170,000. Glass’ gross margin would be:
A.$940,000
B.$1,190,000
C.$1,020,000
D.$380,000
E.$770,000
23) Which of the preceding activities would likely not be considered part of The Gap
clothing company’s value chain?
A.Designing a new product line
B.Locating and then negotiating terms with a clothing manufacturer
C.Marketing an existing product line
D.Distributing goods from regional warehouses to local stores
E.All of these activities would be an element in the company’s value chain
24) A review of Parrish Corporation’s accounting records found that at a volume of
90,000 units, the variable and fixed cost per unit amounted to $8 and $4, respectively.
On the basis of this information, what amount of total cost would Parrish anticipate at a
volume of 85,000 units?
A.$1,020,000
B.$1,040,000
C.$1,060,000
D.$1,080,000
E.None of the other answers is correct
25) Which of the following conditions would cause absorption-costing income to be
higher than variable-costing income?
A.Units sold exceeded units produced
B.Units sold equaled units produced
C.Units sold were less than units produced
D.Sales prices decreased
E.Selling expenses increased
26) Most of the Sarbanes-Oxley Act relates primarily to:
A.Corporate governance
B.Financial accounting
C.Auditing
D.Court-invoked penalties for violating the law
E.All of the other answers are correct
27) A company’s expected receipts from sales and planned disbursements to pay bills is
commonly called a:
A.pro-forma budget
B.master budget
C.financial budget
D.profit plan
E.cash budget
28) 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, the variable cost per machine hour was:
A.$8.40
B.$22.00
C.$25.00
D.$30.40
E.$33.40
29) When an organization involves its many employees in the budgeting process in a
meaningful way, the organization is said to be using an approach most commonly
known as:
A.budgetary slack
B.participative budgeting
C.budget padding
D.imposed budgeting
E.employee-based budgeting
30) Eastside Hospital has two service departments (Patient Records and Accounting)
and two “production” departments (Internal Medicine and Surgery). Which of the
following allocations would likely 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 Accounting cost to Patient Records and Allocation of Patient
Records cost to Internal Medicine
31) Yorkley Corporation plans to sell 41,000 units of its single product in March. The
company has 2,800 units in its March 1 finished-goods inventory and anticipates having
2,400 completed units in inventory on March 31 . On the basis of this information, how
many units does Yorkley plan to produce during March?
A.40,600
B.41,400
C.43,800
D.46,200
E.None of the other answers are correct
32) The difference between the total actual factory overhead and the total factory
overhead applied to production is the:
A.sum of the spending, efficiency, budget, and volume variances
B.controllable variance
C.efficiency variance
D.spending variance
E.volume variance
33) The following data pertain to Polar Company’s commercial snow thrower:
Required:
For each of the following cost bases, determine the appropriate percentage markup that
will result in a price of $980 for the snow thrower. (Round percentages to nearest
one-hundredth of a percent.)
A. Variable manufacturing cost.
B. Absorption manufacturing cost.
C. Total cost.
D. Total variable cost.
34) Depreciation of factory equipment would be classified as:
A.operating cost
B.”other” cost
C.manufacturing overhead
D.period cost
E.administrative cost
35) Costs that can be easily traced to a specific department are called:
A.direct costs
B.indirect costs
C.product costs
D.manufacturing costs
E.processing costs
36) Franco Electronics currently sells a camera for $240. An aggressive competitor has
announced plans for a similar product that will be sold for $205. Franco’s marketing
department believes that if the price is dropped to meet competition, unit sales will
increase by 10%. The current cost to manufacture and distribute the camera is $175, and
Franco has a profit goal of 20% of sales. If Franco meets competitive selling prices,
what is the company’s target cost?
A.$41
B.$48
C.$164
D.$175
E.$192
37) A company that is using the internal rate of return (IRR) to evaluate projects should
accept a project if the IRR:
A.is greater than the project’s net present value
B.equates the present value of the project’s cash inflows with the present value of the
project’s cash outflows
C.is greater than zero
D.is greater than the hurdle rate
E.is less than the firm’s cost of investment capital
38) A mixed cost is also known as a:
A.semivariable cost
B.step-fixed cost
C.variable cost
D.curvilinear cost
E.discretionary cost