1)
If the cost of goods manufactured for the year was $385,000, what was the cost of
goods sold for the year?
A.$395,400
B.$385,000
C.$390,200
D.$400,600
E.None of the other answers are correct
2) Which of the following activity cost pools and activity measures likely has the lowest
degree of correlation?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
3) The contribution-margin ratio is:
A.the difference between the selling price and the variable cost per unit
B.fixed cost per unit divided by variable cost per unit
C.variable cost per unit divided by the selling price
D.unit contribution margin divided by the selling price
E.unit contribution margin divided by fixed cost per unit
4) Atlantis Corporation assembles bicycles by purchasing frames, wheels, and other
parts from various suppliers. Consider the following data:
The company plans to sell 25,000 bicycles during each month of the year’s first quarter.
A review of the accounting records disclosed a finished-goods inventory of 1,400
bicycles on January 1 and an expected finished-goods inventory of 1,850 bicycles on
January 31 .
Atlantis has 4,300 wheels in inventory on January 1, a level that is expected to drop by
5% at month-end.
Assembly time totals 30 minutes per bicycle, and workers are paid $14 per hour.
Atlantis accounts for employee benefits as a component of direct labor cost. Pension
and insurance costs average $2 per hour (total); additionally, the company pays Social
Security taxes that amount to 8% of gross wages earned.
Required:
A. How many bicycles does Atlantis expect to produce (i.e., assemble) in January?
B. How many wheels are budgeted to be purchased in January?
C. Compute Atlantis’s total direct labor cost for January.
D. Briefly explain how the company’s purchasing activity would affect the
end-of-period balance sheet.
5) The nonstatistical method of cost estimation that calls for the creation of a scatter
diagram is the:
A.least-squares regression method
B.high-low method
C.visual-fit method
D.account analysis method
E.multiple regression method
6) Mount Vernon Corporation’s Gauge Division manufactures and sells product no. 24,
which is used in refrigeration systems. Per-unit variable manufacturing and selling costs
amount to $23 and $7, respectively. The Division can sell this item to external domestic
customers for $40 or, alternatively, transfer the product to the company’s Refrigeration
Division. Refrigeration is currently purchasing a similar unit from Taiwan for $36.
Assume use of the general transfer-pricing rule.
Required:
A. What is the most that the Refrigeration Division would be willing to pay the Gauge
Division for one unit?
B. If Gauge had excess capacity, what transfer price would the Division’s management
set?
C. If Gauge had no excess capacity, what transfer price would the Division’s
management set?
D. Repeat part “C,” assuming that Gauge was able to reduce the variable cost of internal
transfers by $5 per unit.
7) From an economic perspective, a company’s profit-maximizing quantity is found
where:
A.the total cost curve intersects with the marginal cost curve
B.the total revenue curve intersects with the average revenue curve
C.the marginal revenue curve intersects with the demand curve
D.the marginal revenue curve intersects with the marginal cost curve
E.the marginal cost curve intersects with the demand curve
8) Which of the following elements is (are) needed in a straightforward calculation of
the variable-overhead spending variance?
A.Variable overhead incurred during the period
B.Budgeted variable overhead based on actual hours worked
C.Standard variable overhead applied to production
D.Both variable overhead incurred during the period and budgeted variable overhead
based on actual hours worked
E.Both variable overhead incurred during the period and standard variable overhead
applied to production
9) Strategic cost management is:
A.the process of determining cost drivers
B.the recognition of the importance of cost relationships among the activities in the
value chain
C.the process of managing cost relationships to the firm’s advantage
D.two of the other answers are correct
10) If a company desires to be in compliance with current income tax law and write off
the cost of its assets rapidly, the firm would use:
A.straight-line depreciation
B.sum-of-the-years’-digits depreciation
C.accelerated depreciation
D.the Modified Accelerated Cost Recovery System (MACRS)
E.annuity depreciation
11) Employee empowerment involves encouraging and authorizing workers to take
initiatives to:
A.improve operations
B.reduce costs
C.improve product quality
D.improve customer service
E.All of the other answers are correct
12) Signature Scents has two divisions: the Cologne Division and the Bottle Division.
The Bottle Division produces containers that can be used by the Cologne Division. The
Bottle Division’s variable manufacturing cost is $2, shipping cost is $0.10, and the
external sales price is $3. No shipping costs are incurred on sales to the Cologne
Division, and the Cologne Division can purchase similar containers in the external
market for $2.60.
The maximum amount the Cologne Division would be willing to pay for each bottle
transferred would be:
A.$2.00
B.$2.10
C.$2.60
D.$2.90
E.$3.00
13) Which of the following statements pertain to variable costing?
A.This method must be used for external financial reporting
B.Fixed manufacturing overhead is attached to each unit produced
C.The income statement not does disclose a company’s contribution margin
D.Variable manufacturing overhead becomes part of a unit’s cost
E.None of the other answers are correct
14) To achieve the objectives of sections 302 and 404 of the Sarbanes-Oxley Act,
management and independent auditors should:
A.Disclose the minutia of the internal control structure
B.Conduct a cost-benefit analysis prior to deciding whether or not to adopt these
sections
C.Emphasize those areas where the greatest risk of fraud or material misstatement is
likely to occur
D.Analyze all financial transactions that are included in the reported financial
statements
E.Work together to design the most effective internal control system
15) Under section 404 of the Sarbanes-Oxley Act, auditors are required to:
A.Attest to and report on management’s assessment of internal controls
B.Establish and maintain internal controls for audited companies
C.Advise management on its preparation of the Report on Internal Controls
D.Evaluate the company’s internal control system periodically throughout the year
E.All of the other answers are correct
16) Lucie Corporation’s purchasing manager obtained a special price on an aluminum
alloy from a new supplier, resulting in a direct-material price variance of $9,500F. The
alloy produced more waste than normal, as evidenced by a direct-material quantity
variance of $2,000U, and was also difficult to use. This slowed worker efficiency,
generating a $2,500U labor efficiency variance. To help remedy the situation, the
production manager used senior line employees, which gave rise to a $900U labor rate
variance. If overall product quality did not suffer, what variance amount is best used in
judging the appropriateness of the purchasing manager’s decision to acquire
substandard material?
A.$4,100F
B.$5,000F
C.$7,000F
D.$7,500F
E.$9,500F
17) 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
18) If income taxes are ignored, which of the following choices correctly notes how a
project’s depreciation is treated under the net-present-value method and the
internal-rate-of-return method?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
19) HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe. The company, which uses activity-based costing, has identified
five activities (and related cost drivers). Each activity, its budgeted cost, and related cost
driver is identified below.
The following information pertains to the three product lines for next year:
What is HiTech’s pool rate for the material-handling activity?
A.$1.00 per part
B.$2.25 per part
C.$6.62 per labor hour
D.$13.23 per part
E.None of the other answers is correct
20) Which of the following is a key document in a typical process-costing system?
A.Departmental production report
B.Master schedule
C.Production budget
D.Sequential product report
E.Materials requirement report
21) Mideast Motors manufactures automobiles. Which of the following would not be
classified as direct materials by the company?
A.Wheel lubricant
B.Tires
C.Interior leather
D.CD player
E.Sheet metal used in the automobile’s body
22) Parker Corporation observed that when 25,000 units were sold, a particular cost
amounted to $75,000, or $3.00 per unit. When volume increased by 10%, the cost
totaled $82,500 (i.e., $3.00 per unit). The cost that Parker is studying can best be
described as a:
A.variable cost
B.fixed cost
C.semivariable cost
D.discretionary fixed cost
E.step-fixed cost
23) Norde Company is making plans for the introduction of a new product, which has a
target selling price of $7 per unit. The following estimates of manufacturing costs have
been derived for 6 million units, to be produced during the first year:
Direct material: $6,000,000
Direct labor: $2,100,000 (at $14 per hour)
Overhead costs have not yet been estimated, but monthly data on total production and
overhead for the past 12 months have been analyzed by using least-squares regression.
The major overhead cost driver is direct labor hours, with the following results:
Computed values:
Fixed overhead cost: $3,200,000
Coefficient of independent variable: $2.25
Required:
A. Prepare the company’s regression equation (Y = a + bX) to estimate overhead.
B. Calculate the predicted overhead cost at an activity level of 6,300,000 units.
C. What is Norde’s dependent variable in this case?
24) The following information relates to DFW Corporation:
All sales are on account and are budgeted as follows: February, $350,000; March,
$360,000; and April, $400,000. DFW collects 70% of its sales in the month of sale and
30% in the following month.
Cost of goods sold averages 60% of sales. Purchases total 65% of the following month’s
sales and are paid in the month following acquisition.
Cash operating expenses total $60,000 per month and are paid when incurred. Monthly
depreciation amounts to $18,000.
Selected amounts taken from the January 31 balance sheet were: accounts receivable,
$115,000; plant and equipment (net), $107,000; and retained earnings, $85,000.
Required: (NOTE: Ignore income taxes in answering these questions).
A. Prepare a budgeted income statement that summarizes activity for the two months
ended March 31, 20×1 .
B. Compute the amounts that would appear on the March 31 balance sheet for accounts
receivable, plant and equipment (net), and retained earnings.
25) Southern Lake Chemical manufactures a product called Zubek. Direct materials are
added at the beginning of the process, and conversion activity occurs uniformly
throughout production. The beginning work-in-process inventory is 60% complete with
respect to conversion; the ending work-in-process inventory is 20% complete. The
following data pertain to May:
Using the weighted-average method of process costing, the cost per unit of conversion
activity is:
A.$2.50
B.$2.53
C.$2.70
D.$2.76
E.None of the answers is correct
26) Committed fixed costs would include:
A.advertising
B.research and development
C.depreciation on buildings and equipment
D.contributions to charitable organizations
E.expenditures for direct labor
27) Factors in a decision problem that cannot be expressed in numerical terms are:
A.qualitative in nature
B.quantitative in nature
C.predictive in nature
D.sensitive in nature
E.uncertain in nature
28) Rowe Corporation reported the following variances for the period just ended:
Variable-overhead spending variance: $50,000U
Variable-overhead efficiency variance: $28,000U
Fixed-overhead budget variance: $70,000U
Fixed-overhead volume variance: $30,000U
If Rowe desires to analyze variances that arose primarily from managers’ expenditures
in excess of anticipated amounts, the company should focus on variances that total:
A.$50,000U
B.$70,000U
C.$120,000U
D.$178,000U
E.None of the other answers are correct
29) Which of the following is least likely to be classified as a batch-level activity in an
activity-based costing system?
A.Shipping
B.Receiving and inspection
C.Production setup
D.Property taxes
E.Quality assurance
30) Which of the following equations is used to calculate cost of goods sold during the
period?
A.Beginning finished goods + cost of goods manufactured + ending finished goods
B.Beginning finished goods – ending finished goods
C.Beginning finished goods + cost of goods manufactured
D.Beginning finished goods + cost of goods manufactured – ending finished goods
E.Beginning finished goods + ending finished goods – cost of goods manufactured