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The balanced scorecard focuses only on lead indicators, because lag indicators are not
important for performance evaluation.
In making product mix decisions, when fixed costs are irrelevant, a company should
emphasize the product with the highest contribution margin per unit of the constraint.
In a manufacturing company, wages and benefits of assembly line workers are period
costs.
The accounting rate of return shows the effect of the investment on the company's
accrual-based income.
Budgetary slack occurs when managers intentionally overstate expected revenues or
understate expected expenses.
The degree of operating leverage for Williams Company is 2. The actual operating
income is $14,000. If the company expects a 25% increase in sales, operating income
should increase by $3,500.
The financial budget of a merchandising company is similar to that of a manufacturing
company.
There is no need for managers to have employees participate in developing the budget
because the budget is a management tool.
Manufacturing companies have inventory accounts, but merchandising companies do
not.
A process costing system is generally used by companies that produce homogeneous
products.
The cost accountant works with the office and sales managers to develop the selling and
administrative expense budget.
If a business is considering buying a new vehicle, the cost of the insurance premium is
relevant to the business decision.
Cost center responsibility reports generally focus on the static budget variance.
Which of the following is true of a purchases journal?
A) For a periodic inventory system, the Merchandise Inventory DR column is replaced
with a column titled Cost of Goods Sold DR.
B) Cash purchases are recorded in the purchases journal.
C) For a perpetual inventory system, a column titled Purchases DR is needed.
D) The Other Accounts DR column is used for purchases on account of items other than
merchandise inventory and office supplies.
Which of the following statements is true of performance reporting?
A) Responsibility reports should focus on the person responsible for unfavorable
variances, rather than information.
B) Managers should not be held accountable for uncontrollable variances.
C) Only unfavorable variances should be explained in the reports.
D) Every variance, regardless of magnitude, must be investigated by the managers.
Gamma Corporation is considering an investment of $518,000 in a land development
project. The investment will yield cash inflows of $220,000 per year for five years. The
company uses a discount rate of 9%. What is the net present value of the investment?
Present value of an ordinary annuity of $1:
A) $238,280
B) $337,800
C) $341,880
D) $220,000
Thomas Manufacturing produces a chemical pesticide and uses process costing. There
are three processing departments-Mixing, Refining, and Packaging. On January 1, the
Refining Department had 2,000 gallons of partially processed product in production.
During January, 36,000 gallons were transferred in from the Mixing Department, and
31,000 gallons were completed and transferred out. At the end of the month, there were
7,000 gallons of partially processed product remaining in the Refining Department. See
additional details below.
Refining Department, beginning balance at January 1
Quantity: 2,000 units (partially processed)
Cost: $15,600 of costs transferred in
$1,600 of materials cost
$4,500 of conversion cost
$21,700 total account balance
Costs added during January
Cost of units transferred in $222,400
Direct materials cost $46,000
Conversion cost $93,750
Refining Department, ending balance at January 31
Quantity: 7,000 units (partially processed)
Percent complete for materials cost: 85%
Percent complete for conversion cost: 70%
What was the cost per equivalent unit with respect to direct materials costs for the
Refining Department in the month of January? Use the weighted-average method.
(Round your calculations to the nearest cent.)
A) $1.29
B) $2.74
C) $1.25
D) $6.80
Which of the following managers is likely to have the most diverse responsibilities?
A) the manager of a cost center
B) the manager of a profit center
C) the manager of an investment center
D) the manager of a revenue center
Roberts Logistics provides the following information:
What is the company's asset turnover ratio? (Round your answer to two decimal
places.)
A) 4.00
B) 4.48
C) 12.44
D) 7.00
Neptune Accounting Services expects its accountants to work for 24,000 direct labor
hours per year. The company's estimated total indirect costs are $225,000. The direct
labor rate is $70 per hour. The company uses direct labor hours as the allocation base
for indirect costs. If Neptune performs a job requiring 30 hours of direct labor, what is
the total job cost? (Round any intermediate calculations to the nearest cent, and your
final answer to the nearest dollar.)
A) $225,000
B) $281
C) $2,381
D) $2,100
Which of the following statements describes a scenario when management should
consider dropping a business division?
A) The division has been consistently reporting an operating loss.
B) The division's avoidable fixed costs are less than its contribution margin.
C) The division's avoidable fixed costs are greater than its contribution margin.
D) The division's unavoidable fixed costs are greater than its operating loss.
DGT Industries expects to sell 470 units of Product A and 410 units of Product B each
day at an average price of $25 for Product A and $28 for Product B. The expected cost
for Product A is 45% of its selling price and the expected cost for Product B is 65% of
its selling price. DGT Industries has no beginning inventory, but it wants to have a
four-day supply of ending inventory for each product. Compute the budgeted purchases
for the next (seven-day) week. (Round the answer to the nearest dollar.)
A) $89,247
B) $92,920
C) $162,610
D) $140,245
Connecticut Manufacturing began business on January 1. During its first year of
operation, Connecticut worked on five industrial jobs and reported the following
information at year-end:
Connecticut's allocation of overhead costs left a debit balance of $1,400 in the
Manufacturing Overhead account, which was adjusted to zero at year-end. What was
the final balance in Cost of Goods Sold for the year ended December 31?
A) $55,300
B) $56,700
C) $53,900
D) $17,900
Which of the following is an example of a direct materials cost standard?
A) $40 per direct labor hour
B) 50 square feet per unit
C) $0.95 per square foot
D) 6 direct labor hours per unit
For a pharmaceutical company, the most suitable base for allocating research and
development costs to the finished products would be the ________.
A) direct labor hours
B) cost of raw materials purchased
C) number of new patents filed
D) number of set ups
Which of the following decisions will most likely involve the use of activity-based
management?
A) decisions related to the financing of an investment using equity or debt
B) decisions related to the expansion operations in a particular geographic location
C) decisions related to the pricing of a product
D) decisions related to the payment of dividends
A favorable sales volume variance in variable costs suggests a(n) ________.
A) increase in number of actual units sold when compared to the expected number of
units sold
B) decrease in number of actual units sold when compared to the expected number of
units sold
C) increase in variable cost per unit
D) decrease in fixed costs
The primary objective in setting transfer prices is to ________.
A) establish a system that determines the best transfer prices for the company as a
whole
B) evaluate the managers of the responsibility centers involved
C) achieve goal congruence by selecting a price that will maximize overall company
profits
D) make it easy for managers to select prices that maximize division profits
The limitations of financial performance measures ________.
A) lead management to use a time horizon of more than five years
B) make it difficult for companies to create goal congruence
C) lead management to use the gross book value of assets
D) can be overcome by taking a broader view of performance
Saber Promotional Services uses a job order system for costing and billing promotional
services for dance and ballet performances. Saber has four public relations specialists
and office staff. At the beginning of the year, Saber estimated the total cost of salaries
and benefits for the public relations specialists at $404,000 and a total of 7,100 billable
hours for the year. The office and administrative costs were estimated at $676,000. The
allocation base for office and administrative costs is billable hours. What rate would
Saber use for allocating the cost of its office and administrative staff? (Round your
answer to the nearest cent.)
A) $95.21 per hour
B) $152.11 per hour
C) $38.31 per hour
D) $56.90 per hour
Projected manufacturing cost per unit of product sold does not include ________ cost
per unit.
A) sales commission
B) direct materials
C) variable manufacturing overhead
D) direct labor
