1) Which of the following would not be considered a direct cost with respect to the
service department of a new car dealership?
A.Wages of repair technicians
B.Property taxes paid by the dealership
C.Repair parts consumed
D.Salary of the department manager
E.Depreciation on new equipment used to analyze engine problems
2) When graphed, a typical step-fixed cost appears as:
A.a horizontal line
B.a vertical line
C.a series of staggered horizontal lines
D.a diagonal line that slopes downward to the right
E.a diagonal line that slopes upward to the right
3) Jenkins plans to generate $650,000 of sales revenue if a capital project is
implemented. Assuming a 30% tax rate, the sales revenue should be reflected in the
analysis by a:
A.$195,000 inflow
B.$195,000 outflow
C.$455,000 inflow
D.$455,000 outflow
E.$650,000 inflow
4) Carolina Corporation has an after-tax operating income of $3,200,000 and a 9%
weighted-average cost of capital. Assets total $7,000,000 and current liabilities total
$1,800,000. On the basis of this information, Carolina’s economic value added is:
A.$2,408,000
B.$2,732,000
C.$3,668,000
D.$3,992,000
E.None of the other answers are correct
5) Which of the following statements represents a similarity between financial and
managerial accounting?
A.Both are useful in providing information for external users
B.Both are governed by GAAP
C.Both draw upon data from an organization’s accounting system
D.Both rely heavily on published financial statements
E.Both are solely concerned with historical transactions
6) The relevant range is that range of activity:
A.where a company achieves its maximum efficiency
B.where units produced equal units sold
C.where management expects the firm to operate
D.where the firm will earn a profit
E.where expected results are abnormally high
7) Which of the following situations would cause variable-costing income to be lower
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
8) Which of the following mathematical expressions is found in a typical
flexible-budget formula for overhead?
A.Total activity units + budgeted fixed overhead cost per unit
B.Budgeted variable overhead cost per unit + budgeted fixed overhead cost
C.(Budgeted variable overhead cost per unit total activity units) + budgeted fixed
overhead costs
D.(Budgeted fixed overhead cost per unit total activity units) + (budgeted variable
overhead cost per unit total activity units)
E.None of the other answers are correct
9) A formal budget program will almost always result in:
A.higher sales
B.more cash inflows than cash outflows
C.decreased expenses
D.improved profits
E.a detailed plan against which actual results can be compared
10) 1> Auditions for actors and actresses
2> Development of promotional materials for use by local newspapers
3> Focus groups to evaluate ideas for potential television comedy series
4> Production of DVDs for release to Best Buy and Blockbuster Video
5> On-location shooting of scenes
6> Fine-tuning and rewrites of scripts
7> Set design and construction for a new medical drama
Required:
A. Evaluate the seven activities as upstream (pre-production), production, or
downstream (post-production) in nature.
B. Generally speaking, which activities (upstream, production, or downstream), if any,
can management ignore if the company is to be successful in achieving its key strategic
goals?
11) Consider the following statements about absorption costing and variable costing:
I. Variable costing is consistent with contribution reporting and cost-volume-profit
analysis.
II. Absorption costing must be used for external financial reporting.
III. A number of companies use both absorption costing and variable costing.
Which of the above statements is (are) true?
A.I only
B.II only
C.III only
D.I and II
E.I, II, and III
12) Which of the following would not likely be used by service providers to accumulate
job costs?
A.Projects
B.Contracts
C.Clients
D.Processes
E.All of these, because service providers cannot use job-costing systems
13) Wrangler Company is considering a five-year project that requires a typical
investment in working capital, in this case, $100,000. Consider the following statements
about this situation:
I. Wrangler should include a $100,000 outflow that occurs at time 0 in a
discounted-cash-flow analysis.
II. Wrangler should include separate $100,000 outflows in each year of the project’s
five-year life.
III. Wrangler should include a $100,000 recovery of its working-capital investment in
year 5 of a discounted-cash-flow analysis.
Which of the above statements is (are) correct?
A.I only
B.II only
C.III only
D.I and II
E.I and III
14) As activity decreases, unit variable cost:
A.increases proportionately with activity
B.decreases proportionately with activity
C.remains constant
D.increases by a fixed amount
E.decreases by a fixed amount
15) The following selected data pertain to Phineus Corporation:
July’s cash disbursements are expected to be:
A.$404,000
B.$464,000
C.$674,000
D.$734,000
E.None of the other answers are correct
16) Which of the following is not considered in the calculation of divisional ROI?
A.Divisional income
B.Earnings velocity
C.Capital turnover
D.Sales margin
E.Sales revenue
17) When income taxes are considered in capital budgeting, the cash flows related to a
company’s depreciation expense would be correctly figured by taking the cash paid for
depreciation and:
A.adding the result of multiplying (depreciation expense tax rate)
B.adding the result of multiplying [depreciation expense (1 – tax rate)]
C.subtracting the result of multiplying (depreciation expense tax rate)
D.subtracting the result of multiplying [depreciation expense (1 – tax rate)]
E.None of the other answers because there is no cash paid for depreciation
18)
Paulsen is considering the acquisition of a $217,750 machine that is expected to
produce annual savings in cash operating costs of $50,000 over the next six years. If
Paulsen uses the internal rate of return (IRR) to evaluate new investments and the
company has a hurdle rate of 12%, which of the following statements is correct?
A.The machine’s IRR is less than 4%, and the machine should not be acquired
B.The machine’s IRR is approximately 10%, and the machine should not be acquired
C.The machine’s IRR is approximately 10%, and the machine should be acquired
D.The machine’s IRR is approximately 12%, and the machine should be acquired
E.All of the other statements are false
19) Henry Company is preparing a segmented income statement, subdivided into
departments (billing, purchasing, and telemarketing). Which of the following choices
correctly describes the accounting treatment of the firm’s compensation cost for key
executives (president and vice-presidents)?
A.The cost is charged to the departments
B.The cost is not charged to the departments because, although easily traceable to the
departments, it is not controllable at the departmental level
C.The cost is not charged to the departments because, although controllable at the
departmental level, it is not easily traceable to the departments
D.The cost is not charged to the departments because it is both easily traceable to the
departments and controllable by the departments
E.The cost is not charged to the departments because it is neither easily traceable to the
departments nor controllable by the departments
20) Process costing would likely be used in all of the following industries except:
A.petroleum refining
B.chemicals
C.truck tire manufacturing
D.wood pulp production
E.automobile repair
21) Montana uses a 140% markup on total cost and recently computed a selling price of
$1,560 for a particular product. On the basis of this information, the product’s total cost
is:
A.$650.00
B.$910.00
C.$1,114.29
D.$2,184.00
E.none of the other answers are correct
22) Cost-volume-profit analysis is based on certain general assumptions. Which of the
following is not one of these assumptions?
A.Product prices will remain constant as volume varies within the relevant range
B.Costs can be categorized as fixed, variable, or semivariable
C.The efficiency and productivity of the production process and workers will change to
reflect manufacturing advances
D.Total fixed costs remain constant as activity changes
E.Unit variable cost remains constant as activity changes
23) A statistical control chart is best used for determining:
A.direct-material price variances
B.direct-labor variances
C.whether a variance is favorable or unfavorable
D.who should be held accountable for specific variances
E.whether a particular variance should be investigated
24) Simone uses a predetermined overhead application rate of $8 per direct labor hour.
A review of the company’s accounting records for the year just ended discovered the
following:
Underapplied manufacturing overhead: $7,200
Actual manufacturing overhead: $392,000
Budgeted labor hours: 50,000
Simone’s actual labor hours worked totaled:
A.48,100
B.49,100
C.49,900
D.50,900
E.cannot be determined based on the information presented
25) Webster, Inc. began operations at the start of the current year, having a production
target of 60,000 units. Actual production totaled 60,000 units, and the company sold
95% of its manufacturing output at $50 per unit. The following costs were incurred:
Required:
A. Assuming the use of variable costing, compute the cost of Webster’s ending
finished-goods inventory.
B. Compute the company’s contribution margin. Would Webster disclose the
contribution margin on a variable-costing income statement or an absorption-costing
income statement?
C. Assuming the use of absorption costing, how much fixed selling and administrative
cost would Webster include in the ending finished-goods inventory?
D. Compute the company’s gross margin.
26) 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 fixed cost was:
A.$184,800
B.$210,000
C.$550,000
D.$734,800
E.$760,000
27) Pumpkin Enterprises began operations on January 1, 20×1, with all of its activities
conducted from a single facility. The company’s accountant concluded that the year’s
building depreciation should be allocated as follows: selling activities, 20%;
administrative activities, 35%; and manufacturing activities, 45%. If Pumpkin sold 60%
of 20×1 production during that year, what percentage of the depreciation would appear
(either directly or indirectly) on the 20×1 income statement?
A.27%
B.45%
C.55%
D.82%
E.100%