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1)
If the cost of goods manufactured for the year was $565,000, what was the amount of
direct materials used during the year?
A.$155,500
B.$140,500
C.$150,000
D.$145,500
E.None of the other answers are correct
2) Which of the following methods fully recognizes the fact that some service
departments provide service to other service departments?
A.Direct method
B.Indirect method
C.Step-down method
D.Reciprocal method
E.Dual-cost allocation method
3) The process of assigning overhead costs to the jobs that are worked on is commonly
called:
A.service department cost allocation
B.overhead cost distribution
C.overhead application
D.transfer costing
E.overhead cost apportionment
4) Which of the following is not an objective of managerial accounting?
A.Providing information for decision making and planning
B.Assisting in directing and controlling operations
C.Maximizing profits and minimizing costs
D.Measuring the performance of managers and subunits
E.Motivating managers toward the organization's goals
5) A series of equal cash flows is called a (n):
A.ongoing cash flow
B.payback
C.accrual
D.cash accumulation
E.annuity
6) Selling and administrative expenses would likely appear on the balance sheet of:
A.The Gap
B.Texas Instruments
C.Turner Broadcasting System
D.All of these firms
E.None of these firms
7) When an organization allows divisional managers to be responsible for short-term
loans and credit, the division's invested capital should be measured by
A.total assets minus total liabilities
B.average total assets minus average current liabilities
C.average total assets minus average total liabilities
D.average total liabilities minus average current assets
E.average total liabilities minus total assets
8) Strong Company applies overhead based on machine hours. At the beginning of
20x1, the company estimated that manufacturing overhead would be $500,000, and
machine hours would total 20,000. By 20x1 year-end, actual overhead totaled $525,000,
and actual machine hours were 25,000. On the basis of this information, the 20x1
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
9) Hershey, Inc. sells a single product. The following information relates to the year just
ended:
Number of units sold: 40,000
Variable cost per unit: $200
Total fixed cost: $2,400,000
Operating income: $3,800,000
Required:
A. Compute the company's selling price.
B. Compute the percentage markup on total cost. Round your answer to two decimal
places.
C. Assume that Hershey desired to change its practice of computing a markup on total
cost to a markup on variable cost. If the company wants to hold selling price constant,
would the markup percentage increase or decrease? By how much?
10) Edge Company had a beginning work-in-process inventory of 30,000 units on June
1 . These units contained $120,000 of direct materials and $272,000 of conversion cost.
The following data relate to activity during June:
Edge uses a weighted-average process-costing system. All materials are added at the
start of manufacturing; in contrast, conversion cost is incurred evenly throughout
production.
Required:
A. Compute the total equivalent units for direct material and conversion cost.
B. Compute the cost per equivalent unit of direct material and conversion cost.
C. Determine the cost of completed production.
D. Determine the cost of the June 30 work in process.
11) Starling Chemical uses a weighted-average process-costing system. The following
data relate to May:
Required:
A. Calculate the number of pounds completed during May.
B. Calculate equivalent units of materials and conversion for May.
C. Does Starling introduce all of its direct materials at the very beginning of
production? Explain your answer.
12) 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 equivalent units of direct
materials total:
A.68,000
B.69,400
C.74,000
D.75,000
E.None of the answers is correct
13) Consider the following statements about taxes and after-tax cash flows:
I. Capital budgeting analyses should incorporate after-tax cash flows rather than
before-tax cash flows.
II. Added company revenues will result in lower taxes for a firm.
III. Operating expenses may actually provide a tax benefit for an organization.
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) Clancy Van Lines is considering the acquisition of two new trucks. Because of
improved mileage, these vehicles are expected to have a lower operating cost per mile
than the trucks the company plans to replace. Management is studying whether the firm
would be better-off keeping the older vehicles or going ahead with the replacement, and
has identified the following decision factors to evaluate:
1> Cost and book value of the old trucks
2> Moving revenues, which are not expected to change with the acquisition
3> Operating costs of the new and old vehicles
4> New truck purchase price and related depreciation charges
5> Proceeds from sale of the old vehicles
6> The 8% return on alternative investments that Clancy will forego by tying up cash in
the new trucks
7> Drivers' wages and fringe benefits
Required:
Classify the seven decision factors listed into the following categories (note: A factor
may be included in more than one category, or the factor may not necessarily be
included in any of the categories):
A. Relevant information.
B. Opportunity costs.
C. Sunk costs.
D. Factors to be considered in the decision.
15) Which of the four items listed below is not a type of production process?
A.Batch
B.Job Shop
C.Continuous Flow
D.Job Flow
16) You received a $5,000 loan at the end of each of your four years of college. Your
grandparents agreed to pay off your loans at the end of your fourth year of school.
Assume a 4% annual compound interest rate on student loans. How much will they
have to deposit when you start school so that they will have enough money to pay off
your loans after four years? Their interest rate is 6% compounded annually.
A.$20,000
B.$21,235
C.$16,818
D.$15,000
E.None of the other answers are correct
17) Fletcher, Inc. disposes of under- or overapplied overhead at year-end as an
adjustment to cost of goods sold. Prior to disposal, the firm reported cost of goods sold
of $590,000 in a year when manufacturing overhead was underapplied by $15,000. If
sales revenue totaled $1,400,000, determine (1) Fletcher's adjusted cost of goods sold
and (2) gross margin.
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
18) Resource Consulting is studying the costs of several clients, and has found that the
accompanying graphs appear as follows:
1> A straight line that gradually slopes upward to the right
2> A curvilinear line that gradually slopes upward to the right
3> A straight line that is parallel to the graph's horizontal axis
4> A straight line that gradually slopes downward to the right
5> A curvilinear line that gradually slopes downward to the right
6> A straight line that gradually slopes upward to the right and then, at a specific point,
flattens out to run parallel to the horizontal axis
7> A series of straight lines that appear to resemble a set of steps
8> A straight line that runs parallel to the graph's horizontal axis and then, at a specific
point, drops to a lower level
Unless told otherwise, assume that the horizontal axis represents total activity and the
vertical axis represents total cost.
Required:
For items A-F, indicate the number of the graph that best represents the cost behavior
pattern described. Note: Graphs can be used more than once, and not all graphs need be
used.
A. The salary cost of lab technicians employed at a clinic. One technician is needed for
every 1,500 patients serviced.
B. The cost of glass used by a manufacturer of automobile windshields.
C. A profit-sharing bonus that is paid to the associate director of a firm that conducts
professional-development courses for executives. The bonus is based on revenues from
courses that are being run, subject to a maximum amount each year.
D. Flood insurance premiums that are paid by Reliable Manufacturing, which operates
a production facility close to a river.
E. The paper cost that is used in the production of a textbook. Note: Assume that for
this part only, the graph's vertical axis represents the cost per unit rather than total cost.
F. Tariffs that are paid on products shipped overseas. For one particular country, if
fewer than 15,000 units are shipped, the client must pay $4 per unit. The tariff is raised
by $1 according to the following schedule:
19) Flexible budgets reflect a company's anticipated costs based on variations in:
A.activity levels
B.inflation rates
C.managers
D.anticipated capital acquisitions
E.standards
20) Costs that remain the same over a wide range of activity, but jump to a different
amount outside that range, are known as:
A.step-fixed costs
B.step-variable costs
C.semivariable costs
D.curvilinear costs
E.mixed costs
21) The procedure used to compute the future value of a series of cash flows is known
as:
A.compounding
B.the annuity method
C.discounting
D.the future-cost approach
E.indexing
22) Wexford Corporation is considering the acquisition of a new machine that costs
$350,000. The machine is expected to have a four-year service life and will produce
annual savings in cash operating costs of $100,000. Wexford uses the optional
straight-line method of depreciation and depreciates the asset over its four-year service
life. The company is subject to a 30% income tax rate, has an after-tax hurdle rate of
12%, and rounds calculations to the nearest dollar.
Required:
A. Determine the annual after-tax cash flows that result from acquisition of the
machine.
B. Calculate the machine's Net present value. Is the machine an attractive investment?
Why?
23) Prices are said to be inelastic under which of the following conditions?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
24) The Sarbanes-Oxley Act:
A.arose because of several accounting scandals that rocked the public's confidence in
published financial statements
B.was enacted, in part, to bring about reform in companies' financial reporting
processes
C.has distinct guidelines for reporting on an organization's internal control practices
D.contains provisions whereby the chief executive officer (CEO) and chief financial
officer (CFO) can be held criminally responsible if their firm's financial statements are
found to be fraudulent in nature
E.all of the other answers are correct
25) Once upon a time, two brothers (Barry and Larry) dreamt about owning and
operating companies in the same line of business. Barry believed in maintaining a very
large, highly efficient manual labor force; Larry, on the other hand, favored
automated-production processes. One business was located in Madison and the other
was located in Austin. Recent data follow.
Required:
A. Which of the two businesses, Madison or Austin, has the higher level of (1) variable
cost and (2) higher level of fixed cost? Explain how you determined your answer.
B. Determine the probable owner of the firm located in (1) Madison and (2) Austin.
Briefly explain your logic.
C. Compute the operating leverage factor for Madison and Austin.
D. Suppose that both Madison and Austin had the opportunity to increase sales by 10%.
Which of the two locations would experience a larger percentage change in net income?
Why?
26) Consider the following statements:
I. Behavioral scientists find that perfection standards often discourage employees and
result in low worker morale.
II. Practical standards are also known as attainable standards.
III. Practical standards incorporate a certain amount of inefficiency such as that caused
by an occasional machine breakdown.
Which of the above statements is (are) true?
A.I only
B.II only
C.III only
D.II and III
E.I, II, and III
27) Generally speaking, companies prefer doing business with customers who:
A.order small quantities rather than large quantities
B.often change their orders
C.require special packaging or handling
D.request normal delivery times
E.need specialized engineering design changes
28) Filipe's Fresh Meats and Produce is a wholesale distributor that operates in central
California. An analysis of two of the company's customers, Atriums Retirement Home
and Sigma SigmaSigma Fraternity, revealed the data that follow for a recent 12-month
period.
Filipe's uses activity-based costing to determine the cost of servicing its customers. The
company had total delivery costs during the year of $576,000 and 8,000 deliveries,
along with cost of $765,000 for the administrative processing of 90,000 invoices.
Required:
A. Compute the pool rates for deliveries and invoice processing.
B. Compute the operating income that Ippilito's earned from these two customers.
C. Compute the total of customer-related costs (deliveries and invoice processing) for
each customer as a percentage of gross margin, and analyze the results for management.
Explain any significant differences that you find.
29) St. James, Inc., currently uses traditional costing procedures, applying $800,000 of
overhead to products Beta and Zeta on the basis of direct labor hours. The company is
considering a shift to activity-based costing and the creation of individual cost pools
that will use direct labor hours (DLH), production setups (SU), and number of parts
components (PC) as cost drivers. Data on the cost pools and respective driver volumes
follow.
The overhead cost allocated to Zeta by using traditional costing procedures would be:
A.$240,000
B.$356,000
C.$444,000
D.$560,000
E.None of the other answers is correct
