1) 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.
Assume the Bottle Division has no excess capacity and could sell everything it
produced externally. Using the general rule, the transfer price from the Bottle Division
to the Cologne Division would be:
A.$2.00
B.$2.10
C.$2.60
D.$2.90
E.$3.00
2) Which of the following occurs if a company experiences a decrease in its fixed
costs?
A.Income would decrease
B.The break-even point would decrease
C.The contribution margin would increase
D.The contribution margin would decrease
E.More than one of the other answers would occur
3) Abbott has a standard variable overhead rate of $4.50 per machine hour, and each
unit produced has a standard time allowed of three hours. The company’s static budget
was based on 46,000 units. Actual results for the year follow.
Actual units produced: 42,000
Actual machine hours worked: 120,000
Actual variable overhead incurred: $520,000
Abbott’s variable-overhead spending variance is:
A.$20,000 favorable
B.$20,000 unfavorable
C.$27,000 favorable
D.$27,000 unfavorable
E.None of the other answers are correct
4)
Refer to the figure above. The vertical distance between the total cost line and the total
revenue line represents:
A.fixed cost
B.variable cost
C.profit or loss at that volume
D.semivariable cost
E.the safety margin
5) The main idea behind the time value of money is that:
A.cash flows received in the distant future are less valuable than cash flows received in
the near-term future
B.cash received in year 3, say, $80,000, has the same value as $40,000 received in year
3 plus $40,000 received in year 4
C.cash flows received in different years are treated as equal in value
D.cash payments made in the future have the same value as payments made today
E.timing considerations of cash flows have little value in decision making
6) 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?
7) Bentson Corporation, a wholesaler, provided the following information:
Customers pay 60% of their balances in the month of sale, 30% in the month following
sale, and 10% in the second month following sale. The company pays all invoices in the
month following purchase and takes advantage of a 3% discount on all amounts due.
Cash payments for operating expenses in May will be $119,500; Bentson’s cash balance
on May 1 was $127,800.
Required:
Determine the following:
A. Expected cash collections during May.
B. Expected cash disbursements during May.
C. Expected cash balance on May 31 .
8) Which of the following costs is not a component of manufacturing overhead?
A.Indirect materials
B.Factory utilities
C.Factory equipment
D.Indirect labor
E.Property taxes on the manufacturing plant
9) Variable costs are costs that:
A.vary inversely with changes in activity
B.vary directly with changes in activity
C.remain constant as activity changes
D.decrease on a per-unit basis as activity increases
E.increase on a per-unit basis as activity increases
10) The following data relate to Horatio, Inc., a new company:
There were no variances during the period.
Required:
A. Determine the number of units in the ending finished-goods inventory.
B. Calculate the cost of the ending finished-goods inventory under (1) variable costing
and (2) absorption costing.
C. Determine the company’s variable-costing income.
D. Determine the company’s absorption-costing income.
11) Which of the following employees at Delta Airlines would not be considered as
holding a line position?
A.Pilot
B.Chief financial officer (CFO)
C.Flight attendant
D.Ticket agent
E.Baggage handler
12) All of the following entities would have a need for managerial accounting
information except:
A.the state of Michigan
B.Google
C.Abercrombie & Fitch
D.H&R Block
E.None of these responses is correct, as all of these entities would use managerial
accounting information
13) Alphabeta Corporation sells three products: J, K, and L. The following information
was taken from a recent budget:
Total fixed costs are anticipated to be $2,450,000.
Required:
A. Determine Alphabeta’s sales mix.
B. Determine the weighted-average contribution margin.
C. Calculate the number of units of J, K, and L that must be sold to break even.
D. If Alphabeta desires to increase company profitability, should it attempt to increase
or decrease the sales of product K relative to those of J and L? Briefly explain.
14) With respect to overhead, what is the difference between normal costing and
standard costing?
A.Use of a predetermined overhead rate
B.Use of standard hours versus actual hours
C.Use of a standard rate versus an actual rate
D.The choice of an activity measure
E.There is no difference
15) Rocky Mountain Company produces two products (X and Y) from a joint process.
Each product may be sold at the split-off point or processed further. Additional
processing requires no special facilities, and production costs of further processing are
entirely variable and traceable to the products involved. Joint manufacturing costs for
the year were $60,000. Sales values and costs were as follows:
If the joint production costs are allocated based on the physical-units method, the
amount of joint cost assigned to product X would be:
A.$20,000
B.$24,000
C.$30,000
D.$36,000
E.$40,000
16) High Point Corporation reported sales revenues of $1,850,000 for the period just
ended. Cost of goods sold, selling expenses, and administrative expenses totaled
$1,200,000, $280,000, and $170,000, respectively. A detailed analysis of the latter three
amounts revealed respective fixed cost components of $780,000, $60,000, and
$130,000.
Required:
A. Determine the amounts, if any, that High Point would report on a traditional income
statement for (1) gross margin, (2) contribution margin, and (3) income.
B. Determine the amounts, if any, that High Point would report on a contribution
income statement for (1) gross margin, (2) contribution margin, and (3) income.
C. Which of the two income statements (traditional or contribution) is more useful for
studying a company’s cost-volume-profit relationships?
17) A recent income statement of Black Corporation reported the following data:
If these data are based on the sale of 20,000 units, the contribution margin per unit
would be:
A.$40
B.$150
C.$290
D.$360
E.None of the other answers is correct
18) St. Helena Cellars produces wine in northern California. Consider the following
selected costs that arose during the current year:
1> Safety costs at winery
2> Truckload shipping costs
3> Building maintenance costs
4> Bottle and cork cost
5> Development cost of new, after-dinner wine
6> Tasting and testing costs
Required:
A. Briefly distinguish between unit-level and product-sustaining activities.
B. Classify the six costs listed as arising from a unit-level, batch-level,
product-sustaining, or facility-level activity.
19) Assuming no change in sales volume, an increase in company’s per-unit
contribution margin would:
A.increase income
B.decrease income
C.have no effect on income
D.increase fixed costs
E.decrease fixed costs
20) A production supervisor generally has little influence over the:
A.direct-material quantity variance
B.direct-labor efficiency variance
C.direct-material price variance
D.number of units produced
E.All of the others answers are correct
21) Assume that HiTech is using a volume-based costing system, and the preceding
overhead costs are applied to all products on the basis of direct labor hours. The
overhead cost that would be assigned to the Deluxe product line is closest to:
A.$456,471
B.$646,471
C.$961,176
D.$1,141,176
E.None of the other answers is correct
22) The following information pertains to Bishop Concrete:
The company’s imputed interest rate is 8%.
The ROI is:
A.6%
B.15%
C.20%
D.30%
E.40%
23) Cosby uses a weighted-average process-costing system. All materials are added at
the beginning of the process; conversion costs are incurred evenly throughout
production. The company finished 40,000 units during the period and had 15,000 units
in progress at year-end, the latter at the 40% stage of completion. Total material costs
amounted to $220,000; conversion costs were $414,000.
The cost of goods completed is:
A.$312,000
B.$414,000
C.$520,000
D.$634,000
E.None of the answers is correct
24) The Gingham Company’s budgeted income statement reflects the following
amounts:
Sales are collected 50% in the month of sale, 30% in the month following sale, and
19% in the second month following sale. One percent of sales is uncollectible and
expensed at the end of the year.
Gingham pays for all purchases in the month following purchase and takes advantage of
a 3% discount. The following balances are as of January 1:
*Of this balance, $35,000 will be collected in January and the remaining amount will be
collected in February.
The monthly expense figures include $5,000 of depreciation. The expenses are paid in
the month incurred.
Gingham’s budgeted cash payments in February are:
A.$75,660
B.$94,860
C.$97,200
D.$99,860
E.$102,200
25) At a volume of 20,000 units, Dries reported sales revenues of $1,000,000, variable
costs of $300,000, and fixed costs of $260,000. The company’s break-even point in
units is:
A.7,027 (rounded)
B.8,667 (rounded)
C.9,286 (rounded)
D.7,429 (rounded)
E.None of the other answers is correct
26) The Dopler Manufacturing Company has two production departments (Assembly
and Finishing) and two service departments (Human Resources and Janitorial). The
projected usage of the two service departments is as follows:
The budgeted costs in the service departments are: Human Resources, $90,000 and
Janitorial, $50,000.
Using the direct method, the amount of Janitorial Department cost allocated to the
Finishing Department is:
A.$21,053
B.$24,843
C.$25,000
D.$28,947
E.$34,157
27) McArthur Corp., which began business at the start of the current year, had the
following data:
Planned and actual production: 40,000 units
Sales: 38,000 units at $15 per unit
Production costs:
Variable: $5 per unit
Fixed: $260,000
Selling and administrative costs:
Variable: $1 per unit
Fixed: $32,000
The contribution margin that the company would disclose on a variable-costing income
statement is:
A.$0
B.$120,000
C.$166,500
D.$342,000
E.None of the other answers are correct