1) Which of the following is the correct mathematical expression to derive a company’s
capital turnover?
A.Sales revenue invested capital
B.Contribution margin invested capital
C.Income invested capital
D.Invested capital sales revenue
E.Invested capital income
2) The following selected data were taken from the accounting records of Schein
Industrial Manufacturing:
Manufacturing overhead consists of three different costs; (1) machine supplies
(variable), (2) property taxes (fixed), and (3) plant maintenance (semivariable). July’s
overhead costs were $170,000 for machine supplies, $24,000 for property taxes, and
$1,080,000 for plant maintenance.
Required:
A. Determine the machine supplies and property taxes for May.
B. By using the high-low method, analyze Schein’s plant maintenance cost and
calculate the monthly fixed portion and the variable cost per machine hour.
C. Assume that present cost behavior patterns continue into future months. Estimate the
total amount of manufacturing overhead the company can expect in September if
56,000 machine hours are worked.
3) Summers Corporation is composed of five divisions. Each division is allocated a
share of Summers’s overhead to make divisional managers aware of the cost of running
the corporate headquarters. The following information relates to the Metro Division:
If the Metro Division is closed, 100% of the traceable fixed operating costs can be
eliminated. What will be the impact on Summers’s overall profitability if the Metro
Division is closed?
A.Decrease by $200,000
B.Decrease by $500,000
C.Decrease by $2,100,000
D.Decrease by $2,400,000
E.None of the answers are correct
4) 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 direct
materials is:
A.$1.17
B.$1.18
C.$1.20
D.$1.28
E.None of the answers is correct
5) Corruption, Inc. overstated the percentage of work completed with respect to
conversion cost on the ending work-in-process inventory. What is the effect of this
overstatement on conversion-cost equivalent units and physical units manufactured,
respectively?
A.Overstated, overstated
B.Overstated, understated
C.Overstated, none
D.None, overstated
E.None, none
6) Conversion costs are:
A.direct material, direct labor, and manufacturing overhead
B.direct material and direct labor
C.direct labor and manufacturing overhead
D.prime costs
E.period costs
7) Swanson and Associates presently leases a copy machine under an agreement that
calls for a fixed fee each month and a charge for each copy made. Swanson made 7,000
copies and paid a total of $360 in March; in May, the firm paid $280 for 5,000 copies.
The company uses the high-low method to analyze costs.
Swanson’s monthly fixed fee is:
A.$80
B.$102
C.$106
D.$112
E.None of the other answers is correct
8) Property taxes are an example of a (n):
A.committed fixed cost
B.committed variable cost
C.discretionary fixed cost
D.discretionaryvariable cost
E.engineered cost
9) Quattro began operations in April of this year. It makes all sales on account, subject
to the following collection pattern: 30% are collected in the month of sale; 60% are
collected in the first month after sale; and 10% are collected in the second month after
sale. If sales for April, May, and June were $60,000, $80,000, and $70,000,
respectively, what were the firm’s budgeted collections for the quarter?
A.$121,000
B.$140,000
C.$153,000
D.$175,000
E.None of the other answers are correct
10) Aglow Company uses a process-cost system for its single product. Material A is
added at the beginning of the process; in contrast, material B is added when the units
are 50% complete. The firm’s ending work-in-process inventory consists of 4,000 units
that are 75% complete. Which of the following correctly expresses the equivalent units
of production with respect to materials A and B in the ending work-in-process
inventory?
A.A, 3,000; B, 0
B.A, 3,000; B, 3,000
C.A, 4,000; B, 0
D.A, 4,000; B, 4,000
E.A, 4,000; B, 3,000
11) Taylor Enterprises purchased 56,000 pounds (cost = $420,000) of direct material to
be used in the manufacture of the company’s sole product. According the production
specifications, each completed unit requires five pounds of direct material at a standard
cost of $7.80 per pound. Direct materials consumed by the end of the period totaled
53,500 pounds in the manufacture of 10,900 finished units.
An examination of Taylor’s payroll records revealed that the company worked 22,000
labor hours (cost = $319,000) during the period, and specifications called for each
completed unit requiring two hours of labor at a standard cost of $14.80 per hour.
Assume that the company computes variances at the earliest point in time.
Taylor’s direct-labor efficiency variance was:
A.$2,900F
B.$2,900U
C.$2,960F
D.$2,960U
E.none of the other answers are correct
12) Perez Corporation recently purchased a $1,200,000 asset that has a three-year
service life and no salvage value. The company is subject to a 30% income tax rate and
employs a 12% after-tax hurdle rate in capital investment decisions.
Management is studying whether to depreciate the asset by using the straight-line
method or the Modified Accelerated Cost Recovery System (MACRS). Assume that the
following MACRS factors are in effect: year 1, 33%; year 2, 45%; year 3, 15%; and
year 4, 7%
Required:
A. Calculate the total depreciation expense that Perez will record under each method.
B. Calculate the total tax savings that will occur with each method.
C. On the basis of your calculations in part “B,” which of the two methods will
management likely prefer? Explain your answer.
D. Compute the present value of the tax savings for each method, rounding to the
nearest dollar.
13) 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
14) Costs that are expensed when incurred are called:
A.product costs
B.direct costs
C.inventoriable costs
D.period costs
E.indirect costs
15) Which of the following is not a period cost?
A.Legal costs
B.Public relations costs
C.Sales commissions
D.Wages of assembly-line workers
E.The salary of a company’s chief financial officer (CFO)
16) You desire to invest $3,000 at the end of each year for the next five years to
accumulate the funds needed for a down payment on a home. Which table factor(s)
should be used to most efficiently determine the amount accumulated by the end of the
five-year period?
A.Future value of $1
B.Future value of a $1 annuity
C.Present value of $1
D.Present value of a $1 annuity
E.Both Future value of $1 and Future value of a $1 annuity
17) Grey, Inc. sells a single product for $20. Variable costs are $8 per unit and fixed
costs total $120,000 at a volume level of 5,000 units. Assuming that fixed costs do not
change, Green’s break-even sales would be:
A.$160,000
B.$200,000
C.$300,000
D.$480,000
E.None of the other answers is correct
18) The left side of the Manufacturing Overhead account is used to accumulate:
A.actual manufacturing overhead costs incurred throughout the accounting period
B.overhead applied to Work-in-Process Inventory
C.underapplied overhead
D.predetermined overhead
E.overapplied overhead
19) Johnson manufactures products X and Y, applying overhead on the basis of labor
hours. X is a high-volume product and relatively simplistic in nature. Y is both a
low-volume product and requires a variety of complex manufacturing procedures. What
would an activity-based costing system likely disclose about products X and Y as a
result of Johnson’s current accounting procedures?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
20) Which of the following is the correct method to calculate a predetermined overhead
rate?
A.Budgeted total manufacturing cost budgeted amount of cost driver
B.Budgeted overhead cost budgeted amount of cost driver
C.Budgeted amount of cost driver budgeted overhead cost
D.Actual overhead cost budgeted amount of cost driver
E.Actual overhead cost actual amount of cost driver
21) Bath Works Company has $70,000 of depreciation expense and is subject to a 30%
income tax rate. On an after-tax basis, depreciation results in a:
A.$21,000 inflow
B.$21,000 outflow
C.$49,000 inflow
D.$49,000 outflow
E.Neither an inflow nor an outflow because depreciation is a noncash expense
22) Astro’s customer service department follows up on customer complaints by
telephone inquiry. During a recent period, the department initiated 10,000 calls and
incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale
operation; the remainder was for the retail division. Costs allocated to the retail division
are:
A.$0
B.$31,200
C.$118,560
D.$193,440
E.$203,000
23) Dragon makes all sales on account, subject to the following collection pattern: 30%
are collected in the month of sale; 60% are collected in the first month after sale; and
10% are collected in the second month after sale. If sales for June, July, and August
were $120,000, $160,000, and $220,000, respectively, what were the firm’s budgeted
collections for August and the company’s budgeted receivables balance on August 31?
A.Choice A
B.Choice B
C.Choice C
D.Choice D
E.Choice E
24) Which of the following underlying assumptions form(s) the basis for
cost-volume-profit analysis?
A.Revenues and costs behave in a linear manner
B.Costs can be categorized as variable, fixed, or semivariable
C.Worker efficiency and productivity remain constant
D.In multiproduct organizations, the sales mix remains constant
E.All the other answers are assumptions that underlie cost-volume-profit analysis
25) Which of the following formulas can often reconcile the difference between
absorption- and variable-costing income?
A.Change in inventory units predetermined variable-overhead rate per unit
B.Change in inventory units predetermined variable-overhead rate per unit
C.Change in inventory units predetermined fixed-overhead rate per unit
D.Change in inventory units predetermined fixed-overhead rate per unit
E.(Absorption-costing income – variable-costing income) fixed-overhead rate per unit