The direct materials cost and efficiency variances make up the total direct materials
variance.
The margin of safety can be used to evaluate a company’s plans for the future.
Absorption costing considers fixed selling and administrative costs as product costs.
The manager of a revenue center is responsible for generating profits.
The net present value of future cash inflows received in earlier years is higher than
future cash inflows received in later years.
Differential analysis is a common approach to making long-term business decisions.
A sunk cost is a cost that was incurred in the past and cannot be changed regardless of
what future action is taken.
A process is one of a series of steps in manufacturing production, usually associated
with making large quantities of similar items.
Variable costing prepares the income statement using the traditional format.
Doro Fill Company fabricates automobiles. Each auto includes one wiring harness,
which is currently made in-house. Details of the harness fabrication are as follows:
A factory in Indonesia has offered to supply Doro Fill with ready-made units for a cost
of $12 each. Assume that Doro Fill’s fixed costs are unavoidable and that the company
will not be able to use the excess capacity in any profitable manner. In order to
maximize operating income, Doro Fill should not outsource.
When a manufacturing company uses a standard cost system, the direct materials cost
variance is recorded at the time direct materials are issued in production.
Which of the following statements is true of managerial accounting?
A) The external stakeholders of a company are the primary users of managerial
accounting.
B) Managerial accounting information is used to help managers plan and control their
operations.
C) An external audit by an independent CPA is required for managerial accounting
information.
D) Managerial accounting information must comply with Generally Accepted
Accounting Principles.
In the budgeted statement of cash flows, all cash receipts and payments are categorized
into operating, financing, and ________ activities.
A) investing
B) merchandising
C) budgeting
D) controlling
Net income is used in the numerator of the return on investment formula.
The responsibility report of Keith Parker, the manager of one of the divisions of an auto
parts manufacturing company, includes profits as well as return on investment and
residual income. Keith is most likely the manager of a(n) ________.
A) investment center
B) profit center
C) cost center
D) revenue center
An automobile parts retailer purchases merchandise inventory on account. When using
a manual accounting information system, this transaction is recorded in the ________.
A) purchases journal
B) general journal
C) cash payments journal
D) sales journal
The last step in the capital budgeting process is control, which compares the actual
results with the projected results. These comparisons are known as ________.
A) net cash inflows
B) post-audits
C) rankings
D) variance analysis
Which of the following statements is true?
A) Indirect costs must be allocated based on a single plant wide rate.
B) Manufacturing overhead costs are accumulated in cost pools and then assigned to
products.
C) Managers cannot wait until the end of the accounting period for product cost
information.
D) Managers can choose to wait until the end of the accounting period to allocate
manufacturing overhead costs.
A cost center responsibility report ________.
A) includes depreciation expense
B) typically focuses on the flexible budget variance
C) is the same as a performance report
D) shows all costs incurred by the department
Phoenix, Inc. manufactures widgets. The target sales price is $440 per unit. The
company desires a 40% net profit margin on its products. What is the company’s target
full-product cost per unit using target pricing?
A) $176
B) $616
C) $704
D) $264
Ego Manufacturing produces a pesticide chemical 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, 33,000 gallons were transferred in from the Mixing Department, and
29,000 gallons were completed and transferred out. At the end of the month, there were
6,000 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
$4,500 of materials cost
$1,000 of conversion cost
21,100 total account balance
Costs added during January
Cost of units transferred in $222,400
Direct materials cost $93,750
Conversion cost $48,000
Refining Department, ending balance at January 31
Quantity: 6,000 units (partially processed)
Percent complete for materials cost: 90%
Percent complete for conversion cost: 75%
What was the cost per equivalent unit with respect to conversion costs for the Refining
Department in the month of January? (Use the weighted-average method, and round
your calculations to the nearest cent.)
A) $1.42
B) $1.46
C) $1.40
D) $8.17
Product costs are expensed ________.
A) when the products are consumed or sold
B) when the accounting period they are incurred in comes to an end
C) when the products are transferred to the Work-in-Process Inventory account
D) when the market value of products goes above the recorded value
Morag Manufacturing Company’s budgeted income statement includes the following
data:
The budget assumes that 60% of commission expenses are paid in the month in which
they are incurred and the remaining 40% are paid one month later. In addition, 50% of
salaries expenses are paid in the month in which they are incurred, and the remaining
50% are paid one month later. Miscellaneous expenses, rent expense, and utility
expenses are assumed to be paid in the same month in which they are incurred.
Insurance was prepaid for the year on January 1. Prepare a schedule of cash payments
for selling and administrative expenses for the quarter ending June 30.
You have just won the lottery and have three payout options:
1. $1,000,000 now
2. $150,000 at the end of each year for the next ten years
3. $2,000,000 at the end of ten years.
What is a common basis for comparison that you can use to decide which option to
choose? Explain your answer.
Use the following sales journal to record the preceding transactions.
Provide the formula for (1) To account for and (2) Accounted for.
Simons, Inc. sells plasticware. The following information summarizes Simons’
operating activities for the year:
Prepare an income statement for Simons, Inc., a merchandiser, for the year ended
December 31 using the format below:
List the four types of responsibility centers. For each center, state the responsibility of
the manager.
Grace Company manufactures candles. The standard direct materials quantity required
to produce one large candle is one pound at a cost of $5 per pound. During November,
7,200 large candles were produced using 7,500 pounds of direct materials that cost
$45,000.
Using the format below, prepare an analysis of the direct materials variances.
Complete the statement, using the following terms: increase, decrease, or have no
effect on.
Decreases in sales price per unit_______ contribution margin per unit and ________
the breakeven point.