Service companies do not have fixed costs; all costs incurred by service companies are
variable costs.
Financial accounting prepares reports for internal purposes, whereas managerial
accounting provides information to external stakeholders.
The payback and accounting rate of return methods are often used to perform an initial
screening of investments.
When the variable cost per unit increases, the contribution margin on each unit
decreases.
The return on investment formula focuses on the amount of operating income earned
before considering other revenue and expense items, such as interest expense.
Tyler Corporation has provided you with the following budgeted income statement for
one of its products:
Tyler Corporation believes that 70% of the fixed costs would be avoidable if the
product line was dropped. Based on the impact on the company’s operating income or
loss, Tyler should keep the product line.
The high-low method requires the identification of the lowest and highest levels of total
costs, not activity, over a period of time.
The cost of goods manufactured includes selling expenses, administrative expenses, and
manufacturing overhead.
Quality management systems use many nonfinancial measures, such as the number of
customer complaints and the volume of incoming customer-service phone calls, as a
means to measure success or failure.
After posting entries in a sales journal to the general ledger, the Accounts Receivable
balance in the general ledger should equal the sum of the individual customer balances
in the accounts receivable subsidiary ledger.
During the year, a company incurred $498,000 of manufacturing overhead costs and
allocated $510,000 of manufacturing overhead costs. At the year-end, the adjustment
entry needed to adjust the Manufacturing Overhead account balance to zero will include
a debit to Cost of Goods Sold.
Manufacturing overhead includes all manufacturing costs, such as direct labor and
direct materials.
Fixed costs divided by contribution margin per unit equals the breakeven point in unit
sales.
Factory rent, as well as factory property taxes and insurance, are included in
manufacturing overhead.
The Assembly Department of Intuitive, Inc., manufacturer of computers, had 4,500
units of beginning inventory in September, and 3,000 units were transferred to it by the
Production Department. The Assembly Department completed 1,500 units during the
month and transferred them to the Packaging Department. Calculate the total number of
units accounted for by the Assembly Department if it had 6,000 units in ending
inventory. The weighted-average method is used.
A) 6,000 units
B) 3,000 units
C) 4,500 units
D) 7,500 units
When determining the product costs for long-term planning, ________.
A) the research and development cost of the product should be ignored
B) variable costing is more appropriate
C) absorption costing is more appropriate
D) the selling and administrative expenses should be ignored
Keys Spas, Inc. reports the following information for August:
Calculate the contribution margin for August.
A) $70,000
B) $630,000
C) $550,000
D) $700,000
From the graph given below, identify the fixed costs line.
A) OB
B) AC
C) AD
D) AE
Which of the following will lower the breakeven point?
A) a decrease in the sales price per unit
B) an increase in total fixed costs
C) an increase in the variable cost per unit
D) an increase in the sales price per unit
Variable cost per unit, within the relevant range, will ________.
A) increase as production decreases
B) decrease as production decreases
C) remain the same as production levels change
D) decrease as production increases
Pavone Corp. has prepared a preliminary cash budget for the third quarter as shown
below:
Subsequently, the marketing department revised its figures for cash collections. New
data are as follows: $57,000 in July, $56,000 in August, and $44,000 in September.
Based on the new data, calculate the new projected cash balance at the end of
September.
A) $27,500
B) $13,000
C) $19,000
D) $22,800
Under conditions of limited resources, when a company is comparing several
investments with different amounts of initial cost, the decision should be made on the
basis of the ________.
A) highest total cash inflows
B) shortest payback period
C) highest profitability index
D) highest NPV
The costs incurred in training employees is an example of a(n) ________.
A) external failure cost
B) internal failure cost
C) prevention cost
D) appraisal cost
Clinton Manufacturing uses a predetermined overhead allocation rate based on a
percentage of direct labor costs. The following are the details of production during the
year:
Calculate the amount of manufacturing overhead costs allocated to production. (Round
any percentages to two decimal places and your final answer to the nearest dollar.)
A) $150,000
B) $164,571
C) $154,296
D) $160,000
Holmes, Inc. has a division that manufactures a component that sells for $150 and has a
variable cost of $45. Another division of the company wants to purchase the
component. Fixed cost per unit of the component is $20. What is the transfer price if the
division is operating at full capacity?
A) $65
B) $170
C) $150
D) $20
Americana Company is preparing its budget for the third quarter. Cash balance on July
31 was $30,000. Assume there is no minimum balance of cash required and no
borrowing is undertaken. Additional budgeted data are provided here:
Calculate the projected balance of cash at the end of August.
A) $(23,000)
B) $3,000
C) $38,000
D) $33,000
Which of the following is an accounting information system activity that can be
classified as a payroll business transaction?
A) approval of new employees
B) receipt of customer payment
C) processing of vendor invoices
D) payment for goods or services
On January 1, Feldstein Manufacturing had a beginning balance in Work-in-Process
Inventory of $81,100 and a beginning balance in Finished Goods Inventory of $22,000.
During the year, Feldstein incurred manufacturing costs of $351,000.
During the year, the following transactions occurred:
Job A-12 was completed for a total cost of $121,100 and was sold for $126,700.
Job A-13 was completed for a total cost of $201,800 and was sold for $211,000.
Job A-15 was completed for a total cost $60,000 but was not sold as of year-end.
What was the balance in Finished Goods Inventory at the end of the year?
A) $404,900 debit balance
B) $82,000 credit balance
C) $82,000 debit balance
D) $382,900 debit balance
In an accounting information system, source documents are the documents which
________.
A) are audited and presented to the Securities and Exchange Commission
B) detail the strategic planning of the business
C) have complete information about the financial statements
D) provide the evidence for accounting transactions