A disadvantage of a typical enterprise resource planning system is that it cannot be
offered through cloud computing.
In a standard cost system, the standard overhead allocation rate replaces the
predetermined
overhead allocation rate but the concept is the same.
The production manager projects direct labor costs.
Compound interest means that interest is calculated only on the principal amount.
The payback and accounting rate of return (ARR) methods are suitable for investments
with a relatively short time span.
Target pricing starts with the full product cost, and it then adds the desired profit to
arrive at the sales price.
In absorption costing, all product costs are recorded first as assets in the inventory
accounts.
Quality management systems emphasize external failure costs.
Joshua was a professional classical guitarist until a motorcycle accident left him
disabled. After long months of therapy, he hired an experienced luthier and started a
small shop to make and sell Spanish guitars. The guitars sell for $800, and the fixed
monthly operating costs are as follows:
Joshua’s accountant told him about contribution margin ratios, and Joshua understood
clearly that for every dollar of sales, $0.60 went to cover his fixed costs, and anything
above that point was profit.
How many guitars does Joshua need to sell each month to break even? (Round your
answer up to the nearest whole guitar.)
A) 5 guitars
B) 3 guitars
C) 7 guitars
D) 8 guitars
Which of the following will appear as a line item in the income statement prepared
under variable costing?
A) Contribution Margin
B) Total Cost of Goods Sold
C) Work-in-Process Inventory
D) Gross Profit
Delleate, Inc. has prepared the following direct materials purchases budget:
All purchases are paid for as follows: 40% in the month of purchase, 50% in the
following month, and 10% two months after purchase. Calculate total cash payments
made in October for purchases.
A) $67,080
B) $46,630
C) $35,710
D) $74,710
Landmark Prints is considering an investment in new equipment costing $502,000. The
equipment will be depreciated on a straight-line basis over a five-year life and is
expected to generate net cash inflows of $122,000 the first year, $158,000 the second
year, and $160,000 every year thereafter until the fifth year. What is the payback period
for this investment? The residual value is zero. (Round your answer to two decimal
places.)
A) 4.30 years
B) 3.39 years
C) 2.80 years
D) 3.11 years
Which of the following is an advantage of decentralization?
A) Managers’ motivation and retention can be increased by empowering segment
managers to make decisions.
B) Certain costs of activities may be duplicated.
C) Customer response time is generally decreased.
D) Top management can concentrate on decisions that relate to day-to-day operations of
segments.
Which of the following is a variable cost?
A) property taxes
B) salary of plant manager
C) direct materials cost
D) straight-line depreciation expense
Hurst Company sells hand-sewn shirts for $40 per shirt. It incurs monthly fixed costs of
$7,000. The contribution margin ratio is calculated to be 50%. What is the breakeven
point in units? (Round your answer up to the nearest whole unit.)
A) 175 units
B) 3,500 units
C) 80 units
D) 350 units
Marion Company provides cleaning services to commercial and residential customers.
The commercial business segment provided services to 280 customers and the
residential business segment provided services to 595 customers.
What is the contribution margin ratio for Marion Company? (Round you answer to two
decimal places.)
A) 0.55%
B) 0.82%
C) 0.62%
D) 0.18%
For decision-making purposes, ________ costs are often divided into prime costs and
conversion costs.
A) fixed costs
B) product costs
C) period costs
D) sunk costs
Which of the following accounts would be debited in the journal entry to record the
issuance of direct materials?
A) Cost of Goods Sold
B) Work-in-Process Inventory
C) Finished Goods Inventory
D) Raw Materials Inventory
Which of the following will be categorized as a manufacturing overhead cost?
A) depreciation on factory plant and equipment
B) wages paid to assembly line workers
C) administration charges of showroom
D) cost of direct materials used