1) If the cost savings from discontinuing a product exceed the lost revenues from
discontinuing the product, it should be retained.
2) The existence of ending work in process inventory necessitates the use of the 5-step
process costing procedure.
3) If a scatter plot reveals a fairly weak relationship between cost and volume, the cost
equation based on that data would not be very useful for predicting future costs.
4) All of the components of manufacturingfrom research and development through
customer service after the saleare part of a firm’s value chain.
5) When the products are shipped to customers, the cost of manufacturing those
products becomes Cost of Goods Sold (COGS) shown on the company’s balance sheet.
6) The “total physical units accounted for” is the sum of the units completed and
transferred out during the period plus the units in beginning WIP inventory.
7) Responsibility accounting performance reports capture the financial performance of
cost, revenue and profit centers.
8) If a company has a series of processes, the company uses just one work-in-process
account.
9) For some merchandisers, the primary constraint may be cubic feet of display space.
10) If manufacturing overhead has been overallocated during the year, it means the jobs
have been overcosted.
11) The variable overhead rate variance tells managers whether more or less was spent
on variable overhead than they expected for the hours worked.
12) Cost of goods sold is a major expense of service companies.
13) A price variance for direct materials measures how well a company keeps unit
prices of material within standards.
14) When a company uses the indirect method to present the statement of cash flows, an
increase in a current liability must be subtracted from net income to reconcile to net
cash provided by operating activities.
15) When the units are sold, Cost of Goods Sold is credited.
16) Which of the following statements is TRUE if the sales price per unit decreases
while the variable cost per unit and total fixed costs remain constant?
A) The contribution margin increases and the breakeven point decreases
B) The contribution margin decreases and the breakeven point decreases
C) The contribution margin increases and the breakeven point increases
D) The contribution margin decreases and the breakeven point increases
17) Which type(s) of companies prepare income statements and balance sheets?
A) Service company
B) Merchandising company
C) Manufacturing company
D) All of these types of companies
18) A restaurant is facing a decision about whether it should bake its own apple pies or
whether it should continue to purchase the pies from a local bakery. Which of the
following costs would be relevant to its decision?
A) The salary of the restaurant manager
B) The price the restaurant sells the apple pies for
C) The purchase price of the apple pies purchased from the local bakery
D) The original purchase price of the current machinery
19) Romona Company expects its November sales to be 20% higher than its October
sales of $165,000. All sales are on credit and are collected as follows: 35% in the month
of the sale and 60% in the following month. Purchases were $110,000 in October and
are expected to be $140,000 in November. Purchases are paid 40% in the month of
purchase and 60% in the following month. The cash balance on November 1 is $13,500.
The cash balance on November 30 will be
A) $46,300
B) $59,800
C) $2,050
D) $32,800
20) (Present value tables are needed.) Shaker Investments, a private investment holding
company, is searching for a new investment opportunity. Shaker Investments has
identified two potential investment opportunities: an upstart fast food chain and a
growing organic grocery chain. Information for each investment follows:
Fast FoodOrganic Grocery
ChainChain
Investment$975,000$1,500,000
Useful life (years)1515
Estimated annual net cash inflows for useful life$120,000$210,000
Residual value$50,000$100,000
Depreciation methodstraight-linestraight-line
Required rate of return8%10%
Required:
a.Calculate the net present value of the Fast Food Chain.
b.Calculate the net present value of the Organic Grocery Chain.
c.Using the net present value method, which investment should Shaker select if it can
select only one investment?
21) At Hodgson Corporation, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the total cost of units remaining in ending WIP?
A) $120,750
B) $92,586
C) $100,050
D) $69,000
22) Which of the following items would be considered a capital asset?
A) Purchase of office supplies to be used internally over the next year
B) Payment for this year’s advertising campaign
C) Construction of a new store building
D) Donation of money to United Way
23) Production loss caused by downtime is an example of a(n)
A) internal failure cost
B) external failure cost
C) prevention cost
D) appraisal cost
24) At Onyx Incorporated, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the total cost of units remaining in ending WIP?
A) $ 226,000
B) $ 162,442
C) $ 135,600
D) $180,800
25) Of the following, which is not a cash outflow from an investing activity?
A) Payment of cash dividends
B) Loans made to another party
C) Investments in subsidiary
D) Purchase of new building
26) The following data relate to Sorrentino Corporation for last year:
What is the net cash provided by operating activities for last year on the statement of
cash flows for Sorrentino Corporation?
A) $130,000
B) $142,000
C) $173,000
D) $177,000
27) Direct labor for a company was $145,000; manufacturing overhead was $300,000;
and direct materials were $270,000. Prime costs would total
A) $715,000
B) $445,000
C) $415,000
D) $570,000
28) Which type of costing system is the only acceptable costing system for external
financial reporting?
A) Prime costing
B) Out-of-pocket costing
C) Variable costing
D) Absorption costing
29) Reardon Enterprises has operating income of $90,000. Its return on investment
(ROI) is 40%, while its target rate of return is 15% . The total assets of Reardon
Enterprises would be closest to
A) $36,000
B) $621,429
C) $225,000
D) $90,000
30) With respect to total fixed costs, which of the following statements is TRUE?
A) They will remain the same as production levels change within the relevant range
B) They will increase as production decreases within the relevant range
C) They will decrease as production increases within the relevant range
D) They will decrease as production decreases within the relevant range
31) (Present value tables are needed.) Somerville Corporation is considering investing
in specialized equipment costing $618,000. The equipment has a useful life of 5 years
and a residual value of $55,000. Depreciation is calculated using the straight-line
method. The expected net cash inflows from the investment are:
Somerville Corporation’s required rate of return is 14%.
The net present value of the investment is closest to
A) $62,976 negative
B) $5,886 negative
C) $34,431 negative
D) $181,000 positive
32) Hurley Enterprises uses job costing. Actual overhead for the year was $494,500.
The allocated
overhead was $523,500. What is the balance in the manufacturing overhead account?
A) $1,018,000 overallocated
B) $ 29,000 underallocated
C) $ 29,000 overallocated
D) $ 494,500 underallocated
33) Total mixed cost is represented by which of the following equations?
A) y = vx
B) y = vx + f
C) y = f
D) y = v + f
34) Sneider Family Orange Groves processes a variety of fresh juices. The company has
the following expenses for July:
What is the total cost for the distribution category of the value chain?
A) $28,000
B) $29,000
C) $222,000
D) $151,000
35) Macy’s (the department store chain) classifies its clothing held for sale as
A) merchandise inventory
B) raw materials inventory
C) work in process inventory
D) finished goods inventory
36) Martinson Company adds direct materials at the beginning of the process and adds
conversion costs throughout the process. Data for the finishing department follows:
The cost per equivalent unit for conversion costs would be closest to
A) $5.11
B) $4.53
C) $5.43
D) $4.88
37) Carrol Company, which uses an activity-based costing system, produces travel
trailers and boat trailers. The company allocates batch setup costs to the two products
using the following basic data:
Total budgeted setup costs for the year are $158,400.
If the setup costs are allocated using direct labor hours, how much of the total setup
costs would be allocated to boat trailers?
A) $158,400
B) $104,400
C) $240,331
D) $306,240
38) If a company sells 15 of Product A for every 2 of Product B that it sells, the sales
mix can be stated as
A) 15:2
B) 15/17 A and 2/17 B
C) neither “15:2″ nor ” 15/17 A and 2/17 B” is correct
D) both “15:2″ and ” 15/17 A and 2/17 B” are correct
39) The assignment of direct and indirect materials to cost objects reduces
A) finished goods inventory
B) raw materials inventory
C) manufacturing overhead
D) work in process inventory
40) Which of the following organizations conducts an annual information Request
survey in which environmental impact information is disclosed?
A) The Carbon Disclosure Project (CDP)
B) The International Accounting Standards Board (IASB)
C) Accounting for Sustainability (A4S)
D) The International Organization for Standardization (ISO)
41) Jeans’s Fitness Club provides monthly memberships as well as personal training
sessions. The personal trainers earn 50% of the revenue for all personal training
sessions. The Fitness Club also sells nutrition products. Jeans’s general ledger accounts
indicate the following for the year. The front desk staff wages expense remains the same
throughout the year.
If a contribution margin income statement is prepared for the year, what is the
contribution margin?
A) $ 72,500
B) $352,500
C) $280,000
D) $207,500
42) The person who is directly responsible for all financial functions is the
A) Treasurer
B) CEO
C) CFO
D) COO