When the actual volume of production exceeds the expected volume of production, the
production volume variance is ________ and fixed overhead is ________.
A) favorable; underapplied
B) favorable; overapplied
C) unfavorable; underapplied
D) unfavorable; overapplied
The Foreign Corrupt Practices Act requires ________.
A) companies to cease conducting business with companies in some foreign countries
B) companies to reject bribes from companies in foreign countries
C) companies to have an appropriate system of internal controls
D) companies to prepare a separate report on their accounting information system
The following data are for the month of January for the Soloway Company. Assume the
cost driver is the number of units sold.
Static budget data:
Sales of 9,000 pairs at $90 per pair
Variable costs of $69 per pair
Total fixed costs $108,000
Actual results:
Sales of 9,600 pairs at $87 per pair
Variable costs of $72 per pair
Total fixed costs $109,200
Required:
A) What is the static budget operating income?
B) What is the sales activity variance for operating income?
C) What is the flexible budget variance for operating income?
Blue Company is a small company with limited expertise with customer service. Blue
Company has a contract with New Company to handle all of Blue Company’s customer
service needs. For Blue Company, this is an example of ________.
A) technology transfer
B) technology osmosis
C) outsourcing
D) none of the above
Division AA does not have excess capacity to produce Product XX. The division can
sell Product XX for $10 per unit outside the company. Variable costs are $6 per unit.
Division BB wants to purchase Product XX from Division AA to use in Product ZZ.
The selling price of Product ZZ is $25 per unit and variable costs to finish the product
after the transfer are $12 per unit. An outside supplier will sell Product XX for $12 per
unit. What is the minimum transfer price for Division AA?
A) $4 per unit
B) $6 per unit
C) $10 per unit
D) $12 per unit
Return on investment can be computed as ________ times ________.
A) residual income; capital turnover
B) return on assets; asset turnover
C) return on sales; capital turnover
D) net income; cost of capital
The relevant range applies to ________.
A) variable costs only
B) fixed costs only
C) fixed costs and variable costs
D) none of the above
Freund Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead 20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the product cost per unit?
A) $40.00
B) $42.00
C) $45.00
D) $54.09
Why do changes in business process management affect management accounting?
A) Management accountants are experts in designing plant layout changes.
B) Management accountants specialize in designing manufacturing cells to streamline
production processes.
C) They all affect product costs and management accountants measure product costs.
D) They all affect the number of workers employed and management accountants are
involved in human resources.
Smiley Company has the following results:
Rolls of film processed 350,000
Sales revenue $1,200,000
Direct labor hours worked 5,500
Direct labor cost $47,000
If productivity is measured using the number of rolls of film processed per direct labor
hour, what is the productivity of Smiley Company?
A) $3.43 per roll
B) $260.87 per direct labor hour
C) 2,553% of direct labor cost
D) 63.64 rolls per direct labor hour
In process costing, the journal entry to record direct labor costs incurred associated with
units in a department would include a ________.
A) Debit to Accrued Payroll
B) Credit to Factory Overhead
C) Debit to Work-in-Process Inventory—Department Name
D) Credit to Finished Goods Inventory
Which of the following statements about responsibility centers is FALSE?
A) Responsibility centers usually have one goal.
B) Management control systems monitor responsibility center goals.
C) Responsibility centers are usually classified according to their managers’ primary
financial responsibility.
D) Cost centers, profit centers and investment centers are all examples of responsibility
centers.
A cost management system provides ________.
A) measures of inventory value and cost of goods sold for financial reporting
B) cost information for strategic management decisions
C) cost information for operational control
D) all of the above
The vertical axis on the cost-volume-profit graph is the ________.
A) dollars of net profit
B) sales volume in units
C) margin of safety
D) dollars of cost and revenue
A manager is trying to decide which product to emphasize in promotion and advertising
efforts. Following the decision process used by managers, predictions about the
amounts of future sales of the two products are used as input to the ________.
A) prediction model
B) prediction method
C) decision model
D) evaluation model
Watson Corporation manufactures two products, Simple and Complex. The following
annual information was gathered:
Simple Complex
Selling price per unit $47.00 $26.00
Variable cost per unit 42.00 22.00
Total annual fixed costs are $18,000. Assume demand for either product exceeds the
factory’s capacity. It takes one hour to make one unit of Complex. However, Simple
takes 50% longer to manufacture when compared to Complex. Only 120,000 hours of
plant capacity are available. How many units of Simple and Complex should Watson
Corporation produce and sell in a year to maximize profits?
A) an equal number of Simple and Complex
B) 80,000 units of Simple and 0 units of Complex
C) 0 units of Simple and 120,000 units of Complex
D) either Simple or Complex; it does not matter
Under absorption costing, all ________ costs are product or inventoriable costs.
A) indirect production
B) direct and indirect production
C) direct production
D) selling and administrative
Upstairs Company has the following data:
Month Budgeted Sales
January $108,000
February 132,000
March 144,000
April 120,000
The gross profit rate is 40% of sales and ending inventory at December 31 was $19,440.
Desired ending inventory levels are 30% of next month’s sales at cost. What are the
expected total purchases for February?
A) $79,200
B) $81,360
C) $102,960
D) $105,120
On January 1, 2014, Everest Company paid $4,000 for insurance that covers the period,
February 1, 2014 through January 31, 2015. Which of the following journal entries is
prepared on January 1, 2014?
A) Debit Insurance Expense $4,000 and Credit Cash $4,000
B) Debit Prepaid Insurance $4,000 and Credit Cash $4,000
C) Debit Cash $4,000 and Credit Insurance Expense $4,000
D) Debit Cash $4,000 and Credit Insurance Revenue $4,000
Selected data for two divisions of the Ramble Company are given below:
South Division North Division
Net sales $4,000,000 $7,000,000
Average total assets $2,000,000 $2,000,000
Net operating income after taxes $360,000 $420,000
Average plant assets $950,000 $800,000
Average cost of capital 10% 12%
Each division is considering a capital investment of $1,000,000. The annual return on
the capital investment is 11%. Invested capital is defined as total assets.
Required:
A) The South Division’s manager is evaluated using residual income. Should South
Division accept the capital investment? Why?
B) The North Division’s manager is evaluated using residual income. Should North
Division accept the capital investment? Why?
C) The South Division’s manager is evaluated using return on investment. Should South
Division accept the capital investment? Why?
When using the Net Present Value model, which of the following assumptions is/are
used?
A) We assume the predicted cash inflows and outflows are certain to occur at the times
specified.
B) We assume perfect capital markets.
C) The Net Present Value model meets the cost-benefit criterion.
D) A and B
When designing an accounting information system, the cost to acquire additional
information should be incurred ________.
A) at all times so the operating manager has more information to make decisions
B) when information overload does not occur
C) at all times because the benefit cannot be quantified
D) when the expected benefit of an improved decision exceeds the cost of the
information
________ are profitability ratios.
A) Price earnings ratio and current ratio
B) Dividend payout and rate of return on invested capital
C) Earnings per share and dividend yield
D) Gross profit rate and return on sales
Sealy Company has a joint process, which produces three products called A, B and C.
Each product may be sold at split-off or processed further and then sold. Joint
processing costs for a year are $20,000. Other relevant data are:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs After Split-Off at Completion
A $94,000 $28,000 $115,000
B 60,000 10,000 82,000
C 66,000 14,000 79,000
Required:
A) Which products should be processed further? Why?
B) If the Sealy Company maximizes profits, what is the operating income?
Smith manufactures greeting cards. Material is introduced at the beginning of the
process in the Printing Department. Conversion costs are applied uniformly throughout
the process. The weighted-average method of process costing is used. Data for the
Printing Department for the month of September follow:
Work-In-Process Inventory, September 1:
Units 22,500
Direct materials (100% complete) $51,000
Conversion costs (30% complete) $20,472
Units started in September 127,500
Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000
Direct materials added in September $427,500
Conversion costs added in September $315,000
With regard to the Work-In-Process Inventory on September 30, materials are 100
percent complete and conversion costs are 50 percent complete. The equivalent units
for conversion costs are ________.
A) 123,000
B) 132,450
C) 136,500
D) 150,000
Management cannot influence the price of a new product. The market price is $100 per
unit. The estimated production cost is $30 per unit. The estimated nonproduction cost is
$40 per unit. If the gross profit is 40 percent of the market price, what is the target cost
of the new product?
A) $30
B) $40
C) $60
D) $70
Venus Company has the following information:
Month Budgeted Sales
January $90,000
February 85,000
March 92,000
April 79,000
Budgeted Operating Expenses Per Month
Wages $15,000
Advertising 12,000
Depreciation 3,000
Sales Commission 4% of sales
All cash expenses are paid as incurred. What are the total cash disbursements budgeted
for operating expenses for the month of January?
A) $28,200
B) $30,000
C) $30,600
D) $33,600
Oak Creek Company uses activity-based costing, and normally produces 1,000,000
units per month. At this level of production, the costs per unit are as follows:
Direct materials used $15
Direct labor $6
Variable indirect production $1
Setup costs $5
For 1,000,000 units, 500 setups are required at a cost of $10,000 per setup. The
company has received a special order for 100,000 units at $22 per unit. The company
has excess capacity. The company estimates that 5 setups will be required for the
special order. Variable selling costs of $1 per unit will also be incurred for the special
order. What is the cost of the special order?
A) $2,300,000
B) $2,350,000
C) $2,700,000
D) $2,800,000
A company can sell any mix of Product A and Product B at full capacity. The company
has 100,000 hours of capacity. The demand for each product exceeds the capacity. It
takes one hour to make one unit of Product A and two hours to make one unit of
Product B. The following information is available:
Product A Product B
Units produced from capacity available 100,000 50,000
Contribution margin per unit $20 $30
If capacity is the limiting factor, which product should be produced?
A) 0 units of Product A and 50,000 units of Product B
B) 20,000 units of Product A and 30,000 units of Product B
C) 30,000 units of Product A and 20,000 units of Product B
D) 100,000 units of Product A and 0 units of Product B
An allocated cost is a(n) ________ assigned to a cost object using a ________.
A) direct cost; cost-allocation base
B) indirect cost; cost-allocation base
C) direct cost; cost pool
D) indirect cost; cost pool