1) When fixed costs are $50,000 and variable costs are 60% of the selling price, then
breakeven sales are ________.
A) $115,000
B) $125,000
C) $175,000
D) $275,000
2) A budget ________.
A) is the qualitative expression of a proposed plan of action by management
B) is an aid to coordinating what needs to be done to execute a plan
C) helps in identifying problems and uncertainties
D) promotes production automation
3) The ________ is primarily responsible for management accounting and financial
accounting.
A) COO (Chief Operating Officer)
B) CIO (Chief Information Officer)
C) treasurer
D) controller
4) Cysco Corp has a budget of $1,200,000 in 2015 for prevention costs. If it decides to
automate a portion of its prevention activities, it will save $100,000 in variable costs.
The new method will require $50,000 in training costs and $140,000 in annual
equipment costs. Management is willing to adjust the budget for an amount up to the
cost of the new equipment. The budgeted production level is 200,000 units.
Appraisal costs for the year are budgeted at $500,000. The new prevention procedures
will save appraisal costs of $50,000. Internal failure costs average $30 per failed unit of
finished goods. The internal failure rate is expected to be 5% of all completed items.
The proposed changes will cut the internal failure rate by one-half. Internal failure units
are destroyed. External failure costs average $50 per failed unit. The company’s average
external failures average 2.5% of units sold. The new proposal will reduce this rate to
1%. Assume all units produced are sold and there are no ending inventories.
Management has offered to allow the prevention changes if all changes take place as
anticipated and the amounts netted are less than the cost of the equipment. What is the
net impact of all the changes created by the preventive changes?
A) $185,200
B) $(230,000)
C) $(234,000)
D) $(250,000)
5) If the contribution margin ratio is 0.25, targeted operating income is $50,000, and
targeted sales volume in dollars is $250,000, then total fixed costs are ________.
A) $11,500
B) $15,000
C) $20,000
D) $12,500
6) ________ is an organization’s ability to offer products or services that are perceived
by its customers as being superior and unique relative to those of its competitors.
A) Strategy
B) Product differentiation
C) Cost leadership
D) The balanced scorecard
7) Carriage Incorporated manufactures horse carriages. The company has two divisions,
Wheels and Assembly. Because of different accounting methods and inflation rates, the
company is considering multiple evaluation measures. The following information is
provided for 2015:
The company is currently using a 12% required rate of return.
Home Decor Inc., manufactures home cleaning products. The company has two
divisions, Bleach and Cleanser. Because of different accounting methods and inflation
rates, the company is considering multiple evaluation measures. The following
information is provided for 2015:
The company is currently using a 15% required rate of return.
What are Wheels’s and Assembly’s return on investment based on book values,
respectively?
A) 0.21; 0.25
B) 0.25; 0.21
C) 0.14; 0.25
D) 0.25; 0.14
8) At the Verill Company, the cost of the library and information center has always been
charged to the various departments based upon number of employees. Recently,
opinions gathered from the department managers indicate that the number of engineers
within a department might be a better predictor of library and information center costs.
Total library and information center costs are $200,000.
What were total fixed costs for 2015?
A) $924,000
B) $576,000
C) $348,000
D) $224,000
9) Using the high-low method, the estimate of the fixed component of office expense
per month is closest to:
A) $9,606
B) $13,485
C) $13,181
D) $13,793
10) The method that allocates costs in each cost pool using the same rate per unit is
known as the ________.
A) incremental cost-allocation method
B) reciprocal cost-allocation method
C) single-rate cost allocation method
D) dual-rate cost-allocation method
11) For planning, control, and decision-making purposes:
A) fixed costs should be converted to a per unit basis.
B) discretionary fixed costs should be eliminated.
C) variable costs should be ignored.
D) mixed costs should be separated into their variable and fixed components.
12) Berman’s Camera Shop has prepared the following flexible budget for September
and is in the process of interpreting the variances. F denotes a favorable variance and U
denotes an unfavorable variance.
The most likely explanation of the above direct manufacturing labor variances is that
________.
A) the average wage rate paid to employees was less than expected
B) employees did not work as efficiently as expected to accomplish the job
C) the company may have assigned more experienced employees this month than
originally planned
D) management may have a problem with budget slack and might be using lax
standards for both labor-wage rates and expected efficiency
13) Hanung Corp has two service departments, Maintenance and Personnel.
Maintenance Department costs of $300,000 are allocated on the basis of budgeted
maintenance-hours. Personnel Department costs of $100,000 are allocated based on the
number of employees. The costs of operating departments A and B are $160,000 and
$240,000, respectively. Data on budgeted maintenance-hours and number of employees
are as follows:
Using the direct method, what amount of Maintenance Department costs will be
allocated to Department B?
A) $96,000
B) $100,000
C) $110,000
D) $122,000
14) Which of the following terms could be used to correctly describe the cost of the
soap used to wash the denim cloth?
Direct Cost Product Cost
A) Yes Yes
B) Yes No
C) No Yes
D) No No
15) One of the problems in using one set of accounting records for tax reporting and
another set of records for internal management reporting is that ________.
A) it is illegal as well as unethical to do so
B) the tax authorities may suspect manipulation of records
C) it is almost impossible to keep the records straight and hard to reconcile the books
D) the shareholders do not approve of such methods and the market prices will decline
16) The Green Company processes unprocessed goat milk up to the splitoff point where
two products, condensed goat milk and skim goat milk result. The following
information was collected for the month of October:
The costs of purchasing the of unprocessed goat milk and processing it up to the splitoff
point to yield a total of 98,000 gallons of saleable product was $184,480. There were no
inventory balances of either product.
Condensed goat milk may be processed further to yield 42,000 gallons (the remainder is
shrinkage) of a medicinal milk product, Xyla, for an additional processing cost of $4
per usable gallon. Xyla can be sold for $20 per gallon.
Skim goat milk can be processed further to yield 54,200 gallons of skim goat ice cream,
for an additional processing cost per usable gallon of $4. The product can be sold for $9
per gallon.
There are no beginning and ending inventory balances.
What is the estimated net realizable value of Xyla at the splitoff point?
A) $271,000
B) $287,400
C) $672,000
D) $712,600
17) If separable costs of Butter Cream was 16,000 and constant gross margin was 25%,
what would have been the total allocated joint costs of production?
A) $37,675
B) $33,700
C) $30,238
D) $34,500
18) Unfavorable direct material price variances are ________.
A) always credits
B) always debits
C) credited to the Materials Control account
D) credited to the Accounts Payable Control account
19) Which of the following increases (are debited to) the Work-in-Process Control
account?
A) actual plant insurance costs
B) customer services costs
C) marketing expenses
D) direct manufacturing labor costs
20) The cost of goods sold for March was:
A) $146,000
B) $150,000
C) $142,000
D) $237,000