A helpful approach to examine changes in the relative size of account balances within a
single statement is referred to as horizontal analysis.
Applied overhead is calculated by dividing the actual activity level of application base
by the predetermined overhead rate.
The direct materials quantity variance is the part of the direct materials flexible budget
variance that is caused by using more or less material than the standard quantity
allowed for actual production.
The four strategies based on a firm ‘s approach to market share growth are build, hold,
harvest and divest.
In an activity-based costing system, after the manufacturing overhead costs have been
assigned to activity cost pools, the next step is to calculate the unit product cost.
The process of using activity-based costing information to manage a business’s
activities, and thus its costs, is called total quality management.
The accounting rate of return is also known as the unadjusted rate of return.
The Finished Goods Inventory account records all the production costs of completed
products.
Trend analysis is very useful for analyzing the financial statements, but not for
analyzing supplemental information reported in corporate annual reports.
Which of the following is not a consequence of poor management of an organization’s
activities?
a. The company may see an increase in costs
b. Employees may experience a decrease in job satisfaction
c. Non-value added activities are generally eliminated
d. All of these answer choices are consequences of poor management of an
organization’s activities.
Which of the following is not an assumption about the data when using CVP analysis?
a. All costs can be easily and accurately separated into fixed and variable components.
b. Total fixed costs remain at a constant level and variable costs per unit remain
unchanged at all sales levels.
c. A linear relationship exists between variable costs and sales activity over the relevant
range of interest.
d. Inventory is sold in the period following purchase or manufacture.
Which of the following combinations results in relevant information?
a. Occurs in the future and is unavoidable
b. Occurs in the future and is avoidable
c. Occurs in the past and is unavoidable
d. Occurs in the past and is avoidable
The work in process inventory account records the costs of all products that have been
a. Started but not yet complete.
b. Completed.
c. Completed and sold.
d. None of these answer choices are correct.
Which of the following is a limitation of the payback period method?
a. It ignores the time value of money
b. It ignores cash flows that occur after the payback period
c. It both ignores the time value of money and it ignores cash flows that occur after the
payback period
d. Neither that it ignores the time value of money nor that it ignores cash flows that
occur after the payback period
In preparing cash flows provided by operating activities using the indirect method,
which of the following is not deducted from net income?
a. Gains on investing and financing transactions
b. Increases in current asset balances
c. Decreases in current liability balances
d. Non-cash expenses such as depreciation
If a company follows a strategy of product differentiation, it will seek ways to set it
products apart in terms of
a.Quality, design or service
b.Price, demand or service
c.Design, price or popularity
d.Quality, demand or life cycle
When too much overhead cost is charged to products as they are made, the result is
a. Overapplied overhead.
b. Underapplied overhead.
c. Understatement of Cost of Goods Sold.
d. Inventory cost is too low.
Alexa Industries has the following amounts budgeted for selling and administrative
expenses for February:
What amount will Alexa report on its February cash budget for selling and
administrative expenses?
a. $154,400
b. $148,000
c. $169,200
d. $156,000
Saguaro Company is a leading producer of disposable chop sticks and other utensils.
One of the company ‘s major product lines is high-quality chop sticks which are sold to
some of the country ‘s best Asian restaurants, including large national chains. Each set
of chop sticks is sold at a price of $0.38 per pair. To maintain its high-quality image,
Saguaro uses a thick premium wood, a special varnish, and individually wraps each pair
of chop sticks. Based on annual production of 5,000,000 sets of chop sticks, Saguaro ‘s
cost for producing a pair of chop sticks is as follows:
Sharon Steele is opening a new Asian restaurant in her hometown. She recently
contacted one of Saguaro ‘s top salespeople, Simon Green, about purchasing utensils for
her new restaurant. Simon described Saguaro ‘s products, emphasizing the high-quality
materials and processes the company uses. Sharon is looking for ways to lower her
operating costs, so after hearing Simon describe Saguaro ‘s products, she told him that
all she wants are 20,000 unwrapped chop sticks. Sharon told Simon she is willing to
pay $0.09 per chop stick ($.18 per pair).
Required
a. Based on Sharon ‘s offer of $0.09 per chop stick, should Saguaro accept Sharon ‘s
order? Saguaro currently has excess production capacity and can easily accommodate
Sharon ‘s order in the production schedule.
b. Since Sharon wants simple chop sticks, Simon is exploring using a lighter-weight
wood for her order. He has found a suitable product that will cost $.02 per chop stick. If
Saguaro uses this lighter-weight wood for Sharon ‘s order, should the company accept
Sharon ‘s order at a price of $0.09 per chop stick? Saguaro currently has excess
production capacity and can easily accommodate Sharon ‘s order in the production
schedule.
c. After visiting with Sharon, Simon received a fax from one of Spain ‘s top Asian
restaurants. The restaurant ‘s normal utensil supplier suffered some earthquake damage
and is unable to ship the restaurant ‘s order of 20,000 pairs of chop sticks this month.
The restaurant ‘s owner is asking if Saguaro can fill a one-time rush order of 20,000
pairs of chop sticks. The restaurant is willing to pay an 8% price premium to expedite
the order. If Saguaro accepts the order, it will incur $2,250 in export taxes and shipping.
Should Saguaro accept the Spanish restaurant ‘s offer?
d. What qualitative issues should Saguaro consider as it evaluates both Sharon ‘s order
and the Spanish restaurant ‘s order? Are these issues different for the two orders?
Which of the following is not a step in calculating EVA?
a. Calculate net operating profit
b. Calculate invested capital
c. Calculate average operating assets
d. Calculate the weighted average cost of capital
For the past two years, Monroe Corporation’s statement of cash flows has shown net
cash used by financing activities. Which of the following choices could explain this
result?
a. Collection of accounts receivable balances
b. Purchase of stock in another company
c. Issuance of bonds payable
d. Payment of cash dividends to stockholders
When managers reduce the workforce without considering the activities that employees
performs, which of the following is not a likely consequence?
a. The amount of work will be reduced.
b. There will be a decrease in job satisfaction.
c. The company will have to pay overtime.
d. All of these answer choices are likely consequences.
Dina Jones just learned that she received an inheritance from her grandmother. The
inheritance provides for Dina to receive $5,000 per year at the end of the year for each
of the next 5 years. Using the following factors, what is the value of this inheritance to
Dina today?
a. $15,523
b. $20,849
c. $18,954
d. $30,526
Which of the following kinds of companies would a bass boat manufacturing company
not want to benchmark?
a. Another bass boat manufacturer with a best practice in quality control
b. A manufacturer of ladies dresses with a best practice in inventory management
c. A retail store that has a best practice in employee safety
d. A bass boat manufacturer might want to benchmark with all the above companies.
If a company uses more direct labor hours than the standard allowed, the result is
a. An inflated prepaid salary account on the balance sheet.
b. An unfavorable direct labor hour variance.
c. An favorable efficiency variance.
d. A reduction in operating income.
Managerial accounting information is provided by which of the following individuals
within an organization.
a.A controller
b.A plant accountant
c.A cost accountant
d.Any of these individuals can provide managerial accounting information.
Which of the following is not a product- or service-related activity?
a. Unit-level
b. Product-level
c. Batch-level
d. Customer-level
A disadvantage of decentralization is that the process does not give lower-level
managers practice in developing their decision-making skills.
Graham’s Wholesale Supply is a distributor of electrical supplies. The company has
recently hired a controller who used activity-based costing at her last job. At her
suggestion, Grahams is in the beginning stages of implementing activity-based costing
for its operations. The following activity pools have been identified:
1> Filling sales orders
2> Maintenance of warehouse equipment
3> Warehousing of electrical supplies
4> Electricity to heat and cool warehouse
5> Delivery of goods to customer job sites
Required:
Identify at least one possible cost driver for each activity cost pool.
The ROI formula decomposed into two components, margin and asset turnover, is
referred to as the Deaumon Model.
Place and “X” in the column that corresponds to the type of activity referred to in each
scenario.
The following data pertain to an investment proposal:
What is the present value of the proposed investment?
Logan’s Enterprises reported the following data for May.
a. How much direct materials were used in production?
b. What were the total manufacturing costs for the month of May?
c. What was the ending balance in the Finished Goods Inventory account?
Define breakeven point. If a product’s variable costs per unit increases while the selling
price and fixed costs remains constant, what will happen to the breakeven point?