1) The number of equivalent units is computed before computing the cost per
equivalent unit.
2) The discounted cash flow methods for capital budgeting are generally considered
inferior to the payback period and the ARR because they consider the time value of
money.
3) When making product mix decisions, companies are most profitable when they
maximize production of the product with the greatest sales demand.
4) A standard cost for production inputs is a carefully predetermined cost that usually is
expressed on a per-unit basis.
5) Total fixed costs do not change in response to changes in the volume of production.
6) Controlling means overseeing the company’s day-to-day operations.
7) The plantwide overhead cost allocation rate is computed by dividing the estimated
total manufacturing overhead costs by the estimated total quantity of the cost allocation
base.
8) The cost of maintenance on the entire production plant would be considered a
facility-level cost.
9) If the data points were randomly scattered, the R-square value would be closer to 0
than 1 .
10) The direct method of presenting the financing activities section of the statement of
cash flow reconciles net income to net cash provided by financing activities.
11) The work in process account is debited for the cost of direct labor in a job cost
system.
12) Companies with high operating leverages generally have lower fixed costs than
variable costs.
13) Mixed costs per unit decrease as volume increases because of the variable cost
component.
14) The primary purpose of managerial accounting information is to help external users
make investing and lending decisions.
15) A scatter plot helps managers visualize the relationship between historical costs and
volume.
16) Outliers are abnormal data points.
17) If a company has ending work in process inventory it must use the 5-step process
costing procedure to determine the cost of making one unit.
18) The journal entry to record the ultimate completion of the units would include a
debit to Finished Goods Inventory.
19) CPA firms cannot provide consulting services for their current audit clients.
20) Madden Enterprises sells two products, Silver models and Gold models. Madden
Enterprises predicts that it will sell 6,000 Silver models and 4,000 Gold models in the
next period. The unit contribution margins for Silver models and Gold models are $75
and $150, respectively. What is the weighted-average unit contribution margin?
A) $0.01
B) $37.50
C) $105.00
D) $525.00
21) Sharon Corporation collects 15% in the second month following sale, 45% in the
month following sale and 35% of a month’s sales in the month of sale. The company
has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four
months are:
The amount of cash that will be collected in November is budgeted to be
A) $286,500
B) $285,500
C) $91,000
D) $281,500
22) A company uses the direct method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to inventory?
A) The decrease of $20,000 will be subtracted from net income
B) The decrease of $20,000 will be added to net income
C) The decrease of $20,000 will be subtracted from cost of goods sold to determine
payments to suppliers
D) The decrease of $20,000 will be added to cost of goods sold to determine payments
to suppliers
23) A company uses the direct method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?
A) The increase of $15,000 will be subtracted from net income
B) The increase of $15,000 will be added to net income
C) The increase of $15,000 will be added to purchases to determine payments to
suppliers
D) The increase of $15,000 will be subtracted from purchases to determine payments to
suppliers
24) The Nichols Corporation data for the current year:
What would a horizontal analysis report with respect to net income before income tax
expense and net income?
A) Both net income before tax expense and net income were 11.26% of net sales
revenue
B) Both net income before income tax expense and net income increased by $128,400
C) The current ratio is 1:06
D) There was an increase in both net income before income tax expense and net income
of 14.00%
25) Brittany Furniture manufactures two products: Futons and Recliners. The following
data are available:
The company can manufacture two futons per machine hour and one recliner per
machine hour. The company’s production capacity is 900 machine hours per month.
What is the contribution margin per machine hour for futons?
A) $350
B) $1,650
C) $175
D) $180
26) Which of the following budgets projects cash inflows and outflows and the
budgeted balance sheet?
A) Purchases budget
B) Capital expenditures budget
C) Financial budget
D) Cash budget
27) Martin Enterprises provides the following information about its single product.
What is the contribution margin per unit?
A) $0.35
B) $10.80
C) $2.30
D) $4.25
28) Mike’s Service Station performs oil changes for cars. Each oil change has a standard
time of 0.5 direct labor hours. The standard direct labor hour rate is $15.00 per hour.
Data relating to oil changes for the month of September follow:
What is the labor rate variance for September?
A) $1,500 favorable
B) $750 favorable
C) $1,500 unfavorable
D) $750 unfavorable
29) The McCumber Corporation data for the current year:
With respect to current assets, what would a horizontal analysis report?
A) Inventory turnover of 9.34 times
B) Current ratio of 0.92
C) Current assets as 40.79% of total assets
D) A 27.00% increase in current assets
30) Which of the following is an example of indirect labor in a manufacturing plant?
A) Chief operating officer
B) Machine operators
C) Salespersons
D) Plant managers
31) Here are selected basic data for Stehli Company:
If the company allocates overhead based on direct labor cost, what are the total actual
manufacturing overhead costs?
A) $227,400
B) $281,100
C) $258,700
D) $172,000
32) A company uses the indirect method to prepare the statement of cash flows. It
presents the following amounts on its financial statements.
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts payable?
A) The increase of $10,000 will be subtracted from net income
B) The increase of $10,000 will be added to net income
C) The increase of $10,000 will be subtracted from cost of goods sold
D) The increase of $10,000 will be added to cost of goods sold
33) Under which of the following situations is finished goods inventory debited and
work in process inventory credited?
A) Transfer of goods to the finished goods storeroom
B) Purchase of goods on account
C) Transfer goods out of the factory
D) Transfer of material to work in process inventory
34) The term ________ is described as a “formal means of analyzing long-range
investment alternatives.”
A) annuity
B) time value of money
C) payback period
D) capital budgeting
35) Which term below is best paired with “The difference between the actual overhead
cost incurred and the flexible budget amount of overhead cost for actual number of
output”?
A) Sales volume variance
B) Flexible budget
C) Overhead flexible budget variance
D) Benchmarking
36) A rolling budget is a budget that
A) extends 5-10 years into the future
B) is continuously updated, so that the next 12 months of operations are always
budgeted
C) begins with zero for each expense, and then amounts are added in
D) is rolled out by upper management
37) Vintage Fun reproduces old-fashioned style roller skates and skateboards. The
annual production and sales of roller skates is 950 units, while 1,750 skateboards are
produced and sold. The company has traditionally used direct labor hours to allocate its
overhead to products. Roller skates require 2.5 direct labor hours per unit, while
skateboards require 1.25 direct labor hours per unit. The total estimated overhead for
the period is $114,300. The company is looking at the possibility of changing to an
activity-based costing system for its products. If the company used an activity-based
costing system, it would have the following three activity cost pools:
The overhead cost per skateboard using the traditional costing system would be closest
to:
A) $31.32
B) $25.05
C) $65.31
D) $9.31
38) There are several reasons an organization might pursue sustainable initiatives. “Due
to rising costs, a manufacturing firm has reduced the amount of plastic used in each of
its products, which helps to keep down the cost of raw materials (plastics). The drop in
plastic usage also reduces the amount of plastic sent to the landfill after consumer use.”
This situation is an example of which type of reason to implement sustainable
initiatives?
A) Cost reduction
B) Regulatory compliance
C) Stakeholder influence
D) Competitive strategy
39) Fun Stuff Manufacturing produces ping pong balls using a three-step sequential
process that includes molding, coloring and finishing. When the balls and associated
costs are transferred from the coloring process to the finishing process, which account
is credited?
A) WIP inventory-coloring
B) WIP inventory-molding
C) Raw materials inventory
D) WIP inventory-finishing
40) Watson’s Computer Company uses ABC to account for its manufacturing process.
Watson’s Computer Company expects to produce 2,250 computers. Watson’s Computer
Company also expects to use 13,000 parts and have 20 setups.
The allocation rate for machine setups is
A) $7.01
B) $1,500
C) $488
D) $765
41) Boots Plus has two product lines: Hiking boots and Fashion boots. Income
statement data for the most recent year follow:
Assuming fixed costs remain unchanged, how would discontinuing the Fashion line
affect operating income?
A) Increase in total operating income of $29,000
B) Increase in total operating income of $132,000
C) Decrease in total operating income of $78,000
D) Decrease in total operating income of $20,000
42) If the variable cost per unit increases while the sale price per unit and total fixed
costs remain constant, which of the following statements is TRUE?
A) Breakeven point in units remains the same
B) Breakeven point in units decreases
C) Breakeven point in units increases
D) Contribution margin ratio increases
43) Which of the following is an example of a period cost when manufacturing
products?
A) Depreciation expense on factory equipment
B) Advertising expense
C) Indirect materials used in the factory
D) Property taxes on the plant
44) The following information was gathered for the Wesley Corporation for the most
recent year. Manufacturing overhead is allocated using direct labor hours.
What is the company’s predetermined manufacturing overhead rate?
A) $16.47 per direct labor hour
B) $19.31 per direct labor hour
C) $24.63 per direct labor hour
D) $21.00 per direct labor hour
45) Strategic planning involves
A) setting long-term goals that extend 5-10 years into the future
B) setting short-term goals that extend one year into the future
C) setting goals for next month
D) executing directives from the board of directors
46) The ________ substantiates the balance of the raw materials inventory account
shown on the company’s balance sheet.
A) bill of materials
B) raw materials records
C) materials requisition
D) labor time record
47) The following information relates to Truman Unlimited for the past two years.
The inventory turnover for the current year is
A) 1.76 times
B) 0.85 times
C) 13.50 times
D) 2.00 times
48) Which of the following types of companies use a sales budget?
A) Manufacturing
B) Merchandising
C) Service
D) All of the above
49) Brittany Furniture manufactures two products, pillows and cushions, from a joint
process. Pillows are allocated $7,000 of the total joint costs of $25,000. There are 2,500
pillows produced and 2,500 cushions produced each year. Pillows can be sold at the
split-off point for $12 per unit, or they can be processed further into a deluxe pillow for
additional processing costs of $8,000 and sold for $16 for each deluxe pillow. If the
pillows are processed further and made into deluxe pillows, the effect on operating
income would be:
A) $30,000 net increase in operating income
B) $2,000 net decrease in operating income
C) $2,000 net increase in operating income
D) $30,000 net decrease in operating income
50) Which statement is TRUE?
A) Management uses financial information to analyze costs
B) Management uses financial information to plan internal operations
C) Management uses reports created for internal parties
D) All of the above are TRUE
51) A company uses the direct method to prepare the statement of cash flows. How will
the amount of cash payments to suppliers be computed?
A) The amount of cash payments to suppliers is computed as interest expense minus the
decrease in accounts payable
B) The amount of cash payments to suppliers is computed as interest expense minus the
decrease in merchandise inventory
C) The amount of cash payments to suppliers is computed as purchases minus the
increase in accounts payable
D) The amount of cash payments to suppliers is computed as interest expense minus the
increase in merchandise inventory
52) Which of the following situations would lead to a favorable direct materials price
variance?
A) The purchasing manager was able to negotiate a lower purchase price for raw
materials
B) A vendor shipped a greater quantity of raw materials than ordered
C) The purchasing manager paid a premium price for a higher quality of raw materials
D) Raw materials waste was substantially reduced in the factory
53) Maintenance costs at Wilmington Manufacturing over the past six months are listed
in the following table.
Using the high-low method, what would the monthly fixed maintenance cost be?
A) $ 1,200
B) $ 2,320
C) $13,680
D) $27,440
54) George Company has a relevant range of 150,000 units to 400,000 units. The
company has total fixed costs of $525,000. Total fixed and variable costs are $612,500
at a production level of 175,000 units. The variable cost per unit at 300,000 units is
A) $3.00
B) $0.29
C) $0.50
D) $3.50
55) McCoy Company wants to have an ending inventory of 7,000 units. McCoy
Company has beginning inventory of 9,000 units and expects to sell 33,000 units. How
many units should McCoy Company produce?
A) 31,000
B) 35,000
C) 49,000
D) 40,000
56) The cost of fixing defective units found during the quality inspections would be
classified as what type of cost?
A) Prevention cost
B) Appraisal cost
C) External failure cost
D) Internal failure cost
57) Manufacturing overhead has an underallocated balance of $12,000; raw materials
inventory balance is $145,000; work in process inventory is $122,000; finished goods
inventory is $140,000; and cost of goods sold is $170,000. After adjusting for the
underallocated manufacturing overhead, what is cost of goods sold?
A) $170,000
B) $ 12,000
C) $182,000
D) $158,000
58) Which of the capital budgeting methods is the best?
A) Payback period
B) Net present value
C) Internal rate of return
D) No single method is best
59) If a company uses the indirect method to prepare the statement of cash flows, how
will the adjustment to reflect the amount of cash payments to employees be presented
on the statement?
A) The adjustment will be for the increase or decrease in accounts payable for the
period and will adjust net income in the operating activities section
B) The adjustment will be for the increase or decrease in accounts receivable for the
period and will adjust net income in the operating activities section
C) The adjustment will be for the increase or decrease in inventory for the period and
will adjust net income in the operating activities section
D) The adjustment will be for the increase or decrease in wages payable for the period
and will adjust net income in the operating activities section