Jensen Company produces dolls. Each doll sells for $20.00. Variable costs are $14.00
per unit. If the break-even volume in dollars is $1,446,000, then the total fixed costs for
the period are ________.
A) $361,500
B) $433,800
C) $516,425
D) $1,446,000
Benjamin Company has the following information available:
Income tax rate 30%
Selling price per unit $5.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
If Benjamin Company wants a targeted after-tax net income of $14,000, how many
units must be sold?
A) 45,000
B) 52,000
C) 55,000
D) 60,000
Stanley Company has identified the following activities related to indirect production
costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Stanley Company has obtained the following data concerning two products:
Product 1 Product 2
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using an activity-based costing system, what amount of materials handling cost is
assigned to Products 1 and 2?
Product 1 Product 2
A) $2,000 $6,000
B) $8,333 $41,667
C) $12,500 $37,500
D) $20,000 $30,000
You can receive $10,000 today or $3,000 per year at the end of each year for the next
five years. If the required rate of return is 10%, what option should be selected? (The
present value of an ordinary annuity of one at 10% for five periods is 3.7908. The
present value of one at 10% for five periods is 0.6209.)
A) Receive $10,000 today.
B) Receive $3,000 per year for the next five years.
C) The results are the same for both options.
D) Neither option is desirable.
Jonathon Company is considering an investment in the project below:
Project 1
Cost $10,000
Annual cash operating savings (end of year) $3,000
Terminal salvage $0
Useful life in years 5
Required rate of return 10%
Present value of one for 5 periods at 10% 0.6209
Present value of ordinary annuity of one for
5 periods at 10% 3.7908
Ignoring taxes, what is the lowest level of annual cash operating savings that will result
in a positive net present value?
A) $2,420
B) $2,638
C) $3,000
D) $3,120
In a manufacturing firm, the computation of Cost of Goods Manufactured does NOT
use ________.
A) Finished Goods Inventory, ending balance
B) indirect production costs
C) direct labor costs
D) direct materials used
At 60,000 machine hours, Norwall Company’s static budget for variable overhead costs
is $180,000. At 60,000 machine hours, the company’s static budget for fixed overhead
costs is $300,000. Machine hours are the cost driver of all overhead costs. The static
budget is based on 60,000 machine hours. At 60,000 machine hours, the company
produces 40,000 units. The following data is available:
Actual units produced and sold 42,000
Actual machine hours 64,000
Actual variable overhead costs $185,600
Actual fixed overhead costs $302,400
What is the variable overhead spending variance?
A) $6,400 Unfavorable
B) $6,400 Favorable
C) $1,000 Favorable
D) $1,000 Unfavorable
Foster Corporation has a joint process, which produces three products, 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 $40,000. Other relevant data are:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs After Split-Off at Completion
A $15,500 $2,200 $17,700
B 18,000 8,000 23,000
C 24,000 11,500 37,500
Required:
A) Which products should be processed further? Why?
B) If the Foster Company maximizes profits, what is the operating income?
The IMA’s ethical standard for integrity includes all of the following EXCEPT
________.
A) each member has a responsibility to mitigate actual conflicts of interest
B) each member has a responsibility to refrain from engaging in any conduct that would
prejudice carrying out duties ethically
C) each member has a responsibility to abstain from engaging in or supporting any
activity that would discredit the profession
D) each member has a responsibility to monitor subordinates’ activities to ensure
compliance with the ethical standard
The ________ method recognizes that some service departments support the activities
in other service departments as well as those in production departments.
A) direct
B) indirect
C) step-down
D) cost driver
An increase in total variable costs usually indicates that ________.
A) the cost-driver activity level is decreasing
B) the cost-driver activity level is increasing
C) variable costs per unit is decreasing
D) fixed costs per unit is increasing
Marvelous Company has two service departments, Maintenance and Human Resources.
Marvelous Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,200 2,400
Number of employees 16 24 48 64
Assume the step-down method is used to allocate service department costs and the
Maintenance Department is allocated first. Then the amount of cost allocated from the
Human Resources Department to the Maintenance Department would be ________.
A) $0
B) $3,539
C) $4,200
D) $4,998
Falls Company has budgeted sales of $120,000 based on 80,000 units. The margin of
safety is $1,000. What is the break-even point in dollars?
A) $81,000
B) $119,000
C) $120,000
D) $121,000
Which statement is FALSE?
A) Each different sales-mix of products has a different break-even point.
B) Changes in the sales-mix of products sold affects a company’s net operating profit.
C) Changes in the sales-mix of products sold affects a company’s contribution margin.
D) If the sales-mix of products sold changes, the break-even point does not change.
In a job-order system, accountants apply factory overhead costs to Work-In-Process
Inventory by using the ________. The company does not use activity-based costing.
A) actual overhead costs
B) budgeted indirect costs for value chain functions
C) budgeted overhead rate
D) actual overhead rate
The statement of changes in stockholders’ equity shows the changes in ________.
A) retained earnings only
B) dividends only
C) each of the stockholders’ equity accounts
D) fixed assets only
Which of the following is NOT a reason for budgetary slack?
A) to buffer managers from budget cuts imposed by top management
B) to provide protection against cost increases or revenue shortfalls due to unforeseen
events
C) to facilitate attainment of performance goals
D) to impose a formal structure for planning purposes
The term opportunity cost applies to a resource that a company ________.
A) is thinking about purchasing
B) already owns only
C) has committed to purchase only
D) already owns or has committed to purchase
A plant asset with a book value of $320,000 is sold for $560,000. The tax rate is 20%.
What is the net after-tax cash inflow resulting from this sale?
A) $144,000
B) $512,000
C) $560,000
D) $656,000
Gollerowski Company had the following information available for its specialty product:
Standards for one unit of product:
Direct Materials: 5 pounds at $2 per pound
Direct Labor: 0.50 hour at $16 per hour
Materials and Labor Used to produce 8,500 units:
Direct Materials: 46,000 pounds at 4 per pound
Direct Labor: ? hours at $17 per hour
If the Direct Labor Efficiency Variance is $4,000 Unfavorable, what are the actual
number of hours worked?
A) $4,000
B) $4,250
C) $4,400
D) $4,500
Bronkov Company has the following data:
Month Budgeted Sales
May $46,000
June 50,000
July 52,000
August 48,000
The cost of goods sold percentage is 65% of sales and the desired ending inventory
level is 25% of next month’s sales at cost. What are the expected total purchases for
June?
A) $17,500
B) $32,500
C) $32,825
D) $40,950
________ is a measure of income divided by the investment required to obtain that
income.
A) Return on sales
B) Capital turnover
C) Return on investment
D) Residual income
When preparing segmented income statements, unallocated costs include ________.
A) costs controlled by others(not segment managers)
B) central corporate costs
C) costs controllable by segment managers
D) costs traced to segments
The following information pertains to the Midwest Division of Clearly Natural
Company:
Net Sales $25,000
Variable Costs:
Cost of merchandise sold 7,200
Operating expenses 2,700
Fixed costs:
Controllable by segment manager 2,400
Controllable by others 1,000
Unallocated costs 600
The contribution controllable by a segment manager is ________.
A) $7,100
B) $7,700
C) $11,100
D) $12,700
Cash collections from customers are included in the ________ section of the statement
of cash flows. Assume the direct method is used.
A) operating
B) investing
C) financing
D) noncash
On the income statement, the absorption approach separates manufacturing costs from
________.
A) some nonmanufacturing costs
B) all nonmanufacturing costs
C) all variable costs
D) all fixed costs
Goldman Company has identified the following activities related to indirect production
costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Goldman Company has obtained the following data concerning two products:
Product A Product B
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using activity-based costing, what is the total production cost per unit for Product A?
A) $8.00 per unit
B) $10.25 per unit
C) $11.75 per unit
D) $70.50 per unit
Here is a statement from the Statement of Ethical Professional Practice drafted by the
Institute of Management Accountants: “Each member has a responsibility to perform
professional duties in accordance with relevant laws, regulations and technical
standards.” This statement comes from the ________ standard.
A) credibility
B) confidentiality
C) competence
D) professional responsibility
Decisions made during long-range planning include ________.
A) addition or deletion of product line
B) location of new plant
C) purchase of equipment
D) all of the above
Which of the following is NOT a tangible asset?
A) inventories
B) land
C) equipment
D) goodwill
The ________ approach computes the differences in cash flows between two
alternatives and then finds the present value of these differences.
A) differential
B) payback
C) total project
D) sensitivity
Robertson Company has two production departments called Assembly and Finishing.
The maintenance department serves both production departments. Maintenance costs
are allocated based on labor hours. Budgeted fixed costs for the maintenance
department are $40,000. Budgeted variable costs for the maintenance department are
$4.00 per labor hour. Other relevant data follow:
Assembly Finishing
Capacity available 18,000 labor hours 12,000 labor hours
Capacity used 15,000 labor hours 9,000 labor hours
Actual maintenance department costs:
Fixed $36,000
Variable $100,000
The amount of fixed maintenance department costs allocated to the Finishing
Department should be ________.
A) $11,250
B) $14,400
C) $15,000
D) $16,000
A ________ is most likely to be held accountable for price variances for direct
materials.
A) machine operator
B) production supervisor
C) purchasing manager
D) marketing director
In determining whether to purchase a labor-saving machine, extreme resistance to the
machine by employees would be a(n) ________.
A) relevant qualitative factor
B) relevant quantitative factor
C) irrelevant qualitative factor
D) irrelevant quantitative factor
The phases of capital budgeting do NOT include ________.
A) a post-audit of the investment
B) gathering data to aid investment decisions
C) the identification of potential investments
D) sensitivity analysis of investment models