Federal Furniture manufactures a small table and a large table. The small table sells for
$1,000, has variable costs of $560 per table, and takes 10 direct labor hours to
manufacture. The large table sells for $1,700, has variable costs of $970, and takes eight
direct labor hours to manufacture. Calculate the contribution margin per direct labor
hour for the large table. (Round your answer to the nearest cent.)
A) $91.25 per direct labor hour
B) $55.00 per direct labor hour
C) $44.00 per direct labor hour
D) $73.00 per direct labor hour
Battista Stationery Company is a price-taker and uses target pricing. The company has
completed an analysis of its revenues, costs, and desired profits and has calculated its
target full product cost. Refer to the following information:
Actual costs are currently higher than target full product cost. Assume all products
produced are sold. Assuming that variable costs are dependent on commodity prices and
cannot be reduced, what is the target fixed cost?
A) $320,000
B) $450,000
C) $150,000
D) $600,000
A petty cash fund was established with a $600 balance. It currently has cash of $130
and petty cash tickets as shown below:
Which of the following would be the journal entry to replenish the Petty Cash account?
A) debit various expenses $470; credit Cash $470
B) debit various expenses $470; credit Petty Cash $470
C) debit Cash $130; credit various expenses $130
D) credit Petty Cash $470; debit Cash $470
Server Solutions paid $209,000 to acquire Tabletz, Inc., an electronic
gadget-advertising website. At the time of the acquisition, Tabletz’s balance sheet
reported total assets of $209,000 and liabilities of $104,500. The fair market value of
Tabletz’s assets was $209,000. The fair market value of its liabilities was $104,500.
How much goodwill did Server Solutions purchase as part of the acquisition of Tabletz?
A) $209,000
B) $52,250
C) $104,500
D) $156,750
A company produces 400 microwave ovens per month, each of which includes one
electrical circuit. The company currently manufactures the circuit in-house but is
considering outsourcing the circuits at a contract cost of $48 each. Currently, the cost of
producing circuits in-house includes variable costs of $26 per circuit and fixed costs of
$7,000 per month. Assume the company could not reduce any fixed costs by
outsourcing and that there is no alternative use for the facilities presently being used to
make circuits. If the company outsources, operating income will ________.
A) increase by $19,200
B) decrease by $10,400
C) decrease by $8,800
D) stay the same
Under a standard cost system, when recording the use of direct materials in the
production process, the debit to Work-in-Process Inventory is ________.
A) standard quantity for actual production times standard cost per unit of direct
materials
B) standard quantity for actual production times actual cost per unit of direct materials
C) actual quantity times standard cost per unit of direct materials
D) actual quantity times actual cost per unit of direct materials
________ are professional accountants who serve the general public, not one particular
company.
A) Certified public accountants
B) Certified financial accountants
C) Audit accountants
D) Controllers
Healthier Living Company manufactures two products—toaster ovens and bread
machines. The following data are available:
Healthier Living can manufacture six toaster ovens per machine hour and four bread
machines per machine hour. Healthier Living’s production capacity is 1,800 machine hours
per month. What is the contribution margin per machine hour for bread machines?
A) $20
B) $100
C) $400
D) $600
Brink Financial Advisors provides accounting and finance assistance to customers in
the retail business. Brink has four professionals on staff, plus an office with six clerical
staff. Total compensation, including benefits, for the professional staff runs up to
$800,000 per year, and normal billable hours are about 3,300 billable hours per year.
The professional staff keep detailed time sheets organized by client number. The total
office and administrative costs for the year are $270,000.
Brink allocates office and administrative costs to clients monthly, using a predetermined
overhead allocation rate based on billable hours. During July, Brink’s professionals
spent 42 hours on their client, Waseca Sales. Brink adds a 30% markup on its costs to
calculate the amount billed to the customer. How much gross profit did Brink earn from
Waseca Sales in July? (Round any intermediate calculations to two decimal places, and
your final answer to the nearest whole number.)
A) $13,618.08
B) $3,054.492
C) $3,436
D) $4,085
Which of the following is considered a period cost in absorption costing?
A) variable manufacturing overhead costs
B) fixed selling and administrative costs
C) fixed manufacturing overhead costs
D) semi-variable manufacturing overhead costs
A company’s proportion of fixed costs to variable costs is called its ________.
A) target profit
B) relevant range
C) mixed cost
D) cost structure
Which of the following is true of goodwill?
A) Goodwill must be capitalized when acquired and amortized over seven years or less.
B) Both created and acquired goodwill must be recorded in the books.
C) Goodwill must be expensed when acquired.
D) Goodwill is not amortized.
Cortes Cargo, Inc. is considering three investment opportunities with the following
payback periods:
Use the decision rule for payback to rank the projects from most desirable to least
desirable, all else being equal.
A) Y, Z, X
B) X, Y, Z
C) Z, Y, X
D) Y, X, Z
A check payment for $658 was incorrectly entered in the Cash account as $856. Which
of the following adjustments needs to be made?
A) decrease the book balance
B) decrease the bank statement balance
C) increase the book balance
D) increase the bank statement balance
Financial statements are prepared after an entity’s transactions are analyzed and
recorded. Which of the following reports is one of the required financial statements?
A) Statement of cash flows
B) Statement of return on assets
C) Statement of dividends
D) Expense statement
Sandra, Inc. had 200 units of inventory on hand at the end of the year. These were
recorded at a cost of $15 each using the last-in, first-out (LIFO) method. The current
replacement cost is $11 per unit. The selling price charged by Sandra, Inc. for each
finished product is $18. In order to record the adjusting entry needed under the
lower-of-cost-or-market rule, the Cost of Goods Sold will be ________.
A) debited by $2,200
B) credited by $2,200
C) debited by $800
D) credited by $800
A company sold merchandise with a cost of $231 for $480 on account. The seller uses
the perpetual inventory system. The entry to record the cost of merchandise sold would
include ________.
A) a debit to Sales Revenue and a credit to Cash for $480
B) a debit to Cash and a credit to Sales Revenue for $480
C) a debit to Cost of Goods Sold and a credit to Merchandise Inventory for $231
D) a debit to Merchandise Inventory for $231 and a credit to Cost of Goods Sold for
$231
Which of the following is not recorded in a modern perpetual inventory system?
A) units purchased and cost amount
B) units sold and sales and cost amounts
C) customer account numbers and balances owed from the sale of merchandise
inventory
D) the quantity of merchandise inventory on hand and its cost
Swanson, Inc. has collected the following data. (There are no beginning inventories.)
What is the ending balance in Finished Goods Inventory using absorption costing if 550
units are sold? (Round any intermediate calculations to the nearest cent, and your final
answer to the nearest dollar.)
A) $1,450
B) $1,900
C) $4,742
D) $3,350
Which of the following statements is true of accrual basis accounting?
A) Accrual basis accounting is required by Generally Accepted Accounting Principles
(GAAP).
B) Accrual basis accounting records expenses only when cash has been paid for them.
C) Accrual basis accounting records revenue only when cash is received.
D) Accrual basis accounting always results in greater net income than cash basis
accounting.
Firewood, Inc. signed a three-year note payable for $59,000 at 7% annual interest. What
is the interest expense for 2017 if the note was signed on August 1, 2017?
A) $2,065
B) $1,721
C) $12,390
D) $4,130
Akao Products uses a standard cost system. Overhead costs are allocated based on
direct labor hours. In the first quarter, Akao had an unfavorable efficiency variance for
variable overhead costs. Which of the following scenarios is a reasonable explanation
for this variance?
A) The actual number of direct labor hours was lower than the budgeted hours.
B) The actual variable overhead costs were higher than the budgeted costs.
C) The actual variable overhead costs were lower than the budgeted costs.
D) The actual number of direct labor hours was higher than the budgeted hours.
Clayton, Inc. purchased a van on January 1, 2016, for $850,000. Estimated life of the
van was five years, and its estimated residual value was $91,000. Clayton uses the
straight-line method of depreciation. At the beginning of 2018, the company revised the
total estimated life of the asset from five years to four years. The estimated residual
value remained the same as estimated earlier. Calculate the depreciation expense for
2018.
A) $273,200
B) $227,700
C) $113,850
D) $136,600
Certified Auto Parts Company uses the indirect method to prepare its statement of cash
flows. Refer to the following information for 2017:
Net cash provided by operating activities: $109,000
Net cash used for investing activities: $(114,500)
Net cash provided by financing activities: $16,000
If the cash balance at the beginning of the year was $13,200, what is the ending cash
balance?
A) $23,700
B) $10,500
C) $13,200
D) $5,500
The direct materials budget is prepared using information from the ________ budget.
A) cash
B) master
C) capital expenditure
D) production
All available-for-sale (AFS) investments are reported on the balance sheet at ________.
A) historical cost
B) replacement cost
C) current market value
D) net realizable value
Avery, Inc. uses the periodic inventory system. On February 1, the corporation
purchased inventory on account for $25,000. The terms of invoice were 3/10, n/30. The
amount due was paid on February 9. Which of the following journal entries correctly
records the payment in the books of Avery, Inc.?
A)
B)
C)
D)
The Interest Expense in the worksheet’s unadjusted trial balance column is $3,500.
Interest Expense in the income statement column is $9,000. Which of the following
entries would have caused this difference?
A) a $9,000 credit to Interest Expense in the worksheet’s adjustments column
B) a $9,000 credit to Interest Payable in the worksheet’s adjustments column
C) a $5,500 debit to Interest Expense in the worksheet’s adjustments column
D) a $5,500 credit to Interest Expense in the worksheet’s adjustments column
IFRS permits the presentation of plant assets at their fair market value because
________.
A) U. S. GAAP requires this presentation
B) fair market value may be more relevant
C) fair market value is easier to compute than book value
D) financial statements users are indifferent to how plant assets are presented
Danube Corp. purchased a used machine for $17,000. The machine required installation
costs of $7,000 and insurance while in transit of $600. At which of the following
amounts would the be recorded?
A) $17,000
B) $24,000
C) $17,600
D) $24,600
The ending merchandise inventory for the current accounting period is overstated by
$3,500. What will be the effect of this error?
A) The net income for the current accounting period will be overstated by $3,500.
B) The cost of goods sold for the current accounting period will be overstated by
$3,500.
C) The ending merchandise inventory for the next accounting period will be overstated
by $3,500.
D) The cost of goods sold for the next accounting period will be understated by $3,500.
The Kentucky Foam Products Company completed the flexible budget analysis for the
second quarter, which is given below.
Which of the following would be a correct analysis of the sales volume variance for
variable costs?
A) decrease in sales price per unit
B) increase in variable cost per unit
C) increase in sales volume
D) increase in fixed costs
Which of the following is a permanent account?
A) Wages Expense
B) Salaries Payable
C) Service Revenue
D) Utilities Expense
Which of the following occurs when a corporation’s board of directors declares a 10%
stock dividend?
A) Stock Dividends will be credited for the new shares times the current market value
of the stock.
B) Stock Dividends will be debited for the new shares times the current market value of
the stock.
C) Stock Dividends will be debited for the new shares times the par value of the stock.
D) Stock Dividends will be credited for the new shares times the par value of the stock.