Goodwill is amortized on the consolidated financial statements.
As the terms are used in the budgeting process, it is possible for a company to be
efficient at the same time it is ineffective.
Journal entries for the expiration of unexpired assets are usually made before the related
cash flows.
The preferred cost driver for allocating central corporate support costs to products is
either actual or estimated usage.
A management control system is a logical integration of techniques to gather and use
data and to evaluate performance.
If regression analysis is used when measuring cost behavior, plotting the cost against
each of the potential cost drivers is not necessary.
In job-order costing, the journal entry to record applied overhead costs would include a
Debit to Work-in-Process Inventory.
Goodness of fit pertains to how well a cost function predicts cost behavior.
Joint costs from producing multiple products are allocated to main products and to
by-products.
When depreciating a fixed asset, the residual value is not considered.
When a company owns less than 20 percent of the common stock of another company,
the market value method of accounting for investments in equity securities is used.
Transfer prices are the amounts charged by one segment of an organization for a
product that it supplies to an outside firm.
Participative budgeting is the active participation of all affected employees in the
formulation of the budget.
In practice, it may be too costly to have several cost-allocation bases for applying
overhead costs to products.
The flexible budget variance for direct labor can be broken down into a price variance
and an effectiveness variance.
Companies that use job-order costing normally have uniform production steps.
Companies must assign all value chain costs to products for internal financial reports.
Transfer prices are the amounts charged by one segment of an organization for a
product that it supplies to an outside firm.
If a company accepts a project with a negative NPV, the project will increase the value
of the firm.
Some level of decentralization in an organizational structure creates benefits for most
organizations.
Return on sales can be increased by increasing expenses.
The account Unearned Revenue is a revenue account.
In the relevant range, fixed overhead costs do not vary with cost driver activity.
The break-even point is when enough units are sold that total contribution margin
equals total variable costs.
Higher-level managers have the best information concerning local conditions.
Two extremes of product-costing are job-order costing and normal-order costing.
Organizational learning may be monitored by measuring employee turnover.
Product design affects a small amount of costs in the value chain.
Total variable costs increase when the cost-driver level increases in the relevant range.
Leasehold improvements are amortized annually.
If actual costs are used for transfer pricing by a selling division, the selling division has
little incentive to control costs.
An example of an implicit transaction is cash received on account.
Capacity costs are variable costs related to a desired level of production or service.
Storing inventories and transporting incomplete products in a plant are examples of
non-value-added activities.
The break-even point is when enough units are sold that total contribution margin
equals total variable costs.
Accountants support only some of the value-chain functions.
The first step in preparing the financial budget is the ________.
A) cash budget
B) capital budget
C) operating expense budget
D) sales budget
Keisha Company is considering the following investment:
Estimated capital investment $300,000
Estimated useful life 3 years
Estimated disposal value in 3 years $10,000
Estimated annual savings in cash operating costs(end of year) $130,000
Minimum desired rate of return 12%
Present value of ordinary annuity of one, 3 periods at 12% 2.4018
Present value of one, 3 periods at 12% 0.7118
Assume straight-line depreciation is used. Ignore income taxes. The net present value of
the investment is ________.
A) $12,234
B) $19,352
C) $22,234
D) $100,000
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
An unfavorable variance occurs on a performance report when ________.
A) the actual cost is less than the budgeted cost
B) the actual revenue is greater than the budgeted revenue
C) the actual profit is greater than the budgeted profit
D) the actual revenue is less than the budgeted revenue
The Savage Company makes mugs for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 5 ounces $2 per ounce
Direct Labor 1.5 hours $8 per hour
Production of 400 mugs was expected in July, but 440 mugs were actually completed.
Direct materials purchased and used were 2,100 ounces at an actual price of $2.20 per
ounce. Direct labor cost for the month was $5,310, and the actual pay per hour was
$9.00. What is the direct material quantity variance for July?
A) $200 Favorable
B) $200 Unfavorable
C) $220 Favorable
D) $220 Unfavorable
Nealy Company has the following information available:
Revenue $500,000
Variable production costs $100,000
Fixed production costs $100,000
Variable selling costs $50,000
Fixed selling costs $50,000
What is the contribution margin?
A) $300,000
B) $350,000
C) $400,000
D) $450,000
Intangible assets are ________.
A) assets with a physical presence
B) assets that can be seen and touched
C) rights to expected future benefits
D) assets with definite lives only
If the selling price per unit increases, what is the effect on the break-even point?
(Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point is zero.
A decrease in either capital turnover or return on sales, without changing the other, will
also ________ the ________.
A) decrease; gross book value of long-term assets
B) decrease; return on investment
C) decrease; cost of capital
D) decrease: net book value of long-term assets
In a master budget, the schedule of cash disbursements for operating expenses is used to
prepare the ________.
A) capital budget
B) purchases and cost of goods sold budget
C) sales budget
D) cash budget
What does a decentralized company expect from its transfer pricing system?
A) to increase the transferring segment’s profits only
B) to increase the buying segment’s profits only
C) to increase the company’s overall profits only
D) to increase the transferring segment’s profits and the company’s overall profits
On July 1, 2012, Slowinski Company borrows $100,000 on a 10% note due to a bank in
one year. The accounts of Slowinski Company are affected by the adjusting entry at
December 31, 2012 in which of the following ways?
A) increase assets and decrease expenses
B) increase assets and increase liabilities
C) increase expenses and increase liabilities
D) increase expenses and increase stockholders’ equity
A company is trying to decide which product to manufacture. The following
information is available:
Costs Product A Product B
Direct Materials 1 $2.00 per unit $2.20 per unit
Direct Materials 2 $1.25 per unit $1.50 per unit
Direct Materials 3 $0.50 per unit $0.80 per unit
Direct Labor $0.70 per unit $0.70 per unit
Which product cost is irrelevant to the decision?
A) Direct Materials 1
B) Direct Materials 2
C) Direct Materials 3
D) Direct Labor
The process of identifying appropriate cost drivers and their effects on the costs of
making a product or providing a service is called ________.
A) account analysis
B) activity analysis
C) cost analysis
D) product analysis
When determining product costs, the last step in the traditional approach to cost
allocation is ________.
A) divide costs in each producing department into direct costs and indirect costs
B) trace direct costs to products
C) select cost pools and cost allocation bases in each production department and assign
indirect department costs to the appropriate cost pool
D) allocate the costs in each cost pool to the products in proportion to their usage of the
related cost-allocation base
The following information is for Brankov Corporation:
Direct Materials (measured in pounds)
Standard price per unit of input $20
Actual price per unit of input $18
Standard inputs per unit of output 3 pounds
Actual units of input 8,300 pounds
Actual units of output 2,770 units
What is the flexible budget variance for direct materials?
A) $16,400 Favorable
B) $16,400 Unfavorable
C) $16,800 Favorable
D) $16,800 Unfavorable
Melody Scott Company uses a job-order costing system and has the following data
available:
Beginning Direct Materials Inventory $26,000
Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 130%
The journal entry to record the actual factory overhead costs incurred would include a
________.
A) Debit to Factory Department Overhead Control for $146,000
B) Credit to Factory Department Overhead Control for $169,000
C) Debit to Work-In-Process Inventory for $146,000
D) Credit to Work-In-Process Inventory for $169,000
Michigan Company has budgeted the following costs for the production of its only
product:
Direct Materials $35,000
Direct Labor 25,000
Variable indirect production costs 30,000
Fixed indirect production costs 15,000
Variable selling and administrative costs 7,500
Fixed selling and administrative costs 12,500
Total Costs $125,000
Michigan Company wants a profit of $50,000, and expects to produce 1,000 units. The
market price is $150 per unit. What is the target cost per unit of the product?
A) $100 per unit
B) $125 per unit
C) $150 per unit
D) $175 per unit
Besides financial statements, alternative sources of financial information about a
company is(are) ________.
A) company press releases
B) trade association publications
C) brokerage house analyses
D) all of the above
Which of the following is NOT an example of indirect production costs?
A) factory supplies
B) depreciation expense on factory building
C) depreciation expense on office equipment in corporate headquarters
D) wages of material handlers in factory
The efficiency variance for fixed overhead costs ________.
A) is greater than the flexible budget variance for fixed overhead costs
B) is greater than the spending variance for fixed overhead costs
C) is greater than the flexible budget variance for variable overhead costs
D) does not exist
Which credential is associated with management accountants?
A) CPA
B) CMA
C) CFP
D) IMA
Latinovich Company has no beginning and ending inventories, and reports the
following data about its only product:
Direct materials used $200,000
Direct labor $80,000
Fixed indirect manufacturing $180,000
Fixed selling and administrative $150,000
Variable indirect manufacturing $130,000
Variable selling and administrative $160,000
Selling price(per unit) $150
Units produced and sold 10,000
Latinovich Company uses the contribution approach to prepare the income statement.
What is the contribution margin?
A) $600,000
B) $910,000
C) $930,000
D) $1,090,000
Mary is considering leaving her current position to open an ice cream shop. Mary’s
current annual salary is $77,000. Annual ice cream shop revenue and costs are
estimated at $260,000 and $210,000, respectively. What is Mary’s annual opportunity
cost of starting the ice cream shop?
A) $50,000
B) $77,000
C) $210,000
D) $260,000
Companies routinely allocate joint product costs to products for purposes of ________.
A) inventory valuation only
B) income determination only
C) decision-making such as further processing of joint products
D) inventory valuation and income determination
Convertible bonds allow a bondholder to exchange ________.
A) unsecured bonds for secured bonds
B) unsubordinated bonds for subordinated bonds
C) common stock for bonds
D) bonds for mortgage bonds
Susanna is the management accountant at Slow Company. Her close friend, Leslie, is a
shareholder in Slow Company. Leslie asks Susanna for information about Slow
Company that is typically available only to executive officers in the company. If
Susanna shares this information with Leslie, Susanna violates the IMA’s ethical
standard of ________.
A) competence
B) confidentiality
C) integrity
D) objectivity
If a selling segment has excess capacity, the opportunity cost of selling a product
internally equals ________.
A) the variable costs of producing the product
B) the contribution margin the producing segment could have received from selling in
the external market rather than the internal market
C) the variable costs plus the avoidable fixed costs of producing the product
D) zero
Costs arising from the possession of facilities, equipment and a basic organizational
structure are ________.
A) capacity costs
B) discretionary costs
C) committed fixed costs
D) engineered costs
Carlson Company has two departments. Factory overhead costs are applied based on
direct labor cost in Department A and machine hours in Department B. The following
information is available:
Budgeted Costs Dept. A Dept. B
Direct labor cost $150,000 $165,000
Machine hours 51,000 20,000
Factory overhead cost $225,000 $180,000
Actual data for Job #10 are as follows:
Actual Costs Dept. A Dept. B
Direct materials requisitioned $10,000 $16,000
Direct labor cost $11,000 $14,000
Machine hours 5,000 3,000
Required:
A) Compute the budgeted factory overhead rate for Department A.
B) Compute the budgeted factory overhead rate for Department B.
C) What is the total overhead cost for Job #10?
D) If Job #10 consists of 50 units of product, what is the unit cost of this job?
On January 1, 2012, a company paid $3,000 for rent. The rent covers the period January
1, 2012 through June 30, 2012. On June 30, 2012, the fiscal year end, the company
prepares an adjusting entry. What is the effect of this adjusting entry on stockholders’
equity?
A) increases
B) decreases
C) no effect
D) not enough information to determine
