In an environment where the there is a constrained resource, the resource should be
allocated first to the product with the highest contribution margin.
The percentage change, as shown in horizontal analysis, is calculated as:
(current year account balance – previous year account balance) /current year account
balance
Offshoring is another term for outsourcing.
When work is in process at the end of an accounting period, cost accumulation and
reporting is extremely easy under process costing, as the product costs are simply added
up and divided evenly among the products produced.
The key to using key performance indicators to drive performance is to understand the
cause-and-effect relationships they represent.
All other things held equal, the more frequent the controlling activity, the faster an
out-of-control process can be corrected.
In interpreting a statement of cash flows, the first thing a manager should examine is
the company’s ability to generate cash from operations.
Benchmarking participants should adhere to the Benchmarking Code of Conduct which
provides general principles to follow during the benchmarking process.
The work-in-process inventory account records the costs of all products that have been
started but are not yet complete.
When using a standard costing system, at the end of the accounting period, the balances
in all inventory and cost of goods sold accounts will be at standard amounts.
Even when direct materials and direct labor comprise the majority of product costs,
manufacturing overhead allocation is still a major issue.
One would expect a company’s primary source of cash is from borrowing and investor
contributions.
A company that wants to be successful needs to know:
a.What it wants to accomplish.
b.How it is going to achieve it
c.Both what it wants to accomplish and how it is going to achieve it.
d.Neither what it wants to accomplish nor how it is going to achieve it.
Patton Company’s selling price is $100, variable costs are 60% of sales, and fixed costs
total $60,000.
Required:
a. At a $400,000 sales level, what is Patton’s degree of operating leverage?
b. If sales volume increases by 10%, what will be the amount of increase in operating
income?
What length of time does the Balanced Scorecard Institute estimate it takes to create a
corporate-level scorecard?
a. Two to three weeks
b. Two to three months
c. Two to three years
d. More than five years
The following data have been taken from the records of Bundy’s Bakery for the current
year:
Required: a. Calculate the dividends payout ratio. b. Calculate the return on common
stockholders’ equity.
Woods Manufacturing is considering the purchase of a new sewing machine that costs
$16,000. The machine, because of its efficiency, will save about $4,000 in cost each
year. The machine is expected to have a salvage value of $3,000 and a life of 6 years.
Woods’ required rate of return is 12%. What is the machine’s net present value?
a. ($34)
b. $1,966
c. $15,000
d. $24,000
The following is Ralley Company’s income statement.
Required:a. What is the markup percentage on cost of goods sold?
b. What is the markup percentage on total cost?
c. What is the gross margin percentage?
d. If the company wants to sell a new product that costs $48 wholesale while keeping
the same markup structure, what will be the price of the new product?
Mounce Catering Service uses an activity-based costing system. What would be the
most appropriate cost driver for the activity of preparing meals?
a. Number of meals prepared
b. Number of orders taken
c. Number of rolls used
d. Rent on building
On January 4th, Stevens Manufacturing received an order for 30 uniforms. The
following information pertained to that order.
Calculate the delivery cycle time.
a. 500 hours
b. 507 hours
c. 502 hours
d. 505 hours
The flexible budget breaks down into the rate and efficiency variances for direct labor.
Required:
a. List two reasons why actual wage rates might differ from standard wage rates,
resulting in a direct labor rate variance.
b. List two reasons why actual labor hours might differ from standard labor hours,
resulting in a direct labor efficiency variance.
At the breakeven point
a. Sales revenue equals zero.
b. Sales revenue equals total costs.
c. Operating income equals total sales.
d. Operating income equals total costs.
Which of the following would be classified as direct material for a furniture
manufacturer?
a. Wood
b. Glue
c. Screws
d. Wood cleaner
Assume the static budget sales revenue is $69,000 and the flexible budget sales revenue
is $70,000. If the actual sales price is $6 and the budgeted sales price is $6.50, what is
the sales volume variance?
a. $1,000 favorable
b. $1,000 unfavorable
c. $6,000 favorable
d. $6,500 unfavorable
While the sales manager may be ecstatic to learn he has beaten his sales goal, the
production manager may not share that enthusiasm because having more sales than
anticipated required overtime for workers and additional maintenance on some
machinery. Managers use budgeting to control and evaluate their operations. Two types
of budgets that are discussed in chapter 6 are the static budget and the flexible budget.
How do the two budgets differ and explain how the flexible budget is used in evaluating
performance.
M&M Manufacturing has provided the following comparative income statements:
Required: Prepare a horizontal analysis of M&M’s 2014 income statement.
Wages of the president of the company is an example of:
Haven Industries purchased 1,000 units of product at a cost of $1.20 per unit. Haven’s
standard price per unit was set at $1.10. Which of the following is the correct journal
entry to record the purchase?
Prepare a horizontal analysis of a balance sheet and income statement and use it to
analyze a company’s performance.
Cooper Company, a retailer of camping supplies has budgeted activity for January using
the following data:
Required:
Prepare a cash budget for January
The wages of security guards to protect the factory building are an example of:
