1) Direct costs can be traced to specific units.
2) A performance report compares expected revenues and expenses against budgeted
figures for each responsibility center.
3) The first component of the operating budget is the production budget.
4) The journal entry to record the ultimate completion of the units would include a debit
to the WIP inventory account of the last sequential production department.
5) The variable overhead efficiency variance is also called the variable overhead
spending variance.
6) Company initiatives to address sustainability and corporate responsibility not only
“do the right thing,” but also can lead to economic profits by increasing demand for the
company’s products and services.
7) A contribution margin income statement allows managers to see which costs will
change with changes in volume and which costs will remain fixed.
8) The residual value is considered in a net present value computation.
9) In a process costing environment, direct labor and manufacturing overhead are
usually combined into one cost category called “conversion cost.”
10) In a vertical analysis of an income statement, sales revenue is assigned a percentage
of 100 .
11) In a manufacturing company, fixed costs remain the same at many different
production levels within the relevant range.
12) Speaker City designs and manufactures high-end home theater speakers. Speaker
City uses a standard overhead rate of 3.5 hours per unit at a cost of $9.50 per hour. Data
for the month of June shows that Speaker City produced 500 units and recorded actual
overhead costs of $19,500. What is the total variable overhead variance for the month
of June?
A) $2,875 favorable
B) $14,750 unfavorable
C) $14,750 favorable
D) $2,875 unfavorable
13) The ________ department would most likely be responsible for a “direct material
price variance.”
A) production
B) marketing
C) personnel
D) purchasing
14) Sound Design sells its computer speakers for $115 per set. Its variable cost is $75
per set of speakers. Fixed costs are $80,000 per month for volumes up to 2,400 sets of
speakers. Above 2,400 sets, monthly fixed costs are $115,000. What is the budgeted
operating income (loss) at a sales level of 2,600 sets of speakers per month?
A) Operating loss of $11,000
B) Operating income of $104,000
C) Operating income of $24,000
D) Operating income of $184,000
15) The McCumber Corporation data for the current year:
With respect to current liabilities, what would a horizontal analysis report?
A) The current ratio is 0.92
B) Current liabilities are 13.35% of total capital
C) Current liabilities saw a 50% increase from the prior year to the current year
D) Current liabilities saw a 66.67% increase from the prior year to the current year
16) Antonio’s Flowers sells bouquets for $65 each. The variable costs for each kit are
$45. The total contribution margin for 30 kits is
A) $1,950
B) $3,300
C) $600
D) $1,350
17) The cost of downtime caused by quality problems with the raw materials would be
classified as what type of cost?
A) Prevention cost
B) Appraisal cost
C) External failure cost
D) Internal failure cost
18) When it comes to developing an EMA system, there are few reference tools
available for environmental management accountants; therefore, organizations are still
working to discover what information they need and how it can be reported in an
accurate, timely and relevant manner. This scenario is an example of which type of
EMA implementation challenge?
A) Historical orientation of accounting
B) Communication issue
C) Newness of EMA
D) Hidden Cost
19) (Present value tables are needed.) Mulheim Corporation is deciding whether to
automate one phase of its production process. The equipment has a six-year life and
will cost $410,000. Projected net cash inflows from the equipment are as follows:
Mulheim Corporation’s hurdle rate is 12%. Assume the residual value is zero.
What is the net present value of the equipment?
A) $(18,275)
B) $3,046
C) $20,000
D) $18,275
20) Ryan Fabrication allocates manufacturing overhead to each job using departmental
overhead rates. Ryan’s operations are divided into a metal casting department and a
metal finishing department. The casting department uses a departmental overhead rate
of $52 per machine hour, while the finishing department uses a departmental overhead
rate of $28 per direct labor hour. Job A216 used the following direct labor hours and
machine hours in the two departments:
The cost for direct labor is $32 per direct labor hour and the cost of the direct materials
used by Job A216 is $1,800.
How much manufacturing overhead would be allocated to Job A216 using the
departmental overhead rates?
A) $544
B) $596
C) $1,360
D) $454
21) Challenge Tennis & Recreation’s operating activities for the year are listed below.
What is the gross profit for the year?
A) $159,000
B) $333,000
C) $97,000
D) $169,000
22) In the equation y = $11.75x + $550, “x” represents
A) number of units produced
B) total fixed costs
C) total costs
D) none of the above
23) What is a system that requires suppliers to deliver materials at the exact time the
materials are needed?
A) JIT
B) TQM
C) ISO
D) ERP
24) Mama’s Favorite Appliances manufactures two products: Food Processors and
Espresso Machines. The following data are available:
The company can manufacture two food processors per machine hour and three
espresso machines per machine hour. The company’s production capacity is 1,200
machine hours per month.
What is the contribution margin per machine hour for espresso machines?
A) $1,125
B) $225
C) $150
D) $75
25) How do variable costs per unit behave?
A) They decrease as production increases
B) They increase as production decreases
C) They decrease as production decreases
D) They remain the same throughout production levels within the relevant range
26) Manufacturing overhead is allocated on the basis of
A) machine hours
B) direct labor hours
C) direct labor costs
D) any of the listed choices
27) Chemical Supply Incorporated budgeted two and one half hours of direct labor per
unit at $11.75 per hour to produce 650 units of product. The 650 units were completed
using 1,750 hours of direct labor at $12.50 per hour. What is the direct labor efficiency
variance?
A) $1,469 unfavorable
B) $1,469 favorable
C) $1,563 unfavorable
D) $1,563 favorable
28) Stars and Stripes Corporation uses job costing. The following is selected financial
data from the company for the most recent year.
Compute:
a)Beginning raw materials inventory
b)Beginning work in process inventory
c)Beginning finished goods inventory
d)Actual manufacturing overhead costs incurred during the year
29) Which of the following would appear on a statement of cash flows prepared using
the direct method?
A) Cash payments for salaries would appear on the statement
B) A loss of the sale of equipment would appear on the statement
C) Amortization expenses would appear on the statement
D) Depreciation expenses would appear on the statement
30) When the number of units produced is less than the number of units sold, how does
operating income under variable costing differ from operating income under absorption
costing?
A) It is lower than operating income under absorption costing
B) It is higher than operating income under absorption costing
C) It is the same as operating income under absorption costing
D) It depends upon the amount of decline
31) Revved Up Toys manufactures a computer chip used in the production of remote
control cars. When 6,000 cars are produced, the costs per part are:
Sam’s Associates has offered to sell Revved Up Toys 6,000 parts for $5.75 each. If
Sarah accepts the offer, $1.00 of the fixed manufacturing overhead costs can be
eliminated.
a.What is the relevant per unit cost to manufacture the part?
b.Which alternative is best for Revved Up Toys and by how much?
32) Tuity Fruity Beverage Company’s operating activities for the year are listed below.
What is the cost of goods sold for the year?
A) $152,000
B) $134,000
C) $140,000
D) $80,000
33) How is the cost per equivalent unit computed?
A) Total equivalent units divided by total costs to account for
B) Total costs to account for divided by total equivalent units
C) Costs in beginning WIP inventory divided by equivalent units in beginning WIP
D) Costs added to production during the month divided by equivalent units in ending
WIP
34) What is the cost of making one more unit called?
A) Unit cost
B) Marginal cost
C) Variable cost
D) None of the above
35) To find the breakeven point using the shortcut formulas, you use
A) zero for the contribution margin per unit
B) zero for the fixed expenses
C) zero for the contribution margin ratio
D) zero for the operating income
36) Haines Corporation has a predicted operating income of $80,000. Its total variable
expenses are $25,000 and its total fixed expenses are $24,000. The company has a unit
contribution margin of $20 on its sole product.
a.Calculate the break-even in sales units.
b.Calculate the break-even in sales units if the company’s fixed expenses double from
$24,000 to $48,000.
37) Which of the following is an example of an industry that would use a process
costingrather than a job costingsystem?
A) Coca-Cola
B) Boeing Jets
C) Centex Custom Homes
D) Snyder & Lewis, Attorneys at Law
38) Which of the following is the starting place for budgeting?
A) Last year’s budget
B) Last year’s actual amounts
C) Zero
D) Any of the above
39) Jackie’s Snacks sells fudge, caramels, and popcorn. It sold 12,000 boxes last year.
Popcorn outsold fudge by a margin of 2 to 1. Sales of caramels were the same as sales
of popcorn. Fixed costs for Jackie’s Snacks are $14,000 and additional information
follows:
The formula to determine the number of boxes of each snack sold is
A) 3x + 2x + x = 12,000
B) x + y + z = 12,000
C) x + 4x = 12,000
D) none of the above
40) Which of the following alternatives reflects the proper order of preparing
components of the master budget?
1> Production budget
2> Sales budget
3> Direct materials budget
A) 2, 3, 1
B) 1, 3, 2
C) 3, 1, 2
D) 2, 1, 3
41) Martinson Company adds direct materials at the beginning of the process and adds
conversion costs throughout the process. Data for the finishing department follows:
What are the equivalent units for direct materials?
A) 64,000
B) 54,000
C) 59,000
D) 52,200
42) Which of the following pairs are characteristics of price-setters?
A) Less competition and target costing
B) Cost-plus pricing and less competition
C) Lack of product uniqueness and heavy competition
D) Less competition and lack of product uniqueness
43) Materials flow accounting (MFA) reconciles physical output with all physical
inputs.