The flexible budget variance is the difference between the static budgeted amounts and
the flexible budgeted amounts.
The time between an order’s placement and its shipment is referred to as the delivery
cycle time.
The customer net profit shows managers how many dollars a customer contributes to
the company’s bottom line.
When a manager drops an unprofitable customer, a company’s total sales revenue and
overall company profit will decrease.
Relevant information meets two criteria: (1) it differs between the alternatives and (2)
the differences have occurred in the past.
Assembly line workers at Thompson Manufacturing worked a total of 9,300 direct labor
hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a
wage rate of $10.50. If the actual wage rate was $10 per direct labor hour, Thompson’s
direct labor efficiency variance is
a. $2,000 favorable
b. $3,000 favorable
c. $3,150 unfavorable
d. $4,500 unfavorable
Brandy Company is deciding whether or not to discontinue one of its divisions. The
division ‘s contribution margin is $27,000 per year. The fixed costs charged to the
division total $32,000, but $15,000 would be eliminated if the division is discontinued.
If the division is eliminated, the overall operating income would
a. Decrease by $9,000
b. Decrease by $12,000
c. Decrease by $15,000
d. Increase by $27,000
R&N Manufacturing produces music boxes. The fixed overhead rate is $5.10 per direct
labor hour, and the company budgeted for 4,600 direct labor hours for the year. During
the year, R&N produced 2,500 music boxes using 4,800 direct labor hours. Actual fixed
overhead for the year was $23,000. What is the company’s fixed overhead spending
variance?
a. $460 favorable
b. $460 unfavorable
c. $1,480 favorable
d. $1,480 unfavorable
Which of the following transactions is not classified as a source or use of cash in the
operating, investing or financing sections of the statement of cash flows?
a. Issuing stock for cash
b. Asset swaps
c. Payment of dividends
d. Payoff of a long-term debt
ABC Corporation produces three products, Standard, Deluxe and Superior, with the
following characteristics:
The company has only 1,800 machine hours available each period. If demand exceeds
the company ‘s capacity, in what sequence should orders for the three products be filled
to maximize the company ‘s total contribution margin?
a. Standard first, Deluxe second, Superior third
b. Deluxe first, Standard second, Superior third
c. Superior first, Standard second, Deluxe third
d. Standard first, Superior second, Deluxe third
A manager of a profit center cannot
a. Incur cost to operate the center.
b. Set the selling price of the center ‘s product.
c. Commit funds to invest in assets.
d. None of these answer choices are correct.
Which of the following is not an example of an employee-oriented nonfinancial
measure?
a. Absenteeism
b. Labor productivity
c. Accidents per month
d. Employee empowerment
Gooding Custom Design generated $320,000 in operating income on sales revenue of
$2,500,000. The company had $3,000,000 in assets on January 1 and $3,250,000 in
assets on December 31.
Required
a. Calculate Gooding ‘s margin.
b. Calculate Gooding ‘s asset turnover.
c. Calculate Gooding ‘s return on investment.
When not enough overhead cost is charged to products as they are made, the result is
a. Overapplied overhead.
b. Underapplied overhead.
c. Overstatement of Cost of Goods Sold.
d. Inventory cost is too high.
Percy ‘s Pickled Snacks produces several types of pickled vegetables. The company
budgets for each quarter in the last month of the previous quarter. In early March, Percy
is preparing the budget for pickled beets. Budgeted sales are 12,000 jars for April,
16,000 jars for May, and 19,000 jars for June. Each jar requires 1.2 pounds of beets.
The pickling process takes 60 minutes for 20 jars. Because pressurized cooking is used,
the processing is monitored by an employee at all times. Each jar of pickled beets sells
for $15.00.
Percy requires ending Finished Goods inventory equal to 25% of the following month ‘s
sales. Other information is as follows:
What is Percy ‘s overhead budget for April?
a. $27,000
b. $29,250
c. $36,000
d. $20,250
Why do variances have little meaning until their causes are identified?
a. Because they cannot be calculated correctly until the causes are known
b. Because identifying their causes allows manages to take correct action
c. Because identifying their causes will immediately increase net income
d. None of these answer choices are correct
Fox Company manufactures decorative fountains used by hotels and restaurants. The
company applies fixed overhead based on direct labor hours. Fox Company’s fixed
overhead spending variance for the year was $6,500 unfavorable. For the current year,
the company had budgeted to produce 78,000 fountains. The company’s actual fixed
overhead for the year was $689,000. Fox produced 75,000 fountains and used 131,250
direct labor hours, which was the standard hours allowed for the number of fountains
produced. What was Fox’s budgeted fixed overhead rate per direct labor hour for the
year (if necessary, round your answer to the nearest cent)?
a. $5.30/DLH
b. $5.00/DLH
c. $5.05/DLH
d. $5.25/DLH
Which of the following is not a measure that relates to the financial perspective?
a. Net income
b. Percentage of revenue from new customers
c. Earnings per share
d. Revenue growth
The manager of which of the following responsibility centers is expected to invest in
assets that generate profit?
a. Cost center
b. Revenue center
c. Profit center
d. Investment center
Many new business fail not because they are unprofitable, but because
a. They do not have the expertise to maintain the business.
b. They run out of cash.
c. They do not have adequate inventory.
d. None of these answer choices are correct.
Which of the following is the correct journal entry to record the cost of goods
manufactured?
Place and “X” in the column that corresponds to the type of activity referred to in each
scenario.
Financial measures alone do not capture all aspects of an organization’s performance.
Nonfinancial measures can be either qualitative or quantitative. Indicate by placing an
“X ” in the appropriate column whether the following nonfinancial measures are
internal operating measures or customer-oriented measures and whether they are
financial or nonfinancial.
Foreman Outfitters, a retail store of camping supplies, has total assets of $170,000 and
total liabilities of $70,000. What is Foreman’s debt-to-equity ratio?
Patton’s Manufacturing has provided the following information relating to a large order
of Part 328G7 engines.
Required:
Calculate the manufacturing cycle efficiency.
Camping Supplies produces light-weight cots. The company plans to produce 10,000
cots this year. Fixed overhead costs for the factory are budgeted to be $50,000. The
company actually spent $48,000 on fixed overhead and produced 8,000 cots.
Required:
Calculate the fixed overhead spending variance.
Operating leverage is the change in total variable costs relative to sales revenue.
Explain how to use sources of industry information to draw conclusions about a
company’s performance.
Kristin West owns an car wash in Clinton, MS. Identify each of the following actions
she performs as a planning, controlling, evaluating or decision making activity:
Assume University Athletic Booster Club sells T-shirts for $20 and anticipates selling
5,000 shirts during football season. The club purchases the shirts from a local dealer for
$14.50. Budgeted fixed cost of $18,000 is made up of $2,000 of selling expense and the
remainder is $16,000 administrative expense. The selling expenses include a sales
commission of $0.05 per shirt. All other costs are fixed. Prepare an income statement in
the contribution format.
