1) The following information describes a company’s usage of direct labor in a recent
period:
How much is the direct labor efficiency variance?
A) $8,375 favorable
B) $8,375 unfavorable
C) $8,500 unfavorable
D) $8,500 favorable
2) Beasley Company currently sells its products for $35 per unit. Management is
contemplating a 20% increase in the selling price for the next year. Variable costs are
currently 50% of sales revenue and are not expected to change in dollar amount on a
per unit basis next year (the company will pay the same amount for variable costs next
year). Fixed expenses are $79,625 per year.
What is the breakeven point in units at the anticipated selling price per unit next year?
A) 1,338 units
B) 3,250 units
C) 3,520 units
D) 7,583 units
3) The Pasta Division of Whole Grain Corporation had sales of $5,500,000 and
operating income of $1,375,000 last year. The total assets of the Pasta Division were
$2,750,000, while current liabilities were $330,000. Whole Grain Corporation’s target
rate of return is 12%, while its weighted average cost of capital is 8%. The effective tax
rate for the company is 30%.
What is the Pasta Division’s Residual Income (RI)?
A) $1,045,000
B) $768,900
C) $1,155,000
D) $330,000
4) ABC generally causes the least amount of cost distortion among products because
indirect costs are allocated to the products based on
A) types of activities used by the product
B) the extent to which the activities are used
C) both A and B
D) none of the above
5) What factor related to manufacturing costs causes the difference between operating
income computed using absorption costing and operating income computed using
variable costing?
A) Absorption costing expenses all costs, whether fixed or variable
B) Absorption costing “inventories” all direct manufacturing costs
C) Absorption costing “inventories” all fixed manufacturing costs
D) Absorption costing “inventories” all fixed manufacturing and period costs
6) Potter & Weasley Company had the following activities, estimated indirect activity
costs, and allocation bases:
Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
What is the cost per driver unit for the account verification activity?
A) $1.75
B) $1.50
C) $9.56
D) $8.00
7) When deciding to buy a new computer, all of the following should be considered
except for the
A) cost of the new computer
B) cost of the old computer
C) games that come with the new computer
D) warranty on the new computer
8) Using account analysis, what type of cost is the monthly cost of a storage locker used
for holding old records?
A) Fixed
B) Mixed
C) Variable
D) Step
9) All of the following represent monetary information in an environmental
management accounting system except
A) cost of lumber used in tables
B) wages of workers needed to comply with new EPA standards
C) gallons of wastewater generated
D) cost to upgrade factory to reduce emissions
10) Which variance is directly impacted if a worker drops the raw material during
production and the raw material must be discarded?
A) Materials quantity variance
B) Materials price variance
C) Labor rate variance
D) Labor efficiency variance
11) Failure to mitigate a conflict of interest would violate which ethical standard of
conduct?
A) Credibility
B) Integrity
C) Competency
D) Confidentiality
12) Testing ways to increase the strength of your product would be classified as which
part of the value chain?
A) Design
B) Distribution
C) Production
D) Research and development
13) Samson Incorporated provided the following information regarding its only
product:
Assuming there is excess capacity, what would be the effect on operating income of
accepting a special order for 3,000 units at a sale price of $45 per product assuming
additional fixed manufacturing overhead costs of $5,000 is incurred? (NOTE: Assume
regular sales are not affected by the special order.)
A) Increase by $135,000
B) Decrease by $49,750
C) Increase by $49,750
D) Increase by $54,750
14) A company uses a process system. The number of equivalent units in ending WIP
inventory regarding direct materials costs and conversion costs is
A) always lower for direct materials
B) always equal
C) always lower for conversion costs
D) none of the above
15) How does depreciation affect the calculation of a project’s accounting rate of return
(ARR)?
A) Depreciation is added to the annual cash inflows
B) Depreciation is deducted from the annual cash inflows
C) Depreciation does not affect ARR
D) Depreciation is only deducted if the ARR is less than the minimum required rate of
return
16) Wet N Wild Sports Equipment Company’s work in process inventory on June 1 has
a balance of $22,400 representing Job No. 265 . During June, $50,000 of direct
materials were requisitioned for Job No. 265 and $35,000 of direct labor cost was
incurred on Job No. 265 . Manufacturing overhead is allocated at 125% of direct labor
cost. Actual manufacturing overhead costs incurred in June amounted to $41,000. No
new jobs were started during June. Job No. 265 is completed on June 28 .
What is the total cost assigned to Job No. 265?
A) $148,400
B) $135,400
C) $151,150
D) $ 43,750
17) A company sells equipment at a loss. If the company prepares the statement of cash
flows using the indirect method or the direct method, where would this transaction
appear?
A) The sale of equipment at a loss would be presented in the investing activities section
as a cash payment under both methods
B) The sale of equipment at a loss would be presented in the investing activities section
as a cash receipt under both methods
C) The sale of equipment at a loss would be presented in the operating activities section
as a reduction in net income under the indirect method and as a cash receipt under the
direct method
D) The sale of equipment at a loss would be presented in the financing activities section
as a cash receipt under both methods
18) Here are selected data for Sally Day Corporation:
What is the ending work in process inventory balance?
A) $147,050
B) $151,500
C) $211,200
D) $207,450
19) Manufacturing overhead has an overallocated balance of $7,500; raw materials
inventory balance is $62,000; work in process inventory is $34,000; finished goods
inventory is $25,000; and cost of goods sold is $135,000. After adjusting for the
overallocated manufacturing overhead, what is cost of goods sold?
A) $127,500
B) $7,500
C) $142,500
D) $135,000
20) Burning River Corporation, a manufacturer of a variety of products, uses an
activity-based costing system. Information from its system for the year for all products
follows:
Burning River Corporation makes 750 of its product X14 a year, which requires a total
of 55 machine hours, 20 inspection hours, and 18 orders. Product X14 requires $77.00
in direct materials per unit and $65.00 in direct labor per unit. Product X14 sells for
$195 per unit.
Required:
a. Calculate the cost pool activity rate for each of the three activities.
b. How much manufacturing overhead would be allocated to Product X14 in total?
c. What is the product margin in total for Product X14?
21) Darlington & Myrtle, Attorneys at Law, provide a variety of legal services. The law
firm uses an activity-based costing system and has developed the following activity
pool cost rates:
Cost and activity data related to two clients is as follows:
Required:
a. Calculate the amount of overhead that would be allocated to Client 245 using the
activity-based costing system.
b. Calculate the amount of overhead that would be allocated to Client 367 using the
activity-based costing system.
22) Crafty Carpentry Company produces and sells a shelf for $25 each. The beginning
inventory is 2,000 shelves, and the desired ending inventory is 2,200 shelves. If
budgeted production is 12,500 shelves, what is the forecasted sales revenue from the
shelves?
A) $417,500
B) $307,500
C) $317,500
D) $207,500
23) Jones Ice Cream Stand is operated by Mr. Jones and experiences different sales
patterns throughout the year. To plan for the future, Mr. Jones wants to determine its
cost behavior patterns. He has the following information available about the ice cream
stand’s operating costs and the number of soft serve cones served.
The variable cost per ice cream cone using the high-low method is
A) $0.25
B) $4.00
C) $0.63
D) $1.19.
24) What factor has changed the way that we now view managerial accountants?
A) Stricter GAAP standards
B) Technology
C) Stricter audit standards
D) None of the above
25) Comparing the horizontal analysis of McDonald’s financial statements to the
horizontal analysis of Burger King’s financial statements in percentages of increase or
decrease from 2010 to 2011 would be
A) vertical analysis
B) benchmarking
C) ratio analysis
D) horizontal analysis
26) Assuming an interest rate of 10%, the present value of $11,000 received at the end
of each year for 6 years would be closest to
A) $6,204
B) $66,000
C) $47,905
D) $84,876
27) For a merchandising company, the costs of shipping inventory to the retail outlet is
associated with which element of the value chain?
A) Design
B) Distribution
C) Production and Purchases
D) Customer Service
28) Nadal Company is debating the use of direct labor cost or direct labor hours as the
cost allocation base for allocating manufacturing overhead. The following information
is available for the most recent year:
If Nadal Company uses direct labor hours as the allocation base, what would the
predetermined manufacturing overhead rate be?
A) $1.51 per direct labor hour
B) $1.40 per direct labor hour
C) $1.60 per direct labor hour
D) $1.72 per direct labor hour
29) Sky High Seats manufactures seats for airplanes. The company has the capacity to
produce 100,000 seats per year, but is currently producing and selling 75,000 seats per
year. The following information relates to current production:
If a special sales order is accepted for 7,000 seats at a price of $350 per unit, and fixed
costs remain unchanged, how would operating income be affected? (NOTE: Assume
regular sales are not affected by the special order.)
A) Increase by $560,000
B) Decrease by $560,000
C) Increase by $2,450,000
D) Increase by $8,000,000
30) During a period, 38,200 units were completed and 5,300 units were in ending WIP
inventory. Ending WIP was 70% complete for direct materials and 50% complete for
conversion costs. What are the equivalent units for direct materials?
A) 43,500
B) 40,850
C) 41,910
D) 30,450