In general, many more costs are direct costs instead of indirect costs when the cost
object is a ________ instead of a(n) ________.
A) product; department
B) product; activity
C) product; resource
D) department; product
Biden Company manufactures small jewelry boxes. The company is considering three
cost drivers for measuring support costs in the factory. The following cost functions
have been estimated using each cost driver:
Cost Driver Cost Function R 2
1. X = gluing time in hours Y = $20,000 + $5X R2 = 0.20
2. X = labor hours Y = $13,000 + $10X R2 = 0.55
3. X = machine hours Y = $15,000 + $7X R2 = 0.90
Which cost driver should be chosen?
A) gluing time in hours
B) labor hours
C) machine hours
D) labor hours x gluing time in hours
Zeman Company has the following information available for the month of March:
Units Transferred- Direct Conversion
in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%
Transferred-in during March 400
Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%
Costs added in March $52,000 $13,200 $48,600
The company uses the weighted average cost method. What is the cost per equivalent
unit for March for conversion costs?
A) $22.00
B) $40.91
C) $104.06
D) $111.00
El Rey Company manufactures generic notebooks. Material is introduced at the
beginning of the process in the Printing Department. Conversion costs are applied
uniformly throughout the process. The weighted-average method of process costing is
used. Data for the Printing Department for the month of June follow:
Work-In-Process Inventory, June 1:
Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $8,400
Units started in June 65,000
Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000
Direct materials added in June $285,000
Conversion costs added in June $210,000
With regard to the Work-In-Process Inventory on June 30, materials are 100 percent
complete and conversion costs are 60 percent complete. The total cost of the ending
Work-In-Process Inventory is ________.
A) $104,400
B) $111,996
C) $122,175
D) $127,260
What is earnings per share?
A) net income divided by weighted average number of preferred shares outstanding
B) net income divided by weighted average number of common shares outstanding
C) net income plus the weighted average number of common and preferred shares
outstanding
D) net income plus the weighted average number of bonds outstanding
Nancy Company pays taxes of 15% on their first $20,000 of pretax income and 40% on
any taxable income in excess of $20,000. The current pretax income is $50,000. What is
the average tax rate?
A) 15%
B) 21%
C) 24%
D) 30%
To approximate cost functions for a particular manufacturing process, engineering
analysis relies on ________.
A) statistical analysis
B) mathematical analysis
C) graphs
D) actual observations of the ongoing process
In a graph of a mixed cost function, the y-axis is ________ and the x-axis is ________.
A) fixed cost; cost driver activity
B) fixed cost; variable cost per unit
C) mixed cost; volume in units
D) cost; cost driver activity
Carpenter Company uses job-order costing. The following is a summary of factory
operations:
Direct materials purchased on account $125,000
Direct materials requisitioned $110,000
Direct labor costs incurred $256,000
Factory overhead costs incurred (Depreciation Expense only) $150,000
Cost of goods completed $515,000
Cost of goods sold $378,000
Sales on account $430,000
Factory overhead applied ?
Factory overhead costs are applied at 50% of direct labor costs.
Required:
A) Prepare the required journal entries for the above transactions.
B) Prepare the journal entry to dispose of the overhead variance using the immediate
write-off method.
C) Is the factory overhead overapplied or underapplied?
D) What is the actual, correct amount of Cost of Goods Sold?
When cash dividends are declared, ________ decrease(s) and ________ increase(s).
A) retained earnings; cash
B) cash; retained earnings
C) retained earnings; liabilities
D) cash; liabilities
A(n) ________ cost is any cost that management cannot reasonably affect within a
given time span.
A) controllable
B) quality
C) uncontrollable
D) opportunity
In a manufacturing company, ________.
A) inventoriable costs only become an expense when the company sells the inventory
B) inventoriable costs become an expense as soon as the company finishes
manufacturing the product
C) there is only one inventory account
D) period expenses are reported as expenses in a future period
Dodge Company had the following information:
Budgeted factory overhead costs $90,000
Actual factory overhead costs $82,000
Budgeted machine hours 40,000
Actual machine hours 35,500
Assume machine hours are the cost driver of factory overhead costs. The budgeted
factory overhead rate is ________.
A) $2.025 per machine hour
B) $2.05 per machine hour
C) $2.25 per machine hour
D) $2.875 per machine hour
Sheboygan Motel’s cost function is given as:
Y = $120,000 + $2.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year, Sheboygan Motel has 8,000 guest days. In the next year, Sheboygan
Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain
in the same relevant range as the current year.) What is the expected total custodial cost
for next year?
A) $37,000
B) $120,000
C) $125,000
D) $145,000
The following information is available for the Thompson Company:
Sales for year $1,000,000
Average invested capital for year $500,000
Return on investment 10%
What is the capital turnover ratio?
A) 0.10
B) 0.35
C) 0.50
D) 2.00
Important factors used to forecast sales for a company include all of the following items
EXCEPT ________.
A) changes in firm’s prices
B) general economic conditions
C) changes in product mix
D) layout of production equipment
Two types of costs that each combine fixed cost and variable cost behaviors are
________ and ________.
A) capacity costs; incremental costs
B) semi-fixed costs; semivariable costs
C) composite costs; average costs
D) step costs; mixed costs
The following information was gathered for all the products made by the Ringaling
Company:
Budgeted direct labor hours 31,000
Actual direct labor hours 32,400
Budgeted factory overhead costs $147,250
Actual factory overhead costs $149,980
Assume the cost driver for factory overhead costs is direct labor hours. What is the
amount of overapplied or underapplied overhead?
A) $2,730 underapplied
B) $2,730 overapplied
C) $3,920 underapplied
D) $3,920 overapplied
The following information pertains to Singh Company:
Average total assets $50,000
Net operating profit after taxes $15,000
Total current liabilities $30,000
Total expenses $60,000
Total liabilities $35,000
Total revenues $80,000
Invested capital is defined as total assets. The capital charge is 10%. What is the
residual income?
A) $1,600
B) $10,000
C) $15,000
D) $20,000
In decision making situations, ________ aspects may dominate quantitative aspects in
many decisions.
A) relevant
B) precision
C) accuracy
D) qualitative
Which of the following items is NOT a component of stockholders’ equity?
A) paid-in capital
B) retained earnings
C) accumulated other comprehensive income
D) deferred income tax liabilities
The activity of Sterling Company for the month of April is presented below:
Cost of goods sold $62,000
Cash purchases of inventory $25,000
Credit purchases of inventory $50,000
Cash paid for credit purchase of inventory $22,000
Cash dividend paid $7,000
Wages earned and paid $14,000
Wages earned and unpaid $2,000
Rent paid for April, May and June $6,000
Using the accrual basis of accounting, the total expenses for Sterling Company for the
month of April is ________.
A) $62,000
B) $78,000
C) $80,000
D) $86,000
An allocated cost is a(n) ________ assigned to a cost object using a ________.
A) direct cost; cost-allocation base
B) indirect cost; cost-allocation base
C) direct cost; cost pool
D) indirect cost; cost pool
The Bombard Company reports the following information:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $45,150
Net income for the year ended December 31, 2012 $10,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Total common shares outstanding, December 31, 2012 1,000
Market price per share, December 31, 2012 $75.00
Dividends per share, for the year ended December 31, 2012 $5.00
What is the return on sales for the year ended December 31, 2012?
A) 6.8%
B) 9.6%
C) 25.8%
D) 42.2%
Costs uncontrolled by a segment manager should be ________ when evaluating the
performance of the segment manager.
A) considered
B) weighed heavily
C) weighed lightly
D) ignored
Sandler Company manufactures electronic devices. The company is considering three
cost drivers for measuring maintenance costs in the factory. The following cost
functions have been estimated using each cost driver:
Cost Driver Cost Function R 2
1. X = number of parts Y = $20,000 + $5X R2 = 0.40
2. X = number of labor hours Y = $13,000 + $10X R2 = 0.95
3. X = number of machine hours Y = $15,000 + $7X R2 = 0.30
Which cost driver should be chosen?
A) number of parts
B) number of labor hours
C) number of machine hours
D) none of the above
Bender Company has two service departments, Maintenance and Human Resources.
Bender Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,200 2,400
Number of employees 16 24 48 64
If the direct method is used to allocate service department costs, then the total cost of
the Maintenance Department after the Human Resources Department cost allocation
would be ________.
A) $33,600
B) $50,400
C) $54,600
D) $70,000
Downers Grove Corporation has a joint process that produces three products: P, G and
A. Each product may be sold at split-off or processed further and then sold.
Joint-processing costs for a year amount to $25,000. The production level for each
product is 10,000 units. Other data follows:
Sales Value Separable Processing Sales Value
Product at Split-Off Costs after Split-Off at Completion
P $12 $10 $21
G 12 4 17
A 10 6 19
To maximize profits, Downers Grove Corporation should process ________ further.
A) Product P only
B) Product G only
C) Product A only
D) Products G and A only
The following information is available for the Platinum Company:
Net income for the year ended December 31, 2014 $127.4
Retained earnings, December 31, 2014 150.0
Retained earnings, December 31, 2013 180.0
Total assets, December 31, 2014 470.0
Total assets, December 31, 2013 442.0
Total liabilities, December 31, 2014 280.0
Total liabilities, December 31, 2013 182.0
What is the debt-to-equity ratio at December 31, 2014?
A) 0.29
B) 1.47
C) 1.90
D) 2.00
According to the IMA’s Statement of Ethical Professional Practice, the standard of
credibility includes ________.
A) continually developing the accountant’s knowledge and skills
B) mitigating actual conflicts of interest
C) disclosing all relevant information that could reasonably be expected to influence an
intended user’s understanding of the reports
D) refraining from engaging in any conduct that would prejudice carrying out duties
ethically
Which budget guides day-to-day operations in a business?
A) sales budget
B) strategic plan
C) master budget
D) long-range plan
The following information is available for the Tyson Company:
Sales for year $1,000,000
Average invested capital for year $500,000
Return on investment for year 25%
Required:
A) Compute capital turnover.
B) Compute operating income.
C) Compute return on sales.
The Anthony Company used regression analysis to predict the annual cost of utilities.
The results were as follows:
Utilities Cost
Explained by Direct Labor Hours
Constant 4,500
Standard error of Y estimate 595
R-Squared 0.87
No. of observations 30
Degrees of freedom 28
X Coefficient 5.02
Standard error of coefficient 0.92
The variable cost per direct labor hour is ________.
A) $0.87
B) $0.92
C) $5.02
D) $4,500