How can a company avoid lying by employees when preparing a budget?
A) reward good budget forecasts
B) reward good performance against the budget
C) reward good budget forecasts and reward good performance against the budget
D) reward good recipes for cooking the books
Product costing is an averaging process. This statement pertains to ________.
A) job order costing only
B) process costing only
C) activity-based costing only
D) all of the above
Campbell Company’s records reveal the following:
Division A
Market price of finished part to outsiders $74 per unit
Variable costs per part $50 per unit
Division B
Sale price of finished product per unit $105 per unit
Variable costs:
Division A(1 part) ?
Division B Processing 27 per unit
Division B Selling 12 per unit
Division B wants to buy the part from Division A. The variable costs of Division B will
be incurred whether it buys the part from Division A or from an outside supplier.
Assume Division A is working at full capacity, and there is no excess capacity. Division
B can buy the parts from an outside supplier at $70 per unit. What is the lowest transfer
price per unit Division A should accept from Division B?
A) $24
B) $66
C) $70
D) $74
The cash received from the sale of land is included in the ________ section of the
statement of cash flows.
A) operating
B) investing
C) financing
D) noncash
Blue Company is a small company with limited expertise with customer service. Blue
Company has a contract with New Company to handle all of Blue Company’s customer
service needs. For Blue Company, this is an example of ________.
A) technology transfer
B) technology osmosis
C) outsourcing
D) none of the above
Christina Company will purchase a van for $40,000. It will have a depreciable life of 5
years and a terminal salvage value of $10,000. Assume a tax rate of 20% and a required
after-tax rate of return of 12%. The company uses straight-line depreciation for tax
purposes. The annual cash operating savings at the end of each year, exclusive of
depreciation, are $10,000 for five years. The present value of one for five periods at
12% is 0.5674. The present value of an ordinary annuity of one for five periods at 12%
is 3.6048. What is the net present value of the van?
A) $(5,394)
B) $(1,162)
C) $11,909
D) $17,583
Assume the cost object is customers. Why should indirect costs associated with
customers be allocated to customers instead of producing departments?
A) The allocation to customers would be based on production-related output measures
that are related to the cause of customer-service costs.
B) The allocation to customers would be based on production-related output measures
that are probably not related to the cause of customer-service costs.
C) The cost-allocation base cannot be determined.
D) Actual costs would be used instead of budgeted costs.
________ budgeting is when budgets are formulated with the active involvement of all
affected employees.
A) Rolling
B) Team
C) Participative
D) Zero-based
Presented below is the balance sheet of Houser Company at January 1, 2015:
Cash $100
Net Fixed Assets 400
Total Assets $500
Accounts Payable $20
Long-term Bonds Payable 220
Stockholders’ Equity 260
Total Liabilities and Stockholders’ Equity $500
The balance sheet of Maury Company at January 1, 2015 is below:
Cash $400
Net Fixed Assets 380
Total Assets $780
Accounts Payable $120
Long-term Bonds Payable 280
Stockholders’ Equity 380
Total Liabilities and Stockholders’ Equity $780
On January 1, 2015, Maury Company acquired 100 percent of the outstanding common
stock of Houser Company for $260 cash. The book value and fair value of Houser’s
assets and liabilities were equal. What is the amount of Total Assets on the consolidated
balance sheet immediately after the acquisition of Houser Company’s stock? (Assume
elimination entries are completed.)
A) $0
B) $780
C) $1,020
D) $1,280
The following information is available for the Wetzel Company:
Net income for the year ended December 31, 2014 $127.4
Credit sales for the year ended December 31, 2014 $1,606.0
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 240.0
Total liabilities, December 31, 2013 182.0
Accounts Receivable, December 31, 2014 180.0
Accounts Receivable, December 31, 2013 144.0
What is the average collection period in days for the year ended December 31, 2014?
A) 5.0
B) 36.8
C) 40.9
D) 77.3
The following information pertains to Garcia Company:
Total assets $50,000
Net operating profit after taxes $10,000
Total current liabilities $10,000
Total expenses $60,000
Total liabilities $15,000
Total revenues $80,000
Invested capital is defined as total assets minus current liabilities. The after-tax cost of
capital is 20%. What is the residual income?
A) $2,000
B) $4,000
C) $12,000
D) $20,000
Green Company had the following information:
Budgeted factory overhead costs $144,500
Actual factory overhead costs $151,980
Budgeted direct labor hours 34,000
Actual direct labor hours 30,400
Assume direct labor hours are the cost driver for factory overhead costs. The budgeted
factory overhead rate is ________.
A) $4.25 per direct labor hour
B) $4.45 per direct labor hour
C) $4.63 per direct labor hour
D) $4.84 per direct labor hour
Costs of defective components or products that are scrapped or reworked are examples
of ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit.
The part is produced in Country Z and transferred to a plant in Country B. Country Z
has a 10% income tax rate. Country B has a 50% income tax rate and an import duty
equal to 10% of the price of the item. Part X can be transferred at full cost or variable
cost. Assume Part X is transferred at full cost. By using full cost instead of variable cost
for the transfer price, the income tax effect per unit in Country B is ________.
A) a decrease in tax by $9 per unit
B) an increase in tax by $9 per unit
C) a decrease in tax by $15 per unit
D) an increase in tax by $15 per unit
Which of the following is NOT a component of the operating budget?
A) capital budget
B) purchases and cost of goods sold budget
C) budgeted income statement
D) operating expense budget
Why do accountants add Depreciation Expense to net income when determining net
cash provided by operating activities? Assume the indirect method is used.
A) because depreciation expense is a source of cash
B) because depreciation expense requires the outflow of cash
C) because depreciation expense is an investing activity that should be reported in the
investing section of the cash flow statement
D) because it cancels the earlier deduction when calculating net income
Planning refers to ________.
A) the implementation of organizational plans
B) the use of performance reports to evaluate the attainment of organizational
objectives
C) setting organizational objectives and establishing the path to attain them
D) an analysis of alternative courses of action
At 60,000 machine hours, Clark Company’s static budget for variable overhead costs is
$180,000. At 60,000 machine hours, the company’s static budget for fixed overhead
costs is $300,000. Machine hours are the cost driver of all overhead costs. The static
budget is based on 60,000 machine hours. At 60,000 machine hours, the company
produces 40,000 units. The following data is available:
Actual units produced and sold 42,000
Actual machine hours 64,000
Actual variable overhead costs $185,600
Actual fixed overhead costs $302,400
What is the fixed overhead spending variance?
A) $2,400 Unfavorable
B) $2,400 Favorable
C) $1,000 Favorable
D) $1,000 Unfavorable
Miley Company has the following data available:
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 $7,300
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
Average total common shares outstanding in 2012 1,000
Market price per share, December 31, 2012 $75.00
Preferred dividends declared during 2012 $4,000
What are the earnings per share for the year ended December 31, 2012?
A) $3.30
B) $4.30
C) $7.30
D) none of the above
In an efficient capital market, the appropriate investment strategy for most investors is
the ________.
A) daily trading and high volume approach
B) inactive portfolio approach
C) active portfolio approach
D) buy low and sell high approach
When deciding whether to add or delete a department, managers should keep the
department as long as ________ from the department exceeds ________.
A) contribution margin; variable costs
B) contribution margin; common costs
C) contribution margin; avoidable fixed costs
D) contribution margin; unavoidable fixed costs
Which of the following is NOT an appraisal cost for quality control?
A) inspection and testing of purchased materials
B) product quality audits
C) maintenance of test equipment
D) training program for material suppliers
Rocky Company had the following information:
Budgeted factory overhead costs $90,000
Actual factory overhead costs $80,000
Budgeted production setups 12,000
Actual production setups 11,500
Assume production setups are the cost driver for factory overhead costs. The budgeted
factory overhead rate is ________.
A) $6.25 per setup
B) $6.52 per setup
C) $6.78 per setup
D) $7.50 per setup
An example of a staff department at a clothing manufacturer is the ________.
A) pressing department
B) cutting department
C) sewing department
D) maintenance department
What journal entry is necessary to apply factory overhead to jobs in job-order costing?
A) Work-In-Process Inventory XXX
Factory Department Overhead Applied XXX
B) Finished Goods Inventory XXX
Factory Department Overhead Applied XXX
C) Factory Department Overhead Control XXX
Various accounts XXX
D) Work-In-Process Inventory XXX
Factory Department Overhead Control XXX
Ignoring taxes, the total project approach to investment decisions calculates the
difference in the ________. Ignoring income taxes, the differential approach to
investment decisions computes the net present value of the difference in ________.
A) depreciation expense; operating cost savings
B) tax savings due to depreciation expense; tax savings due to operating cost savings
C) cash flows between two projects; net present values between two projects
D) net present values between two projects; cash flows between two projects
When managers make decisions, the accountant’s primary role is ________.
A) making the decision
B) providing information that may be useful to the manager
C) uncertain because it depends on the decision being made
D) uncertain because it depends on the manager
Under absorption costing, fixed overhead costs applied to products will be included in
________.
A) Cost of Goods Sold on the income statement when the products are sold
B) Ending Inventory on the balance sheet before the products are sold
C) Extraordinary Item on the income statement when the products are sold
D) A and B
The Quinn Company makes tables for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 10 pounds $4 per pound
Direct Labor 3 hours $16 per hour
Production of 200 tables was expected in June, but 220 tables were actually completed.
Direct materials purchased and used were 2,100 pounds at an actual price of $4.40 per
pound. Direct labor cost for the month was $10,620, and the actual pay per hour was
$18.00. What is the direct labor quantity variance for the month of June?
A) $1,120 Favorable
B) $1,120 Unfavorable
C) $1,260 Favorable
D) $1,260 Unfavorable
Decreasing cycle time ________.
A) results in a lower-quality product
B) creates reduced flexibility in the production process
C) results in slower reactions to customer requests
D) requires smooth-running processes
Brankovich Company uses a job-order costing system and has the following data
available:
Beginning Direct Materials Inventory $26,000
Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $90,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $256,000
Overhead application rate (based on direct labor cost) 125%
What is the cost of the ending inventory of Direct Materials?
A) $84,000
B) $90,000
C) $108,000
D) $174,000
