Archives: Quiz

A service mark distinguishes the provider of a service rather than a product. For a new technology to be successful in a market, it is enough for the new technology’s stand-alone utility to exceed that of the incumbent standard. Answer: […]

Globalization of markets has reduced the importance of innovation. An individual with only a moderate degree of knowledge of a field will be able to produce more creative solutions than an individual with extensive knowledge of the field. Answer: True […]

The house of quality uses a scale of one to ten to evaluate competing products. The intellectual property policies of a university embrace both patentable and unpatentable innovations. Answer: True Innovation and new technologies have led to longer product life […]

For technologies in which standardization and compatibility are important, maintaining the integrity of the core product is absolutely essential. Product life cycles shorten with high-speed technological changes. Answer: True Cross-functional communication can lead to longer cycle times. Answer: False When […]

Describe the factors involved in communicating useful financial information. Cannon Company operates a clothing store that reported the following operating results for 2013: Required: Prepare an income statement for Cannon Company using the contribution margin format. Answer: Answers will vary […]

How does depreciation serve as a tax shield? How is the amount of the annual tax shield calculated? The College of Business Administration needs to distribute $12,000 received from an anonymous donor and earmarked for three business student organizations, Beta […]

For the month of January 2014, Ghent Corporation had a beginning balance of $103,200 in work in process inventory. During the month, the company added the following costs to work in process: direct materials, $90,900; direct labor, $54,000; and manufacturing […]

How do short-term plans differ from long-term plans? Indicate whether each of the following statements is true or false. The schedule of cost of goods manufactured and sold is included as part of a company’s income statement. The schedule of […]

Compare least squares regression and the scattergraph method of analyzing mixed costs. What should a company consider when pooling indirect costs? Answer: Answers will vary Feedback: Companies should only pool costs that have a common cost driver. If costs with […]

A management accountant was working on a cash budget for Oklahoma Company when he accidentally spilled his coffee. Some of the liquid splattered on his working papers rendering a few of the amounts illegible. The budget with missing amounts indicated […]

The Varsity Club sells souvenir items at university sporting events for $24 each. The souvenir items cost $16 each. The club is negotiating with the university administration to sell the items in a kiosk in the university student center. Three […]

The Szakos Company engaged in the following transactions during 2013: a) Acquired $50,000 of cash by issuing common stock to owners b) Paid $10,000 to acquire manufacturing equipment c) Paid $5,000 cash for materials used in production d) Paid $2,000 […]

Joint products A and B emerge from common processing that costs $150,000 and yields 8,000 units of Product A and 4,000 units of Product B. Product A can be sold for $100 per unit. Product B can be sold for […]

O’Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During 2014, O’Hare recognized cost of goods sold of $4,850 for job #132. The recognition of this event will include a […]

Jones Company developed the following static budget at the beginning of the company’s accounting period: If actual production totals 8,200 units, the flexible budget would show total costs of: A. $8,000. B. $8,100. C. $8,200. D. None of these is […]

Select the incorrect statement regarding net margin. A. Net margin refers to the average amount of each sales dollar remaining after all expenses are subtracted. B. Net margin may be calculated in several ways. C. The amount of net margin […]

Grayson Company is considering purchase of equipment that costs $49,000 and is expected to offer annual cash inflows of $13,000. Grayson’s minimum required rate of return is 10%. How many years must the cash flows last, for the investment to […]

Craft, Inc. normally produces between 120,000 and 150,000 units each year. Producing more than 150,000 units alters the company’s cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired. The production […]

All of the following are examples of product-level costs except: A. product inspection costs. B. product advertising costs. C. engineering design costs. D. patent costs. Howard Lumber Company mistakenly classified a product cost as an expense that totaled $20,000. The […]

Select the correct statement regarding relevant revenues. A. Relevant revenues must not differ between the alternatives being considered. B. Past or future revenues may be relevant. C. Relevant revenues must make a difference in the decision under consideration. D. Revenues […]

Chu Company provided the following information related to its inventory sales and purchases for December 2013 and the first quarter of 2014: Desired ending inventory levels are 25% of the following month’s projected cost of goods sold. Budgeted purchases of […]

Select the correct statement. A. Four purposes often claimed for budgeting involve planning, coordination, performance measurement, and reporting. B. In a participative budgeting system, budget information flows in one direction only, from bottom to top. C. The three major categories […]

Which of the following costs is likely to be driven by machine usage? A. Factory insurance B. Depreciation on factory building C. Factory utilities D. Factory rent The following static budget is provided: What will be the overall volume variance […]

Which of the following items will not appear on a cash budget? A. Expected cash collections B. Expected cash payments C. Expected credit sales D. Financing activities Purchasing production supplies for cash is a(n): A. asset source transaction. B. asset […]

Which of the following is a true statement regarding product-level costs? A. Product-level costs are only relevant to a decision when adding a product to a company’s product line. B. Product-level costs are generally relevant to outsourcing decisions. C. Product-level […]

Compared to a traditional two-stage cost allocation system, activity-based costing systems: A. use fewer cost centers. B. use more cost drivers. C. are less expensive to maintain. D. All of these answers are correct. A series of equal cash flows […]

Weston Company is considering a capital project that delivers a $50,000 annual net cash flow before tax. The investment will result in annual depreciation expense of $10,000 over the project’s four-year useful life. Assuming a tax rate of 40%, what […]

Which of the following is not a criteria that is used to determine whether a project is acceptable under the net present value method? A. If the net present value is equal to zero B. If the net present value […]

Traditionally, the most popular company-wide base for allocating overhead to products was: A. machine hours. B. direct labor hours or costs. C. number of units produced. D. number of units sold. Which of the following items typically found on the […]

Stephenson Company is trying to decide which one of two contracts it will accept. The costs and revenues associated with each are listed below: The equipment was purchased last year and has no resale value. Which of these amounts is […]

Carson Corporation’s sales increase from $500,000 to $600,000 in the current year. What is the percentage change in sales? A. 20% B. 25% C. 22% D. 16.7% The following balance sheet information was provided by O’Connor Company: Assuming that net […]

Spacely Sprockets’ sales budget shows the following expected total sales: The company expects 80% of its sales to be on account (credit sales). Credit sales are collected as follows: 30% in the month of sale, 68% in the month following […]

Which of the following equations can be used to compute a labor price variance? (A = Actual; S = Standard; H = Hour; P = Price) A. (AH × AP) – (AH × SP) B. (AH × SP) – (SH […]

Two ratios that provide insight on the relationship between credit sales and receivables are: A. Current ratio and inventory turnover ratio. B. Accounts receivable turnover and average days to collect receivables. C. Average days to collect receivables and asset turnover. […]

Mertz Group is a consulting firm specializing in mergers and acquisitions. In addition to the three partners, the firm employs nine consultants who work directly with clients. The average budgeted compensation for the twelve professionals is $65,000. Each consultant is […]

Job-order cost systems are used by many service businesses; process cost systems are not applicable to service businesses. Pepperdine Company paid factory rent of $10,000. At the time this transaction occurred, it did not affect total assets or net income. […]

Qualitative information is only relevant for decision making if it can be quantified. Direct labor is an example of a product-level cost. Answer: FALSE If more overhead was applied than had been incurred, the balance in the manufacturing overhead account […]

The objective of a just-in-time inventory system is to totally eliminate all inventories. Vertical analysis always involves comparing financial statement elements over a span of time. Answer: FALSE Product costs are reported on the income statement above gross margin. Answer: […]

Vector Company seeks input from salespeople regarding the number of units they believe they can sell during the upcoming budget period. This is an example of participative budgeting. Under the indirect method, the increase or decrease in stockholder’s equity is […]

The goal of zero defects will generally lead to minimizing quality costs. The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made. Answer: TRUE The first budget prepared in a master budget […]

A capital investment decision is essentially a decision to exchange current cash outflows for future cash inflows. Unlike manufacturers, service companies do not have an inventory of products. Answer: TRUE In a process cost system, costs are accumulated by department. […]

Both direct and indirect costs can be relevant to a particular decision. Frost Company reported a $4,000 increase in dividends payable, a $60,000 increase in retained earnings, and $64,000 in net income for 2014. Based on this information, the company […]

A company may use several different cost drivers to allocate its indirect costs. When computing the break-even point in units, a company should round to the next whole unit because partial units ordinarily are not sold. Answer: TRUE The weighted […]

At the end of the period, the balance remaining in work in process is reported on the balance sheet. Manufacturing companies use a predetermined overhead rate; such rates are not used by service companies. Answer: FALSE The most useful cost […]

Implementation of an activity-based costing system requires a company to generate more detailed accounting information than would be required by a traditional product cost system. The Purina Company would use a job-order costing system to account for the costs of […]

The sales volume variance is the difference between sales revenue on the static budget and sales revenue on the flexible budget. Taylor Company is considering whether or not to replace a drill press that is several years old. The current […]

One way that computing an average cost per unit facilitates management decision making is that managers are provided more timely and more relevant cost information. A manager believes that the number of units sold drives the company’s selling costs. The […]

The predetermined overhead rate is found by dividing total estimated overhead costs by the total estimated volume of the overhead allocation base. Under all circumstances, unfavorable variances are bad; favorable variances are good. Answer: FALSE Under job-order costing, the actual […]

Sales volume variances are attributable to differences between planned and actual activity volumes, as well as differences in selling price. Each indirect cost should be allocated to products individually to provide the most useful cost information. Answer: FALSE The work […]

For a company using target costing, market price minus profit equals target price. In a job-order cost system, each department has a work in process account. Answer: FALSE The method used to allocate service department costs can cause overstatement of […]