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Given the following cost and activity observations for George Company's utilities, use
the highÂlow method to calculate George's variable utilities costs per machine hour.
a. $100.00
b. $1.00
c. $10.00
d. $0.10
The sales, income from operations, and invested assets for each division of Wren
Company are as follows:
Management has established a minimum rate of return for invested assets of 8%.
(a) Determine the residual income for each division.
(b) Based on residual income, which of the divisions is the most profitable?
On the balance sheet for a manufacturing business, the cost of direct materials, direct
labor, and factory overhead are categorized as either materials inventory, work in
process inventory, or finished goods inventory.
a. True
b. False
A company must choose either a standard system or nonfinancial performance measures
to evaluate the performance of a company.
a. True
b. False
When budget goals are set too tight, the budget becomes less effective as a tool for
planning and controlling operations.
a. True
b. False
A change from one acceptable accounting method to another is reported
a. on the statement of retained earnings, as a correction to the beginning balance
b. on the income statement, below income from continuing operations
c. on the income statement, above income from continuing operations
d. through a retroactive restatement of prior-period earnings
Activity-based costing for selling and administrative expenses can also be beneficial in
allocating expenses to various products. Which of the following is the best allocation
base for help desk costs?
a. Number of calls
b. Square footage of the help desk office
c. Number of products sold
d. Number of sales employees
Ratio of income from operations to sales
Match the definition that follows with the term (a-e) it defines.
a. Controllable revenues
b. Profit margin
c. Investment turnover
d. Rate of return on investments
e. Residual income
The production budgets are used to prepare which of the following budgets?
a. operating expenses
b. direct materials purchases, direct labor cost, and factory overhead cost
c. sales in dollars
d. sales in units
Conversion costs are
a. direct materials and direct labor
b. direct materials and factory overhead
c. factory overhead and direct labor
d. direct materials and indirect labor
Eagle Co. manufactures bentwood chairs and tables. Wood for both products is
steam-bent in the same process, but different types of wood are used for each product.
Thus, materials cost is identified separately to each product. One production cycle uses
20 board feet. Labor cost is identified to the process as a whole, as is overhead cost.
Data for the month of July follow:
(a) Compute July's predetermined rate for the steam-bending process
(b) Compute July's direct material costs for chairs and tables
(c) Compute conversion costs to be applied to chairs and tables in July
(d) Journalize the following entries:
(1) Assignment of direct materials to chairs and tables
(2) Application of conversion costs to chairs and tables
(3) The transfer of completed chairs and tables to the Finishing Department. All of
July's production was completed in July.
The first budget to be prepared is usually the sales budget.
a. True
b. False
What ratio indicates the percentage of each sales dollar that is available to cover fixed
costs and to provide a profit?
a. margin of safety ratio
b. contribution margin ratio
c. costs and expenses ratio
d. profit ratio
ABC Corporation has three service departments with the following costs and activity
base:
ABC has three operating divisions, Micro, Macro and Super. Their revenue, cost and
activity information are as follows:
What is the service department charge rate for the Personnel Department?
a. $2,758
b. $3,200
c. $3,077
d. $1,000
Miller's Quarter Horse Company has sales of $4,500,000. It also has invested assets of
$2,500,000 and operating expenses of $3,800,000. The company has established a
minimum rate of return of 7%.
(a) What is Miller's profit margin?
(b) What is the investment turnover?
(c) What is the rate of return on investment?
(d) What is Miller's residual income?
Below is budgeted production and sales information for Flushing Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $15.
Budgeted sales for the month are
a. $3,180,000
b. $5,820,000
c. $1,800,000
d. $8,500,000
Materials are transferred from the storeroom to the factory in response to materials
requisitions.
a. True
b. False
*Actual hours are equal to standard hours for units produced.
The fixed factory overhead volume variance is
a. $1,701.00 favorable
b. $4,866.75 unfavorable
c. $1,701.00 unfavorable
d. $4,866.75 favorable
Vanessa Company is evaluating a project requiring a capital expenditure of $480,000.
The project has an estimated life of 4 years and no salvage value. The estimated net
income and net cash flow from the project are as follows:
The company's minimum desired rate of return for net present value analysis is 15%.
The present value of $1 at compound interest of 15% for 1, 2, 3, and 4 years is 0.870,
0.756, 0.658, and 0.572, respectively.
Determine (a) the average rate of return on investment, using straight-line depreciation,
and (b) the net present value.
If a proposed expenditure of $80,000 for a fixed asset with a 4-year life has an annual
expected net cash flow and net income of $32,000 and $12,000, respectively, the cash
payback period is 4 years.
a. True
b. False
A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables,
$150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio
is 2.5.
a. True
b. False
Assume the following sales data for a company:
Current year $325,000
Preceding year 250,000
What is the percentage increase in sales from the preceding year to the current year? a.
70%
b. 76.9%
c. 30%
d. 50%
Currently attainable standards do not allow for reasonable production difficulties.
a. True
b. False
Accounting systems that use standards for product costs are called standard cost
systems.
a. True
b. False
Product costing consists of only direct materials and direct labor.
a. True
b. False
