Assume a sales price per unit of $25, variable cost per unit $15, and total fixed costs of
$18,000. If no units are sold, how much cost would the company incur?
a. Zero.
b. The amount of variable costs at the breakeven point.
c. $18,000.
d. $27,000.
Which of the following items would not be classified as direct material for an
automobile manufacturer?
a. Steel
b. Paint
c. tires
d. Screws
Ronaldi Corporation ‘s Port division has a segment margin of $400,000 and net sales
revenue of $4,400,000 for the current reporting period. The division has an asset
turnover of 1.5. What is the division ‘s ROI?
a. 11%
b. 13.2%
c. 13.6%
d. The answer cannot be determined from the information given.
Jumbo Industries is considering the purchase of equipment costing $80,000. The
company has a 12% required minimum rate of return. The equipment is expected to
generate $20,000 in additional operating income. Jumbo ‘s tax rate is 25% and its
weighted-average cost of capital is 12%. What is the equipment ‘s EVA?
a. $2,400
b. $5,400
c. $7,200
d. $9,600
Earnings per share must be reported on the face of every income statement that is
a. Prepared in accordance with generally accepted accounting principles.
b. Prepared in accordance with the National Association of State Boards of
Accountancy standards.
c. Prepared in accordance with ethical standards set by the American Institute of
Certified Public Accountants.
d. None of these answer choices are correct.
A zero balance in the Manufacturing Overhead Control account indicates that
a. Actual overhead cost and applied overhead cost are equal.
b. All inventory is reflected at actual cost.
c. Both actual overhead cost and applied overhead cost are equal and all inventory is
reflected at actual cost.
d. Neither actual overhead cost and applied overhead cost are equal nor all inventory is
reflected at actual cost.
Which of the following is a use of cash?
a. Exchanging old auto for new auto and taking a note for balance due
b. Paying employees monthly payroll
c. Issuing long-term bonds
d. All of these answer choices uses of cash
Which of the following would not be considered a customer-level activity?
a. Making a sales call
b. Processing a sales order
c. Delivery costs
d. Preparing purchase orders
In each of the following situations, identify whether the setting is primarily financial
accounting or managerial accounting.
a.Falcon Company sent its annual report to its stockholders.
b.Genesis, Inc. ‘s controller sent a report of actual versus budgeted sales figures to the
sales manager.
c.Hurtz Rent-All Company determines that its investments have declined in value and
should be adjusted.
d.Inca, Inc. controller suspects that cash is being stolen by a sales clerk. As a result, she
prepares an analysis to compare each sales clerk ‘s collections for each day.
e. Jones Company executives are meeting to review the annual report to be submitted to
the SEC.
The goal of benchmarking is to
a. Identify those best practices and improve both quality and productivity.
b. Help managers understand the interrelationships between various areas of an
organization.
c. To make an organization more competitive with other companies within the industry.
d. Use qualitative and quantitative measures to evaluate managers of organizational
units.
Assume total fixed costs of $160,000, variable costs per unit of $6, and contribution
margin per unit of $4. How many units must be sold to meet a target net income of
$50,000, assuming a tax rate of 20%?
a. 55,625
b. 52,500
c. 50,000
d, 35,000
During the current year, Maddox Industries sold a delivery truck with a book value of
$5,000 for $15,000, declared and paid cash dividends of $6,000 and borrowed $40,000
from First National Bank. Maddox’s net cash flows provided by financing activities is
a. $15,000
b. $44,000
c. $34,000
d. $46,000
Assume you have been assigned to a team responsible for using the flexible budget to
assist in determining managers’ bonuses. When you approach the production manager
about some variances, he says, ‘œI don’t know why your team can’t just use the budget
we developed at the beginning of the year. It was based on last year’s actual numbers
which seems reasonable. I don’t understand this ‘˜flexible budget’ stuff. When I compare
my actual results with our beginning of the year budget I have beat the budget, so that
should be sufficient. That will save us all a lot of time and effort.’ Explain to the sales
manager why a flexible budget is better than a static budget and its use in evaluating
performance.
Analyze a statement of cash flows.
Prepare pro-forma financial statements and describe their relationship to the master
budget components.
The two common approaches to budgeting is the top-down budget approach and the
bottom-up approach. Both methods have advantages and disadvantages both from a
practical standpoint and behavioral issues. List two advantages related to each method
and two disadvantages that create problems with each approach.
Prepare a contribution format income statement.
Describe why companies that use job order costing have over-/or under-applied
overhead and list the two methods used to dispose of any over-/or under-applied
overhead?
Whereas cost-plus pricing starts with the cost, target costing starts with the price
customers are willing to pay.
Complete the table below by placing an “X” under each heading that classifies the cost
as relevant or irrelevant.
