Triumph Division of Traveling Fantasies, is evaluated based on residual income
generated. In the most recent year, the Triumph Division generated a residual income of
$2,000,000 and net income of $5,000,000. The target rate of return for all divisions of
Traveling Fantasies is 20%. What was the return on investment for the Triumph
Division?
a. 40%
b. 13%
c. 20%
d. 33%
To compute the break-even point in units, which of the following formulas is used?
a. FC/CM per unit
b. FC/CM ratio
c. CM/CM ratio
d. (FC+VC)/CM ratio
Benchmarking against direct competitors creates the risk of
a. creating products or services with identical specifications.
b. becoming stagnant relative to process improvements.
c. being taken over by the competitors to prevent a loss of ideas.
d. all of the above.
Wright Company
Wright Company adds material at the start of production. The following production
information is available for September:
Refer to Wright Company. What is the conversion cost per equivalent unit using the
weighted average method?
a. $1.01
b. $1.05
c. $1.55
d. $1.61
Saturn Corporation
Material A is added at the start of production, while Material B is added uniformly
throughout the process.
Refer to Saturn Corporation Assuming a FIFO method of process costing, compute the
average cost per EUP for Material A.
a. $31.25
b. $20.10
c. $20.00
d. $31.00
____ is (are) a strategy for dealing with environmental effects.
a. End-of-pipe strategies
b. Process improvements
c. Pollution prevention
d. All of the above
Terrell Corporation has the following data relating to its power usage for the first six
months of the current year.
Assume usage is within the relevant range of activity.
Required:
Which of the following is not a factor that directly affects the budget for a discretionary
cost?
a. the importance of the activity to the achievement of the organization’s goals
b. last period’s budget
c. the expected level of operations
d. managerial negotiations in the budgeting process
Which of the following is the first element of knowledge needed by a company wanting
to pursue total quality management?
a. what the company’s customers want
b. who the company’s customers are
c. how the company’s processes are designed
d. what the components of the company’s product are
In a job-order costing system,
a. standards cannot be used.
b. an average cost per unit within a job cannot be computed.
c. costs are accumulated by departments and averaged among all jobs.
d. overhead is typically assigned to jobs on the basis of some cost driver.
Which of the following is least likely to be a discretionary cost?
a. salaries of salespeople
b. advertising
c. maintenance
d. insurance
Parker Company
Below is an income statement for Parker Company:
Refer to Parker Company. Assuming that the fixed costs are expected to remain at
$200,000 for the coming year and the sales price per unit and variable costs per unit are
also expected to remain constant, how much profit before taxes will be produced if the
company anticipates sales for the coming year rising to 130 percent of the current year’s
level?
a. $97,500
b. $195,000
c. $157,500
d. A prediction cannot be made from the information given.
Which of the following would not be considered a value-added activity in the
preparation of a tax return?
a. printing a copy of the return for the client
b. printing a copy of the return for the IRS
c. installing tax software
d. checking for accuracy
Goods will flow through a production process at the rate of the
a. slowest part of the process.
b. fastest part of the process.
c. average of all the parts of the process.
d. time standards set using externally calibrated benchmarks.
Tisdale Company reported the following results from sales of 5,000 units of Product A
for June:
Assume that Tisdale increases the selling price of Product A by 10 percent in July. How
many units of Product A would have to be sold in July to generate an operating income
of $20,000?
a. 4,000
b. 4,300
c. 4,545
d. 5,000
When the cost of lost units must be assigned, and those same units must be included in
an equivalent unit schedule, these units are considered
a. normal and discrete.
b. normal and continuous.
c. abnormal and discrete.
d. abnormal and continuous.
A management information system should emphasize satisfying
a. external demands for information.
b. external and internal demands for information.
c. internal demands for information.
d. the Accounting Department’s demands for information.
Which of the following is likely to be a discretionary cost in most organizations?
a. managerial training programs
b. managerial labor costs
c. factory utilities
d. factory rent
On a balanced scorecard, which of the following would be most appropriate to measure
production process integrity?
a. Rapid time-to-market of new products
b. Corporate financial profits
c. Low employee turnover
d. Decrease in reworked products
If only one or two overhead cost pools are used,
a. it will be easy to determine which products or services are creating the most costs.
b. overhead created by a specific product will be assigned to all products.
c. the reduction in cost accumulation and allocation time will raise company profits.
d. allocations should be made using only unit-based cost drivers.
Performance evaluation measures in an organization
a. affect the motivation of subunit managers to transact with one another.
b. always promote goal congruence.
c. are less motivating to managers than overall organizational goals.
d. must be the same for all managers to eliminate suboptimization.
Which of the following equations can be used to budget purchases?
(BI = beginning inventory, EI = ending inventory desired, CGS = budgeted cost of
goods sold, P = budgeted purchases)
a. P = CGS + BI – EI
b. P = CGS + BI
c. P = CGS + EI + BI
d. P = CGS + EI – BI
Bolton Company produced three joint products at a joint cost of $100,000. These
products were processed further and sold as follows:
The company has had an opportunity to sell at split-off directly to other processors. If
that alternative had been selected, sales would have been: A, $56,000; B, $28,000; and
C, $56,000.
The company expects to operate at the same level of production and sales in the
forthcoming year.
Required: Consider all the available information and assume that all costs incurred
after split-off are variable.
U-shaped groupings of workers and machines that improve materials handling and flow
are known as
a. manufacturing cells.
b. efficiency stations.
c. multi-flow modules.
d. productivity islands.
Shiny Floors Company
Shiny Floors Company produces four floor cleaners from the same process: C, D, E,
and G. Joint product costs are $9,000. (Round all answers to the nearest dollar.)
If Shiny Floors sells the products after further processing, the following disposal costs
will be incurred: C, $2.50; D, $1.00; E, $3.50; G, $6.00.
Refer to Shiny Floors Company. Using sales value at split-off, what amount of joint
processing cost is allocated to Product G?
a. $4,433
b. $1,182
c. $1,108
d. $2,276
Employee stock ownership in the employees’ firm
a. will encourage short term earnings growth patterns.
b. will encourage employees to take a longer term perspective regarding their
performance in the company.
c. is not suitable for hourly or salaried employees.
d. is common for management in American firms.
Phoenix Corporation
The records of Phoenix Corporation revealed the following data for the current year.
Refer to Phoenix Corporation. Assume, for this question only, actual overhead is
$98,700 and applied overhead is $93,250. Manufacturing overhead is:
a. overapplied by $12,900.
b. underapplied by $18,350.
c. overapplied by $5,450.
d. underapplied by $5,450.
Whitney Corporation
Whitney Corporation, a reseller of women’s fashions, has budgeted its activity for
March. The budget information is presented below:
Refer to Whitney Corporation. The budgeted net income for March is:
a. $107,500
b. $137,500
c. $ 42,500
d. $ 77,500
Delightful Candy Corporation has two processing departments, Cooking and
Packaging. Ingredients are placed into production at the beginning of the process in
Cooking, where they are formed into various shapes. When finished, they are
transferred into Packaging, where the candy is placed into heart and tuxedo boxes and
covered with foil. All material added in Packaging is considered as one material for
convenience. Since the boxes contain a variety of candies, they are considered partially
complete until filled with the appropriate assortment. The following information relates
to the two departments for the month of February:
a. Determine equivalent units of production for both departments using the weighted
average method.
b. Determine equivalent units of production for both departments using the FIFO
method.
Jennings Creations
Jennings Creations is considering an investment in a computer that is capable of
producing various images that are useful in the production of commercial art. The
computer would cost $20,000 and have an expected life of eight years. The computer is
expected to generate additional annual net cash receipts (before-tax) of $6,000 per year.
The computer will be depreciated according to the straight-line method and the firm’s
marginal tax rate is 25 percent.
Refer to Jennings Creations. What is the after-tax net present value of the proposed
project (using a 16 percent discount rate)? Present value tables or a financial
calculator are required.
a. $2,261
b. $(454)
c. $6,062
d. $(4,797)
Discuss why standards may need to be changed after they have been in effect for some
period of time.
The formula for margin of safety is
_____________________________________________.
The discount rate that causes the present value of a project’s net cash inflows to equal
the present value of the cash outflows is referred to as the
________________________________________.
Most tactical plans are single use plans.
The net realizable value approach is used to account for scrap and by-products when the
net realizable value is significant.
Garfield Company
Garfield Company applies overhead based on direct labor hours and has the following
available for the current month:
Refer to Garfield Company. Compute all the appropriate variances using the
three-variance approach.
What factors make discretionary costs difficult to control?
A budget that indicates the funds to be generated or consumed during the period is
referred to as a ______________________________.
The three components of throughput are
_____________________________________________,
______________________________, and ___________________________________.
Decentralization can lead to greater job enrichment and satisfaction.
A profit sharing plan is an example of a motivational element.
List the five general criteria that should be considered when designing a performance
measurement system.
The portion of an asset that was consumed during a period is referred to an expired cost.
A management information system is a part of a management control system.
Benchmarks for performance measures may be monetary or non-monetary.
Monetary allocation measures recognize the revenue generating ability of each product
in a joint process.
Castle Corporation
The following questions are based on the following data pertaining to two types of
products manufactured by Castle Corporation:
Fixed costs total $300,000 annually. The expected mix in units is 60 percent for Product
Y and 40 percent for Product Z.
Refer to Castle Corporation. How much is Castle’s break-even point sales in units?