What happens when the cost-driver activity level increases within the relevant range?
A) Total fixed costs increase.
B) Fixed costs per unit of cost driver decrease.
C) Total variable costs decrease.
D) Variable costs per unit of cost driver decrease.
Which of the following statements about perfection standards is TRUE?
A) It is generally believed that they have a negative influence on employee morale.
B) They are expressions of the most efficient performance possible.
C) They usually result in unfavorable variances.
D) All of the above
The county government released $100,000 as an appropriation for a counseling
program for at-risk teenagers. The program should run one year and the variable costs
for the program are $400 per teenager per year. Within the relevant range of 50 to 150
teenagers, the fixed costs for the program are $60,000. How many teenagers can the
program serve?
A) 50
B) 100
C) 150
D) 250
Which of the following statements about depreciation is FALSE?
A) Depreciation does not generate cash.
B) Depreciation is an allocation of the original cost of an asset to the periods in which
the asset is used.
C) Depreciation does not entail an outflow of cash.
D) Depreciation is a means of setting aside cash for the replacement of an asset.
What types of variances should be investigated when looking at performance reports?
A) all variances
B) only favorable and unfavorable variances that are large in size
C) only unfavorable variances that are large in size
D) only favorable variances that are large in size
Xerox Company has the following information available:
Selling price per unit $100
Variable cost per unit $45
Fixed costs per year $420,000
Expected sales per year (units) 20,000
If variable costs increase to $65 per unit, what is the break-even point in units?
A) 12,000
B) 13,000
C) 20,000
D) none of the above
In nonprofit organizations, a program is defined as a(n) ________.
A) identifiable group of activities that produces outputs in the form of consumable
products
B) identifiable group of activities that produces outputs in the form of services
C) class of products
D) none of the above
The total amount of cash collections from customers by month appears on the
________.
A) sales budget
B) operating expense budget
C) cash budget
D) budgeted balance sheet
Variable costing considers fixed manufacturing overhead costs as a(n) ________.
A) inventoriable cost
B) product cost
C) future cost
D) immediate expense
Suppose a hotel has annual fixed costs applicable to its rooms of $2.0 million for its
300-room hotel. Average daily room rents are $50 per room and average variable costs
are $10 for each room rented. It operates 365 days per year. If the hotel is completely
full throughout the year, what is net income for one year?
A) $1,280,000
B) $2,380,000
C) $3,180,000
D) $4,380,000
Incremental benefits are the ________ generated by a proposed alternative.
A) reduced revenues
B) additional costs
C) additional profits
D) additional revenues or reduced costs
Stanley Company has obtained the following information about a proposed project:
Annual cash operating savings (excluding depreciation)
for 5 years (end of year) $50,000
Depreciation expense per year for tax purposes $33,000
Estimated salvage value in 5 years $10,000
Cost of equipment $175,000
Required rate of return 10%
Income tax rate 40%
Estimated useful life (in years) 5
Depreciation method for tax purposes Straight-line
Present value of ordinary annuity of one
at 10% for 5 periods 3.7908
Present value of one at 10% for 5 periods 0.6209
Required:
A) What is the NPV of the project?
B) Should the project be undertaken?
Under variable costing, ________ is NOT an inventoriable cost.
A) direct materials
B) variable manufacturing overhead
C) variable selling and administrative expenses
D) direct labor
Leasehold Improvements do NOT include ________.
A) painting and decorating of leased property
B) security systems added to leased property
C) bookcases built into walls of leased property
D) furniture used at leased property
Nestle Company paid $130,000 for a machine used to mill oats. The annual
contribution margin from oat sales is $60,000. The machine could be sold for $80,000.
The opportunity cost of producing the oats is ________.
A) $20,000
B) $60,000
C) $80,000
D) $130,000
A manager is trying to decide which product to emphasize in promotion and advertising
efforts. Following the decision process used by managers, predictions about the
amounts of future sales of the two products are used as input to the ________.
A) prediction model
B) prediction method
C) decision model
D) evaluation model
An unfavorable production volume variance ________ a company’s operating income.
A) increases
B) decreases
C) does not affect
D) it depends on the size of the variance
________ models are mathematical models that can react to any set of assumptions
about sales, costs and product mix.
A) Strategic
B) Long-range
C) Financial planning
D) Operating budget
Barber Company has budgeted sales of $30,000 with the following budgeted costs:
Direct materials $6,300
Direct labor $4,100
Variable factory overhead $3,700
Fixed factory overhead $5,600
Variable selling and administrative costs $2,400
Fixed selling and administrative costs $3,200
What is the average target markup percentage for setting prices as a percentage of total
variable costs?
A) 45%
B) 57%
C) 82%
D) none of the above
Valesano Company is considering a project with the following information:
Project 1
Cost $4,000
Annual cash operating savings(end of year) $2,000
Terminal salvage $0
Useful life in years 3
Required rate of return 10%
Present value of one for 3 periods at 10% 0.7513
Present value of ordinary annuity of one for
3 periods at 10% 2.4869
Ignoring taxes, what is the lowest level of annual cash operating savings that will result
in a positive net present value?
A) $1,550
B) $1,600
C) $1,608
D) $2,000
Utah Corporation reports the following data:
12/31/14 12/31/15
Fixed Assets $330 $581
Less: Accumulated Depreciation (110) (127)
Net Fixed Assets $220 $454
Depreciation expense for the year ending December 31, 2015 is $27. The company sold
a fixed asset for $10 cash on December 1, 2015. The cost of the fixed asset sold was
$20 and the accumulated depreciation on the fixed asset sold was $10. What is the net
cash flow from investing activities for the year ending December 31, 2015?
A) $241 cash outflow
B) $251 cash outflow
C) $261 cash outflow
D) $271 cash outflow
Costs for a department store in Austin, Texas are listed below. The headquarters of the
company are located in Dallas, Texas. From the view of the store manager in Austin,
identify each cost as one of the following:
A. Variable cost
B. Fixed cost controllable by store manager
C. Fixed cost controllable by others (not store manager)
D. Unallocated cost
_____ 1. Insurance on Austin store
_____ 2. Sales supervisor’s salary in Austin store
_____ 3. Depreciation expense on Austin store
_____ 4. Corporate-level advertising costs
_____ 5. Temporary sales staff wages in Austin store
_____ 6. Cost of merchandise sold in Austin store
_____ 7. Local advertising costs for Austin store
_____ 8. CEO salary
_____ 9. Salary of store manager in Austin store
_____ 10. Public relations department at corporate headquarters
_____ 11. Supplies for break room in Austin store
_____ 12. Salaries of attorneys at corporate headquarters
_____ 13. Salaries of accountants at corporate headquarters
_____ 14. Wages of janitors at Austin store
_____ 15. Wages of janitors at corporate headquarters
Haworth Company is considering the purchase of a labor saving piece of equipment
with the following information:
Purchase cost of equipment $432,000
Annual cost savings, excluding depreciation (end of year) $90,000
Terminal salvage value 0
Useful life of equipment 12 years
Required rate of return 10%
Tax rate 30%
Depreciation method for tax purposes Straight-line
Present value of ordinary annuity of one
at 10% for 12 periods 6.8137
Present value of one at 10% for 12 periods 0.3186
What is the net present value of the equipment?
A) $(2,737)
B) $(174,442)
C) $70,851
D) $168,968
On April 1, 2012, Company Z lends $200,000 to Company Y on a 8% note. For the six
months ending June 30, 2012, what amount of interest revenue will Company Z report
on this note?
A) $4,000
B) $8,000
C) $12,000
D) $16,000
Van Dover Company purchased common stock in Sanchez Company. During the
current year, Sanchez Company earned $4,000,000 and paid dividends of $1,000,000.
Assume that Van Dover Company owns 30% of the outstanding shares of Sanchez
Company. Sanchez Company’s dividend will affect Van Dover Company by ________.
A) increasing cash and stockholders’ equity by $300,000
B) increasing investments and stockholders’ equity by $300,000
C) increasing cash and decreasing investments by $300,000
D) increasing cash and increasing investments by $300,000
Nancy Company pays taxes of 15% on their first $20,000 of pretax income and 40% on
any taxable income in excess of $20,000. The current pretax income is $50,000. What is
the average tax rate?
A) 15%
B) 21%
C) 24%
D) 30%
The minimum desired rate of return on an investment is sometimes referred to as
________.
A) the discount rate
B) the hurdle rate
C) the required rate of return
D) all of the above
Which of the following statements about productivity is FALSE?
A) Productivity is a measure of outputs divided by inputs.
B) The fewer inputs needed to produce a given output, the more productive the
organization.
C) Inputs and outputs are difficult to measure.
D) Productivity measures can be compared over time without making adjustments for
inflation.
During the month of May, Sonny Company transferred 140,000 gadgets to Finished
Goods Inventory. There was no beginning work-in-process inventory. The company had
40,000 gadgets in process at May 31 and the gadgets were 75 percent complete with
respect to conversion costs. All direct materials are added at the end of the production
process. The equivalent units for conversion costs for May are ________.
A) 140,000
B) 150,000
C) 170,000
D) 180,000
Mary Company has the following information:
Month Budgeted Purchases
January $26,800
February 29,000
March 30,520
April 29,480
May 27,680
Purchases are paid as follows:
10% in the month of purchase
50% one month after purchase
40% two months after purchase
A) $14,740
B) $17,508
C) $26,948
D) $29,716
Zebron Company is considering the following investment:
Initial capital investment $200,000
Estimated useful life 3 years
Estimated disposal value in 3 years $1,000
Estimated annual savings in cash operating costs(end of year) $100,000
Minimum desired rate of return 10%
Present value of ordinary annuity of one, 3 periods at 10% 2.4869
Present value of one, 3 periods at 10% 0.7513
Assume straight-line depreciation is used. Ignore income taxes. The net present value of
the investment is ________.
A) $48,690
B) $49,441
C) $49,690
D) $101,000
Green Company manufactures phones in a two-department process that involves
Assembly and Finishing. The Assembly Department reported the follow data for the
past month:
Direct materials added $336,000
Direct labor 460,000
Factory overhead 204,000
Total costs to account for $1,000,000
Units started 80,000
Units completed and transferred 67,200
Units not complete 12,800
Units in beginning inventory 0
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 75 percent complete with respect to conversion costs. The
journal entry to record the requisition of direct materials for the Assembly Department
includes a Debit to ________.
A) Direct Materials Inventory for $336,000
B) Work-in-Process Inventory, Finishing for $336,00
C) Work-in-Process Inventory, Assembly for $336,000
D) Finished Goods Inventory for $336,000