How should Unearned Rent Revenue be classified on a balance sheet at December 31,
2013? The rental contract covers the period, January 1, 2013 through December 31,
2015.
A) current liability only
B) long-term liability only
C) current and long-term liability
D) current asset only
According to agency theory, employment contracts will balance three factors that
include ________.
A) cost-benefit, risk and uncontrollable factors
B) goal congruence, incentive and risk
C) cost of measuring performance, cost-benefit and risk
D) incentive, risk and cost of measuring performance
The high-low, visual-fit and least squares regression methods are more objective
methods to estimate cost functions than ________ and ________.
A) activity analysis; account analysis
B) activity analysis; engineering analysis
C) account analysis; engineering analysis
D) capacity analysis; activity analysis
Yesterday Company’s accountant recorded a debit to Accounts Payable and a credit to
Cash. This transaction will ________.
A) increase Cash and decrease Accounts Payable
B) decrease Cash and increase Accounts Payable
C) increase Cash and increase Accounts Payable
D) decrease Cash and decrease Accounts Payable
When evaluating a cost function estimated by least squares regression, it is important to
see if the estimated cost function makes economic sense. This is assessed by ________.
A) examining the sign of the coefficient of determination
B) examining the sign of the fixed cost estimate
C) examining the sign of the variable cost estimate
D) examining the standard deviation of the cost driver
The following data has been assembled for Arnold Company. Use the high-low method.
Month Cost Hours
January $24,000 2,000
February $39,000 2,200
March $35,280 2,750
April $36,400 3,500
May $40,000 4,000
The total fixed cost is ________.
A) $3,600
B) $8,000
C) $21,360
D) $26,672
Jupiter Company has the following information:
Month Budgeted Sales
January $76,000
February 85,000
March 100,000
April 79,000
Budgeted Operating Expenses Per Month
Wages $15,000
Advertising 12,000
Depreciation 3,000
Sales Commissions 4% of sales
All cash expenses are paid as incurred. What are the budgeted total cash disbursements
for operating expenses in March?
A) $3,680
B) $30,000
C) $31,000
D) $34,000
A disadvantage of engineering analysis which is used to estimate cost functions is
________.
A) it fails to produce a cost function
B) it is a costly process
C) it is not acceptable under Generally Accepted Accounting Principles
D) it cannot be used with mixed costs
The balance sheet for Ramon Company is given below:
Cash $242
Accounts Receivable 194
Inventory 450
Prepaid Insurance 76
Fixed Assets 390
Accumulated Depreciation (228)
Total Assets $1,124
Accounts payable $152
Wages payable 32
Notes payable 420
Paid-in capital 160
Retained earnings 360
Total liabilities and stockholders’ equity $1,124
If a common-size balance sheet was prepared, what would Ramon Company report for
inventory?
A) 13.5%
B) 25.2%
C) 34.5%
D) 40.0%
Direct labor cost is the primary cost driver of support costs for two products. Product
One has direct labor costs of $8.50 per unit and Product Two has direct labor costs of
$130 per unit. The support costs assigned to each product is the direct labor cost times
five. What is the support cost assigned to Product One and Product Two?
Product One Product Two
A) $8.50 $130
B) $5.00 $76.47
C) $42.50 $650
D) $5.00 $26.00
In process costing, each department computes the product cost of ________.
A) completed goods transferred out of the department only
B) completed goods waiting to be sold only
C) uncompleted goods in the department only
D) uncompleted goods in the department and completed goods transferred out of the
department
A major drawback of using historical results for judging current performance is that
________.
A) past results may be inaccurate
B) results may refer to a different manager
C) inefficiencies may be concealed in past results
D) managers may have cooked the books
LIFO uses the ________ costs to measure the cost of goods sold.
A) latest
B) earliest
C) average
D) weighted-average
Which of the following is NOT a component of the operating budget?
A) sales budget
B) operating expense budget
C) capital budget
D) budgeted income statement
Gerald Eiche Company uses a job-order costing system and has the following data
available:
Beginning Direct Materials Inventory $26,000
Beginning Work-In-Process Inventory $64,000
Beginning Finished Goods Inventory $58,000
Direct materials purchased on account $148,000
Direct materials requisitioned $82,000
Direct labor cost incurred $130,000
Factory overhead incurred $146,000
Cost of goods completed $292,000
Cost of Goods Sold $260,000
Overhead application rate (based on direct labor cost) 125%
The journal entry to record the cost of goods sold would include a ________.
A) Debit to Finished Goods Inventory for $292,000
B) Credit to Finished Goods Inventory for $260,000
C) Credit to Work-In-Process Inventory for $260,000
D) Credit to Cost of Goods Sold for $292,000
The following information pertains to the Southern Division of Swenson Company:
Net Sales $5,000
Variable Costs:
Cost of merchandise sold 1,200
Operating expenses 450
Fixed costs:
Controllable by segment manager 600
Controllable by others 250
Unallocated costs 750
The contribution by segment is ________.
A) $2,350
B) $2,500
C) $2,750
D) $3,350
A payment on bonds payable will be reported in the ________ section of the statement
of cash flows.
A) operating activities only
B) investing activities
C) financing activities
D) noncash investing and financing activities
Goyette Company processes copper ore into two products, C and U. The ore costs $5
per pound and conversion costs are $15 per pound. Goyette Company plans to produce
40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of
ore. Product C sells for $30 per pound and Product U sells for $40 per pound. Assume
the company uses the relative-sales-value method of allocating joint costs. What
amount of joint costs is allocated to Product C?
A) $400,000
B) $514,286
C) $720,000
D) $800,000
Which of the following adjustments to after-tax operating income is used to
approximate cash income for EVA?
A) expensing research and development costs
B) using LIFO inventory method
C) deducting after tax interest expense
D) using taxes paid rather than tax expense
Johnston Company wants to double production of Product X from 1,000 units to 2,000
units. The variable manufacturing cost per unit is $10. The variable nonmanufacturing
cost per unit is $20. There are no fixed costs. The selling price per unit is $50. What is
the incremental cost of the proposed change?
A) $10,000
B) $20,000
C) $30,000
D) $60,000
In a process costing system, which of the following entries is prepared to transfer direct
materials from storage to the cooking process?
A) Debit Direct Materials Inventory, Credit Work-In-Process Inventory—Cooking
B) Debit Direct Materials Inventory, Credit Accounts Payable
C) Debit Work-In-Process Inventory—Cooking, Credit Work-In-Process Inventory—
Storage
D) Debit Work-In-Process Inventory—Cooking, Credit Direct Materials Inventory
Under accrual basis accounting, research and development expenses for new products
are recorded as ________.
A) assets and written off systematically over the expected life
B) assets and expensed when paid in cash
C) assets and expensed when the related products are sold
D) expenses immediately
The following information pertains to Kumperor Company:
Average total assets $100,000
Total current liabilities $30,000
Total expenses $60,000
Total liabilities $35,000
Total revenues $80,000
Invested capital is defined as total assets. What is the return on investment?
A) 20%
B) 60%
C) 70%
D) 160%
The following data was obtained for a company that makes statues:
Standard Inputs Expected Standard Price
For Each Unit of Output Per Unit of Input
Direct material 5 pounds $12 per pound
Direct labor 1.5 hours $12 per hour
During the month of July, the company actually produced 1,000 statutes, which is 100
units less than expected. Direct material purchased and used amounted to 5,500 pounds
at a cost of $12.50 per pound. Actual direct labor was 1,450 hours at an actual cost of
$13.00 per hour.
Required:
A) Compute the price and quantity variances for direct materials.
B) Compute the price and quantity variances for direct labor.
The following information is available for Half Price Books Inc. and its two divisions,
Books and Periodicals:
Whole Books Periodicals
Company Division Division
Net Sales $100,000 $50,000 $50,000
Fixed Costs Controllable
By Division Manager 26,500 22,500 4,000
Fixed Costs Not Controlled
By Division Manager 18,000 15,000 3,000
Variable Costs:
Cost of Merchandise Sold 24,500 17,500 7,000
Operating Expenses 17,400 10,000 7,400
Unallocated Costs 4,000
What is the contribution margin for the Periodicals Division?
A) $29,600
B) $32,600
C) $35,600
D) $43,000
On January 1, 2014, a company had 100 units of inventory. A company acquired 100
units of inventory on January 31, 2014 and 100 units on December 1, 2014. The
company sold 100 units on December 31, 2014, which was the company’s only sale.
Under FIFO, the cost of goods sold would come from ________.
A) the purchase cost of beginning inventory
B) the purchase cost on January 31, 2014
C) the purchase cost on December 1, 2014
D) an average of the cost over the two purchase dates
The ” break-even” cash inflow for an investment project is the point at which
________.
A) the present value of the variable cost of future cash flows equals the present value of
the fixed cost of future cash flows
B) the present value of the variable cost of future cash flows equals the present value of
the variable cost of past cash flows
C) the net present value of the investment project is zero
D) the total cash revenues equal total cash expenses
The flexible budget variance for variable overhead costs is composed of a(n) ________
variance and a(n) ________ variance.
A) efficiency; effective
B) spending; rate
C) quantity; efficiency
D) spending; efficiency
In an efficient capital market, the appropriate investment strategy is risk control,
________ and ________.
A) low diversification; high turnover of securities
B) low diversification; low turnover of securities
C) high diversification; high turnover of securities
D) high diversification; low turnover of securities
The absorption costing approach applies fixed overhead costs to products as though
they have a ________ pattern.
A) mixed cost behavior
B) variable cost behavior
C) step cost behavior
D) fixed cost behavior
Inspection costs of incoming raw materials are ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
Santelle Company processes copper ore into two products, C and U. The ore costs $5
per pound and conversion costs are $15 per pound. Santelle Company plans to produce
40,000 pounds of Product C and 20,000 pounds of Product U from 60,000 pounds of
ore. Product C sells for $30 per pound and Product U sells for $40 per pound. Assume
the company uses the relative-sales-value method of allocating joint costs. What
amount of joint costs is allocated to Product U?
A) $0
B) $400,000
C) $480,000
D) $685,714
