A budget is an operating plan that may be expressed in either financial or non-financial
terms.
Preparers of managerial accounting information are generally not active participants in
the decision making process.
A variance is the difference between actual results and budgeted, or expected results.
The balanced scorecard assists in communicating the corporate strategy throughout the
organization.
Product costs are the costs related to inventory and period costs are the costs related to
the selling and administrative functions.
Measures that are predictors of your ultimate performance on a particular activity are
referred to as predictor indicators.
Which of the following items is more complicated for a manufacturing company than
for a retail operation?
a. Accounting for inventory costs
b. Trying to forecast the effects of financial decisions on the income statement
c. Both accounting for inventory costs and trying to forecast the effects of financial
decisions on the income statement
d. Neither accounting for inventory costs nor trying to forecast the effects of financial
decisions on the income statement
For the past two years, Monroe Corporation’s statement of cash flows has shown net
cash used by investing activities. Which of the following choices could explain this
result?
a. Selling of inventory on credit in excess of collections from customers
b. Sales of factory equipment
c. Purchasing investments in other company’s stock
d. Issuance of long-term debt
Another term for vertical analysis is
a. Common-size analysis.
b. Liquidity analysis.
c. Horizontal analysis.
d. Leverage analysis.
The sales of each product relative to total sales is referred to as
a. Horizontal Mix.
b. Sales Mix.
c. Managed Ratio.
d. Product line sales.
If a special order results in a positive contribution margin of $8 when the contribution
margin for regular orders is $15, which of the following decisions is the most likely to
be chosen?
a. Accept the order
b. Reject the order
c. Accept the order, but only if the customer agrees to an increase in the selling price to
match the $15 regular contribution margin.
d. Accept the order, but only if the customer agrees to an increase of $7 in the selling
price.
Work in Process Inventory decreases when
a. Raw materials are purchased.
b. Raw materials are used.
c. Products are finished.
d. Products are sold.
Common allocated fixed costs are an issue in evaluating segment performance. Answer
the following questions relating to common fixed costs.
a. What are two other terms used in referring to common costs?
b. Where are common allocated fixed costs shown on a segment margin income
statement?
c. When do traceable fixed costs become common costs?
ABC Company is considering the purchase of a new piece of equipment costing
$138,875. The equipment has a 7-year useful life and is expected to generate $24,000 in
annual cost savings. ABC has a 4% required rate of return.
Required:
a. What is the internal rate of return for the equipment (round to nearest factor)
b. Should ABC purchase the new equipment? Why or Why not?
Althea Corporation ‘s Perfume division has a segment margin is $85,000 for the current
reporting period. Total assets at the beginning of the period were $800,000 and
$900,000 at the end of the period. What is the division ‘s ROI?
a. 9.44%
b. 10%
c. 10.625%
d. None of these answer choices are correct
Tillamoke Company produces gourmet cheejes. Selected results from the most current
year were as follows:
Production manager Melinda Penland is investing the purchase of a new fermenting
station that will increase the plant ‘s production capacity. Based on her research,
Melinda thinks the station would cost $140,000 and would increase sales revenue by
$200,000 and operating profit by $32,000.
Required
a. Calculate Tillamoke ‘s current margin, asset turnover, and return on investment.
b. Calculate Tillamoke ‘s margin, asset turnover, and return on investment assuming the
company purchases the new fermenting station.
c. Assume Melinda Penland ‘s annual bonus is based on the company ‘s return on
investment. Will Melinda support the purchase of the new fermenting station? Why or
why not?
Which of the following is not a method of estimating costs?
a.Scattergraphs
b.Bar charts
c.The high-low method
d.Regression analysis
Holt Manufacturing Company produces three products in its Dallas factory. Data
relating to the products are given below:
A total of 8,200 hours are available in the Dallas facility.
Required:
a. How many hours will be required to satisfy the demand for all three products?
b. How much of each product should be produced to maximize Hold ‘s operating
income?
Jensen manufactures speakers for car stereos and applies fixed overhead based on direct
labor hours. Jensen’s fixed overhead spending variance for the year was $12,500
favorable. For the current year, the company had budgeted to produce 124,000
speakers. Jensen’s actual fixed overhead for the year was $378,100. Jensen produced
122,000 speakers and used 183,000 direct labor hours, which was the standard hours
allowed for the number of speakers produced. What was Jensen’s budgeted fixed
overhead rate per direct labor hour for the year (if necessary, round your answer to the
nearest cent)?
a. $2.00/DLH
b. $2.10/DLH
c. $2.07/DLH
d. $2.03/DLH
Walker Corporation reported total operating expenses of $120,000 on the income
statement. During the year, accounts payable increased by $7,000, accrued liabilities
increased by $5,000, and prepaid expenses decreased by $1,000. Depreciation expense
totaled $10,000. Walker uses the direct method to determine the net cash provided by
operating activities on the statement of cash flows. What is the amount of operating
expenses adjusted to a cash basis?
a. $114,000
b. $116,000
c. $120,000
d. $124,000
Period costs are expensed when they are
a. Incurred.
b. At the time of payment.
c. Entered into production.
d. None of these answer choices are correct.
Sales mix is, when a company sells more than one type of product, the sales of each
product relative to operating income.
A company’s margin of safety is the difference between current sales and breakeven
sales.
Wages of sewing machine operators making baseball jerseys is an example of:
Place and “X” in the column that corresponds to the type of activity referred to in each
scenario.
Students who have not taken an accounting class may not understand what is included
in the cost of a product. Explain the three product cost classifications, the three
manufacturing overhead cost classifications, and the difference in product and period
costs.