In job-order costing, the journal entry to record the completion of goods would include
a Debit to Cost of Goods Sold.
A merchandising company has Raw Materials Inventory.
In recent years, companies in the United States have discovered it is more cost effective
to prevent defects than to detect and correct them.
The direct method of allocating service department costs ignores other service
departments when allocating service departments’ costs to user departments.
Cash dividends are reported as an expense on the Income Statement.
The balance sheet shows a company’s financial status at only one point in time.
The last step in calculating the production-cost report is to apply unit costs to units
completed and to units in the ending work-in-process inventory.
Analysts focus on free cash flow from the statement of cash flows.
Once a management control system is designed for a nonprofit organization, it does not
have to be altered in the future.
The matching convention attempts to match revenues and assets to a particular period.
Marginal cost is the additional cost resulting from producing and selling one additional
unit.
The accounting rate of return model ignores the time value of money.
Line managers are directly involved with making and selling the organization’s products
or services.
Inventory turnover is the number of times the average inventory is sold per year.
A static budget is prepared for one expected level of activity.
Possible definitions of invested capital for purposes of calculating return on investment
include total assets and total stockholders’ equity.
Imprecise but relevant information can be useful.
U.S. corporations are required to use the same method of calculating depreciation on
both their income tax return and their annual financial statements.
The most popular inventory system that companies use for process costing with
beginning inventories is the weighted-average method.
Activity-based costing systems focus on accumulating costs into key activities instead
of departments.
Organizational learning may be monitored by measuring employee turnover.
Two common methods for comparing alternative investments are the total project
approach and the conversion approach.
Ideal standards make no provision for waste, spoilage and machine breakdowns.
In the relevant range, fixed overhead costs do not vary with cost driver activity.
Backflush costing has only two categories of costs that include materials and
conversion costs.
Managers may use different markup rates for different categories of costs.
Discounted-cash-flow models focus on a project’s cash inflows and cash outflows
without regard to the time value of money.
Line operating managers usually prepare and use the operating budget.
If regression analysis is used when measuring cost behavior, plotting the cost against
each of the potential cost drivers is not necessary.
Dividends reduce stockholders’ equity when paid.
In a partnership, a partner’s capital account is increased by ________.
A) dividends
B) a partner’s share of net income
C) contributions made by a partner
D) B and C
Black Company manufactures gadgets in one department. The following information is
available:
Work-In-Process Inventory, beginning 0
Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000
Direct materials added $240,000
Direct labor $164,780
Factory overhead $82,000
The units in the ending Work-In-Process Inventory are 0 percent complete with respect
to direct materials and 50 percent complete with respect to conversion costs. Direct
materials are added at the end of the process. The total cost of units completed and
transferred is ________.
A) $90,240
B) $411,360
C) $459,360
D) $488,400
A telephone hotline is established for customers to call with questions about a new
electronic device. This is an example of the ________ function in the ________.
A) marketing; value chain
B) distribution; value chain
C) customer service; value chain
D) marketing; product life cycle
Which of the following costs is NOT an inventoriable cost for a manufacturing firm?
A) Marketing Expense
B) Factory Supervisor’s Salary Expense
C) Wages Expense for security guard in factory
D) Wages Expense for forklift operator in factory
Nonoperating items on a multiple-step income statement do NOT include ________.
A) interest income
B) interest expense
C) gain from disposal of a fixed asset
D) selling expenses
Huntsman Company’s variable selling and administrative expenses are $48,000 at a
production level of 6,000 units. If the production level is 8,000 units, what are the
variable selling administrative expenses?
A) $48,000
B) $56,000
C) $64,000
D) $80,000
The adjusting entry for ________ increases expenses and decreases assets.
A) wages expense
B) depreciation expense
C) unearned revenue
D) accruing interest expense
The flexible budget variance for fixed overhead costs equals the ________ variance.
A) efficiency
B) spending
C) static budget
D) operating budget
Which of the following costs is a fixed cost?
A) cost of dairy ingredients used to produce ice cream
B) depreciation expense on factory building
C) fuel used by delivery trucks
D) labor wages of workers who mix dairy ingredients to make ice cream
Rate variances are the same as ________ variances. Efficiency variances are the same
as ________ variances.
A) spending; effective
B) activity; static
C) usage; quantity
D) price; quantity
Cash collections from customers who purchased goods on credit will decrease
________.
A) Accounts Receivable
B) Accounts Payable
C) Cash
D) Retained Earnings
The account “Noncontrolling Interests” as reported on a balance sheet shows ________.
A) the parent company’s interest in a subsidiary
B) the subsidiary’s interest in a parent company
C) the outside stockholders’ interest in a subsidiary
D) the outside stockholders’ interest in a parent company
A management control system includes the techniques to gather and use information to
________.
A) motivate employee behavior
B) evaluate performance
C) make planning and control decisions
D) all of the above
Any event that affects the financial position of an organization and requires recording is
called a(n) ________.
A) transaction
B) account
C) posting
D) recognition principle
Rozman Company produces calendars in a one-department process. The following data
is available for the past month:
Work-in-process inventory, beginning 0
Units started 15,000
Units completed and transferred 12,000
Work-in-process inventory, ending 3,000
Direct materials added $30,000
Direct labor $20,700
Factory overhead costs $10,350
The units in process at the end of the month are 100 percent complete with respect to
direct materials and 50 percent complete with respect to conversion costs. What are the
equivalent units for conversion costs for the month?
A) 3,000
B) 12,000
C) 13,500
D) 15,000
The IMA’s ethical standard for integrity includes all of the following EXCEPT
________.
A) each member has a responsibility to mitigate actual conflicts of interest
B) each member has a responsibility to refrain from engaging in any conduct that would
prejudice carrying out duties ethically
C) each member has a responsibility to abstain from engaging in or supporting any
activity that would discredit the profession
D) each member has a responsibility to monitor subordinates’ activities to ensure
compliance with the ethical standard
Gonzalez Company produces a part that is used in the manufacture of one of its
products. The annual costs associated with the production of 5,000 units of this part are
as follows:
Direct materials $100,000
Direct labor 56,000
Variable factory overhead 72,000
Fixed factory overhead 168,000
Total costs $396,000
Of the fixed factory overhead costs, $72,000 are avoidable. Another company has
offered to sell 5,000 units of the same part to Gonzalez for $70.00 per unit. The
facilities currently used to make the part can be rented out to another manufacturer for
$72,000 per year. What should Gonzalez Company do?
A) Make the part to save $22,000.
B) Make the part to save $50,000.
C) Buy the part and rent the facilities to save $22,000.
D) Buy the part and rent the facilities to save $72,000.
In the step-down method, the first service department used in the sequence to allocate
service department costs is the department that renders the ________.
A) greatest service as measured by physical capacity
B) greatest service as measured by total employees
C) greatest service as measured by costs to the other service departments
D) greatest service as measured by costs to the producing departments
It may be difficult to trace costs to products or services if the costs are ________.
A) volume-driven
B) driven by activities directly related to volume
C) driven by multiple cost drivers
D) none of the above
Maureen Company has the following income statement for the year ending December
31, 2016:
Sales $1,562
Cost of goods sold 806
Gross profit 756
Operating expenses:
Wage expense 110
Depreciation expense 76
Rent expense 36
Miscellaneous expense 70
Total operating expenses 292
Operating income 464
Income tax expense 162
Net income $302
If Maureen Company prepares a common size income statement, what will they report
for Wage expense?
A) 7.0%
B) 10.2%
C) 34.4%
D) 66.1%
What type of information is used in making nonroutine decisions, such as the decision
to replace a traditional assembly line with fully automated robots?
A) scorekeeping information
B) attention directing information
C) problem solving information
D) auditing information
According to the Financial Executive, which of the following situations create pressures
for unethical behavior?
A) emphasis on long-term results
B) upward trends in the economy
C) ignoring small lapses in ethical behavior
D) rising stock prices
________ is the degree to which an organization minimizes the ________ used to
achieve an objective.
A) Efficiency; costs
B) Efficiency; resources
C) Effectiveness; resources
D) Effectiveness; costs
When evaluating alternative uses of a capital asset, equivalent decisions are reached
using the opportunity cost approach and ________.
A) cost-volume-profit analysis
B) contribution margin approach
C) absorption costing approach
D) incremental analysis
Discriminatory pricing occurs when a firm sets ________.
A) prices below their competitors’ prices
B) different prices for a product in different regions of the United States due to a cost
differential in providing the product
C) different prices for different customers for the same product or service
D) discounts for all customers if they pay within a certain number of days after
purchase
Daisy Company is considering the purchase of equipment for $400,000. The equipment
will have a ten year life with no terminal salvage value. Straight-line depreciation will
be used for tax purposes. It is expected that the equipment will generate annual sales of
$180,000 and annual production costs, exclusive of depreciation, of $120,000. The tax
rate is 40%. What is the net annual after-tax cash flow from the equipment?
A) $16,000 cash inflow
B) $36,000 cash inflow
C) $52,000 cash inflow
D) $60,000 cash inflow
An investor that has effective control over an investee usually owns ________ of the
investee’s stock.
A) less than 20 percent
B) more than 20 percent
C) more than 40 percent
D) more than 50 percent
Slowinski Company has the following sales budget:
Month Cash Sales Credit Sales
September $100,000 $300,000
October 125,000 180,000
November 130,000 210,000
December 135,000 190,000
Collections of credit sales are 50% in the month of sale, 40% in the month following
sale, and 10% two months following sale. No uncollectible accounts are expected. What
are the estimated cash collections in November?
A) $130,000
B) $197,000
C) $327,000
D) $337,000
The marginal tax rate for a company is the ________.
A) average tax rate for the company
B) highest possible tax rate that may be imposed on the company by IRS
C) lowest tax rate that may be imposed on the company by IRS
D) tax rate paid on additional amounts of pretax income
In agency theory, risk to the manager is defined as ________.
A) probability that a desired outcome will not be achieved
B) possibility that performance will be measured inaccurately
C) probability that an undesirable outcome will be achieved
D) the influence of uncontrollable factors on a manager’s performance
Johnson Company’s power plant provides electricity to two producing departments. The
annual budget for the power plant shows the following:
Budgeted fixed costs $500,000
Budgeted variable costs per kilowatt hour $1
Actual annual costs incurred by the power plant were:
Actual fixed costs $215,000
Actual variable costs $350,000
Additional annual data follows:
Producing Department 1 Producing Department 2
Capacity available 250,000 kilowatt hours 150,000 kilowatt hours
Capacity used 270,000 kilowatt hours 165,000 kilowatt hours
Required:
A) Compute the amount of fixed costs allocated to each producing department.
B) Compute the amount of variable costs allocated to each producing department.
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
According to the Financial Executives Institute, a function of the controller is
________.
A) investments
B) short-term financing
C) provision of capital
D) reporting and interpreting
When managers graph a linear cost function with one cost driver, the intercept
represents the ________ cost and the slope represents the ________ cost.
A) variable; fixed
B) fixed; variable
C) fixed; mixed
D) variable; mixed