Treasury stock is a deduction from total stockholders’ equity.
An operating budget is the major part of the master budget that focuses on the balance
sheet and supporting schedules.
Noncontrolling interests affect only the balance sheet of consolidated financial
statements.
When using the NPV model, it is assumed that we can borrow or lend money at the
same interest rate.
Cost of goods sold is the cost of the merchandise that a company acquires or produces
and then sells.
Joint cost allocations should be ignored for decisions such as selling a joint product at
the split-off point or processing it further.
Noncontrolling interests appear on a consolidated balance sheet when a parent company
owns more than 50 percent but less than 100 percent of a subsidiary’s common stock.
Accountants initially collect costs by some natural classification such as activities
performed.
Dividends paid are considered an expense on the income statement.
Some backflush costing systems eliminate the Finished Goods Inventory account.
In regression analysis, a lower coefficient of determination is better than a higher one.
The payback model measures profitability as well as how quickly investment dollars
are recouped.
Amounts due from customers are called accounts payable.
In regression analysis, a lower coefficient of determination is better than a higher one.
In a manufacturing firm, the Finished Goods Inventory account is only found on the
balance sheet.
When selecting a cost driver for a budgeted overhead rate, no one cost driver is
appropriate for all situations.
Efficiency is the degree to which a goal or objective is met.
When adding or dropping a product line, fixed avoidable costs may be relevant costs.
A subsidiary is a company that owns more than 50 percent of another company’s
outstanding common stock.
A management by objectives approach uses responsibility center budgets.
An effective budget process communicates from the top down, but not from the bottom
up.
The behavioral implications of an accounting system refer to the system’s effects on the
firm’s customers.
Company activities such as processing orders, billing customers, and moving materials
can be cost objects.
The cost of new equipment is relevant in deciding whether to keep or replace old
equipment.
Job-order costing only applies to specific jobs with a single physical unit.
Capital turnover equals revenue divided by invested capital.
Reports prepared by managerial accountants have a past orientation.
The real rate of interest equals the risk-free rate plus the business-risk rate.
Owners’ equity represents the excess cash a company has made.
Period costs include selling and administrative expenses.
Full cost means the total of all variable manufacturing costs and all fixed manufacturing
costs.
Corbin Company has prepared the following sales budget:
Month Cash Sales Credit Sales
September $99,000 $250,000
October 225,000 180,000
November 310,000 210,000
December 94,000 170,000
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
is the expected balance in Accounts Receivable at November 30?
A) $77,500
B) $105,000
C) $123,000
D) $210,000
If we account for a product as a by-product, we allocate ________ to it.
A) joint costs
B) separable costs
C) avoidable costs
D) separable and joint costs
Regression analysis uses ________ to fit a cost function to all the historical data.
A) visual placement
B) engineering analysis
C) statistical analysis
D) activity analysis
Which of the following events do NOT affect cash flows from operating activities?
Assume the direct method is used.
A) cash sale of merchandise inventory
B) cash purchase of equipment
C) cash purchase of inventory
D) cash paid for employees’ wages
The schedule of cash disbursements for operating expenses does NOT have ________.
A) rent expense
B) insurance expense
C) wages expense
D) amortization expense on patents
Transfer prices are ________.
A) revenues of the segment producing the transferred product
B) costs of the segment acquiring the transferred product
C) costs of the segment producing the transferred product
D) revenues of the segment producing the transferred product and costs of the segment
acquiring the transferred product
Using the net present value method, managers sum the present values of all expected
future cash flows from the project and ________.
A) add the initial investment
B) subtract the initial investment
C) ignore the initial investment
D) add the depreciation expense
The annual after-tax cash operating inflows of a newly purchased machine are expected
to be $60,000. The expected useful life of the machine is 5 years. The after-tax
minimum desired rate of return, including an inflation factor, is 25%. The inflation rate
is 10% per year. After adjusting for inflation, what is the rate of return used to find the
net present value of the machine?
A) 10%
B) 15%
C) 25%
D) none of the above
Variable selling expenses affect the calculation of ________ on the contribution income
statement. Variable selling expenses do NOT affect the calculation of ________ on the
absorption income statement.
A) gross margin; contribution margin
B) operating income; contribution margin
C) contribution margin; gross margin
D) gross margin; operating income
Butters 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
manufacturing costs?
A) 34%
B) 52%
C) 61%
D) none of the above
Starbucks generates many financial reports to evaluate the operating performance of
each store at the end of each quarter. The financial reports are an example of ________.
A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing
Which of the following is an example of a strategic management decision that uses cost
information?
A) determining the ending balance of Merchandise Inventory for financial reporting to
external users
B) determining the product mix
C) assessing a cost control program in a factory
D) determining the amount of Cost of Goods Sold for financial reporting to external
users
Stevie Company has two service departments, Maintenance and Human Resources.
Stevie Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,000 2,000
Number of employees 16 24 40 60
If the direct method is used to allocate service department costs, then the cost allocated
from the Maintenance Department to the Mixing Department is ________.
A) $20,160
B) $25,200
C) $30,240
D) $50,400
Parrish Company had the following information available for its specialty product:
Standards for one unit of product:
Direct Materials: 5 pounds at $2 per pound
Direct Labor: 0.50 hour at $16 per hour
Materials and Labor Used to produce 8,500 units:
Direct Materials: ? pounds at $2.10 per pound
Direct Labor: 4,000 hours at $16.80 per hour
If the Direct Materials Quantity Variance is $7,000 Unfavorable, what is the actual
quantity of direct materials used?
A) 7,000
B) 42,500
C) 46,000
D) 47,000
Within the relevant range, the total amount of ________ cost changes in direct
proportion to changes in the cost driver. Within the relevant range, the total amount of
________ cost does not change in direct proportion to changes in the cost driver.
A) fixed; variable
B) variable; fixed
C) step; mixed
D) mixed; step
Which of the following costs can be canceled in the short run?
A) salary of CEO of company
B) mortgage payment on factory building
C) lease payments on two-year lease for leased equipment in factory
D) management consulting services engaged to change company logo
Consider the following activity: The installation of seats by an airplane manufacturer in
a commercial airplane. What is an appropriate cost driver for the labor resources used
for this activity?
A) number of service center hours
B) number of labor hours used to install seats
C) number of mechanic hours
D) number of engineering hours
Preferred stock has priority over common stock in ________.
A) voting rights
B) distribution of assets in liquidation
C) payment of dividends
D) B and C
In an efficient capital market, the market prices of securities ________.
A) fully reflect all the information available to the public
B) fully reflect all the information available to insiders
C) reflect some of the information available to the public
D) reflect most of the information available to the public
Which of the following costs is a variable cost?
A) rental expense for factory building for manufacturer of electronics
B) lease cost for factory machine for manufacturer of electronics
C) fuel for airplane for airline
D) depreciation expense of airplane for airline
Assume the net present value method is used to evaluate investment opportunities. A
manager is faced with several investments, but only has funding for one investment.
Which investment should be chosen?
A) the investment with the lowest net present value
B) the investment with a net present value equal to zero
C) the investment with a negative net present value
D) the investment with the largest net present value
Herman Loebl Company, a producer of salsa, has the following information:
Income tax rate 30%
Selling price per unit $8.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
The contribution margin per unit is ________.
A) $2.00
B) $3.00
C) $5.00
D) $8.00
Mary is considering leaving her current position to open an ice cream shop. Mary’s
current annual salary is $77,000. Annual ice cream shop revenue and costs are
estimated at $260,000 and $210,000, respectively. What is Mary’s annual opportunity
cost of starting the ice cream shop?
A) $50,000
B) $77,000
C) $210,000
D) $260,000
Wyoming Company has 40,000 shares of its common stock outstanding. Dakota
Company owns 35,000 shares of Wyoming Company’s stock. Which of the following
methods should Dakota Company use to account for its investment in Wyoming
Company?
A) market-value
B) equity
C) consolidated financial statements
D) cost
Presented below is the production data for six months of the year showing the mixed
costs incurred by Kennedy Company.
Month Cost Units
July $6,000 4,000
August $10,250 6,500
September $10,500 8,000
October $12,700 10,500
November $14,000 12,000
December $10,850 9,000
Kennedy Company uses the high-low method to analyze mixed costs. The total fixed
cost is ________.
A) $2,000
B) $4,500
C) $10,417
D) $10,500
The sales activity variance for ________ will always be zero.
A) sales
B) contribution margin
C) variable costs
D) fixed costs
Nicholson Company uses job order costing. Supporting documents for the
Work-In-Process Inventory account do NOT include ________.
A) labor time tickets
B) time cards
C) materials requisition forms
D) schedule of actual factory overhead costs
Switsdorf Company has the following information available for variable overhead
costs. Direct labor hours are the cost driver for variable overhead costs.
Actual variable overhead costs $5,120
Standard variable overhead costs $3.00 per hour
Actual direct labor hours 2,000 hours
Standard direct labor hours per unit 3 hours
Units produced 1,000
What is the variable overhead efficiency variance?
A) $1,000 Favorable
B) $2,000 Unfavorable
C) $2,000 Favorable
D) $3,000 Favorable
________ is the drive for some selected goal that creates effort and action toward that
goal.
A) Goal congruence
B) Managerial effort
C) Motivation
D) Personal rewards
An example of a favorable variance is ________.
A) actual revenues are less than expected revenues
B) actual expenses are less than expected expenses
C) actual material prices are greater than expected material prices
D) expected labor costs are less than actual labor costs
Joseph Industries Inc. reported the following information about the production and sale
of its only product during the first month of operations:
Selling price per unit $100.00
Sales $100,000
Direct materials used $37,500
Direct labor $36,000
Variable factory overhead $25,500
Fixed factory overhead $20,000
Variable selling and administrative expenses $2,000
Fixed selling and administrative expenses $7,500
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 1,200 units
Under variable costing, what is the variable manufacturing cost of goods sold?
A) $45,000
B) $54,000
C) $101,000
D) $119,000
Depreciation expense is recorded for ________.
A) equipment and land
B) land and buildings
C) equipment and buildings
D) equipment, land and building
Lakers Company produces two products. The following information is available:
Product X Product Y
Selling price per unit $46 $36
Variable cost per unit $38 $24
Total fixed costs are $234,000. Lakers plans to sell 21,000 units of Product X and 7,000
units of Product Y.
Required:
A) Compute the contribution margin for each product.
B) What is the expected net income?
C) Assume the sales mix is 3 units of Product X for every 1 unit of Product Y.
What is the break-even point in units for each product?
D) Assume the sales mix is 3 units of Product X for every 2 units of Product Y.
What is the break-even point in units for each product?
Jayson Company used regression analysis to predict the annual cost of indirect
materials. The results were as follows:
Indirect Materials Cost
Explained by Units Produced
Constant 14,885
Standard error of Y estimate 0.90
R-Squared 0.60
No. of observations 22
Degrees of freedom 20
X Coefficient 0.70
Standard error of coefficient 2.1876
The coefficient of determination is ________.
A) 0.60
B) 0.70
C) 0.90
D) 1.10
Distribution is the function of the value chain that involves ________.
A) the mechanism by which a company delivers products or services to the customer
B) the manner by which individuals or groups learn about the value and features of
products or services
C) the support activities provided to the customer
D) none of the above