1) The cost to design and market new models would be considered a facility-level cost.
2) To calculate the weighted-average contribution margin, divide the sum of the
individual product contribution margins by the sales mix in units.
3) Lean production cuts the throughput time of a manufacturing concern.
4) Holding all other factors constant, the breakeven point will always double if fixed
expenses increase by 25%.
5) Days’ sales in receivables is a measure of a company’s ability to collect their
accounts receivable.
6) As compared to traditional volume-based costing using a single plantwide overhead
rate, activity-based costing (ABC) is a more refined costing system that reduces cost
distortion.
7) The total cost of a job shown on the job cost record is the sum of the direct labor
traced to the job and the manufacturing overhead allocated to the job.
8) Return on Investment (ROI) is defined as operating income divided by current assets.
9) CVP assumes that inventory levels will not change.
10) Budgeting includes planning for ending inventory.
11) Traditional costing systems are generally more accurate than ABC costing.
12) According to SOX, at least one member of the audit committee should be a
financial expert.
13) Fixed costs vary in total over a wide range of activity levels.
14) Implementing sustainable business practices may help an organization to grow its
market share.
15) A profit center is a responsibility center in which a manager is accountable for costs
only.
16) If there is little or no relationship between the cost and the volume, the data points
on a scatter plot will appear almost as a straight line.
17) At Lowry Company, the production staff does not share information with the
environmental staff. This scenario is an example of which type of EMA implementation
challenge?
A) Historical orientation of accounting
B) Communication issue
C) Newness of EMA
D) Hidden Cost
18) (Present value tables are needed.) Family Fun Park is evaluating the purchase of a
new game to be located on its Midway. Family Fun has narrowed their choices down to
two: the Wacky Water Race game and the Whack-A-Mole game. Financial data about
the two choices follows.
What is the total present value of future cash inflows from the Whack-A-Mole game?
A) $22,746
B) $24,579
C) $23,367
D) $45,367
19) (Present value tables are needed.) The Janus Vending Machine Company is looking
to expand its business by adding a new line of vending machines. The management
team is considering expanding into either soda machines or snack machines. Following
is the relevant financial data relating to the decision:
What is the net present value for the soda machines?
A) $(140,220)
B) $24,360
C) $65,220
D) $54,920
20) If the fixed costs increase while the sales price per unit and variable costs per unit
remain constant, which of the following statements is TRUE?
A) The contribution margin stays the same and the breakeven point increases
B) The contribution margin decreases and the breakeven point increases
C) The contribution margin stays the same and the breakeven point decreases
D) The contribution margin increases and the breakeven point decreases
21) With ________, managers look at the size of the variances between actual results
and budgeted amounts in order to determine which variances should be investigated.
A) management by variance
B) management by budget
C) management by decision
D) management by exception
22) Creditor and stockholder transactions are considered ________ activities.
A) financing
B) planning
C) operating
D) investing
23) Which of the following statements is FALSE?
A) Financial accounting helps investors make decisions
B) Financial accounting provides sufficient information for managers to effectively plan
and control operations
C) Financial accounting reports help creditors make decisions
D) Financial accounting provides external reports
24) The number of new products developed would be an example of measuring which
perspective?
A) Financial
B) Customer
C) Learning and growth
D) Internal business
25) Which of the following is an acceptable basis for the preparation of the statement of
cash flows?
A) The sum of cash, inventory, and money market accounts
B) The sum of cash and accounts receivable
C) Cash
D) The sum of cash and cash equivalents
26) At lean companies, employees tend to be multi-skilled and cross-trained to perform
a number of duties. These workers are held in high-esteem by management and are
considered to be part of a team effort, rather than a labor force to be controlled.
Consequently, this
A) increases the importance of direct labor standards
B) decreases the importance of direct labor standards
C) Both of the above
D) None of the above
27) When deciding whether or not to adopt standard costs and perform variance
analysis, management should do which of the following?
A) Examine the costs and benefits of a standard costing system
B) Update inaccurate standard costs
C) Adopt lean thinking
D) Increase automation of assembly lines
28) A table that lists items of a balance sheet in dollars and percentages for two
companies would be
A) used for vertical analysis
B) a common-size balance sheet
C) used for benchmarking
D) used for horizontal analysis
29) If a company must decrease its selling price while all of the company’s expenses
remain constant, what will happen to return on investment (ROI)?
A) ROI will decrease
B) ROI will increase
C) ROI will not be affected
D) We cannot determine the effect from the information provided
30) Palmer’s Gourmet Chocolates produces and sells assorted boxed chocolates. The
unit selling price is $50, unit variable costs are $25, and total fixed costs are $2,000.
How many boxes of chocolates must Palmer’s Gourmet Chocolates sell to breakeven?
A) 4,000
B) 40
C) 27
D) 80
31) The formula to compute the acid-test ratio is
A) (cash + short-term investments + net current receivables)/current assets
B) (cash + short-term investments + net current receivables)/current liabilities
C) current liabilities/current assets
D) currents assets/current liabilities
32) “Contribution margin per unit” is best described by which of the following?
A) Sales price per unit minus fixed cost per unit
B) Sales price per unit minus variable cost unit
C) Sales price per unit minus fixed and variable costs per unit
D) Units sold time contribution margin ratio
33) A company is evaluating a variety of different capital investment opportunities. Due
to limited funds, the company can only choose one project. What would be the best
capital budgeting method for this company to use to select a project?
A) Payback method
B) Accounting rate of return method
C) Profitability index
D) Net present value method
34) At Onyx Incorporated, direct materials are added at the beginning of the process
and conversions costs are uniformly applied. Other details include:
What is the total cost of units completed and transferred out?
A) $540,658
B) $600,000
C) $750,000
D) $628,696
35) Siberling Tire Corporation manufactures automobile tires. Siberling reported the
following budgeted (standard) and actual information for last quarter.
What is the direct labor efficiency variance for last quarter?
A) $12,250 favorable
B) $175 favorable
C) $12,250 unfavorable
D) $175 unfavorable
36) If production increases by 25%, how will total fixed costs likely react?
A) Increase by 12.5%
B) Increase by 25%
C) Decrease by 25%
D) Remain the same
37) A manufacturer of luxury yachts would use which type of costing system?
A) Process costing
B) Job costing
C) Either job or process
D) Both job and process
38) Which of the following items would be reported in the financing activities section
on the statement of cash flows?
A) Cash paid for rent
B) Cash received from sale of inventory
C) Cash received from issuance of long-term debt
D) Cash paid for land
39) Corny and Sweet grows and sells sweet corn at its roadside produce stand. The
selling price per dozen is $3.75, variable costs are $1.25 per dozen, and total fixed costs
are $750.00. What are breakeven sales in dollars?
A) $563
B) $300
C) $375
D) $1,125
40) ABC Company makes wooden furniture. Identify each of the following as either an
inventoriable product cost or a period cost. If it is an inventoriable product cost, classify
it as direct materials, direct labor, or manufacturing overhead.
A.________Insurance on the plant building
B.________Cost of shipping the furniture to the customers
C.________Assembly line workers’ wages
D.________Depreciation on plant equipment
E.________Salesmen’s salaries
F.________Cost of various types of wood
G.________Insurance on delivery trucks
H.________Plant forklift operator’s salary
41) Mama’s Favorite Appliances manufactures two products: Food Processors and
Espresso Machines. The following data are available:
The company can manufacture two food processors per machine hour and three
espresso machines per machine hour. The company’s production capacity is 1,200
machine hours per month.
To maximize profits, what product and how many units should the company produce in
a month?
A) 2,400 Food Processors and 0 Espresso Machines
B) 300 Food Processors and 675 Espresso Machines
C) 2,400 Food Processors and 3,600 Espresso Machines
D) 3,600 Espresso Machines and 0 Food Processors
42) Costs incurred to avoid manufacturing poor quality goods are considered to be
A) appraisal costs
B) activity-based costing
C) prevention costs
D) value engineering
43) How is the cost of direct materials used in production recorded?
A) Credit to manufacturing overhead
B) Credit to work in process inventory
C) Credit to direct materials expense
D) Credit to raw materials inventory
44) Use the direct method of cash flows to answer the question.
Beginning A/R: $68,000Beginning Inventory: $42,500
Ending A/R: $79,000Ending Inventory: $47,000
Credit Sales: $745,000Beginning A/P: $29,000
Cost of Goods Sold: $412,000Ending A/P: $36,300
Compute the cash received from receivables customers during the year.
45) Elite Office Furniture received a special order for 1,200 units of its executive chair
at a selling price of $90 per chair. Elite Office Furniture has enough capacity to accept
the order. No additional selling costs will be incurred. Unit costs to make and sell this
product are as follows: Direct Materials $45; Direct Labor $19; Variable Manufacturing
Overhead $6; Fixed Manufacturing Overhead $12; and Variable Selling Costs $5.
List the relevant costs (and amount) to Elite Office Furniture for this special order.
46) Discuss at least four differences between financial accounting and managerial
accounting.
47) Standard Products Company recognizes variances from standards at the earliest
opportunity, and the quantity of direct materials purchased is equal to the quantity used.
The following information is available for the most recent month. Assume the
allocation base for fixed overhead costs is the number of units.
Direct MaterialsDirect Labor
Standard quantity/unit6.00 lbs.2.5 hrs.
Standard price/lb. or hr.$8.10/lb.$8.00/hr.
Actual quantity/unit6.25 lbs.2.8 hrs.
Actual price/lb. or hr.$8.00/lb.$7.50/hr
Price variance$562.50 F$1,260.00 F
Quantity/Efficiency variance$1,822.50 U$2,160.00 U
Static budget volume800 units
Actual volume900 units
Actual overhead cost$11,000
Standard variable overhead cost$5/unit
Standard fixed overhead cost$5,600
Overhead flexible budget variance$900 U
Production volume variance$700 F
Journalize the purchase and usage of direct materials including the related variances.
48) The Hawn Corporation bought a new machine that cost $150,000 with a 10-year
life and a residual value of $20,000. The company plans to generate annual cash inflows
of $40,000 over 10 years. Calculate the accounting rate of return.
49) The law firm of Lyons & Lyons uses a job costing system to accumulate
client-related costs. The indirect cost allocation rate is 80% of direct labor cost. Staff
time is charged at a rate of $65 per labor hour. A recent job for a client involved 30 staff
labor hours by staff lawyers.
Compute the cost of the job.
50) Use the direct method of cash flows to answer the question.
Beginning A/R: $68,000Beginning Inventory: $42,500
Ending A/R: $79,000Ending Inventory: $47,000
Credit Sales: $745,000Beginning A/P: $29,000
Cost of Goods Sold: $412,000Ending A/P: $36,300
Calculate the cost of merchandise purchased during the year.
51) Why do service firms not have inventory costs pertaining to items to be sold? What
type of costs do they have?
52) Johnson Scooter Company is considering whether or not to expand into a new area
of the US. They produce high-performance gas scooters with moderate gas mileage, but
have developed a new battery technology that combines a small amount of electrical
energy with the existing gas power. This new technology will significantly increase the
fuel economy of their bikes. They will need to spend $5,075,000 to retrofit a building to
incorporate the new fuel-saving technology. New worker training will cost $1,984,000.
Other expenses involved in getting the new plant up and running amount to $332,000.
The CEO anticipates that, with gas price increases, the profit potential of this expansion
is $7,588,000. Do the benefits outweigh the costs or do the costs outweigh the benefits,
and by how much?