The following data points are available. This is an example of a ________ cost.
Units Costs
600 $560
650 $565
800 $580
900 $590
A) variable
B) fixed
C) mixed
D) none of the above
According to the Financial Executives Institute, a function of the treasurer is ________.
A) reporting and interpreting
B) short-term financing
C) protection of assets
D) government reporting
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
Sanchez Company has no beginning and ending inventories, and reports the following
data about its only product:
Direct materials used $100,000
Direct labor $80,000
Fixed indirect manufacturing $100,000
Fixed selling and administrative $170,000
Variable indirect manufacturing $20,000
Variable selling and administrative $90,000
Selling price(per unit) $100
Units produced and sold 12,000
Sanchez Company uses the absorption approach to prepare the income statement. What
is the manufacturing cost of goods sold?
A) $270,000
B) $300,000
C) $390,000
D) $500,000
Laskowski Company manufactures a part for its production cycle. The annual costs per
unit for 5,000 units of the part are as follows:
Per Unit
Direct materials $3.00
Direct labor 5.00
Variable factory overhead 4.00
Fixed factory overhead 2.00
Total costs $14.00
The fixed factory overhead costs are unavoidable. Hendricks Company has offered to
sell 5,000 units of the same part to Laskowski Company for $14 per unit. The facilities
currently used for the part could be used to make 5,000 units annually of a new product
that would contribute $5 a unit to fixed expenses. No additional fixed costs would be
incurred with the new product. Laskowski Company should ________.
A) make the part to save $5,000
B) make the part to save $15,000
C) make the new product and buy the part to save $5,000
D) make the new product and buy the part to save $15,000
In job-order costing, a Debit to Work-In-Process Inventory is used to record ________.
A) a sale of merchandise
B) a purchase of direct materials
C) the cost of goods completed
D) a requisition of direct materials for production area
Under absorption costing, fixed manufacturing costs are used to calculate ________ on
the income statement.
A) contribution margin
B) manufacturing cost of goods sold
C) total variable costs
D) total fixed costs
All other things equal, a higher current ratio indicates that ________.
A) a company has excess cash to pay liabilities
B) a short-term creditor is likely to be paid in full and on time
C) a company’s long-term debt is coming due within the next year
D) a company’s short-term debt is coming due within the next year
The following information pertains to a segment of the Marian Company. Invested
capital is defined as total assets. The weighted average cost of capital is 10%. The ROI
of the segment before the project is 20%. The ROI of the segment after the project is
18%. The manager is evaluated based on the segment’s economic profit. A project
earning a ROI of 12% should be ________.
A) accepted
B) rejected
C) compared to the company’s ROI
D) compared to the company’s residual income
________ is a capital budgeting model that ignores the time value of money and
focuses on the profitability of an investment project.
A) Payback model
B) Internal rate of return model
C) Accounting rate of return model
D) Real options model
Rework costs for manufactured products are a form of ________ costs.
A) prevention
B) appraisal
C) internal failure
D) external failure
Helium Company has the following information available:
Selling price per unit $5.00
Variable cost per unit $3.50
Total fixed costs $90,000.00
Targeted net income $30,000.00
How many units must be sold to achieve the targeted net income?
A) 10,000 units
B) 27,000 units
C) 45,000 units
D) 80,000 units
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
The first step in regression analysis is to plot the cost data against each potential cost
driver because the plots may show ________.
A) nonlinear trends in the data only
B) outliers only
C) nonlinear trends in the data and outliers
D) missing cost data
The ________ system is better suited for a single physical unit or a few similar units.
A) process-costing
B) job-order costing
C) activity-based costing
D) activity-based management
Donnie Company has the following information:
Month Budgeted Sales
January $80,000
February 85,000
March 92,000
April 79,000
Budgeted Operating Expenses Per Month
Wages $15,000
Advertising 12,000
Depreciation 3,000
Other expenses 4% of sales
All cash expenses are paid as incurred. What are the total operating expenses budgeted
for the month of January?
A) $30,000
B) $30,040
C) $31,200
D) $33,200
The internal rate of return method and the ________ method usually result in the same
investment decisions.
A) payback period
B) accounting rate of return
C) net present value
D) return on investment
When evaluating short-term special order decisions, which of the following types of
income statements should be used?
A) method used for external reporting
B) method that follows U.S. Generally Accepted Accounting Principles
C) absorption approach
D) contribution approach
Which of the following methods of allocating service department costs to user
departments is superior?
A) The step down method is superior because it is easy to understand.
B) The direct method is superior because it recognizes the support provided between
service departments.
C) The direct and step down methods allocate the same amount of total costs so both
methods are comparable.
D) The step down method is superior because it recognizes the support provided
between service departments.
What is the sequence of steps(order of preparation) for the operating budget?
A) sales budget, operating expense budget, purchases and cost of goods sold budget
B) sales budget, capital budget, operating expense budget
C) sales budget, purchases and cost of goods sold budget, schedule of cash collections
from customers, operating expense budget
D) sales budget, schedule of cash collections from customers, purchases and cost of
goods sold budget, schedule of cash disbursements for purchases, operating expense
budget
When examining a master budget, where does a company find the planned expenditures
for facilities and equipment?
A) operating expense budget
B) capital budget
C) operating budget
D) purchases budget
If the variable cost per unit increases, what is the effect on the break-even point?
(Assume no other changes.)
A) The break-even point increases.
B) The break-even point decreases.
C) The break-even point remains the same.
D) The break-even point is zero.
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
The cash paid for taxes is included in the ________ section of the statement of cash
flows. Assume the direct method is used.
A) operating
B) investing
C) financing
D) noncash
Johannes Corporation uses a budgeted factory overhead rate to apply overhead to
production. Direct labor costs are the cost driver for overhead costs. The following data
are available for the year ending December 31, 2015:
Budgeted factory overhead costs $675,000
Actual factory overhead costs $1,200,000
Budgeted direct labor costs $250,000
Actual direct labor costs $482,000
Cost of goods sold $150,000
Direct materials inventory, December 31, 2015 $120,000
Work-in-process inventory, December 31, 2015 $100,000
Finished goods inventory, December 31, 2015 $250,000
Required:
A) Compute the budgeted factory overhead rate.
B) Compute the applied overhead costs.
C) What is the overhead variance?
D) Prorate the overhead variance to the appropriate accounts.
The degree of operating leverage for Murphy Company is 8.0 at 80,000 units of sales.
At 80,000 units of sales, the net profit is $10,000. If the sales volume decreases to
72,000 units, what is the net profit?
A) $2,000
B) $8,000
C) $10,000
D) $18,000
The county government released $100,000 as an appropriation for a counseling
program for at-risk teenagers. The program should run one year and the variable costs
for the program are $400 per teenager per year. Within the relevant range of 50 to 150
teenagers, the fixed costs for the program are $60,000. How many teenagers can the
program serve?
A) 50
B) 100
C) 150
D) 250
________ usually prepare and use the operating budget. ________ focus on the
financial budget.
A) Sales managers; the board of directors
B) Controllers and treasurers; line operating managers
C) Line operating managers; controllers and treasurers
D) The audit committee; the board of directors
In periods of inflation, the ________ method of inventory valuation provides a more
realistic net income.
A) LIFO
B) FIFO
C) average cost
D) weighted-average cost
Equipment to be sold has a book value of $4,000. The cost of the equipment is $10,000.
The cash received at sale is $2,000. What is the gain or loss on disposal of the
equipment?
A) loss on disposal of $2,000
B) loss on disposal of $4,000
C) loss on disposal of $6,000
D) gain on disposal of $2,000
Residual income is defined as ________.
A) sales less operating expenses
B) operating income divided by revenue
C) net operating profit after tax less a capital charge
D) net operating profit after tax
In an efficient capital market, the role of accounting information is to ________.
A) help investors find underpriced securities
B) help investors find overpriced securities
C) help investors find low risk securities
D) help investors identify the different degrees of risk among different securities
In job-order costing, the journal entry to record the transfer of completed goods from
the production area would include a Credit to ________.
A) Cost of Goods Sold
B) Finished Goods Inventory
C) Factory Department Overhead Control
D) Work-In-Process Inventory
