Allocated equally among divisions
An activity base is used to charge service department expenses. Match the following
activity bases with the appropriate department (a-h).
a. Purchasing
b. Payroll accounting
c. Human resources
d. Maintenance
e. Information systems
f. Marketing
g. President’s Office
h. Transportation
Answer:
Bar code scanners are now being used to track incoming materials and to electronically
transmit this data. Scanners have replaced which of the following?
a. receiving report
b. materials requisition
c. materials ledger
d. job cost sheet
Answer:
In a profit center, the department manager has responsibility for and the authority to
make decisions that affect
a. not only costs and revenues, but also assets invested in the center
b. the assets invested in the center, but not costs and revenues
c. both costs and revenues for the department or division
d. costs and assets invested in the center, but not revenues
Answer:
Under absorption costing, the amount of income reported from operations can be
increased by producing more units than are sold.
a. True
b. False
Answer:
The expected period of time that will elapse between the date of a capital investment
and the complete recovery in cash of the amount invested is called the cash payback
period.
a. True
b. False
Answer:
Which of the following items appear on the corporate income statement before income
from continuing operations?
a. cumulative effect of a change in accounting principle
b. income tax expense
c. extraordinary gain
d. loss on discontinued operations
Answer:
If fixed costs are $250,000, the unit selling price is $125, and the unit variable costs are
$73, what is the break-even sales (units)?
a. 3,425 units
b. 2,381 units
c. 2,000 units
d. 4,808 units
Answer:
Using vertical analysis of the income statement, a company’s net income as a
percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales
must be 85%.
a. True
b. False
Answer:
If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales,
the contribution margin ratio is 40%.
a. True
b. False
Answer:
A practical approach that is frequently used by managers when setting normal long-run
prices is the
a. cost-plus approach
b. economic theory approach
c. price graph approach
d. price skimming
Answer:
Which of the following budgets is not directly associated with the production budget?
a. direct materials purchases budget
b. sales budget
c. capital expenditures budget
d. direct labor cost budget
Answer:
Below is budgeted production and sales information for Bluebird Company for the
month of December:
The unit selling price for product XXX is $5 and for product ZZZ is $14.
Budgeted production for product XXX during the month is
a. 522,000 units
b. 552,000 units
c. 518,000 units
d. 520,000 units
Answer:
Labor costs that are directly traceable to the product are part of factory overhead.
a. True
b. False
Answer:
Department K had 3,000 units 45% completed in process at the beginning of the period;
17,000 units completed during the period; and 1,200 units 40% completed at the end of
the period. What was the number of equivalent units of production for the period for
conversion if the first-in, first-out method is used to cost inventories? Assume the
completion percentage applies to both direct materials and conversion cost.
a. 18,350
b. 16,310
c. 15,650
d. 16,130
Answer:
The following budget data are available for Sharp Company:
If factory overhead is to be applied based on direct labor dollars, the predetermined
overhead rate is
a. 199%
b. 196%
c. $14.92
d. $15.65
Answer:
Which of the following costs incurred by a tool manufacturer would not be included in
conversion costs?
a. factory supervisor’s salary
b. machine operator’s wages
c. raw steel
d. factory maintenance personnel supplies
Answer:
A widely used activity base for developing factory overhead rates in highly automated
settings is
a. direct labor hours
b. direct labor dollars
c. direct materials
d. machine hours
Answer:
The Cavy Company estimates that the factory overhead for the following year will be
$1,250,000. The company has decided that the basis for applying factory overhead
should be machine hours, which is estimated to be 40,000 hours. The machine hours for
the month of April for all of the jobs was 4,780. If the actual factory overhead totaled
$141,800, determine the over- or under applied amount for the month.
Answer:
The treasurer of Calico Dreams Company has accumulated the following budget
information for the first two months of the coming fiscal year:
The company expects to sell about 35% of its merchandise for cash. Of sales on
account, 80% are collected in full in the month of the sale, and the remainder in the
month following the sale. One-fourth of the manufacturing costs are paid in the month
in which they are incurred, and the other three-fourths in the following month.
Depreciation, insurance, and property taxes represent $6,400 of the monthly selling and
administrative expenses. Insurance is paid in February, and property taxes are paid
yearly in September. A $40,000 installment on income taxes is to be paid in April. Of
the remainder of the selling and administrative expenses, one-half are to be paid in the
month in which they are incurred and the balance in the following month. Capital
additions of $250,000 are paid in March.
Current assets as of March 1 are composed of cash of $45,000 and accounts receivable
of $51,000. Current liabilities as of March 1 are accounts payable of $121,500
($102,000 for materials purchases and $19,500 for operating expenses). Management
desires to maintain a minimum cash balance of $25,000.
Prepare a monthly cash budget for March and April.
Answer:
Prepare an income statement (through income before income tax) for presentation to
management, using the following data from the records of Greenway Manufacturing
Company for November of the current year:
Answer:
Paduka Industries has several divisions. The Eastern Division has $350,000 of invested
assets, income from operations of $200,000, and residual income of $151,000.
Determine the minimum acceptable rate of return on divisional assets.
Answer:
The Ruff Jeans Company produces two different types of jeans, Simple Life, and Fancy
Life. The company sales budget estimates that 350,000 of the Simple Life jeans and
200,000 of the Fancy Life jeans will be sold during the current year. The production
budget requires 353,500 units of Simple Life and 196,000 Fancy Life be manufactured.
The Simple Life jeans require 3 yards of denim material, a zipper, and 25 yards of
thread. The Fancy Life jeans require 4.5 yards of denim material, a zipper, and 40 yards
of thread. Each yard of denim material costs $3.25, the zipper costs $0.75 each, and the
thread is $0.02 per yard. There is enough material to make 2,000 jeans of each type at
the beginning of the year. The desired amount of materials left in ending inventory is to
have enough to manufacture 3,500 jeans of each type. Prepare a direct materials
purchases budget.
Answer:
Piper Rose Boutique has been approached by the community college to make special
polo shirts for the faculty and staff. The college is willing to buy 4,000 polos with its
own design for $6.00 each. The company normally sells its shirts for $12.00 each. The
company has enough excess capacity to make this order. A breakdown of their costs is
as follows:
Should Piper Rose Boutique accept the special order made by the college?
Answer:
A stream of equal cash flow amounts
Match the definition that follows with the term (a’“f) it defines.
m. Capital rationing
n. Annuity
o. Capital investment analysis
p. Internal rate of return method
q. Payback period
r. Accounting rate of return
Answer:
A company reports the following:
Sales $2,520,000
Average total assets 1,400,000
Determine the ratio of sales to assets. Round your answer to one decimal place.
Answer:
Which of the following businesses would normally use job order costing systems and
which would normally use process costing systems?
Tax consultant Paint manufacturer Nail manufacturer Videographer
Lotions and cosmetics manufacturer Web design
Answer:
The Beauty Beyond Words Salon uses an activity-based costing system in its beauty
salon to determine the cost of services. The salon has determined the costs of services
by activity as follows:
Calculate the cost of services for a highlight.
Answer: