1) All of the following are advantages of using standard costs and variances except
A) standard costs have benchmarks managers use to judge actual costs.
B) standard costs and benchmarks are useful tools that mangers use as a basis in the
master budget.
C) the timeliness that occurs when variances are computed once each month.
D) standard costing systems simplify the bookkeeping process.
2) Rubber City Cycles manufactures carbon fiber bicycle frames for professional racing
and avid amateur cyclists. Rubber City has found a CNC (computer numerical control)
machine that will significantly reduce manufacturing waste while improving the quality
of the frames. The new CNC machine will increase annual fixed costs by $13,750, but
will decrease variable cost per unit by $150. Rubber City expects to sell 750 frames
next year.
Annual data for the current system are as follows:
By what amount will the breakeven point in dollars increase (decrease) if Rubber City
purchases the new CNC machine?
A) ($62,500)
B) $62,500
C) ($312,500)
D) $312,500
3) Sally’s neighbor recently spent $180 on fitness clothes at the Workout Shop. The
neighbor used a credit card to purchase the workout clothes and the store charged a
transaction fee of $0.33 plus a fee of 1.10% of the total cost of the clothes charged on
the credit cards. What is the total cost of the workout clothes that Sally’s neighbor paid
to purchase the workout clothes?
A) $0.33
B) $33.00
C) $1.80
D) $182.31
4) The manager at Rainbow International prepares a Cost of Quality report to report the
following expenses:
Which of the following total cost is the total cost of quality in the external failure cost
category?
A) $180,000
B) $7,500
C) $240,000
D) $680,000
E) $250,000
5) R-Cubed manufactures custom playground equipment from recycled plastics for city
school districts. The school districts are required to use a certain percentage of recycled
materials to comply with its state grants. As a result, R-Cubed tracks both virgin
(non-recycled) and recycled materials used to manufacture its playground equipment.
R-Cubed uses a predetermined manufacturing overhead rate of $7.00 per direct labor
hour.
Here is a summary of the materials and labor used on a recent job for Stow City
Schools:
Calculate the total cost of the Stow City job.
A) $7,930
B) $7,480
C) $7,280
D) $7,790
6) The Candy Factory manufactures healthy candy that it sells to consumers and groups
in the marketplace. The business produces chocolate-covered cherries in a three-step
process to develop the center of the cherries, coat the cherries in chocolate, and package
the final product. The total cost to produce a pound of chocolate covered cherries is the
sum of the cost per pound in each of the following processes:
The managerial accountant reported that there is no Work in Process Inventory.
Assuming that there is no work in process inventories, calculate the total cost per pound
for each of the three processes listed above and the total cost to produce a pound of
chocolate covered cherries. Explain why the cost in each process is important to the
managerial accountant. Discuss at least three reasons why the cost in the process is
important and how this cost is used at the company.
7) Direct materials are added at the beginning of the process and conversions costs are
uniformly applied. Other details include:
Required:
a.What are the total equivalent units for direct materials?
b.What are the total equivalent units for conversion costs?
c.What is the cost per equivalent unit for direct materials?
d.What is the cost per equivalent unit for conversion costs?
e.What is the total cost of units completed and transferred out?
f.What is the total cost of units remaining in ending WIP?
8) A company uses the indirect method to prepare the statement of cash flows. It
presents the following data on its financial statements:
*Relates solely to the acquisition of inventory
What will appear in the operating activities section related to salary payable?
A) The decrease of $3,000 will be added to net income.
B) The decrease of $3,000 will be added to cost of goods sold.
C) The decrease of $3,000 will be subtracted from cost of goods sold.
D) The decrease of $3,000 will be subtracted from net income.
9) The McCumber Corporation data for the current year:
With respect to current liabilities, what would a horizontal analysis report?
A) The current ratio is 0.92.
B) Current liabilities are 13.35% of total capital.
C) Current liabilities saw a 50% increase from the prior year to the current year.
D) Current liabilities saw a 66.67% increase from the prior year to the current year.
10) Scott Incorporated has been in business for several months. Because of increased
competition in the region for part adapters, the managers at Scott Incorporated is
considering cutting sales price from $32 per adapter to $28 per adapter.
If the variable expenses remain at $21 per adapter and the fixed expenses remain at
$6,500, how many adapters will the managers need to sell to break even? Compute the
breakeven sales in units.
A) 902 units
B) 908 units
C) 928 units
D) 982 units
11) The Stemple Corporation data for the current year:
What would a horizontal analysis report with respect to long-term liabilities show?
A) The debt ratio is 35.32%.
B) Long-term liabilities increased by 4.47%.
C) The current ratio is 1.24.
D) Long-term liabilities decreased by $(1,400).
12) The Bedford Corporation reported the following income statement and balance
sheet amounts and additional information for the end of the current year.
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the acid-test ratio for the current year?
A) 0.53
B) 1.98
C) 8.46
D) 1.46
13) At Billy Distillery, direct materials are added at the beginning of the process and
conversion costs are added throughout the process. Data for the Finishing Department
follows:
Required:
a.What are the equivalent units for conversion costs?
b. What is the cost per equivalent unit for conversion costs?
c.What are the equivalent units for direct materials?
d.What are the total number of physical units for which to account?
14) Rachel’s Beach Shoppe charges tourists to use their credit cards to purchase
merchandise at the vacation store. On Monday, Rachel sold $2,500 in merchandise to
tourists that used their credit cards to purchase beachwear at the store. The bank charges
Rachel’s store 1.15% of the total credit card purchases per day to settle the credit
transactions. What is the total deposit Rachel expects the bank to deposit into her
account after the total bank fees and charges are taken out of the credit purchases on
Monday?
A) $31.15
B) $2,750.25
C) $2,472.50
D) $2,500.00
15) Sydney’s Barbecue reported the following information:
What is the amount of ending finished goods inventory for the period ending December
31, 20XX?
A) $850,000
B) $860,000
C) $870,000
D) $880,000
E) $890,000
16) Tasty Treats is a snow cone stand near the local park. To plan for the future, Tasty
Treats wants to determine its cost behavior patterns. It has the following information
available about its operating costs and the number of snow cones served.
The variable cost per snow cone using the high-low method is
A) $1.43.
B) $0.70.
C) $0.90.
D) $0.94.
17) All of the following are functions of the budget committee except
A) review the budgets it submits for approval in an organization.
B) determine the bonuses the organization awards to employees that achieve the target
budget.
C) approve the final budget it expects the organization to implement.
D) remove unwarranted slack in the workplace.
18) McCartney Services has a customer Web site to take orders, answer customer
questions, and address customer complaints. The costs associated with this customer
Web site over the past six months are listed below:
Management at McCartney Services believes that the customer Web site costs are a
mixed cost and would like to use the high-low method to estimate their future costs
using the number of Web site hits in any given month as the cost driver.
Required:
1.Using the high-low method, estimate the variable cost per Web site hit and the
monthly fixed costs associated with the customer Web site.
2.Use the results you computed in Requirement 1 to write the cost equation to estimate
the customer Web site expenses for McCartney Services.
3.If McCartney Services expects 9,500 Web site hits for July, what are their anticipated
customer Web site costs for July?
19) The Print Manufacturing Company manufactures Size 1, Size 2, and Size 3 printer
ribbons to support the printers it manufactures. The managerial accountant reported the
following information:
The managerial accountant at Print Manufacturing noted that the Size 3 printer ribbon
reports a loss and the managerial accountant needs to determine if the company should
drop the Size 3 printer ribbon. What is the increase or decrease in operating income if
the operations manager drops the Size 3 printer ribbon and does not replace it? If the
managerial accountant recommends that the organization drop the Size 3 printer ribbon
and rent out the space the company uses to store the product at $11,000 per year, is
there an increase or a decrease in operating income?
20) The managerial accountant at American Memorial Shoppe reported the following
data that reflect the balance sheets during the period ending December 31, 20X2 and
December 31, 20X3:
Compute the balances and analyze the changes that occurred in 20X3 and 20X2. Which
accounts had increases? Which accounts had decreases?
21) The managerial accountant at the Health Club is required to determine the amount
of cash purchases inventory. The managerial accountant reported a beginning inventory
balance of $900,000 and $8,400,000 in cost of goods sold during the year. The ending
inventory balance during the year was $850,000. Calculate the amount of cash
purchases of inventory during the year. Next, discuss what occurs when there is an
increase in the inventory account. What occurs when there is a decrease in the inventory
account.
22) Jim works at Master Remodeling Company. Jim was elected by the stockholders at
Master Remodeling Company to oversee the internal audit company and the annual
financial statement audit by independent CPAs. Jim does not have a set schedule; and,
Jim meets with others at the company only periodically. What is Jim’s role at Master
Remodeling Company?