1) A rate variance for direct labor measures how well a company keeps unit prices of
labor inputs within standards.
2) Non-value-added activities can be described as activities for which the customer is
willing to pay.
3) Environmental sustainability should only be the concern of large multinational
manufacturing corporations.
4) The entry to allocate manufacturing overhead costs to work in process requires a
debit to work in process.
5) Product costs and period costs receive similar treatment when presented in the
financial statements.
6) The total cost of a job shown on the job cost record is the sum of the direct materials
traced to the job and the manufacturing overhead allocated to the job.
7) Traditional income statements do not distinguish fixed operating costs from variable
operating costs.
8) In process costing, the manufacturing costs assigned to the product must always
follow the physical movement of the product.
9) The American Institute of Certified Public Accountants was the first professional
membership organization in the United States to earn the ISO 9001 certification.
10) All four perspectives must always be included on each individual company’s
balanced scorecard.
11) For maximum impact, a firm should initially focus on pollution control and cleanup
measures.
12) Conversion costs are generally added evenly throughout a process.
13) When units are transferred from Processing Department #1 to Processing
Department #2, a debit is made to WIP-Processing Department #1 to reflect the
transferred-out costs.
14) Product-level activities and costs are incurred for a particular product, regardless of
the number of units or batches of the product produced.
15) The internal audit department reports directly to the audit committee, a
subcommittee of the board of directors.
16) If all direct materials are added at the end of the production process, and the units
have made it 50% of the way through the production process, then the percentage
completion for direct materials is 50%.
17) If a job consists of a batch of identical units, managers find the unit cost by dividing
the total job cost by the number of units in the job.
18) In a process costing environment, direct materials and direct labor are usually
combined into one cost category called “conversion costs.”
19) In job costing, the purchase of raw materials is recorded as a debit to raw materials
inventory and a credit to accounts payable.
20) When a company produces more units than it sells, absorption costing operating
income will be higher than variable costing operating income.
21) The balance sheet for Blineberry Corporation follows:
Operating income for the period was $18,000, while cash dividends paid were $17,400.
The overall total of the sources of cash for Blineberry Corporation for the year was
A) $40,950
B) $8,200
C) $48,050
D) $12,050
22) Which of the following is a characteristic of a service company?
A) Service companies make a product
B) Service companies have a single category of inventory
C) Service companies generally have no tangible products to sell
D) Service companies transform raw materials into finished goods
23) People’s Public Power is an electric utility company. The new CEO is interested in
implementing new projects that will not only benefit the environment, but will also
benefit the company through cost savings. One of the proposed projects is to offer a
paperless, online billing solution for its customers in Green Township. Preliminary
market research indicates that participation in the paperless option will be between 20 –
30% of customers.
Total costs for the paperless system are projected to be $100,000 per quarter, which are
comprised solely of fixed costs for IT personnel and computer hardware. The CEO has
asked you to perform an analysis of the proposed paperless billing system.
Historical costs for the current paper-based system are as follows:
Requirements:
a.Using the historical costs calculate the variable costs per bill under the current system.
b.The company projects that next quarter 650,000 bills will be mailed to customers.
What is the projected cost savings if the maximum number, 30%, of customers choose
the paperless system?
c.What is the projected cost savings if the minimum number, 20%, of customers choose
the paperless system?
24) Checak Incorporated wanted to determine the relationship between its monthly
operating costs and a potential cost driver, machine hours. The output of a regression
analysis showed the following information (note: only a portion of the regression
analysis results is presented here):
What is closest to the total cost if the firm uses 6,000 machine hours?
A) $7,257.49
B) $6,538.90
C) $14,729,732.60
D) $1,365.59
25) Jack’s Toys sells kites for $20 each. Variable costs are $8 per refill. Fixed costs are
$2,400 per month. What is the contribution margin per kite?
A) $1.67
B) $ 0.60
C) $8.00
D) $12.00
26) Shamrock Manufacturing budgeted fixed overhead costs of $2.75 per unit at an
anticipated production level of 1,350 units. In July Shamrock incurred actual fixed
overhead costs of $4,400 and actually produced 1,300 units.
What is Shamrock’s fixed overhead budget variance for July?
A) $687.50 favorable
B) $687.50 unfavorable
C) $825.00 favorable
D) $825.00 unfavorable
27) Which part of the value chain would depreciation on a factory be classified as?
A) Design
B) Distribution
C) Research and development
D) Production
28) Which of the following is an example of a cost item that should be classified as an
external failure cost?
A) Tooling changes
B) Cost of a lost unit
C) Warranty claims
D) Cost to redesign product
29) All of the following relate to part of the value chain for a clothing company except
A) cost of advertising the new products
B) administrative costs
C) cost of shipping to retailers
D) salaries of clothing designers
30) Which of the following would be considered an operating activity on the statement
of cash flows?
A) Dividends paid to stockholders
B) Gain on sale of short-term investments
C) The sale of inventory
D) The receipt of stock dividends from investment stock
31) Sander Enterprises prepared the following sales budget:
The expected gross profit rate is 40% and the inventory at the end of February was
$10,000. Desired inventory levels at the end of the month are 20% of the next month’s
cost of goods sold.
What are the total purchases budgeted for April?
A) $9,360
B) $7,440
C) $7,680
D) $7,920
32) A company uses the direct method to prepare the statement of cash flows. How will
the amount of cash received from customers be computed?
A) The amount of cash received from customers is computed as cost of goods sold plus
ending inventory minus beginning inventory
B) The amount of cash received from customers is computed as cost of goods sold
minus ending inventory plus beginning inventory
C) The amount of cash received from customers is computed as sales revenue plus the
decrease (or minus the increase) in accounts receivable
D) The amount of cash received from customers is computed as sales revenue minus the
decrease (or plus the increase) in accounts receivable
33) Which of the following budgets is the cornerstone of the master budget?
A) sales
B) cash
C) budgeted balance sheet
D) operating expense
34) Potter & Weasley Company had the following activities, estimated indirect activity
costs, and allocation bases:
Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
How much of the account inquiry cost will be assigned to Department Q?
A) $6,400
B) $25,600
C) $12,800
D) $8,000
35) 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.
Using the high-low method, the fixed costs for a month are
A) $ 980
B) $12,660
C) $ 1,500
D) $ 5,320
36) A product is sold at $6 per unit, the unit contribution margin is $5, and total fixed
expenses are $5,000, what are the breakeven sales in units?
A) 30,000
B) 1,000
C) 833
D) 25,000
37) The formula for calculating the accounting rate of return for a capital asset is
A) average annual operating income from asset/amount invested in asset
B) average annual net cash inflow from asset/amount invested in asset
C) (average annual operating income + depreciation expense)/amount invested in asset
D) (average annual cash inflows – depreciation expense)/(amount invested in asset +
residual value of asset)
38) Philadelphia Swim Club is planning for the coming year. Investors would like to
earn a 10% return on the company’s $30 million of assets. The company primarily
incurs fixed costs to maintain the swimming pools. Fixed costs are projected to be
$12,500,000 for the year. About 500,000 members are expected to swim each year.
Variable costs are about $10 per swimmer. Philadelphia Swim Club is a price-taker and
won’t be able to charge more than its competitors who charge $37.00 for a membership.
What profit will it earn in terms of dollars?
A) $11,000,000
B) $(12,500,000)
C) $1,000,000
D) $(1,000,000)
39) Youngstown Rubber reports the following data for its first year of operation.
What are the total manufacturing costs?
A) $945,000
B) $585,000
C) $1,265,000
D) $455,000
40) Pluto Incorporated provided the following information regarding its single product:
The regular selling price for the product is $80. The annual quantity of units produced
and sold is 40,000 units (the costs above relate to the 40,000 units production level).
The company has excess capacity and regular sales will not be affected by this special
order. There was no beginning inventory.
What would be the effect on operating income of accepting a special order for 1,000
units at a sale price of $40 per product? The special order units would not require any
variable selling and administrative expenses.
A) Decrease by $18,000
B) Decrease by $19,500
C) Increase by $18,000
D) Increase by $19,500
41) A business has 175 full-time workers who work 8 hours per day. They have 130
part-time workers who work 4 hours per day. What is the number of full-time
equivalent employees?
A) 150
B) 300
C) 238
D) 240
42) Which of the following pairs are characteristics of price-takers?
A) Less competition and target pricing
B) Cost-plus pricing and less competition
C) Target costing and heavy competition
D) Cost-plus pricing and lack of product uniqueness
43) Jackie’s Snacks sells fudge, caramels, and popcorn. It sold 12,000 units last year.
Popcorn outsold fudge by a margin of 2 to 1 . Sales of caramels were the same as sales
of popcorn. Fixed costs for Jackie’s Snacks are $14,000. Additional information
follows:
Breakeven sales in dollars for Jackie’s Snacks is
A) $46,200
B) $39,600
C) $ 8,250
D) $16,800
44) Presented are the income statements of Conley and Woolf Publications companies
for the current year:
What should Woolf do to improve its performance to match or to exceed Conley’s
performance?
A) Reduce percentage of COGS
B) Reduce percentage of income tax expense
C) Reduce percentage of selling/general expenses
D) Any of the above would be useful to improve performance
45) The journal entries needed for job costing at a service company
A) are more complicated than those needed at a manufacturing company
B) are virtually the same as those needed at a manufacturing company
C) include the movement of inventory
D) are simpler than those needed at a manufacturing company
46) Martinson Company adds direct materials at the beginning of the process and adds
conversion costs throughout the process. Data for the finishing department follows:
The total number of physical units for which we have to account is
A) 42,000
B) 54,000
C) 64,000
D) 59,000
47) Use the following information to do a horizontal analysis of Marcus Corporation’s
income statement for the current year and prior year:
What is the percentage change in net income?
A) 78.00%
B) -22.00%
C) 16.73%
D) 35.59%
48) Akron Clay Company manufactures flowerpots. The following data relate to the
standards for direct labor:
Akron Clay Company had the following actual results for April:
What is the direct labor efficiency variance for April?
A) $38 favorable
B) $38 unfavorable
C) $1,406 favorable
D) $1,406 unfavorable
49) Kalanja Designs, which produces earrings, is developing direct material standards.
Each earring requires 0.52 kilograms of a special metal. The allowance for waste is 0.03
kilograms per earring, while the allowance for rejects is 0.02 kilograms per earring.
What is the standard quantity of metal per earring?
A) 0.52 kilograms
B) 0.55 kilograms
C) 0.57 kilograms
D) 0.54 kilograms
50) Westfall Watches has two product lines: Luxury watches and Sporty watches.
Income statement data for the most recent year follow:
Assuming fixed costs remain unchanged, how would discontinuing the Sporty line
affect operating income?
A) Increase in total operating income of $49,000
B) Increase in total operating income of $142,000
C) Decrease in total operating income of $10,000
D) Decrease in total operating income of $108,000
51) Direct materials for a company were $500,000; manufacturing overhead was
$250,000; and direct labor was $770,000. Prime costs would total
A) $1,020,000
B) $1,270,000
C) $1,520,000
D) $750,000