Direct materials standards specify both
a. Quantity and efficiency.
b. Quantity and price.
c. Efficiency and price.
d. Quality and Usage.
The standard cost of direct material is the
a. Standard price of direct material input x standard quantity of direct material inputs
b. Standard price of direct material input x actual quantity of direct material inputs
c. Actual price of direct material input x standard quantity of direct material inputs
d. Actual price of direct material input x actual quantity of direct material inputs.
Jones Manufacturing Company makes two products. The company’s budget includes
$500,000 of overhead. In the past, the company allocated overhead based on estimated
total direct labor hours of 20,000. Jones recently implemented an activity-based costing
system and had determined that overhead can be broken into three overhead pools:
processed purchase orders, machine setups, and good shipped. The following is a
summary of company information:
Required:
a. Calculate the company’s overhead rate based on total direct hours.
b. Calculate the company’s overhead rates using the activity-based costing pools.
The formula for computing the contribution per constrained resource is
a. Contribution margin per unit multiplied by the constrained resource per unit.
b. Contribution margin per unit divided by the constrained resource per unit.
c. Total contribution margin multiplied by the constrained resource per unit.
d. Total contribution margin divided by the constrained resource per unit.
Mauldin Welding Shop is considering the purchase of new high-tech welding
equipment. If the equipment is purchased, Mauldin will incur an additional $8,000 in
annual depreciation expense for the next five years. In determining the cash flows
associated with the new equipment, the $8,000 of annual depreciation expense will be
a. A cash outflow
b. A cash inflow
c. A sunk cost
d. Ignored in the cash flow analysis
The 2013 and 2014 partial balance sheets for Ottoman Industries is shown below.
Calculate the current ratio for 2014.
a. 0.47
b. 0.62
c. 1.37
d. 2.20
Within the organization, which of the following groups reviews capital project
requests?
a. Audit committee
b. Financial expenditures committee
c. Capital budgeting committee
d. Investment committee
Common fixed costs are most likely the responsibility of
a. Top management only.
b. Managers who have no control of them.
c. Investment center managers only.
d. Cost center managers only.
A contribution margin format income statement
a.Is based on cost function rather than on cost behavior.
b.Allows managers to assess the impact of sales volume on operating income.
c.Both is based on cost function rather than on cost behavior and allows managers to
assess the impact of sales volume on operating income.
d.Neither is based on cost function rather than on cost behavior nor allows managers to
assess the impact of sales volume on operating income.
Which of the following is not a criterion of relevant information?
a. It differs between the alternatives
b. Differences among alternatives will occur in the future.
c. Differences among the alternatives must have occurred in the past and must occur in
the future.
d. None of these answer choices are correct.
The formula to calculate EVA is
a. Net operating profit – (invested capital x weighted average cost of capital).
b. Contribution margin – (invested capital x weighted average cost of capital).
c. Net operating profit – (average capital assets x internal rate of return).
d. Contribution margin – (average capital assets x internal rate of return).
When a company purchases materials for use in the production process, the cost of
those materials is recorded in which of the following accounts?
a. Finished Goods Inventory
b. Work in Process Inventory
c. Raw Materials Inventory
d. Supplies Expense
Ethical behavior is
a.Always doing what benefits yourself regardless of the consequences to others affected
by your decision.
b.Always choosing the behavior that will harm the least number of stakeholders.
c.Knowing right from wrong and conducting yourself accordingly so that your
decisions are consistent with your own value system and the values of those affected by
your decisions.
d.Knowing right from wrong and conducting yourself accordingly so that your
decisions are made to benefit others affected by your decisions rather than yourself.
Cross Creek Company sells concrete culverts. Currently, the company’s sales revenue is
$900,000, variable costs total $450,000, and fixed costs total $300,000. If Cross Creek’s
controller has calculated the company’s breakeven point to be $597,000, what is the
company’s margin of safety?
a. $15,000
b. $153,000
c. $303,000
d. $447,000
The 2012, 2013, and 2014 partial balance sheets for Ottoman Manufacturing Company
appear below.
Net credit sales for Ottoman were $126,000 for 2012, $120,000 for 2013 and $114,000
for 2014 while cost of goods sold was $84,000 for 2012, $82,400 for 2013 and $72,500
for 2014.
What is the average collection period for 2014?
a. 68.6 days
b. 70.5 days
c. 74.9 days
d. 76.8 days
Bend Manufacturers is considering investing in a new truck that will be used to deliver
its custom-made furniture. The truck currently used by Bend cost the company $72,000
eight years ago. Two years from now the company anticipates spending $20,000 to
overhaul the old truck, at which time the truck could be used for an additional 10 years.
The old truck costs $8,000 per month in gas, insurance, and other costs to operate. Ron
Shop, Controller of Bend Manufacturers, is considering the purchase of a new truck
which will cost $100,000 and which has a useful life of 10 years. The new truck will
only cost $4,800 per month to operate, but will require an overhaul 8 years from now
that is expected to cost $8,000. Ron believes the old truck could be sold for $16,000. If
the new truck is purchased, he estimates that the new truck could be sold for $28,000 at
the end of its useful life. Which of the following is not a relevant cash flow in the
decision to replace the truck?
a. $3,200 per month in operating cost savings
b. $20,000 overhaul avoided on old truck
c. $72,000 purchase price of old truck
d. $16,000 salvage value of old truck
Bart’s Bike Shop has the following income statement.
Required:
a. Calculate the contribution margin per unit.
b. Calculate the contribution margin ratio.
c. Calculate the breakeven point in units. In sales dollars.
d. Calculate the margin of safety in units. In dollars.
If a special order is being considered when the product normally sells for $10 and
relevant costs are $6 to produce a unit and $2 to sell the unit, which of the following
decisions is the most likely to be chosen?
a. Accept the order if the sales price is $6 or more.
b. Accept the order if the sales price is $8 or more.
c. Accept the order if the sales price is at least $10.
d. Reject the order.
On the breakeven graph, the fixed cost line
a. Increases with sales volume.
b. Decreases with sales volume.
c. Remains the same regardless of sales volume.
d. Moves to the right as fixed cost increase.