The main qualities of accounting information that make accounting information useful
for decision making are ________ and ________.
A) relevance; reliability
B) relevance; comparability
C) consistency; comparability
D) relevance; faithful representation
Who provides assurance to external users about the reliability of a company’s financial
statements?
A) Certified Management Accountants and Certified Public Accountants
B) Chartered Management Accountants and Certified Management Accountants
C) Certified Public Accountants and Chartered Management Accountants
D) Certified Public Accountants and Chartered Accountants
Keller Company manufactures plastic cups in one department. The following
information is available:
Work-In-Process Inventory, beginning 0
Units started 60,000
Units completed and transferred 48,000
Work-In-Process Inventory, end 12,000
Direct materials added $240,000
Direct labor $164,780
Factory overhead $82,000
The units in the ending Work-In-Process Inventory are 50 percent complete with respect
to direct materials and 50 percent complete with respect to conversion costs. The unit
cost of conversion costs is ________.
A) $0.88
B) $4.14
C) $4.57
D) $5.18
Wisconsin Division has operating income of $40,000 for the year ending December 31,
2011. Average invested capital is $800,000 and the weighted-average cost of capital is
10%. The division is considering a new investment that would cost $800,000 and earn
7% annually. If return on investment is the performance metric, should the manager of
the Wisconsin Division accept the new investment?
A) No, because the return on investment of the division decreases with the new
investment.
B) No, because the return on investment of the division increases with the new
investment.
C) Yes, because the return on investment of the division decreases with the new
investment.
D) Yes, because the return on investment of the division increases with the new
investment.
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
With the high-low method, the most accurate way to measure the intercept and slope for
a cost function is to ________.
A) plot the data points and draw a line
B) plot the data points, identify the high and low points and draw a line between the
high and low points
C) plot the data points and draw a straight line through the points as close as possible to
all the points
D) use algebra using the two data points with the highest and lowest activity levels
The following information is available for Ward Company:
Sales $189,400
Gross profit $56,400
Net income $25,800
Total current assets $32,400
Total current liabilities $34,400
Total stockholders’ equity, last year $192,000
Total stockholders’ equity, current year $280,000
Required:
Compute the following ratios:
A) Current ratio
B) Gross profit rate
C) Return on sales
D) Return on stockholders’ equity
The balanced scorecard focuses management attention on the ________.
A) measures of productivity
B) measures that drive an organization to achieve its goals
C) measures that increase cycle time
D) measures that decrease quality costs
Williams Company manufactures tape dispensers. The Assembly Department reported
the follow data for the past month:
Units started and completed 70,000
Units started and not complete 10,000
Units in beginning inventory 0
Direct materials costs $480,000
Conversion costs $240,000
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 40 percent complete with respect to conversion costs. The unit
cost of conversion costs is ________.
A) $3.00
B) $3.24
C) $3.42
D) $24.00
During the month of May, Masters Company transferred 140,000 gadgets to Finished
Goods Inventory. There was no beginning work-in-process inventory. The company had
40,000 gadgets in process at May 31 and the gadgets were 50 percent complete with
respect to conversion costs. All direct materials are added at the end of the production
process. The equivalent units for materials for May are ________.
A) 90,000
B) 140,000
C) 160,000
D) 180,000
The efficiency variance for fixed overhead costs ________.
A) is greater than the flexible budget variance for fixed overhead costs
B) is greater than the spending variance for fixed overhead costs
C) is greater than the flexible budget variance for variable overhead costs
D) does not exist
________ is the relative proportions or combinations of quantities of different products
that comprise total sales.
A) Sales mix
B) Constant mix
C) Fluctuating mix
D) Variable cost ratio
Collier Products has a Valve Division that manufactures and sells a standard valve. The
Valve Division has a capacity of 100,000 units. The variable costs per unit are $16. The
fixed costs per unit are $9, based on the capacity of 100,000 units. None of the fixed
costs are avoidable. The selling price to outside customers in the intermediate market
are $30 per unit.
The Pump Division wants to purchase the valve from the Valve Division for one of its
pumps. The Pump Division is currently purchasing 10,000 valves per year from an
overseas supplier at a cost of $29 per valve. The selling price of the completed pump is
$100 per unit and the costs to complete the pump are $60 per unit, excluding the valve
purchased from the other division.
Required:
A) Assume the Valve Division has ample idle capacity to produce the 10,000 valves for
the Pump Division. What should be the transfer price between the two divisions? Give a
range. Determine the minimum transfer price for the Valve Division and the maximum
transfer price for the Pump Division.
B) Assume the Valve Division does not have idle capacity to produce the valves for the
Pump Division. It is selling all that it can produce to outside customers in the
intermediate market. What should be the transfer price between the two divisions? Give
a range. Determine the minimum transfer price for the Valve Division and the
maximum transfer price for the Pump Division. Will a transfer occur?
C) Assume the Valve Division does not have idle capacity to produce the valves for the
Pump Division. It is selling all that it can produce to outside customers in the
intermediate market. Now assume the Valve Division saves $3.00 per unit by selling
internally. What should be the transfer price between the two divisions? Give a range.
Determine the minimum transfer price for the Valve Division and the maximum transfer
price for the Pump Division.
In a make-or-buy decision, which of the following is the fundamental question that is
asked in making the decision?
A) What is the difference in present costs between the two alternatives?
B) What is the difference in present revenues between the two alternatives?
C) What is the difference in future revenues between the two alternatives?
D) What is the difference in future costs between the two alternatives?
Walter Company manufactures greeting cards. Special glittery material is added at the
end of the process in the Printing Department. Conversion costs are applied uniformly
throughout the process. The weighted-average method of process costing is used. Data
for the Printing Department for the month of September follow:
Work-In-Process Inventory, September 1:
Units 22,500
Direct materials (0% complete) $0
Conversion costs (30% complete) $20,472
Units started in September 127,500
Units completed in September 123,000
Work-In-Process Inventory, September 30 27,000
Direct materials added in September $427,500
Conversion costs added in September $315,000
With regard to the Work-In-Process Inventory on September 30, materials are 0 percent
complete and conversion costs are 60 percent complete. The unit cost for conversion
costs is ________.
A) $2.24
B) $2.26
C) $2.41
D) $2.73
The following data are for California Closets:
Flexible Budget for
Actual Static Budget Actual Sales Activity
Units 18,000 16,000 18,000
Sales $360,000 $320,000 $360,000
Variable costs 234,000 192,000 216,000
Contribution margin $126,000 $128,000 $144,000
Fixed costs 76,000 80,000 80,000
Operating income $50,000 $48,000 $64,000
The sales activity variance for operating income is ________.
A) $14,000 Favorable
B) $14,000 Unfavorable
C) $16,000 Favorable
D) $16,000 Unfavorable
A department’s applied overhead cost will ________ equal the actual overhead cost
incurred.
A) always
B) never
C) about fifty percent of the time
D) rarely
Which of the following statements about cost accounting systems is FALSE?
A) The cost accounting system provides the cost data that managers use for decision
making.
B) The cost accounting system is the most fundamental component of a cost
management system.
C) A cost accounting system that provides accurate information is a key success factor
for all types of organizations.
D) Some types of organizations do not need cost accounting systems.
What is Six Sigma?
A) a process improvement to eliminate waste from the entire enterprise
B) a process improvement to reduce the time products spend in the production process
C) a process improvement to reduce the time products spend in activities that do not
add value
D) a data-driven approach to eliminate defects in any process
May Company has the following information:
Month Budgeted Purchases
January $33,000
February 37,000
March 31,000
April 30,000
May 27,680
Purchases are paid as follows:
75% in the month of purchase
25% one month after purchase
What is the expected balance in Accounts Payable on April 30?
A) 0
B) $7,500
C) $20,250
D) $30,000
Costs that may be essential to the long-run achievement of the organization’s goals, but
that managers can almost reduce to zero in the short-run, are called ________.
A) capacity costs
B) committed fixed costs
C) discretionary fixed costs
D) mixed costs
Latinovich Company has the following information available for the month of March:
Units Transferred- Direct Conversion
in Costs Materials Costs
Work-in-process inventory, March 1 240 $33,600 0 $18,000
*Percent complete 100% 0% 62.5%
Transferred-in during March 400
Completed in March 440
Work-in-process inventory, March 31 200
*Percent complete 100% 0% 80%
Costs added in March $52,000 $13,200 $48,600
The company uses the weighted-average method of process costing. What are the
equivalent units for March for conversion costs?
A) 400
B) 440
C) 600
D) 640
Which of the following is the first and most basic component in a management control
system?
A) the organization’s long-range budget
B) the organization’s goals
C) the stockholders’ goals
D) managerial effort
The Cornell Company makes tables for which the following standards have been
developed:
Standard Inputs Expected Standard Price Expected
For Each Unit of Output Per Unit of Input
Direct Materials 10 pounds $4 per pound
Direct Labor 3 hours $16 per hour
Production of 200 tables was expected in July, but 220 tables were actually completed.
Direct materials purchased and used were 2,000 pounds at an actual price of $4.40 per
pound. Direct labor cost for the month was $10,620, and the actual pay per hour was
$18.00. What is the direct material quantity variance for July?
A) $800 Favorable
B) $800 Unfavorable
C) $880 Favorable
D) $880 Unfavorable
Companies routinely allocate joint product costs to products for purposes of ________.
A) inventory valuation only
B) income determination only
C) decision-making such as further processing of joint products
D) inventory valuation and income determination
Leshan Company planned to produce 12,000 units. This level of production required 20
setups at a cost of $18,000 plus $500 per setup. Actual production was 10,000 units,
requiring 15 setups. Actual setup cost was $26,000. What is the flexible budget variance
for setup costs?
A) $500 Favorable
B) $500 Unfavorable
C) $2,000 Favorable
D) $2,000 Unfavorable
A plant asset with a book value of $200,000 is sold for $150,000. The applicable tax
rate is 40%. What is the tax effect of the loss on sale?
A) $20,000 cash outflow
B) $20,000 cash inflow
C) $30,000 cash inflow
D) $170,000 cash inflow
On a cash budget, if available cash balance plus net cash receipts and disbursements is
negative, ________.
A) repayment of loan is suggested
B) repayment of loan is required
C) borrowing is necessary
D) borrowing is not necessary
Causes for the difference between applied and actual overhead costs do NOT include
________.
A) different number of workdays in different months
B) price changes in individual overhead items
C) inefficient use of overhead items
D) repairs made on a regular, consistent basis
When preparing a budgeted balance sheet, the balance in the equipment account is
derived from information in the ________.
A) operating expense budget
B) capital budget
C) purchases and cost of goods sold budget
D) schedule of cash disbursements for operating expenses
Which of the following budget(s) has(have) the disbursement for a planned purchase of
equipment?
A) operating expense budget
B) purchases and cost of goods sold budget
C) cash budget only
D) cash budget and capital budget
The Conner Company reports the following information:
Sales for the year ended December 31, 2012 $106,950
Gross profit for the year ended December 31, 2012 $52,350
Net income for the year ended December 31, 2012 $7,300
Total Current Assets, December 31, 2012 $18,700
Total Current Liabilities, December 31, 2012 $7,600
Total Assets, December 31, 2012 $48,400
Total Liabilities, December 31, 2012 $20,850
Total common shares outstanding, December 31, 2012 1,000
Market price per share, December 31, 2012 $75.00
Dividends per share, for the year ended December 31, 2012 $5.00
What is the gross profit percentage for the year ended December 31, 2012?
A) 6.8%
B) 12.6%
C) 16.2%
D) 48.9%
Which statement is FALSE concerning Enterprise Resource Planning (ERP) systems?
A) Accounting is one part of an ERP system.
B) Accountants must work with operating managers throughout the organization to
ensure that the ERP system provides the financial information that managers need.
C) ERP systems support all functional areas of a company.
D) SAP is not a provider of ERP systems.