If the actual volume of production differs from the expected volume of production, the
fixed overhead costs used for budgeting and product costing are ________.
A) the same
B) different
C) indeterminate
D) changing over the accounting period
Investigating the reasons for the variances on a department’s performance report is an
example of ________.
A) scorekeeping
B) attention directing
C) problem solving
D) auditing
Flexible budget variances are the difference between the actual results and ________.
A) the static budget for the planned level of output
B) the flexible budget for the planned level of output
C) the flexible budget for the actual level of output
D) the master budget for the planned level of output
It is misleading to use the absorption costing income statement to predict the effect of
changes in sales volume because ________.
A) variable production costs per unit do not change with small changes in sales volume
B) total fixed production costs do not change with small changes in sales volume
C) fixed production costs per unit do not change with small changes in sales volume
D) total variable production costs do not change with small changes in sales volume
The following information is available for the Christian Company:
Net income for the year ended December 31, 2014 $127.4
Retained earnings, December 31, 2014 150.0
Retained earnings, December 31, 2013 180.0
$5 par Common stock, December 31, 2014 80.0
$5 par Common stock, December 31, 2013 80.0
Total liabilities, December 31, 2014 240.0
Total liabilities, December 31, 2013 182.0
What is the earnings per share for the year ended December 31, 2014?
A) $1.04
B) $1.56
C) $7.50
D) $7.96
Slowinski Company has the following sales budget:
Month Cash Sales Credit Sales
September $100,000 $300,000
October 125,000 180,000
November 130,000 210,000
December 135,000 190,000
Collections of credit sales are 50% in the month of sale, 40% in the month following
sale, and 10% two months following sale. No uncollectible accounts are expected. What
are the estimated cash collections in November?
A) $130,000
B) $197,000
C) $327,000
D) $337,000
Yellow Cake Company planned to produce and sell 900 units at a total cost of
$180,000. Actual production and sales were 900 units at a cost of $170,000. The
company was ________.
A) efficient and ineffective
B) inefficient and ineffective
C) inefficient and effective
D) efficient and effective
On January 1, 2012, Parrot Company acquired all of the stock of a subsidiary. The
following data is available:
Parrot Company Subsidiary
Total assets $650 $400
Total liabilities $200 $190
Total stockholders’ equity $450 $210
The acquisition by the Parrot Company represents a 100 percent interest in the
subsidiary. On January 1, 2012, the fair value of the subsidiary’s assets and liabilities
are equal to their book value. Parrot Company paid $450 for the 100 percent interest in
the subsidiary. What amount of goodwill is implied in the purchase?
A) $0
B) $10
C) $200
D) $240
A company is unsure whether it is more cost efficient to make or buy a component used
in a manufactured product that is mass produced. What type of information is needed to
make this decision?
A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing
________ 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
Upstairs Company has the following data:
Month Budgeted Sales
January $108,000
February 132,000
March 144,000
April 120,000
The gross profit rate is 40% of sales and ending inventory at December 31 was $19,440.
Desired ending inventory levels are 30% of next month’s sales at cost. What are the
expected total purchases for February?
A) $79,200
B) $81,360
C) $102,960
D) $105,120
In process costing, how many Work-In-Process Inventory accounts are used?
A) none
B) only one
C) one for each processing department
D) at least two for each processing department
Danville Company is contemplating whether to use MACRS depreciation or
straight-line depreciation for a plant asset. The following information is available:
MACRS Straight-line Present Value of
Depreciation Depreciation One At 12%
Year 1 $13,333 $10,000 0.8929
Year 2 $17,780 $10,000 0.7972
Year 3 $5,924 $10,000 0.7118
Year 4 $2,964 $10,000 0.6355
Assume the tax rate is 40%. Over the four years examined, what is the present value of
the difference in tax savings between MACRS depreciation and straight-line
depreciation?
A) $722
B) $1,806
C) $2,976
D) $9,178
If the actual volume of production differs from the expected volume of production, the
same variable overhead costs per unit are used for ________ and ________ purposes.
A) budgeting; employee motivation
B) budgeting; product costing
C) flexible budgets; employee hiring
D) planning; employee hiring
Examples using activity-based costing generally show that traditional costing systems
________ high-volume, simple products and ________ low-volume, complex products.
A) undercost; overcost
B) overcost; undercost
C) undercost; undercost
D) overcost; overcost
An investment of $42,000 is expected to generate the following annual cash flows:
Year 1 $10,000
Year 2 $15,000
Year 3 $15,000
Year 4 $12,000
Assume straight-line depreciation is used. Ignore income taxes. What is the payback
period?
A) 3 years
B) 3.17 years
C) 3.83 years
D) 4 years
Department A covers one section of a large factory building. Which of the following
costs is relevant to the decision to eliminate Department A?
A) Heating expenses of building allocated to Department A
B) General corporate overhead allocated to Department A
C) Depreciation Expense on store building allocated to Department A
D) Salary Expense of Supervisor in Department A; he only works in Department A
Major weaknesses of the payback method do NOT include which of the following?
A) It does not measure profitability.
B) It ignores the time value of money.
C) It ignores cash flows beyond the payback period.
D) It cannot be used as a rough estimate of the riskiness of a project.
Starbucks experiments with adding ice cream sundaes to its menu at several stores in
the state of Washington Financial reports are prepared showing revenues and costs for
the new menu item. Based on the reports, management at the corporate office will then
decide whether to permanently add or remove the new menu item. The financial reports
are an example of ________ information.
A) scorekeeping
B) attention directing
C) problem-solving
D) management auditing
The cost to serve percentage for a customer equals ________.
A) gross margin per unit divided by selling price per unit
B) contribution margin per unit divided by selling price per unit
C) cost of goods sold per unit divided by selling price per unit
D) costs associated with customer divided by sales revenue
According to the IMA’s Statement of Ethical Professional Practice, the standard of
credibility requires ________.
A) mitigating actual conflicts of interest
B) maintaining an appropriate level of professional expertise by continually developing
knowledge and skills
C) communicating information fairly and objectively
D) performing professional duties in accordance with relevant laws, regulations and
technical standards
Central Company reported the following information about the production and sale of
its only product during the first month of operations:
Selling price per unit $225.00
Sales $360,000
Direct materials used $176,000
Direct labor $100,000
Variable factory overhead $44,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $10,000
Production volume variance 0
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 400 units
Under absorption costing, what is the operating income or loss?
A) $(6,000)
B) $(70,000)
C) $10,000
D) $20,000
Wenzel Company has two service departments, Maintenance and Human Resources.
Wenzel Company also has two production departments, Mixing and Finishing.
Maintenance costs are allocated based on square footage while Human Resources costs
are allocated based on number of employees. The following information has been
gathered for the current year:
Human
Maintenance Resources Mixing Finishing
Direct costs $50,400 $33,600 $42,000 $70,000
Square footage 1,600 800 3,200 2,400
Number of employees 16 24 48 64
Assume the step-down method is used to allocate service department costs and the
Maintenance Department is allocated first. What amount of costs would be allocated
from the Maintenance Department to the Human Resources Department?
A) $0
B) $5,040
C) $6,300
D) $16,800
Goal congruence exists when ________.
A) short-run goals and long-run goals are the same
B) employees respond to incentives created by a management control system and make
decisions that help meet the goals of the organization
C) the management control system reflects the organization’s goals
D) performance reports are used constructively
Yemen Company has the following information available:
Selling price per unit $100
Variable cost per unit $45
Fixed costs per year $420,000
Expected sales per year (units) 20,000
If variable costs increase to $65 per unit and fixed costs increase by $200,000, what is
the break-even point in units?
A) 11,273
B) 12,000
C) 20,000
D) 17,714
A ________ is most likely to be held accountable for price variances for direct
materials.
A) machine operator
B) production supervisor
C) purchasing manager
D) marketing director
The balance sheet for Jennifer Company is given below:
Cash $200
Accounts Receivable 236
Inventory 388
Prepaid Insurance 76
Fixed Assets 452
Accumulated Depreciation (228)
Total Assets $1,124
Accounts payable $152
Wages payable 32
Notes payable 420
Paid-in capital 160
Retained earnings 360
Total liabilities and stockholders’ equity $1,124
If a common-size balance sheet was prepared, what would Jennifer Company report for
Cash?
A) 17.8%
B) 21.5%
C) 25.2%
D) 62.3%
In absorption costing, sales revenue less cost of goods sold is equal to ________.
A) contribution margin
B) operating margin
C) operating income
D) gross margin
Distribution is the function of the value chain that involves ________.
A) the mechanism by which a company delivers products or services to the customer
B) the manner by which individuals or groups learn about the value and features of
products or services
C) the support activities provided to the customer
D) none of the above
BOTH variable-costing and absorption-costing include ________ as product costs.
A) indirect manufacturing costs
B) variable selling and administrative expenses
C) fixed selling and administrative expenses
D) direct manufacturing costs
In periods of inflation, FIFO leads to ________ gross profit than LIFO.
A) lower
B) the same
C) higher
D) not enough information