Selected items from the financial statements for Lorna Company are listed below:
Paid in capital, December 31, 2014 $100,000
Retained earnings, December 31, 2014 $75,000
Common stock dividends declared in 2014 $75,000
Net income for the year ended December 31, 2014 $100,000
Lorna Company has 5,000 common shares outstanding during the year. What are the
earnings per share for the year ended December 31, 2014?
A) $12.00
B) $15.00
C) $20.00
D) $25.00
In capital budgeting decisions, the riskiness of a project may be shown by ________.
A) the size of the future cash inflows from the project
B) the size of the future cash outflows from the project
C) the timing of the cash flows from the project
D) the project’s sensitivity to changes in predictions of cash flows
The acquisition of inventory for cash will ________.
A) increase liabilities and decrease stockholders’ equity
B) decrease assets and decrease liabilities
C) increase assets and decrease liabilities
D) increase assets and decrease assets
Kulvekowski Company has budgeted sales of $30,000 with the following budgeted
costs:
Direct materials $6,300
Direct labor $4,100
Variable factory overhead $3,700
Fixed factory overhead $5,600
Variable selling and administrative costs $2,400
Fixed selling and administrative costs $3,200
What is the average target markup percentage for setting prices as a percentage of total
costs?
A) 15.7%
B) 18.6%
C) 20.1%
D) none of the above
A plant asset with a book value of $320,000 is sold for $400,000. The tax rate is 20%.
What is the tax effect of the gain on sale?
A) $16,000 cash outflow
B) $16,000 cash inflow
C) $64,000 cash inflow
D) $80,000 cash inflow
The cash paid for employees’ wages is included in the ________ section of the
statement of cash flows. Assume the direct method is used.
A) operating
B) financing
C) investing
D) noncash
The ________ chart is the statistical plot of measures of various product quality
dimensions or attributes.
A) cycle-time
B) productivity-control
C) quality-control
D) throughput-time
Deferred tax liabilities are ________.
A) expected increases in future income taxes due to past transactions
B) expected decreases in future income taxes due to past transactions
C) expected increases in future income taxes due to future transactions
D) expected decreases in future income taxes due to future transactions
The balance sheet for James Company is given below:
Cash $242
Accounts Receivable 200
Inventory 388
Prepaid Insurance 70
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 James Company report for
accounts receivable?
A) 13.5%
B) 17.3%
C) 17.8%
D) 86.3%
On a cost-volume-profit graph, the net profit area is found ________.
A) at the break-even point
B) to the right of the break-even point
C) to the left of the break-even point
D) to the right of the intersection of the y-axis and x-axis
An example of a nonfinancial goal is ________.
A) increase customer satisfaction
B) increase profits
C) increase segment margin
D) increase required return on investment
Johnson Company’s capital stock is currently trading for $22 per share. The following
accounts appear on the balance sheet:
Common stock, $6.00 par value per share, 10,000 shares issued $60,000
Paid in capital in excess of par value $200,000
The only transaction affecting the accounts was one issue of the company’s common
stock. What was the original selling price of the common stock?
A) $6.00 per share
B) $20.00 per share
C) $22.00 per share
D) $26.00 per share
Christina Company has two service departments, Maintenance and Human Resources.
Christina 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
Human Resources Department is allocated first. Then the cost allocated from the
Human Resources Department to the Maintenance Department is ________.
A) $0
B) $3,539
C) $4,200
D) $13,440
Warbel Company is preparing a cash budget for the month of June. The following
information is available:
Cash Balance, May 31, 2015 $11,000
Cash collections from customers in June 43,000
Cash paid for merchandise in June 20,000
Cash paid for operating expenses in June 20,000
Paid cash dividend in June 5,000
The minimum cash balance desired is $5,000. What is the cash balance on June 30,
2015?
A) $8,000
B) $9,000
C) $10,000
D) $13,000
A nonoperating item on a multiple-step income statement that reflects financial
decisions is ________.
A) gain from sale of inventory
B) interest expense
C) income tax expense
D) operating profit
Cornell Company had the following information available for its specialty product:
Standards for one unit of product:
Direct Materials: 5 pounds at $2 per pound
Direct Labor: 0.50 hour at $16 per hour
Materials and Labor Used to produce 8,500 units:
Direct Materials: 46,000 pounds at $3 per pound
Direct Labor: 4,000 hours at ? per hour
If the Direct Labor Price Variance is $4,600 Unfavorable, what is the actual labor rate
per hour?
A) $16.00
B) $16.50
C) $17.10
D) $17.15
Department B is the second department in a series of production processes. Department
B receives units from Department A. Department B adds materials, labor and overhead
to the units received. The company uses process costing. What costs are assigned to
each completed unit in Department B?
A) material cost per equivalent unit, conversion cost per equivalent unit
B) transferred-in cost per equivalent unit, conversion cost per equivalent unit
C) transferred-in cost per equivalent unit, material cost per equivalent unit
D) transferred-in cost per equivalent unit, material cost per equivalent unit, conversion
cost per equivalent unit
The preferred cost allocation base that can be used to allocate central corporate support
costs to products is ________.
A) sales
B) cost of goods sold
C) total assets
D) a measure of usage
The income statement summarizes a company’s operating performance ________ and
the balance sheet shows a company’s financial position ________.
A) at a point in time; over a period of time
B) at a point in time; at a point in time
C) over a period of time; over a period of time
D) over a period of time; at a point in time
A sorority held a party. The sorority prepared the following budget for 25 expected
attendees:
Room rental $270
Food 250
Entertainment 150
Decorations 75
Total Costs $745
Twenty-five people attended the party. The costs incurred were:
Room rental $140
Food 320
Entertainment 125
Decorations 75
Total Costs $660
What is the variance for the room rental cost?
A) $85 Unfavorable
B) $85 Favorable
C) $130 Favorable
D) $130 Unfavorable
Which of the following is NOT a component of the financial budget?
A) capital budget
B) cash budget
C) budgeted balance sheet
D) budgeted income statement
Choosing direct labor cost rather than direct labor hours as a cost driver for overhead
costs implies that ________.
A) direct labor cost data is more accurate
B) direct labor cost data is easier to obtain
C) higher paid employees use proportionately less overhead support than lower paid
employees
D) higher paid employees use proportionately more overhead support than lower paid
employees
When the units sold are greater than the units produced, variable costing income is
________ absorption costing income. When the units sold are less than the units
produced, variable costing income is ________ absorption costing income.
A) equal to; equal to
B) less than; greater than
C) greater than; less than
D) cannot be determined; cannot be determined
The internal rate of return model determines the ________ at which the net present
value of an investment project equals ________.
A) cost of capital; a positive number
B) hurdle rate; a positive number
C) interest rate; zero
D) discount rate; a positive number
Misalignment between the ________ stressed in budgets and ________ used to reward
employees and managers can limit the advantages of budgeting.
A) performance goals; participative goals
B) performance goals; performance measures
C) sales goals; bonuses
D) resource goals; bonuses
Planning in the management control system does NOT include ________.
A) defining goals
B) establishing plans to achieve goals
C) carrying out plans to achieve goals
D) measuring performance measures
Potter Company has the following information:
Actual operating loss at 5,000 units $(11,000)
Budgeted operating income at 5,000 units $5,000
Budgeted operating income at 10,000 units $12,000
Planned level of operations 10,000 units
Actual level of operations 5,000 units
Assume the cost driver of product costs is units of production. What is the flexible
budget variance for operating income?
A) $5,000 Unfavorable
B) $11,000 Unfavorable
C) $16,000 Unfavorable
D) $16,000 Favorable
The following information is available for Munter Manufacturing Company.
— Direct materials price standard is $3.25 per pound.
— Direct materials quantity standard is six pounds per finished unit.
— Budgeted production is 25,000 finished units.
— 175,000 pounds of direct materials were purchased for $525,000.
— 175,000 pounds of direct materials were used in production.
— 25,600 finished units of product were produced.
What is the direct materials price variance?
A) $43,750 Unfavorable
B) $43,750 Favorable
C) $350,000 Unfavorable
D) $350,000 Favorable
Which one of the following is NOT a nonfinancial performance measure of customer
satisfaction on a commercial airline?
A) number of lost bag reports
B) number of flights cancelled
C) number of employees with advanced degrees
D) number of flights on time
Smith manufactures greeting cards. Material is introduced at the beginning 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 (100% complete) $51,000
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 100
percent complete and conversion costs are 50 percent complete. The equivalent units
for conversion costs are ________.
A) 123,000
B) 132,450
C) 136,500
D) 150,000