Which of the following costs is a variable cost?
A) rental expense for factory building for manufacturer of electronics
B) lease cost for factory machine for manufacturer of electronics
C) fuel for airplane for airline
D) depreciation expense of airplane for airline
Companies may be forced to use engineering analysis or account analysis to estimate
cost functions because ________.
A) engineering analysis is the least costly method
B) historical data are too subjective
C) the other estimation methods are too difficult to use
D) historical data are not available
Organizations should choose performance metrics that improve the alignment of
managerial incentives with ________.
A) managerial effort
B) organizational objectives
C) ethical behavior
D) agency theory
The sales activity variance for ________ will always be zero.
A) sales
B) contribution margin
C) variable costs
D) fixed costs
Under absorption costing, all ________ costs are product or inventoriable costs.
A) indirect production
B) direct and indirect production
C) direct production
D) selling and administrative
Murphy Company produces dolls. Each doll sells for $20.00. Variable costs per unit are
$14.00 and total fixed costs for the period are $435,000. What is the break-even point in
units?
A) 21,750
B) 31,071
C) 51,176
D) 72,500
As the minimum required rate of return increases for an investment project, the net
present value of the project ________.
A) increases
B) does not change
C) decreases
D) becomes positive
When estimating the total cost of a one-way flight from New York to Los Angeles, what
cost driver should be used?
A) number of miles on flight
B) number of passengers on flight
C) number of pounds of baggage on flight
D) number of passengers on flight times the number of miles on flight
Manufacturers have several inventory accounts that do NOT include ________.
A) Finished Goods Inventory
B) Raw Materials Inventory
C) Work in Process Inventory
D) Construction in Process Inventory
________ is (are) the primary consideration in choosing among accounting systems.
A) Simplicity
B) Behavioral implications
C) The cost-benefit balance
D) Simplicity and behavioral implications
The gain or loss on the disposal of equipment is determined by ________.
A) subtracting the book value of the old equipment to the cost of the new equipment
B) subtracting the disposal value of the old equipment to the book value of the old
equipment
C) subtracting the book value of the old equipment from the cash received for the old
equipment
D) subtracting the book value of the old equipment from the cost of the new equipment
In a manufacturing area of a firm, poor product design and problems with the quality of
materials will, more than likely, result in a(n) ________ variance or ________ variance.
A) unfavorable material efficiency; unfavorable labor usage
B) favorable material efficiency; unfavorable labor price
C) unfavorable material price; unfavorable labor rate
D) unfavorable material price; unfavorable labor usage
The present value of tax savings from depreciation deductions from an accelerated
depreciation method will be ________ those from the straight-line method.
A) the same as
B) greater than
C) less than
D) none of the above
In process costing, the journal entry to transfer completed units from Department A to
Department B would include a ________.
A) Credit to Direct Materials Inventory
B) Debit to Work-In-Process Inventory—Department A
C) Credit to Work-In-Process Inventory—Department B
D) Debit to Work-In-Process Inventory—Department B
The Troy Company has the following information available:
Total fixed costs $400,000
Expected sales (units) 100,000
Contribution margin per unit $7.50
Tax rate 30%
What is the after-tax net income?
A) $245,000
B) $280,000
C) $350,000
D) $400,000
The largest U.S. association of professional accountants whose major interest is
management accounting is the ________.
A) American Institute of Certified Public Accountants
B) American Institute of Certified Management Accountants
C) Institute of Management Accountants
D) American Institute of Management Accountants
What are accounting systems?
A) The process used to streamline production processes
B) The process used to generate performance measures
C) Formal mechanisms for gathering, organizing and communicating information about
an organization’s activities
D) none of the above
On January 1, 2014, Jonathon Company purchased common stock in Garcia Company
for $1,000,000. Jonathon Company treats the investment as trading securities. During
2014, Garcia Company earned $4,000,000 and paid dividends of $1,000,000. Assume
that Jonathon Company owns 10% of the outstanding shares of Garcia Company. The
market value of the investment at December 31, 2014 is $1,100,000. What is the
balance in the Investment account at December 31, 2014?
A) $1,000,000
B) $1,100,000
C) $1,400,000
D) $1,500,000
Hoover Company expects June sales to be $30,000. Of these sales, credit sales are
expected to be $12,000. Collection of credit sales are 50% in the month of sale, 40% in
the month following sale and 5% two months following sale. The remaining 5% is
uncollectible. ________ is the expected cash collection in June from June sales.
A) $9,200
B) $14,000
C) $17,200
D) $24,000
Organizations should choose performance metrics that improve the alignment of
managerial incentives with ________.
A) managerial effort
B) organizational objectives
C) ethical behavior
D) agency theory
Sandler Company has identified the following activities related to indirect production
costs:
Activity Activity Costs Cost Drivers
Machine Setup $180,000 1,500 setup hours
Materials Handling $50,000 12,500 pounds of materials
Electric Power $20,000 20,000 kilowatt hours
Sandler Company has obtained the following data concerning two products:
Product A Product B
Number of units produced 4,000 20,000
Direct materials cost $20,000 $25,000
Direct labor cost $12,000 $20,000
Number of setup hours 100 120
Pounds of materials used 500 1,500
Kilowatt-hours 1,000 2,000
Using activity-based costing, what amount of electric power cost is assigned to Product
A and Product B?
Product A Product B
A) $1,000 $2,000
B) $3,333 $16,667
C) $5,000 $15,000
D) $6,667 $13,333
Fixed factory overhead costs appear on the absorption-costing income statements as
________.
A) a fixed expense
B) part of cost of goods sold
C) a production volume variance
D) part of cost of goods sold and a production volume variance
Olson Company has three departments. Data for the most recent year is presented
below:
Dept. C Dept. A Dept. T
Sales $4,000 $1,920 $2,240
Variable expenses 3,280 1,420 520
Unavoidable fixed expenses 480 180 440
Avoidable fixed expenses 555 265 360
Operating income (loss) $(315) $55 $920
Olson Company is considering eliminating Dept. C because it is operating at a loss.
Required:
A) Compute the change in operating income if Olson Company eliminates Dept. C and
does not replace it.
B) Compute the change in operating income if Olson Company eliminates Dept. C and
doubles the sales of Dept. T without increasing fixed costs.
Customers with a high cost to serve have ________.
A) large order quantity
B) few order changes
C) standard delivery requirements
D) frequent returns
Which of the following is an example of a strategic management decision that uses cost
information?
A) determination of Cost of Goods Sold for the income statement
B) identification of value-chain function to outsource
C) evaluation of operational cost control program
D) assessment of process improvement efforts in quality control
Sunset Motel’s cost function is given as:
Y = $75,000 + $9.50X
Where:
Y = annual custodial cost
X = number of guest-days of occupancy
In the current year, Sunset Motel has 8,000 guest days. In the next year, Sunset Motel
expects an occupancy level of 10,000 guest days. (All costs next year will remain in the
same relevant range as the current year.) What is the expected total variable custodial
cost for next year?
A) $60,000
B) $75,000
C) $95,000
D) $170,000
Merchandising and manufacturing companies account for ________ in the same way.
A) design expenses
B) customer service expenses
C) selling expenses
D) all of the above
Gray Lake Company is considering the replacement of a machine that is presently used
in production. The following data are available:
Old Machine New Machine
Original cost $57,000 $35,000
Useful life in years 17 5
Current age in years 12 0
Book value $39,000 –
Disposal value now $8,000 –
Disposal value in 5 years 0 0
Annual cash operating costs $7,000 $4,000
Adding all five years together, the total relevant costs to consider if the old machine is
not replaced is ________.
A) $22,000
B) $31,000
C) $35,000
D) $39,000
Operating income divided by sales is ________.
A) residual income
B) capital turnover
C) return on investment
D) return on sales
Treasury stock is ________.
A) unissued shares of stock
B) the number of shares of stock that cannot be sold in the future
C) shares of stock held in other companies for investment purposes
D) shares of stock already issued that are later repurchased by the corporation that
originally issued them
Schaefer 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 for process costing. What are the
equivalent units for March for transferred-in costs?
A) 400
B) 440
C) 600
D) 640
Which of the following statements is FALSE about information used for decision
making?
A) Precise but irrelevant information is worthless for decision making.
B) Imprecise but relevant information can be useful for decision making.
C) Relevant information must be reasonably accurate but not precisely so.
D) Relevant information must be totally accurate or it is useless.
Switsdorf Company has the following information available for variable overhead
costs. Direct labor hours are the cost driver for variable overhead costs.
Actual variable overhead costs $5,120
Standard variable overhead costs $3.00 per hour
Actual direct labor hours 2,000 hours
Standard direct labor hours per unit 3 hours
Units produced 1,000
What is the variable overhead efficiency variance?
A) $1,000 Favorable
B) $2,000 Unfavorable
C) $2,000 Favorable
D) $3,000 Favorable
When estimating a cost function, we assess reliability using ________.
A) visual inspection
B) plausible relationships
C) goodness of fit
D) intuition
Suppose Shady Lane Hotel has annual fixed costs applicable to its rooms of $1.0
million for its 300-room hotel. Average daily room rents are $60 per room and average
variable costs are $10 for each room rented. It operates 365 days per year. What percent
of occupancy is needed to breakeven?
A) 3.65%
B) 18.3%
C) 27.4%
D) 34.3%