occurs when a company abandons a segment
Match each definition that follows with the term (a’“h) it defines.
a. discontinued operations
b. extraordinary items
c. change from one generally accepted accounting principle to another
d. horizontal analysis
e. vertical analysis
f. common-sized financial statements
g. current position analysis
h. profitability analysis
All of the following qualitative considerations may impact upon capital investment
analysis except
a. manufacturing productivity
b. manufacturing sunk cost
c. manufacturing flexibility
d. market opportunities
If the ability to sell and the amount of production facilities devoted to each of two
products is equal, it is profitable to increase the sales of that product with the highest
contribution margin.
a. True
b. False
The following data relate to direct labor costs for August: Actual costs: 5,500 hours at
$24.00 per hour. Standard costs: 5,000 hours at $23.70 per hour.
What is the direct labor time variance?
a. $1,650 favorable
b. $1,650 unfavorable
c. $1,500 favorable
d. $1,500 unfavorable
The profit center income statement should include only controllable revenues and
expenses.
a. True
b. False
Jensen Company reports the following:
Jensen Company’s product costs are
a. $995,000
b. $920,000
c. $825,000
d. $770,000
Heston and Burton, CPA’s, currently work a five-day week. They estimate that net
income for the firm would increase by $75,000 annually if they worked an additional
day each month. The cost associated with the decision to continue the practice of a
five-day work week is an example of a(n)
a. differential revenue
b. sunk cost
c. differential income
d. opportunity cost
Period costs are
a. found on the balance sheet
b. not involved in the production process
c. classified as direct labor, direct material, or factory overhead
d. found on the job order cost sheets
A firm operated at 90% of capacity for the past year, during which fixed costs were
$420,000, variable costs were 40% of sales, and sales were $1,000,000. Operating
profit was
a. $180,000
b. $420,000
c. $1,080,000
d. $980,000
The costs of materials and labor that do not enter directly into the finished product are
classified as cost of goods sold.
a. True
b. False
A company used $35,000 of direct materials, incurred $73,000 in direct labor cost, and
had $114,000 in factory overhead costs during the period. If beginning and ending work
in process inventories were $28,000 and $32,000, respectively, the cost of goods
manufactured was
a. $218,000
b. $226,000
c. $190,000
d. $222,000
Using multiple department factory overhead rates instead of a single plantwide factory
overhead rate:
a. results in more accurate product costs
b. results in distorted product costs
c. is simpler and less expensive to compute than a plantwide rate
d. applies overhead costs to all departments equally
Carmelita Inc., has the following information available:
At the beginning of the period, there were 500 units in process that were 60% complete
as to conversion costs and 100% complete as to direct materials costs. During the
period, 4,500 units were started and completed. Ending inventory contained 340 units
that were 30% complete as to conversion costs and 100% complete as to materials
costs. The company uses the FIFO process cost method.
The equivalent units of production for direct materials and conversion costs,
respectively, were
a. 5,340 for direct materials and 4,902 for conversion costs
b. 4,840 for direct materials and 4,802 for conversion costs
c. 4,602 for direct materials and 4,802 for conversion costs
d. 4,902 for direct materials and 4,802 for conversion costs
Department M had 2,000 units 40% completed in process at the beginning of June,
12,000 units completed during June, and 1,200 units 25% completed at the end of June.
What was the number of equivalent units of production for conversion costs for June if
the first-in, first-out method is used to cost inventories?
a. 11,500 units
b. 11,200 units
c. 15,200 units
d. 10,000 units
The direct labor and overhead costs of providing services to clients are accumulated in
a work in process account.
a. True
b. False
A disadvantage to using the residual income performance measure is that it encourages
managers to spend only the minimum acceptable rate of return on assets set by upper
management.
a. True
b. False
In a factory with several processing departments, a single factory overhead rate may not
provide accurate product costs and effective cost control.
a. True
b. False
Under absorption costing, the cost of finished goods includes only direct materials,
direct labor, and variable factory overhead.
a. True
b. False
Variable costs are costs that vary on a per-unit basis with changes in the activity level.
a. True
b. False
The report on internal control required by the Sarbanes-Oxley Act of 2002 may be
prepared by either management or the company’s auditors.
a. True
b. False
Supervisor salaries, maintenance, and indirect factory wages would normally appear in
the operating expenses budget.
a. True
b. False