Which of the following is the formula for the accounting rate of return?
a. Net initial investment Annual cash flow b. Project revenue – project operating
expenses Initial investment – salvage of old asset c. Present value of future cash flows
Net initial investment d. None of these answer choices are correct
Four common cost behavior patterns that serve as the foundation for cost-volume-profit
analysis are
a.Variable cost, fixed cost, selling cost, and administrative cost.
b.Variable cost, fixed cost, mixed cost, and step cost.
c.Variable cost, fixed cost, period cost, and other cost.
d.Selling cost, administrative cost, cost of goods sold, and depreciation.
The information provided by managerial accountants is not disseminated to the general
public because
a.To do so would violate federal trade laws
b.It would be too expensive to distribute the information
c.To do so would provide competitors with vital information about corporate strategies
and capabilities.
d.All of these answer choices are reasons managerial accounting information is not
disseminated to the general public.
When a company recoups its original investment – that is, gets its money back, the
company has received a
a. Return on investment.
b. Return of investment.
c. Return of contribution.
d. None of these answer choices are correct.
Back Yard Leisure sells two types of hammocks: Sundance and Shady Lady. The
following table shows the sales price and variable cost for each hammock. Back Yard
Leisure incurs $600,000 a year in fixed costs. Assume the store has a sales mix of four
Sundance for each Shady Lady hammock sold.
Required:
a. How many hammocks of each type must be sold for Back Yard Leisure to break
even?
b. What amount of revenue would be generated by each type of hammock for the
company to earn $75,200 in operating income?
In interpreting common-size financial statements denominated in a foreign currency, a
word of caution is
a. There may be differences in the accounting principles the companies use for
reporting.
b. There may be differences in the culture of the company’s stakeholders.
c. There may be differences in the time period covered in the statements.
d. None of these answer choices are correct.
Keltner Enterprises is considering investing in a new packing machine. The new
machine will provide annual cash operating inflows of $12,300 for 5 years. The cost of
the machine is $50,430. The machine currently being used is 3 years old and could be
sold for $1,320. What is the machine’s internal rate of return?
a. 6%
b. 8%
c. 10%
d. 12%
International Imports is a merchandising firm. Last year they reported sales of $674,500
and cost of goods sold of $404,700. The company’s total variable selling and
administrative expense was $60,705, and fixed selling and administrative expense was
$53,960. The total variable costs for the firm are:
a.$60,705
b. $114,665
c. $404,700
d.$465,405
Which of the following is not a test of an ethical business decision as suggested by the
Institute of Business Ethics?
a.Would I want others to do to me what I am doing to them?
b.Do I mind others knowing what I have done?
c.Who does my decision affect or hurt?
d.Would my decision be considered fair by those affected?
Which of the following is not a measure that relates to the financial perspective?
a. Residual income
b. Earnings per share
c. Revenue growth
d. Training dollars spent on employee training
Yarlan Gravity Grips produces spike sets for track shoes. CEO Brittany Yarlan has
gathered the following information about the company’s sales
volume and marketing cost for the past six months.
Required:
a.Using the high-low method, compute the variable marketing cost per spike set.
b.Compute the total fixed marketing cost.
c.Represent the marketing cost function in equation form.
d.Examine the data and identify the potential outlier.
e.Recalculate the marketing cost function, removing the potential outlier.
f.Which of the two cost functions you calculated would be appropriate to use in
estimating future marketing costs? Why?
There is an important relation between contribution margin and profit. Which of the
following statements is not True?
a.As the number of units sold rises, profit increases by the variable cost per unit.
b.As the number of units sold increases, total contribution margin increases, but fixed
costs remain the same.
c.As the number of units sold rises, profit increases by the additional contribution
margin per unit.
d.As the number of units sold decreases, total contribution margin decreases, but fixed
costs remain the same.
On the breakeven graph, if sales price and variable cost remain constant and fixed costs
decrease, the breakeven point will
a. Shift upward.
b. Not shift.
c. Shift to the right.
d. Shift to the left.
Gary Brown Manufacturing makes single kayaks, double kayaks, and lightweight
competitive kayaks. The double kayak line has been showing losses for several years,
and management is considering dropping the line. Recent income statements have been
very similar to the following information which was prepared for the most recent year:
Of the fixed costs, $393,750 is common costs that have been allocated equally to each
product line. What will total operating income be if Brown drops the double kayak line?
a. $127,375
b. $(3,875)
c. $96,750
d. $33,625
The predetermined overhead rate is calculated by
a. Dividing the budgeted activity level of application base by the budgeted total
manufacturing overhead.
b. Multiplying the budgeted activity level of application base by the budgeted total
manufacturing overhead.
c. Dividing the budgeted total manufacturing overhead by the budgeted activity level.
d. Multiplying the budgeted total manufacturing overhead by the budgeted activity
level.
Gant Wholesale Company has $2,000 in cash, $7,000 in accounts receivable, $12,000
in inventory, and $3,000 in prepaid expenses. Liabilities totaled $20,000, with $6,000
current and $14,000 long-term. What is Gant’s working capital?
London, Inc. uses 2,000 units of Part 8G3 each year in the manufacture of one of its
products. The company currently produces the part internally, but an outside supplier
has offered to provide the part at a price of $15 per part. If London chooses to purchase
the part from the outside supplier, one half of it ‘s the fixed manufacturing overhead will
be eliminated. London ‘s standard unit cost of producing the part is listed below.
Required
Ignoring qualitative factors, should London continue to make the parts internally or
purchase them from the outside supplier? Why?
The best measures that should be captured and reported to managers relate to corporate
strategy and are SMART: specific, measurable, actionable, relevant, and timely. Below
are examples of poorly constructed performance measures for each of these. For each
component of SMART, provide two better measures than the poorly constructed
measures provided.
Nantucket, Inc. uses a standard cost system with the following labor standards for one
unit of product: standard hours 1/5 and standard wage rate $10. During December,
Nantucket incurred 3,500 hours of direct labor and paid $34,000 in wages in production
of 18,000 units.
Required:
Calculate the direct labor rate and efficiency variances and indicate whether the
variances are favorable or unfavorable.
Discuss the differences in “margin of safety” and “target operating income.” How do
managers use these two items in the decision-making process?
A company with a high operating leverage will experience a large percentage change in
operating income as a result of a small percentage change in sales.
Calculate and interpret basic financial statement ratios.
Alma Ortiz prepared Carlee Instruments’ balance sheet and income statement for 2014.
Before she could complete the statement of cash flows, she had to leave town to attend
to a family emergency. Because the full set of statements must be provided to the
auditors today, Carlee’s president, Mike Lymon, has asked you to prepare the statement
of cash flows. Lymon has provided you with the balance sheet and income statement
that Ortiz prepared, as well as some notes she made:
ï€ Equipment with an original cost of $35,000 was sold for $20,300. The book value of
the equipment was $19,400.
ï€ On June 1, 2014, the company purchased new equipment for cash at a cost of
$18,500.
ï€ At the end of the year the company issued notes payable for $10,500 cash. The note
will mature on December 31, 2018.
ï€ The company paid $20,200 in cash dividends for the year. Required:
Using the direct method, prepare Carlee Instruments’ statement of cash flows for 2014.
Calculate the multiproduct breakeven point and level of activity required to meet a
target income.
In an activity-based costing system, activities are classified into five categories. List
and define the five categories and give one example of each type of activity.