When preparing a flexible budget income statement, ________ costs are constant at
different levels of activity.
A) variable
B) step
C) contributed
D) fixed
At 60,000 machine hours, Clark Company’s static budget for variable overhead costs is
$180,000. At 60,000 machine hours, the company’s static budget for fixed overhead
costs is $300,000. Machine hours are the cost driver of all overhead costs. The static
budget is based on 60,000 machine hours. At 60,000 machine hours, the company
produces 40,000 units. The following data is available:
Actual units produced and sold 42,000
Actual machine hours 64,000
Actual variable overhead costs $185,600
Actual fixed overhead costs $302,400
What is the fixed overhead spending variance?
A) $2,400 Unfavorable
B) $2,400 Favorable
C) $1,000 Favorable
D) $1,000 Unfavorable
Mary Company had the following data available:
Paid-in capital, December 31, 2014 $43,000
Retained earnings, December 31, 2014 $27,000
Net income for the year ended December 31, 2015 $35,400
Dividends declared in 2015 $20,000
What is the balance in Retained Earnings on December 31, 2015?
A) $23,400
B) $42,400
C) $52,400
D) $66,400
Accountants require investors with significant influence, but not control, over the
decisions of an investee firm to use the ________ method.
A) equity
B) cost
C) market value
D) lower of cost or market
Historical or past information can have an indirect bearing on a manager’s decision
because ________.
A) the past decision resulted in a favorable outcome
B) it can help predict the future
C) the past decision resulted in a bonus for the manager
D) the manager wants to repeat the past decisions made some of the time
The cash basis of accounting recognizes the impact of transactions in the period when
________.
A) revenues and expenses occur
B) cash is received or disbursed
C) the accounting equation changes
D) assets or liabilities change
Henricks Company has the following information available:
Revenue $500,000
Variable production costs $100,000
Fixed production costs $100,000
Variable selling costs $50,000
Fixed selling costs $50,000
What is the gross margin and net income?
A) $200,000; $200,000
B) $250,000; $150,000
C) $300,000; $200,000
D) $400,000: $200,000
The net amount a company expects to collects on Accounts Receivable is equal to
________.
A) gross Accounts Receivable
B) Allowance for Doubtful Accounts
C) gross Accounts Receivable minus Allowance for Doubtful Accounts
D) gross Accounts Receivable plus Allowance for Doubtful Accounts
Goodwill is recognized when one company purchases another company and ________.
A) the purchase price of the acquired company exceeds the book value of the acquired
company’s assets
B) the purchase price of the acquired company exceeds the book value of the acquired
company’s assets less liabilities
C) the purchase price of the acquired company exceeds the fair value of the acquired
company’s assets
D) the purchase price of the acquired company exceeds the fair value of the acquired
company’s assets less liabilities
John Company has two service departments, Maintenance and Human Resources. John
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 $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the direct method is used to allocate service department costs, then the total cost of
the Mixing Department after allocation would be ________.
A) $36,000
B) $105,000
C) $108,000
D) $213,000
A merchandising firm has ________ inventory account(s). A manufacturing firm has
________ inventory account(s).
A) one; three
B) three; one
C) two; three
D) three; three
The McCain Company manufactures several products. The McCain Company has
gathered the following information for the year ended December 31, 2015:
Sales $110,000
Direct materials used $10,700
Fixed indirect production costs $10,900
Variable indirect production costs $7,900
Fixed direct labor $10,300
Variable direct labor $12,300
Fixed selling expenses $33,040
Variable selling expenses $3,440
Finished Goods Inventory, January 1, 2015 $24,000
Finished Goods Inventory, December 31, 2015 $22,000
Work-In-Process Inventory, January 1, 2015 0
Work-In-Process Inventory, December 31, 2015 0
Requirements:
A) Compute the Cost of Goods Manufactured for the year ended December 31, 2015.
B) Compute the Cost of Goods Sold for the year ended December 31, 2015.
C) Compute the Net Income for the year ended December 31, 2015.
The stockholders’ equity section of a corporation’s balance sheet can be divided into
________.
A) net income and retained earnings
B) retained earnings and paid-in capital
C) net income and paid-in capital
D) liabilities and retained earnings
The following information pertains to Sanjay Company:
Total assets $50,000
Total current liabilities $30,000
Total expenses $60,000
Total liabilities $45,000
Total revenues $100,000
Invested capital is defined as total assets. What is the capital turnover?
A) 0.40
B) 0.63
C) 1.79
D) 2.00
In a typical manufacturing factory, line functions do NOT include ________.
A) purchasing
B) stamping
C) welding
D) assembly
An investor holds 5% of the outstanding stock of an investee. Securities that the
investor company buys only with the intent to resell them shortly are called ________.
A) available-for-sale securities
B) equity method securities
C) trading securities
D) options
Wisconsin Company has a current production capacity level of 200,000 units per
month. At this level of production, variable costs are $1.00 per unit and fixed costs are
$0.50 per unit. Current monthly sales are 164,500 units. Gates Company has contacted
Wisconsin Company about purchasing 20,000 units at $2.00 each. Current sales would
not be affected by the special order and no additional fixed costs would be incurred on
the special order. Variable costs would increase $0.10 per unit with the special order. If
the order is accepted, what is Wisconsin Company’s increase in operating income?
A) $8,000
B) $18,000
C) $20,000
D) $24,000
Cash collected from customers before goods are delivered is known as ________.
A) unearned revenue
B) deferred revenue
C) customer advances
D) all of the above
An investor holds 5% of the outstanding stock of an investee. Securities that the
investor company does not intend to sell in the near future are called ________.
A) trading securities
B) options
C) available-for-sale securities
D) equity method securities
The variable cost of Part X is $50 per unit and the full cost of the part is $80 per unit.
The part is produced in Country Z and transferred to a plant in Country B. Country Z
has a 10% income tax rate. Country B has a 50% income tax rate and an import duty
equal to 10% of the price of the item. Part X can be transferred at full cost or variable
cost. Assume Part X is transferred at full cost. By using full cost instead of variable cost
for the transfer price, the net savings is ________.
A) $3 per unit
B) $6 per unit
C) $9 per unit
D) $15 per unit
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%
Managers may be tempted to make decisions that are not in the best interests of the
company because ________.
A) performance measures in use reward them for decisions that are in the best interests
of the company
B) performance measures in use reward them for decisions that are not in the best
interests of the company
C) the managers do not understand the use of decision-making tools
D) the managers are evaluated several times each year
The debt-to-equity ratio is used to judge a company’s ________.
A) return on investment
B) liquidity
C) risk of insolvency
D) marketability
A product such as Sure-Fine Graham Crackers, and a customer such as an Internet
customer, are both examples of ________.
A) cost accounting
B) cost management system
C) cost assignment
D) cost objects
The activity-level variance for fixed costs equals zero when ________.
A) the actual level of output equals the static budget level of output
B) the actual level of output is greater than the static budget level of output
C) the actual level of output is less than the static budget level of output
D) all of the above
When using a two stage activity-based costing system, which of the following is NOT a
legitimate step?
A) Identify a cost pool for each significant activity.
B) Assign the indirect resource cost to the appropriate cost pool.
C) Allocate the costs in each pool to products or services using multiple cost drivers.
D) Select an allocation base for each cost pool.
What type of managers supports line managers by providing information and advice?
A) staff managers
B) operating managers
C) assembly room managers
D) welding room managers
Consider the following activity: The installation of seats by an airplane manufacturer in
a commercial airplane. What is an appropriate cost driver for the labor resources used
for this activity?
A) number of service center hours
B) number of labor hours used to install seats
C) number of mechanic hours
D) number of engineering hours
Medved 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 $315,000
Direct materials used $160,000
Direct labor $100,000
Variable factory overhead $60,000
Fixed factory overhead $80,000
Variable selling and administrative expenses $20,000
Fixed selling and administrative expenses $30,000
Production volume variance 0
Ending inventory, Direct Materials 0
Ending inventory, Work-in-process 0
Ending inventory, Finished Goods 600 units
Under absorption costing, what is the cost of the ending inventory of finished goods?
A) $78,000
B) $96,000
C) $120,000
D) $135,000
Burtard Chemical makes a variety of chemicals. The company uses process costing.
Materials are added at the end of the process. Conversion costs are added evenly
throughout the process. The company has no beginning work-in-process inventory. The
Mixing Department had the following data:
Units started and completed 8,000
Units started and 30% complete 2,500
Direct materials costs $126,000
Direct labor costs $31,250
Factory overhead costs $30,000
Required:
A) Compute the equivalent units for materials and conversion costs.
B) Compute the cost per unit for materials and conversion costs.
C) Compute the cost of the goods completed and transferred.
D) Compute the cost of the ending work-in-process inventory.
The following information is available for Kismer Corporation:
Total fixed costs $313,500
Variable costs per unit $90
Selling price per unit $150
If management has a targeted net income of $59,400, then sales revenue should be
________.
A) $239,721
B) $580,067
C) $671,220
D) $932,250
Many organizations use a linear relationship with a single cost driver to describe a cost
even though the cost may have multiple cost drivers. Why?
A) This approach is easier and less expensive.
B) The cost of developing a more complex function is greater than the benefit.
C) Cost estimates from the simple function are accurate enough for most decisions.
D) All of the above