Campbell Company gathered the following information for the year ended December
31, 2015:
Units produced 45,000
Units expected to be produced 45,000
Units sold 43,200
Direct labor $137,200
Direct materials used $126,400
Fixed selling and administrative expenses $51,000
Variable selling and administrative expenses $58,000
Fixed manufacturing overhead $83,250
Variable manufacturing overhead $73,900
Direct materials inventory, December 31, 2015 0
Direct materials inventory, December 31, 2014 0
Work-in-process inventory, December 31, 2015 0
Work-in-process inventory, December 31, 2014 0
Finished goods inventory, December 31, 2014 0
Required:
A) Under absorption costing, what is the cost of the finished goods inventory on
December 31, 2015?
B) Under variable costing, what is the cost of the finished goods inventory on
December 31, 2015?
Two conventional ways of allocating joint costs to products are ________.
A) physical units and incremental revenues
B) physical units and incremental expenses
C) separable costs and relative sales values
D) physical units and relative sales values
All of the following are disadvantages of decentralization EXCEPT for ________.
A) Local managers make decisions that are not in the organization’s best interests.
B) Managers spend time negotiating transfer prices for goods and services transferred
between divisions and segments.
C) Local managers duplicate services.
D) Local managers have more authority and greater levels of job satisfaction.
The production volume variance is a line item on the ________ income statement.
A) contribution approach
B) variable costing
C) absorption costing
D) absorption costing and variable costing
The process of collecting costs by some natural classification is called ________.
A) cost accounting
B) cost allocation
C) cost accumulation
D) cost assignment
________ is used for external reporting.
A) Absorption costing
B) Variable costing
C) Direct costing
D) The contribution margin approach
Joint costs of producing multiple products are allocated to ________.
A) main products only
B) by-products only
C) main products and by-products
D) service departments
Current liabilities are debts due within the ________ year or within the normal
operating cycle if ________.
A) past; longer than a year
B) next; longer than a year
C) past; shorter than a year
D) next; shorter than a year
Accountants require investors that have control over the decisions of an investee firm to
use the ________ method.
A) consolidated financial statements
B) cost
C) market value
D) lower of cost or market
Brankovich Company manufactures generic notebooks. 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 June follow:
Work-In-Process Inventory, June 1:
Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $14,000
Units started in June 65,000
Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000
Direct materials added in June $285,000
Conversion costs added in June $210,000
With regard to the Work-In-Process Inventory on June 30, materials are 100 percent
complete and conversion costs are 60 percent complete. The unit cost for materials is
________.
A) $3.54
B) $3.59
C) $4.00
D) $4.91
Michael Company had the following data:
Retained earnings, January 1, 2015 $45,000
Depreciation expense for 2015 $7,000
Cost of goods sold for 2015 $102,000
Paid-in capital, January 1, 2015 $26,000
Rent expense for 2015 $12,000
Sales for 2015 $194,000
Dividends declared in 2015 $15,000
Wage expense for 2015 $40,000
Prepaid rent, January 1, 2015 $2,000
What is the balance in Retained Earnings on December 31, 2015?
A) $61,000
B) $63,000
C) $65,000
D) $74,000
Which of the following statements about the payback model is FALSE?
A) The payback model measures how quickly investment dollars may be recouped.
B) The payback model provides a rough estimate of the riskiness of a project.
C) The payback model does not consider cash flows after the payback period.
D) The payback model measures profitability.
Christian Company has the following information:
Month Budgeted Purchases
January $26,800
February 29,000
March 30,520
April 29,480
May 27,680
Purchases are paid as follows:
10% in the month of purchase
50% one month after purchase
40% two months after purchase
What is the expected balance in Accounts Payable at March 31?
A) $2,900
B) $18,312
C) $30,520
D) $39,068
Brown Company manufactures tape dispensers. The Assembly Department reported the
follow data for the past month:
Units started and completed 70,000
Units started and not complete 10,000
Units in beginning inventory 0
Direct materials costs $560,000
Conversion costs $240,000
The partially complete units at the end of the month were 100 percent complete with
respect to materials and 60 percent complete with respect to conversion costs. The unit
cost of direct materials is ________.
A) $1.67
B) $3.32
C) $6.86
D) $7.00
Watson Corporation manufactures two products, Simple and Complex. The following
annual information was gathered:
Simple Complex
Selling price per unit $47.00 $26.00
Variable cost per unit 42.00 22.00
Total annual fixed costs are $18,000. Assume demand for either product exceeds the
factory’s capacity. It takes one hour to make one unit of Complex. However, Simple
takes 50% longer to manufacture when compared to Complex. Only 120,000 hours of
plant capacity are available. How many units of Simple and Complex should Watson
Corporation produce and sell in a year to maximize profits?
A) an equal number of Simple and Complex
B) 80,000 units of Simple and 0 units of Complex
C) 0 units of Simple and 120,000 units of Complex
D) either Simple or Complex; it does not matter
The production volume variance is the difference between ________.
A) expected fixed overhead costs and actual fixed overhead costs
B) expected fixed overhead costs and budgeted fixed overhead costs
C) budgeted fixed overhead costs and actual fixed overhead costs
D) budgeted fixed overhead costs and applied fixed overhead costs
When designing an accounting information system for management, which
governmental regulations are NOT important?
A) Sarbanes-Oxley Act
B) Foreign Corrupt Practices Act
C) Tax rules promulgated by Internal Revenue Service
D) Six Sigma Act
Which of the following approaches should be used to compare four investment
alternatives?
A) total project approach
B) sensitivity analysis
C) payback method
D) differential approach
Sanchez Company reports the following information:
Net operating profit after taxes $500,000
Adjusted net operating profit after taxes $670,000
Average invested capital $500,000
Adjusted average invested capital $700,000
After-tax cost of capital 10%
The adjusted figures reflect adjustments used by Stern Stewart & Company. What is the
EVA for Sanchez Company?
A) $430,000
B) $450,000
C) $600,000
D) $620,000
Xerox Company produces plastic cups in a one-department process. The following data
is available for the past month:
Work-in-process inventory, beginning 0
Units started 60,000
Units completed and transferred 48,000
Work-in-process inventory, ending 12,000
The units in process at the end of the month are 100 percent complete with respect to
materials and 50 percent complete with respect to conversion costs. What are the
equivalent units for materials for the month?
A) 12,000
B) 48,000
C) 54,000
D) 60,000
The cost driver chosen for applying factory overhead costs should be the cost driver
that ________.
A) is easiest to understand
B) incurs the least administrative costs
C) is easiest to calculate
D) causes most of the overhead costs
Sanders Company had the following data for the year ending December 31, 2014:
Cash $6,000
Depreciation expense 40,000
Prepaid rent 1,400
Cost of goods sold 69,000
Sales 200,000
Dividends paid 3,000
Rent expense 3,600
Wage expense 81,000
What is the net income for the year ending December 31, 2014?
A) $400
B) $3,400
C) $6,000
D) $6,400
Marvelous Company has two service departments, Maintenance and Human Resources.
Marvelous 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
Maintenance Department is allocated first. Then the amount of cost allocated from the
Human Resources Department to the Maintenance Department would be ________.
A) $0
B) $3,539
C) $4,200
D) $4,998
The least-squares regression method can be used to approximate a cost function. A
disadvantage of this method is ________.
A) it does not use all the available data points
B) it requires a lot of prior cost data
C) it requires subjective placement of the line
D) it is more subjective than engineering analysis
In a clothing factory, clothing items are sewn by hundreds of workers using sewing
machines and hand stitching. The sewing machines are used 80 percent of the time it
takes to make the clothing items. Overhead costs relate primarily to electricity and
indirect materials such as needles, bobbins, thread and thimbles. What is the most
appropriate cost-allocation base for applying overhead costs to the clothing items?
A) the number of sewing machines
B) the number of direct labor hours
C) the number of sewing machine hours
D) the number of workers
Brown Company is considering the following investment:
Estimated capital investment $220,000
Estimated useful life 3 years
Estimated disposal value in 3 years $5,000
Estimated annual savings in cash operating costs(end of year) $120,000
Minimum desired rate of return 12%
Present value of ordinary annuity of one, 3 periods at 12% 2.4018
Present value of one, 3 periods at 12% 0.7118
Assume straight-line depreciation is used. Ignore income taxes. The net present value of
the investment is ________.
A) $68,216
B) $71,775
C) $73,216
D) $145,090
To estimate cost functions using account analysis, each account is classified as a
________ cost or ________ cost with respect to ________.
A) mixed; fixed; sales volume in units
B) mixed; variable: sales volume in units
C) variable; fixed; a cost driver
D) mixed; fixed; production in units
When using the step-down method of allocating service department costs, service
departments provide support activities to ________.
A) producing departments only
B) producing departments and other service departments
C) service departments only
D) producing departments and corporate central offices only
Simeranio Company manufactures generic notebooks. 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 June follow:
Work-In-Process Inventory, June 1:
Units 15,000
Direct materials (100% complete) $35,000
Conversion costs (30% complete) $14,000
Units started in June 65,000
Units completed in June 62,000
Work-In-Process Inventory, June 30 18,000
Direct materials added in June $285,000
Conversion costs added in June $210,000
With regard to the Work-In-Process Inventory on June 30, materials are 100 percent
complete and conversion costs are 50 percent complete. The unit cost for conversion
costs is ________.
A) $2.62
B) $2.80
C) $2.88
D) $3.15
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