2071_samplefinalsp10

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ACG 2071 FINAL EXAM REVIEW PROBLEMS

1. Ceradyne manufactures lawn ornaments. Three types, the P1, P2 and P3, have contribution margin ratios of 30%,
42%, and 36%, respectively, and profit margin ratios of 12%, 16%, and 19%, respectively. Product demand is high.
Which product should the company push to its customers?
A. P1 only
B. P2 only
C. P3 only
D. P2 or P3

2. A cost that includes direct labor, direct materials, and manufacturing overhead is called
A. a discretionary cost
B. a direct cost
C. a variable cost
D. a product cost
E. a period cost

3. The job order cost sheet for Job 434 contains the following information: 100 units; direct labor, \$2,000; direct
materials, \$5,000; manufacturing overhead, \$3,000. Twenty of the units will be shipped to the customer at a sales
price of \$150 each. Which of the following is one effect of recording the shipment to the customer?
A. Finished goods decreases by \$3,000.
B. Work in process decreases by \$3,000.
C. Cost of goods sold increases by \$2,000.
D. Work in process decreases by \$2,000.

4. Beginning finished goods inventory for Alves Inc. was \$12,000. Goods completed during the year were costed at
\$800,000. Purchases of raw materials totaled \$400,000. The ending finished goods inventory was \$16,000. How much
was cost of goods sold for the year?
A. \$1,200,000
B. \$812,000
C. \$1,196,000
D. \$796,000

5. Hunley Company‟s sales revenue for 2004 was \$120,000. Hunley has one product that sells for \$5 and has a 40
percent contribution margin. Fixed costs total \$25,000. What is Hunley Company‟s breakeven point in sales dollars?
A. \$41,667
B. \$8,333
C. \$62,500
D. \$12,500

6. Manufacturing overhead during the year was underapplied. If the amount is immaterial, which one of the following is a
part of the transaction that should occur to dispose of the underapplied amount?
A. Increase Cost of Goods Sold
B. Decrease Cost of Goods Sold
C. Increase Finished Goods Inventory, Work in process, and Cost of goods sold
D. Decrease Finished Goods Inventory, Work in process, and Cost of goods sold
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7. A disadvantage of using an outside supplier is that
A. they may be able to produce a component at a lower cost.
B. there is a loss of control over the production process.
C. there may be an opportunity to expand other parts of the company.
D. the supplier assumes some of the risk of a downturn in business activity

8. Harper Dating Services is trying to determine the variable and fixed elements of its service overhead. The following
data have been collected from recent activity:
June                           \$52,875                     186
July                            52,100                     182
August                          53,375                     194
The formula for total service overhead costs is
A. \$32,762.50 + \$106.25 per case
B. \$16,837.50 + \$193.75 per case
C. \$41,250 + \$62.50 per case
D. \$24,800 + \$150 per case

9. The following budget data are available for Surly Corporation:
Estimated direct labor hours                     9,000
Estimated direct labor dollars                   \$85,500
Surley applies manufacturing overhead based on direct labor dollars. How much is the predetermined overhead rate?
A. \$11.50
B. \$9.50
C. \$1.21
D. \$0.83
E. \$11.20

10. Which is not a way that managerial accounting supports the management cycle?
A. evaluating performance
B. reporting the results of activities
C. providing GAAP statements
D. developing plans and analyzing alternatives

11. Which of the following best describes one impact of undercosting?
A. It is a common goal of all companies that allows a company to show larger profit margins.
B. Undercosting some products will lead to overcosting other products, which is acceptable because total costs and
profits are the same.
C. Undercosting may cause a company to price it products less than what is necessary to make a profit.
D. It can cause activity levels to fluctuate.

12. Which one of the following is an appropriate cost driver?
A. A product such as Monopoly games
B. The dollar amount of delivery costs incurred in shipping goods to customers
C. The number of purchase orders prepared by an ordering department
D. A production department

13. Which one of the following statements most accurately explains the behavior of costs?
A. The majority of costs are variable per unit of production.
B. The majority of costs are fixed per unit of production.
C. Costs can be fixed or variable but usually not a combination of both.
D. There is no norm; rather, costs can be fixed, variable, or a combination of both.

14. As volume decreases,
A. variable cost per unit decreases.
B. fixed cost in total decreases.
C. variable cost in total remains the same.
D. fixed cost per unit increases.
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15. Sam Company makes 2 products, buckets and shovels. Additional information follows:
Buckets     Shovels
Units                              2,000       3,000
Sales                            \$60,000     \$25,000
Variable costs                    24,000      13,750
Fixed costs                       10,000       5,250
Net income                       \$26,000      \$6,000
Pounds of plastic per unit          2.00        0.40
Profit per unit                   \$13.00       \$2.00
Contribution margin per unit      \$18.00       \$3.75
The company can sell as many buckets and shovels as it can manufacture and can eliminate one or the other without
an effect on demand of the other. How much is the weighted average contribution margin ratio?
A. 10.88%
B. 25.58%
C. 55.58%
D. 56.78%

16. Use the information in question 15. Suppose that plastic is in limited supply and only 1,500 pounds are available.
Which product and how many should the company manufacture?
A. 2,000 buckets and 3,000 shovels
B. 750 buckets and no shovels
C. 1,500 shovels and no buckets

17. The following information was taken from the cost records of the Solom Corporation:
Estimated direct labor hours                      12,000
Actual direct labor hours                         12,500
Solom applies manufacturing overhead based on direct labor hours. How much is overapplied or underapplied
A. \$5,000 overapplied.
B. \$5,000 underapplied.
C. \$1,500 overapplied.
D. \$1,500 underapplied.
E. \$3,500 underapplied

18. The delivery trucks of Slavin Transport Company incurred \$3,600 of maintenance costs during the busiest month of
2004, in which 12,000 miles were driven collectively. During the slowest month, \$2,800 in maintenance costs were
incurred, and 8,000 miles were driven. Using the high-low method, what maintenance cost would the company expect
to incur if 15,000 miles were driven?
A. \$3,000
B. \$4,400
C. \$4,000
D. \$4,200

19. Activity-based costing
A. calculates a more accurate product cost and is less expensive than the traditional method of costing.
B. categorizes direct costs by activity and traces the direct costs to those activities using a cost driver.
C. is used to allocate indirect and direct costs to products.
D. allocates indirect costs based on the activity that causes costs to increase.

20. If the anticipated contribution margin on a new product line is \$20, fixed costs are \$200,000, and the total market for
the product is 20,000 units, then the CVP analysis would recommend that the company
A. abandon the potential new product line.
B. decrease the sales price per unit.
C. increase fixed costs (such as advertising) to lower the breakeven units.
D. adopt the new product line.
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21. In graph form, the breakeven point is at the intersection of the
A. total-revenue and variable-cost lines.
B. total-cost line and vertical axis.
C. variable-cost and fixed-cost lines.
D. total-cost and total-revenue lines.
22. During May, actual costs for for a company that produced 20,000 widgets were direct materials, \$20,000; direct labor,
\$30,000; indirect materials, \$3,000, indirect labor, \$2,000, factory supplies, \$1,000, factory supervisor salary, \$4,000,
selling expenses; \$10,000, and costs to delivery products to customers, \$2,000. How much is the unit cost of
manufacturing widgets?
A. \$3.00
B. \$3.60.
C. \$2.50.
D. \$3.10.
E. Some other amount

23. When direct materials are requisitioned by the production supervisor,
A. Work in Process Inventory decreases.
B. Finished Goods Inventory increases.
C. Materials Inventory decreases.
D. Finished Goods Inventory decreases.

24. At the point that indirect materials are used in production, what transaction occurs?
A. Raw Materials Inventory increases
B. Work in Process Inventory increases
D. Cost of goods sold increases

25. Wright Company's Work in Process account showed a balance of \$20,780 on July 1, 2004. During July, direct
materials costing \$58,300 were requested for production, \$24,200 of the \$96,400 total factory payroll was used to pay
indirect labor. Wright applies manufacturing overhead at a rate of 125% of direct labor costs. Costs of \$193,600 were
transferred to the Finished Goods Inventory account during July. How much should Wright report as its July 31, 2004
balance in Work in Process Inventory?
A. \$27,150.
B. \$47,930.
C. \$22,280.
D. \$1,600.
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26. Sarah Jones, the manager of the Teen Division of Ellen Clothing Company, was evaluating the acquisition of a new
embroidery machine. The budgeted operating income of the Teen Division was \$4,000,000 with total assets of
\$22,000,000 and noninterest-bearing current liabilities of \$1,000,000. The proposed investment would add \$450,000
to operating income and would require an additional investment of \$3,500,000. The targeted rate of return for the
Teen Division is 14%. Ignoring taxes, how much is the ROI of the Teen division if the embroidery machine is
purchased?
A. 19.0%
B. 12.9%
C. 18.2%
D. 21.2%

27.    Which of the following statements is true?
A.     Managers have a tendency to underinvest when ROI is used as a performance
measure.
B.     Managers have a tendency to overinvest when profit is used as a performance
measure.
C.     Both A and B are true.
D.     Neither A nor B is true.

28.    The following income statements and other information are available for the Biltmore Company:
2011                 2010
Sales                                        \$230,000,000        \$220,000,000
Cost of goods sold                             105,000,000          96,000,000
Gross margin                                   145,000,000         124,000,000
Selling and administrative costs                25,000,000          22,500,000
Research and development                        15,600,000          12,400,000
Income from operations                         104,400,000          89,100,000
Less taxes on income                            31,320,000          26,730,000
Net income                                    \$ 73,080,000        \$ 62,370,000
Total assets                                 \$650,000,000        \$605,000,000
Noninterest-bearing current                    \$15,000,000         \$12,300,000
liabilities
Cost of capital                                         10%                  10%

Interest expense is \$0 and the tax rate is 35%. Biltmore amortizes R&D over 4 years. By how much is invested
capital adjusted as it relates to computing EVA for 2011?
A.       \$17,900,000
B.       \$7,800,000
C.       \$15,600,000
D.       \$21,000,000

29.    Consider the following information for Executive Electronics.
12/31/2011       12/31/2012
Total assets                                            \$11,800,000      \$11,000,000
Noninterest-bearing current liabilities                     500,000          520,000
Net income                                                  700,000          800,000
Interest expense                                          2,100,000          300,000
Tax rate                                                       35%              35%
Cost of capital                                                 7%               8%
Required rate of return                                         9%              10%

How much is residual income for 2012?
A. \$53,000)
B. (\$38,400)
C. \$73,400
D. \$156,660
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30.   The following income statements and other information are available for the Biltmore Company:
2011                 2010
Sales                                        \$230,000,000        \$220,000,000
Cost of goods sold                             105,000,000          96,000,000
Gross margin                                   145,000,000         124,000,000
Selling and administrative costs                25,000,000          22,500,000
Research and development                        15,600,000          12,400,000
Income from operations                         104,400,000          89,100,000
Less taxes on income                            31,320,000          26,730,000
Net income                                    \$ 73,080,000        \$ 62,370,000
Total assets                                 \$650,000,000        \$605,000,000
Noninterest-bearing current liabilities        \$15,000,000         \$12,300,000

Cost of capital                                           10%                 10%

Interest expense is \$0 and the tax rate is 35%. Biltmore amortizes R&D over 4 years. By how much is NOPAT
adjusted as it relates to computing EVA for 2011?
A.       \$8,600,000
B.       \$5,590,000
C.       \$15,600,000
D.       \$3,010,000

31.   Jackie Chin Waste Management has a subsidiary that disposes of hazardous waste and a subsidiary that collects
and disposes of residential garbage. Information related to the two subsidiaries follows:
Hazardous             Residential
Waste                 Waste
Total assets                                                   \$12,000,000             \$72,000,000
Noninterest-bearing current liabilities                          3,000,000              12,000,000
Net income                                                       1,700,000               6,000,000
Interest expense                                                 1,250,000               2,300,000
Cost of capital                                                        8%                     10%
Tax rate                                                              35%                     40%

Which subsidiary has added the most to shareholder value in the last year?
A.     Hazardous Waste, because it has a higher residual income.
B.     Residential Waste, because it has a higher ROI
C.     Both contributed equally

32.   On a balanced scorecard, the measure of the number of new patents developed through research and
development would be an example of a measure in the:
A.     learning and growth dimension
B.     internal process dimension
C.     the customer dimension
D.     the financial dimension

33.   Claremont Woolen Products has two divisions: a Fabric division that manufactures woolen fabrics, and a Clothing
division that manufactures woolen dresses, coats, shirts, and accessories. All fabric used by the Clothing division
is supplied by the Fabric division, which also supplies fabric to outside companies. What is the best transfer price
for the fabric, assuming that the Fabric division is operating at only 60 percent of capacity due to a surge in
popularity of “easy-care” fabrics made of polyester and rayon?
A.       An amount that equates to variable costs plus contribution margin
B.       An amount that equates to the external selling price
C.       An amount that equates to variable costs
D.       An amount that equates to full product costs
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34.      Boone Enterprises has two divisions, Newhart and Ferrell. Information for each division for last year appears
below:
Newhart                  Ferrell
Sales                                    \$4,000,000             \$9,000,000
NOPAT                                       \$250,000              \$450,000
Investment                               \$1,000,000             \$3,000,000
Required Rate of Return                          18%                    18%

.        What are the profit margin and investment turnover, respectively, for the Newhart Division?
A.     4, 6.25%
B.     6.25%, 25%
C.     .25, 100%
D.     6.25%, 4

35.      Which of the following units of Target Corporation would most likely not be a cost center?
A.     The Target Store in Ames, Iowa
B.     The corporate accounting department
C.     The marketing department
D.     Investor Relations

36.      The overhead volume variance is favorable when
A.     more units are produced than were originally planned.
B.     actual overhead costs are less than the flexible budget.
C.     the predetermined overhead rate was set too low.
D.     there are units remaining in ending inventory.

37.      Smithy Company produces hockey helmets. The standard cost for each helmet is as follows:
Per Helmet
Direct material 5.0 lbs at \$4.00/lb.                          \$20.00
Direct labor             2.0 hrs @ \$16.00/hr.                 \$32.00

During November, 2,000 helmets were produced. 10,600 lbs. of material were purchased and used during
November, at a total cost of \$44,520. Labor worked 3,870 hours at an hourly rate of \$15.80. Actual overhead was
\$21,900. The overhead cost of \$10.00 per helmet was determined using an estimated monthly fixed overhead of
\$13,200 and is \$4.00. What is the total standard cost of all the helmets produced?
A.     \$40,000
B.     \$127,566
C.     \$124,000
D.     \$104,000
E.     Some other amount

38.      A dress company has the following standards to make one dress:
Standard Quantity                Standard Price
Direct materials               3 yards per unit                \$6.50 per yard
Direct labor                  1.5 hours per unit               \$8.00 per hour

The company purchased 3,000 yards of material in March for \$21,000. The company used 2,800 yards in March
in order to make 7,700 dresses. How much is the direct materials price variance?
A.       \$1,400 unfavorable
B.       \$1,500 unfavorable
C.       \$1,400 favorable
D.       \$1,500 favorable
E.       some other amount

39.      Use the information in question 38. How much is the direct materials price variance?
A.      \$1,400 unfavorable
B.      \$1,500 unfavorable
C.      \$1,400 favorable
D.      \$1,500 favorable
E.      some other amount
Page 8 of 25
Use the following information for questions 40-45.

Nelson Manufacturing produces baseball equipment. The standard cost of producing one unit of model XHR is:
Material (3.50 ounces at \$1.30 per ounce)               \$4.55
Labor (0.30 hour at \$12.00 per hour)                     3.60
Total                                                  \$10.35
At the start of 2008, Nelson‟s planned to produce 80,000 units during the year. Annual fixed overhead is budgeted at
\$56,000 and the standard for variable overhead is \$1.50 per unit.
The following information summarizes the results for 2011:
Actual production was 75,000 units.
Purchased 275,000 ounces of material at a total cost of \$343,750.
Used 266,250 ounces of material in production.
Employees worked 22,000 hours and were paid \$275,000.

40.     What is the material price variance?
A.      \$4,875 unfavorable
B.      \$13,750 favorable
C.      \$13,313 favorable
D.      \$8,875 favorable

41.     What is the material quantity variance?
A.      \$4,875 unfavorable
B.      \$8,875 favorable
C.      \$\$14,750 favorable
D.      \$13,750 favorable

42.     What is the labor rate variance?
A.      \$6,000 favorable
B.      \$5,000 unfavorable
C.      \$24,000 favorable
D.      \$11,000 unfavorable

43.     What is the labor efficiency variance?
A.      \$11,000 unfavorable
B.      \$5,000 unfavorable
C.      \$6,000 favorable
D.      \$24,000 favorable

44.     What is the controllable overhead variance?
A.      \$3,000 unfavorable
B.      \$10,000 unfavorable
C.      \$6,500 unfavorable
D.      \$3,500 unfavorable

45.     What is the overhead volume variance?
A.      \$6,500 unfavorable
B.      \$3,500 unfavorable
C.      \$10,000 unfavorable
D.      \$3,000 unfavorable
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46.   The standard price for materials is often determined by
A.     a financial analyst who is following the company.
B.     a union labor contract.
C.     price lists provided by suppliers.
D.     multiplying the number of units needed by the actual cost.

47.   The difference between standard costs and budgeted costs is that standard costs
A.      refer to a single unit while budgeted costs refer to the cost, at standard, for the
total number of budgeted units.
B.      are calculated under ideal conditions, while budgeted costs are calculated for
attainable conditions.
C.      are calculated for material while budgeted costs are calculated for labor.
D.      are part of the management accounting system, while budgets are part of the
financial accounting system.

48.   Standard costs would be most useful for:
A.     A canning factory
B.     A tax preparation firm
C.     A software company
D.     A custom home builder

49.   In general, unfavorable material variances arise from
A.      using more material than planned.
B.      paying a higher price than planned.
C.      Both A and B are correct.
D.      None of the above is correct.

50.   In a bottom-up approach to budgeting, the primary source of information used in setting the budget is
A.       economists.
C.       the controller.
D.       lower level managers.

51.   A method of budget preparation that requires all budgeted amounts to be justified by the department, even if the
amounts were supported in prior periods, is called
A.     variance budgeting.
B.     flexible budgeting.
C.     current period budgeting.
D.     zero base budgeting.

52.   Which of the following is a reasonable order in which to prepare budgets?
A.     Budgeted income statement, sales budget, cash receipts and disbursements budget
B.     Cash receipts and disbursements budget, capital acquisitions budget, labor budget
C.     Sales budget, production budget, material purchases budget
D.     Labor budget, budgeted income statement, sales budget

53.   If the number of units in beginning inventory is more than the number of units in ending inventory, the number of
units sold is
A.       less than the number of units produced.
B.       greater than the number of units produced.
C.       less than the number of units in beginning inventory.
D.       greater than the number of units in ending inventory.

54.   A significant difference between the direct material purchases budget and the direct labor budget is that the direct
material purchases budget
A.       is based on units sold, while the direct labor budget is based on units produced.
B.       considers beginning and ending inventory amounts, which are not part of a direct labor budget.
C.       is constructed for each quarter, while the direct labor budget is constructed for each pay period.
D.       is constructed from the top down, while the direct labor budget uses a bottom-up approach.
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55.   What is one reason the amount of cash paid out for overhead each period does not equal the total overhead
incurred?
A.      Depreciation is an overhead expense that does not require the use of cash.
B.      Overhead expenses are only estimates, they do not require cash.
C.      Cash is only paid out for fixed manufacturing overhead expenses.
D.      The amount of cash paid out is adjusted for the number of units sold.

56.   Which of the following does not appear on the cash budget?
A.     ending cash balance
B.     cash needed for capital acquisitions
C.     cost of goods sold
D.     dividends payments

57.   Jefferson Company‟s sales are 55% cash and 45% credit. 50% of credit sales are collected in the month of sale,
30% in the month following the sale, and 20% is collected two months after. Budgeted sales data is as follows:
June                            \$100,000
July                             \$90,000
August                          \$100,000

How much is total „Accounts Receivable‟ at the end of August?
A.    \$45,000
B.    \$63,000
C.    \$22,500
D.    \$30,600

58.   Budgeted sales (in units) for the Randstar Company are as follows:
September                          45,000 units
October                            60,000 units
November                           40,000 units
December                           75,000 units
The company wishes to have 10% of the next month‟s sales on hand at the end of each month. Budgeted
production for November is:
A.      43,500 units
B.      40,000 units
C.      47,500 units
D.      36,000 units

59.   Billings Rail Company‟s sales for the next five months are as follows:
February                      \$175,000
March                         \$160,000
April                         \$145,000
May                           \$135,000
June                          \$130,000
Collection history for the company indicates that 50% of sales are collected in the month of the sale, 38% is
collected in the following month, and 12% of sales are uncollectible.
How much are total budgeted cash receipts for April?
A.       \$133,300
B.       \$154,300
C.       \$72,500
D.       \$123,800
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60.   Rawlings Company has budgeted sales and production over the next quarter as follows:
Sales                 Production
September                 60,000                  48,000
October                   40,000                  44,000
November                        ?                 58,000
Rawlings Company has 20,000 units of product on hand at September 1. The company requires that 20% of the
next month‟s sales in units are on hand at the end of each month. December sales are expected to be 50,000
units. How much is ending inventory in units for October?
A.      8,800
B.      52,000
C.      12,000
D.      4,000

61.   The main difference between a static budget and a flexible budget is that the static budget is
A.     constructed using a top-down approach while the flexible budget uses a bottom-up approach.
B.     for units produced while a flexible budget is for units sold.
C.     for a single level of activity while a flexible budget can be adjusted for different activity levels.
D.     used only for selling and administrative costs while the flexible budget is used for manufacturing costs.

62.   Jericho Company‟s budgeted income statement for 2011 follows:
Sales (8,000 units)                                 \$128,000
Direct materials                                       27,600
Direct labor                                            6,000
Fixed selling & administrative expenses                30,000
Net Income                                            \$32,600
How much income before taxes would appear on a flexible budget for 14,000 units?
A.      \$90,800
B.      \$103,400
C.      \$57,050
D.      Not enough information is provided.

63.   Management by exception refers to the practice of only investigating variances
A.    in fixed costs.
B.    where the actual amount exceeds the budget.
C.    that are large in dollar amounts or relative to budgeted amounts.
D.    in the operations managed by those who lack experience in the company

64.   Stanton Company had sales of 15,000 units of its only product in the first quarter of 2007. In the first quarter of
2008, Stanton anticipates selling 20% more units than it sold in the first quarter of 2007, with a selling price of \$68
per unit. What is the amount of sales revenue that will appear in the budgeted income statement for the first
quarter of 2008?
A.       \$1,224,000
B.       \$1,020,000
C.       \$1,468,800
D.       \$816,000
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65.   History Entertainment distributes a DVD which sells for \$12 per unit. History pays \$7 per unit to buy the product.
Selling cost of \$1 per unit is incurred to deliver the product to the customer. This is paid in cash when the product
is sold. History has \$50,000 per month in fixed selling and administrative expenses (including \$3,000 in
depreciation), which are paid half in the month incurred and half in the next month. It is History‟s policy to maintain
an inventory at the end of each month equal to 30% of the next month‟s projected cost of sales.
History makes 30% of sales in cash, and the rest are on credit. Credit sales are collected in the month after sale.
Budgeted monthly sales for the first five months of 2008 are as follows:
January                       20,000 units
February                      22,000 units
March                         26,000 units
April                         28,000 units
May                           40,000 units
What amount of purchases of inventory (at cost) will be required in February?
A.       \$154,000
B.       \$23,200
C.       \$162,400
D.       \$54,600

66.   Use the information in #65. What will net income be in March? Use variable costing.
A.      \$312,000
B.      \$54,000
C.      \$57,000
D.      \$104,000

67.   Brink Company planned to make 500,000 cans of pasta sauce and spend \$250,000 on tomatoes during
November. However, demand was weak due to increased competition, and only 450,000 cans of pasta sauce
were produced. The actual cost incurred was \$230,000. Tomato prices were as expected during the period.
Which of the following statements would be a fair statement regarding Brink‟s performance on tomato usage?
A.      Brink‟s was under flexible budget by \$20,000 and did well controlling costs.
B.      Brink‟s was over budget by \$5,000 and did a poor job of controlling costs.
C.      Brink‟s flexible budget for tomatoes for performance evaluation should have been \$250,000.
D.      Both a and c are correct

68.   Which one of the following do budget reports provide for managers?
a. The cause of differences between actual and projected amounts
b. The nature of corrective action needed
c. Feedback on operations
d. Modification actions necessary

69.   Freesome Enterprises planned to sell 18,000 surfboards, however the actual number sold totaled 19,000. Which
one of the following provides the best comparison of the cost data associated with the sales?
a. A budget based on the original planned level of activity
b. A budget of 18,000 units of activity
c. A budget of 19,000 units of activity
d. The master budget level of activity

70.   Which one of the following is a suitable way to evaluate cost centers?
a. Compare the actual profit generated with expected profit
b. Compare actual total costs with flexible budget data
c. Compare actual controllable costs with static budget data
d. Compare actual controllable costs with flexible budget data
Page 13 of 25
71.   Given below is a portion of Dance, Inc.‟s management performance report:
Budget             Actual              Difference
Contribution margin               \$1,040,000         \$1,020,000             \$20,000
Controllable fixed costs             430,000            420,000               10,000
Which statement is true about the manager‟s overall performance?
a. His performance is above expectations.
b. His performance is below expectations.
c. The manager was under budget on all controllable amounts.
d. The manager's overall performance cannot be determined from information given.

72.    Which statement below describes the budgeted balance sheet?
a. It is a projection of financial position of the company at the end of the budget period.
b. It is developed from the budgeted balance sheet for the preceding year.
c. It is the last operational budget prepared.
d. It shows the costs incurred by the company for the current year.

73.    Zappa, Inc. makes and sells a single product, balloons. 30 grams of latex are needed to make one balloon.
Budgeted production of balloons for the next three months is as follows: August 88,000 units, September 60,000
units, October 50,000 units. The company wants to maintain monthly ending inventories of latex equal to 5% of
the following month's production needs, and 10% of the number of balloons to be sold in the following month. The
cost of latex is \$.01 per 30 grams. How many grams of latex will Zappa use for production during September?
a. 1,795,000
b. 1,800,000
c. 1,815,000
d. 1,785,000

74.    Arcano Corporation is considering producing a new automobile product, Shine. Research has determined that the
company will be able to sell 60,000 units per year at \$12. The product will be produced in a section of an existing
factory that is currently not in use.
To produce Shine, Arcano must buy a machine that costs \$400,000. The machine has an expected life of five
years and will have an ending residual value of \$15,000. Williams will depreciate the machine over five years
using the straight-line method. In addition to the cost of the machine, the company will incur incremental
manufacturing costs of \$570,000. Arcano has a tax rate of 30 percent, and the company‟s required rate of return
is 8 percent. How much is the payback period?
A. 3.12 years
B. 7.82 years
C. 3.80 years
D. 2.67 years

75.    BlueMan, Inc. wants to purchase of a new ice cream truck with a cost of \$58,000. BlueMan has a cost of capital of
8.4% and a required rate of return of 12.4%. Its income tax rate is 30%. The acquisition is proposed for January 1,
2008. BlueMan expects it can sell the truck for \$10,000 at end of its useful life of 4 years. BlueMan predicts the
new truck will generate net income of \$6,000 and operating cash flows of \$18,000 during 2008, with an increase
of 8% each subsequent year. How much is ARR?
A.      19.88%
B.      17.65%
C.      11.65%
D.      23.31%

76.    When using Excel to calculate the internal rate of return, which item can you safely omit from the wizard and still
calculate the IRR?
A.      The initial cash flow
B.      The annual cash flows
C.      A guess at the internal rate of return
D.      The net present value
Page 14 of 25
77.       Handy Wrappers is considering investing in a piece of machinery which will cost \$500,000. It will provide an
additional \$160,000 is additional sales each year and its annual operating expenses are expected to be \$35,000.
The machine will be depreciated on a straight-line basis over a 10 year life with no estimated salvage value. The
company has a 40% tax rate and its required rate of return is 16%. How much is the annual depreciation tax
shield?
A.      \$20,000
B.      \$96,664
C.      \$241,660
D.      \$72,498

78.       A company is considering investing in a piece of machinery which will cost \$550,000. It will provide an additional
\$160,000 in sales each year and its annual operating expenses are expected to be \$52,000. The machine will be
depreciated on a straight-line basis over a 10-year life with no estimated salvage value. The company has a 40%
tax rate. What is the annual operating cash flow?
A.       \$64,800
B.       \$96,000
C.       \$86,800
D.       \$118,000

79.       Which of the following would not appear in a capital budget?
A.     purchase of a state-of-the-art packaging system
B.     purchase of land where a new warehouse will be built
C.     purchase of a new delivery truck
D.     purchase of inventory to be sold next month

80.       Dokley is deciding whether to accept a project requiring a \$110,000 investment. Projected operating cash flows
are:
Year 1                               \$ 30,000
Year 2                                 40,000
Year 3                                 50,000
Total                               \$120,000
If HT‟s required rate of return is 5.7%, how much is the NPV?
A. (\$3,476)
B. \$106,254
C. (\$3,289)
D. \$10,000
E. \$6,270

81. Carlita Inc. is deciding whether to accept a project requiring a \$80,000 investment with a 4 year useful life and an
estimated salvage value of \$8,000. The required rate of return is 8.5%. Projected operating cash flows are:
Year 1                              \$ 50,000
Year 2                                20,000
Year 3                                30,000
Total                              \$100,000
To determine the NPV, which of the follow represents the correct input for the BAII plus calculator?
A. C0 = 50,000; C1 = 20,000; C2 = 30,000
B. C0 = (72,000); C1 = 50,000; C2 = 20,000; C3 = 30,000
C. C0 = (80,000); C1 = 50,000; C1 = 20,000; C2 = 30,000; C4 = 8,000
D. C1 = 50,000; C2 = 20,000; C3 = 38,000
E. C0 = (80,000); C1 = 50,000; C2 = 20,000; C3 = 38,000

82. Projects should not be undertaken if
A. the NPV is less than zero.
B. the payback period is more than five years.
C. the cost of capital is high.
D. the IRR is equal to or greater than the required rate of return.
Page 15 of 25
83. Staten Company has net income of \$100,000, interest expense of \$20,000, total assets of \$800,000, and non-interest
bearing current liabilities totaling \$100,000. The cost of capital is 10%. The income tax rate is 40%. How much is NOPAT?
A.       \$108,000
B.       \$112,000
C.       \$50,000
D.       \$120,000
E.       \$88,000

84. An investment costing \$940,000 will yield cash inflows of \$400,000 per year for 2 years, then \$200,000 for the next
two years. The company‟s required rate of return is 8.2%. What is the internal rate of return on the investment?
A.      3.13%
B.      10.11%
C.      78.33%
D.      12.32%

85 Stuart Company received the following requests for capital investments for 2004:
Project Amount of Investment          IRR
A             \$120,000              14
B               250,000             16
C                98,000             21
D               265,000             20
E               180,000             15
F               100,000             19
The required rate of return is 17 percent and \$725,000 is available for capital investments for 2004. Which capital
investment proposals should Stuart Company consider? Rank the proposals in order, with the most desirable first.
A.       D, F, C
B.       C, D, F
C.       D, B, E
D.       C, D, F, B

86. In calculating invested capital, non-interest bearing current liabilities are deducted from total assets because:
A. total assets includes current assets.
B. invested assets are always non-current assets.
C. they are a “free” source of financing.
D. managers are unable to control those amounts.

87. Under which situation would a project be acceptable under the net present value method?
A. Total net cash inflows exceed the purchase price of the asset.
B. The project‟s net income is greater than its cost.
C. The minimum time it will take to recover the initial investment is less than a desired period of time.
D. The purchase price of the asset is less than the present value of net cash inflows.

88. Budgets are useful in planning because they enhance
A. relevance and reliability of information.
B. communication and coordination.
C. understanding of costs.
D. elimination of costs.

89. Which of the following items would not be relevant to a capital budgeting decision to replace an old machine?
A. Annual operating cash flows
B. Disposal value of old machine
C. Residual value of new machine
D. Acquisition cost of old machine
Page 16 of 25
90. Sudo Enterprises budgeted 2003 sales to be 390,000 gallons and production to be 400,000 gallons of window
cleaner. Material cost in the 2003 production plan amounted to \$800,000. During 2003, the company actually
produced 450,000 gallons and material costs were \$910,000. A comparison of actual material cost to material cost in
a flexible budget would indicate a variance of:
a. \$50,000 unfavorable.
b. \$10,000 unfavorable.
c. \$110,000 unfavorable.
d. \$100,000 unfavorable.

91. Robin Company currently produces 8,000 units of part B13. Current costs for part B13 are as follows:
Direct materials                    \$12
Direct labor                          9
Factory rent                          7
Total                               \$45
If the company decides to buy part B13, 50% of the administrative costs would be avoided. All of the Robin Company
items, including part B13, are manufactured in the same rented production facility. The company has an offer from a
wholesaler that wishes to sell the part to Robin for \$31 per unit. What effect will occur if the company decides to
accept the offer?
A.      The cost for this part will increase by \$5 per unit.
B.      The cost for this part will be the same.
C.      The cost for this part will decrease by \$14 per unit.
D.      The cost for this part will decrease by \$10 per unit.

92.    Walter Jewelry Company produces a bracelet which normally sells for \$79.95. The company produces 1,500
units annually but has the capacity to produce 2,000 units. A special order for manufacturing and selling 200
bracelets at \$49.95 has been received which would not disrupt current operations. Current costs for the bracelet
are as follows:
Direct materials             \$17.00
Direct labor                   14.50
Total                        \$40.50

In addition, the customer would like to add a monogram to each bracelet which would require an additional \$2 per
unit in additional labor costs and Walter Company would also have to purchase a piece of equipment to create the
monogram which would cost \$1,600. This equipment would not have any other uses.

With regard to this special order, only
A.      incremental revenues will exceed incremental costs by \$2,490.
B.      incremental revenues will exceed incremental costs by \$890.
C.      incremental revenues will exceed incremental costs by \$2,890
D.      incremental revenues will exceed incremental costs by \$1,290

93.    BigByte Company has 12 obsolete computers that are carried in inventory at a cost of \$13,200. If these
computers are upgraded at a cost of \$7,500, they could be sold for \$15,300. Alternatively, the calculators could
be sold “as is” for \$9,000. What is the net advantage or disadvantage of re-working the computers?
E.      Some other amount
Page 17 of 25
94.    The following are production and cost data for two products, buckets and pails.
Buckets                   Pails
Contribution margin per unit                \$450                    \$280
Machine set-ups needed per unit                20                     14

The company can only perform 14,000 set-ups each period yet there is unlimited demand for each product. What
is the maximum contribution margin for the year?
A.      \$315,000
B.      \$35,000
C.      \$280,000
D.      \$595,000
E.      Some other amount

95.    Central Apparel Company owns two stores and management is considering eliminating the East store due to
declining sales. Contribution income statements are as follows and common fixed costs are allocated on the
basis of sales.
West              East             Total
Sales                        \$420,000             \$90,000        \$510,000
Variable costs                 210,000             45,000         255,000
Direct fixed costs              50,000             25,000          75,000
Allocated fixed costs          110,000             35,000         145,000
Net Income                   \$ 50,000           (\$15,000)         \$35,000

Central‟s management feels that if they eliminate the East store, that sales in the West store will increase by 20%.
If the East store is closed, what effect will occur to the overall company net income?
A.       Increase by \$25,000
B.       Increase by \$22,000
C.       Increase by \$12,000
D.       Increase by \$15,000

96. Wallen Company has gathered the following data on a proposed investment project.
Investment required in equipment                  \$400,000
Annual net cash inflows expected                    80,000
Salvage value                               40,000
Life of the equipment                      10 years
Income tax rate                                30%
How much is the rate of return on the proposed investment?
A. 11.43%
B. 16.7%
C. 20%
D. 30.4%
E. 15.7%

97.    Hardline Flooring produced 2,500 yards of its economy-grade carpet. In the coloring process, there was a
pigment defect and the resulting color appeared to be faded. The carpet normally sells for \$15 per yard, with \$8 of
variable cost per yard and \$4 of fixed cost per yard assigned to the carpet. The company realizes that it cannot
sell the carpet for \$15 per yard through its normal channels, unless the coloring process is repeated. The
incremental cost of the process is \$3 per yard. Reliable Home Solutions is willing to buy the carpet in its current
faded condition for \$10 per yard. Should Hardline repeat the coloring process or sell the carpet to Reliable Home
Solutions and what is the benefit?
A.       Repeat coloring for \$5,000 benefit
B.       Sell as is to Reliable for \$17,500 benefit
C.       Repeat coloring for \$30,000 benefit
D.       Sell as is to Reliable for \$5,000 benefit
Page 18 of 25
98.    Companies which use only one or two cost pools rather than several cost pools
A.    may have seriously distorted product costs.
B.    will have higher record-keeping costs.
C.    will be able to more accurately price products to cover the cost and generate a
profit.
D.    are likely to be using ABC.

99.    Which of the following is not generally true when a company compares ABC and traditional costing?
A.     ABC uses more cost drivers.
B.     ABC allocates cost based solely on production volume.
C.     ABC is more expensive.
D.     ABC is less likely to undercost complex, low-volume products.

100. Offshore Company makes 2 different types of boats, commercial fishing and sail boats both for recreation and
competition. The company consists of two different departments, design & engineering, and production. The
company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead
follows:

Estimated        Sailboat        Fishing
Activity           Driver
Product Design      # of designs            \$180,000       22 designs     23 designs
Production          Labor hours             \$994,000       4,500 hours    2,500 hours

What overhead rates will be used in each department to assign costs to the sailboats?
Design &
Engineering             Production
A.        \$8,182                \$220.89
B.        \$88,000               \$639,000
C.        \$4,000                \$142.00
D.        \$4,000                 \$220.89

Use the following information for questions 101 through 102:

Jarme Company makes two products and is budgeting for an Activity Based Costing (ABC) system. Previously, all
overhead had been applied on the basis of machine hours. The company produces 100,000 units of product D and 5,000
units of product F annually.

Estimated
Cost Pool         Estimated Activity                       Product D             Product F
Cost in Pool
Equipment Setup          500 setups           \$1,000,000       350 setups           150 setups
Materials Ordering      10,000 orders         \$2,000,000      7,000 orders         3,000 orders
Quality Control      4,000 inspections         \$500,000    2,000 inspections    2,000 inspections
50,000 machine                        40,000 machine       10,000 machine
Machining                                  \$5,000,000
hours                                 hours                hours

101.   What is the overhead cost per unit for Product D when all overhead is applied based on machine hours?
A.      \$170
B.      \$68
C.      \$340
D.      \$40
E.      some other amount

102.   What is the overhead cost per unit for Product F using ABC?
A.      \$63.50
B.      \$430
C.      \$68
D.      \$340
E.      some other amount
Page 19 of 25
103.   West Company‟s manufacturing costs for 2010 are as follows:
Direct materials                              \$100,000
Direct labor                                  \$250,000
Depreciation of factory equipment              \$30,000
What amount should be considered product costs for external reporting purposes?
A.     \$430,000
B.     \$380,000
C.     \$350,000
D.     \$400,000
F.     some other amount

104.   Which of the following items on a variable costing income statement will change in direct proportion to a change in
sales?
A.     Sales, contribution margin, income
B.     Sales, variable costs, contribution margin
C.     Sales, variable costs, contribution margin, fixed costs and income
D.     Sales, variable costs, and fixed costs

105.   Washington Supply Company experienced the following costs in 2010:
Direct materials                            \$3.50/unit
Direct labor                                \$2.55/unit
Variable                                  \$1.50/unit
Fixed                                       \$20,000
Variable selling                          \$2.15/unit
Fixed selling                                \$8,000
During the year the company manufactured 95,000 units and sold 80,000 units. If the average selling price per
unit was \$20, how much was the company‟s contribution margin?
A.      \$996,000
B.      \$776,000
C.      \$824,000
D.      \$1,116,000
F.      some other amount

106.   Offshore Company makes 2 different types of boats, commercial fishing and sail boats both for recreation and
competition. The company consists of two different departments, design & engineering, and production. The
company has decided to allocate overhead costs in each of the two cost pools. Data on estimated overhead
follows:

Estimated          Sailboat          Fishing
Activity           Driver
Product Design      # of designs            \$180,000     22 designs      18 designs
Production          Labor hours             \$945,000     4,000 hours     3,500 hours

If the company produces and sells 22 sailboats, and each sailboat requires 180 labor hours, how much overhead
will be assigned to each sailboat produced?
A.       \$27,180
B        \$22,680
C        \$36,900
D.       \$32,400
Page 20 of 25
Use the following information for questions 107 through 109:
Bjorni Inc. makes a single product, the Bjorn. Information for 2010 appears below:
Sales in units                                                   200,000
Production in units                                              200,000
Variable production cost per unit                                   \$1.00
Variable selling cost per unit                                      \$0.30
Fixed production cost per year                                  \$100,000
Fixed selling and administrative cost per year                   \$50,000
Selling price per unit                                              \$3.00

107.    How much is the cost per unit of inventory using variable costing?
A.    \$1.00
B.    \$1.30
C.    \$1.40
D.    \$1.70
E.    some other amount

108.    How much is the full cost per unit of inventory?
A.    \$1.00
B.    \$1.30
C.    \$1.40
D.    \$1.70
E.    Some other amount

109.    A significant weakness of the high-low method is that
A.       a significant amount of management expertise is necessary to break out the variable and fixed costs.
B.       the two data points that are used may not be representative of the general relation between cost and
activity.
C.       the calculations are so complex that a computer is usually necessary in order to get accurate results.
D.       monthly data must be collected for at least three years before the method can be used.

110.    Duradyne, Inc. has total costs of \$18,000 when 2,000 units are produced and \$26,000 when 5,200 units are
produced. During March, 4,000 units were produced and sold for \$8 each. What is the variable cost per unit?
A.     \$2.50
B.     \$0.40
C.     \$2.00
D.     \$4.00

111.    NerdTown Computers has collected the following production data for the past four months:
Units produced                Total cost
7,000                     \$16,500
10,000                       22,500
8,500                      17,750
9,000                      21,000

If the high-low method is used, what is the monthly total cost equation?
A.     Total cost = \$2,500 + (\$2.00 * units produced)
B.     Total cost = \$3,750 + (\$2.75 * units produced)
C.     Total cost = \$1,500 + (\$ 2.17 * units produced)
D.     Total cost = \$500 + (\$2.25 * units produced)
Page 21 of 25
112.   A regression analysis yields the following information:

Regression Statistics
Multiple R           0.961386
R Square             0.924262
Square               0.916688
Standard Error       39.10106
Observations               12

ANOVA
Significance
df          SS          MS          F              F
Regression                    1    186578     186578     122.0345        6.3E-07
Residual                     10    15288.9    1528.89
Total                        11    201867

Standard                                          Upper     Lower      Upper
Coefficients     Error      t Stat     P-value     Lower 95%      95%      95.0%      95.0%
Intercept              955.01      225.526     4.2349     0.00173        452.579    1457.6    452.58     1457.6
X Variable 1               1.09    0.09912    11.0469     0.00634        0.87409    1.3158    0.8741     1.3158

What is the estimated cost for a production level of 1,200 units?
A.      \$1,308
B.      \$1,152
C.      \$2,263

113.   Which of the following statements is correct?
A.     Total fixed costs are equal to revenue plus variable cost per unit times the quantity produced.
B.     Profit is equal to total fixed costs plus revenue.
C.     Total fixed costs are equal to profit minus revenue.
D.     Profit is equal to revenue minus total variable costs minus total fixed costs.

111.   Holding all other factors constant, the break-even point will be decreased by
A.      increasing the fixed costs.
B.      decreasing the contribution margin.
C.      increasing the selling price.
D.      increasing the variable cost per unit.

115.   Werth Company produces tie racks. The estimated fixed costs for the year are \$288,000, and the estimated
variable costs per unit are \$14. Werth expects to produce and sell 60,000 units at a price of \$20 per unit. By how
much can sales revenue drop before Werth incurs a loss?
A.      \$12,000
B.      \$240,000
C.      \$72,000
D.      \$360,000
E.      some other amount

116.   Allen Company sells homework machines for \$100 each. Variable costs per unit are \$75 and total fixed costs are
\$62,000. Allen Company expects to sell 3,000 units next year. How many units can Allen's sales drop before he
loses his 'cushion' if it purchases the equipment?
A.      900 units
B.      33,000 units
C.      12,000 units
D.      520 units
E.      Some other amount
Page 22 of 25
117.    Randy Company produces a single product that is sold for \$85 per unit. If variable costs per unit are \$26 and
fixed costs total \$47,500, how many units must Randy sell in order to earn a profit of \$100,000?
A.      1,735
B.      618
C.      890
D.      2,500
E.      Some other amount

118. Rambles Toyland makes a product that sells for \$70 per unit and has \$45 per unit in variable costs. Annual fixed
costs are \$24,000. How much will profits increase if 600 more units are sold?
A.      \$15,000
B.      \$42,000
C.      \$27,000
D.      \$9,000
E.      Some other amount

119.    Verret, Inc. produces tacos and burritos with a stable sales mix. Its financial information follows for the month of
June:

Tacos            Burritos
Sales revenue                         \$50,000          \$150,000
Fixed costs                             6,000            38,000
Variable costs                         12,000            78,000
Income                                \$32,000           \$34,000

How much is the breakeven point in total sales dollars for Verret?
A.    \$115,385
B.    \$200,000
C.    \$135,333
D.    \$80,000
E.    Some other amoun

120.    Which of the following is not an assumption underlying CVP analysis?
A.     Costs can be accurately separated into their fixed and variable components.
B.     Fixed costs remain fixed over the relevant range.
C.     Variable costs per unit change over the relevant range.
D.     The sales mix remains constant.

121.    GoGrow produces shovels and rakes. Sales and costs for the most recent year are indicated below:

Shovels       Rakes        Total
Units                     8,000       20,000        28,000
Sales revenue          \$160,000      \$40,000      \$200,000
Variable costs           98,000       18,000       116,000
Fixed costs              28,000       12,000        40,000
Profit                  \$34,000      \$10,000       \$44,000

The number of units and selling price per unit appears to be stable for the foreseeable future. How much is the
weighted average contribution margin per unit?
A. \$4.43
B. \$1.57
C. \$0.42
D. \$3.00
E. Some other amount

122.    Which of the following is not true for a firm with high operating leverage?
A.     It has a relatively high amount of fixed costs.
B.     It is generally thought to be riskier than a company with lower operating leverage.
C.     It has a larger contribution margin ratio than similar firms.
D.     If sales increase, its profits will increase slower than a company with lower operating leverage.
Page 23 of 25
123.   If a company has fixed costs and is operating above the breakeven point, when sales increase by 15%, profits will
A.       increase by less than 15%.
B.       increase by 15%.
C.       increase by more than 15%.
D.       decrease by less than 15%
.
124.   Verna Trotteria Inc. makes a product that sell for \$50 per unit and has \$38 per unit in variable costs. Annual fixed
costs are \$12,000. Joanna expects to sell 2,000 units this year. How much would profits increase if 100 more
units are sold than expected?
A.       \$5,000
B.       \$3,800
C.       \$600
D.       \$1,200
E.       Some other amount

125.   Ice Box Company manufactures refrigerators. Which of the following items is most likely to be an indirect material
cost for Ice Box Company?
A.      Factory supervisor‟s salary
B.      Lubricant for refrigerator door hinges
C.      Glass shelves for the refrigerators
D.      Refrigerator motors

126.   Which of the following costs is not part of manufacturing overhead?
A.     Electricity for the factory
B.     Depreciation of factory equipment
C.     Salaries for the production supervisors
D.     Health insurance for sales staff

127    Work in Process Inventory includes the cost of
A.      goods which are only partially completed.
B.      all goods sold during the period.
C.      all materials purchased during the last period.
D.      all goods which are completed and ready to sell.

128.   Border Designs manufactures custom tiles and applies job-order costing. The following information relates to the
fiscal year ending December 31, 2011.

Beginning balance in Raw Materials Inventory                   \$ 12,500
Purchases of raw material                                       189,000
Ending balance in Raw Materials Inventory                        14,300
Beginning balance in Work in Process                             24,500
Ending balance in Work in Process                                23,100
Direct labor cost                                                89,700
Beginning balance in Finished Goods                              28,900
Ending balance in Finished Goods                                 24,300
Sales                                                           432,000
Selling expenses                                                120,000

How much is the cost of direct materials transferred into production?
A.    \$187,200
B.    \$189,000
C.    \$190,800
D.    \$201,500
Page 24 of 25
129.    Burson, Inc. uses a job-order costing system. It reported the following amounts for March:

Work in process, March 1              \$35,000       Finished goods, March 1               \$12,800
Work in process, March 31              31,000       Finished goods, March 31               15,200
Cost of goods manufactured            182,000       Raw materials, March 1                 15,300
Direct labor used                      56,000       Raw materials, March 31                17,800
Selling costs incurred                 33,000       Direct materials used                  66,000

How much of the above amounts will Burson report on its balance sheet at the end of March?
A. \$15,200
B. \$246,200
C. \$243,600
D. \$64,000
E. Some other amount

130     GreenSpace, Inc. manufactures solar coffee makers and employs an actual costing system. Beginning raw
materials totaled \$6,800 and beginning work in process totaled \$11,200. Ending work in process totaled
\$10,000. During October, GreenSpace‟s transactions and accounts included the following:
Raw materials acquired                                                \$88,000
Direct materials requisitioned and transferred to production           89,400
Cost of goods manufactured                                            345,000
How much is the amount of the current manufacturing costs?
A.      \$254,400
B.      \$219,600
C.      \$343,800
D.      Not enough information is provided.

131.    Companies that use process costing systems
A.    generally produce large quantities of identical items.
B.    trace costs to specific items produced.
C.    accumulate costs by completed products rather than by departments.
D.    All of the above answers are correct.

132.    Which of the following statements about job-order costing is not true?
A.     Materials are traced to jobs using materials requisition forms.
B.     Indirect labor is traced to jobs using time tickets.
C.     Manufacturing overhead cannot be traced directly to jobs, so it is assigned
D.     All of the above statements are true.

133.    Nations Shipping determined the rate to apply overhead based on direct labor hours would be \$8.40, and based
on machine hours would be \$5.20. Job 43D used \$12.40 of direct materials, 0.46 machine hours, and 18
minutes of direct labor at a cost of \$13 per hour. How much is the cost of job 43D if Nations Shipping applies
A.      \$2.52
B.      \$18.69
C.      \$248.92
D.      \$8.82

134.    Which of the following is not true in a job-order costing system?
A.     Cost of goods sold will include the costs of all jobs that are sold during the accounting period.
B.     Work in Process Inventory will include the cost of all jobs that are currently being worked on.
C.     Finished Goods Inventory will include the cost of all jobs that are completed but not yet sold.
D.     Raw Materials Inventory will include the cost of jobs that have been started but are not yet completed.
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135.    Clinton Ties began the month of July with jobs 80 and 83 completed and waiting to be shipped to customers. At
the end of June, jobs 81, 84, and 85 were in production. During July, jobs 86, 87, 88, 89 and 90 were begun. The
company completed Jobs 81, 85, 86, 88, and 89 during July. Jobs 80, 81, 83, 86, and 88 were shipped to
customers during July. Which jobs are in finished goods at July 31?
A.      84, 87, and 90
B.      80, 85, and 89
C.      85 and 89
D.      80, 83, 85, and 89

136.    Southeastern Spas produces custom portable spas. At the end of its accounting period, the account balances
indicated the following:

Raw Materials Inventory                          \$ 18,000
Work in Process Inventory                          74,000
Finished Goods Inventory                           42,000
Cost of Goods Sold                               384,000

Determine the adjusted balance of Cost of Goods Sold, rounded to the nearest whole dollar, if the balance in
Manufacturing Overhead is considered immaterial in amount.
A. \$376,000
B. \$392,000
C. \$384,000
D. \$382,000
E. Some other amount

137.    Uno Pizza produced and sold 800 pizzas last month and had total variable ingredients that cost \$3,440. If
production and sales are expected to increase by 10% next month, which of the following statements is true?
A.      Total variable materials costs are expected to be \$3,784
B.      Variable material cost per unit is expected to be \$4.73
C.      Total variable materials costs are expected to be \$3,444.30
D.      Total variable materials costs are expected to be \$344

138.    Which of the following statements regarding fixed costs is true?
A.     When production increases, fixed cost per unit increases.
B.     When production decreases, total fixed costs decrease.
C.     When production increases, fixed cost per unit decreases.
D.     When production decreases, total fixed costs increase.

Use this info for questions 139 and 140.
Books Galore plans to produce 50,000 books next year at a total cost of \$1,900,000. Fixed costs total \$120,000. Selling
price per book is \$65.00. Management is considering lowering the price to \$62.00 per unit, and feels that this action will
cause sales to climb to 54,000 books.

139.    What are the incremental revenues generated if 54,000 units are sold?
A.     \$44,400
B.     \$98,000
C.     \$3,348,00
D.     \$3,250,000

140.    What are the incremental costs generated if 54,000 units are sold?
A.     \$1,900,000
B.     \$1,922,400
C.     \$142,400
D.     \$152,000

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