Acc Exams

Question 1
2 out of 2 points

How will increases in the following items affect return on investment (ROI)?

Answer

Selected Answer: a.

Question 2
2 out of 2 points

Which of the following is considered a bottleneck in a product emphasis/constrained
resource decision?
Answer

Selected Answer:
The companys 12 machines can only operate 18 hours per day

Question 3
2 out of 2 points

The balanced scorecard emphasizes linkages between the organizations vision and
its operations. Organizational strategies link down to
Answer

Selected Answer:
Operating plans.

Question 4
2 out of 2 points

Which of the following are valid reasons for eliminating a product line?
1. The product line's contribution margin is negative.
2. The product line's traceable fixed costs plus its allocated common corporate costs are less than its
contribution margin.
Answer

Selected Answer: a.
Only I

Question 5
2 out of 2 points

Employee involvement is important in an effective performance measurement system
because it
Answer

Selected
Answer:
d.
increases the employee's commitment to the organization and its
objectives.

Question 6
2 out of 2 points

One of the results in using balanced scorecards is a shift from a focus on financial

results to a focus on
Answer
Selected Answer: a.
increasing customer satisfaction.

Question 7
2 out of 2 points

A description of an organization's values, definition of its responsibilities to
stakeholders, and identification of its major strategies is called its
Answer

Selected Answer: c.
mission statement.

Question 8
2 out of 2 points

Which of the following statements is (are) true regarding performance measures?

(A) In general, subjective performance measures are better than objective
performance measures.
(B) In general, the use of multiple performance measures is better than the use of
single performance measures.
Answer

Selected Answer: c.
Only B is true.

Question 9
2 out of 2 points

A strategy map is
Answer
Selected
Answer:
d.
a cause and effect diagram of the relationships among the balanced
scorecard perspectives to show how the achievement of critical success
factors in each perspective affect the achievement of goals in other
perspectives and the overall financial performance of the firm

Question 10
2 out of 2 points

Which of the following is considered to be an advantage that nonfinancial information has over financial
information?
Answer

Selected
Answer:
b.
Nonfinancial information reflects the company's current and potential
competitive advantage, while financial information tends to focus only
on a firm's current situation.

Question 11
2 out of 2 points

Due, in part, to increased global competitiveness and changes in management techniques and processes, what has

changed about the role of the management accountant?
Answer
Selected
Answer:
b.
Rather than being a provider of information, the role of the management
accountant has shifted to encompass more of a strategic management
perspective.

Question 12
2 out of 2 points

Which of the following is not a partial productivity measure?
Answer
Selected Answer: a.
sales value of units completed/total manufacturing costs

Question 13
0 out of 2 points

The balanced scorecard is an approach that articulates the links between various
perspectives; i.e., stakeholder interests and concerns. However, experimental
evidence suggests that upper level managers often
Answer

Selected
Answer:
b.
only use the balanced scorecard approach to evaluate the performance
of lower management and production employees.

Question 14
2 out of 2 points

Which of the following balanced scorecard perspectives focuses on quality and process improvement?
Answer
Selected Answer: a.
Internal

Question 15
0 out of 2 points

Research has shown that having several levels of management participate in the
budgetary process is beneficial to both the company and the employees. However,
there are certain behavioral problems encountered in the process, one of which is the
use of budgetary slack. From the perspective of corporate management, the use of
budgetary slack
Answer

Selected Answer: e.
increases the effectiveness of the corporate planning process.

Question 16
2 out of 2 points

Which of the following statements is (are) true regarding managerial decisions?

(A) The design and use of management control systems affects how an individual
makes and implements decisions.

(B) Rational managers will always make decisions that are in the best interest of the
organization employing them.
Answer
Selected Answer:
a.
Only A is true.

Question 17
2 out of 2 points

Which of the following organizational policies is most likely to result in undesirable
managerial behavior?
Answer

Selected
Answer:
c.
Joe Walk, the chief executive officer of Eagle Rock Brewery, wrote a
memorandum to his executives stating, "Operating plans are contracts
and they should be met without fail."

Question 18
2 out of 2 points

Controllable revenue is included in a performance report of a

Answer

Selected Answer: d.

Question 19
2 out of 2 points

Examples of pressures that can lead to financial fraud do not include
Answer
Selected Answer: d.
overemphasis on long-term results.

Question 20
2 out of 2 points

A manager makes a decision that is beneficial for a specific investment center but not
for the entire organization. From the organization's perspective, this decision results
in
Answer

Selected Answer: d.
suboptimization.

Question 21
2 out of 2 points

A strategy map is

Answer

Selected
Answer:

a cause and effect diagram of the relationships among the balanced
scorecard perspectives to show how the achievement of critical success
factors affect the achievement of goals of the firm

Question 22
2 out of 2 points

The controllability concept states that managers should be held responsible for
Answer

Selected Answer:
all items over which they have decision-making authority.

Question 23
2 out of 2 points

What type of theory provides an analytic framework for the conflicts that arise between owners and
managers?

Answer

Selected Answer:
Agency theory

Question 24
2 out of 2 points

Which of the following is an opportunity cost associated with dropping a business
segment?
Answer

Selected Answer:
The benefit of using excess capacity for something else

Question 25
0 out of 2 points

Economic value added (EVA) is a concept that is closely related to residual income. In calculating EVA, all of the
following would result in an adjustment to increase operating income and/or divisional investment EXCEPT
Answer

Selected Answer: d.
Write-off of goodwill

Question 26
0 out of 2 points

REB Service Co. is a computer service center. For the month of May, REB had the
following operating statistics: (CMA adapted)

Based on the above information, which one of the following statements is correct?
REB has a
Answer
Selected Answer: a.
Residual income of $(22,000).

Question 27
2 out of 2 points

Which of the following statements does not represent a limitation of using return on
investment (ROI) for measuring and evaluating performance?
Answer

Selected Answer: b.
ROI cannot be used to compare divisions of different sizes.

Question 28
2 out of 2 points

Residual income is a better measure for performance evaluation of an investment
center manager than return on investment (ROI) because
Answer

Selected
Answer:
d.
desirable investment decisions will not be neglected by high return
divisions.

Question 29
0 out of 2 points

Rayburn Corporation purchased a new machine for $120,000. The machine has an
estimated useful life of 10-years with no salvage value and a return on investment
(ROI) of 15%. ROI is computed using operating income. The company uses straight-
line depreciation. What is the annual cash flow using the gross book value method?
Answer

Selected Answer: b.
$18,000

Question 30
2 out of 2 points

Whick of the following should not be used to compute residual income?
Answer
Selected Answer: d.

return on investment (ROI).

Question 31
2 out of 2 points

Which one of the following items would most likely NOT be incorporated into the
calculation of a division's investment base when using the residual income approach
for performance measurement and evaluation?
Answer

Selected Answer: c.
Land being held by the division as a site for a new plant.

Question 32
2 out of 2 points

Level return on investments (ROI) over the life of a long-term project is more likely
when ROI is computed using
Answer

Selected Answer: d.
current costs and gross book values.

Question 33
2 out of 2 points

The following information was presented for 2008 by Delta Manufacturing Company
for an asset purchased at the beginning of 2007.

What is the return on investment (ROI) for 2008 assuming Delta (a) uses the straight-
line method for depreciation and (b) average net book values to compute ROI?
Answer

Selected Answer: e.
11.76%

Question 34
2 out of 2 points

The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If
these microcomputers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an
alternative, the microcomputers can be sold in their present condition for $50,000. The sunk cost in this situation
is:
Answer

Selected Answer: d.
$720,000.

Question 35
0 out of 2 points

Wagner Corporation can manufacture 490,000 tennis rackets a year at a variable cost of $15
per racket and fixed costs of $500,000. Wagner budgeted that it can sell 400,000 at $25
each. An additional order of 100,000 was received, but at a discount of 35% from the regular
price. If Wagner accepts the special order, income before taxes will
Answer

Selected Answer:
Increase by $125,000

Question 36
2 out of 2 points

The balanced scorecard approach has been criticized for not capturing core values
related to
Answer

Selected Answer:
Approaches to the environment

Question 37
0 out of 2 points

An organizations required rate of return is 12%. The ROI of Divisions A and B,
respectively, is 10% and 15%. Each Division is considering a project that will have a
13% rate of return. If residual income is used to evaluate divisions, which of the
following statements is true?
Answer

Selected Answer:
Division A will reject, and Division B will accept

Question 38
0 out of 2 points

AXZ is a multi-city not-for-profit organization. Which of the following statements is
TRUE?
Answer

Selected
Answer:

AXZ should establish performance targets after analyzing scorecard
data.

Question 39
0 out of 2 points

The internal business process perspective in a balanced scorecard is often broken
down into its value chain components. Those components include all of the
following except the
Answer

Selected Answer:
Post-sales service cycle

Question 40
2 out of 2 points

Freestone Company is considering renting Machine Y to replace Machine X. It is
expected that Y will waste less direct materials than does X. If Y is rented, X will be
sold on the open market. For this decision, which of the following factors is (are)
relevant?
1. Cost of direct materials used
2. Resale value of Machine X
Answer

Selected Answer: c.
Both I and II

Question 41
2 out of 2 points

Barrus Company makes 30,000 motors to be used in the productions of its power lawn mowers. The
manufacturing cost per motor at this level of activity is as follows:
Direct materials. $9.50
Direct labor $8.60
Variable manufacturing overhead $3.75
Fixed manufacturing overhead. $4.35
This motor has recently become available from an outside supplier for $25 per motor.
If Barrus decides not to make the motors, none of the fixed manufacturing overhead
would be avoidable and there would be no other use for the facilities. If Barrus
decides to continue making the motor, how much higher or lower will the company's
net operating income be than if the motors are purchased from the outside supplier?
Answer

Selected Answer: a.
$94,500 higher.

Question 42
2 out of 2 points

The opportunity cost of making a component part in a factory with no excess capacity is the:
Answer
Selected
Answer:
b.
net benefit foregone from the best alternative use of the capacity
required.

Question 43
2 out of 2 points

Which of the following costs are irrelevant to the make-or-buy decision?
Answer
Selected Answer: e.
Fixed overhead that will continue if the item is purchased

Question 44
2 out of 2 points

The Kelsh Company has two divisions--North and South. The divisions have the
following revenues and expenses:

North South
Sales...................................................................................................... $900,000 $800,000
Variable expenses.................................................................................. 450,000 300,000

Traceable fixed expenses....................................................................... 260,000 210,000
Allocated common corporate expenses................................................. 240,000 190,000
Net operating income (loss)................................................................... $(50,000) $100,000
Management at Kelsh is pondering the elimination of North Division. If North Division were eliminated, its
traceable fixed expenses could be avoided. The total common corporate expenses would be unaffected.
Given these data, the elimination of North Division would result in an overall company net operating income
of:
Answer
Selected Answer: a.
$(140,000).

Question 45
2 out of 2 points

The CJP Company produces 10,000 units of item S10 annually at a total cost of
$190,000.

The XYZ Company has offered to supply 10,000 units of S10 per year for $18 per
unit. If CJP accepts the offer, $4 per unit of the fixed overhead would be saved. In
addition, some of CJP's facilities could be rented to a third party for $15,000 per year.
At what price would CJP be indifferent to XYZ's offer?
Answer

Selected Answer: b.
$17.50

Question 46
2 out of 2 points

Consider the following production and cost data for two products, X and Y:

Product X Product Y
Contribution margin per unit $24 $18
Machine-hours needed per unit. 3 hours 2 hours
The company has 15,000 machine hours available each period, and there is unlimited demand for each
product. What is the largest possible total contribution margin that can be realized each
period?
Answer

Selected Answer: b.
$135,000

Question 47
0 out of 2 points

PQK Corporation produces and sells bookends. Its managers are considering whether to
outsource the task of cutting the wood for the bookends to DLN Corporation. Which of the
following is most likely to be a qualitative factor that managers will consider in making the

decision?
Answer
Selected Answer:
Whether DLN will outsource the delivery process

Question 48
2 out of 2 points

Suppose an office building is owned for which long-term leases have been signed,
the tenants pay utilities and operating costs, and straight-line depreciation is
taken. The rate of return on the book value of this investment can be expected to
Answer

Selected Answer:
Increase over time

Question 49
2 out of 2 points

Broxson Company makes four products in a single facility. These products have the following unit product
costs:

Products

A B C D
Direct materials. $19.20 $22.70 $12.60 $15.30
Direct labor.. 12.00 15.80 8.00 8.80
Variable manufacturing overhead 4.60 4.40 5.30 3.40
Fixed manufacturing overhead. 14.00 11.20 6.50 7.50
Unit product cost... $49.80 $54.10 $32.40 $35.00
Additional data concerning these products are listed below.

Products

A B C D
Grinding minutes per unit.. 3.90 5.70 6.00 3.20
Selling price per unit $61.20 $68.90 $47.00 $49.80
Variable selling cost per unit. $2.20 $2.00 $1.40 $3.20
Monthly demand in units. 2,000 4,000 4,000 1,000
Which product makes the MOST profitable use of the grinding machines?
Answer

Selected Answer: d.
Product D

Question 50
0 out of 2 points

In the balanced scorecard, the learning and growth perspective addresses which of
the following questions?
Answer

Selected
Answer:

"To achieve our mission, how will we sustain our ability to improve
performance?"

Question 1
10 out of 18 points

This first table presents the Master Budget that was prepared before the start of the
current period for Nordic Company:

Master Budget

Production

37,300 units

Quantity

$/gal,hr

Cost
RM-A

93,250 gal

4.50

$ 419,625
Labor

9,325 DL hrs

13.00

121,225
Var. Ovhd.

1,865 M hrs

25.00

46,625
Fixed
Ovhd
Budget

63,000
Total Cost

$ 650,475

Usage Rate
RM-A Used in
Production
2.50 gal/unit
Direct Labor

0.25 DL hrs/unit
Variable
Overhead
0.05 M hrs/unit
Overhead is applied based on STANDARD machine hours.
This second table presents the Actual Results for the current period for Nordic Company:

Actual Results

Production
41,800 units

Quantity

$/gal,hr

Cost
RM-A
111,500 gal

5.75

$ 641,125
Labor
10,100 DL hrs 14.35

144,935
Var. Ovhd.
2,095 M hrs 23.30

48,814
Fixed Ovhd

Actual

60,165
Total Cost

$ 895,039

After you prepare the Flexible Budget including applied fixed overhead for the current period,
determine each of the following variances. FORMAT NOTE: Enter whole dollar amount, NO comma.
Add ONE SPACE between the dollar amount and the U/F indicator. (3 pts each, 18 pts total)
Material Price Variance [x1]
Material Quantity Variance [x2]

Labor Rate Variance [x3]
Var. Ovhd. Efficiency Variance [x4]
Budget Variance [x5]
Volume Variance [x6]
Answer
Specified Answer for: x1
139375 U
54016 U
13635 U
5638 U
244564 U
4500 F
Correct Answers for: x1
Evaluation Method Correct Answer Case Sensitivity
Exact Match
139375 U

Exact Match
31500 U

Exact Match
13635 U

Exact Match
125 u

Exact Match
2835 U

Exact Match
7601 F

Question 2
2 out of 2 points

The Waverly Company has budgeted sales for the year 2008 as follows:

The ending inventory of finished goods for each quarter should equal 25% of
the next quarter's budgeted sales in units. The finished goods inventory at the
start of the year is 3,000 units. Scheduled production for the second quarter is
(in units)
Answer
Selected Answer:
c.
15,000.
Correct Answer:
c.
15,000.

Question 3
2 out of 2 points

A company is formulating its plans for the coming year, including the
preparation of its cash budget. Historically, the company's sales are 30% cash.
The remaining sales are on credit with the following collection pattern:

Sales for the first 5 months of the coming year are forecast as follows:

For the month of April, the total cash receipts from sales and collections on
account would be (CIA adapted)
Answer

Selected Answer:
b.
$3,781,600
Correct Answer:
b.
$3,781,600

Question 4
2 out of 2 points

The Tobler Company had budgeted production for the year 2008 as follows:

Four pounds of raw materials are required for each unit produced. Raw
materials on hand at the start of the year total 4,000 lbs. The raw materials
inventory at the end of each quarter should equal 10% of the next quarter's
production needs in materials. Budgeted purchases of raw materials in the third
quarter would be (in lbs.)
Answer

Selected Answer:
a.
63,200.
Correct Answer:
a.
63,200.

Question 5
2 out of 2 points

In developing a master budget for a manufacturing company, which one of the
following items should be done first?
Answer

Selected Answer:
c.
development of a sales budget.
Correct Answer:
c.
development of a sales budget.

Question 6
2 out of 2 points

When the sales volume (units) is highly seasonal, it is very important that
certain budgets in the master budget are coordinated. The two most important
budgets that must be coordinated are
Answer

Selected Answer:
d.
sales and production.
Correct Answer:
d.
sales and production.

Question 7
2 out of 2 points

From the perspective of corporate management, the use of budgetary slack
Answer
Selected Answer:
d.
increases the likelihood of inefficient resource allocation.
Correct Answer:
d.
increases the likelihood of inefficient resource allocation.

Question 8
2 out of 2 points

The Jack Company is preparing its cash budget for the month of June. The
following information is available concerning its inventories:

What are the estimated cash disbursements for inventories in June?
Answer

Selected Answer:
c.
$335,250.
Correct Answer:
c.
$335,250.

Question 9
2 out of 2 points

Long-range planning as a management function is more important
Answer
Selected Answer:
a.
at top management levels.
Correct Answer:
a.
at top management levels.

Question 10
0 out of 2 points

A company has the following 2008 budget data:

What are 2007 total budgeted production costs? (CIA adapted)
Answer
Selected Answer:
f.
$3,040,000
Correct Answer:
g.
$2,180,000
Response
Feedback:
70,000 + 30,000 40,000 = 60,000[60,000 (10 + 20 + 5)]
+ $80,000 = $2,180,000

Question 11
2 out of 2 points

A continuous (rolling) budget
Answer
Selected
Answer:
b.
drops the current month or quarter and adds a future month or
quarter as the current month or quarter is completed.
Correct
Answer:
b.
drops the current month or quarter and adds a future month or
quarter as the current month or quarter is completed.

Question 12
2 out of 2 points

Pro forma financial statements are part of the budgeting process. Normally, the
last pro forma statement prepared is the
Answer

Selected Answer:
c.
statement of cash flows.
Correct Answer:
c.
statement of cash flows.

Question 13
2 out of 2 points

Sensitivity analysis can best be used in the budgeting process to
Answer
Selected Answer:
b.
answer "what-if" questions regarding key projections.
Correct Answer:
b.
answer "what-if" questions regarding key projections.

Question 14
2 out of 2 points

In analyzing company operations, the controller of the Jason Corporation
found a $250,000 favorable flexible budget revenue variance. The variance
was calculated by comparing the actual results with the flexible budget. This
variance can be wholly explained by
Answer

Selected Answer:
d.
changes in unit selling prices.
Correct Answer:
d.
changes in unit selling prices.

Question 15
2 out of 2 points

If materials are carried in the direct materials inventory account at standard
cost, then it is reasonable to assume that the
Answer

Selected Answer:
d.
price variance is recognized when materials are purchased.
Correct Answer:
d.
price variance is recognized when materials are purchased.

Question 16
2 out of 2 points

Which department is customarily held responsible for an unfavorable materials
quantity variance?
Answer

Selected Answer:
c.
Production.
Correct Answer:
c.
Production.

Question 17
2 out of 2 points

Which one of the following variances is of least significance from a behavioral

control perspective?
Answer
Selected
Answer:
c.
Fixed factory overhead volume variance resulting from
management's decision midway through the fiscal year to reduce
its budgeted output by 20%.
Correct
Answer:
c.
Fixed factory overhead volume variance resulting from
management's decision midway through the fiscal year to reduce
its budgeted output by 20%.

Question 18
2 out of 2 points

Which of the following statements regarding variances is (are) false?

(A) In general and holding all other things constant, an unfavorable variance
decreases operating profits.
(B) A favorable variance is not always good, and an unfavorable variance is
not always bad.
Answer

Selected Answer:
d.
Neither A nor B is false.
Correct Answer:
d.
Neither A nor B is false.

Question 19
2 out of 2 points

A favorable materials price variance coupled with an unfavorable materials
usage variance would most likely result from
Answer

Selected Answer:
d.
The purchase of lower-than-standard-quality materials.
Correct Answer:
d.
The purchase of lower-than-standard-quality materials.

Question 20
2 out of 2 points

A debit balance in the labor-efficiency variance account indicates that
Answer
Selected Answer:
a.
actual hours exceed standard hours.
Correct Answer:
a.
actual hours exceed standard hours.

Question 21
0 out of 2 points

What is the production volume variance?
Answer

Selected Answer:
e.
$300F
Correct Answer:
h.
$400U
Response Feedback:
$4,000 ($4 900) = $400 unfavorable

Question 22
0 out of 2 points

Which of the following is the most probable reason a company would
experience an unfavorable labor rate variance and a favorable labor efficiency
variance?
Answer

Selected
Answer:
b.
The mix of workers assigned to the particular job was heavily
weighted towards the use of new relatively low paid unskilled
workers.
Correct
Answer:
d.
The mix of workers assigned to the particular job was heavily
weighted towards the use of higher paid experienced individuals.

Question 23
2 out of 2 points

When using a flexible budget, what will happen to variable costs on a per-unit
basis as production increases within the relevant range?
Answer

Selected Answer:
d.

Remain unchanged.
Correct Answer:
d.
Remain unchanged.

Question 24
2 out of 2 points

Arrow Industries employs a standard cost system in which direct materials
inventory is carried at standard cost. Arrow has established the following
standards for the prime costs of one unit of product.

During November, Arrow purchased 160,000 pounds of direct materials at a
total cost of $304,000. The total factory wages for November were $42,000,
90% of which were for direct labor. Arrow manufactured 19,000 units of
product during November using 142,500 pounds of direct materials and 5,000
direct labor hours.

What is the dollar amount of the direct labor price (rate) variance for
November?
Answer

Selected Answer:
a.
$2,200
Correct Answer:
a.
$2,200

Question 25
2 out of 2 points

Which of the following statements is (are) true?

(A) If variances are prorated at the end of the accounting period, an
unfavorable direct materials price variance will, when prorated, increase the
value of the Finished Goods Inventory.
(B) Insignificant variances are not generally prorated at the end of the
accounting period and are closed to the Cost of Goods Sold.
Answer

Selected Answer:
c.
Both A and B are true.
Correct Answer:
c.
Both A and B are true.

Question 26
0 out of 2 points

Which of the following sales variances is further analyzed into the market size
and industry volume variances?
Answer

Selected Answer:
e.
Activity
Correct Answer:
c.
Price

Question 27
0 out of 2 points

How should an insignificant material price variance be treated at the end of the
year?
Answer

Selected Answer:
d.
Debited or credited directly to cost of goods manufactured
Correct Answer:
a.
Debited or credited directly to cost of goods sold

Question 28
2 out of 2 points

The sales mix variance would be
Answer
Selected
Answer:
b.
favorable when a company sells relatively more of the products
that have contribution margins higher than average.
Correct
Answer:
b.
favorable when a company sells relatively more of the products
that have contribution margins higher than average.

Question 29
2 out of 2 points

In a standard cost system, overhead is applied to production on a basis of
Answer
Selected
Answer:
d.

the standard hours allowed to complete the output of the
period.
Correct Answer:
d.
the standard hours allowed to complete the output of the
period.

Question 30
2 out of 2 points

One feature of a standard cost system is that it
Answer
Selected
Answer:
c.
simplifies the record keeping process by allowing amounts to be
carried at standard cost rather than actual cost in the accounting
records.
Correct
Answer:
c.
simplifies the record keeping process by allowing amounts to be
carried at standard cost rather than actual cost in the accounting
records.

Question 31
2 out of 2 points

The budget for a given cost during a given period was $80,000. The actual cost
for the period was $72,000. Considering these facts, the plant manager has
done a better-than-expected job in controlling the cost if (CPA adapted)
Answer

Selected
Answer:
d.
the cost is variable and actual production equals budgeted
production.
Correct
Answer:
d.
the cost is variable and actual production equals budgeted
production.

Question 32
2 out of 2 points

Actual and budgeted information about the sales of a product are presented
below for June: (CIA adapted)

The sales price variance for June was
Answer

Selected Answer:
d.
$ 8,000 favorable.
Correct Answer:
d.
$ 8,000 favorable.

Question 33
0 out of 2 points

Which of the following is not an acceptable treatment of factory overhead
variances at an interim reporting date? (CPA adapted)
Answer

Selected
Answer:
a.
Carry forward the total to be offset by opposite balances in later
periods.
Correct
Answer:
d.
Apportion the total only among work-in-process and finished
goods inventories on hand at the end of the interim reporting
period.

Question 34
2 out of 2 points

Standard costs should be based on
Answer
Selected Answer:
c.
reasonably attainable levels of efficiency.
Correct Answer:
c.
reasonably attainable levels of efficiency.

Question 35
0 out of 1 points

A machine distributor sells two models, basic and deluxe. The following
information relates to its 2006 master budget.

Actual sales for 2006 were 7,000 basic models and 2,800 deluxe models. The
actual sales prices were the same as the budgeted sales prices for both models.

Is the sales activity variance for the basic model favorable or unfavorable?
Answer

Selected Answer:
a.
favorable.
Correct Answer:
b.
unfavorable.

Question 36
1 out of 1 points

A machine distributor sells two models, basic and deluxe. The following
information relates to its 2006 master budget.

Actual sales for 2006 were 7,000 basic models and 2,800 deluxe models. The
actual sales prices were the same as the budgeted sales prices for both models.

Is the sales mix variance for the basic model favorable or unfavorable?
Answer

Selected Answer:
b.
unfavorable.
Correct Answer:
b.
unfavorable.

Question 37
2 out of 2 points

An decrease in the discount rate:
Answer

Selected Answer:
c.
will increase present values of future cash flows.
Correct Answer:
c.
will increase present values of future cash flows.

Question 38
2 out of 2 points

Which of the following is considered to be a disinvestment cash flow?
Answer

Selected Answer:
d.
Salvage
Correct Answer:
d.

Salvage

Question 39
2 out of 2 points

The Phenom Corporation has a pre-tax annual cash inflow from operations from its investment in a
capital asset of $100,000 for six years. The corporation's income tax rate is 30%. Calculate the total after-
tax cash inflow from operations for those six years.
Answer

Selected Answer:
c.
$420,000
Correct Answer:
c.
$420,000

Question 40
0 out of 2 points

A manager is evaluating net present value of a proposed equipment purchase. Initial investment is
$90,000 with estimated salvage value of $10,000 after 5 years. Marginal tax rate is 30% and cost of
capital is 10%. Assuming straight-line method is used, what is the amount of the depreciation tax shield
for year 2?
Answer

Selected Answer:
c.
$14,400
Correct Answer:
f.
$4,800

Question 41
2 out of 2 points

Investment A requires an initial net investment of $500,000. The required rate of return is 8% for a ten-
year annuity. What are the dollar amount (rounded) of annual net cash inflows if the net present value
equals 0?
Answer

Selected Answer:
b.
74,515
Correct Answer:
b.
74,515

Question 42
2 out of 2 points

Which of the following analytical techniques (I, II, III) consider the time value
of money?
1. Accounting rate of return
2. Payback period
3. Net present value
Answer

Selected Answer:
c.
III only
Correct Answer:
c.
III only

Question 43
0 out of 2 points

Redd Inc. purchased a new Flagner Machine for $80,000, which is expected to generate about $20,000 of
total net after-tax cash flows for each of the next 15 years with no salvage value. What is the approximate
internal rate of return for this investment?
Answer

Selected Answer:
d.
26.7%
Correct Answer:
c.
24.0%

Question 44
0 out of 2 points

Net present values DECREASE as
Answer

Selected Answer:
b.
Cash receipts are collected sooner
Correct Answer:
c.
Costs increase

Question 45
0 out of 8 points

Six years ago, Gorley Company (a not-for-profit job training organization)
purchased a parsing machine for $60,000. The current book value of the
machine is $12,000. The machine is now considered to be obsolete and
worthless. However, it can be retrofitted at a cost of $8,500, in which case it
can be expected to generate net cash flows of $4,000 a year for the next FIVE
years and sold for $1,000 salvage value. The prevailing market interest rate is
4% and the company's cost of capital is 6%. What is the (rounded) net present
value of retrofitting the machine? RESPONSE NOTE: (1) Type the dollar
amount of your answer (to the nearest whole dollar). (2) BRIEFLY describe
the procedure you used to determine that dollar amount for the net present
value of retrofitting the machine.
Answer

Selected
Answer:
[None Given]
Correct
Answer:

(1) $9,097 (2) Initial cost-$8,500; annual net cash flows-$4,000;
Salvage value-$1,000; discount rate-6%

Response
Feedback:
[None Given]

Question 1
16 out of 18 points

PROBLEM 1 (18 points)
The following data for QRS Companys manufacturing operations are available.
Prime costs totaled $369,000.
Period costs totaled $2,222,000.
Raw material purchases totaled $333,000
Sales for the year totaled $4,500,000.
Total cost of goods manufactured was $999,000.
Inventory records show these values:
...............................Beginning Ending
Raw materials $33,000 $39,000
Work-in-process 55,000 41,000
Finished Goods.. 66,000 88,000
TYPE ANSWERS AS WHOLE DOLLAR AMOUNTS, NO DOLLAR SIGN, NO COMMA, NO
EXTRA SPACES (Example: 999 thousand dollars would be typed as 999000). Questions should be
answered in the sequence presented-- a first, b seccond, c third, and so on.
11. What is the dollar amount of Cost of Goods Sold? [x1] (3 pts)
12. What is the dollar amount of raw materials used in production? [x2] (3 pts)
13. What is the dollar amount of total current manufacturing costs charged into Work-In-
Process? [x3] (3 pts)
14. What is the dollar amount of direct labor costs? [x4] (2 pts)
15. What is the dollar amount of conversion costs? [x5] (2 pts)
16. What is the total dollar amount of inventory reported on the year-end balance
sheet? [x6] (3 pts)
17. What is the total dollar amount of gross profit reported on the year-end income
statement? [x7] (2 pts)
18. What is the total dollar amount of net income reported on the year-end income
statement? [x8] (2 pts)
Answer

977000
327000
985000
42000
616000
168000

3523000
1301000
Exact Match
977000

Exact Match
327000

Exact Match
985000

Exact Match
42000

Exact Match
658000

Exact Match
168000

Exact Match
3523000

Exact Match
1301000

Response
Feedback:
In (d), direct labor = Prime costs (given) minus Materials Used (from b) In e, total
Conversion costs = Total current manufacturing costs (from c) minus Materials
Used (from b) In (f), total inventory reported on the balance sheet at the end of the
period is the total of the three ending inventory amounts. In (g), Sales (given)
minus CGS (from a) equals Gross Margin (Gross Profit) In (h), Gross Profit (from
g) minus period costs (given) equals net operating income
Question 2
2 out of 8 points

Nadal, Inc. uses a job-order costing system with operations in two departments: Assembly and
Packaging.
Direct labor hours provide the basis for applying overhead costs in Assembly.
Machine hours provide the basis for applying overhead costs in Packaging.
Information for the 2012 Budget Assembly Packag00ing
Budgeted annual direct labor cost $600,000 $1,400,000
Budgeted annual overhead cost $1,200,000 $1,000,000
Budgeted annual machine hours 60,000 hrs 50,000 hrs
Budgeted annual direct labor hours 20,000 hrs 40,000 hrs

Information about Job # 10SNE1 Assembly Packaging
Materials requisitioned $8,400 $3,100
Direct labor hours 400 hrs 300hrs
Machine hours 800 hrs 500hrs
What is the total cost for Job #10SNE1? (8 pts) [x1]
FORMAT NOTE: Type your answer as a WHOLE DOLLAR amount with NO dollar
sign, NO comma, NO cents.
Answer

Selected Answer:
46500
Correct Answer:
Exact Match
68000

Question 3
8 out of 16 points

(16 pts) The following information pertains to Lap Co.'s Palo Division for the month
of April. All materials are added at the beginning of the process and so all inventories
are 100% complete with respect to materials.

Number of Units Material Cost Conversion Cost
Beginning Work-in-Process (70% complete) 20,000 $22,000 $ 70,000
Started in April $40,000 $160,000
Units Finished and Transferred 45,000
Ending Work-in-Process (40% complete) 15,000
FORMAT NOTE:
For questions that ask for "equivalent units" type answer as WHOLE UNITS with
NO comma.
For questions that ask for "cost per unit" type answer to THREE DECIMAL
PLACES (nearest tenth of a cent).

For questions that ask for "total dollar amount" type answer as WHOLE
DOLLARS with NO dollar sign, NO comma, and NO cents.

(a) What is the number of equivalent units of product available with respect to
3. materials? (2pts) [x1] WHOLE UNITS
4. conversion? (2pts) [x2] WHOLE UNITS
(b) What is the average total cost per equivalent unit available? (2pts) [x3] THREE
DECIMAL PLACES
(c) What is the number of equivalent units of new product produced during the
month with respect to
5. materials? (2pts) [x4] WHOLE UNITS
6. conversion? (2pts) [x5] WHOLE UNITS
(d) Using the FIFO method
1. Determine the dollar value of ending inventory (2pts) [x6] WHOLE DOLLAR
2. Determine the dollar value of goods transferred (2pts) [x7] WHOLE DOLLAR
3. Determine the total cost per unit transferred (2pts) [x8] THREE DECIMAL
PLACES
Answer
60000
51000
5,543
58000
49000
30180
265787
5,906
Exact Match
60000

Exact Match
51000

Exact Match
5.543

Exact Match
5.54

Exact Match
40000

Exact Match
37000

Exact Match
40946

Exact Match
40944

Exact Match
40945

Exact Match
251054

Exact Match
251055

Exact Match
251056

Exact Match
5.579

Exact Match
5.58

Question 4
2 out of 6 points

Squiggles Company has two service departments and two producing departments.
Maintenance Department costs are allocated based on maintenance hours and Administration
costs are allocated based on number of employees.
Overhead Maintenance # of
Costs Hours Employees

Maintenance $100,000 500 10
Administration $200,000 300 5

Production A $300,000 600 30
Production B $500,000 600 25
Total
Overhead
$1,100,000
The company allocates overhead costs using the step method with Maintenance Department
costs first. What is the total dollar amount of overhead costs associated with Production Dept.
A after allocations have been made? (6 pts) [x1]
FORMAT NOTE: Type your answer as a whole dollar amount with NO dollar sign, NO
comma, and NO cents.
Answer
Selected Answer:
461000
Correct Answer:
Exact Match
460000

Question 5
4 out of 10 points

OLeary Company has two products: Little and Big. The company uses activity-based
costing and has prepared the following analysis showing the estimated total cost and
expected activity for each of its three activity cost pools:

Expected Activity
Activity Cost Pool Estimated
Overhead Cost
Little Product Big Product
Activity A $420,000 1,500 labor hours 5,000 labor hours
Activity B $180,000 6 set-ups 4 set-ups
The annual production and sales level of Little Product is 13,600 units.
The annual production and sales level of Big Product is 4,400 units.

(a) What is the activity rate for Activity A? (4 pts) [x1]
FORMAT NOTE: Round your answer to TWO decimal places (to the nearest cent) with
NO dollar sign.

(b) What is the total overhead cost per unit of Big Product under activity-based
costing? (6 pts) [x2]
FORMAT NOTE: Round your answer to the nearest WHOLE DOLLAR with NO dollar
sign, NO comma, and NO cents.
Answer

64,62
90

Exact Match
64.62

Exact Match
89.79

Question 6
0 out of 2 points

Cost pools are:
Answer
Selected
Answer:
b.
costs that are relevant to decision-making but irrelevant to
financial reporting.
Correct
Answer:
c.
costs that are accumulated before being allocated to cost objects
on some common basis.

Question 7
2 out of 2 points

The journal entry to record requisitions of material for new jobs started during the
period is
Answer

Selecte
d
Answer
:
e.

Correct
Answer
:
e.

Question 8
2 out of 2 points

Engineering design changes is an example of a
Answer

Selected Answer:
D.
Product-related activity
Correct Answer:
D.
Product-related activity

Question 9
0 out of 2 points

Given the following information, what is the amount of unapplied overhead if
overhead is applied based on machine hours?
Budgeted Overhead Costs $600,000 Actual Overhead
Costs $580,000
Budgeted Machine Hours 20,000 mh Actual Machine
Hours 19,000 mh
Answer

Selected Answer:
C.
$20,000 overapplied
Correct Answer:
B.
$10,000 underapplied

Question 10
0 out of 2 points

If cost of goods manufactured is greater than cost of goods sold, which of the
following is TRUE?

Answer

Selected
Answer:
C.
Finished goods beginning inventory is greater than finished goods
ending inventory.
Correct
Answer:
B.
Finished goods beginning inventory is less than finished goods
ending inventory.

Question 11
2 out of 2 points

An error was made in computing the percentage-of-completion for ending
Work-in-Process Inventory resulting in the assignment of a lower percentage
of completion to each component of the inventory than actually was the case.
There was no beginning Inventory. What is the effect of this error on cost
assigned to (1) cost of goods completed and transferred for the period and (2)
the cost per equivalent unit?
Cost of Goods..............Cost per
Completed................Equivalent Unit
Answer

Selected Answer:
A.
Overstated ........... Overstated
Correct Answer:
A.
Overstated ........... Overstated

Question 12
2 out of 2 points

When volume or level of activity decreases, which of the following is TRUE?:
Answer

Selected Answer:
A.
Unit fixed cost increases.
Correct Answer:
A.
Unit fixed cost increases.

Question 13
2 out of 2 points

The Super Supply Company manufactures cleaning spray for public schools.
During 2008, the company spent $600,000 on prime costs and $800,000 on
conversion costs. Overhead is applied at a rate of 150% of direct labor costs.
How much did the company spend on manufacturing overhead during 2008?
Answer

Selected Answer:
d.
$480,000
Correct Answer:
d.
$480,000

Question 14
0 out of 2 points

An increase in the by-products sales value will

Answer

Selected
Answer:
E.
Have no effect on the gross margin reported by the main
products
Correct Answer:
C.
Increase the gross margin reported by the main products

Question 15
2 out of 2 points

If a company multiplies its predetermined overhead rate by the actual activity
level of its allocation base, it is using
Answer

Selected Answer:
e.
normal costing.
Correct Answer:
e.

normal costing.

Question 16
2 out of 2 points

When a manufacturing company has a highly automated manufacturing plant
producing many different products, what is probably the most appropriate
basis of applying overhead costs to work-in-process?
Answer

Selected Answer:
c.
Machine hours.
Correct Answer:
c.
Machine hours.

Question 17
2 out of 2 points

ABC can be used to determine the costs of quality and to help refine quality
strategies. Quality activities are commonly classified as
Answer

Selected Answer:
B.
Prevention, appraisal, production, or post-sales
Correct Answer:
B.
Prevention, appraisal, production, or post-sales

Question 18
2 out of 2 points

If two service departments service the same number of departments, which
service department's costs are allocated first when using the step method?
Answer

Selected
Answer:
a.
The service department that provides the most service to other
service departments.
Correct
Answer:
a.
The service department that provides the most service to other
service departments.

Question 19
2 out of 2 points

Allocated joint costs are only useful for
Answer
Selected Answer:
a.
determining inventory cost for accounting purposes.

Correct Answer:
a.

Question 20
2 out of 2 points

Service department costs are
Answer
Selected
Answer:
d.
eventually applied by the user departments to the units
produced.
Correct Answer:
d.
produced.

Question 21
2 out of 2 points

The Freed Company produces three products, X, Y, and Z from a single raw
material input. Product Y can be sold at the splitoff point for total revenues of
$50,000 or it can be processed further at a total cost of $19,000 and then sold
for $68,000. Product Y
Answer

Selected
Answer:
a.
should be sold at the splitoff point, rather than processed
further.
Correct Answer:
a.
should be sold at the splitoff point, rather than processed
further.

Question 22
2 out of 2 points

If by-products are to be processed further, they should be carried in the books
at
Answer

Selected Answer:
d.
expected sales price minus separable processing costs.
Correct Answer:
d.

Question 23
2 out of 2 points

Use the following information for the FGH Manufacturing Company's material
costs

If FGH sold 20,000 units during the current period and used weighted-average
costing, would its net income be higher or lower than if it used FIFO? Would its
ending Work-in-Process Inventory be higher or lower if FGH used weighted-
average instead of FIFO?

Answer
Selected Answer:
a.

Correct Answer:
a.

Question 24
2 out of 2 points

Generally, individual department rates for applying overhead, rather than a
single plantwide rate, are appropriate if
Answer

Selected
Answer:
a.
The manufactured products differ with regard to the resources
consumed from the individual departments in the plant.
Correct
Answer:
a.
The manufactured products differ with regard to the resources
consumed from the individual departments in the plant.

Question 25
2 out of 2 points

In computing the current period's manufacturing cost per equivalent unit, the
FIFO method of process costing considers:
Answer

Selected Answer:
c.
only current period costs
Correct Answer:
c.
only current period costs

Question 26
2 out of 2 points

The Finishing Department had 5,000 incomplete units in its beginning Work-
in-Process Inventory which were 100% complete as to materials and 30%
complete as to conversion costs. 15,000 units were received from the previous
department. The ending Work-in-Process Inventory consisted of 2,000 units
which were 50% complete as to materials and 30% complete as to conversion
costs. The Finishing Department uses first-in, first-out (FIFO) process costing.

The How many units were started and completed during the period?
Answer

Selected Answer:
a.
13,000
Correct Answer:
a.
13,000

Question 27
2 out of 2 points

Before prorating the manufacturing overhead costs at the end of 2008, the Cost
of Goods Sold and Finished Goods Inventory had applied overhead costs of
$57,500 and $20,000 in them, respectively. There was no work in process at
the beginning or end of 2008. During the year, manufacturing overhead costs
of $74,000 were actually incurred. The balance in the Applied Manufacturing
Overhead was $77,500 at the end of 2008. If the under- or overapplied
overhead is prorated between Cost of Goods Sold and the inventory accounts,
how much will be the Cost of Goods Sold after the proration?
Answer

Selected Answer:
b.
$54,903
Correct Answer:
b.
$54,903

Question 28
2 out of 2 points

If by-products are to be processed further, they should be carried in the books
at
Answer

Selected Answer:
c.
Correct Answer:
c.

Question 29
2 out of 2 points

Service department costs are
Answer
Selected
Answer:
a.
produced.
Correct Answer:
a.
produced.

Question 30
2 out of 2 points

The Moody Company produced three joint products at a joint cost of
$100,000. Two of these products were processed further. Production and sales
were:

If the estimated net realizable value method is used and product Q is accounted
for as a main product, how much of the joint costs would be allocated to
product R?
Answer

Selected Answer:
c.
$50,000
Correct Answer:
c.
$50,000

Question 31
2 out of 2 points

Allocated joint costs are only useful for
Answer
Selected Answer:
b.
Correct Answer:
b.

Question 1
4 out of 8 points

These two regression reports analyze the relationships between total warehousing overhead

cost and either tons of product moved or labor hours.
Regression Statistics
R-Sq. 0.814
Adj. R-Sq. 0.797
Std. Error 30.627
Observations 12

Coefficients Std. Eror t Stat P-value
Intercept 106323.323 20115.32 5.286 0.038
Tons of product 0.789 0.787 1.001 0.593

Regression Statistics
R-Sq. 0.625
Adj. R-Sq. 0.603
Std. Error 36.353
Observations 12

Coefficients Std. Eror t Stat P-value
Intercept 19876.543 3211.511 6.189 0.024
Labor hours 4.239 1.567 2.705 0.092

(a) Which of those two cost drivers is the better predictor? TYPE Tons OR Hours. [x1]

(b) Why? TYPE A BRIEF REASON. [x2]

(c) Assume 30,000 labor hours are expected for next month. What is the predicted amount of
warehousing overhead cost? TYPE YOUR ANSWER TO THE NEAREST WHOLE
NUMBER (e.g., 9999). DO NOT INCLUDE COMMAS OR SYMBOLS. [x3]
Answer
Tons
Adj. R-Sq is higher
19877
Exact Match
Tons

Exact Match
R-squared

Exact Match
147047

Question 2
2 out of 2 points

XYZ Company's sales are $750,000 with operating profits of $130,000. If the
contribution margin ratio is 40%, what did the fixed costs amount to?
Answer

Selected Answer:
d.
$170,000.
Correct Answer:
d.
$170,000.
Answer Feedback:
40% of 750,000 - Fixed costs = $130,000

Question 3
2 out of 2 points

After-tax operating profits are equal to:
Answer
Selected Answer:
a.
before-tax operating profits multiplied by (1 - tax rate).
Correct Answer:
a.
before-tax operating profits multiplied by (1 - tax rate).

Question 4
2 out of 2 points

At the break-even point the contribution margin equals total:
Answer
Selected Answer:
a.
Fixed costs
Correct Answer:
a.
Fixed costs
Answer Feedback:
Total Contribution margin - Fixed costs = -0- (breakeven)

Question 5
2 out of 2 points

For the month ended October 31
st
, there are no finished goods or work in
process inventories at the beginning of the month for the Fleetfoot Company.
Net sales $8,400
Product costs:
Variable 4,270
Fixed 2,660
Selling and Administrative costs:
Variable 1,680
Fixed 1,540

Units manufactured 210
Units sold 180
What is the value of ending inventory under absorption costing?
Answer
Selected Answer:

$990
Correct Answer:

$990

Question 6
2 out of 2 points

A cost driver is defined as:
Answer
Selected
Answer:
b.
a factor that causes an increase or decrease in the total cost of a
cost object.
Correct
Answer:
b.
a factor that causes an increase or decrease in the total cost of a
cost object.

Question 7
2 out of 2 points

A disadvantage of the high-low method of cost analysis is that it
Answer

Selected
Answer:
b.
uses two extreme data points, which may not be representative
of normal conditions.
Correct
Answer:
b.
uses two extreme data points, which may not be representative
of normal conditions.

Question 8
2 out of 2 points

Christi Manufacturing provided the following information for last month.
Sales $10,000
Variable costs 3,000
Fixed costs 5,000
Operating income $2,000
If sales double next month, what is the projected operating income?
Answer

Selected Answer:
c.
$9,000
Correct Answer:
c.
$9,000
Answer Feedback:
Sales double, Variable costs double, fixed cost is constant

Question 9
2 out of 2 points

Shipping costs at Fisheries Inc. are a mixed cost with variable and fixed cost components. Records
indicate the company shipped 6,000 tons of halibut for $8,000 in March and 10,000 tons for $11,200 in
April. Assuming that this activity is within the relevant range, the expected shipping cost for shipping
7,800 tons would be:
Answer

Selected Answer:
c.
$9,440
Correct Answer:
c.
$9,440
Answer Feedback:
Use high-low method

Question 10
2 out of 2 points

Garth Company sells a single product. If the selling price per unit and the variable expense per unit both
increase by 10% and fixed expenses do not change, what is the effect on (1) Unit Contribution Margin
(UCM) and (2) Contribution Margin Ratio (CMR)?
Answer

Selected Answer:
e.
UCM increases; CMR does not change
Correct Answer:
e.
UCM increases; CMR does not change

Question 11
2 out of 2 points

For a company that makes and sells one product, which of the following changes (A, B, C) will cause the
breakeven point to decrease?
Answer

Selected Answer:
d.
Both A and B
Correct Answer:
d.
Both A and B
Answer Feedback:
F / (p-v) = Breakeven

Question 12
2 out of 2 points

Operating leverage for ACDC Company is 3.5 for current sales of $100,000 and current net
income of $20,000. Which of the following statements (I, II, III) is/are TRUE?
I. Current contribution margin is $70,000.
II. If sales increase by 2%, net income will increase by 7%.
III. If sales increase by $10,000, net income will be $27,000.
Answer

Selected Answer:
g.
I, II, and III are true.
Correct Answer:
g.
I, II, and III are true.

Question 13
2 out of 2 points

Assuming a constant mix of 3 units of Small for every 1 unit of Large.
Small Large Total
Sales $20 $30
Variable cost per unit 14 18
Total fixed costs $48,000
What are the breakeven quantities?
Answer

Selected Answer:
c.
4,800 units of Small and 1,600 units of Large.
Correct Answer:
c.
4,800 units of Small and 1,600 units of Large.

Question 14
2 out of 2 points

In describing the cost equation, Y = a + bX, "X" is:
Answer
Selected Answer:
c.
the level of activity.
Correct Answer:
c.
the level of activity.

Question 15
2 out of 2 points

Which of the following is sn example of cognitive bias?
Answer
Selected
Answer:
c.
The decision maker may exercise an error in judgment or
processing information

Correct
Answer:
c.
The decision maker may exercise an error in judgment or
processing information

Question 16
2 out of 2 points

The fixed manufacturing overhead rate will be the lowest when the denominator level
used is
Answer

Selected Answer:

Theoretical capacity
Correct Answer:


Question 17
2 out of 2 points

The capacity level which assumes continuous, uninterrupted production 365
days per year is called
Answer

Selected Answer:

Correct Answer:


Question 18
2 out of 2 points

Which costing method matches costs and revenues in accordance with
generally accepted accounting principles?
Answer

Selected Answer:

Absorption costing
Correct Answer:

Absorption costing

Question 19
2 out of 2 points

In throughput costing, direct labor and variable overhead are treated as
Answer
Selected Answer:

Period costs
Correct Answer:

Period costs

Question 20
2 out of 2 points

Which of the following is the best definition of a qualitative factor?
Answer
Selected Answer:
C.
Factors that are not valued in monetary terms
Correct Answer:
C.
Factors that are not valued in monetary terms

Question 21
2 out of 2 points

In the Levers of Control framework, which of the following is an example of a
boundary system?
Answer

Selected Answer:
A.
Code of ethics
Correct Answer:
A.
Code of ethics

Question 22
2 out of 2 points

Edison Company has 5,000 obsolete desk lamps that are carried in inventory at a
manufacturing cost of $45,000. If the lamps are reworked for $20,000, they could be
sold for $37,000. Alternatively, the lamps could be sold for $9,000 for scrap. In a
decision model analyzing these alternatives, the sunk cost would be:
Answer

Selected Answer:
A.
$45,000
Correct Answer:
A.
$45,000

Question 23
2 out of 2 points

Consider the following production and cost data for two products, L and C:

Product L Product C
Contribution margin per
unit.............................. $120 $112
Machine minutes needed per
unit...................... 10 minutes 8 minutes
A total of 60,000 machine minutes are available each period and there is unlimited
demand for each product. What is the largest possible total contribution margin that

can be realized each period?
Answer
Selected Answer:

$840,000
Correct Answer:

$840,000

Question 24
2 out of 2 points

The cost for a salesperson that is paid a flat salary of $2,000 per month plus a 3%
commission on all sales is an example of what type of cost?
Answer

Selected Answer:
C.
Mixed cost
Correct Answer:
C.
Mixed cost

Question 25
2 out of 2 points

In an outsourcing decision, fixed costs are
Answer
Selected Answer:
A.
Relevant if they can be avoided through outsourcing
Correct Answer:
A.
Relevant if they can be avoided through outsourcing

Question 26
2 out of 2 points

Which of the following statements regarding organizational vision is FALSE?
Answer
Selected Answer:
B.
Organizational vision means the same as core competencies
Correct Answer:
B.
Organizational vision means the same as core competencies

Question 27
2 out of 2 points

Which of the following is an element of an operating plan?

Answer

Selected Answer:
C.
Budgeting employee costs
Correct Answer:
C.
Budgeting employee costs

Question 28
2 out of 2 points

Analyzing the strengths and weaknesses of different alternatives includes all of the
following except
Answer

Selected Answer:
A.
Drawing a conclusion about which alternative is best overall
Correct Answer:
A.
Drawing a conclusion about which alternative is best overall

Question 29
2 out of 2 points

Which of the following statements (A, B, C) is/are TRUE?
Answer
Selected Answer:
B.
Sunk costs are never relevant for decision making
Correct Answer:
B.
Sunk costs are never relevant for decision making

Question 30
2 out of 2 points

Break-even analysis assumes that:
Answer
Selected Answer:
C.
Unit variable cost is constant
Correct Answer:
C.
Unit variable cost is constant

Question 31
14 out of 20 points

PROBLEM 1 (20 pts)
A manufacturer of large stainless steel buckets has supplied the following data:
Selling price per bucket $100
Material cost per bucket 12
Direct labor cost per bucket 8
Variable manufacturing cost per bucket 15
Variable selling and administrative cost per bucket 5

Total fixed manufacturing costs $125,000
Total fixed selling and administrative cost $ 85,000
Tax rate is 40%
(a) What is contribution margin ratio? [x1] (4 pts) TYPE YOUR ANSWER TO ONE DECIMAL
PLACE, THE NEAREST TENTH OF A PERCENT (e.g., 99.9 or 12.3) DO NOT INCLUDE
COMMAS OR SYMBOLS.
(b) What is the quantity of product that needs to be produced and sold in order to earn a pre-tax profit of
$140,000? [x2] (4 pts) TYPE YOUR ANSWER TO THE NEAREST WHOLE NUMBER (e.g.,
99999). DO NOT INCLUDE COMMAS OR SYMBOLS.
(c) What is the dollar amount of sales at the break-even point? [x3] (4 pts) TYPE YOUR ANSWER
TO THE NEAREST WHOLE NUMBER (e.g., 99 thousand would be typed as 99000). DO NOT
INCLUDE COMMAS OR SYMBOLS.
(d) Assume the company produces 6,000 units and sells 5,000 units (with no beginning inventory),
using Variable Costing to prepare the income statement, what is the dollar amount of the appropriate
margin subtotal? [x4] (2 pts) TYPE YOUR ANSWER TO THE NEAREST WHOLE NUMBER (e.g.,
(e) Assume the company produces 6,000 units and sells 5,000 units (with no beginning inventory),
using Variable Costing to prepare the income statement, what is the dollar amount of net operating
income? [x5] (2 pts) TYPE YOUR ANSWER TO THE NEAREST WHOLE NUMBER (e.g., 99999).
DO NOT INCLUDE COMMAS OR SYMBOLS.
(f) Assume the company produces 6,000 units and sells 5,000 units (with no beginning inventory),
using Absorption Costing to prepare the income statement, what is the dollar amount of the appropriate
margin subtotal? [x6] (2 pts) TYPE YOUR ANSWER TO THE NEAREST WHOLE NUMBER (e.g.,
(g) Assume the company produces 6,000 units and sells 5,000 units (with no beginning inventory),
using Absorption Costing to prepare the income statement, what is the dollar amount of net operating
income? [x7] (2 pts) TYPE YOUR ANSWER TO THE NEAREST WHOLE NUMBER (e.g., 99999).
DO NOT INCLUDE COMMAS OR SYMBOLS.
Answer
0.6
5833
350000
300000
54000
220833
75000

ABSORPTION
COSTING
VARIABLE COSTING
Sales 500,000 Sales 500,000
CGS 279,167 Variable 200,000
Gross
Mgn
220,833 CM 300,000

Period
Cost
110,000 Fixed 210,000
Net Op
Inc
110,833
Net Op
Inc
90,000

Exact Match
60.0

Exact Match
5833

Exact Match
350000

Exact Match
300000

Exact Match
90000

Exact Match
220833

Exact Match
110833

Response
Feedback:
Sales price minus *ALL* unit VARIABLE costs equals unit Contribution Margin
(Variable costs include direct materials, direct labor, variable manufacturing,
variable period costs, ALL variable costs)
ABSORPTION
COSTING
VARIABLE COSTING
Sales 500,000 Sales 500,000
CGS 279,167 Variable 200,000
Gross
Mgn
220,833 CM 300,000
Period
Cost
110,000 Fixed 210,000
Net
Op
Inc
110,833
Net Op
Inc
90,000

Question 32
12 out of 12 points

PROBLEM 3 (12 pts)
Your boss needs you to estimate cafeteria costs for next week. Past data follows:

Week Meals served Cafeteria costs

1 3,500 $26,840

2 3,800 $28,200

3 4,100 $29,160

4 3,300 $25,930

5 2,900 $24,000
(a) Using the high-low method, what is the estimated variable cost per meal? [x1] (4
pts) TYPE ANSWER TO THREE DECIMAL PLACES, NO DOLLAR SIGN, NO
COMMA (e.g., 99.999 or 1.234 or 10.000)
(b) What is the estimated total fixed cost? [x2] (4 pts) TYPE ANSWER AS WHOLE
DOLLAR AMOUNT, NO DOLLAR SIGN, NO COMMA (e.g., 999 thousand dollars would
be typed as 999000)
(c) You expect to serve 3,700 meals next week. What is your estimate for total cafeteria costs
next week? [x3] (4 pts) TYPE ANSWER AS ROUNDED WHOLE DOLLAR AMOUNT,
NO DOLLAR SIGN, NO COMMA (e.g., $49,999.99 would be typed as 50000)
Answer

4.300
11530
27440
Exact Match
4.300

Exact Match
11530

Exact Match
27440

Question 33
4 out of 4 points

Bates Corp. has the following information for its single product (sold for $8 per unit) for last
period:
Units sold 300,000
Variable costs $900,000
Fixed costs $600,000
Based on a market study, Bates estimates that it could increase the unit selling price by
15% and increase the unit sales volume by 10% if an additional $60,000 was spent on
advertising. Based on the analysis, what would Bates' operating income be from
selling the candy if the decision is made to advertise? TYPE YOUR ANSWER TO
THE NEAREST WHOLE NUMBER (e.g., 9999). DO NOT INCLUDE COMMAS
OR SYMBOLS. [x1]
Answer

1386000
Exact Match
1386000

Question 34
2 out of 2 points

When production quantity is greater than sales quantity, net operating income
reported by variable costing will be __________ net operating income reported
by absorption costing.
Answer

Selected Answer:

less than
Correct Answer:

less than

Question 35
2 out of 2 points

Booker Company, in its first year of operations, produces a product that sells
for $49 per unit. The following manufacturing costs were incurred during the
year to produce 600,000 units (50,000 units per month):
Direct materials.............$6,600,000
Direct labor...................$2,400,000 (@ $20/direct labor hour)
Manufacturing overhead costs incurred for each of the first twelve months of operations were
analyzed using linear regression. The following results provide the basis for overhead costs
estimates for the product:
REGRESSION REPORT
Dependent variable---Manufacturing overhead costs
Independent variable--Direct labor hours
Computed values:
Intercept...............................................$250,000

Coefficient of independent variable............$7.000
Coefficient of correlation ..........................0.921
R-squared...............................................0.848
Next month, management expects to produce 60,000 units. What is the estimated dollar
amount of expected TOTAL MANUFACTURING OVERHEAD COST for next month?
Answer
Selected Answer:
e.
$ 334,000
Correct Answer:
e.
$ 334,000

Question 36
2 out of 2 points

At an activity level of 20,000 units produced, fixed costs total $30,000 and variable costs total $68,000.
Assuming that this activity is within the relevant range, if 25,000 units are produced,
Answer

Selected Answer:
a.
fixed cost per unit is expected to equal $1.20.
Correct Answer:
a.
fixed cost per unit is expected to equal $1.20.
Answer Feedback:
$30,000/25,000 units = $1.20/unit

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