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Managerial Accounting
All of the following are required to calculate the cost of goods sold in the budgeted income statement except:
Select one:
- b. the selling and administrative costs per unit.
- a. the manufacturing overhead costs per unit.
- c. the number of units sold.
- d. the direct material and direct labor costs per unit.
- e. None of the answer choices is correct.
Petro Inc. produces two joint products, product A and B. Prior to the split-off point, the company incurred $600,000 in joint costs. Production totaled 72,000 pounds for product A and 48,000 pounds for product B. What amount of joint costs is allocated to product A using the physical quantities method (pounds)?
Select one:
- a. $360,000
- b. $240,000
- c. $80,000
- d. $60,000
- e. None of the answer choices is correct.
The bottom of the statement of cash flows shows a net increase in cash of $350,000. What is this increase linked to elsewhere in the financial statements?
Select one:
- c. The balance sheet.
- a. The income statement.
- b. The statement of owners’ equity.
- d. The income statement, the balance sheet, and the statement of owners’ equity.
- e. None of the answer choices is correct.
All of the following items can appear on the cash collections and cash payments budget except:
Select one:
- b. depreciation expense.
- a. direct labor.
- c. selling and administrative.
- d. direct materials.
- e. None of the answer choices is correct.
The best definition of an opportunity cost is a:
Select one:
- a. Cost reflecting benefits foregone when one alternative is selected over another.
- b. Cost incurred in the past that cannot be changed by future decisions.
- c. Fixed cost that cannot be traced directly to a product line.
- d. Cost that can be avoided by selecting a particular course of action.
- e. None of the answer choices is correct.
The operating cash flow ratio measures:
Select one:
- c. the company’s ability to generate enough cash from daily operations to cover current liabilities.
- a. the company’s ability to generate enough cash from daily operations to cover capital expenditures.
- b. the company’s ability to generate enough cash from daily operations to cover long-term liabilities.
- d. the company’s ability to generate enough cash from financing operations to cover current liabilities.
- e. None of the answer choices is correct.
Which of the following is not considered relevant when considering a make-or-buy decision?
Select one:
- d. The effect on unavoidable fixed costs.
- a. The effect on variable costs.
- b. The effect on employee morale.
- c. The quality of the outsourced product.
- e. None of the answer choices is correct.
All of the following are disadvantages of decentralizing except:
Select one:
- b. quicker decision making at the division level.
- a. duplication of administrative services.
- c. loss of control at top management levels.
- d. managers at the division level might make decisions that are in their best interest even if the decision is not in the best interest of the company as a whole.
- e. None of the answer choices is correct.
On a common-size balance sheet, equipment should be stated as a percentage of:
Select one:
- b. total assets.
- a. net sales.
- c. total liabilities.
- d. total long-term assets.
- e. None of the answer choices is correct.
All of the following ratios are used to evaluate short-term liquidity except:
Select one:
- d. the gross margin ratio.
- a. the receivable turnover ratio.
- b. the current ratio.
- c. the inventory turnover ratio.
- e. None of the answer choices is correct.
The three categories of product costs include all of the following except:
Select one:
- c. Indirect labor.
- a. Manufacturing overhead.
- b. Direct materials.
- d. Direct labor.
- e. None of the above.
If the under- or overapplied overhead amount is considered to be material, which of the following accounts would be the least likely to be used when closing the Manufacturing Overhead account at the end of the period?
Select one:
- a. Raw Materials Inventory.
- b. Work in Process Inventory.
- c. Finished Goods Inventory.
- d. Cost of Goods Sold.
- e. None of the answer choices is correct.
High operating leverage means:
Select one:
- c. the company has relatively high fixed costs.
- a. the company has relatively high variable costs.
- b. the company has relatively low fixed costs.
- d. the company has a relatively low amount of debt.
- e. None of the answer choices is correct.
Which of the following approaches for estimating fixed and variable costs using historical information fits a straight line to a set of data points?
Select one:
- a. Scattergraph method and regression analysis.
- b. Scattergraph method and account analysis.
- c. High-low method and account analysis.
- d. Scattergraph method and high-low method.
- e. None of the answer choices is correct.
The Work in Process Inventory account for Baja Manufacturing Company shows a balance of $7,200 at the end of the accounting period. The job cost sheets of the only two uncompleted jobs, Jobs 4 and 7, show respective charges of $2,400 and $1,200 for direct materials used. Jobs 4 and 7 also show respective charges of $1,600 and $800 for direct labor used. Based on this information, what is the predetermined overhead rate as a percentage of direct labor costs that Morris is using?
Select one:
- a. 200%
- b. 50%
- c. 33.3%
- d. 16.7%
- e. None of the answer choices is correct.
If a project’s net present value is zero, the internal rate of return is:
Select one:
- b. equal to the discount rate.
- a. less than the discount rate.
- c. greater than the discount rate.
- d. cannot be determined without more information.
- e. None of the answer choices is correct.
Which of the following costs is typically not a fixed overhead cost for a factory?
Select one:
- d. Indirect materials used in production.
- a. Salaries of factory supervisors.
- b. Rent on the factory building.
- c. Property taxes on the factory building.
- e. None of the answer choices is correct.
For organizations that do not pay income taxes, the depreciation taken on a long-term asset in future periods:
Select one:
- c. is not included in the IRR and NPV calculations.
- a. must be multiplied by the tax rate for the IRR and NPV.
- b. must be multiplied by one minus the tax rate for the IRR and NPV calculations.
- d. is only included in the payback calculation.
- e. None of the answer choices is correct.
Which of the following companies would most likely have a high operating leverage?
Select one:
- d. A company manufacturing microprocessors.
- a. A landscaping company.
- b. An accounting company.
- c. A plumbing company.
- e. None of these have high operating leverage.
Which of the following ratios can managers use to break down return on investment (ROI) for improving performance?
Select one:
- d. Operating profit margin and asset turnover.
- a. Inventory turnover and gross margin ratio.
- b. Inventory turnover and profit margin ratio.
- c. Operating profit margin and EVA.
- e. None of the answer choices is correct.
If a project’s net present value is positive, the internal rate of return is:
Select one:
- c. greater than the discount rate.
- a. less than the discount rate.
- b. equal to the discount rate.
- d. cannot be determined without more information.
- e. None of the answer choices is correct.
Significant noncash financing and investing activities are reported in:
Select one:
- a. a note below the statement of cash flows.
- b. the investing activities section of the statement of cash flows.
- c. the financing activities section of the statement of cash flows.
- d. the operating activities section of the statement of cash flows.
- e. None of the answer choices is correct.
Accounting Services, Inc. has two customers. Customer X generates $600,000 in income after direct fixed costs are deducted, and Customer Z generates $580,000 in income after direct fixed costs are deducted. Allocated fixed costs total $1,000,000 and are assigned 40 percent to Customer X and 60 percent to Customer Z. Total allocated fixed costs remain the same regardless of how these costs are assigned to customers. What is the amount of allocated fixed costs to be assigned to Customer Z?
Select one:
- b. $600,000.
- a. $580,000
- c. $400,000
- d. $420,000
- e. None of the answer choices is correct.
In an airplane factory, which of the following would most likely be classified as a direct material?
Select one:
- b. Jet engines.
- a. Sandpaper.
- c. Inexpensive fasteners.
- d. Cleaning supplies.
- e. None of the above.
Solutions Inc. would like to purchase a new production machine for $300,000. The machine is expected to have a life of four years, and a salvage value of $50,000. Annual maintenance costs will total $30,000. Annual labor and material savings are predicted to be $150,000. The company’s required rate of return is 6 percent. What is the payback period for this investment (round to the nearest month)?
Select one:
- c. 2 years, 6 months.
- a. 3 years, 5 months.
- b. 2 years, 5 months.
- d. 3 years, 6 months.
- e. None of the answer choices is correct.
In a wooden boat factory, which of the following would most likely be classified as indirect labor?
Select one:
- a. Salaries for the factory supervisors.
- b. Salaries for sanding operators.
- c. Salaries for production machine operators.
- d. Salaries for staining and painting personnel.
- e. None of the above.
Assume you receive $60,000 in five years and the annual interest rate is six percent. Using the present value formula, how much is that worth in today’s dollars (rounded to the nearest dollar)?
Select one:
- c. $44,835.
- a. $42,000
- b. $78,000
- d. $60,000
- e. None of the answer choices is correct.
The best definition of differential analysis is:
Select one:
- d. an analysis that looks at the difference in revenues and costs from one alternative course of action to another.
- a. an analysis of the benefits foregone when one alternative is selected over another.
- b. an analysis of allocated fixed costs related to each product line.
- c. an analysis of variable costs that are the same from one alternative course of action to another.
- e. None of the answer choices is correct.
All of the following measures evaluate profitability except:
Select one:
- c. market capitalization.
- a. profit margin ratio.
- b. return on assets.
- d. gross margin ratio.
- e. None of the answer choices is correct.
The equation that best describes a mixed cost is:
Select one:
- b. Y = f + vX.
- a. Y = f – vX.
- c. Y = f + v + X.
- d. Y = fv + X.
- e. None of the answer choices is correct.
When ideal standards are used, which of the following is most likely true?
Select one:
- a. The standards are not likely to be achieved.
- b. The standards allow for occasional downtime for equipment.
- c. The standards reflect what really happens in the factory.
- d. The standards motivate employees to achieve perfection.
- e. None of the answer choices is correct.
On a common-size balance sheet, current liabilities should be stated as a percentage of:
Select one:
- b. total assets.
- a. net sales.
- c. total liabilities.
- d. total long-term liabilities.
- e. None of the answer choices is correct.
Jasper Company uses the weighted average process costing method. The Mixing Department at Jasper had 17,000 units in beginning inventory. These units contained $88,000 in direct materials, $80,000 in direct labor, and $60,000 in overhead. During the period, the department incurred costs of $300,000 in direct materials, $400,000 in direct labor and $200,000 in overhead and started 80,000 units. Ending inventory consisted of 6,000 units which were 100% complete with respect to direct materials and 50% complete with respect to direct labor and overhead. What is the cost per equivalent unit for materials (rounded to the nearest cent)?
Select one:
- b. $4.26.
- a. $4.12
- c. $3.76
- d. $4.00
- e. None of the answer choices is correct.
All of the following accounts would typically be used to calculate the quick ratio except:
Select one:
- b. equipment.
- a. cash.
- c. accounts payable.
- d. accounts receivable.
- e. None of the answer choices is correct.
Vista Company wants to replace one of its older production machines. The estimated cost is $180,000. Using a discount rate of 18%, the company calculates a net present value of the new machine to be negative $10,000. Based on this information, which of the following statements is true?
Select one:
- c. The net present value will be positive if the actual purchase price is less than $170,000.
- a. The use of a higher discount rate would cause the net present value to be positive.
- b. The guaranteed rate of return on the new purchase is 18%.
- d. The internal rate of return on the truck is negative.
- e. None of the answer choices is correct.
Which of the following best describes an advantage of decentralization from the company’s perspective?
Select one:
- a. Decentralization allows decisions to be made more quickly at the division level.
- b. Managers at the division level might make decisions that are in their best interest even if the decision is not in the best interest of the company as a whole.
- c. Decentralization allows top-level management at a corporate headquarters to work with division managers in making day-to-day decisions at the division level.
- d. Decentralization allows for the duplication of administrative services.
- e. None of the answer choices is correct.
Assume you receive $63,000 in three years and the annual interest rate is five percent. Using the present value formula, how much is that amount worth in today’s dollars (rounded to the nearest dollar)?
Select one:
- a. $54,422.
- b. $72,945.
- c. $53,550.
- d. $63,000.
- e. None of the answer choices is correct.
All of the following are nonfinancial measures that might be used by transportation companies such as FedEx except:
Select one:
- c. average collection period.
- a. percentage of damage-free goods.
- b. percentage of on-time deliveries.
- d. hours of employee training.
- e. None of the answer choices is correct.
Alta Vista Company plans to sell 90,000 units in June and 135,000 units in July. The company’s policy is to keep 15% of the next month’s sales in ending inventory. If the ending inventory in May was consistent with this policy, how many units should be produced in June?
Select one:
- b. 83,250 units.
- a. 110,250 units
- c. 96,750 units
- d. 123,750 units
- e. There is not enough information to answer this question.
Assume you receive $4,800 in two years and the annual interest rate is four percent. Using the present value formula, how much is that amount worth in today’s dollars (rounded to the nearest dollar)?
Select one:
- b. $4,438.
- a. $5,192
- c. $4,800
- d. $4,416
- e. None of the answer choices is correct.
Which of the following statements is true regarding cost per equivalent unit?
Select one:
- b. This measure is used to assign costs to units transferred out.
- a. This calculation only includes variable costs.
- c. This measure always stays the same from one month to the next regardless of different levels of production.
- d. The formula to calculate this measure uses total equivalent units accounted for divided by total costs to be accounted for.
- e. None of the answer choices is correct.
The amount of cash paid out for overhead each period does not equal the total overhead costs incurred during the period because:
Select one:
- d. depreciation expense does not require a cash payment.
- a. overhead expenses rarely require cash payments.
- b. overhead expenses only require cash payments for factory rent.
- c. overhead expenses only require cash payments for indirect materials.
- e. None of the answer choices is correct.
Division A has a building with the same original cost as Division B, except that it was purchased four years before Division B’s building. If both divisions have identical operating incomes and use the net book value approach for calculating return on investment (ROI), which of the following will be true?
Select one:
- b. Division B will have a higher ROI.
- a. Both divisions will have the same ROI.
- c. Division A will have a higher ROI.
- d. More information is needed to answer this question.
- e. None of the answer choices is correct.
Equivalent units are usually applied to:
Select one:
- d. direct materials, direct labor, and overhead.
- a. only direct materials and direct labor.
- b. only direct materials and overhead.
- c. only direct labor.
- e. None of the answer choices is correct.
During 2013, Columbia Inc. had beginning accounts receivable of $680,000 and ending accounts receivable of $760,000. Its net sales of $4,500,000 are composed of 20% cash sales and 80% credit sales. Based on this information, what is Columbia’s average collection period?
Select one:
- a. 58.4 days.
- b. 292.0 days.
- c. 73.0 days.
- d. 5.0 days.
- e. None of the answer choices is correct.
When using a job cost system, which of the following will not appear on a job cost sheet?
Select one:
- c. Actual manufacturing overhead incurred.
- a. Direct labor.
- b. Direct materials.
- d. Manufacturing overhead applied.
- e. None of the answer choices is correct.
Which of the following best describes an operating budget?
Select one:
- b. A short-term budget that focuses on the daily operations of the organization.
- a. An estimate of cash expenditures for long-term assets.
- c. A series of budget schedules outlining the organization’s plans for the next three years.
- d. An estimate of all operating costs other than production.
- e. None of the answer choices is correct.
The number of equivalent units for any input (direct materials, direct labor, or overhead) cannot be greater than:
Select one:
- b. units to account for.
- a. units completed.
- c. units started.
- d. total costs to account for.
- e. None of the answer choices is correct.
Assume that Crimson Company’s market price per share remains at $20 over a two-year period. Over the same two-year period, Crimson sells an additional 100,000 shares of stock to investors. Net income was the same for both years. The issuance of additional shares will have the following effect for the company over the two-year period:
Select one:
- b. Market capitalization will increase.
- a. Market capitalization will decrease.
- c. Market capitalization will stay the same.
- d. Earnings per share will increase.
- e. None of the answer choices is correct.
Which of the following is not an advantage of using activity-based costing (ABC)?
Select one:
- d. ABC is typically expensive to implement.
- a. ABC cost information tends to be more accurate compared to traditional costing.
- b. Managers can use ABC costing to improve efficiency.
- c. ABC allows managers to make better product mix decisions.
- e. None of the answer choices is correct.
All of the following are steps of target costing except:
Select one:
- a. maximizing the contribution margin per unit of constrained resource.
- b. engineering the product to achieve the target cost.
- c. designing a product that provides the features and price demanded by customers.
- d. deriving the target cost by subtracting the desired profit.
- e. None of the answer choices is correct.
Damon, Inc. currently produces 30,000 sweatshirts each year for its regular customers and charges $30 per sweatshirt. Damon has capacity to produce an additional 5,000 sweatshirts if sales grow in the future. Variable costs total $16 per sweatshirt and annual fixed costs total $60,000. The city of Loveland recently approached the company and proposed a one-time purchase of 1,000 sweatshirts for $24 each. Should Damon accept the special order proposal?
Select one:
- b. Yes, because they will make $6 per shirt from this special order.
- a. No, because total fixed costs will increase by $2,000 and total sales will decline by $6,000 from this special order.
- c. Yes, because they will make $8 per shirt from this special order.
- d. No, because they will lose $6 per shirt from this special order.
- e. None of the answer choices is correct.
Cost estimates made using activity levels outside the relevant range:
Select one:
- b. May result in poor decisions.
- a. Are more accurate.
- c. Mean that cost behavior patterns are accurate at all levels of activity.
- d. Mean the cost estimates will be relevant.
- e. None of the answer choices is correct.
All of the following are reasons that companies prefer normal costing except:
Select one:
- b. Normal costing tracks actual direct materials, actual direct labor costs, and actual manufacturing overhead costs.
- a. Normal costing averages overhead costs and levels out overhead fluctuations that might occur from month to month.
- c. Normal costing simplifies recordkeeping.
- d. Normal costing provides information for managers to quote customers the price of products based on estimated costs.
- e. None of the answer choices is correct.
According to the Business in Action “Moving from Spreadsheets to Intranet Budgeting,” which of the following is not an advantage of Intranet budgeting?
Select one:
- d. Intranet budgeting eliminates technology support.
- a. Intranet budgeting minimizes or eliminates the uploading of Excel spreadsheets.
- b. Intranet budgeting saves input time.
- c. Intranet budgeting provides real-time reports.
- e. None of the answer choices is correct.
Dresden Inc. has net sales of $1,200,000, cost of goods sold of $900,000, operating expenses of $200,000, interest expense of $30,000, and income tax expense of $10,000. The company’s gross margin ratio is (round to the nearest tenth of a percent):
Select one:
- d. 25.0%.
- a. 8.3%
- b. 5.0%
- c. 10.0%
- e. None of the answer choices is correct.
Which of the following is not relevant in a special order decision?
Select one:
- c. Sunk costs.
- a. Variable costs.
- b. Opportunity costs.
- d. Avoidable fixed costs.
- e. None of the answer choices is correct.
Factory maintenance costs are estimated for Bing Company based on the level of machine hours used. If total monthly fixed costs are $150,000, variable costs per machine hour are $8, and 15,000 machine hours are expected to be used in June, which of the following would be the best estimate of total maintenance costs?
Select one:
- d. $270,000.
- a. $150,000
- b. $120,000
- c. $30,000
- e. None of the answer choices is correct.
Sawyer Inc. plans to sell 75,000 units in September and 165,000 units in October. Sawyer’s policy is to keep 25% of the next month’s sales in ending inventory. If the ending inventory in August was consistent with this policy, how many units should be produced in September?
Select one:
- b. 97,500 units.
- a. 15,000 units
- c. 135,000 units
- d. 52,500 units
- e. None of the answer choices is correct.
Davis Company has $20 per unit in variable costs and $800,000 per year in fixed costs. Demand is estimated to be 400,000 units per year. What is the desired price per unit if a markup of 30% on total cost is used to determine the price?
Select one:
- b. $37.40.
- a. $26.00
- c. $28.60
- d. $34.00
- e. None of the answer choices is correct.
Larimer Company has monthly fixed costs totaling $90,000 and variable costs of $5 per unit. Each unit of product is sold for $20. What is the break-even point in units?
Select one:
- b. 6,000.
- a. 3,600
- c. 4,500
- d. 18,000
- e. None of the answer choices is correct.
The payback period is typically stated:
Select one:
- a. in days, months, or years.
- b. as a percent.
- c. as a dollar amount.
- d. in the same format as the required rate of return.
- e. None of the answer choices is correct.
On a common-size income statement, net income should be stated as a percentage of:
Select one:
- c. net sales.
- a. gross margin.
- b. total assets.
- d. current assets.
- e. None of the answer choices is correct.
If a project’s net present value is negative, the internal rate of return is:
Select one:
- a. less than the discount rate.
- b. equal to the discount rate.
- c. greater than the discount rate.
- d. cannot be determined without more information.
All of the following appear on the direct materials purchases budget except:
Select one:
- b. projected sales in units.
- a. units to be produced.
- c. quantity of direct materials to be purchased.
- d. quantity of desired direct materials ending inventory.
- e. None of the answer choices is correct.
All of the following appear on the manufacturing overhead budget except:
Select one:
- b. direct labor cost per unit.
- a. units to be produced.
- c. indirect labor cost per unit.
- d. total fixed overhead costs.
- e. None of the answer choices is correct.
Most managers prefer attainable standards rather than ideal standards for the following reasons except:
Select one:
- c. attainable standards motivate employees to achieve perfection.
- a. attainable standards reflect what really happens in the factory.
- b. attainable standards allow for occasional downtime for equipment.
- d. attainable standards recognize that some materials might have to be scrapped.
- e. None of the answer choices is correct.
Paco’s Bikes sells 120 bicycles each month for $400 per unit. Variable cost per unit is $160 and fixed costs total $4,800 per month. What is the contribution margin ratio?
Select one:
- b. 0.60.
- a. 0.40
- c. 2.50
- d. 0.70
- e. None of the answer choices is correct.
The predetermined overhead rate is calculated as:
Select one:
- b. Estimated Overhead Costs / Estimated Cost Driver Activity.
- a. Estimated Overhead Costs × Estimated Cost Driver Activity.
- c. Estimated Overhead Costs − Estimated Cost Driver Activity.
- d. Estimated Overhead Costs + Estimated Cost Driver Activity.
- e. None of the answer choices is correct.
The inventory cost flow equation is:
Select one:
- a. Beginning balance + Transfers in − Ending balance = Transfers out.
- b. Beginning balance + Transfers in + Ending balance = Transfers out.
- c. Beginning balance − Transfers in − Ending balance = Transfers out.
- d. Beginning balance − Transfers in + Ending balance = Transfers out.
- e. None of the above.
The correct profit equation is:
Select one:
- c. Total sales − total variable costs − total fixed costs.
- a. Total sales − total variable costs.
- b. Total sales − total fixed costs.
- d. Total sales − total variable costs + total fixed costs.
- e. None of the answer choices is correct.
