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Question 1
1.
Walk Manufacturing gathered the following data about the three products that it produces:
Product Present Sales Value Estimated Additional
Processing Costs Estimated Sales
if Processed Further
A $24,000 $16,000 $42,000
B $28,000 $10,000 $36,000
C $22,000 $6,000 $32,000
Which of the products should not be processed further?
Answer
Product A
Product B
Product C
Products A and C
2 points
Question 2
1.
Cara Industries incurred the following costs for 50,000 units:
Variable Costs $90,000
Fixed Costs $120,000
Cara has received a special order from a foreign company for 5,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $4,250 for shipping.
If Cara wants to earn $4,000 on the order, what should the unit price be?
Answer
$1.65
$5.85
$2.60
$3.45
2 points
Question 3
1.
Opportunity cost is usually
Answer
a standard cost.
a potential benefit.
a sunk cost.
included as part of cost of goods sold.
2 points
Question 4
1.
It costs Ross Co. $24 of variable and $10 of fixed costs to produce one bathroom scale which normally sells for $70. A foreign wholesaler offers to purchase 2,000 scales at $30 each. Ross would incur special shipping costs of $2 per scale if the order were accepted. Ross has sufficient unused capacity to produce the 2,000 scales. If the special order is accepted, what will be the effect on net income?
Answer
$8,000 increase
$8,000 decrease
$12,000 decrease
$60,000 increase
2 points
Question 5
1.
Brave Industries is considering buying a machine for $180,000 with an estimated life of ten years and no salvage value. The straight-line method of depreciation will be used. The machine is expected to generate net income of $12,000 each year. The cash payback on this investment is
Answer
15 years.
10 years.
6 years.
3 years.
2 points
Question 6
1.
If a company has limited resources, the key factor in performing incremental analysis is
Answer
contribution margin.
limited resources required.
contribution margin per unit of limited resource.
none of these.
2 points
Question 7
1.
Roger Industries is considering two capital investment proposals. Estimates regarding each project are provided below:
Project XR8 Project AAA
Initial Investment $800,000 $1,200,000
Annual Net Income $40,000 $84,000
Net Annual Cash Inflow $200,000 $284,000
Estimated Useful Life 5 years 6 years
Salvage Value 0 0
The company requires a 10% rate of return on all new investments.
Present Value of an Annuity of 1
Periods 9% 10% 11% 12%
5 3.890 3.791 3.696 3.605
6 4.486 4.355 4.231 4.111
The annual rate of return for Project XR8 is
Answer
5%.
10%.
25%.
50%.
2 points
Question 8
1.
In incremental analysis,
Answer
costs are not relevant if they change between alternatives.
all costs are relevant if they change between alternatives.
only fixed costs are relevant.
only variable costs are relevant.
2 points
Question 9
1.
Begley, Inc. is contemplating the replacement of an old machine with a new one. The following information has been gathered:
Old Machine New Machine
Price $250,000 $500,000
Accumulated Depreciation $75,000 -0-
Remaining Useful Life 10 years -0-
Useful Life -0- 10 years
Annual Operating Costs $200,000 $150,000
If the old machine is replaced, it can be sold for $20,000.
The net advantage (disadvantage) of replacing the old machine is
Answer
$15,000
$20,000
$(5,000)
$(50,000)
2 points
Question 10
1.
Debra Manufacturing has identified that the cost of a new computer will be $120,000, but with the use of the new computer, net income will increase by $10,000 a year. If depreciation expense is $6,000 a year, the cash payback period is:
Answer
30 years.
20 years.
12 years.
7.5 years.
2 points
Question 11
1.
A company is considering purchasing factory equipment that costs $640,000 and is estimated to have no salvage value at the end of its 8-year useful life. If the equipment is purchased, annual revenues are expected to be $180,000 and annual operating expenses exclusive of depreciation expense are expected to be $76,000. The straight-line method of depreciation would be used.
The cash payback period on the equipment is
Answer
13.3 years.
8.0 years.
6.2 years.
3.1 years.
2 points
Question 12
1.
The rate of return that management expects to pay on all borrowed and equity funds is the
Answer
cost of capital.
cutoff rate.
hurdle rate.
minimum rate.
2 points
Question 13
1.
In a make-or-buy decision, opportunity costs are
Answer
added to the make total cost.
deducted from the make total cost.
added to the buy total cost.
ignored.
2 points
Question 14
1.
Cost behavior analysis is a study of how a firm’s costs
Answer
relate to competitors’ costs.
relate to general price level changes.
respond to changes in the level of business activity.
respond to changes in the gross national product.
2 points
Question 15
1.
CVP analysis does not consider
Answer
level of activity.
fixed cost per unit.
variable cost per unit.
sales mix.
2 points
Question 16
1.
Pascal, Inc. is planning to sell 600,000 units for $1.50 per unit. The contribution margin ratio is 20%. If Pascal will break even at this level of sales, what are the fixed costs?
Answer
$180,000.
$420,000.
$600,000.
$720,000.
2 points
Question 17
1.
Greg’s Golf Carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 200 units, how much will profit change?
Answer
$10,000 increase
$17,500 increase
$27,500 increase
$28,000 increase
2 points
Question 18
1.
A company sells a product which has a unit sales price of $5, unit variable cost of $3 and total fixed costs of $150,000. The number of units the company must sell to break even is
Answer
75,000 units.
30,000 units.
300,000 units.
50,000 units.
2 points
Question 19
1.
Fixed costs are $900,000 and the variable costs are 75% of the unit selling price. What is the break-even point in dollars?
Answer
$2,100,000
$2,700,000
$3,600,000
$1,200,000
2 points
Question 20
1.
Variable costs for Abbey, Inc. are 25% of sales. Its selling price is $60 per unit. If Abbey sells one unit more than break-even units, how much will profit increase?
Answer
$45
$15
$20
$240
2 points
Question 21
1.
Cost activity indexes might help classify costs as
Answer
temporary.
permanent.
variable.
transient.
2 points
Question 22
1.
Which one of the following is a name for the range over which a company expects to operate?
Answer
Mixed range
Fixed range
Variable range
Relevant range
2 points
Question 23
1.
The break-even point cannot be determined by
Answer
computing it from a mathematical equation.
computing it using contribution margin.
reading the prior year’s financial statements.
deriving it from a CVP graph.
2 points
Question 24
1.
In applying the high-low method, what is the unit variable cost?
Month Miles Total Cost
January 80,000 $96,000
February 50,000 $80,000
March 70,000 $94,000
April 90,000 $140,000
Answer
$1.44
$1.50
$1.60
Cannot be determined from the information given.
2 points
Question 25
1.
A CVP graph does not include a
Answer
variable cost line.
fixed cost line.
sales line.
total cost line.
2 points
Question 26
1.
If a company had a contribution margin of $300,000 and a contribution margin ratio of 40%, total variable costs must have been
Answer
$450,000.
$180,000.
$750,000.
$120,000.
2 points
Question 27
1.
Which of the following is not a management function?
Answer
Constraining
Planning
Controlling
Directing
2 points
Question 28
1.
Managerial accounting is applicable to
Answer
service entities.
manufacturing entities.
not-for-profit entities.
all of these.
2 points
Question 29
1.
Which one of the following costs would not be inventoriable?
Answer
Period costs
Factory insurance costs
Indirect materials
Indirect labor costs
2 points
Question 30
1.
Assuming the cost of direct materials used is $1,300,000, compute the total manufacturing costs using the information below.
Raw materials inventory, January 1 $30,000
Raw materials inventory, December 31 $60,000
Work in process, January 1 $27,000
Work in process, December 31 $18,000
Finished goods, January 1 $60,000
Finished goods, December 31 $48,000
Raw materials purchases $1,300,000
Direct labor $690,000
Factory utilities $225,000
Indirect labor $75,000
Factory depreciation $500,000
Operating expenses $630,000
Answer
$2,790,000.
$2,781,000.
$2,490,000.
$3,420,000.
2 points
Question 31
1.
In an analogous sense, external user is to internal user as generally accepted accounting principles are to
Answer
timely.
special-purpose.
relevance to decision.
SEC.
2 points
Question 32
1.
Cost of goods sold
Answer
only appears on merchandising companies’ income statements.
only appears on manufacturing companies’ income statements.
appears on both manufacturing and merchandising companies’ income statements.
is calculated exactly the same for merchandising and manufacturing companies.
2 points
Question 33
1.
Which of the following are period costs?
Answer
Raw materials
Direct materials and direct labor
Direct labor and manufacturing overhead
Selling expenses
2 points
Question 34
1.
The subtotal, “Cost of goods manufactured” appears on
Answer
a merchandising company’s income statement.
a manufacturing company’s income statement.
both a manufacturing and a merchandising company’s income statement.
neither a merchandising nor a manufacturing company’s income statement.
2 points
Question 35
1.
The wages of a timekeeper in the factory would be classified as
Answer
a period cost.
direct labor.
indirect labor.
compliance costs.
2 points
Question 36
1.
Assuming that the cost of goods manufactured is $2,760,000 compute the cost of goods sold using the following information.
Raw materials inventory, January 1 $30,000
Raw materials inventory, December 31 $60,000
Work in process, January 1 $27,000
Work in process, December 31 $18,000
Finished goods, January 1 $60,000
Finished goods, December 31 $48,000
Raw materials purchases $1,300,000
Direct labor $690,000
Factory utilities $225,000
Indirect labor $75,000
Factory depreciation $500,000
Operating expenses $630,000
Answer
$2,769,000.
$2,712,000.
$2,748,000.
$2,772,000.
2 points
Question 37
1.
The function that pertains to keeping the activities of the enterprise on track is
Answer
planning.
directing.
controlling.
accounting.
2 points
Question 38
1.
Which of the following statements about internal reports is not true?
Answer
The content of internal reports may extend beyond the double-entry accounting system.
Internal reports may show all amounts at market values.
Internal reports may discuss prospective events.
Most internal reports are summarized rather than detailed.
2 points
Question 39
1.
Which of the following is not another name for the term manufacturing overhead?
Answer
Factory overhead
Pervasive costs
Burden
Indirect manufacturing costs
2 points
Question 40
1.
Which cost is not charged to the product under variable costing?
Answer
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
2 points
Question 41
1.
Hinge Manufacturing’s cost of goods sold is $420,000 variable and $240,000 fixed. The company’s selling and administrative expenses are $300,000 variable and $360,000 fixed. If the company’s sales is $1,680,000, what is its net income?
Answer
$360,000
$960,000
$1,020,000
$1,080,000
2 points
Question 42
1.
In 2012, Teller Company sold 3,000 units at $300 each. Variable expenses were $210 per unit, and fixed expenses were $120,000. What was Teller’s 2012 net income?
Answer
$150,000
$270,000
$630,000
$900,000
2 points
Question 43
1.
Companies that use just-in-time processing techniques will
Answer
have greater differences between absorption and variable costing net income.
have smaller differences between absorption and variable costing net income.
not be able to use absorption costing.
not be able to use variable costing.
2 points
Question 44
1.
Capitol Manufacturing sells 2,000 units of Product A annually, and 3,000 units of Product B annually. The sales mix for Product A is
Answer
40%.
60%.
67%.
cannot determine from information given.
2 points
Question 45
1.
For Buffalo Co., at a sales level of 5,000 units, sales is $75,000, variable expenses total $40,000, and fixed expenses are $21,000. What is the contribution margin per unit?
Answer
$2.80
$7.00
$8.00
$15.00
2 points
Question 46
1.
Sprinkle Co. sells its product for $60 per unit. During 2012, it produced 60,000 units and sold 50,000 units (there was no beginning inventory). Costs per unit are: directmaterials $15, direct labor $9, and variable overhead $3. Fixed costs are: $720,000 manufacturing overhead, and $90,000 selling and administrative expenses. Under absorption costing, what amount of fixed overhead is deferred to a future period?
Answer
$30,000
$120,000
$150,000
$720,000
2 points
Question 47
1.
For Pierce Company, sales is $500,000, variable expenses are $310,000, and fixed expenses are $140,000. Pierce’s contribution margin ratio is
Answer
10%.
28%.
38%.
62%.
2 points
Question 48
1.
Variable costing
Answer
is used for external reporting purposes.
is required under GAAP.
treats fixed manufacturing overhead as a period cost.
is also known as full costing.
2 points
Question 49
1.
What is the key factor in determining sales mix if a company has limited resources?
Answer
Contribution margin per unit of limited resource
The amount of fixed costs per unit
Total contribution margin
The cost of limited resources
2 points
Question 50
1.
For Franklin, Inc., sales is $2,000,000, fixed expenses are $600,000, and the contribution margin ratio is 36%. What is net income?
Answer
$120,000
$216,000
$504,000
$720,000
2 points
Question 51
1.
Which cost is charged to the product under variable costing?
Answer
Variable manufacturing overhead
Fixed manufacturing overhead
Variable administrative expenses
Fixed administrative expenses
2 points
Question 52
1.
Ramirez Corporation sells two types of computer chips. The sales mix is 30% (Q-Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $36 and a selling price of $60. Q-Chip Plus has variable costs per unit of $42 and a selling price of $78. Ramirez’s fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point?
Answer
5,063
5,869
9,000
11,813

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