eb 125 managerial accounting final exam database …econ.ucsb.edu/~harmon/password2/database of mc...

EB 125 Managerial Accounting Final Exam Database – Fall 2011

1. Which of the following are strategies based on a firm's approach to market share growth?A) Handle, Hermetic, Hold, or Harvest C) Handle, Expand, Low-Cost, or DivestB) Build, Hold, Harvest, or Divest D) Build, Expand, Hold, or Divest

2. Which of the following is not a component of the IMA Statement of Ethical Professional Practice standards?A) Reliability B) Confidentiality C) Integrity D) Credibility

3. The leading professional organization for managerial accountants isA) The American Institute of Managerial Accountants.B) The Society of American Management Accountants.C) The Institute of Management Accountants.D) The National Society of Management Accountants.

4. Which of the following is not a correct statement relating to the balanced scorecard?A) It was developed in the early 1990s by David Norton and Robert KaplanB) It is a collection of performance measures that track an organization's progress toward achieving its goalsC) The selection of performance measures used is driven by the organization's network of facilities used to

produce and deliver its product.D) It uses both financial and non-financial performance measures.

5. Which of the following is not an activity in which managerial accounting is designed to assist managers?A) Reporting B) Controlling C) Decision making D) Evaluation

6. Which of the following is not a category for performance measures used for a balanced scorecard?A) Financial B) Customer C) Internal business processes D) Regulatory

7. Which of the following are managers most likely to monitor whether using product differentiation or low-cost production strategy?A) Customer satisfactionB) The production processC) External information such as competitor actionsD) None of the above

8. Decision makers sometimes might need to sacrifice precision for timeliness becauseA) Receiving highly accurate information after the deadline has passed would be of no help.B) The nature of many business decisions does not require precision in managerial accounting reports.C) Both A and B.D) Neither A nor B.

9. In the context of managerial accounting, relevant informationA) Is information that will make a difference in the decision.B) Is information that has been provided by the controller.C) Must be provided in quantitative terms.D) Must be analyzed by the chief financial officer before being provided to managers.

10. Which of the following is not an input into the monitoring activities relating to production?A) Actual production rate and outputB) Checking output against the planned inventory levelC) Anticipated manufacturing capacityD) All of the above are monitoring activities

11. Which of the following is not a characteristic of managerial accounting reports?A) Managerial accounting reports are designed to provide the ultimate decision maker with the appropriate

information.B) Managerial accounting reports come in a variety of formats.C) Managerial accounting reports are not distributed to the general public.D) All of the above are characteristics of managerial accounting reports.

12. An example of an external user is aA) Managerial accountant. C) Potential Investor.B) Vice-President of Marketing. D) Payroll Manager.

13. Which of the following is a not a consequence of unethical behavior?A) It can lead to illegal activity.

B) It can lead to the destruction of the firm.C) It can lead to inferior financial performance.D) All of the above are consequences of unethical behavior.

14. Under the Sarbanes-Oxley Act, which of the following related to the corporate code of ethics is not required?A) Must be published n the annual report or on the corporate website or provided at no charge upon request.B) Must disclose the likelihood of a breach of the code based on the industry and structure of the corporation.C) Must disclose all instances in which these codes have been waived for a particular individual.D) Must disclose all changes to the code.

15. Which of the following is not a duty of a management accountant under the IMA Statement of Ethical Professional Practice's credibility standard?A) Communicate information fairly and objectively.B) Disclose all relevant information that could reasonably be expected to influence and intended user's

understanding of the reports, analyses, or recommendations.C) Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with

organization policy and/or applicable law.D) All of the above are include under the credibility standard.

16. Managerial accounting is used by managers toA) Plan. B) Evaluate. C) Control. D) All of the above.

17. Which of the following is not a duty of a management accountant under the IMA Statement of Ethical Professional Practice's credibility standard?A) Mitigate actual conflict of interest.B) Refrain from engaging in any conduct that would prejudice carrying out duties ethically.C) Maintain an appropriate level of professional expertise.D) Abstain from engaging in or supporting any activity that might discredit the profession.

18. Which of the following is not a category for performance measures used for a balanced scorecard?A) Learning and growth C) Internal business processesB) Competitive D) Customer

19. A problem with traditional computerization of operation was thatA) Functional areas such as marketing and production created systems to meet their own needs without

considering the needs of other areas.B) Traditional systems often resulted in a collection of mismatched or redundant systems.C) Both A and B.D) Neither A nor B.

20. The leading professional organization for management accountants is theA) American Association of Management Accountants.B) Institute of Management Accountants.C) National Association of Accountants.D) Society of Management Accountants.

21. A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior. Which of the following is not classified as a cost function?A) Product B) Sales C) Administration D) Variable

22. If activity level decreases, what happens to the unit fixed cost?A) It decreases.B) It increases.C) It remains the same.D) It depends on how much the activity level increases.

23. Which of the following is not a step in estimating total cost using the high-low method?A) Identify the highest and lowest levels of activityB) Visually “fit” a line to the plotted pointsC) Compute the variable cost per unitD) Calculate the fixed cost using either the high point or the low point.

24. The high-low method differs from the scattergraph in that the high-low methodA) Is simple to prepare and interpret whereas the scattergraph requires the use of statistical techniques.B) Is less costly than the scattergraph method.

C) Uses a statistical technique to estimate the cost components.D) Requires only two data points – the lowest point of activity and the highest point of activity.

25. Which of the following is an example of a variable cost?A) Rent B) Insurance C) Direct material D) Depreciation

26. A traditional GAAP income statement does not help managers predict the financial results of their decisions because the format of the statement is based on cost function rather than cost behavior. Which of the following is not classified as a cost behavior?A) ProductB) FixedC) VariableD) All of the above are classified as cost behaviors.

27. You and two friends decide to rent an apartment off campus. You have found an apartment for $750 per month. You and your two friends will share the rent equally. This is an example of aA) Fixed cost. B) Variable cost. C) Mixed cost. D) Step cost.

28. A discretionary fixed costA) Remains the same regardless of the level of activity.B) Increases as the level of activity increases.C) Can be changed in the short run.D) Can be changed over the long run.

29. There is an important relation between contribution margin and profit. Which of the following statements is not true?A) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.B) As the number of units sold rises, profit increases by the additional contribution margin per unit.C) As the number of units sold increases, total contribution margin and fixed costs increase.D) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

30. The formula for the contribution margin ratio isA) Contribution margin divided by salesB) Contribution margin divided by net incomeC) Contribution margin divided by gross profitD) Contribution margin divided by (sales less variable costs)

31. A contribution margin format income statementA) Is based on cost function rather than on cost behavior.B) Allows managers to assess the impact of sales volume on operating income.C) Both A and B.D) Neither A nor B.

32. If activity level decreases, what happens to the total fixed cost?A) It remains the same.B) It decreases.C) It increases.D) It depends on how much the activity level increases.

33. The contribution margin ratio can be used toA) Determine the increase in profits from a given dollar increase in sales revenue.B) Impact of fixed costs on contribution margin.C) Both A and B.D) Neither A nor B.

34. There is an important relation between contribution margin and profit. Which of the following statements is not true?A) As the number of units sold rises, profit increases by the variable cost per unit.B) As the number of units sold increases, total contribution margin increases, but fixed costs remain the same.C) As the number of units sold rises, profit increases by the additional contribution margin per unit.D) As the number of units sold decreases, total contribution margin decreases, but fixed costs remain the same.

35. Assume a scattergraph shows $100 at no activity and $1,500 at an activity level of 1,000 units. The variable cost per unit is:A) $2 B) $1.40 C) $2.50 D) $5.00

36. On a scattergraph, once the individual points have been plotted,A) Enter the information into a statistical calculator to calculate the total cost.

B) Count the points and divide by variable cost per unit.C) Draw a line through them to estimate the cost relationship.D) Multiply the high point by the variable cost per unit to calculate the total cost.

37. Which of the following is not an example of a variable cost?A) Direct material C) Direct labor.B) Indirect material D) President of the company's salary.

38. Chocolate Delight sells chocolate dipped fruit to local restaurants. Chocolate Delight delivered 30,000 chocolate dipped strawberries to customers in May and 24,000 in June. Delivery costs for the two months were $1,500 and $1,200, respectively. Using these two months' data, the delivery cost function is best estimated asA) ($2 x number of strawberries) + $800B) ($0.02 x number of strawberries) + $900C) ($0.05 x number of strawberries) + $0D) ($0.05 x number of strawberries) + $600

39. A limitation of using the scattergraph method to estimate the cost components of total cost is:A) The scattergraph method is complex and costly to use.B) The scattergraph method requires the use of statistical software.C) The scattergraph method is not an accepted method for many companies.D) The choice of the line used to estimate the cost components is subjective.

40. Cross Creek Company sells concrete culverts. Currently, the company's sales revenue is $900,000, variable costs total $450,000 and fixed costs total $300,000. If Cross Creek's controller has calculated the company's breakeven point to be $597,000, what is the company's margin of safety?A) $15,000 B) $153,000 C) $303,000 D) $447,000

41. Assume Buddy's Farm Supply wants to make $45,000 in net income. If the tax rate is 25%, how much operating income must Buddy have?A) $56,250 B) $60,000 C) $180,000 D) $360,000

42. Assume a sales price per unit of $20, variable cost per unit $16, and total fixed costs of $168,000. What is the breakeven point?A) 420,000 units B) $420,000 C) 840,000 units D) $840,000

43. On the breakeven graph, the point at which the total sales revenue line and the total cost line intersect isA) Contribution margin C) Net incomeB) Breakeven point D) Operating income

44. Which of the following formulas is used to calculate the breakeven point in units?A) Total fixed costs divided by contribution margin per unit.B) Total fixed costs divided by total contribution margin.C) Total fixed costs divided by contribution margin ratio.D) None of the above formulas calculate the breakeven point in units.

45. On the breakeven graph, any level of sales to the left of the breakeven point representsA) Fixed cost. B) Variable cost. C) Operating income. D) Operating loss.

46. The sales of each product relative to total sales is referred to asA) Horizontal Mix. B) Sales Mix. C) Managed Ratio. D) None of the above.

47. On the breakeven graph, any level of sales to the right of the breakeven point representsA) Fixed cost. B) Variable cost. C) Operating income. D) Operating loss.

48. When costs go downA) Operating profit goes down. C) Contribution margin goes down.B) Operating profit goes up. D) Contribution margin goes up.

49. One way to compute the expected change in operating income due to a change to sales volume as a given level of sales is to computeA) Degree of operating leverage C) Scattergraph analysisB) High-low analysis D) Horizontal analysis

50. While customers and cost influence prices, so doesA) Contribution margin C) CompetitionB) Fixed versus variable costs D) None of the above

51. Assume a sales volume of 6,000 units, unit selling price of $20, unit variable cost of $12, and total fixed costs of $20,000. What is the margin of safety in units?A) 2,500 B) 3,500 C) 6,000 D) 8,000

52. The formula for margin of safety in sales dollars isA) Current unit sales minus Breakeven unit sales.B) Actual sales minus Budgeted sales.C) Current sales revenue minus Breakeven sales revenue.D) None of the above.

53. Assume a sales price per unit of $25, variable cost per unit $15, and total fixed costs of $18,000. What is the breakeven point?A) 45,000 units B) $45,000 C) 37,500 units D) $37,500

54. Which of the following formulas is not used to calculate the breakeven point?A) Total fixed costs divided by contribution margin per unit.B) Total fixed costs divided by (sales price per unit less variable cost per unit).C) Total fixed costs divided by contribution margin ratio.D) Total fixed cost divided by total contribution margin.

55. The “plus” in cost-plus pricing is often referred to asA) Extra profit B) Margin of Safety C) Markup D) None of the above

56. If a company sells it product for $30 and has a unit cost of $12, what is the company's markup percentage?A) 35% B) 40% C) 25% D) 150%

57. A breakeven graphA) Illustrates the relationship between volume and sales price.B) Illustrates the relationship between volume and total costs.C) Illustrates the relationship between breakeven and operating income.D) Illustrates the relationship between sales and costs.

58. On the breakeven graph, if sales price and variable cost remain constant and fixed costs decrease, the breakeven point willA) Shift upward B) Shift downward. C) Shift to the right D) Shift to the left

59. At the breakeven pointA) Sales revenue equals zero.B) Contribution margin equals total variable costs.C) Sales revenue equals total costs.D) Operating income equals total costs.

60. Gough's Manufacturing had underapplied overhead totaling $5,000 during the period. To dispose of this underapplied overhead, Gough shouldA) Increase the cost of goods sold by $5,000B) Decrease the cost of goods sold by $5,000C) Increase the work in process account by $5,000D) Decrease the work in process account by $5,000

61. At the beginning of the year, managers at King Industries estimated $400,000 in manufacturing overhead. 20,000 direct labor hours and 50,000 machine hours. Actual manufacturing costs at the end of the year were $425,000 in manufacturing overhead, 22,000 direct labor hours and 47,000 machine hours. If overhead is applied based on direct labor hours, how much overhead was applied during the year?A) $399,960 B) $440,000 C) $467,500 D) $425,040

62. When a company purchases materials for use in the production process, the cost of those materials is recorded in which of the following accounts?A) Finished Goods Inventory C) Raw Materials InventoryB) Work in Process Inventory D) Supplies Expense

63. At what point are manufacturing costs expensed?A) When finished goods are soldB) When they are transferred out of Work in ProcessC) When they are entered into productionD) At the end of the accounting period

64. When a product is sold to a customer, which of the following inventory accounts is increased or decreased?A) Work in Process is decreased and Finished Goods is increasedB) Finished Goods is increased and Cost of Goods Sold is decreasedC) Finished Goods is decreased and Cost of Goods Sold is increasedD) Raw Materials is decreased and Cost of Goods Sold is increased.

65. Period costs are associated with theA) Selling of products. C) Both a and b.B) The administration of the business. D) Neither a nor b.

66. Fabric used in the manufacture of baseball jerseys is an example of:

Direct Material Product Costa. Yes Nob. Yes Yesc. No Yesd. No No

A) A B) B C) C D) D

67. When indirect materials are used, which of the following accounts increases?A) Raw Materials Inventory C) Finished Goods InventoryB) Work in Process Inventory D) Manufacturing Overhead

68. Which of the following items is not classified as direct material for Family Ice Cream Parlor?A) The cost of empty ice cream conesB) The cost of milk used in the manufacturing of ice creamC) The cost of hairnets worn by production line workersD) The cost of strawberries used in the manufacturing of ice cream

69. Spikes Sports Manufacturing Company uses a job order costing system to account for its production of specialty golf accessories. On May 31 the company reported the following balances in its inventory accounts: $45,000 in Raw Materials, $25,000 in Work in Process, and $15,000 in Finished Goods. On May 31, the total of all open job order cost sheets would beA) $45,000. B) $25,000. C) $70,000. D) $85,000.

70. If the ending balance in Raw Materials Inventory is $3,500, $60,000 was purchased, and $61,500 was transferred to Work in Process Inventory during the period, what was the amount in beginning inventory?A) $1,500 B) $2,000 C) $3,500 D) $5,000

71. If the beginning balance in the Raw Materials Inventory account for the month was $25,000, the ending balance of $22,000 and material used during the month was $130,000, what is the amount of materials purchased during the month?A) $177,000 B) $130,000 C) $127,000 D) $133,000

72. Which of the following documents is used to release direct materials from the storeroom to the factory floor?A) Materials requisition slip C) Bill of materialsB) Job cost sheet D) Application sheet

73. If the amount of overapplied or underapplied manufacturing overhead is small, most companies will generally make an adjustment toA) Work in Process Inventory. C) Cost of Goods Sold.B) Finished Goods Inventory. D) All of the above.

74. Which of the following is not classified as a direct labor cost?A) Wages of the store manager at StarbucksB) Wages of the assemblers who put planes together at BoeingC) Wages of computer animators at PixarD) Ring engravers at Josten's

75. Finished Goods Inventory includes which of the following costs?A) Direct material B) Direct labor C) Overhead D) All of the above

76. Which of the following is not included in the schedule of cost of goods manufactured?A) Direct materials in inventory C) Direct laborB) Direct materials used in production D) Overhead

77. Which of the following is not associated with period costs?A) Selling of a product C) The passage of timeB) Creation of overhead D) Administration of the business

78. Which of the following is not a reason to allocate overhead?A) Unlike direct materials and direct labor, the amount of overhead actually incurred may not be known at the

time a job is being worked on.B) Manufacturing overhead is an indirect cost that cannot be physically or economically traced back to a specific

item.C) Allocation is more accurate than tracing items directly to jobs.D) Some overhead costs are seasonal, and should be spread over production for the entire year.

79. Which of the following is not classified as a variable product cost?A) Direct materials B) Electricity C) Sales commissions D) Indirect materials

80. Development of the operating budget begins with theA) Cash budget. C) Overhead budget.B) Sales budget. D) Pro-forma budget.

81. In order to prepare the sales budget, one needsA) The number of units expected to be produced and the prices expected to be charged.B) The number of units expected to be sold and the cost of producing each unit.C) The number of units expected to be sold and the prices expected to be charged.D) The number of units sold in the previous period and the price charged for the units.

82. Which of the following is not a component of the master budget?A) Selling and administrative expenses budgetB) Ending inventory and cost of goods sold budgetC) Capital expenditures budgetD) All of the above are components of the master budget.

83. Under both participative budgeting and imposed budgeting, the process isA) Linear. B) Iterative. C) Curvilinear. D) None of the above.

84. Which of the following is not a characteristic of a top-down budget environment?A) Executive management creates the budget.B) This approach is referred to as participative budgeting.C) The budget is pushed down through the organization.D) All of the above are characteristics of a top-down budget environment.

85. London Manufacturing Company expects the following sales in January, February, and March:

Cash Sales Credit SalesJanuary $60,000 $270,000February $50,000 $240,000March $75,000 $355,000

The controller has determined that the company collects credit sales as follows: 60% in the month of sale, 30% in the first month after sale, 5% in the second month after sale, and 5% is expected to be uncollectible. How much cash will be collected from customers in March?A) $291,500 B) $376,500 C) $373,500 D) $410,000

86. In setting the direct labor quantity standard, allowances are made forA) Rest time. B) Machine down time. C) Both a and b. D) Neither a nor b.

87. The basic managerial functions that help managers ensure that enough cash is available to run the business is the function ofA) Planning B) Controlling C) Evaluation D) Decision making

88. Information from the manufacturing overhead budget flows to theA) Ending inventory and costs of goods sold budget.B) Cash budget.C) Both a and b.D) Neither a nor b.

89. Which of the following is a disadvantage of participative budgeting?A) It is a time-consuming process. C) Both a and b.B) Managers may pad the budget. D) Neither a nor b.

90. To determine the cash payments for direct materials during a period, companies prepare aA) Cash payment for materials budget. C) Cash disbursements schedule.B) Cash flow from operating activities. D) None of the above.

91. Tanger Products plans to produce 10,000 units in January. Each unit requires 3 pounds of plastic, which costs $2 per pound. What standard material cost would the company use to plan for production?A) $2 B) $6 C) $3,333 D) $5,000

92. Which of the following is a suggested source for forecasting sales for a new business?A) Industry projections B) Market data C) Both a and b D) Neither a nor b

93. James Worman is preparing a direct labor budget. His sales budget shows total sales units of 15,000 and sales dollars of $18,750. The direct materials purchases budget shows materials to be purchased of 15,000 units and budgeted purchases cost of $3,750. The production budget indicates a total of 12,000 units to be produced. Standard direct labor hours per unit is .30 and the standard average wage rate is $8. What is budgeted direct labor cost?A) $22,500 B) $28,800 C) $32,550 D) $51,300

94. Which of the following is not a characteristic of a rolling budget?A) A method of budgeting always includes 12 months of data.B) As one month ends, it is removed from the budget and the entire budget rolls forward one month.C) At the beginning of the budget period, management breaks down only the first quarter into months.D) All of the above are characteristics of a rolling budget.

95. Which of the following is a use of the materials purchases budget?A) It helps managers minimize the resources invested in inventory.B) It helps managers plan the quantity and timing of purchases of material.C) It helps ensure the adequate level of inventory.D) All of the above.

96. Which of the following is a disadvantage of an imposed budget?A) It is a time-consuming process. C) Both a and b.B) Managers may pad the budget. D) Neither a nor b.

97. The direct labor budget calculatesA) The number of direct labor hours required to meet the units in the sales budget.B) The number of direct and indirect labor hours required to meet the units in the sales budget.C) The number of direct labor hours required to meet the budgeted level of production.D) The number of direct and indirect labor hours required to meet the budgeted level of production.

98. Which of the following is not a criticism of ideal standards?A) After a period of performing below standard, employees will likely lose motivation.B) Morale will suffer because employees cannot attain the standard.C) In an effort to meet an ideal efficiency standard, employees may take shortcuts.D) All of the above are criticisms of ideal standards.

99. The master budget process usually begins with theA) Cash budget. C) Production budget.B) Operating budget. D) Sales budget.

100. The variable overhead variance is separated into which of the following components?A) Volume variance and efficiency varianceB) Quantity variance and efficiency varianceC) Spending variance and efficiency varianceD) Spending variance and volume variance

101. The variable overhead spending variance capturesA) Whether the company has paid more or less for variable overhead items.B) The relative efficiency with which variable overhead items are used.C) Whether a company is more or less efficient with respect to the production activity, since variable overhead

varies with production activity.D) Both a and b, but not c.

102. Which of the following is typically held responsible for direct labor rate variances?A) The human resources manager C) The production managerB) The controller D) The line supervisor in the factory

103. The direct materials quantity variance is part of the direct materials flexible budget variance that is caused byA) Using more or less material than the standard quantity allowed for actual production.B) Applying too much overhead to production.C) Having too much inventory in the storeroom.D) None of the above.

104. The difference between actual sales volume and budgeted sales volume has an effect onA) Price variance. B) Quantity variance. C) Both a and b. D) Neither a nor b.

105. If a company uses more direct labor hours than the standard allowed, the result isA) An inflated prepaid salary account on the balance sheet.B) An unfavorable direct labor hour variance.C) An favorable efficiency variance.D) A reduction in operating income.

106. When analyzing direct materials price and quantity variances, the responsibility typically lies withA) Controller and CFO.B) Purchasing manager and production manager.C) Purchasing and cost accounting manager.D) Sales manager and production manager.

107. Assembly line workers at Thompson Manufacturing worked a total of 12,000 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10. If the actual wage rate was $10.50 per direct labor hour, Thompson's direct labor rate variance isA) $6,000 favorable C) $4,500 favorableB) $6,000 unfavorable D) $4,500 unfavorable

108. Which of the following is not a factor that could influence worker productivity?A) Machine breakdownsB) A lack of adequate supervisionC) The amount of automation used in the production processD) Workers that are working overtime

109. Why is the direct materials price variance based on the quantity of materials purchased, but the direct materials quantity variance on the quantity of materials used?A) Managers need to isolate variances and take corrective action as soon as possible.B) Production managers are only interested in the quantity purchased.C) It is a simpler process to calculate the quantity variance on what is purchasedD) All of the above are reasons the variances are based on different quantities.

110. If the actual cost of direct materials is $10 per unit while the standard cost of the direct material is $11,A) The direct materials quantity variance will be favorableB) The direct materials quantity variance will be unfavorableC) The direct materials price variance will be favorableD) The direct materials price variance will be unfavorable

111. The direct materials quantity variance is calculated using which of the three amounts?A) Actual quantity used, standard quantity allowed for actual production, actual price paidB) Actual quantity used, standard quantity allowed for actual production, standard price paidC) Standard quantity used, actual price paid, standard price paidD) Actual quantity used, actual price paid, standard price paid

112. R&N Manufacturing produces music boxes. The fixed overhead rate is $5.10 per direct labor hour, and the company budgeted for 4,600 direct labor hours for the year. During the year, R&N produced 2,500 music boxes using 4,800 direct labor hours. Actual fixed overhead for the year was $23,000. What is the company's fixed overhead spending variance?A) $460 favorable C) $1,480 favorableB) $460 unfavorable D) $1,480 unfavorable

113. Which of the following is not a reason variable overhead costs might differ from the flexible budget costs?A) Executives' salaries may increase or decrease.B) The prices paid to acquire variable overhead items can increase or decrease.

C) Variable overhead items can be used more or less efficiently than planned.D) Since variable overhead varies with production activity, if the company is less efficient with respect to that

production activity, then variable overhead will be used more or less efficiently.

114. The difference between actual results and budgeted, or expected, results is referred to as aA) Variance. C) Unfavorable outcome.B) Production flaw. D) None of the above.

115. Assembly line workers at Thompson Manufacturing worked a total of 9,300 direct labor hours to produce 36,000 units. The standard for producing one unit is 15 minutes at a wage rate of $10.50. If the actual wage rate was $10 per direct labor hour, Thompson's direct labor efficiency variance isA) $2,000 favorable C) $3,150 unfavorableB) $3,000 favorable D) $4,500 unfavorable

116. Which of the following is not a factor that could influence worker productivity?A) The level of skill and training workers possess will affect their productivity.B) The amount of automation used in the production process.C) Workers' level of fatigue will affect the direct labor efficiency variance.D) The quality of direct material used.

117. Which of the following employees is typically held accountable for the direct materials price variance?A) Controller C) Production ManagerB) Purchasing Manager D) Engineering Department Manager

118. Which of the following is not used in the calculation of the direct labor rate variance?A) Standard wage rate C) Standard hours workedB) Actual wage rate D) Actual hours worked

119. The flexible budget variance reflectsA) How efficiently the company operated in producing a given level of sales.B) How effectively the company reached its strategic goals.C) A different volume of products than that specified in the static budget.D) All of the above.

120. Which of the following is a way a company can use information about activities to manage its operations?A) Activity-based costing C) Activity-based budgetingB) Activity-based management D) All of the above

121. When using an activity-based costing system, which of the following is the formula for allocating costs to products or services?A) Activity cost pool resources divided by activity driverB) Activity cost pool resources times activity driverC) Activity rate divided by activity driver consumptionD) Activity rate times activity driver consumption

122. An activity-based analysis that focused only on manufacturing overhead wouldA) Not improve GAAP-based financial statements.B) Would improve GAAP-based financial statements.C) Would improve statement sent to the SEC by publicly-traded companies.D) Both b and c.

123. A management tool that focuses on improving the efficiency and effectiveness of an organization's business processes through radical change is referred to asA) Business process reengineering. C) Radical analysis.B) Process improvement. D) Activity-based management.

124. In order to increase a company's bottom line, it canA) Increase sales B) Decrease costs C) Either a or b. D) Neither a nor b.

125. Which of the following would be considered a batch-level activity?A) Machine set-up C) Direct laborB) Preparing the annual budget D) None of the above

126. In an activity-based system, which of the following is not a category in which activities are classified?A) Unit-levelB) Batch-level

C) Product-levelD) All of the above are categories in which activities are classified.

127. Identifying activities performed in the organization is the first step in developing activity-based product costs. Which of the following is a way to identify these activities?A) Asking employees what they do C) Both a and bB) Analyzing industry averages D) Neither a nor b

128. A company that is interested in maximizing profits will instruct its sales force to emphasize itsA) Products with the least non-value-added activities.B) Oldest products.C) Most profitable products.D) None of the above.

129. Which of the following is a product- or service-related activity?A) Batch-levelB) Customer-levelC) Organization-levelD) All of the above are product- or service-related activities.

130. As non-value-added activities and their associated resources are eliminated, a company'sA) Costs will decrease. C) Variable costs will increase.B) Fixed costs will be eliminated. D) None of the above.

131. The categories of activities that are required to produce and sell products, non-value-added and value-added, are defined from which of the following perspectives?A) Industry B) Management C) Customer D) Organization

132. Murphy Company produces two products: Standard and Deluxe. The company uses an activity-based costing system. Murphy produces 8,000 units of Standard and 2,000 units of Deluxe. The company uses two activity cost pools, with estimated total cost and activity as follows:

Expected ActivityActivity Cost Pool Estimated Cost Standard Deluxe

#1 $12,000 500 250#2 $24,000 400 1,200

What is the cost per unit of Standard under activity-based costing?A) $1.75 B) $9.00 C) $15.00 D) $16.00

133. An example of an organization-level activity isA) Providing electricity to the factory to run the sewing machines.B) Creating a pattern for a new line of dresses.C) Renting factory space.D) All of the above are organization-level activities.

134. Which of the following would be the most appropriate cost driver for the purchasing department?A) Number of orders placed C) Machine hoursB) Direct labor hours D) Direct labor cost

135. An activity that is performed for each individual unit of product is classified as aA) Variable cost-level activity. C) Batch-level activity.B) Unit-level activity. D) Operations-level activity.

136. Which of the following is not a characteristic of a non-value-added activity?A) An activity may be non-value-added in one scenario but value-added in another.B) Non-value-added activities may be decreased without affecting the quality of the product.C) Non-valued-added activities cannot be eliminated entirely.D) Non-value-added activities always relate to fixed costs.

137. Activities that are required to provide productive capacity and to keep the business in operation areA) Batch-level activities C) Customer-level activitiesB) Product-level activities D) Organization-level activities

138. Activity-based costing information may be used by managers forA) Process improvement.B) Distribution channel profitability decisions.

C) Pricing decisions.D) All of the above.

139. Mounce Catering Service uses an activity-based costing system. What would be the most appropriate cost driver for the activity of preparing meals?A) Number of meals prepared C) Number of rolls usedB) Number of orders taken D) Rent on building

140. Which of the following is a difference between job costing and process costing systems?A) Companies that use a process costing system mass-produce identical products while companies that use a job

order costing system produce many different types of products.B) Companies that use a process costing system accumulate product costs throughout the production process

while companies that use a job order costing system accumulate product cost only at the end of the production process.

C) Companies that use a process costing system accumulate direct material and direct labor, but not manufacturing overhead while companies that use a job order costing systems accumulate direct material, direct labor and manufacturing overhead.

D) All of the above are differences between process costing and job order costing systems.

141. Which of the following is a difference between job costing and process costing systems?A) Companies that use a process costing system accumulate product costs throughout the production process

while companies that use a job order costing system accumulate product cost only at the end of the production process.

B) Companies that use a process costing system accumulate product costs in each production department and allocate the costs evenly across all units produced in the department during the period while companies that use job order costing accumulate product costs by job and allocate those costs only to the units in that particular job.

C) Companies that use a process costing system accumulate direct material and direct labor, but not manufacturing overhead while companies that use a job order costing systems accumulate direct material, direct labor and manufacturing overhead.

D) All of the above are differences between process costing and job order costing systems.

142. Which of the following is a similarity between job costing and process costing systems?A) Both accumulate product costs throughout the production process and assign those costs to individual units of

productionB) Both track individual product costsC) Both accumulate product costs in each production department during the periodD) Both accumulate costs on a job cost sheet

143. When using a process costing system, the formula to reconcile the physical unit flow isA) Beginning WIP units + Units started = Units transferred out + Ending WIP unitsB) Beginning WIP units + Units transferred out = Units started plus Ending WIP unitsC) Units started – Beginning = Units transferred out + Ending WIP unitsD) Beginning WIP units + Units transferred out = Units started – Ending inventory

144. On December 31, Berry Company recorded the following information in the Mixing Department's Work in Process account:

Units CostBeginning balance (80% complete) 5,000 $50,000Started into production 100,000 $500,000Completed and transferred to Packaging 95,000Ending balance (60% complete) 10,000

Assume that the unfinished units in ending inventory are 60% complete for both materials and conversion. What is balance in the ending Work in Process on December 31?A) $32,640 B) $33,300 C) $51,800 D) $52,300

145. On December 31, Berry Company recorded the following information in the Mixing Department's Work in Process account:

Units CostBeginning balance (80% complete) 5,000 $50,000Started into production 100,000 $500,000Completed and transferred to Packaging 95,000Ending balance (60% complete) 10,000

Assume that the unfinished units in ending inventory are 60% complete for both materials and conversion. What is the cost per equivalent unit?A) $5.18 B) $5.23 C) $5.44 D) $5.55

146. Which of the following is not a step in calculating the unit product cost?A) Calculate the equivalent units of productionB) Allocate the equivalent unit costs of productionC) Divide the total equivalent costs by the total unitsD) Reconcile the costs of production

147. At the end of January, Monroe Industries had completed 65,000 units and left 8,000 units in Work In process, 60% complete with respect to materials and 80% complete with respect to conversion. How many equivalent units will be used to determine the cost per equivalent unit for materials.A) 66,600 B) 68,200 C) 69,800 D) 71,400

148. Which of the following is a similarity between job costing and process costing systems?A) Both mass-produce identical productsB) Both accumulate direct materials, direct labor and manufacturing overhead costsC) Both accumulate product cost on a departmental production reportD) None of the above are similarities between job costing and process costing systems.

149. Which of the following costs are incurred in a process costing system?A) Direct material C) Manufacturing overheadB) Direct labor D) All of the above

150. Which of the following is a similarity between job costing and process costing systems?A) Both accumulate product costs throughout the production process and assign those costs to individual units of

productionB) Both accumulate direct materials, direct labor, and manufacturing overhead costsC) Both track cost flows from raw materials to work in process, from work in process to finished goods, and from

finished goods to cost of goods soldD) All of the above are similarities between job costing and process costing systems

151. Which of the following is a similarity between job costing and process costing systems?A) Both accumulate costs on a job cost sheetB) Both accumulate product costs in each production department during the periodC) Both systems track cost flows from raw materials to work in process, from work in process to finished goods,

and from finished goods to cost of goods soldD) Both produce many different types of products, often to customer specifications

152. The units of product in the ending work in process inventory must be converted to equivalent units of production separately for the direct materials and conversion costs becauseA) The units may be in different departments at the end of the periodB) The units may not be at the same stage of completionC) The conversion cost may have been added at the beginning of the processD) None of the above

153. The mixing department of the Glasson Company started the month with 20,000 units in its beginning work in process inventory. An additional 309,000 units were transferred into the mixing department during the month. At the end of the month 29,000 units were in ending work in process inventory in the mixing department. How many units were transferred out of the mixing department during the period?A) 280,000 B) 300,000 C) 318,000 D) 329,000

154. When a department has work in process at the end of the period, the incomplete units must be converted toA) Actual units C) Transferred-in unitsB) Equivalent units D) None of the above

155. To determine the equivalent units produced,A) Multiply the percentage of completion for each cost category by the number of physical units in the ending

work in process inventory.B) Divide the percentage of completion for each cost category by the number of physical units in the ending work

in process inventory.C) Add the cost of production to beginning work in process inventory and divide this total by the physical units

transferred out.D) Multiply the number of physical units in ending work in process by the cost per physical units.

156. In a job order costing system, the costs of each job are accumulated on aA) Job cost sheet. C) End-of-job accumulation sheet.B) Departmental cost sheet. D) None of the above.

157. When a department has work in process at the end of the period, we need to determine the percentage of completion for the work in process. Based on that percentage we calculateA) Actual units of production C) Equivalent units of productionB) Particular units of production D) Half-units of production

158. When using a process costing system, the formula for reconciling the costs of production isA) Beginning WIP balance + Costs transferred out during the period + Ending WIP = Total costs accounted forB) Beginning WIP balance + Cost added during the period = Cost transferred out during the period + Ending WIP

balanceC) Cost added during the period – Beginning WIP balance = Cost transferred out during the period + Ending WIP

balanceD) Beginning WIP balance + Cost transferred out – Ending inventory = Total costs to accounted for

159. Which of the following types of entities would probably use a process costing system?A) Oil refiner C) Airplane manufacturerB) Construction company D) CPA firm

160. The costing method in which only variable product costs are accumulated in inventory is calledA) Absorption costing B) Normal costing C) Direct costing D) Full costing

161. Fixed manufacturing overhead is treated as a period expense in which of the following costing methods?A) Absorption costing B) Normal costing C) Full costing D) Variable costing

162. Walker's Manufacturing began its operations on January 1 of the current year. Walker produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000. Under variable costing, what was Walker's ending inventory on the balance sheet?A) $8,000 B) $28,000 C) $30,000 D) $30,400

163. Variable costing is also referred to asA) Absorption costing B) Normal costing C) Direct costing D) Full costing

164. Mixed costs must be divided into which of the following components?A) Period and product C) Direct and indirectB) Fixed and variable D) Cost and profit

165. Walker's Manufacturing began its operations on January 1 of the current year. Walker produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000. Under absorption costing, what was Walker's ending inventory on the balance sheet?A) $8,000 B) $28,000 C) $30,000 D) $30,400

166. When the units produced is less than the units soldA) Ending inventory on the balance sheet is lower under absorption costing than under variable costing.B) Ending inventory on the balance sheet is higher under absorption costing than under variable costing.C) Ending inventory on the balance sheet is the same under absorption costing and variable costing.D) Cannot be determined with the information given.

167. Walker's Manufacturing began its operations on January 1 of the current year. Walker produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000. Under absorption costing, what was Walker's operating income?A) ($26,000) B) $6,000 C) $8,400 D) $10,000

168. Walker's Manufacturing began its operations on January 1 of the current year. Walker produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000. Under variable costing, what was Walker's operating income?A) ($26,000) B) $6,000 C) $8,400 D) $10,000

169. Absorption costing is also referred to asA) Variable costing B) Full costing C) Nominal costing D) None of the above

170. Under variable costing, subtract variable costs from sales to arrive atA) Gross profit B) Gross margin C) Contribution margin D) Net income

171. Which of the following items is more complicated for a manufacturing company than for a retail operation?A) Accounting for inventory costsB) Trying to forecast the effects of financial decisions on the income statementC) Both a and bD) Neither a nor b

172. The underlying principle that absorption costing satisfied is theA) Matching principle C) Historical cost principleB) Relevance principle D) Understandability principle

173. When the units produced equals the units soldA) Operating income is higher under absorption costing than under variable costing.B) Operating income is lower under absorption costing than under variable costing.C) Operating is the same under absorption costing and variable costing.D) Cannot be determined with the information given.

174. Based on the matching principle, all product cost flow throughA) Raw Material Inventory, Work in Process Inventory and Finished Goods until the goods are sold.B) Raw Material Inventory, Work in Process Inventory and Manufacturing overhead until the goods are sold.C) Raw Materials Inventory, Direct Materials and Conversion, and Work in Process.D) Raw materials Inventory, Conversion, and Finished Goods until the goods are sold.

175. Which of the following is not a product cost?A) Direct material C) Selling expensesB) Direct labor D) Manufacturing overhead

176. In absorption costing, all manufacturing costs are considered to beA) Product costs B) Period costs C) Variable costs D) Mixed costs

177. To make predictions about costs and income, you must first separate cost by their behavior,A) Fixed or variableB) Product or selling and administrativeC) Direct material, direct labor or manufacturing overheadD) Direct or indirect

178. When the units sold exceeds the units producedA) Operating income is higher under absorption costing than under variable costing.B) Operating income is lower under absorption costing than under variable costing.C) Operating is the same under absorption costing and variable costing.D) Cannot be determined with the information given.

179. Based on the matching principles, all product cost flow throughA) Raw materials Inventory C) Finished GoodsB) Work in Process D) All of the above.

180. The price/earnings ratio indicatesA) The amount of earnings that a company is willing to pay to shareholders in the form of dividends.B) What multiple of current earnings investors are willing to pay for a share of stock.C) The net income available to pay out in dividends to shareholders.D) None of the above.

181. Numerous resources are available to assist in developing an understanding of a company's competitive environment. The U.S. Census Bureau collects a wide array of statistics and makes them available through which of the following cites?A) http://www.census.gov/ C) http://www.census.com/B) http://www.stats.com/ D) http://www.statistics.gov/

182. Barber Industries reported net income of $32,000, earnings per share of $2, and paid dividends of $3 per share or a total of $3,000. The stock sells for $20 per share. What is the price/earnings ratio?A) 10 B) 10.67 C) 1.50 D) 6.67

183. The times interest earned ratio measures a company's ability toA) Maintain profit after paying interest.B) Pay interest and debt on the due date.C) Make interest payment out of current earnings.D) Pay interest and debt from current assets already on hand.

184. The formula for the return on common stockholders' equity isA) Net Income + Preferred dividends

Average common stockholders' equityB) Operating income – Preferred dividends

Average common stockholders' equityC) Net income – preferred dividends

Average common stockholders' equityD) Operating income + Preferred dividends

Average common stockholders' equity

185. Debt is not a free resource becauseA) The use of debt funds is restricted as designated by the debt instrument.B) Companies must pay interest on the borrowings.C) Companies must restrict cash flow until the debt is repaid.D) None of the above.

186. The income statement for Otto Construction Company appear below:

Net sales (all credit sales) $180,000Cost of Goods Sold 100,000Gross margin 80,000Operating expenses 30,000Interest expense 12,000Net income before taxes 38,000Income tax 9,500Net income $ 28,500

Average total assets total $240,000.Otto's income tax rate is 25%What is the times interest earned ratio?A) 2.38 B) 3.13 C) 3.16 D) 4.17

187. Earnings per share representsA) How much of a company's current net income has been distributed for each share of stock held by an investor.B) How much of a company's current net income could be distributed for each share of stock held by an investor.C) How much of a company's contribution margin is available to be distributed to each stockholder.D) How much gross profit of a company could be distributed for each share of stock held by an investor.

188. The 2010 and 2011 partial balance sheets for Ottoman Industries is shown below:

2010 2011Current Assets Cash and cash equivalents $ 16,000 $ 14,000 Accounts Receivable, net 20,000 24,000 Inventory 25,000 23,000 Marketable equity securities 5,000 5,000Total Current Assets 66,000 66,000Plant & Equipment, net 60,000 40,000Total Assets 126,000 106,000

Current Liabilities 20,000 30,000Noncurrent Liabilities 60,000 40,000Total Liabilities 80,000 70,000Total Stockholders' Equity 46,000 32,000Total liabilities and Stockholders' Equity $126,000 $126,000

Calculate the 2011 acid-test ratio.A) 1.27 B) 1.51 C) 2.03 D) 2.20

189. Which of the following is not an advantage of a company using debt rather than equity to finance a project?A) Dividends do not need to be paid.B) Interest is tax deductible whereas dividends paid are not.C) Dividends always require more cash than does paying interest on debt.D) All of the above are advantages of using debt rather than equity to finance a project.

190. On a common-size balance sheet, notes payable is shown as a percentage ofA) Total liabilities. C) Total assets.B) Current liabilities. D) Total stockholders' equity.

191. Rather than looking only at the balances reported on the financial statements, it is helpful to look at the changes in the account balances over time. This is calledA) Common analysis. C) Horizontal analysis.B) Vertical analysis. D) Benchmarking

192. Which of the following is not a component of common stockholders' equity?A) Long-term debt C) Additional paid-in capitalB) Common stock D) Retained earnings

193. Because the assets included in the current ratio have different levels of liquidity that reflect different degrees of collectability, many companies use which of the following ratios to measure current liquidity?A) Current ratio. B) Acid-test. C) Working capital. D) None of the above.

194. Which of the following is not a use of trend analysis?A) For revealing more information about performance than one year's worth of change than is revealed by just one

year's worth of changeB) For comparing changes in related accounts.C) For analyzing information other than that found on the balance sheet and income statement, such as

supplemental information reported in annual reportsD) All of the above are uses of trend analysis

195. The debt to equity ratio measures the amount of financing provided by creditors relative toA) Equity earned through from operations.B) Equity provided by retained earnings.C) Equity provided by owners.D) None of the above.

196. A note of caution in interpreting the debt ratio is thatA) All debt decreases liquidity ratios.B) Financing arrangements, such as leases, may be off-balance sheet arrangement and not be classified as debt on

the balance sheet.C) Financing arrangements, such as leases, may be classified as debt when in fact they do not require interest

payments.D) Long-term debt may be inflated because of a desire to reduce the current ratio.

197. The return on assets ratio measuresA) How well current assets are used to provide cash for the purchase of long-term assets.B) How well a company's assets create sales revenue.C) Howe well a company manages its assets.D) How well assets have been employed in conducting the business.

198. On a common-size balance sheet, notes receivable is shown as a percentage ofA) Total liabilities. C) Total stockholders' equity.B) Current liabilities. D) Total assets.

199. Which of the following measures how much of earnings per share is returned to common stockholders in the form of dividends?A) Earnings per share C) Price/earnings ratioB) Dividend payout ratio D) Return on assets

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