Accounting 2 Final Exam

61. If a company had a contribution margin of $750,000 and a contribution margin ratio of 40%, total variable costs must have been A) $1,125,000. B) $450,000. C) $1,875,000. D) $300,000.

A) $1,125,000. $750,000 / 40% = $1,875,000 sales 750,000 = $1,125,000 margin costs

34. For Jacobs Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $300,000 of factory labor costs are incurred of which $70,000 is indirect labor. Actual overhead incurred was $160,000. The amount of overhead debited to Work in Process Inventory should be: A) $161,000 B) $160,000 C) $210,000 D) $230,000

A) $161,000

67. Montoya Manufacturing has fixed costs of $2,500,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $250,000? A) $4,583,333 B) $4,166,667 C) $6,875,000 D) $6,250,000

A) $4,583,333

84. It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 3,000 scales. If the special order is accepted, what will be the effect on net income? A) $6,000 increase B) $6,000 decrease C) $9,000 decrease D) $45,000 increase

A) $6,000 increase

97. A company budgeted unit sales of 204,000 units for January, 2013 and 240,000 units for February 2013. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month's budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2012, how many units should be produced in January, 2013 in order for the company to meet its goals? A) 214,800 units B) 204,000 units C) 193,200 units D) 276,000 units

A) 214,800 units

76. 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 $60 and a selling price of $100. Q-Chip Plus has variable costs per unit of $70 and a selling price of $130. Ramirez's fixed costs are $540,000. How many units of Q-Chip would be sold at the break-even point? A) 3,000 B) 3,522 C) 5,000 D) 7,000

A) 3,000

126. The corporate capital budget authorization process consists of how many steps? A) 4 B) 3 C) 2 D) 1

A) 4

63. Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $90, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio? A) 55% B) 45% C) 150% D) 222%

A) 55%

113. Which of the following statements is false? A) A standard cost is more accurate than a budgeted cost. B) A standard is a unit amount. C) In concept, standards and budgets are essentially the same. D) The standard cost of a product is equivalent to the budgeted cost per unit of product.

A) A standard cost is more accurate than a budgeted cost.

30. Which one of the following best describes a job cost sheet? A) It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job. B) It is used to track manufacturing overhead costs to specific jobs. C) It is used by management to understand how direct costs affect profitability. D) It is a daily form that management uses for tracking worker productivity on which employee raises are based.

A) It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job.

58. Which of the following would be the least controllable fixed costs? A) Property taxes B) Rent C) Research and development D) Management training programs

A) Property taxes

7. Which of the following would not be considered an example of a discontinued operation? A) Shifting production processes within an operation B) Elimination of a major class of customers C) Elimination of an entire activity D) Disposal of a significant component of a business

A) Shifting production processes within an operation

68. The CVP income statement classifies costs as variable or fixed and computes a contribution margin. A) True B) False

A) True

104. A static budget is appropriate in evaluating a manager's performance if A) actual activity closely approximates the master budget activity. B) actual activity is less than the master budget activity. C) the company prepares reports on an annual basis. D) the company is a not-for-profit organization.

A) actual activity closely approximates the master budget activity.

51. The last step in activity-based costing is to A) assign overhead costs to products, using overhead rates determined for each cost pool. B) compute the activity-based overhead rate per cost driver. C) identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. D) identify the cost driver that has a strong correlation to the activity cost pool.

A) assign overhead costs to products, using overhead rates determined for each cost pool.

123. The capital budget for the year is approved by a company's A) board of directors. B) capital budgeting committee. C) officers. D) stockholders.

A) board of directors.

26. The flow of costs in a job order cost system A) involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done. B) cannot be measured until all jobs are complete. C) measures product costs for a set time period. D) generally follows a LIFO cost flow assumption.

A) involves accumulating manufacturing costs incurred and assigning the accumulated costs to work done.

114. If standard costs are incorporated into the accounting system, A) it may simplify the costing of inventories and reduce clerical costs. B) it can eliminate the need for the budgeting process. C) the accounting system will produce information which is less relevant than the historical cost accounting system. D) approval of the shareholders is required.

A) it may simplify the costing of inventories and reduce clerical costs.

31. Postings to control accounts in a costing system are made A) monthly. B) daily. C) annually. D) semi-annually.

A) monthly.

16. Both direct materials and indirect materials are A) raw materials. B) manufacturing overhead. C) merchandise inventory. D) sold directly to customers by a manufacturing company.

A) raw materials.

45. For the Assembly Department, unit materials cost is $8 and unit conversion cost is $12. If there are 10,000 units in ending work in process 75% complete as to conversion costs, the costs to be assigned to the inventory are A) $200,000. B) $170,000. C) $150,000. D) $180,000.

B) $170,000.

72. If contribution margin is $120,000, sales is $300,000, and net income is $40,000, then variable and fixed expenses are Variable Fixed A) $180,000 $260,000 B) $180,000 $80,000 C) $80,000 $180,000 D) $420,000 $260,000

B) $180,000 $80,000

62. A company has contribution margin per unit of $90 and a contribution margin ratio of 40%. What is the unit selling price? A) $150 B) $225 C) $36 D) Cannot be determined.

B) $225

120. A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was A) $5,700 favorable. B) $300 favorable. C) $150 favorable. D) $300 unfavorable.

B) $300 favorable.

74. For Wilder Corporation, sales is $1,200,000 (6,000 units), fixed expenses are $360,000, and the contribution margin per unit is $80. What is the margin of safety in dollars? A) $60,000 B) $300,000 C) $540,000 D) $840,000

B) $300,000

130. Sloan Inc. recently invested in a project with a 3-year life span. The net present value was $9,000 and annual cash inflows were $21,000 for year 1; $24,000 for year 2; and $27,000 for year 3. The initial investment for the project, assuming a 15% required rate of return, was A) $45,792. B) $45,180. C) $29,232. D) $38,376.

B) $45,180.

71. For Buffalo Co., at a sales level of 5,000 units, sales is $75,000, variable expenses total $50,000, and fixed expenses are $21,000. What is the contribution margin per unit? A) $4.20 B) $5.00 C) $10.00 D) $15.00

B) $5.00

122. A company uses 20,000 pounds of materials for which it paid $6.00 a pound. The materials price variance was $15,000 unfavorable. What is the standard price per pound? A) $0.75 B) $5.25 C) $6.00 D) $6.75

B) $5.25

87. Mallory Company manufactures widgets. Bowden Company has approached Mallory with a proposal to sell the company widgets at a price of $82,000 for 100,000 units. Mallory is currently making these components in its own factory. The following costs are associated with this part of the process when 100,000 units are produced: The manufacturing overhead consists of $16,000 of costs that will be eliminated if the components are no longer produced by Mallory. From Mallory's point of view, how much is the incremental cost or savings if the widgets are bought instead of made? A) $18,000 incremental savings B) $6,000 incremental cost C) $2,000 incremental savings D) $18,000 incremental cost

B) $6,000 incremental cost

65. O'Malley Company sells 100,000 units for $13 a unit. Fixed costs are $350,000 and net income is $250,000. What should be reported as variable expenses in the CVP income statement? A) $600,000. B) $700,000. C) $950,000. D) $1,050,000.

B) $700,000.

66. Boswell company reported the following information for the current year: Sales (50,000 units) $1,000,000, direct materials and direct labor $500,000, other variable costs $50,000, and fixed costs $270,000. What is Boswell's contribution margin ratio? A) 68%. B) 45%. C) 32%. D) 55%.

B) 45%.

127. If an asset costs $240,000 and is expected to have a $40,000 salvage value at the end of its ten-year life, and generates annual net cash inflows of $40,000 each year, the cash payback period is A) 7 years. B) 6 years. C) 5 years. D) 4 years.

B) 6 years.

99. Of the following items, which one is not obtained from an individual operating budget? A) Selling and administrative expenses B) Accounts receivable C) Cost of goods sold D) Sales

B) Accounts receivable

1. Which of the following income statement figures would probably be the best indicator of a company's future performance? A) Total revenues B) Income from operations C) Net income D) Gross profit

B) Income from operations

8. Jack's by the Tracks. has the following partial balance sheet: What effect will the unrealized gain on available for sales securities have on comprehensive income? A) No effect on comprehensive income. B) Increase of $800,000 in comprehensive income. C) Increase of $8,800,000 in comprehensive income. D) Decrease of $800,000 in comprehensive income.

B) Increase of $800,000 in comprehensive income.

4. An extraordinary item must meet which of the following two criteria? A) Foreseeable and material B) Infrequent and unusual C) Substantial and measurable D) Unusual and measurable

B) Infrequent and unusual

128. Using the profitability index method, the present value of cash inflows for Project Flower is $88,000 and the present value of cash inflows of Project Plant is $48,000. If Project Flower and Project Plant require initial investments of $90,000 and $40,000, respectively, and have the same useful life, the project that should be accepted is A) Project Flower. B) Project Plant. C) Either project may be accepted. D) Neither project should be accepted.

B) Project Plant.

86. A company has a process that results in 24,000 pounds of Product A that can be sold for $8 per pound. An alternative would be to process Product A further at a cost of $160,000 and then sell it for $14 per pound. Should management sell Product A now or should Product A be processed further and then sold? What is the effect of the action? A) Process further, the company will be better off by $16,000. B) Sell now, the company will be better off by $16,000. C) Process further, the company will be better off by $144,000. D) Sell now, the company will be better off by $160,000.

B) Sell now, the company will be better off by $16,000.

90. Why are budgets useful in the planning process? A) They provide management with information about the company's past performance. B) They help communicate goals and provide a basis for evaluation. C) They guarantee the company will be profitable if it meets its objectives. D) They enable the budget committee to earn their paycheck.

B) They help communicate goals and provide a basis for evaluation.

124. Most of the capital budgeting methods use A) accrual accounting numbers. B) cash flow numbers. C) net income. D) accrual accounting revenues.

B) cash flow numbers.

75. Margin of safety in dollars is A) expected sales divided by break-even sales. B) expected sales less break-even sales. C) actual sales less expected sales. D) expected sales less actual sales.

B) expected sales less break-even sales.

91. A budget A) is a substitute for management. B) is an aid to management. C) can operate or enforce itself. D) is the responsibility of the accounting department.

B) is an aid to management.

24. The two basic types of cost accounting systems are A) job order and job accumulation systems. B) job order and process cost systems. C) process cost and batch systems. D) job order and batch systems.

B) job order and process cost systems.

19. As current technology changes manufacturing processes, it is likely that direct A) labor will increase. B) labor will decrease. C) materials will increase. D) materials will decrease.

B) labor will decrease.

28. Cost of raw materials is debited to Raw Materials Inventory when the A) materials are ordered. B) materials are received. C) materials are put into production. D) bill for the materials is paid.

B) materials are received.

14. Managerial accounting information A) pertains to the entity as a whole and is highly aggregated. B) pertains to subunits of the entity and may be very detailed. C) is prepared only once a year. D) is constrained by the requirements of generally accepted accounting principles.

B) pertains to subunits of the entity and may be very detailed.

79. A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to A) assign responsibility for the decision. B) provide relevant revenue and cost data about each course of action. C) determine the amount of money that should be spent on a project. D) decide which actions that management should consider.

B) provide relevant revenue and cost data about each course of action.

102. A major element in budgetary control is A) the preparation of long-term plans. B) the comparison of actual results with planned objectives. C) the valuation of inventories. D) approval of the budget by the stockholders.

B) the comparison of actual results with planned objectives.

41. Zibba Company enters materials at the beginning of the process. In January, there was no beginning work in process, but there were 200 units in the ending work in process inventory. The number of units completed equals the number of A) units started. B) units started less 200. C) units started plus 200. D) equivalent units.

B) units started less 200.

6. The Holiday House had severe damage done to its Christmas inventory due to an escaped circus monkey rampaging through the store. The inventory loss was $150,000 before applicable taxes of $30,000. The Holiday House should record the loss as a(n) A) $150,000 loss in other expenses and losses. B) $180,000 extraordinary loss. C) $120,000 extraordinary loss. D) $130,000 extraordinary loss.

C) $120,000 extraordinary loss.

33. Simmons Inc. applies overhead to production at a predetermined rate of 90% based on direct labor cost. Job No. 250, the only job still in process at the end of August, has been charged with manufacturing overhead of $7,200. What was the amount of direct materials charged to Job 250 assuming the balance in Work in Process inventory is $30,000? A) $7,500. B) $8,000. C) $14,800. D) $30,000.

C) $14,800.

69. Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. Contribution margin is A) $400,000. B) $240,000. C) $160,000. D) $72,000.

C) $160,000.

3. Sophie's Dog Supplies has income before taxes of $550,000 and an extraordinary loss of $170,000. If the income tax rate is 30% on all items, the income statement should show income before irregular items and an extraordinary loss, respectively, of A) $550,000 and ($170,000). B) $385,000 and ($86,700). C) $385,000 and ($119,000). D) $165,000 and ($51,000).

C) $385,000 and ($119,000).

48. Daffodil Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $800,000. Daffodil uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of A) $25.00. B) $30.77. C) $50.00. D) need more information to compute.

C) $50.00.

121. A company uses 8,400 pounds of materials and exceeds the standard by 300 pounds. The quantity variance is $1,800 unfavorable. What is the standard price? A) $2 B) $4 C) $6 D) Cannot be determined from the data provided.

C) $6

135. Kushman Combines, Inc. has $20,000 of ending finished goods inventory as of December 31, 2013. If beginning finished goods inventory was $10,000 and cost of goods sold was $50,000, how much would Kushman report for cost of goods manufactured? A) $70,000 B) $10,000 C) $60,000 D) $40,000

C) $60,000

52. For its inspecting cost pool, Davidson, Inc. expected overhead cost of $300,000 and 4,000 inspections. The actual overhead cost for that cost pool was $360,000 for 5,000 inspections. The activity-based overhead rate used to assign the costs of the inspecting cost pool to products is A) $60 per inspection. B) $72 per inspection. C) $75 per inspection. D) $90 per inspection.

C) $75 per inspection.

107. If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on A) the original planned level of activity. B) 54,000 units of activity. C) 60,000 units of activity. D) 48,000 units of activity.

C) 60,000 units of activity.

43. If 120,000 units are started into production there was no beginning work in process, and 40,000 units are in process at the end of the period, how many units were completed and transferred out? A) 120,000. B) 40,000. C) 80,000. D) 160,000.

C) 80,000.

23. Which one of the following characteristics would likely be associated with a just-in-time inventory method? A) Ending inventory of work in process that would allow several production runs B) A backlog of inventory orders not yet shipped C) Minimal finished goods inventory on hand D) An understanding with customers that they may come to the showroom and select from inventory on hand

C) Minimal finished goods inventory on hand

42. Which of the following is not a necessary step in preparing a production cost report? A) Compute the equivalent units of production. B) Compute the physical unit flow. C) Prepare the job order cost sheet. D) Prepare a cost reconciliation schedule.

C) Prepare the job order cost sheet.

27. When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is A) Finished Goods Inventory Direct Materials Direct Labor Manufacturing Overhead B) Work In Process Inventory Direct Materials Direct Labor Manufacturing Overhead C) Raw Materials Inventory Work In Process Inventory D) Finished Goods Inventory Work In Process Inventory

C) Raw Materials Inventory Work In Process Inventory

37. Which of these best reflects a distinguishing factor between a job order cost system and a process cost system? A) The detail at which costs are calculated. B) The time period each covers. C) The number of work in process accounts. D) The manufacturing cost elements included.

C) The number of work in process accounts.

101. What is budgetary control? A) Another name for a flexible budget B) The degree to which the CFO controls the budget C) The use of budgets in controlling operations D) The process of providing information on budget differences to lower level managers

C) The use of budgets in controlling operations

38. A product requires processing in two departments, the Baking Department and then the Packaging Department, before it is completed. Costs transferred out of the Baking Department will be transferred to: A) Finished Goods Inventory. B) Cost of Goods Sold. C) Work in Process—Packaging Department. D) Manufacturing Overhead.

C) Work in Process—Packaging Department.

112. The difference between a budget and a standard is that A) a budget expresses what costs were, while a standard expresses what costs should be. B) a budget expresses management's plans, while a standard reflects what actually happened. C) a budget expresses a total amount, while a standard expresses a unit amount. D) standards are excluded from the cost accounting system, whereas budgets are generally incorporated into the cost accounting system.

C) a budget expresses a total amount, while a standard expresses a unit amount.

132. In evaluating high-tech projects, A) only tangible benefits should be considered. B) only intangible benefits should be considered. C) both tangible and intangible benefits should be considered. D) neither tangible nor intangible benefits should be considered.

C) both tangible and intangible benefits should be considered.

25. A process cost system would most likely be used by a company that makes A) motion pictures. B) repairs to automobiles. C) breakfast cereal. D) college graduation announcements.

C) breakfast cereal.

125. Capital expenditure proposals are initially screened by the A) board of directors. B) executive committee. C) capital budgeting committee. D) stockholders.

C) capital budgeting committee.

32. If annual overhead costs are expected to be $800,000 and direct labor costs are expected to be $1,000,000, then if the activity base is direct labor costs: A) $1.25 is the predetermined overhead rate. B) for every dollar of manufacturing overhead, 80 cents of direct labor will be assigned. C) for every dollar of direct labor, 80 cents of manufacturing overhead will be assigned. D) a predetermined overhead rate cannot be determined.

C) for every dollar of direct labor, 80 cents of manufacturing overhead will be assigned.

83. The process of evaluating financial data that change under alternative courses of action is called A) double entry analysis. B) contribution margin analysis. C) incremental analysis. D) cost-benefit analysis.

C) incremental analysis.

18. The wages of a timekeeper in the factory would be classified as A) a period cost. B) direct labor. C) indirect labor. D) compliance costs.

C) indirect labor.

80. Internal reports that review the actual impact of decisions are prepared by A) department heads. B) the controller. C) management accountants. D) factory workers.

C) management accountants.

20. The product cost that is most difficult to associate with a product is A) direct materials. B) direct labor. C) manufacturing overhead. D) advertising.

C) manufacturing overhead.

36. A process cost system would be used for all of the following products except A) chemicals. B) computer chips. C) motion pictures. D) soft drinks.

C) motion pictures.

44. The basic similarities between job order cost and process cost systems include all of the following except the A) manufacturing cost elements. B) flow of costs. C) point at which costs are totaled. D) accumulation of the costs of materials, labor, and overhead.

C) point at which costs are totaled.

134. When a capital budgeting project generates a positive net present value, this means that the project earns a return higher than the A) internal rate of return. B) annual rate of return. C) required rate of return. D) profitability index.

C) required rate of return.

35. A process cost accounting system is most appropriate when A) a variety of different products are produced, each one requiring different types of materials, labor, and overhead. B) the focus of attention is on a particular job or order. C) similar products are mass-produced. D) individual products are custom made to the specification of customers.

C) similar products are mass-produced.

129. The discount rate that will result in the highest net present value for a project is A) any rate lower that the cost of capital. B) any rate higher than the cost of capital. C) the lowest rate used to evaluate the project. D) the highest rate used to evaluate the project.

C) the lowest rate used to evaluate the project.

15. A distinguishing feature of managerial accounting is A) external users. B) general-purpose reports. C) very detailed reports. D) quarterly and annual reports.

C) very detailed reports.

22. Penner Company reported total manufacturing costs of $410,000, manufacturing overhead totaling $78,000, and direct materials totaling $96,000. labor cost? A) Cannot be determined from the information provided. B) $584,000 C) $174,000 D) $236,000

D) $236,000

109. A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of A) $288,000. B) $360,000. C) $384,000. D) $408,000.

D) $408,000.

131. Miles, Inc. is considering the purchase of a new machine for $600,000 that has an estimated useful life of 5 years and no salvage value. The machine will generate net annual cash flows of $105,000. It is believed that the new machine will reduce downtime because of its reliability. Assume the discount rate is 8%. In order to make the project acceptable, the reduction in downtime must be worth A) $23,958 per year. B) $49,662 per year. C) $18,264 per year. D) $45,263 per year.

D) $45,263 per year.

70. Moonwalker's CVP income statement included sales of 4,000 units, a selling price of $100, variable expenses of $60 per unit, and fixed expenses of $88,000. Net income is A) $400,000. B) $160,000. C) $152,000. D) $72,000.

D) $72,000.

119. Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance? A) $48,600 U B) $4,860 U C) $3,960 F D) $900 U

D) $900 U

133. The following information is available for a potential investment for Panda Company: The potential investment's profitability index is A) 4.75. B) 3.22. C) 2.62. D) 1.38.

D) 1.38.

110. Kathleen Corp. produced 320,000 units in 150,000 direct labor hours. Production for the period was estimated at 330,000 units and 165,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at A) 160,000 hours and 165,000 hours. B) 165,000 hours and 150,000 hours. C) 160,000 hours and 150,000 hours. D) 150,000 hours and 150,000 hours.

D) 150,000 hours and 150,000 hours.

56. Austin Accounting Services estimates for next year revenues of $2,000,000, direct labor of $400,000, and overhead of $700,000. Under traditional costing, overhead is applied to audit jobs using the rate of A) 35% of revenues. B) 20% of revenues. C) 56% of direct labor. D) 175% of direct labor.

D) 175% of direct labor.

98. Lion Industries required production for June is 132,000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 300,000 and 330,000 pounds, respectively. How many pounds of direct material Z must be purchased? A) 378,000. B) 396,000. C) 408,000. D) 426,000.

D) 426,000.

94. If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 410,000 pounds are required for January production, how many pounds of raw materials should be purchased in January? A) 350,000 pounds B) 530,000 pounds C) 290,000 pounds D) 470,000 pounds

D) 470,000 pounds

95. The production budget shows expected unit sales of 32,000. Beginning finished goods units are 3,600. Required production units are 33,600. What are the desired ending finished goods units? A) 2,000 B) 3,600 C) 6,400 D) 5,200

D) 5,200

39. A department adds raw materials to a process at the beginning of the process and incurs conversion costs uniformly throughout the process. For the month of January, there were no units in the beginning work in process inventory; 80,000 units were started into production in January; and there were 20,000 units that were 40% complete in the ending work in process inventory at the end of January. What were the equivalent units of production for materials for the month of January? A) 88,000 equivalent units. B) 72,000 equivalent units. C) 60,000 equivalent units. D) 80,000 equivalent units.

D) 80,000 equivalent units.

106. A flexible budget can be prepared for which of the following budgets comprising the master budget? A) Sales B) Overhead C) Direct materials D) All of these.

D) All of these.

47. Direct labor is sometimes the appropriate basis for assigning overhead cost to products. It is appropriate to use direct labor when which of the following is true? (1) Direct labor constitutes a significant part of total product cost. (2) A high correlation exists between direct labor and changes in the amount of overhead costs. A) (1) only B) (2) only C) Either (1) or (2) D) Both (1) and (2)

D) Both (1) and (2)

92. Which of the following items does not follow from the adoption of a budget? A) Promote efficiency B) Deterrent to waste C) Basis for performance evaluation D) Guarantee of accomplishing the profit objective

D) Guarantee of accomplishing the profit objective

85. Baden Company manufactures a product with a unit variable cost of $100 and a unit sales price of $176. Fixed manufacturing costs were $480,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 1,000 units at $140 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows: A) Income would decrease by $8,000. B) Income would increase by $8,000. C) Income would increase by $140,000. D) Income would increase by $40,000.

D) Income would increase by $40,000.

13. Managerial accounting applies to each of the following types of businesses except A) service firms. B) merchandising firms. C) manufacturing firms. D) Managerial accounting applies to all types of firms.

D) Managerial accounting applies to all types of firms.

81. Which of the following will always be a relevant cost? A) Sunk cost B) Fixed cost C) Variable cost D) Opportunity cost

D) Opportunity cost

21. Which of the following are period costs? A) Raw materials B) Direct materials and direct labor C) Direct labor and manufacturing overhead D) Selling expenses

D) Selling expenses

2. Which of the following is the best definition of sustainable income? A) Sustainable income is a measure of solvency that does not include capital expenditure. B) Sustainable income is the same as net income. C) Sustainable income is income that is unusual in nature and infrequent in occurrence. D) Sustainable income is the most likely level of income to be obtained in the future.

D) Sustainable income is the most likely level of income to be obtained in the future.

46. Which of the following is not typical of traditional costing systems? A) Use of a single predetermined overhead rate. B) Use of direct labor hours or direct labor cost to assign overhead. C) Assumption of correlation between direct labor and incurrence of overhead cost. D) Use of multiple cost drivers to allocate overhead.

D) Use of multiple cost drivers to allocate overhead.

103. Budget reports should be prepared A) daily. B) monthly. C) weekly. D) as frequently as needed.

D) as frequently as needed.

17. Manufacturing costs include A) direct materials and direct labor only. B) direct materials and manufacturing overhead only. C) direct labor and manufacturing overhead only. D) direct materials, direct labor, and manufacturing overhead.

D) direct materials, direct labor, and manufacturing overhead.

105. If costs are not responsive to changes in activity level, then these costs can be best described as A) mixed. B) flexible. C) variable. D) fixed.

D) fixed.

89. The costs incurred prior to the split-off point are referred to as A) separable costs. B) split-off costs. C) joint product costs. D) joint costs.

D) joint costs.

93. A budget period should be A) monthly. B) for a year or more. C) long-term. D) long enough to provide an obtainable goal under normal business conditions.

D) long enough to provide an obtainable goal under normal business conditions.

108. Management by exception A) causes managers to be buried under voluminous paperwork. B) means that all differences will be investigated. C) means that only unfavorable differences will be investigated. D) means that material differences will be investigated.

D) means that material differences will be investigated.

73. In a CVP income statement, cost of goods sold is generally A) completely a variable cost. B) completely a fixed cost. C) neither a variable cost nor a fixed cost. D) partly a variable cost and partly a fixed cost.

D) partly a variable cost and partly a fixed cost.

12. Ratios are most useful in identifying A) trends. B) differences. C) causes. D) relationships.

D) relationships.

57. If a firm increases its activity level, A) costs should remain the same. B) most costs will rise. C) no costs will remain the same. D) some costs will change, others will remain the same.

D) some costs will change, others will remain the same.

55. Under just-in-time processing, all of the following are received or completed "just in time" except A) finished goods. B) raw materials. C) subassembly parts. D) supplies.

D) supplies.

5. The discontinued operations section of the income statement refers to A) discontinuance of a product line. B) the income or loss on products that have been completed and sold. C) obsolete equipment and discontinued inventory items. D) the disposal of a significant component of a business.

D) the disposal of a significant component of a business.

9. Horizontal analysis is a technique for evaluating a series of financial statement data over a period of time A) that has been arranged from the highest number to the lowest number. B) that has been arranged from the lowest number to the highest number. C) to determine which items are in error. D) to determine the amount and/or percentage increase or decrease that has taken place.

D) to determine the amount and/or percentage increase or decrease that has taken place.