BEC

The essence of responsibility accounting is A.Developing performance reports emphasizing costs and revenues that managers can control. B.Allocating service department costs to production departments so that production department managers know all costs for which they are responsible. C.Determining who is to blame for unfavorable variances. D.Investigating all variances, regardless of their status as favorable or unfavorable.

A. Developing performance reports emphasizing costs and revenues that managers can control.

The expected selling price for a new product is $19.00. Management's goal is to obtain a 20% contribution margin on all sales. If the new product has variable selling and distribution costs of $3.00 per unit, what is the product's target variable manufacturing cost? A.$12.20 B.$12.80 C.$15.80 D.$18.20

A.$12.20

Dawn Corp. uses a standard cost system. During the year, both the labor rate variance and the labor efficiency variance were unfavorable. Dawn wrote the variances off directly to cost of goods sold. If Dawn had allocated the variances to work in process, finished goods, and cost of goods sold instead, what would have been the effects on current ratio and net income? Current--------- Net ratio -----------income A.Increases ----Increases B.Increases ----Decreases C.Decreases --Increases D.Decreases-- Decreases

A.Increases Increases

A 20% target contribution margin is set for Duct, which is a new product with the following unit costs: Manufacturing costs --------Variable --------$12 --------------------------------Fixed ----------- 8 Selling & admin. Costs -------Variable -------$3 --------------------------------Fixed -----------5 What is Duct's target selling price? A.$18.00 B. $18.75 C.$25.00 D.$33.60

B. $18.75

A company that produces a single product using a continuous process had no work in process on April 1. During the month of April, 10,000 units were started and 9,000 completed units were transferred. The ending work-in-process inventory was complete as to materials and 50% complete as to conversion. The cost of direct materials was $114,000, and the cost of direct labor amounted to $38,000. Manufacturing overhead is assigned at the rate of 50% of direct materials. For the purpose of determining the cost of goods manufactured in April, what is the cost per equivalent whole unit? A.$23.22 B.$21.40 C.$20.90 D.$15.40

B. $21.40

Smith Legal Services has offered to represent a plaintiff in a lawsuit for a retainer of $20,000 plus 40% of any award over $20,000. Smith expects to incur out-of-pocket expenditures of $15,000 in litigating the suit. Possible court awards with their associated probabilities are: Award -----Probability $100,000 -----0.7 $0 ------------0.3 What is the expected value to Smith of the lawsuit? A.$25,900 B.$27,400 C.$33,000 D.$37,000

B. $27,400

Roger Co. implemented activity-based costing in the current year. To select the appropriate driver for Cost Pool A, Roger performed regression analyses for two independent variables, Driver 1 and Driver 2, using monthly operating data. The monthly levels of Cost Pool A were the dependent variables in both regressions. Output results from the regression analyses were as follows: ------------------------Driver 1 ----Driver 2 R squared ---------------0.46 -------0.80 Intercept -------------$551.00 ---$970.00 X variable (slope) -----$ 0.55 -----$ 0.33 At the budgeted production level for next month, the levels of Driver 1 and Driver 2 are expected to be 5,880 and 7,000, respectively. Based on this information, what is the budgeted amount for Cost Pool A for next month? A.$2,624 B.$3,280 C.$3,464 D.$3,785

B. $3,280

Darv Co. had a current ratio of 3-to-1 and a quick ratio of 1-to-1. Current liabilities were $322,000. What was the total amount for inventory and prepaid expenses? A.$322,000 B.$644,000 C.$966,000 D.$1,288,000

B. $644,000

Grant Co.'s sales budget shows the following projections for the year ending December 31: Quarter -----Units First --------30,000 Second ----40,000 Third -------22,500 Fourth -----27,500 Total ------120,000 Inventory at the beginning of the year was budgeted at 9,000 units. The quantity of finished goods inventory at the end of each quarter is to equal 30% of the next quarter's budgeted sales of units. What amount should the production budget show for units to be produced during the first quarter? A.36,000 B.33,000 C.24,000 D.12,000

B. 33,000

What term is used to represent unavoidable past costs that cannot be changed no matter what action is taken? A.Prime costs B.Sunk costs C.Opportunity costs D.Incremental costs

B. Sunk costs

An issuer's board of directors would ordinarily participate in each of the following activities, except A.Establishing long-term strategy and objectives to which their information technology system should be aligned. B.Supervising and monitoring the quality control testing upon the installation of a new information technology system. C.Ensuring that suitable information technology resources and skills are available to meet the company's strategic objectives. D.Maintaining awareness of current technology used by the organization to assure its efficiency and effectiveness for financial reporting.

B. Supervising and monitoring the quality control testing upon the installation of a new information technology system.

Which of the following statements that relate to capital budgeting is true? A.The impact of taxes on capital budgeting will not make a difference in the decision to purchase new equipment. B.Accelerated methods of depreciation provide tax shields that are advantageous from a present-value point of view. C.The depreciation method used for financial accounting reporting and not the depreciation method used for tax purposes should be used in capital budgeting decisions. D.If the depreciable life of a project is shorter than the expected useful life of the project, then the anticipated after-tax cash flows should be evaluated over the depreciable life.

B.Accelerated methods of depreciation provide tax shields that are advantageous from a present-value point of view.

Match Co. manufactures a product with the following costs per unit, based on a maximum plant capacity of 400,000 units per year: Direct materials ------$ 60 Direct labor -------------10 Variable overhead------40 Fixed overhead -------- 30 Total -------------------$140 Match has a ready market for all 400,000 units at a selling price of $200 each. Selling costs in this market consist of $10 per unit shipping and a fixed licensing fee of $50,000 per year. Reno Co. wishes to buy 5,000 of these units on a special order. There would be no shipping costs on this special order. What is the lowest price per unit at which Match should be willing to sell the 5,000 units to Reno? A.$110 B.$140 C.$190 D.$200

C. $190

A company sells DVD players for $200 per unit. The players have a unit variable cost of $160. The company estimates that it will sell one home entertainment system for every four DVD players sold. Home entertainment systems have a unit variable cost of $460 and sell for $600 per unit. The company's fixed costs are $90,000. Assuming that the sales mix estimate is correct, how many DVD players need to be sold for the company to break even? A.300 B.500 C.1,200 D.1,500

C. 1,200

The following information pertains to Baxter Co: Inventory at beginning of year ----------$200,000 Inventory at year end --------------------$300,000 Cost of goods sold during the year ----$500,000 What was Baxter's inventory turnover for the year? A.1.0 B.1.5 C.2.0 D.2.5

C. 2.0

Skytop Co., a nonprofit entity, is considering acquiring a machine for $80,000 that will produce uniform cash inflows of $25,000 for four years. Skytop evaluates capital projects using discounted cash flows at a cost of capital of 10% per year. Based upon the following table, what action should Skytop take regarding acquisition of the machine, and why? Future value of $1 for 4 years at 10% ----------------------------$1.464 Present value of $1 for 4 years at 10% --------------------------$0.683 Future value of $1 ordinary annuity for 4 years at 10% ---------$4.641 Present value of $1 ordinary annuity for 4 years at 10% --------$3.170 Acquire: ----Reason: A.Yes ------- Net cash flow is $20,000 B.Yes --------Net future value is $36,025 C.No --------Net present value is ($750) D.No --------Net present value is ($8,750)

C. No Net present value is ($750)

Below are data from the income statement of Brown, Inc: Beginning inventory, finished goods ----------------$16,000 Ending inventory, finished goods ---------------------21,000 Cost of goods sold -----------------------------------43,000 Gross margin from sales ------------------------------39,000 Operating expenses - marketing and selling --------20,000 Net income --------------------------------------------19,000 What was Brown's cost of goods manufactured? A.$37,000 B.$38,000 C.$48,000 D.$50,000

C.$48,000

Carter Co. had the following items on its balance sheet at the end of the current year: Cash and cash equivalents ---$ 200,000 Short-term investments ---------100,000 Accounts receivable -----------400,000 Inventories ----------------------600,000 Patent-10 years ------------------300,000 Equipment ---------------------1,000,000 Accumulated depreciation -----200,000 The amount of current liabilities at the end of the current year was $640,000. What is Carter's working capital at the end of the current year? A.$60,000 B.$560,000 C.$660,000 D.$960,000

C.$660,000

What is the process by which products and services of a business entity are measured and evaluated relative to the best possible levels of performance? A.Measuring the performance gap B.Standard measurement C.Benchmarking D.Variance management

C.Benchmarking

How would the following ratios or measures be affected if a company issued additional capital stock for cash? Total debt to -----Working total assets -------capital A.Increase -------Increase B.Increase -------Decrease C.Decrease ------Increase D.Decrease ------Decrease

C.Decrease -- Increase

Star Co. is a retail store specializing in contemporary furniture. The following information is taken from Star's June budget: Sales ------------------------------------------$540,000 Cost of goods sold ----------------------------300,000 Merchandise inventory-June 1 -----------------150,000 Merchandise inventory-June 30 ---------------180,000 Accounts payable for purchases-June 1 -------85,000 Accounts payable for purchases-June 30 -----75,000 What amount should Star budget for cash disbursements for June purchases? A.$260,000 B.$280,000 C.$320,000 D.$340,000

D. $340,000

Spark Co. buys cordless phones for $125 each and sells them for $200 each. Spark pays a sales commission of $25 per phone sold and monthly fixed costs are $3,000. Assuming Spark desired a profit of 10% of sales, how many units must Spark sell? A.600 B.400 C.200 D.100

D. 100

Gamma Co., a manufacturer of medical products, had a 10% return on assets and an asset turnover of 4:1. What was Gamma's profit margin on sales? A.40.0% B.10.0% C. 4.0% D. 2.5%

D. 2.5%

Which of the following is an essential element of the audit trail in an electronic data interchange (EDI) system? A.An integrated test facility that verifies the accuracy of data. B.A heuristic program that accesses remote locations. C.Hardware security modules that store sensitive data. D.Computer activity logs that indicate failed transactions.

D. Computer activity logs that indicate failed transactions.

Which of the following is a major difference between the just-in-time (JIT) and traditional approaches to manufacturing? A.The JIT approach usually involves a large number of suppliers while traditional approaches usually involve only a small number of suppliers. B.The JIT approach requires centralized purchasing while traditional approaches encourage purchasing decisions by production employees. C.The JIT approach uses a push-through system while traditional approaches use a pull-through system. D.The JIT approach operates with low inventory levels while traditional approaches may operate with high inventory levels.

D. The JIT approach operates with low inventory levels while traditional approaches may operate with high inventory levels.