1) Which of the following is not a characteristic of managerial accounting?
a) Emphasizes relevance
b) focuses on the future more than the past
c) provides detailed information about parts of the company, not just the company as a whole.
d) Emphasizes reliability
2) Which of the following is not a part of Toyota’s manufacturing overhead?
a) Insurance on plant and equipment
b) depreciation on its North American corporate headquarters
c) plant property taxes
d) plant utilities
3) The three inventoriable costs are direct materials, direct labor and.....
a) Direct materials used
b) manufacturing overhead
c) cost of goods sold
d) work in process
4) If manufacturing overhead is over allocated for the period by $200, then.....
a) the $200 should be prorated between work in process inventory, finished goods inventory, and cost of goods sold
b) actual manufacturing overhead is greater than allocated manufacturing overhead
c) jobs have been over costed during the period
d) cost of goods sold should be adjusted by an increase of $200
5) When Dell applies manufacturing overhead, it traces the cost by.....
a) debiting manufacturing overhead and crediting raw materials
b) debiting manufacturing overhead and crediting work in process
c) debiting work in process and crediting manufacturing overhead
d) debiting work in process and credit raw materials
6) Which of the following is false?
a) ABC focuses on allocating indirect costs.
b) advances in information technology have made it feasible for more companies to adopt ABC.
c) ABC is only for manufacturing firms.
d) A system that uses ABC is more refined than one that uses departmental overhead rates.
7) Actual and normal costing are similar in their accounting for:
A) material and labor costs
B) materials and overhead costs
C) labor and overhead costs
D) all of the above
8) Volume-based cost systems tend to:
a) Under-cost low-volume products and under-cost high volume products
b) Under-cost low-volume products and over-cost high volume products
c) Over-cost low-volume products and under-cost high volume products
d) Over-cost both low and high volume products
9) A construction company currently uses traditional costing where overhead is applied based on direct labor hours. Using tradi-
tional costing, the applied overhead rate is $20 per direct labor hour, and 50 Direct labor hours were used for this current job.
They are considering a switch to ABC. The company controller has come up with the following information:
Accounting 241 Final Exam Review
Actual Activity Us-
age
Activity Allocation base Activity Rate Current Job
Material delivery and
handling Number of deliveries $100 per delivery 2 deliveries
Inspections Number of inspec-
tions $75 per inspection 3 inspections
Supervision Hours of supervision
time $30 per supervisor
hour 2 hours
Purchasing Number of purchase
orders $60 per purchase or-
der 5 purchase orders
Which of the following statements is true when comparing the total overhead allocated to the job using traditional costing versus
ABC costing?
a) ABC costing will yield $215 less in overhead cost being allocated to the job
b) ABC costing will yield $735 less in overhead cost being allocated to the job
c) ABC costing will yield $545 more in overhead cost being allocated to the job
d) ABC costing will yield $785 more in overhead cost being allocated to the job.
10) Handling a customer complaint is an example of which of the following costs?
a) appraisal costs
b) external failure costs
c) internal failure costs
d) prevention costs
11) Which of the following activities in a manufacturing firm is value-added?
a) Operate production equipment to bring product to partial completion
b) Place partially finished product in storage area to await further work
c) maintain storage area for partially finished product
d) remove partially finished product from storage area.
12) Eddie’s has the following transactions for the month of September:
1) purchased materials on account $77,000
2) materials requisitioned $55,000
3) Direct labor for the month was incurred (but not paid) of $33,000
4) Actual Overhead for the month was $21,000 (not paid, charged to payables)
5) Overhead is applied to production at the rate of 80% of direct labor
6) Jobs totaling $70,000 were transferred from Work in process to finished goods
7) Jobs totaling $45,000 were sold.
←
Inventory balances at the beginning of the month were:
Materials: 20,000
Work in process: 1,000
Finished goods: 8,000
What is the ending balance in finished goods?
a) $50,000
b) $33,000
c) $34,000
d) $35,000
13) Kaitlin’s Company had a debit balance of $5,000 in MOH at the end of the period. What is the proper journal entry to adjust
Cost of Goods Sold?
a) Debit MOH and credit Cost of goods sold.
b) Debit Work in Process and credit cost of goods sold.
c) Debit Cost of goods sold and credit MOH.
d) Debit cost of goods sold and credit finished goods inventory.
14) The legal costs associated with filing a patent for a new model of an oven at an appliance manufacturer is an example of
which type of activity?
a) unit-level
b) batch-level
c) product-level
d) facility-level
15) What statements are product costs found on?
a) only the balance sheet
b) only the income statement
c) on the balance sheet before the goods are sold, and on the income statement after the goods are sold
d) on the income statement before the goods are sold, and on the balance sheet after the goods are sold
16) Matt’s company had the following information for the year:
Direct materials used $140,000
Direct Labor incurred (8,000
hours) $190,000
Actual MOH incurred $210,000
Matt’s company used a predetermined overhead rate of $30 per direct labor hour for the year. Assume the only inventory balance
is an ending work in process inventory balance of $20,000. What was the adjusted cost of goods sold?
a) $540,000
b) $570,000
c) $600,000
d) $520,000
17) Which of the following is NOT a good reason for dell to use ABC?
a) The computer industry is highly competitive
b) Dell produces many more desktops than servers, and the servers are more difficult to assemble
c) Most costs are direct; indirect costs are a small proportion of total costs
d) Dell has advanced information technology, including bar-coded materials and labor.
18) In a job costing system, all of the following statements about materials are correct except for which of the following?
a) a materials requisition is used to request materials needed from the storeroom.
b) The job cost record for a job will contain all the direct material used for that particular job
c) Materials that cannot be traced to a particular job are treated as manufacturing overhead
d) all materials are always classified as direct materials.
19) Which is NOT an element of Toyota’s value chain?
a) administrative costs
b) cost of shipping cars to dealers
c) salaries of engineers who update car design
d) cost of print ads and television commercials
20) Dell enjoys many benefits from committing to lean production. Which is not a benefit of adopting a lean production philo-
sophy.
a) lower inventory carrying costs
b) more space available for production
c) ability to respond more quickly to changes in customer demand
d) ability to continue production despite disruptions in deliveries of raw materials
21) A company produces a single product selling for $40 per unit. Variable costs are $20, and total fixed costs are $8,000. What is
the Break-even point in sales dollars?
a) 600
b) 16,000
c) 10,000
d) 400
22) Dave’s Steel produces Steel parts for the automobile industry. The company has monthly fixed expenses of $600,000 and a
contribution margin of 80% of revenues. However, lately the automotive manufacturers are demanding lower prices, and the steel
producers have increased raw material costs. Dave’s contribution margin has shrunk to 50% of revenues. To maintain the level of
profit he did when his contribution margin was 80%, what sales dollar amount must Dave now achieve if his income prior to
these pressures was $200,000?
a) 2,000,000
b) 1,600,000
c) 1,800,000
d) 2,100,000
23) Kaitlin’s company currently sells 15,000 units a month for $50 each, has variable costs of $20 per unit, and fixed costs of
$300,000. Kaitlin is considering increasing the price of her units to $60 per unit. This will not affect costs, but demand is expec-
ted to drop 20%. Should Kaitlin increase the cost of her product?
a) No, net income will decrease $30,000
b) No, net income will decrease by $150,000
c) Yes, net income will increase $30,000
d) Yes, net income will increase $150,000
24) If a per-unit cost remains constant over a wide range of volume, the cost is most likely a:
a) variable cost
b) fixed cost
c) mixed cost
d) step cost
25) The cost per unit decreases as volume increase for which of the following cost behaviors:
a) variable costs and fixed costs
b) variable costs and mixed costs
c) fixed and mixed costs
d) only fixed costs
26) Record’s of Harrison’s traveling circus show that he had a total overhead cost of $30,000 for 900 labor hours worked and
$33,000 for 1,100 labor hours worked. What are Harrison’s total expected overhead costs if he expects that 950 hours will be
used next month.
a) 30,000
b) 35,500
c) 30,750
d) 42,000
27) If the sales of a product increases while everything else remains the same, what happens to the break-even point?
a) The break-even point will increase
b) The break-even point will decrease
c) the break-even point will remain the same
d) the effect cannot be determined without further information
28) Suppose Amazon.com is considering investing in warehouse-management software that costs $500,000, has $50,000 residual
value, and should lead to cost savings of $120,000 per year for its five-year life. What is the ARR?
a) 4%
b) 6%
c) 5%
d) 8%
29) A company plans to sell 80,000 units in June and 100,000 units in july. This company’s policy is that 15% of the following
months sales must be in ending inventory. What is the budgeted production for units in june?
a) 80,000
b) 83,000
c) 81,000
d) 79,000
30) A company finds that typically 20% of a month’s sales are cash. Payments on accounts receivable are 70% in the month of
sale and 30% in the month following sale. Budgeted sales for January are $200,000, February $250,000, and $150,000 in March.
What are the total cash receipts for February?
a) $248,000
b) $254,000
c) $238,000
d) $255,000
31) A flexible budget variance is:
a)The difference between actual costs and estimated costs found on the static budget
b)The difference between actual costs this year and the prior year’s actual costs
c)The difference between the costs of the static budget and the expected costs of the flexible budget
d)The difference between actual costs and the expected costs at the same level of actual activity
32) A company makes desks and uses a standard cost system. From the accounting records, one can see that the company’s stand-
ard costs are $3.90 per pound, and $6.00 per labor hour. Each desk uses 5 pounds of lumber, and 3 hours of labor. Materials pur-
chased and used for the year were 39,500 pounds and 22,000 labor hours. Actual material costs were $4.05 per pound and labor
actually costed $6.95 per hour. The company’s estimated production was 10,000 desks, and they actually produced 8,000. What
was the company’s materials quantity variance?
a) 5925 U
b) 1950 U
c) 5925 F
d) 1950 F
33) Using the Information from number 32, what is the Labor Rate variance?
a) 20,900 U
b) 20,900 F
c) 6000 U
d) 6000 F
34) Suppose that your aunt wants to give you $200,000 on your 35th birthday in 15 years! how much does she need to invest
now, in order to ensure that you get that much in 15 years, assuming her account earns 6%?
a) $59,000
b) $70,000
c) $83,400
d) $93,450
35) A company has an initial investment on a project of $8,000,000. The project earns annual net income of $300,000. the project
has annual depreciation of 100,000. How long will the payback period be for this project?
a) 20 years
b) 25 years
c) 10 years
d) 16 years
36) Assume you want to retire early at age 52. You plan to save using one of the following strategies. Option 1: Save $3,000 per
year in an IRA beginning when you are 22 and ending when you are 52, or option 2: wait until you are 40, and save $7,500 for
the next 12 years. which option should you choose, and how much savings will you accumulate with this option assuming that
you can get a return of 10%?
a) option 1, $493,470
b) option 2, $160,380
c) Option 1, $ 740,346
d) option 2, $205,000
37) You Won the Lottery! The state lottery offers you the following payout options: Option 1: $12,000,000 5 years from now. Op-
tion 2: $2,250,000 at the end of each year for the next five years. Option 3: $10,000,000 three years from now. Which option
would you choose with an 8% discount rate?
a) option 1
b) option 2
c) option 3
d) none of the above
38) A machine costs $90,000. A company incurs labor costs of $45,000 annually that can be avoided if the new machine is pur-
chased. The machine will also allow the company to produce an additional 8,000 units per year. The company realizes a contribu-
tion margin of $.40 per unit. The machine will cost $16,000 per year to operate. Straight line depreciation is used, and the useful
life of the machine is 9 years with no salvage value. Although the machine has a live of 9 years, a $6,000 overhaul will be re-
quired at the end of the third year. After 9 years, the machine would be sold for $20,000. The company is subject to a 30% tax
rate, and requires 10% return on all investments in the equipment. What is the present value of depreciation tax shield?
a) 16,737
b) 17,277
c) 18,717
d) 20,568
39) What is the Net Present Value of the machine mentioned in number 38?
a) $149,867
b) $59,867
c) 165,789
d) 75,449
40) Which of the following is the starting point for the master budget?
a) the sales budget
b) the direct materials
c) the production budget
d) the operating expenses budget
41) Which of the following responsibility centers is a profit center?
a) The accounting department for a local bank
b) the sales office for a charter airline service
c) the headquarters for an international tire manufacturer
d) the local branch office for a national bank
42) Which of the following managers is at the highest level of organization?
a) Cost center manager
b) revenue center manager
c) profit center manager
d) investment center manager
43) A favorable material quantity variance indicates that:
a) The standard material price is less than the actual material price
b) the actual material price is less than the standard material price
c) the actual quantity of material used is less than the standard material allowed for the actual quantity of output.
d) the standard material allowed for the actual quantity of output is less than the actual quantity of material used.
44) Advantages of using standard costs include all of the following except that
a) standard costing allows companies to create flexible budgets
b) managers can evaluate the efficiency of production workers
c) differences between the static budget and the flexible budget can be broken down into price and quantity compon-
ents
d) the price sensitivity of consumers can be analyzed
45) A company has fixed expenses of $500,000, a unit sales price of $75, and variable costs of $25. If a company
wants to make and after-tax profit of $60,000, assuming a 40% tax rate, how many units must this company sell?
a) 12,000
b) 13,000
c) 14,000
d) 15,000
46) If a company produces more units than it sells, one would expect.....
a) Net income would be greater under absorption costing than variable costing
b) Net income would be greater under variable costing than absorption costing
c) Net income would be less under variable costing than absorption costing
d) Net income would be less under absorption costing
e) a and c
47) A company is comprised of 2 divisions: Music and News. A summary of the expected operations for the year for each
division and the total corporation follows:
Music News
Sales $800,000 $2,000,000
Expenses $700,000 $900,000
Average Assets $1,000,000 $2,000,000
A new project has just been identified that could be purchased and put in place by 2010. The required investment in assets is
$500,000 and it would generate a net income of $70,000 next year. The project is available to either division.
Who would be in favor of this if their performance was evaluated based on ROI?
a) The music manager and news manager
b) Neither the music manager, nor the news manager
c) The music manager but not the news manager
d) the news manager, but not the music manager
48) Who would be in favor of investing in the new project assuming that the divisions are organized as investment centers
and their performance is evaluated on the basis of residual income? The corporate target rate of return is 12%.
a) Both managers
b) neither manager
c) the music manager, but not the news manager
d) the news manager, but not the music manager
49) If NPV is positive, the IRR is....
a) greater than the discount rate
b) less than the discount rate
c) the same as the discount rate
d) none of the above
50) Knight Fashion in New York operates 3 departments: Men’s, Women’s, and Accessories. Knight Fashion allocates all fixed
expenses (unavoidable building depreciation and utilities) based on each department’s square footage. Departmental operating in-
come data for the 3rd quarter of the current year are as follows: Department
Men’s Women’s Accessories Total
Sales Revenue $105,000 $54,000 $100,000 $259,000
Department
Variable Ex-
penses $60,000 $30,000 $80,000 $170,000
Fixed Expenses $25,000 $20,000 $25,000 $70,000
Operating In-
come (loss) $20,000 $4,000 -$5,000 $19,000
Assume that all the fixed costs are unavoidable. If Knight fashion drops one of the departments, it plans to replace the department
with a new shoe department. The company expects the Shoe department to produce $80,000 in sales and have $50,000 variable
costs. Because the shoe business would be new to Knight Fashion, the company would have to incur $7,000 of fixed costs (ad-
vertising, new shoe racks, etc) per quarter related to the department. What effect would this have on operating income?
a) decrease $3,000
b) increase $3,000
c) decrease $22,000
d) increase $22,000
51) Deep Blue manufactures flotation vests in Charleston, South Carolina. Deep Blue’s contribution margin income statement for
the most recent month contains the following data:
Sales in units 31,000
Sales Revenue $434,000
Variable Expenses $186,000
Fixed Expenses $332,000
Operating LOSS -$84,000
Deep Blue is currently producing 31,000 vests. Boats and More asks Deep Blue if they will fill a special order of 4,600 vests at
$8 each. Deep Blue’s maximum production capacity is 34,600 vests. They normally sell their vests at $14 each. If Deep Blue ac-
cepts this offer, what would the effect on sales be?
a) sales will increase by $14,000
b) sales will increase by $22,800
c) sales will decrease by $14,000
d) sales will decrease by $22,800
52) Each morning, Murry Cole stocks the drink case at Murry’s Beach Hut in Charlotte, North Carolina. Murry’s Beach Hut has
105 linear feet of refrigerated display space for cold drinks. Each linear foot can hold either five 12-oz cans or four 20-oz plastic
or glass bottles. Murry’s Hut sells three types of cold drinks.....
Cold Drink Can Size Selling price per
bottle Cost per bottle
Grand-Cola 12 oz $1.50 $0.25
Fizzle-Pop 20 oz $1.75 $0.40
Value-Soda 20 oz $2.30 $0.80
To provide variety to customers, suppose Murry refuses to devote more than 60 linear feet and no less than 5 linear feet to any in-
dividual product. Under this condition , how many linear feet of each drink should Murry stock?
a) 35 feet of value soda, 35 feet of fizzle pop, and 35 feet of grand cola
b) 60 feet of Grand Cola, 40 feet of fizzle pop, and 5 feet of value soda
c) 60 feet of value soda, 40 feet of fizzle pop, and 5 feet of grand cola
d) 60 feet of Grand Cola, 40 feet of value-soda, and 5 feet of fizzle-pop
53) A company has 3 products: 1,2, and 3. Each of these products can either be sold right away or processed further into a more
complete product. Given the following information which of the following products should NOT be processed further?
Product Current Sales Price Later Sales Price Unit cost of further pro-
cessing
ONE $5 $10 $6
TWO $10 $15 $4
THREE $15 $20 $3
a) 1, 2, 3
b) 2 and 3 only
c) 1 only
d) all should be further processed
54) Tech Systems manufactures an optical switch that is used in its final product. Tech systems incurred the following manufac-
turing costs when it produced 68,000 units last year:
Direct Materials $680,000
Direct Labor $136,000
Variable Overhead $68,000
Fixed Overhead $374,000
Manufacturing cost for
68,000 units $1,258,000
Another company has offered to sell tech systems the switch for $15.00 per unit. Assume that Tech Systems can avoid $204,000
of fixed costs a year by outsourcing production. If Tech systems accepts the offer, what effect will this have on operating income?
a) Operating income would decrease by $68,000
b) Operating income would decrease by $80,000
c) Operating income would increase by $68,000
d) Operating income would increase by $80,000
55) Rapid Scooters plans to sell a motorized standard scooter for $65 and a motorized chrome scooter for $75. Rapid Scooters
purchases the standard scooter for $50 and the chrome scooter for $55. Rapid Scooters expects to sell two chrome scooters for
every three standard scooters. Rapid Scooters’ monthly fixed expenses are $15,300. How many of each type of scooter must Rap-
id Scooters sell monthly to make $9,350?
a) 580 standard scooters and 870 chrome scooters
b) 870 standard scooters and 580 chrome scooters
c) 540 standard scooters and 360 chrome scooters
d) 360 standard scooters and 540 chrome scooters
56) A firm with a high operating leverage.......
a) has higher levels of variable costs and lower levels of fixed costs
b) has lower risk and lower potential for reward
c) has higher risk, but a lower potential for reward
d) has higher levels of fixed costs and lower levels of variable costs
