Managerial and Cost Accounting
(Exam)
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Table of Contents (click to navigate)
Cost Terms & Classifications
Answers (1 - 40)
3
7
EOQ & Inventory Control
Answers (466 - 480)
73
75
Manufacturing Costs
Answers (41 - 80)
8
11
Financial Ratios
Answers (481 - 500)
76
78
Service Department Allocations
Answers (81 - 105)
12
16
Quality & Other Terms
Answers (501 - 520)
79
81
Variable vs. Absorption Costing
Answers 106 - 130
17
20
Cost Behavior & Estimation
Answers (131 - 150)
21
23
Regression for Estimating
Answers (151 - 185)
24
28
Break-even and Cost-Volume-Profit
Answers (186 - 210)
29
32
Job Costing
Answers (211 - 240)
33
37
Process Costing
Answers (241 - 265)
38
41
Standard Costing - Direct Materials & Direct
Labor42
Answers (266 - 305)
46
Standard Costing - Manufacturing Overhead47
Answers (306 - 340)
51
Activity Based Costing
Answers (341 - 375)
52
56
Joint Costs
Answers (376 - 395)
57
60
Operating Budgets
Answers (396 - 420)
61
65
Capital Budgeting
Answers (421 - 445)
66
69
Decentralized Operations
Answers (446 - 465)
70
72
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Part 1: Cost Terms & Classifications
Multiple Choice
1.
Management accounting is usually associated with
external internal
2.
Fixed, mixed, and variable are terms used to describe how
reasonable or relevant range of volume or activities.
costs revenues
3.
The professional organization with its primary focus on management accounting is
AAA AICPA FASB
IMA
4.
Present and future costs that will differ among alternatives are considered to be
costs for making decisions.
fixed relevant
variable
5.
Generally, managerial accounting is focused on
decision making.
auditing income taxes planning
6.
Costs that are traceable to a product without allocation are described as
product costs.
assigned
direct indirect
7.
The salary of the manager of the factory maintenance department will be a direct cost to
that department, and willl be
product cost.
a direct an indirect
a prime
8.
Burden is used when referring to which of the following costs?
administrative conversion manufacturing overhead
9.
Manufacturing overhead is which type of cost?
administrative expense direct product 10.
A cost that exists, but is not explicitly stated is best described as
cost.
an imputed a relevant a variable
11.
The head of the accounting department in a very large manufacturing firm usually has the
title of
CEO CFO CIO controller
reporting.
behave within a
, control, and internal
indirect product
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3
12.
The budget that changes for increases or decreases in volume or activity is a
budget.
capital flexible static
13.
The relevant costs for a business decision are the
common differential fixed 14.
The cost to manufacture one unit of a product is likely to be
known with precision a reasonable approximation
15.
Freight-out is best classified as a
manufacturing overhead 16.
A relevant cost could include some fixed costs.
True False
17.
The lubricants used to operate a factory’s production equipment is
cost.
a direct product an indirect product a period expense
18.
The annual depreciation of the factory building is a
manager.
controllable noncontrollable
19.
The accountants’ term incremental cost is related to the economists’ term
cost.
elasticity equilibrium marginal
20.
The theory of constraints focuses on
benchmarking throughput 21.
Interest on a loan for operations is classified as a
capitalized period prime cost.
product
22.
Selling and delivery expenses are examples of
inventoriable noninventoriable costs.
product
23.
The Japanese term for continuous improvement is
JIT
kaizen kanban
costs.
past
.
nonmanufacturing expense
cost for the plant
value added
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six sigma
4
24.
For decision making,
historical replacement
25.
A variable cost is likely to remain the same
in total per unit
26.
The
contribution margin costs are likely to be more useful.
as volume changes.
is defined as revenues minus variable costs.
gross profit opportunity cost
Matching
Match one of the following terms with the definitions or descriptions listed in 27 - 40 below.
Use each term only once.
conversion drivers fixed inventory mixed 27.
28.
29.
object opportunity overhead period prime
30.
31.
34.
The term which refers to the combination of direct
materials and direct labor costs.
This term refers to the combination of direct labor
costs and manufacturing overhead costs.
The cost defined as a benefit foregone by having
selected and taken an alternative action.
The term for a past, irrelevant cost.
These costs consist of direct materials, direct
labor, and manufacturing overhead.
32.
33.
product
standard
sunk
variable
A cost term used instead of semivariable.
These costs do not change in total within a
relevant range of volume or activity.
The total of these costs will change in
proportion to the change in activity or volume.
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35.
A manufacturer’s indirect product costs are also
referred to as manufacturing
costs.
36.
A cost that is not a product cost is likely to be
a
cost.
37.
38.
39.
40.
Realistic, predetermined costs for direct
materials, direct labor, and factory overhead
describes
costs.
A product, department, service, customer, etc. to
which a cost is assigned is a cost
.
Raw materials, work-in-process, and finished
goods are the three
accounts
usually used by manufacturers.
Activity-based costing utilizes more than one of
these in the assigning of costs.
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6
Answers (1 - 40)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
internal
costs
IMA
relevant
planning
direct
an indirect
manufacturing overhead
indirect product
an imputed
controller
flexible
differential
a reasonable approximation
nonmanufacturing expense
True
an indirect product
noncontrollable
marginal
throughput
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
period
noninventoriable
kaizen
replacement
per unit
contribution margin
prime
conversion
opportunity
sunk
product
mixed
fixed
variable
overhead
period
standard
object
inventory
drivers
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7
Part 2: Manufacturing Costs
Fill-in the Blanks
41.
The manufacturing costs considered to be direct product costs are direct materials and
direct
.
42.
The manufacturing costs which are indirect product costs are the fixed and variable
manufacturing
costs.
43.
A manufacturer’s inventory classifications are raw materials,
and finished goods.
44.
A manufacturer will have cost of goods
have cost of goods purchased.
45.
The difference between full absorption costing and variable (or direct) costing involves the
assigning or not assigning of
manufacturing overhead.
46.
Words such as theoretical, practical, normal, and expected are used when discussing a
factory’s productive
.
47.
The ideal basis for assigning manufacturing overhead costs will involve a
-and-effect relationship.
48.
Instead of spreading manufacturing overhead costs on the basis of direct labor hours
or production machine hours, a more sophisticated and logical method
is
-based costing.
,
whereas a retailer will
Multiple Choice
49.
The manufacturing overhead costs are considered to be
administrative period product
50.
Conversion costs consist of
direct materials and direct labor
direct materials and manufacturing overhead
direct labor and manufacturing overhead
51.
Prime costs consist of
direct materials and direct labor
direct materials and manufacturing overhead
direct labor and manufacturing overhead
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costs.
8
52.
The factory’s maintenance department is a
production service
53.
The cost that is both a prime cost and a conversion cost is
direct materials direct labor manufacturing overhead
54.
Under conventional costing, the depreciation of the assembly line is a
direct product cost
general and administrative overhead expense
component of manufacturing overhead
55.
Under conventional costing, maintenance of the manufacturing equipment is
cost.
a direct product
an indirect product an indirect period
56.
The cost of the labor to maintain the manufacturing equipment is
cost of the maintenance department.
a direct an indirect
57.
Manufacturing overhead is
a direct an indirect
58.
The
costing system is likely to be used for the manufacturing of a basic
cabinet carried in inventory by many of the national home improvement centers.
job process
59.
The
costing system is likely to be used for the manufacturing of a custom
made display counter.
job process
60.
Variable and fixed manufacturing overhead costs are allocated to products for external
reporting purposes because of
GAAP only tax rules only both GAAP and tax rules
61.
Predetermined overhead rates are likely to be calculated by using
amounts.
annual actual annual budgeted monthly actual
62.
Manufacturing overhead costs that are actually incurred are recorded by a
a manufacturing overhead account.
debit credit
department.
product cost.
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to
9
63.
The manufacturing overhead costs applied to products will be recorded as a
in the account Overhead Applied.
debit credit
Matching
Match one of the three components of a manufactured product’s cost (DM, DL, or MO)
with the list of items 64 - 80. If the item is not a product cost, use NA for that item.
DM direct material DL direct labor 64.
MO manufacturing overhead
NA not a product cost
65.
Fuel for the fork lift trucks used in the manufacturing area.
66.
67.
Hourly wages for operators of the production machines.
The cost of water for washing the parts that were manufactured.
68.
69.
Factory supplies.
Insurance on the factory building and equipment.
Factory service department costs are likely to be part of this.
70.
Lubricants for factory equipment.
71.
Interest on loans associated with finished goods.
72.
This product cost is most likely to contain some fixed costs.
73.
Corporate office administration expenses.
74.
Real estate taxes on a building used for manufacturing.
75.
Likely to be absorbed by products through a
predetermined annual rate.
76.
The flour used by a bakery producing bread and rolls.
77.
The commissions earned by reps selling the
manufactured products.
78.
The freight-in on raw materials used in the
manufacturing process.
79.
The freight for shipping finished goods to customers.
80.
The payroll taxes applicable to the direct labor wages.
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10
Answers (41 - 80)
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
labor
overhead
work-in-process
manufactured
fixed
capacity
cause
activity
product
direct labor and manufacturing overhead
direct materials and direct labor
service
direct labor
component of manufacturing overhead
an indirect product
a direct
an indirect
process
job
both GAAP and tax rules
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
annual budgeted
debit
credit
MO
MO
DL
MO
MO
MO
MO
NA
MO
NA
MO
MO
DM
NA
DM
NA
DL
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Part 3: Service Department Allocations
Multiple Choice
81.
Service departments are likely to be
cost profit revenue
82.
Service departments refer to
administrative/office 83.
Service department costs are likely to be part of
direct materials
direct labor 84.
The allocated costs of service departments will be
producing departments.
direct indirect
85.
The factory’s maintenance department is an example of a
department.
production service
86.
The maintenance department’s wages will be
maintenance department.
a direct an indirect
cost of the
87.
The maintenance department’s wages will be
department.
a direct an indirect
cost of a production
88.
The maintenance department’s wages will be
a direct an indirect
product cost.
89.
The costs of the factory cafeteria will likely be allocated to other departments based on
the other factory departments’
number of employees
size of machines
square footage
factory centers.
departments.
selling
manufacturing overhead
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costs to the
12
Matching
For each of the items 90 - 99 select one of the following three methods for allocating
service or support department costs.
D Direct Method
S Step Method
R Reciprocal Method
90.
The least precise method of the three methods listed.
91.
This method uses simultaneous equations.
92.
Under this method, the order or sequence in which the
service department costs are allocated is important.
93.
94.
No allocation is ever made to another service department.
95.
96.
97.
98.
99.
Considers the relationships with all service departments and
production departments.
Ignores all activities between service departments.
Is the most sophisticated and precise method of the three
methods listed.
Under this method, the allocations begin with the service
department that serves the greatest number of other service
departments, or with the service department with the highest
amount of costs.
This method always recognizes work or services done
between all service departments.
Under this method, some but not all service departments
will be allocated to another service department’s costs.
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Calculations
Use the following information for answering Questions 100 - 105:
Service Dept.
Maintenance (S1)
Power (S2)
IT (S3)
Total
Direct
Costs
$ 210,000
180,000
80,000
$ 470,000
S1
15%
10%
% of Service to
S3
S2
P1
20% 10% 40%
- 10% 35%
- 60%
10%
P2
30%
40%
20%
100. Under the direct method, the amount of the Maintenance service department (S1) costs
that are allocated to the production department P1 is $
101. Under the direct method, the production department P1 will be assigned a total of
$
from the three service departments.
102. Under the direct method, the production department P2 will be assigned a total of
$
from the three service departments.
103. Assume the step method is used to allocate the service department costs in the following
order: S1, S2, S3. The amounts allocated to the other departments from S1 will be:
S2: $
S3: $
P1: $
P2: $
104. Assume the step method is used to allocate the service department costs in the following
order: S1, S2, S3. The amounts allocated to the other departments from S2 will be:
S1: $
S3: $
P1: $
P2: $
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105. Assume the step method is used to allocate the service department costs in the following
order: S1, S2, S3. After all of the allocations have been made, the total amounts of service
department costs that will be assigned to the production departments are:
P1: $
P2: $
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Answers (81 - 105)
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100. $120,000
$210,000 x 40/70
cost
factory
manufacturing overhead
indirect
service
a direct
an indirect
an indirect
number of employees
D
R
S
D
R
D
R
S
R
S
101. $264,000
S1: $210,000 x 40/70 = $120,000
S2: $180,000 x 35/75 = $ 84,000
S3: $ 80,000 x 60/80 = $ 60,000
Total to P1
$264,000
102. $206,000
S1: $210,000 x 30/70 = $ 90,000
S2: $180,000 x 40/75 = $ 96,000
S3: $ 80,000 x 20/80 = $ 20,000
Total to P2 $206,000
103. S2: $42,000
S3: $21,000
P1: $84,000
P2: $63,000
104. S1: $0
S3: $26,118
P1: $91,412
P2: $104,471
105. P1: $270,750
P2: $199,250
Solutions for Questions 103 - 105 below.
Allocation Based
on % of Service
to Departments
Direct Costs
Allocation of S1
20-10-40-30=100
Totals after S1 Allocation
Allocation of S2
10-35-40=85
Totals after S2 Allocation
Allocation of S3
S3
P1
P2
Totals
$ 210,000
S1
$ 180,000
S2
$80,000
not given
not given
$ 470,000
(210,000)
42,000
21,000
84,000
63,000
$ 222,000
$ 101,000
$ 84,000
$ 63,000
26,118
91,412
104, 471
$ 127,118
$ 175,412
$ 167, 471
222,000
60-20=80
127,118
$
-
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95,338
31,779
$ 270, 750
$ 199,250
$ 470,000
$ 470,000
$ 470,000
16
Part 4: Variable vs. Absorption Costing
Fill-in the Blanks
106. Variable costing is also known as
107. Under variable costing, the
products.
costing.
manufacturing overhead is not assigned to
108. Sales minus all variable costs and expenses equals the
.
109. A cost that is part fixed and part variable is referred to as a semivariable or
cost.
Multiple Choice
110. Which of the following would be considered to be the conventional method for inventory
costing?
absorption variable
111. In an accounting year when the number of units produced is the same as the number of
units sold, the net income under absorption costing will be
the net
income under variable costing.
more than less than equal to
112. In an accounting year when the number of units manufactured exceeds the number of
units sold, the net income using absorption costing will be
the
net income under variable costing.
more than less than equal to
113. Variable and fixed manufacturing overhead costs are assigned to products because of
GAAP only tax rules only both GAAP and tax rules
114. If you wanted to increase the gross profit in the short term, which of the following would
be compatible?
decreasing production
increasing production
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Matching
Select one of the following four answers that best matches each of the items listed
as 115 - 125.
A
V
B
N
Absorption costing only
Variable or direct costing only
Both absorption and variable costing
Neither absorption nor variable costing
115.
Fixed selling and nonmanufacturing administrative
expenses are reported as product costs.
116.
117.
Fixed manufacturing costs are inventoriable.
118.
Is more compatible with cost-volume-profit analysis.
119.
Required by GAAP for external financial reports.
Will be used with an income statement that reports the
amount of gross profit.
120.
Variable selling expenses are reported as period expenses.
121.
Variable manufacturing costs are inventoriable.
122.
Fixed manufacturing overhead costs are assigned to
products.
123.
Will be used with an internal income statement that reports
contribution margin.
124.
125.
Fixed manufacturing costs are treated as period costs
instead of product costs.
Variable manufacturing overhead costs are assigned to
products.
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Calculations
Use the following information for answering Questions 126 - 130:
During the past year a company budgeted, manufactured, and sold 100,000 units of its
only product. The selling price was $30 each.
The company’s variable costs per unit consisted of:
Direct material
Direct labor
Manufacturing overhead
Selling, general & admin
$5
$4
$11
$1
The company’s fixed costs for the year were:
Manufacturing overhead
Selling, general & admin
$ 200,000
$ 300,000
126. If the company uses variable costing for its internal financial statements and if it had
sold one less unit, it would report the unit in inventory on its internal balance sheet at
$
.
127. If the company uses absorption costing for its external financial statements and if it had
sold one less unit, it would report the unit in inventory on its external balance sheet at
$
.
128. The product’s contribution margin per unit is $
129. The product’s gross profit per unit is $
130. The company’s net income before tax is $
$
under absorption costing.
.
.
under direct costing, and
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Answers 106 - 130
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
direct
fixed
contribution margin
mixed
absorption
equal to
more than
both GAAP and tax rules
increasing production
N
A
A
V
A
B
B
A
V
V
B
$20 ($5+$4+$11)
$22 ($5+$4+$11+$2)
$9 [$30 - ($5+$4+$11+$1)]
$8 [$30 - ($5+$4+$11+$2)]
$400,000 and $400,000
Direct or Variable Cost:
Sales
$3,000,000
- Var Costs
- 2,100,000 (100,000 x $21)
= Contr Margin
900,000
- Fixed Costs
- 500,000
= Net Income
$ 400,000
Absorption Costing:
Sales
$3,000,000
- COGS
- 2,200,000 (100,000 x $22)
= Gross Profit
800,000
- SG&A variable - 100,000 (100,000 x $1)
- SG&A fixed
- 300,000
= Net Income
$ 400,000
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20
Part 5: Cost Behavior & Estimation
Fill-in the Blanks
131. Prior to using a cost estimation technique, it is prudent to first prepare a
of the activity and its related cost.
132. A cost or its related activity volume that is not consistent with the other observations
plotted on a scattergraph is referred to as an
.
133. The total dollar amount of a fixed cost is assumed to remain unchanged within a relevant
of activity or volume.
134. A statistical method for determining the relationship between costs and volume of
activities is
analysis.
135. A cost that is part fixed and part variable is referred to as a semivariable or
cost.
Multiple Choice
136. When there is an increase in volume within a reasonable range, the variable cost per unit
is assumed to
decrease
increase remain constant
137. As volume increases within a reasonable range, the fixed costs per unit will
decrease
increase remain constant
138. Within a relevant range of activity, fixed costs do not change
in total per unit of activity
139. In relationship to the machine hours used to apply manufacturing overhead to products,
which of the following is likely to be a fixed manufacturing cost?
electricity for production machinery
manufacturing supplies
wages of the factory security guard
140. When graphing the cost of electricity at various levels of machine hours, the dollars of
total electricity costs are indicated on the
.
x-axis y-axis
141. In the cost equation, y = a + bx, which term indicates the variable cost per unit of activity?
a
b
x
y
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21
142. The cost equation, y = a + bx, implies that a
linear
nonlinear
relationship exists.
143. In the cost equation, y = a + bx, “y” is the
dependent variable fixed cost
independent variable
144. In the cost equation, y = a + bx, “x” is the
dependent variable fixed cost independent variable
145. In the cost equation y = a + bx, “a” is the
dependent variable fixed cost independent variable
146. When graphing a cost that is linear, the amount of the fixed cost is the point that intercepts
the
x-axis y-axis
147. The slope of the total cost line reflects the
fixed variable
cost rate per unit.
Calculations
Use the following information for answering Questions 148 - 150:
The amounts of a company’s monthly electric bills and the number of hours that the
production machines ran between the meter reading dates shown on the electric bills
were:
Period Number
1
2
3
4
Electricity Cost
$29,500
$26,400
$33,600
$37,920
Machine Hours
1,960
1,590
2,431
2,870
148. Using the high-low method, the variable cost of electricity per machine hour is
$
.
149. Using the high-low method, the amount of fixed cost per month is $
.
150. When the number of machine hours are 2,730 the estimated amount of the electricity
cost is $
.
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22
Answers (131 - 150)
131.
132.
133.
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.
144.
145.
146.
147.
148.
graph or scattergraph
outlier
range
regression
mixed
remain constant
decrease
in total
wages of the factory security guard
y-axis
b
linear
dependent variable
independent variable
fixed cost
y-axis
variable
$9.00
($37,920 - $26,400 divided by (2,870 - 1,590)
= $11,520 divided by 1,280.
= $9.00 per hour
149. $12,090
y = a + bx
$26,400 = a + $9 (1,590)
$26,400 = a + $14,310
$26,400 - $14,310 = a
$12,090 = a
or
y = a + bx
$37,920 = a + $9 (2,870)
$37,920 = a + $25,830
$37,920- $25,830 = a
$12,090 = a
150. $36,660
y = a + bx
y = $12,090 + $9 (2,730)
y = $12,090 + $24,570
y = $36,660
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23
Part 6: Regression for Estimating
Fill-in the Blanks
151. Simple regression analysis uses the leastbest fitting line through the plotted points.
method for calculating the
152. A data point that is not representative of the typical observations is referred to as an
.
153.
regression analysis involves only one independent variable.
154. A cost that is partly fixed and partly variable is referred to as a mixed or
cost.
155. r2 is known as the “
of fit” statistic.
156. Before applying regression analysis to a set of observations, it is wise to first
the data.
157. Another term for autocorrelation is
correlation.
Multiple Choice
158. In the equation of the line, y = a + bx, “a” refers to the amount of
costs.
fixed total variable
159. In the equation of the line, y = a + bx, “b” is the
fixed total variable
cost rate.
160. In the equation of the line, y = a + bx, “y” is the
dependent variable independent variable .
volume
161. Multiple regression means there are two or more
dependent independent
variables.
162. The statistic, r, is the coefficient of
correlation
determination
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163. The statistic, r2, is the coefficient of
correlation determination
164. The percentage change in the dependent variable that is explained by the change in the
independent variable(s) is
r
r2 Se
t
165. The standard error of the coefficient provides an amount for determining the range of
a
b
x
y
166. Assume that a cost is estimated to be $10,500 + $14 DLH. If the equation has a
coefficient of correlation of 0.8 how much of the change in the total cost is explained by
the change in the number of DLHs.
0% 64% 80% 100%
167. There can be a high correlation between an independent variable and a dependent
variable without the existence of a cause and effect relationship?
True False
168. The value for the statistic, r, will always be in the following range:
-1 to 0 0 to 1 -1 to +1 another range
169. When graphing a cost line, the independent variable will be referenced by which of the
following?
x-axis y-axis
170. In the equation of the line, y = a + bx, which term indicates the slope of the line?
a
b
x
y
171. The standard error of the estimate provides an amount to be used when determining the
range of
a
b
x
y
172. Assuming costs decrease as activity or volume is increasing, the statistic, r, will be
negative positive
173. Assuming costs decrease as activity or volume is increasing, the statistic, r2, will be
negative positive
174. The cost driver in the equation y = a + bx is represented by
a
b
x
y
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175. In a simple regression analysis of 12 observations, the number of degrees of freedom will
be
.
1 2 1011121314
176. In multiple regression, multicollinearity means you
specific effect of each of the independent variables.
can cannot
177. A simple regression analysis resulting in an r2 of 0.85 is
not very
be confident in the
impressive.
178. The term used in multiple regression to describe the situation when two independent
variables are correlated to each other is
.
autocorrelation multicollinearity
179. If all of the plotted observation points lie on the regression line, the value of the statistic r2
will be
.
0
1.0 between 0 and 1.0
180. The situation where the cost of the independent variable in one month is correlated to the
cost of the same variable in the previous month (or in the following month) is known
as
.
autocorrelation multicollinearity
Calculations
Use the following information for answering Questions 181 - 185:
A manufacturer produces one uniform product. A regression analysis of its mixed costs
and units produced revealed the following:
y-intercept
15000
coefficient of the independent variable
3.0
standard error of the estimate
2000
standard error of the coefficient
0.4
appropriate t-value for 95% confidence interval
2.5
181. The average amount of the fixed costs occurring per period was calculated to be
$
.
182. The increase in the total amount of the mixed costs will be on average $
each unit manufactured.
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26
183. If 10,000 units were manufactured, the estimated total of the mixed costs would be
$
.
184. The range of the coefficient, when computed for a 95% confidence interval, is
$
to $
.
185. The range of the estimated total cost for the manufacturing of 12,000 units when a 95%
confidence interval is required will be $
to $
.
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27
Answers (151 - 185)
151.
152.
153.
154.
155.
156.
157.
158.
159.
160.
161.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
172.
173.
174.
175.
squares
outlier
Simple
semivariable
goodness
graph or plot
serial
fixed
variable
dependent variable
independent
correlation
determination
r2
b
64%
True
-1 to +1
x-axis
b
y
negative
positive
x
10
176.
177.
178,
179
180.
181.
182.
cannot
very
multicollinearity
1.0
autocorrelation
$15,000
$3.00
183. $45,000
y = a + bx
y = $15,000 + $3 (10,000)
y = $15,000 + $30,000
y = $45,000
184. $2.00 to $4.00
(3.00 + or - 2.5 ($0.40)
$3.00 + or - $1.00
185. $46,000 to $56,000
y = a + bx
y = $15,000 + $3 (12,000)
y = $15,000 + $36,000
y = $51,000
Interval is $51,000 + or 2.5 ($2,000)
= $51,000 + or - $5,000
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Part 7: Break-even and Cost-Volume-Profit
Fill-in the Blanks
186. Sales minus variable costs equals the
margin.
187. The sales in excess of the amount of sales necessary to break-even is referred to as the
margin of
.
188. The break-even point in dollars is calculated by dividing the total amount of fixed costs by
the contribution margin
.
189. The relative proportion of a company’s various products that were sold or were planned to
be sold is referred to as the company’s sales
.
190. Within a reasonable range after the break-even point, each additional unit sold should
increase the pretax profit by the amount of the
per unit.
Multiple Choice
191. When calculating the break-even point, it is assumed that the selling price per unit will
as additional units are sold.
decrease
increase remain the same
192. The break-even point is where revenues are equal to the total of
expenses.
the fixed
the variable both fixed and variable
193. Calculating the break-even point of a manufacturer will be easier if the manufacturer
uses
costing.
variable full absorption
194. When graphing the break-even point, the number of units sold will be indicated by the
-axis.
x y
195. In calculating the break-even point, it is assumed that the total amount of
costs will not change.
all fixed variable
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196. When calculating the break-even point, it is assumed that the
per unit will remain the same.
fixed total variable
costs
197. The total amount of fixed costs divided by the contribution margin per unit is the breakeven point in
.
dollars units
Calculations
Use the following information for answering Questions 198 - 202:
A manufacturer sells only one product for $30 per unit. Its variable costs are $8 for
manufacturing and $2 for selling expenses. The fixed costs per year are $100,000 for
manufacturing and $80,000 for selling and administrative expenses. The company does
not carry any inventory.
198. The company’s contribution margin per unit is $
199. In order to break-even, the company must sell
.
units.
200. The dollars of sales needed in order to break-even is $
.
201. If the company sells 10,000 units, its net income before tax will be $
.
202. If the company wants to earn $60,000 of net income before income taxes, it must sell
units of product.
Use the following information for answering Questions 203 - 206:
A consulting firm has a billing rate of $100 per hour. Its variable expenses are $20 per
hour and its fixed expenses are $150,000 per year.
203. The contribution margin ratio is
%.
204. In order to break-even the annual revenues must be $
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30
205. For the firm to have a net income of $50,000 before income taxes, the number of hours it
must bill at $100 per hour is
hours.
206. For the firm to have a net income of $90,000 before income taxes, its revenues for the
year must be $
,
Use the following information for answering Questions 207 - 210:
A company sells three types of products with the following information for the upcoming
year:
Type 1
Type 2
Selling price per unit
$10
$12
Variable cost per unit
$6
$7
Expected sales in units
30,000
20,000
Expected fixed costs and expenses for the year:
Type 3
$18
$10
50,000
Total
100,000
$496,000
$ 1430
+ 60
- 840
$ 650
$ 851
207. If the units sold are in the same proportion as the units shown above, the
+ total
19 number of
units to be sold to break-even is
units.
30
- 100
90
$ 650
208. At the break-even point, the expected number of units of Type 1 that would be sold is
units.
209. If the company’s sales mix remains the same, the total number of units required to be sold
in order to earn a profit of $93,000 is
units.
210. If a company’s sales mix remains constant and a total of 105,000 units are sold, the
company’s net income before tax will be $
.
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31
Answers (186 - 210)
186.
187.
188.
189.
190.
191.
192.
193.
194.
195.
196.
197.
198.
contribution
safety
ratio
mix
contribution margin
remain the same
both fixed and variable
variable
x
fixed
variable
units
$20
$30 - $8 - $2
199. 9,000
$180,000/$20
200. $270,000
Fixed costs of $180,000
divided by CM ratio of
0.6666667
or
9,000 units X $30
201. $20,000
10,000 units X $20 = total
CM of $200,000 minus
$180,000 of fixed costs
202. 12,000
FC of $180,000 + $60,000
of profit = $240,000 divided
by $20 CM per unit =
12,000 units
203. 80%
CM of $80 divided by
revenue of $100
204. $187,500
FC of $150,000 divided by
CM ratio of 80%
205. 2,500
$150,000 + $50,000 = $200,000
divided by $80 per hour
206. $300,000
$150,000 + $90,000 = $240,000
divided by 80%
207. 80,000
$496,000 of fixed costs divided
by $6.20 the avg CM per unit.
(Total CM of $620,000 for
expected 100,000 units =
$6.20 avg. per unit.)
208. 24,000
30,000 of 100,000 units or 30%
are expected to be Type 1.
30% of 80,000 units in Q207
209. 95,000
$496,000 + $93,000 = $589,000
divided by $6.20 per unit
210. $155,000
105,000 units times $6.20 avg =
$651,000 minus $496,000.
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Part 8: Job Costing
Fill-in the Blanks
211. Job costing is also known as job
costing.
212. Instead of stating that manufacturing overhead costs have been allocated, applied,
assigned, or spread to products, we often state that the products have
the manufacturing overhead costs.
213. The three main classifications of costs in the job cost records are direct
direct labor, and manufacturing overhead.
,
214. In traditional costing, manufacturing overhead has often been applied to jobs on the basis
of direct labor hours or production
hours.
215. Under a perpetual accounting system, when a job is completed its cost is credited to the
account work-in-process and is debited to the account with the
title
.
216. A small amount of manufacturing overhead that is either overapplied or underapplied at
the end of an accounting year is likely to be assigned to the
.
217. Under normal costing, manufacturing overhead is likely to be assigned to jobs by using a
predetermined overhead
.
218. The name of the general ledger account which serves as the control account for the job
cost records of jobs that have been started but not completed is the
account.
Multiple Choice
219. A job could be a batch of several units.
True False
220. A job costing system is more likely to be used when a company’s products or services
are
each other.
different from similar to
221. The numerator in the calculation of a predetermined overhead rate is the
amount of factory overhead.
actual estimated
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222. Ideally, the denominator in the calculation of a predetermined overhead rate is a
cost
.
budget
center driver pool
223. If a company has a significant difference between its manufacturing overhead incurred
and manufacturing overhead applied, the difference should be assigned to
cost of goods sold (COGS) only
work-in-process inventory (WIP) only
finished goods inventory (FG) only
COGS and WIP and FG
WIP and FG only
224. Assuming a high volume company has a perpetual inventory system, which of the
following accounts would you expect to have the largest account balance at the end of an
accounting year?
direct materials inventory
work-in-process inventory
finished goods inventory
cost of goods sold
225. In a job costing system, the units are likely to be produced for
inventory special orders
226. Manufacturing overhead is usually considered to be
cost.
a direct product an indirect product a direct period
227. Minor amounts of supplies, such as the glue and sandpaper used in manufacturing a
product, are likely to be charged to jobs as part of a product’s
.
administrative expense
direct materials
manufacturing overhead
228. The
clock cards are used to assign direct labor cost to jobs.
job tickets
229. Using actual materials cost, actual direct labor cost, and predetermined overhead rates is
known as
product costing.
actual normal standard
230. When the actual manufacturing overhead costs are greater than the manufacturing costs
that have been applied to products, the manufacturing overhead has been
.
overabsorbed overapplied underabsorbed
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231. To avoid monthly fluctuations in the overhead rates,
overhead rate is often used.
an annual a monthly
manufacturing
232. The costs transferred from a manufacturer’s work-in-process inventory to its finished
goods inventory is the cost of goods
.
manufactured returned sold started
233. The debit to work-in-process inventory for direct materials is the cost of materials
during the accounting period.
purchased used
Use the following information for answering Questions 234 - 235:
XYZ is a manufacturer of custom cabinetry. It uses a job order cost system with a
predetermined manufacturing overhead rate.
234. At the time that XYZ incurs indirect labor costs, the amounts will be debited to which of
the following accounts?
Manufacturing Overhead Control
Manufacturing Overhead Applied
Payroll Payable
Work-in-Process
235. The depreciation on the factory equipment used on jobs is debited to which of the
following accounts?
Accumulated Depreciation
Manufacturing Overhead Control
Manufacturing Overhead Applied
Work-in-Process
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Calculations
Use the following information for answering Questions 236 - 238:
A manufacturer uses a predetermined overhead rate for assigning manufacturing costs in
its job costing system. It has budgeted the following amounts for the upcoming year:
Direct materials
Direct labor
Manufacturing overhead
Selling and administrative expenses
Machine hours
$120,000
$100,000
$300,000
$200,000
20,000
236. The predetermined overhead rate for assigning costs to inventories and the cost of goods
sold during the upcoming year will be $
per machine hour.
237. Assuming that the actual manufacturing overhead costs end up at $313,500 and there are
actually 21,000 machine hours of production, the manufacturing overhead will
be
.
overapplied underapplied
238. The amount of the overapplied or underapplied manufacturing overhead will be
$
.
Use the following information for answering Questions 239 - 240:
A manufacturer’s work-in-process (WIP) account had a balance of $85,000 at the
beginning of the year. By the end of the year the WIP account had a debit balance of
$100,000. During the year $620,000 of manufacturing costs were debited to the WIP
account.
The company’s finished goods inventory at the start of the year was $240,000 and was
$275,000 at the end of the year.
239. The company’s cost of goods manufactured for the year was $
240. The company’s cost of goods sold for the year was $
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.
.
36
Answers (211 - 240)
211.
212.
213.
214.
215.
216.
217.
218.
219.
220.
221.
222.
223.
224.
225.
226.
227.
228.
229.
230.
231.
232.
order
absorbed
materials
machine
finished goods
cost of goods sold
rate
work-in-process
True
different from
estimated
driver
COGS and WIP and FG
cost of goods sold
special orders
an indirect product
manufacturing overhead
job tickets
normal
underabsorbed
an annual
manufactured
233. used
234. Manufacturing Overhead
Control
235. Manufacturing Overhead
Control
236. $15
$300,000 of manufacturing overhead
divided by 20,000 machine hours.
237. overapplied
Applied of $315,000 (21,000 mach hrs
x $15) versus Actual of $313,500.
238. $1,500
Applied of $315,000 (21,000 mach hrs
x $15) minus Actual of $313,500.
239. $605,000
Beg WIP of $85,000 + $620,000 =
$705,000 - $100,000 of End WIP
240. $570,000
Beginning FG inventory $240,000
+ $605,000 from WIP = $845,000 $275,000 of Ending FG inventory.
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Part 9: Process Costing
Fill-in the Blanks
241. If the units produced vary significantly from each other, a
be more advantageous than the process costing system.
costing system may
242. Because some units of products are at various stages of completion at the end of a
month,
units of production are used for assigning a department’s
manufacturing costs to products.
243. Conversion costs consist of direct
and manufacturing overhead.
244. The units completed by Department A and sent to Department B for further processing are
referred to as
units by Department A.
245. Department A’s costs for the units it sent to Department B are referred to as
costs by Department B.
246. The cost per equivalent unit is used to assign costs to units finished and to the units in the
ending
inventory.
247. In a process costing system, costs are typically collected or accumulated in
before being assigned to products.
248. In a process costing system, a
units and costs in a department.
cost report is used to account for the
Multiple Choice
249. The method in which the units in beginning inventory are treated as if they were started
and completed in the current period is
FIFO weighted average
250. Under which method are the units in beginning inventory treated separately from the units
that were started and completed in the current period?
FIFO weighted average
251. In a process costing system, the units are more likely to be produced for
inventory a customer’s special order
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Calculations
Use the following information for answering Questions 252 - 253:
At the beginning of May, a department’s beginning work-in-process consisted of 6,000
units. During May, it started 40,000 units. At the end of May its work-in-process contained
7,000 units.
252. The total number of units to be accounted for in May was
units.
253. Assuming no spoilage, the number of units that were transferred out of the department
during May was
units.
Use the following information for answering Questions 254 - 256:
In August a manufacturing department had 1) no beginning inventory, 2) started 30,000
units of product, and 3) had 2,000 units of product in work-in-process inventory at the end
of August. The ending work-in-process inventory was 100% complete for materials and
30% complete for conversion costs.
254. The department’s number of equivalent units for materials for the month of August
was
.
255. The department’s number of equivalent units for conversion costs for the month of August
was
under the weighted average method.
256. The department’s number of equivalent units for conversion costs for the month of August
was
under the FIFO method.
Use the following information for answering Questions 257 - 258:
During July, a department has 1) completed the conversion costs on the 1,000 units
of product that were 20% complete at the end of the previous month, 2) started and
completed 8,000 units, and 3) started 600 units but completed only 40% of the conversion
costs.
257. The number of equivalent units for the conversion costs under the weighted average
method is
.
258. The number of equivalent units for the conversion costs under the FIFO method
is
.
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Use the following information for answering Questions 259 - 265:
A department began the month of July with its beginning work-in-process inventory
consisting of 10,000 units which were 100% complete for materials and 40% complete
for conversion costs. The costs associated with the beginning inventory are $30,000 for
materials and $80,000 for conversion costs.
During July the department also started an additional 200,000 units. Its ending work-inprocess inventory on July 31 consisted of 20,000 units which were 100% complete for
materials and 20% complete for conversion costs.
During July the department requisitioned and used materials having a cost of $581,100
and incurred conversion costs of $2,306,200.
259. Under the weighted average method, the cost of materials per equivalent unit for July was
$
.
260. Under the weighted average method, the conversion costs per equivalent unit for July
was $
.
261. Under the weighted average method, the total cost of the units transferred out of the
department was $
(consisting of $
of materials cost,
and $
for conversion costs).
262. Under the weighted average method, the total cost of the units in the July 31 ending
work-in-process inventory was $
(consisting of $
of
materials cost and $
for conversion costs).
263. Under the FIFO method, the conversion costs per equivalent unit for July
was $
. (Round to nearest cent.)
264. Under the FIFO method, the materials costs per equivalent unit for July was
$
. (Round to nearest cent.)
265. Using the answer in Question 264 rounded to the nearest cent, the total amount of
materials costs in the July 31 ending work-in-process inventory under the FIFO method
will be $
,
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40
Answers (241 - 265)
241.
242.
243.
244.
245.
246.
247.
248.
249.
250.
251.
job
equivalent
labor
transferred-out
transferred-in
work-in-process
departments
production
weighted average
FIFO
inventory
252. 46,000
Beg WIP of 6,000 + 40,000
new units started = 46,000.
253. 39,000
46,000 units from Q252 less
7,000 units in ending WIP
254. 30,000
The beginning WIP of 0 units +
30,000 units started = 30,000
255. 28,600
Beginning WIP of 0 units +
28,000 units started and
completed = 28,000 + 30% of
2,000 units started but not
completed = 28,600.
256. 28,600
28,000 units started and
completed = 28,000 + 30% of
2,000 units started but not
completed = 28,600.
257. 9,240
1,000 units in beginning WIP
(assumed to be started in July) +
8,000 started and completed in
July + 40% of 600 started in July
but in ending WIP on July 31.
258. 9,040
800 to complete the 1,000 units
in beginning WIP + 8,000 started
and completed + 40% of 600 in
ending WIP.
259. $2.91
$30,000 + $581,100 = $611,100
divided by 210,000 (100% of 10,000
+ 180,000 + 20,000)
260. $12.30
$80,000 + $2,306,200 = $2,386,200
divided by 194,000 (10,000 +
180,000 + 4,000) equivalent units.
261. $2,889,900; $552,900;
$2,337,000
Matls: 190,000 x $2.91 = $552,900
CC: 190,000 x $12.30 = $2,337,000
262. $107,400; $58,200; $49,200
Matls: 20,000 x $2.91 = $58,200
CC: 4,000 x $12.30 = $49,200
263. $12.14
$2,306,200 divided by 190,000
(60% of 10,000 + 100% of 180,000
+ 20% of 20,000)
264. $2.91 ($2.9055)
$581,100 divided by 200,000
(180,000 + 20,000).
265. $58,200
Matls: 20,000 x $2.91 = $58,200
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Part 10: Standard Costing — Direct Materials & Direct Labor
Multiple Choice
266. The standards for the direct materials and direct labor should be
amount.
an attainable the ideal the prior year’s actual
267. The account Direct Materials Price Variance will have a
variance is unfavorable.
credit debit
balance when the
268. The invoice amount for direct materials purchased will be credited to Accounts Payable
for the
cost.
actual standard
269. The standard quantity of materials assigned to products is computed by using the actual
quantity of
.
materials requisitioned products manufactured
270. The usage and efficiency variances are
price quantity
rate variances.
271. For the end-of-the-year financial statements, a significant favorable materials price
variance that was recorded when the materials were purchased should be prorated or
assigned to
all inventories only
all inventories and the cost of goods sold
cost of goods sold only
work-in-process and finished goods inventory only
272. It is more beneficial for management purposes if the materials price variance is recorded
at the time that the materials are
purchased used
273. Which of the following machine hours is a better indicator of the volume of actual output of
products manufactured?
actual standard
274. The labor rate variance is the difference between the actual labor rate and the standard
labor rate multiplied times the
hours.
actual standard
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275. The labor efficiency variance is the actual labor hours minus the standard labor hours
multiplied times the
labor pay rate.
actual standard
276. The direct labor rate variance is
an efficiency a price a quantity
variance.
277. The total labor variance is the difference between the actual dollars of direct labor cost
and the amount the direct labor cost should have been for the actual
.
input output
Matching
Select one of the terms that best matches the descriptions listed as items 278 - 287.
Each term is to be used only once.
278.
bill budgets efficiency output price rate standard
unfavorable The standard quantity of materials for a given
product can be found in the product’s
of materials.
279.
The difference between an actual cost and a
standard cost.
280.
The materials variance that is best recorded
at the time the materials are purchased.
281.
The name often used for the materials
quantity variance.
282.
The name of the direct labor quantity variance.
283.
The name of the direct labor price variance.
284.
285.
usage
variance
The units of good products actually manufactured
are referred to as the good
.
When the standard hours for the goods
manufactured are less than the actual hours, the
labor quantity variance is said to be
286.
The standard costs are often derived from the
company’s annual
or profit plan.
287.
If the materials price variance is recognized at the
time of purchase, the materials will be reported in
inventory at their
cost.
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43
Calculations
Use the following information for answering Questions 288 - 296:
A company manufactures only one product and its only direct material is aluminum. A
standard cost system is used and the direct materials price variances are recorded at
the time that the aluminum is received from the supplier. The data applicable to the direct
materials for a recent month include:
Pounds of aluminum received Amount paid per pound
Standard cost per pound Number of units of product
manufactured Standard quantity of aluminum
required for each unit of product
Actual pounds of aluminum used 40,000
$ 1.30
$ 1.20
10,000
0.8 pound
8,300
288. The total cost actually paid for the aluminum received was $
.
289. The total cost debited to the direct materials inventory was $
.
290. The purchase price variance for the month was
favorable
unfavorable no variance
291. The amount of the purchase price variance for the month was $
.
292. The number of pounds of aluminum that should have been used is
.
293. The total amount credited to the direct materials inventory account during the month was
$
.
294. The materials usage variance for the month is
favorable unfavorable no variance
295. The amount of the materials usage variance was $
.
296. The total standard direct materials cost for the products manufactured was $
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.
44
Use the following information for answering Questions 297 - 305:
A company using standard costing has the following direct labor information associated
with one of its products.
Number of units of product manufactured
Labor hours allowed for one unit of product Actual direct labor hours worked
Actual hourly pay rate
Standard hourly pay rate 2,000
3
6,200
$ 15.00
$ 14.00
297. If no overtime was worked, the actual labor cost was $
.
298. The number of hours allowed for the units produced was
299. The labor efficiency variance was
favorable unfavorable .
no variance
300. The amount of the labor efficiency variance was $
301. The amount of the labor rate variance was $
302. The labor rate variance was
favorable
unfavorable .
.
no variance
303. The total standard cost for direct labor for the units manufactured was $
304. The total direct labor variance for the units manufactured was $
305. The total direct labor variance was
favorable
unfavorable .
.
no variance
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45
Answers (266 - 305)
266.
267.
268.
269.
270.
271.
272.
273.
274.
275.
276.
277.
278.
279.
280.
281.
282.
283.
284.
285.
286.
287.
an attainable
debit
actual
products manufactured
quantity
all inventories and the cost of goods sold
purchased
standard
actual
standard
a price
output
bill
variance
price
usage
efficiency
rate
output
unfavorable
budgets
standard
288. $52,000
40,000 lbs X $1.30
289. $48,000
40,000 lbs X $1.20
290. unfavorable
291. $4,000
40,000 lbs X $0.10
292. 8,000
10,000 units mfd X 0.8 lb.
293. $9,960
8,300 lbs X $1.20
294. unfavorable
295. $360
$9,960 - $9,600
(or 300 lbs. x $1.20)
296. $9,600
10,000 units X 0.8 lbs X $1.20
297. $93,000
6,200 hrs X $15
298. 6,000
2,000 units X 3 hrs
299. unfavorable
6,200 actual v. 6,000 allowed
300. $2,800
6,200-6,000=200 hrs X $14
301. $6,200
$15-$14=$1 X 6,200 hrs
302. unfavorable
303. $84,000
2,000 units X 3 hrs = 6,000 X $14
304. $9,000
Actual 6,200 hrs X $15 = $93,000
Std 6,000 hrs X $14 = $84,000
Variance = $9,000
305. unfavorable
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46
Part 11: Standard Costing — Manufacturing Overhead
Fill-in the Blanks
306. A budget that increases as volume increases is known as a
budget.
307. The variable overhead variances include the spending variance and the
variance.
308. The fixed overhead variances include the budget variance and the production
variance.
Multiple Choice
309. If manufacturing overhead is applied using the standard direct labor hours and the actual
direct labor hours were more than standard, which overhead variance will occur?
efficiency spending
310. If a company’s production has absorbed more manufacturing overhead than the actual
manufacturing overhead incurred, the total overhead variance will be
favorable unfavorable need more information
311. When the real estate taxes on the factory building are greater than the amount used
in calculating the standard costs, which manufacturing overhead variance would you
expect?
budget
efficiency volume
312. When the actual cost of each gallon of lubricants used for the production equipment
is greater than the cost used in setting the standards, which manufacturing overhead
variance would you expect?
efficiency
spending volume
313. A manufacturer assigns variable factory overhead on the basis of machine hours. Its
variable factory overhead spending variance will be the difference between 1) the actual
amount of variable factory overhead costs incurred, and 2) the budget amount based on
the
machine hours.
actual standard
314. The largest unfavorable volume variance is likely to occur when the standard overhead
costs are established using the
capacity.
expected practical
theoretical
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315. Which of the following could possibly cause an unfavorable variable manufacturing
overhead efficiency variance?
inefficient direct labor
an unplanned increase in real estate taxes on the factory
an unexpected price in the cost of manufacturing supplies
316. Which of the variable manufacturing overhead variances will be affected by the electric
utility increasing its rates per kilowatt hour?
efficiency spending
317. The production volume variance pertains to the
costs.
fixed total variable
manufacturing overhead
318. The 2-way and 3-way variance analysis pertains to
fixed manufacturing overhead only
variable manufacturing overhead only
all manufacturing overhead (fixed and variable)
319. The
variance will appear as the same amount in both the 2-way and the
3-way variance analysis of overhead.
efficiency spending volume
320. The manufacturing overhead budget for
flexible budget.
fixed total variable
costs will not change under a
321. The spending variance is the difference between the
budget for variable
manufacturing overhead and the actual amount of the variable manufacturing overhead
costs incurred.
flexible master
static
322. The
variance is the difference between 1) the fixed manufacturing overhead
absorbed by (or assigned to) the products manufactured, and 2) the budgeted amount of
fixed manufacturing overhead.
efficiency spending volume
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48
Calculations
Use the following information for answering Questions 323 - 331:
A company uses a standard costing system and assigns variable manufacturing overhead
to its only product on the basis of standard direct labor hours (DLHs). During the past
year, the company experienced the following:
Actual variable manufacturing overhead costs
Standard variable manufacturing overhead cost per DLH
Standard DLHs per product
Actual direct labor hours
Number of units of product manufactured
$394,000
$ 10.00
2
42,000
20,200
$ 1430
+ 60
- 840
$ 650
$ 851
323. The standard variable manufacturing overhead cost assigned to each unit
of product
+ 19
is $
.
30
- 100
90
$ 650
324. In the past year, the total amount of standard variable manufacturing overhead costs
assigned to the units manufactured was $
.
325. The total variance for the variable manufacturing overhead was $
.
326. The total variance for variable manufacturing overhead is
favorable
unfavorable no variance
327. The variable manufacturing overhead efficiency variance is $
.
328. The variable manufacturing overhead efficiency variance is
favorable
unfavorable no variance
329. The flexible budget for variable manufacturing overhead is $
.
330. The variable manufacturing overhead spending variance is $
.
331. The variable manufacturing overhead spending variance is
favorable
unfavorable no variance
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49
Use the following information for answering Questions 332 - 340:
A company uses a standard costing system and assigns fixed manufacturing overhead
to its only product based on standard direct labor hours (DLHs). During the past year, the
company experienced the following:
Actual fixed manufacturing overhead costs
Budgeted fixed manufacturing overhead costs
Planned/denominator volume in DLHs
Standard DLHs per product
Actual direct labor hours
Number of units of product manufactured
$518,000
$504,000
24,000
2
24,600
12,100
$ 1430
+ 60
- 840
$ 650
$ 851
+ 19
332. The standard rate for applying the fixed manufacturing overhead to products
30 was
- 100
$
per direct labor hour.
90
$ 650
333. The fixed manufacturing overhead absorbed by the products manufactured was
$
.
334. The flexible budget for fixed manufacturing overhead for the year was $
335. The amount of the budget or spending variance was $
.
.
336. The budget variance for the fixed manufacturing overhead was
favorable unfavorable no variance
337. The manufacturing overhead volume variance was $
338. The production volume variance was
favorable unfavorable .
no variance
339. The total variance for fixed manufacturing overhead was $
.
340. The total variance for fixed manufacturing overhead was
favorable unfavorable no variance
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50
Answers (306 - 340)
306.
307.
308.
309.
310.
311.
312.
313.
314.
315.
316.
317.
318.
319.
320.
321.
322.
flexible
efficiency
volume
efficiency
favorable
budget
spending
actual
theoretical
inefficient direct labor
spending
fixed
all manufacturing overhead
(fixed and variable)
volume
fixed
flexible
volume
323. $20 (2 DLH X $10)
324. $404,000
20,200 units X 2 DLH
= 40,400 X $10
329. $420,000
42,000 DLH X $10
330. $26,000
Actual $394,000 v.
Flexible Budget of $420,000
331. favorable
332. $21
$504,000/24,000 DLH
333. $508,200
12,100 units X 2 DLH =
24,200 X $21
334. $504,000
(given in intro)
335. $14,000
actual of $518,000 - budget
of $504,000.
336. unfavorable
325. $10,000
$404,000 - $394,000
337. $4,200
$508,200 applied $504,000 budget
326. favorable
actual was less than standard
338. favorable
Applied more than budget.
327. $16,000
42,000 DLH X $10 =
$420,000 - $404,000
339. $9,800
Actual $518,000 - $508,200
applied.
328. unfavorable
340. unfavorable
Applied less than the
amount incurred.
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51
Part 12: Activity Based Costing
Fill-in the Blanks
341. In a conventional or traditional costing system, the manufacturing overhead costs were
often assigned to products on the basis of
hours or dollars, or
on production machine hours.
342. The ABC system assumes that resources are consumed or are caused by
.
343. In a modern production facility with a diversity of products, the allocation of manufacturing
overhead on the basis of production machine hours is not likely to reflect a
-and-effect-relationship.
344. Rather than merely spreading manufacturing costs to products, ABC attempts to assign
the costs based on their root
.
345. An extension of ABC is ABM, the acronym for activity-based
346. Product complexities cause
.
, which in turn cause costs.
347. The second stage of an ABC system usually assigns the accumulated costs in stage 1 to
a product or service by using an activity cost
.
Multiple Choice
348. Activity-based costing systems will use
costing system.
less more
cost drivers than a traditional
349. Traditional or conventional costing systems usually assign
overhead to products.
manufacturing
nonmanufacturing
both manufacturing and nonmanufacturing
350. Traditional costing systems generally assign manufacturing overhead costs to products in
proportion to the
of production.
complexity volume
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351. In the past 50 years, manufacturing overhead costs have generally
percentage of a product’s manufacturing cost.
decreased increased
as a
352. Under a traditional or conventional costing system, products with small
production runs and which require special handling would likely be assigned too
manufacturing overhead.
little much
353. Activity-based costing systems will likely have
conventional costing systems.
less more
354. ABC systems improve the allocation of
traditional/conventional costing systems.
direct indirect
cost pools than traditional/
costs when compared to
355. Which of the following would be the best driver of the costs associated with setting up a
production machine in a job shop?
direct labor hours
direct material pounds
production machine hours
number of customer orders
356. When a manufacturer’s products vary in complexity, its more complex products are
generally assigned too little manufacturing overhead costs under
costing system.
an ABC a traditional
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Matching
Assuming a job shop (as opposed to a continuous process operation), select one of the
following five types of activities or costs for each of the items 357 - 371.
U
B
P
F
O
Unit-level activity or cost
Batch-level activity or cost
Product-level activity or cost
Facility-level activity or cost
Organization-level activity or cost
357.
Machine setup labor.
358.
Traditional costing systems generally assign
manufacturing overhead costs on this basis.
359.
Security services for the factory.
360.
Material handling labor.
361.
Often referred to as “volume related.”
362.
Design and engineering the product lines.
363.
Operating the production equipment.
364.
Inspecting the first items of a production run.
365.
Salaries of the corporation’s CEO and CFO.
366.
Machine hours would be a valid cost driver for this.
367.
Maintaining the bills of material.
368.
Lighting and heating of the factory.
369.
Least likely to be assigned to products.
370.
Electricity to operate the assembly line.
371.
Depreciation on the factory building.
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Calculations
Use the following information for answering Questions 372 - 375:
A company’s budget for next year’s operations includes:
Manufacturing overhead costs
Setting up machines and related
movement of materials
All other manufacturing overhead
(all caused by production hours)
Total manufacturing overhead
Number of machine setups
Number of production machine hours
$ 100,000
700,000
$ 800,000
200
20,000
372. Under traditional costing where the $800,000 is applied on 20,000 machine hours, the
overhead costs assigned to a product that required one production run of 16,000 units
and required 1,000 machine hours will be $
per unit of product.
373. Under traditional costing where the $800,000 is applied on 20,000 machine hours, the
overhead costs assigned to a product that required one production run of 1,500 units and
required 90 machine hours will be $
per unit of product.
374. Under activity based costing where there are two activities (setup and production), the
overhead cost assigned to a product that required one production run of 16,000 units and
required 1,000 machine hours will be $
per unit of product.
(Round the answer to nearest cent.)
375. Under activity based costing where there are two activities (setup and production), the
overhead costs assigned to a product that required one production run of 1,500 units and
required 90 machine hours will be $
per unit of product.
(Round the answer to nearest cent.)
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55
Answers (341 - 375)
341.
342.
343.
344.
345.
346.
347.
348.
349.
350.
351.
352.
353.
354.
355.
356.
357.
358.
359.
360.
361.
362.
363.
364.
365.
direct labor
activities
cause
causes
management
activities
driver
more
manufacturing
volume
increased
little
more
indirect
number of customer orders
a traditional
B
U
F
B
U
P
U
B
O
366.
367.
368.
369.
370.
371.
U
P
F
O
U
F
372. $2.50
$800,000/20,000 MH = $40 per MH.
$40 x 1,000 MH = $40,000/16,000 units.
373. $2.40
$800,000/20,000 MH = $40 per MH.
$40 x 90 MH = $3,600/1,500 units.
374. $2.22
$700,000/20,000 MH = $35 per MH.
$100,000/200 setups = $500.
$35 x 1,000 MH = $35,000 + one
setup at $500 = $35,500/16,000 units.
375. $2.43
$700,000/20,000 MH = $35 per MH.
$100,000/200 setups = $500.
$35 x 90 MH = $3,150 + one setup at
$500 = $3,650/1,500 units.
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Part 13: Joint Costs
Fill-in the Blanks
376. The point at which two or more products emerge from a common process is
the
point.
377. The costs of a process from which two or more products emerge are referred to as
common or
costs.
378. A frequent decision at the point where two or more products emerge from a common
process is whether to 1) sell the products at that point, 2) or to
them
further.
379. The main products that emerge from a common process and have significant sales value
are known as
products.
380. A product that emerges from a common process but its total sales value is insignificant is
known as a
.
381. Net
value is the estimated sales value in the ordinary course of
business minus the costs to complete and dispose.
382. The benefit foregone by choosing another course of action is known
as the
cost.
Multiple Choice
383. A separable cost occurs
after before
the split-off point.
384. The allocation of joint costs at the split-off point is based on the net realizable of the units
.
produced sold
385. The joint costs that have been allocated to products are usually
the decision of whether or not to further process a joint product.
irrelevant relevant
386. A past cost that is irrelevant for a decision is referred to as
an incremental a marginal a sunk
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in
cost.
57
387. Opportunity costs are usually found in a company’s general ledger.
True False
388. The decision of whether or not to further process a joint product should be based on
which of the following?
incremental future costs joint costs
389. If a joint product is further processed because it is not saleable at the split-off point, which
of the following would be more logical for allocating the joint costs?
net realizable value at the split-off point
sales value after additional processing
390. One method for accounting for a by-product is to assign it with its net realizable value at
the split-off point and then to
the common
costs that will be allocated to the joint products.
add that amount to deduct that amount from
391. Generally it is better to allocate joint costs on the basis of
of joint products.
number of units net realizable value
392. The allocation of joint costs is required for
decision making
external financial reporting
both decision making and external financial reporting
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58
Calculations
Use the following information for answering Questions 393 - 395:
A, B, and C are three main products that emerge from a common process. The total costs
of the common process for a recent accounting period were $500,000 and are allocated
on the sales value at the split-off point. The following information is also available:
Number of units produced
Sales value at split-off point
Product A
60,000
$ 600,000
Product B
40,000
$ 360,000
Product C
20,000
$ 240,000
393. The total amount of joint costs allocated to Product B is $
394. The allocated costs will be $
Total
120,000
$ 1,200,000
.
per unit of Product C.
395. Assume that a by-product emerges at the split-off point along with the Products A, B, and
C. If the by-product is assigned its net realizable value of $10,000 the total joint costs
allocated to Product A will be $
,
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59
Answers (376 - 395)
376.
377.
378.
379.
380.
381.
382.
383.
384.
385.
386.
387.
388.
389.
split-off
joint
process
joint
by-product
realizable
opportunity
after
produced
irrelevant
a sunk
False
incremental future costs
net realizable value at
the split-off point
390. deduct that amount from
391. net realizable value
392. external financial reporting
393. $150,000
Product B’s share of the joint costs is 30%
of $500,000, or $150,000. 30% is based on
sales value of $360,000 out of $1,200,000.
394. $5.00
Product C’s share of the joint costs is 20%
of $500,000, or $100,000. $100,000/ 20,000
units of Product C is $5 per unit. The 20%
was C’s sales value of $240,000 divided by
the total sales value of $1,200,000.
395. $245,000
The joint costs to be allocated to Products
A, B, and C amount to $490,000 (the joint
costs of $500,000 minus $10,000 assigned
to the by-product).
Product A’s sales value at the split-off
point is $600,000 out of $1,200,000 or 50%.
50% of the $490,000 of costs to be
allocated to the main products is $245,000.
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60
Part 14: Operating Budgets
Fill-in the Blanks
396. Prior to the preparation of the master budget, a company’s
and the
strategies for achieving them should be articulated by the leaders of the company.
397. The production budget is driven by the
398. A company’s profit plan or
financial budgets.
budget.
budget includes all of the operating and
399. A budget that will increase when volume increases is referred to as
a
budget.
400. The difference in the number of units in the sales budget versus the number of units in the
production budget is explained by the change in the number of units in
.
401. The materials needed for each unit to be manufactured can be found in each product’s
of materials.
402. Accountants refer to the differences between budgeted amounts and actual amounts as
favorable or unfavorable
.
403. Management by
expected amounts.
has its focus on the deviations from the
404. A budgeted financial statement is sometimes referred to as a profinancial statement.
405.
costs are predetermined costs for direct materials, direct labor,
and manufacturing overhead that are based upon the per unit amounts in the company’s
annual profit plan.
406.
budgeting focuses on the expenditures for fixed assets that will likely
affect the operating budgets of several years.
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Multiple Choice
407. The sales and production budgets will include the number of units of product as well as
dollar amounts.
True False
408. A
flexible budget is the better measure of a department’s efficiency.
static
409. The cash budget is referred to as
a financial an operating
budget.
410. The budgeted income statement is part of the
financial operating
budget.
411. The
budget consists of the materials budget, the labor budget, and
the manufacturing overhead budget.
production purchasing sales
412. The master budget is typically prepared for
one year two years
three years five years
.
413. Which type of planning has a more long-term focus?
strategic
tactical
414. A budget that adds a future month and deletes the month that has just ended is referred
to as a
budget.
continuous
flexible
static
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Calculations
415. A company is forecasting its sales for next year to be 150,000 units. At the end of the
current year it expects to have 10,000 units in inventory and to end next year with 12,000
units in inventory. The number of units to be produced during the next year should be
units.
Use the following information for answering Questions 416 - 417:
A company’s sales budget includes the following forecast:
January
February
March
$ 40,000
$ 50,000
$ 70,000
40% of each month’s sales are collected in the month of the sales, and the remaining
60% is collected in the month following the sales.
416. The expected amount of cash to be received during March is $
.
417. The projected balance in Accounts Receivable at March 31 is $
.
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63
Use the following information for Questions 418 - 420:
A company’s production budget shows the following number of units of product to be
manufactured in the next year:
January
February
March
April
20,000
15,000
17,000
25,000
Each unit of product requires two pounds of plastic pellets.
The company’s practice is to have on hand at the end of each month 60% of the pounds
of plastic pellets required for the following month’s production.
The purchases of pellets occur throughout each month at the contracted price of $1.50
per pound. The purchases for each month are paid for in the month following the
purchase.
418. The number of pounds of plastic pellets that needs to be on hand at the end of February
is
pounds.
419. The number of pounds of pellets to be purchased in March will be
pounds
420. The amount to be remitted in April for the purchase of plastic pellets is $
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64
Answers (396 - 420)
396.
397.
398.
399.
400.
401.
402.
403.
404.
405.
406.
407.
408.
409.
410.
411.
412.
413.
414.
goals
sales
master
flexible
inventory
bill
variances
exception
forma
Standard
Capital
True
flexible
a financial
operating
production
one year
strategic
continuous
415. 152,000
150,000 + 12,000 = 162,000 - 10,000.
OR
150,000 + 2,000 for the increase in
inventory.
416. $58,000
40% x March’s $70,000 plus 60% x
February’s $50,000.
417. $42,000
60% x March’s $70,000.
418. 20,400
March’s production of 17,000 units x
2 lbs = 34,000 lbs x 60%.
419. 43,600
March’s production of 17,000 units x 2 lbs.
equals 34,000 lbs, minus 20,400 lbs on
hand at Feb 28 + the March 31 requirement
of 60% x April’s 25,000 units x 2 lbs.
420. $65,400
43,600 lbs from Q419 x $1.50 per lb.
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Part 15: Capital Budgeting
Fill-in the Blanks
421. Recognizing that a dollar in the future is worth less than a dollar today is the essence of
the
value of money.
422. A series of equal amounts occurring at equal time intervals describes an
.
423. Methods that compute the present value of future cash flows are referred to
as
cash flow techniques.
424. Part of the difference between an investment’s net income during a specific year and
its net cash flow during the same year is usually attributable to
expense.
Multiple Choice
425. The conventional payback period is calculated by using
accounting net income
discounted cash flows
undiscounted cash flows
426. Which rate used for discounting will result in the largest present value?
10% 14%20%
427. Which of the following techniques does not consider the long-term profitability of a
potential investment project?
internal rate of return net present value payback
428. A project’s discounted cash flows result in a negative present value. This indicates that
the project will have a negative accounting net income.
True False
429. The
accounting rate of return does not consider the time value of money.
adjusted internal
430. The cash savings from depreciation is the income tax deduction for depreciation multiplied
by the income tax rate.
True False
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66
431. The factors taken from a present value of 1 table assume the amounts occur
the period.
at the beginning of at the end of evenly throughout
432. Which of the following rates would not be appropriate for discounting an investment’s
future cash flows?
cost of capital hurdle loan interest target
433. If a project is considered to be risky, the rate used to discount its cash flows should
be
the rate used to discount the cash flows of a project
considered to be more safe.
higher than lower than
the same as
434. Using an accelerated depreciation method on a company’s income tax return instead of
the straight-line method will
the net present value and internal rate of
return.
decrease
increase have no effect on
435. The internal rate of return calculation uses cash flows, while the accounting rate of return
calculation uses accrual accounting net income amounts?
True False
436. A series of equal amounts occurring at the end of a time period describes
an
.
annuity due annuity in advance ordinary annuity
437. An annuity in arrears is also known as an
annuity due annuity in advance .
ordinary annuity
438. The
rate of return is the rate that discounts the future cash flows to the
exact amount of the investment.
accounting internal
target
439. A project’s accounting income divided by the investment or the average investment
describes which of the following?
accounting rate of return
internal rate of return
net present value
payback period
440. A project under consideration indicates a net present value of $0 when its cash flows are
discounted at 12%. This project’s internal rate of return is
a negative percentage 0%
12%
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Calculations
Use the following information for Questions 441 - 444:
XYZ Corp plans to make an investment of $400,000 on January
1, 2012. The project willl have a life of 5 years and will involve the
following cash amounts:
Cash payment on Jan. 1, 2012
Cash receipt on Dec. 31, 2012
Cash receipt on Dec. 31, 2013
Cash receipt on Dec. 31, 2014
Cash receipt on Dec. 31, 2015
Cash receipt on Dec. 31, 2016
441. The payback period is
Cash Out
$400,000
Cash In
$ 50,000
100,000
150,000
200,000
100,000
Present Value
Factors
for i = 12%
n
0
1
2
3
4
5
Factor
1.000
0.893
0.797
0.712
0.636
0.567
years.
442. Assuming a required rate of return of 12%, the present value of the cash receipts from
this project is $
.
443. If rate of return of 12% is required, the net present value of this project is $
444. The internal rate of return on this investment is slightly
less more
.
than 12%.
445. A $70,000 investment on January 1, 2012 will result in a one-time receipt of $100,000 on
December 31, 2014. Assuming a required rate of return of 12%, the net present value of
the investment is $
.
(Use the present value factors shown in the introduction to Questions 441 - 444.)
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68
Answers (421 - 445)
421.
422.
423.
424.
425.
426.
427.
428.
429.
430.
431.
432.
433.
434.
435.
436.
437.
438.
439.
time
annuity
discounted
depreciation
undiscounted cash flows
10%
payback
False
accounting
True
at the end of
loan interest
higher than
increase
True
ordinary annuity
ordinary annuity
internal
accounting rate of return
440. 12%
441. 3.5
$50,000 + $100,000 + $150,000 +
half of $200,000 = $400,000.
442. $415,050
$50,000 x 0.893 = PV
$44,650
$100,000 x 0.797 =
79,700
$150,000 x 0.712 =
106,800
$200,000 x 0.636 =
127,200
$100,000 x 0.567 =
56,700
Total present value = PV $ 415,050
443. $15,050
$415,050 - $400,000 = $15,050.
444. more
445. $1,200
in: $100,000 x 0.712 = PV$ 71,200
out: ($70,000) x 1.000 = ( 70,000)
Net Present Value = $1,200
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Part 16: Decentralized Operations
Fill-in the Blanks
446. ROI is the acronym for
.
447. RI is the acronym for residual
.
448. ROCE is the acronym for return on
.
449. The benefit foregone by carrying out another alternative is the
cost.
450. A division’s profit minus a charge for its assets or capital employed is its
income.
451. The per unit selling price and purchase price for a product sold between two divisions of
the same corporation is known as the
price.
452. Asset turnover is calculated by dividing a division’s net
amount of assets.
by its average
453. Goal
refers to a decentralized division taking an action that is
best for itself and for the entire corporation.
Multiple Choice
454. The best transfer price is the company’s
transfer plus the company’s opportunity cost.
fixed incremental total
cost to the point of
455. Residual income is stated as a
dollar amount percentage
456. A potential project with an ROI of 15% could have a greater residual income than a project
having an ROI of 20%.
True
False
457. Residual income includes
the actual interest an imputed
cost for the capital employed.
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70
Matching
Match one of the following centers with items 458 - 463.
A center may be used more than once, or not at all.
C
R
P
I
cost center
revenue center
profit center
investment center
458. _________ An assembly line.
459. _________ Responsible for return on capital employed.
460. _________ Not responsible for revenues.
461. _________ Responsible for revenues and expenses, but not investments.
462. _________ Often a department or part of a department.
463. _________ Is able to add or eliminate assets.
Calculations
Use the following information for Questions 464 - 465:
During its most recent accounting year, Division X of Conglomerate Corporation had
a net income before tax of $1,200,000 and residual income before tax of $400,000.
Conglomerate Corporation uses 16% as the cost of capital.
464. The amount of capital employed at Division X was $
465. Division X earned
.
% on its capital employed.
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71
Answers (446 - 465)
446.
447.
448.
449.
450.
451.
452.
453.
454.
455.
456.
457.
458.
return on investment
income
capital employed
opportunity
residual
transfer
sales
congruence
incremental
dollar amount
True
an imputed
C
459.
460.
461.
462.
463.
I
C
P
C
I
464.
$5,000,000. Imputed cost of capital
was $800,000 (net income of $1,200,000
versus the residual income of $400,000).
The amount of capital employed is the
imputed cost of capital of $800,000
divided by 16%.
465.
24%. Net income of $1,200,000 divided
by $5,000,000 of capital employed.
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Part 17: EOQ & Inventory Control
Fill-in the Blanks
466. The time between the placing of an order and the receipt of the goods that were ordered
is known as
time.
467. The
should be ordered.
point is the physical quantity of goods on hand when more goods
468. The EOQ model determines the quantity to be ordered so as to minimize the total cost of:
1) the cost of
and 2) the cost of holding the inventory.
469. When a customer’s order cannot be filled because an item is not in inventory, it causes a
cost referred to as a
cost.
470. The additional quantity of inventory held by a company so that it will not run out of stock
when there is an unexpected increase in demand for its product is known as
stock.
471. If the EOQ model is used to determine a manufacturer’s economic production quantity,
the cost to order is replaced by the costs related to
a machine for
a production run.
472. MRP is the acronym for materials
planning.
Multiple Choice
473. Since the EOQ is the square root of several variables, the EOQ model is relatively
insensitive to small errors in estimating those variables.
True False
474. Some companies classify their inventory items as “A” items, “B” items, and “C” items.
Which of the following is the best description of the “A” items?
15% of the items which account for 80% of the dollars
15% of the items which account for 15% of the dollars
70% of the items which account for 5% of the dollars
475. Which of the following is the most logical calculation of a company’s inventory turnover?
annual cost of goods sold divided by year-end inventory
annual net sales divided by year-end inventory
annual cost of goods sold divided by the average inventory
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73
476. Which of the following is a cost of holding inventory?
preparing the purchase order
risk of obsolescence
receiving and stocking the goods ordered from a supplier
477. The EOQ model includes a variable to recognize the price discount granted for ordering a
larger quantity.
True
False
478. The EOQ model can result in additional profit without the need for capital expenditures.
True False
479. The costs used in the EOQ model are the incremental costs.
True
False
480. One of the amounts entered into the EOQ model is the demand
during the lead time for one year
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.
74
Answers (466 - 480)
466.
467.
468.
469.
470.
471.
472.
473.
474.
475.
476.
477.
478.
479.
480.
lead
reorder or order
ordering
stock-out
safety
setting up
requirements
True
15% of the items which account for 80% of the dollars
annual cost of goods sold divided by the average inventory
risk of obsolescence
False
True
True
for one year
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Part 18: Financial Ratios
Fill-in the Blanks
481. Current assets minus current liabilities is the calculation to determine the amount of a
company’s
.
482. Current assets divided by current liabilities is the calculation for the
ratio.
483. A common-size balance sheet is prepared by dividing all of the dollar amounts by the
amount of total
.
484. A common-size income statement is prepared by dividing all of the dollar amounts by the
amount of net
.
485. Another name for the quick ratio is the
-test ratio.
486. The numerator in the calculation of the receivable turnover ratio is the net credit
for the year.
487. The inventory turnover ratio is best computed with the numerator being the
.
488. In the calculation of asset turnover, the numerator is net
.
489. To compute the earnings per share (EPS), you must deduct the preferred stock’s
requirement from the corporation’s net income.
Multiple Choice
490. Earnings per share is based on the weighted-average number of
shares of common stock.
authorized issued outstanding
491. Which of the following current assets is also a quick asset?
accounts receivable inventory supplies
492. The logical denominator in the turnover ratios should be the
the year.
average
beginning ending
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amounts for
76
493. In the calculation of the return on assets, the numerator is
gross profit net income
net sales
494. The times interest earned ratio refers to a company’s interest
coverage
income
.
.
495. The dividend payout ratio compares the cash dividend per share of common stock to the
corporation’s
per share of common stock.
market value net income
Calculations
496. If the inventory turnover ratio is 9, the days sales in inventory is
days.
Use the following information for answering Questions 497 - 500:
For the past year, a company had net credit sales of $770,000 plus cash sales of
$210,000. Its average balance in Accounts Receivable was $70,000.
The company’s cost of the goods sold averaged 70% of selling prices. During the past
year its average inventory was $100,000.
497. The company’s gross margin was
% of the sales value.
498. During the past year the accounts receivable turned over on average
times.
499. On average, the number of days of credit sales that were uncollected during the past year
was
days. (Round the answer to the nearest whole day.)
500. During the past year the company’s inventory turned over on average
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times.
77
Answers (481 - 500)
481.
482.
483.
484.
485.
486.
487.
488.
489.
490.
491.
492.
493.
494.
495.
working capital
current
assets
sales
acid
sales
cost of goods sold
sales
dividend
outstanding
accounts receivable
average
net income
coverage
net income
496. 40 (360 days divided by
the turnover of 9)
or
40.6 (365 days divided by
the turnover of 9)
497. 30%
498. 11
($770,000 divided by $70,000)
499. 33
360 or 365 days divided by the
turnover of 11 = 33.
500. 6.86
Total sales of $980,000 x 70% =
$686,000 the cost of goods sold.
$686,000 divided by the avg
inventory of $100,000 = 6.86.
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Part 19: Quality & Other Terms
Fill-in the Blanks
501. The term bottlenecks is a relevant concept in the theory of
.
502. The term used by the Japanese when referring to continuous improvement
is
.
503. ISO 9001 involves international general standards to provide assurance of the
in processes and products.
504. MRP is the acronym for material requirement
.
505. One of the primary inputs for an MRP system is each product’s
materials.
506. The balanced
achieved for stockholders.
of
measures more than the financial results
507. A group of different machines or operations that are 1) often arranged in the shape of a U,
and 2) results in less movement of materials is a manufacturing or work
.
508. The program that dramatically reduces the number of defects so there is 99.99966%
perfection is known as six
.
509. Reducing the amount of time for a machine’s setup is part of
or production
manufacturing
510. TQM is the acronym for
.
511. A
chart or graph contains upper and lower limits for assisting in the
decision to investigate or not investigate a process.
512. The continuous process of studying how one’s processes, products, etc. compare to the
best practices is known as
.
513. The mathematical technique that computes the optimum mix of products that will provide
the greatest contribution margin from scarce resources is known as
programming.
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514. One of the benefits of the Program and Evaluation Review Technique (PERT) is the
identification of the
path.
515. The
curve models recognize that the amount of time necessary for
performing a recurring task will decrease as one learns or experiences the task.
516. The goal of target
is to reduce manufacturing costs so that a product
can be priced competitively and yet be profitable.
517. A potential benefit of the information found in an ABC system is the elimination of activities
that do not add
for the customer.
518. A value
shows the business activities or functions starting with research
and development and ending with customer service.
519. A
chain shows the path from the purchase of materials to the ultimate
customer of a product.
Multiple Choice
520. Throughput costing involves the assigning of
products.
all some
of the manufacturing costs to
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80
Answers (501 - 520)
501.
502.
503.
504.
505.
506.
507.
508.
509.
510.
511.
512.
513.
514.
515.
516.
517.
518.
519.
520.
constraints
kaizen
quality
planning
bill
scorecard
cell
sigma
lean
total quality management
control
benchmarking
linear
critical
learning
costing
value
chain
supply
some
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