Question 1

Favorable variances

	A.	cannot occur when the Manufacturing Overhead account is used.
	B.	have a debit balance.
	C.	are generally closed to Work in Process.
	D.	are associated with reductions in the expenses of the company.

2 points

Question 2

At Electrix, the standard price for the M640 electrical relay, a component used in the production of a commercial refrigeration unit, is $67. Standards call for two relays per refrigeration unit. In July, the company purchased 120 relays for $7,560. The company used 104 relays in the production of 50 refrigeration units, with four relays damaged in the installation process. The standard quantity of labor is 20 hours per refrigeration unit. The standard wage rate is $23. In July, the company incurred 1,020 labor hours at a cost of $22,950. How much is the labor rate variance?

	A.	$460 unfavorable.
	B.	$460 favorable.
	C.	$510 favorable.
	D.	$50 favorable.

2 points

Question 3

At Briggs Company, the standard time required to assemble one transmitter is 2.30 hours. The standard wage is $9.60 per hour. During June, employees at Briggs produced 860 transmitters and worked 1,935 labor hours at a total cost of $18,963. What is Briggs' labor rate variance?

	A.	$395.60 unfavorable.
	B.	$25.80 favorable.
	C.	$1,677.00 unfavorable.
	D.	$387.00 unfavorable.

2 points

Question 4

White Company manufactures a single product, the AZQR. The standards for materials for each unit have been set as 5 pounds of KR-27 at a standard cost of $35.00 per pound. During May, the company purchased 500 pounds and used 512 pounds of KR-27 to make 100 units of the AZQR. White paid $32.00 per pound for the material. What is the material price variance?

	A.	$1,920 unfavorable.
	B.	$1,500 favorable.
	C.	$420 unfavorable.
	D.	$1,080 favorable.

2 points

Question 5

The overhead volume variance indicates that

	A.	management has done a poor job of controlling costs.
	B.	raw materials have been wasted.
	C.	the quantity of production differed from what was anticipated.
	D.	labor rates were higher than expected.

2 points

Question 6

Cringle Company expects sales as follows:

January	$100,000
February	$150,000
March	$180,000
April	$200,000

Sales are made 20% for cash, and 80% on credit. Credit sales are collected 60% in the month of sale and 40% in the next month. What are cash collections for March?

	A.	$168,000
	B.	$170,400
	C.	$36,000
	D.	$180,000

2 points

Question 7

Right Wing Company's sales for the next three months are as follows:

February	$130,000
March	$170,000
April	$200,000

Collection history for the company indicates that 60% of sales are collected in the month of the sale, 36% is collected in the following month, and 4% of sales are uncollectible. How much are budgeted cash receipts for April?

	A.	$181,200
	B.	$120,000
	C.	$186,400
	D.	$222,000

2 points

Question 8

A flexible budget takes into account the fact that when production levels change

	A.	total fixed costs remain the same.
	B.	variable costs per unit changes.
	C.	fixed costs per unit remain the same.
	D.	None of the above is true.

2 points

Question 9

Tech Star Company must maintain a minimum cash balance of $25,000. At the beginning of June the company's cash balance was $17,000. Budgeted cash receipts for June are $150,000 and budgeted cash disbursements are $201,000. Budgeted net income for July totals $11,000. During July, how much will Tech Star Company need to borrow?

	A.	$43,000
	B.	$59,000
	C.	$9,000
	D.	$34,000

2 points

Question 10

The formal documents that quantify a company's plans for achieving its goals are called

	A.	variance reports.
	B.	exception logs.
	C.	cost of production reports.
	D.	budgets.

2 points

Question 11

Which of the following would most likely be the present value of a 5 year annuity of $5,000 per year (assuming a positive discount rate)?

	A.	$5,000
	B.	$18,000
	C.	$25,000
	D.	$2,000

2 points

Question 12

A $600,000 investment is expected to generate cash flows of $120,000 per year for each of the next six years. What is the investment's payback period?

	A.	2.50 years.
	B.	6.00 years.
	C.	4.00 years.
	D.	5.00 years.

2 points

Question 13

Maude Company's required rate of return on capital budgeting projects is 9%. The company is considering an investment which would yield a cash flow of $12,000 per year for five years. Ignoring taxes, what is the most that the company would be willing to invest in this project?

	A.	$38,994
	B.	$60,000
	C.	$46,674
	D.	$55,046

2 points

Question 14

Melton Company's required rate of return on capital budgeting projects is 16%. The company is considering an investment which would yield an after-tax cash flow of $30,000 in four years. What is the most that the company would be willing to invest in this project?

	A.	$10,721
	B.	$54,318
	C.	$83,946
	D.	$16,569

2 points

Question 15

A proposed project will cost $600,000 and will provide operating cash flows of $150,000 in Year 1, $300,000 in Year 2, $500,000 in Year 3The company's hurdle rate is 15%. How much is the net present value of the project?

	A.	$23,013
	B.	$66,373
	C.	$86,020
	D.	$50,000

2 points

Question 16

Red Rock Company sells a single product that has variable costs of $14 per unit. Fixed costs will remain constant across all levels of sales shown.

Units Sold	Price per Unit
80,000	$35
90,000	$33
100,000	$31
110,000	$29
120,000	$27

What price should Red Rock charge to maximize profits?

	A.	$33
	B.	$29
	C.	$31
	D.	$27
	E.	$35

2 points

Question 17

Core Manufacturing makes a single product. Budget information regarding the current period is given below:

Revenue (100,000 units at $8.00)

$800,000

Direct materials	$170,000
Direct labor	125,000
Variable manufacturing overhead	235,000

Fixed manufacturing overhead	110,000	640,000
Net income		$160,000

Deer Company approaches Core with a special order for 15,000 units at a price of $8.50 per unit. Variable costs will be the same as the current production and accepting the special order will not have any impact on the rest of the company's orders. However, Core is operating at capacity and will incur an additional $55,000 in fixed manufacturing overhead if the order is accepted. What is the incremental income (loss) associated with accepting the special order?

	A.	$48,000
	B.	($7,000)
	C.	$134,500
	D.	($23,500)

2 points

Question 18

Jackson Company is trying to determine the optimal price to charge for its PUNCH model. Jackson has fixed costs of $50,000 and the PUNCH has variable costs of $12.00 per unit. Jackson has determined that the following relationships exist between price and demand:

Price	Demand
$20	6,875
$19	8,800
$18	10,000
$17	11,000

What is the contribution margin for a price of $20?

	A.	$12.00
	B.	$8.00
	C.	$10.00
	D.	$6.00

2 points

Question 19

Which is the proper order of steps in the target costing process?

	A.	Analyze customer needs and wants, find the target cost, design the product, determine the desired profit.
	B.	Design the product, analyze customer needs and wants, determine the desired profit, find the target cost.
	C.	Analyze customer needs and wants, determine the desired profit, find the target cost, and design the product.
	D.	Analyze customer needs and wants, determine the desired profit, design the product, find the target cost.

2 points

Question 20

As the price increases, the quantity demanded will generally:

	A.	decrease.
	B.	increase and then decrease.
	C.	increase.
	D.	stay the same.

2 points

Question 21

Wharton Company has the capacity to produce 50,000 units per year. The company sells each unit for $125. Budgeted information is as follows:

Revenues

$5,612,000

Direct materials	$1,932,000
Direct labor	552,000
Manufacturing overhead (fixed)	276,000

Manufacturing overhead (variable)

552,000

3,312,000

Total

$2,300,000

A special order has been received for 5,000 units to be sold for $80 per unit. The company would incur an additional $60,000 in total fixed costs in order to lease a special machine in order to make a slight modification to the original product. Should the company accept the special order?

	A.	Yes, the revenue will increase substantially.
	B.	No, total costs would increase by $303,600.
	C.	Yes, profit will increase by $36,400.
	D.	No, accepting this order would decrease profits to $2,263,600.

2 points

Question 22

Billings Company sells one product with a variable cost of $4 per unit. The company is unsure what price to charge in order to maximize profits. The price charged will also affect the demand as shown below.

Units Sold	Price
20,000	$9
30,000	$8
35,000	$7
50,000	$6

If fixed costs are $100,000 and the chart represents the demand at various prices, what price should be charged in order to maximize profits?

	A.	$7
	B.	$8
	C.	$9
	D.	$6

2 points

Question 23

Most of the manufacturing costs for a product are determined in the:

	A.	design stage.
	B.	preproduction stage.
	C.	at maturity.
	D.	during production.

2 points

Question 24

Which of the following are relevant in deciding whether to accept or reject a special order?

	A.	The impact the order will have on existing business.
	B.	The price that will be charged on the special order.
	C.	The incremental cost of filling the special order.
	D.	All of the above.

2 points

Question 25

Which of the following statements about prices and profit is true?

	A.	Higher prices combine with lower demand to change the level of profits.
	B.	Higher prices always lead to lower demand and lower profits.
	C.	Higher prices will be offset by lower demand so profits will stay constant.
	D.	Higher prices always lead to higher profits.

2 points

Question 26

Residual income is NOPAT with an adjustment for

	A.	accounting distortions.
	B.	profit required for the level of investment in the investment center.
	C.	standard cost variances.
	D.	taxes and depreciation.

2 points

Question 27

Brooke Company had sales of $300,000 and NOPAT of $15,000. The company's invested capital is $656,250. What is the company's profit margin as it relates to investment center performance evaluation?

	A.	45.7%
	B.	5%
	C.	48.0%
	D.	2.3%

2 points

Question 28

Dot Company's Dental Division has invested capital of $1,200,000, sales of $3,600,000, net income of $70,000, and NOPAT of $60,000. What is the division's turnover as it relates to investment center performance evaluation?

	A.	5.00
	B.	0.33
	C.	1.67
	D.	3.00

2 points

Question 29

The produce division of Boot Ship Nutrition had invested capital of $800,000 last year. If the minimum required rate of return is 15% and last year's residual income was $60,000, how much was NOPAT?

	A.	$60,000
	B.	$120,000
	C.	$400,000
	D.	$180,000

2 points

Question 30

Goal congruence refers to the match between

	A.	locations of manufacturing plants and customers.
	B.	goals of the individual managers and those of the company as a whole.
	C.	evaluations based on profits and those based on return on investment.
	D.	number of units produced and number of units sold.

2 points

Question 31

The Banks Company prepares the statement of cash flows using the indirect method. The statement reported that cash provided by operating activities for the year was $8,000. If the company experienced a $14,000 decrease in accounts receivable, a $13,000 decrease in accounts payable, and a $4,000 decrease in inventory during the year, the company's net income(loss) must have been:

	A.	$13,000
	B.	$3,000
	C.	$5,000
	D.	($5,000)

2 points

Question 32

Warlace Company provided the following information from its accounting records during the year:

Acquired land by signing a loan	$ 150,000
Proceeds from issuing stock	90,000
Dividends paid to stockholders	55,000
Proceeds from sale of building	120,000
Purchases of inventories	45,000
Collections from customers	225,000
Payment of loan	50,000

How much is net cash provided (used) by financing activities?

	A.	$35,000
	B.	$435,000
	C.	$135,000
	D.	($15,000)

2 points

Question 33

When preparing the operating section of a statement of cash flows using the indirect method, various adjustments are needed. Which of the following adjustments is incorrectly stated?

	A.	Add gains on sale of equipment.
	B.	Deduct any increases in inventories from net income.
	C.	Add to net income any increases in current liabilities.
	D.	Add to net income depreciation and amortization expense.

2 points

Question 34

Cash flows related to long-term liabilities and stockholders' equity items are classified as:

	A.	investing activities.
	B.	financing activities
	C.	operating activities.
	D.	non-cash activities.

2 points

Question 35

Cash received from interest and dividends is classified on the statement of cash flows as:

	A.	financing cash outflows.
	B.	financing cash inflows.
	C.	investing cash inflows.
	D.	operating cash inflows.

2 points

Question 36

Cash flows from investing activities include all of the following, except:

	A.	collections from long-term loans.
	B.	collection of interest on a note receivable.
	C.	proceeds from the sale of a building.
	D.	investments in other companies' securities.

2 points

Question 37

Cash flows related to buying and selling long-term assets are classified as:

	A.	non-cash activities.
	B.	investing activities.
	C.	operating activities.
	D.	financing activities.

2 points

Question 38

Cash flows relating to financing activities include:

	A.	payment of principal on notes payable.
	B.	payment of interest on notes payable.
	C.	receipt of dividends from stock investments.
	D.	making loans to other entities.

2 points

Question 39

Carte Company reported cost of goods sold for $100,000 and depreciation expense totaling $7,000. On January 1, Carte had inventory and accounts payable of $21,000 and $24,000, respectively. On December 31, inventory and accounts payable were $28,000 and $20,000, respectively. Net income is $60,000. Beginning accounts receivable was $13,000 and ending was $12,000. How much are the cash flows from operating activities using the indirect method?

	A.	$57,000
	B.	$77,000
	C.	$50,000
	D.	$65,000

2 points

Question 40

The Washington Company had the following results in 2012:

Account Balances

	End of	Beginning of
	Year	Year

Property, plant, and equipment	$358,000	$347,000
Accumulated depreciation	(256,000)	(220,000)
Net Property, plant, and equipment	$102,000	$127,000

During the year the company sold an asset which had an original cost of $55,000 and accumulated depreciation of $31,000. How much depreciation expense for 2012 will be reported on the statement of cash flows?

	A.	$67,000
	B.	Not enough information is provided.
	C.	$36,000
	D.	$5,000

2 points

Question 41

Which of the following would be included in the current ratio but not the quick ratio?

	A.	Inventory.
	B.	Marketable securities.
	C.	Cash.
	D.	Accounts receivable.

2 points

Question 42

Asset turnover is

	A.	net sales divided by total assets.
	B.	earnings per share divided by market price per share.
	C.	net sales divided by current assets.
	D.	net income divided by sales.

2 points

Question 43

Cinema Theatre had a current ratio of 2.5 to 1 on December 31 of the current year. On that date, the company's assets were as follows:

Cash	$ 100,000
Accounts receivable (net)	600,000
Inventory	960,000
Prepaid expenses	25,000
Equipment (net)	2,200,000
Total assets	3,885,000

What impact would collecting $55,000 due from customers have on its inventory turnover ratio?

	A.	Decrease.
	B.	Not enough information is given.
	C.	Increase.
	D.	Stay the same.

2 points

Question 44

The ratio that measures the return earned on capital independently of how the firm is financed is the

	A.	return on stockholders' equity.
	B.	price earnings ratio.
	C.	return on assets.
	D.	earnings per share.

2 points

Question 45

Axilrode Company reported earnings per share of common stock $12 in 2012 and paid dividends of $3 per share. The current market price per share is $102 and the book value per share is $54. How much is the company's price-earnings ratio?

	A.	$11.80
	B.	$11.30
	C.	$1.90
	D.	$8.50

2 points

Question 46

Which is the most stringent test of a company's ability to meet its current obligations?

	A.	Times interest earned.
	B.	Debt-equity ratio.
	C.	Current ratio.
	D.	Quick ratio.

2 points

Question 47

Cost of goods sold in 2011 for the Cego Tire Company totaled $4,670,000. If gross profit was 64%, how much would sales be?

	A.	$2,988,800
	B.	$8,302,080
	C.	$12,972,222
	D.	$1,681,200

2 points

Question 48

Blackstone Company has total assets of $550,000 and owners' equity of $220,000, of which $65,000 of the equity is common stock. To which of the following is the company's debt-to-equity ratio closest?

	A.	0.60
	B.	1.50
	C.	5.08
	D.	0.67

2 points

Question 49

Inventory turnover is

	A.	sales divided by inventory.
	B.	sales divided by accounts receivable.
	C.	sales divided by cost of goods sold.
	D.	cost of goods sold divided by inventory.

2 points

Question 50

Selling an old piece of machinery is a(n)

	A.	financing activity.
	B.	operating activity.
	C.	investing activity.
	D.	general activity.

2 points