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# 1) As sales volume decreases in the relevant range, fixed costs per unit ________, but total fixed costs

________. A) increase; do not change B) decrease: do not change C) do not change; increase D) do not change; decrease 2) Last year, XYZ Company sold 10,000 units that cost \$40,000 to produce. This cost included \$4,000 in fixed computer resource costs, \$6,000 in fixed labor cost and \$3.00 per unit for communications resource costs. XYZ Company expects to sell 20,000 units next year. Resource costs are expected to be in the same relevant range next year. What are the total estimated costs for next year? A) \$70,000 B) \$75,000 C) \$80,000 D) \$84,000 3) Hot Company, a producer of salsa, has the following information: Income tax rate Selling price per unit Variable cost per unit Total fixed costs 30% \$8.00 \$3.00 \$90,000.00

The contribution margin per unit is ________. A) \$2.00 B) \$3.00 C) \$5.00 D) \$8.00

4) Cherry Wood Company sells desks at \$480 per desk. The variable costs are \$372 per desk. Total fixed costs for the period are \$456,840. The contribution margin ratio is ________. A) 22.5% B) 29.0% C) 40.6% D) 77.5% 5) Company ZZZ has the following information available: Selling price per unit \$100 Variable cost per unit \$45 Fixed costs per year \$420,000 Expected sales per year 20,000 units What is the expected operating income for a year? A) \$480,000 B) \$680,000 C) \$1,580,000 D) none of the above

6) A company rents a machine to be used in operations. The rental agreement calls for a flat rent payment of \$2,000 per month plus \$0.10 for each hour the machine is used. This is an example of a ________. A) fixed cost B) variable cost C) mixed cost D) step cost 7) Merkey Motel's cost function is given as: Y = \$50,000 + \$7.50X Where: Y = annual custodial cost X = number of guest-days of occupancy In the current year, Merkey Motel has 8,000 guest days. In the next year, Merkey Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain in the same relevant range as the current year.) What is the expected fixed custodial cost for next year? A) \$7.50 B) \$50,000 C) \$62,500 D) \$75,000

8) Sunrise Motel's cost function is given as: Y = \$50,000 + \$7.50X Where: Y = annual custodial cost X = number of guest-days of occupancy In the current year, Sunrise Motel has 8,000 guest days. In the next year, Sunrise Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain in the same relevant range as the current year.) What is the expected total custodial cost for next year? A) \$50,000 B) \$62,500 C) \$125,000 D) \$137,500 9) Which statement is FALSE? A) A cost may be defined as a sacrifice or giving up of resources for a particular purpose. B) Costs are frequently measured by the monetary units that must be paid for goods and services. C) Only manufacturing firms need some form of cost accounting. D) The first step in a cost accounting system is the collection of costs by some category. 10) Which of the following costs is a direct cost to a manufactured product? A) depreciation expense on factory equipment used for the product B) the wages of an assembly worker who works specifically on the product

C) accountants who accumulate the costs of the product D) a factory supervisor who oversees the production of several different types of products

11) The following information was taken from the accounting records of Jackson Manufacturing Company: Direct materials purchased Direct materials used Direct manufacturing labor costs Indirect manufacturing labor costs Sales salaries Miscellaneous factory expenses Administrative expenses Finished goods inventory, beginning Finished goods inventory, end Work in process inventory, beginning Work in process inventory, end \$95,000 76,000 10,000 22,000 35,000 5,000 40,000 10,000 12,000 0 0

What is Cost of Goods Manufactured? A) \$111,000 B) \$113,000 C) \$130,000 D) \$132,000 12) The following information was obtained from the accounting records of Stevie Nicks Incorporated: Direct materials purchased Direct materials used Direct manufacturing labor costs Indirect manufacturing labor costs Selling expenses Administrative expenses Factory utilities costs Rental cost of factory machines Work in process inventory, beginning Work in process inventory, end Finished goods inventory, beginning Finished goods inventory, end What is Cost of Goods Sold? A) \$207,000 B) \$211,000 C) \$227,000 D) \$231,000 13) Information is relevant in business decisions if it is a(n) ________. A) expected future cost or it differs among alternatives B) expected future cost and it differs among alternatives \$80,000 76,000 15,000 13,000 16,000 22,000 23,000 100,000 0 0 10,000 30,000

C) historical cost and it differs among alternatives D) expected future cost that differs from a past cost 14) Santa Company reported the following information for its only product: Direct materials used Direct labor Indirect manufacturing fixed Indirect manufacturing variable Selling and administrative variable Selling and administrative fixed Units produced and sold \$450,000 170,000 80,000 20,000 40,000 10,000 40,000

Santa Company uses the absorption approach. What is the product cost per unit? A) \$13.00 B) \$13.50 C) \$14.75 D) \$18.00

15) Arizona Company has the following data about its only product: Direct materials used Direct labor Indirect manufacturing fixed Selling and administrative fixed Indirect manufacturing variable Selling and administrative variable Selling price(per unit) Units produced and sold \$270,000 180,000 130,000 150,000 120,000 60,000 99 30,000

Arizona Company uses the contribution approach. What is the operating income? A) \$2,060,000 B) \$2,120,000 C) \$2,240,000 D) \$2,970,000 16) The key to determining the financial difference between two alternative courses of action is to identify the ________. A) opportunity cost of one alternative B) joint cost of both alternatives C) differential costs and revenues D) joint cost of one alternative

17) The term opportunity cost applies to a resource that a company ________. A) is thinking about purchasing B) already owns C) has committed to purchase D) already owns or has committed to purchase 18) Beth is considering leaving her current position to open a coffee shop. Beth's current annual salary is \$56,000. Beth is going to invest \$200,000 of her own money to start the business. Estimated annual revenue from the new business is \$250,000. What is the outlay cost associated with the decision to open the coffee shop? A) \$50,000 B) \$56,000 C) \$200,000 D) \$250,000 19) Budgets are generally more effective if they are ________. A) created with the active participation of all affected employees B) understood and accepted by affected managers C) supported by top management D) all of the above 20) Which of the following statements about long-range plans is FALSE? A) Long-range plans provide forecasted financial statements for five to ten year periods. B) Long-range plans guide day-to-day operations. C) Companies coordinate long-range plans with capital budgets. D) A decision made during long-range planning is the acquisition of a plant building.

21) Full Hotels operates a 100-room property in Naples, Florida. Occupancy rates average 95% in March and 80% in April. The average room rental rate is \$150 per night. Expected revenues for March are ________. A) \$372,000 B) \$418,500 C) \$427,500 D) \$441,750 22) The static budget is based on the ________ level of output and the flexible budget is based on the ________ level of output. A) actual; expected B) expected; actual C) expected; planned D) actual; projected 23) Yesterday Company has the following information: Actual operating loss at 5,000 units Budgeted operating income at 5,000 units \$(11,000) \$5,000

Budgeted operating income at 10,000 units Planned level of operations Actual level of operations

## \$12,000 10,000 units 5,000 units

Assume units of output is the cost driver for product costs. What is the static budget variance for operating income? A) \$11,000 Unfavorable B) \$12,000 Unfavorable C) \$23,000 Unfavorable D) \$23,000 Favorable 24) Today Company has the following information: Actual operating loss at 5,000 units Budgeted operating income at 5,000 units Budgeted operating income at 10,000 units Planned level of operations Actual level of operations \$(11,000) \$5,000 \$12,000 10,000 units 5,000 units

Assume the cost driver of product costs is units of production. What is the flexible budget variance for operating income? A) \$5,000 Unfavorable B) \$11,000 Unfavorable C) \$16,000 Unfavorable D) \$16,000 Favorable 25) For most organizations, effective performance measurement requires ________ and ________ measures of performance. A) rolling; static B) flexible; static C) strategic; continuous D) financial; nonfinancial 26) Product profitability is a performance measure used to monitor the achievement of the ________ goal. A) customer satisfaction B) business process improvement C) employee turnover D) financial strength

27) Responsibility accounting includes ________. A) identifying what parts of the organization have primary responsibility for each action B) developing performance measures and targets C) designing reports of measures by responsibility center D) all of the above

28) The following information pertains to the Lower Division of Peapod Company:

Net Sales Variable Costs: Cost of merchandise sold Operating expenses Fixed costs: Controllable by segment manager Controllable by others Unallocated costs

## \$25,000 7,200 2,700 2,400 1,000 600

The contribution controllable by a segment manager is ________. A) \$7,100 B) \$7,700 C) \$11,100 D) \$12,700 29) Which of the following statements is NOT a benefit of decentralization? A) Lower-level managers are able to make faster and better decisions on local decisions than higher-level managers. B) By delegating decision-making authority to local managers, higher-level managers free up time to deal with larger issues and fundamental strategy. C) Local managers who are given more authority often have greater motivation and job satisfaction. D) Managers in decentralized units may spend time negotiating transfer prices for goods transferred between units. 30) The decentralization of organizations has several disadvantages that include ________. A) lower level managers can make faster decisions than higher level managers. B) innovative ideas are less likely to be shared in decentralized organizations. C) local managers are given the opportunity to develop decision making skills so they can move up in the organization. D) higher level managers are given more time to pursue strategy issues. 31) Frazier Company's revenues are \$300 on invested capital of \$240. Expenses are currently 84% of sales. If Frazier Company can reduce its expenses to 70% of sales, return on investment will be ________. A) 20% B) 37.5% C) 70% D) 93.75% 32) A manager is considering the following investment: Estimated capital investment Estimated useful life Estimated disposal value in 3 years Estimated annual savings in cash operating costs Minimum desired rate of return Present value of ordinary annuity, 3 periods at 12% Present value of one, 3 periods at 12% \$270,000 3 years \$10,000 \$150,000 12% 2.4018 0.7118

Assume straight-line depreciation is used. Ignore income taxes. The net present value of the investment is ________. A) \$50,310 B) \$57,428 C) \$90,270 D) \$97,388 33) Budgeted cost rates are used for allocating variable costs of service departments to user departments because ________. A) it protects user departments from intervening price fluctuations B) it protects user departments from inefficiencies in service departments C) it protects managers in producing departments from uncontrollable costs D) all of the above 34) James Company has two production departments called Mixing and Finishing. The maintenance department serves both production departments. Budgeted fixed costs for the maintenance department are \$30,000. Budgeted variable costs for the maintenance department are \$5.00 per labor hour. Actual maintenance department costs are \$36,000 fixed and \$100,000 variable. Other relevant data follow: Mixing 20,000 labor hours 15,000 labor hours Finishing 15,000 labor hours 9,000 labor hours

## Capacity available Capacity used

The amount of variable maintenance department costs allocated to the Mixing Department should be ________. A) \$48,000 B) \$62,500 C) \$75,000 D) \$100,000 35) The budgeted factory overhead rate is computed as ________. A) actual factory overhead divided by actual production in units B) actual factory overhead divided by actual cost driver activity C) budgeted factory overhead divided by actual cost driver activity D) budgeted factory overhead divided by budgeted cost driver activity 36) USC Company has the following information available: Budgeted factory overhead \$90,000 Actual factory overhead \$80,000 Budgeted direct labor hours 20,000 Actual direct labor hours 21,000 Assume direct labor hours are the cost driver of factory overhead costs. The budgeted factory overhead rate is ________. A) \$3.57 per direct labor hour B) \$3.81 per direct labor hour C) \$4.00 per direct labor hour D) \$4.50 per direct labor hour

37) Ralph Company uses a job-order costing system and has the following data available: Beginning direct-materials inventory Beginning work-in-process inventory Beginning finished goods inventory Direct materials purchased on account Direct materials requisitioned Direct labor cost incurred Factory overhead incurred Cost of goods completed Cost of goods sold Overhead application rate(based on direct labor cost) What is the cost of the ending inventory of Direct Materials? A) \$84,000 B) \$90,000 C) \$108,000 D) \$174,000 \$26,000 64,000 58,000 148,000 90,000 130,000 146,000 292,000 256,000 125%