Multiple Choice - (23 questions)
1. Southern Company is manufacturing 5,000 units for the period. The following are actual and standard direct materials information:
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Standard Costs
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Actual Costs
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1.5 pounds per unit
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1.6 pounds per unit
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Purchase price is $0.78 per pound
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Purchase price is $0.75 per pound
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Based on the information, the materials price variance is:
A. $240 Unfavorable.
B. $390 Favorable.
C. $240 Favorable.
D. $390 Unfavorable.
2. Southern Company is manufacturing 5,000 units for the period. The following are actual and standard direct materials information:
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Standard Costs
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Actual Costs
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1.5 pounds per unit
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1.6 pounds per unit
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Purchase price is $0.78 per pound
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Purchase price is $0.75 per pound
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Based on the information, the materials usage/quantity variance is:
A. $240 Unfavorable.
B. $390 Favorable.
C. $240 Favorable.
D. $390 Unfavorable.
3. Southern Company is manufacturing 5,000 units for the period. The following are actual and standard direct labor information:
Based on the information, the direct labor rate/price variance is:
A. $10,125 Unfavorable.
B. $6,500 Favorable.
C. $6,500 Unfavorable.
D. $3,625 Unfavorable.
4. Southern Company is manufacturing 5,000 units for the period. The following are actual and standard direct labor information:
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Standard Costs
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Actual Costs
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2.5 hours/unit
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13,000 actual hours worked for the 5,000 units
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Hourly rate is $20.25 per hour
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Hourly rate is $19.75 per hour
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Based on the information, the direct labor efficiency/usage/quantity variance is:
A. $10,125 Unfavorable.
B. $6,500 Favorable.
C. $6,500 Unfavorable.
D. $3,625 Unfavorable.
5. Southern Company is manufacturing 5,000 units for the period. The following are actual and standard direct labor information:
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Standard Costs
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Actual Costs
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2.5 hours/unit
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13,000 actual hours worked for the 5,000 units
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Hourly rate is $20.25 per hour
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Hourly rate is $19.75 per hour
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Based on the information, the total direct labor cost variance is:
A. $10,125 Unfavorable.
B. $6,500 Favorable.
C. $6,500 Unfavorable.
D. $3,625 Unfavorable.
6. Decentralization is:
A. A practice that is not recommended
B. The practice of allowing lower level managers to participate in the budget
C. Allowing lower level managers to implement decisions made by top management
D. The practice of delegating authority to lower level managers
7. A responsibility center where a manager is responsible only for sales is called:
A. Investment Center
B. Revenue Center
C. Cost Center
D. Profit Center
8. Under Absorption Costing
A. Fixed overhead is not expensed until the product is sold
B. Variable overhead is not assigned to product cost
C. Fixed overhead is not assigned to product cost
D. Variable overhead has to be actual overhead
9. As a component of return on investment (ROI), operating income divided by sales is referred to as:
A. ROI
B. Turnover
C. Residual income
D. Margin
10. The difference in costs between two alternatives is referred to as:
A. Opportunity costs
B. Relevant costs
C. Irrelevant costs
D. Sunk costs.
11. In short term decision making, sunk costs
A. Are those costs that do not differ across alternatives.
B. Should be identified and included if they will affect future periods.
C. Should not be included in the decision analysis.
D. Do not include depreciation on equipment purchased in the past.
12. Which of the following is true regarding special order decisions:
A. The company should consider whether excess capacity is available.
B. The company should consider employee morale.
C. The company should try to avoid special orders since their costs outweigh the benefits.
D. The company should ensure that the special price exceeds the total cost of the product (fixed plus variable costs.)
13. If a company has a policy of charging its customers 15% above direct materials and labor costs and the following costs are incurred:
Direct materials $60,000
Direct Labor: $5,000
What is the price charged by the company?
A. $65,750.
B. $74,750.
C. $65,000.
D. $74,000.
14. Target costing is useful because:
A. It is useful in the decision to keep inventory.
B. It forces managers to control costs.
C. It considers how much it costs to make a product before setting the selling price.
D. It includes all manufacturing costs.
15. Which of the following is a possible disadvantage of just-in-time?
A. It makes the company focus on quality.
B. It reduces the need for high levels of inventory.
C. It makes a company dependent on certain suppliers.
D. It reduces the number of inventory orders.
16. Which of the following financial statements provides relevant information about a company's cash receipts and cash payments?
A. Income Statement.
B. Balance Sheet.
C. Statement of Retained Earnings.
D. Statement of Cash Flows.
17. Which of the following is an example of a cash inflow from financing activities?
A. Cash received from the issuance of stock and debt.
B. Collection of the principal amount of loans from borrowers.
C. Collections of accounts receivable.
D. Cash received from the sale of property.
18. Which of the following results in a decrease in cash?
A. Decrease in liabilities
B. Increase in stockholder's equity
C. Decrease in noncash assets
D. Increases in retained earnings
19. Which among these items is subtracted from net income while computing cash flows from operating activities?
A. Increase in inventory
B. Loss on the sale of property, plant, and equipment
C. Increase in accounts payable
D. Increase in accrued expenses
20. Which of the following is included as an adjustment to cash flows from operating activities under the indirect method?
A. Depreciation expense
B. Receipts from the sale of investments
C. Repayments of bonds that have come due
D. Payments of dividends to stockholders
21. A firm's income is $260,000 on sales of $31.5 million. Average assets for the period were $7 million. For the year:
A. Margin was .75%, turnover was 4.2, and ROI was 6%.
B. Margin was 6.25%, turnover was 1.5, and ROI was 6%.
C. Margin was 1.5%, turnover was 1.2, and ROI was 4.8%.
D. Margin was .08%, turnover was 4.5, and ROI was 3.7%.
22. For performance reporting, it is best to compare actual costs with budgeted costs using?
A. Short-term budgets
B. Static budgets
C. Master budgets
D. Flexible budgets
23. Which of the following is not a perspective of the balance scorecard?
A. Learning and growth
B. Financial
C. Internal business process
D. All of the above are part of the balance scorecard
True/False - (6 questions - Worth 2 points each for 12 points total)
24. T/F - Price variance + quantity variance = total variance.
25. T/F - When production exceeds sales, absorption income exceeds variable income.
26. T/F -The investing and financing sections of the cash flow statement are treated the same way under the direct and indirect methods.
27. T/F - Variable costs are the only difference between the absorption and variable costing methods
28. T/F - Cost centers, revenue centers, expense centers, and management centers are the four types of responsibility centers
29. T/F - When determining the optimal product mix when both products use constrained resources, the product that has the highest contribution margin per unit of the constrained/scarce resource should be maximized
Matching
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30. Favorable Variance
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a. AKA Rate Variance, Spending Variance.
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31. Unfavorable Variance
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b. This reports the detail of costs for a specific activity and the related variances and it generally gets sent to only the manager in charge of the detail.
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32. Balanced Scorecard
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c. We need to use this when our activity level differs from the expected amount. This helps us to explain why costs differ at different activity levels.
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33. Price Variance
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d. This occurs when the related difference in cost has a positive total effect on net income.
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34. Transfer Price
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e. AKA Usage Variance, Efficiency Variance
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35. Performance Reporting
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f. This occurs when the related difference in cost has a negative total effect on net income.
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36. Flexible Budget
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g. There are four categories of measurements used to rate the company’s performance using this method.
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37. Quantity Variance
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h. The internal price that one department sells products or services to another department within the same company.
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