Managerial accounting multiple choice questions

Managerial Accounting Multiple Choice Questions

1.Burgundy Manufacturing uses a process cost system and computes cost using the weighted average method. During the current period, the beginning work-in-process inventory cost was $13,525. Manufacturing cost added was $57,000. If Burgundy's ending work-in-process inventory was valued at $15,100, then cost of goods transferred must have been
A) $70,525
B) $84,625
C) $58,575
D) $55,425
E) None of the above
2.
The following amounts were selected from the production report of Chandon Corporation:

Actual units in production 42,000
Equivalent units (materials) 42,000
Equivalent units (conversion) 39,000
Cost per equivalent unit (materials) $1.10
Cost per equivalent unit (conversion) $0.90

Chandon uses the weighted average method in preparing its production reports. Chandon's total production cost to be accounted for must have been
A) $81,300
B) $72,900
C) None of the above
D) $89,100
E) $84,000
3.
Beginning inventory for the month contained 2,000 units that were 70 percent complete with respect to materials. During the month, 60,000 units were completed and transferred out. Ending inventory contained 3,000 units, 20 percent complete with respect to materials. The weighted average equivalent units of production for materials for the month would be
A) 63,000
B) 60,600
C) 62,400
D) 60,000
E) None of the above
Figure 6-11

Figaro Company reports the following information for one of its production processes.
Units
Work in process, May 1 (10% complete) 2,000
Started in May 17,000
Work in process, May 31 (20% complete) 3,000

Materials and conversion are incurred uniformly throughout the process.
4.
Refer to Figure 6-11. The total units of production to be accounted for would be
A) 14,000
B) 19,000
C) 22,000
D) 17,000
5.
Refer to Figure 6-11. Equivalent units of production for conversion using the weighted average method would be
A) None of the above
B) 16,600
C) 16,400
D) 14,800
E) 17,800
6.
For the month of November, one department of the Watkins Company had 64,000 equivalent units of production with respect to conversion cost. Work-in-process inventory on November 1 had 7,500 units and was 50 percent complete. During November, 62,500 units were started and 60,000 were completed and transferred to the next department. Assuming the Watkins Company uses the weighted average cost method, the ending work-in-process inventory in the department
A) was 40 percent complete with respect to conversion costs
B) None of the above
C) consisted of 2,500 units
D) was 50 percent complete with respect to conversion costs
E) consisted of 7,500 units
Figure 6-16

Kramer, Inc., manufactures a product that passes through two processes: mixing and molding. All manufacturing costs are added uniformly in the mixing department.

Information for the mixing department for April follows:
Work in process, April 1:
Units (35% complete) 5,000
Direct materials $24,000
Direct labor $30,000
Overhead $10,000

During April, 25,000 units were completed and transferred to the molding department. The following costs were incurred by the mixing department during April:
Direct Materials $ 90,000
Direct labor $120,000
Overhead $30,000

Two thousand five hundred (2,500) units that were 80 percent complete remained in mixing at April 30.
7.
Refer to Figure 6-16. Kramer's equivalent units of production using the weighted average method would be
A) 27,000
B) 28,750
C) None of the above
D) 20,000
E) 23,000
8.
Refer to Figure 6-16. Kramer's total cost per equivalent unit of production would be (round to two decimal places).
A) $11.26
B) $12.16
C) $6.52
D) None of the above
E) $9.76
9.
What is the first step in allocating support-department costs to producing departments?
A) Calculate predetermined overhead rates for producing departments.
B) Allocate support-department costs to the producing department.
C) Departmentalize the firm.
D) Trace all overhead costs in the firm to a support department or producing department.
10.
Which of the following would most likely be the most appropriate base for allocating the costs of the cafeteria to other departments?
A) machine hours
B) direct labor hours
C) square feet
D) number of employees
Figure 7-3

Jen's Catering operates a catering business at two different locations. Jen's Catering has one support department that is responsible for the cleaning, service, and maintenance of its equipment. The costs of the service department are allocated to each catering location on the basis of total hours operated.

During the first month, the costs of the support department were expected to be $300,000. Of this amount, $60,000 is considered a fixed cost. During the month, the support department incurred actual variable costs of $260,000 and actual fixed costs of $58,000.

Normal and actual activity (hours operated) are as follows:
North Location South Location
Normal activity (hours) 2,500,000 3,500,000
Actual activity (hours) 2,750,000 3,400,000

11.
Refer to Figure 7-3. Jen's Catering's predetermined support cost per hour would be (round to three decimal places)
A) $0.036
B) $0.040
C) $0.050
D) $0.086
Figure 7-9
Support
Departments Producing
Departments
Personnel Maintenance Fabrication Assembly
Budgeted overhead $160,000 $288,000 $560,000 $640,000
Direct labor hours 8,000 10,000 32,000 40,000
Machine hours 12,000 15,000 48,000 32,000
Number of employees 16 20 60 100

The company does not divide costs into fixed and variable components.
Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.

Predetermined overhead rates for fabrication and assembly are based on direct labor hours. (Round to the nearest dollar.)
12.
Refer to Figure 7-9. The amount of maintenance costs allocated to the Assembly Department using the direct method would be
A) $152,640
B) $115,200
C) $57,600
D) $192,000
E) None of the above
13.
Refer to Figure 7-9. If the direct method is used to allocate support-department costs, the predetermined overhead rate for the Fabrication Department would be (round to two decimal places)
A) None of the above
B) $7.28
C) $5.40
D) $28.80
E) $24.78
14.
Refer to Figure 7-9. If the sequential or step method is used to allocate support-department costs starting with personnel, the amount of maintenance costs allocated to the Fabrication Department would be (round to the nearest dollar)
A) $17,777
B) $183,467
C) $53,333
D) $122,312
E) None of the above
15.
Which of the following is true about budgets?
A) Budgets should be tightly linked to the strategic plan.
B) all of the above
C) Budgets identify objectives and the actions needed to achieve them.
D) Budgets are financial plans for the future.
16.
The budget that is a comprehensive financial plan for the organization as a whole is called a
A) capital budget
B) master budget
C) comprehensive budget
D) continuous budget
17.
Which of the following budgets concerns the income-generating activities of the firm?
A) all of the above
B) capital budget
C) operating budget
D) financial budget
18.
The first step in the budgeting process is the preparation of the
A) cash budget
B) selling and administrative expenses budget
C) sales forecast
D) production budget
19.
Jiggy Company plans to sell 33,000 units during the month of May. Beginning inventory was 1,200 units. The company plans to have 2,500 units on hand at the end of the month. Each unit requires 3 pounds of raw materials. If raw material inventory on May 1 is 4,400 pounds and desired ending inventory is 2,200 pounds, how many pounds of raw materials must be purchased during May?
A) 102,900
B) 103,500
C) 100,700
D) 105,100
Figure 8-6

Budgeted purchases for Kelsey Company for the first quarter of the current year are as follows:
Budgeted Purchases Direct Labor Costs
January $325,000 $23,000
February $250,000 $32,000
March $300,000 $27,500

The company buys all purchases on credit. The company pays for 60 percent of its purchases in the month of purchase and 40 percent in the following month. Each month, overhead costs amount to $25,000 (including depreciation of $5,000) and selling and administrative costs amount to $34,000.
20.
Refer to Figure 8-6. Kelsey's budgeted cash payments on accounts payable for March are
A) $280,000
B) $220,000
C) $330,000
D) None of the above
E) $300,000
Figure 8-8

Andrews Company sells a product for $10. Budgeted sales for the first quarter of the current year are as follows:
Budgeted Sales
January $160,000
February $100,000
March $180,000

The company collects 70 percent in the month of sale and 25 percent in the following month. Five percent of all sales are uncollectible and written off.
21.
Refer to Figure 8-8. Andrews Company’s budgeted cash receipts for February are
A) $70,000
B) $100,000
C) $48,000
D) None of the above
E) $110,000
22.
Efficiency variances focus on the difference between
A) quantity allowed for estimated production and standard quantity allowed for units actually produced
B) actual quantity used and standard quantity allowed for units actually produced
C) none of the above
D) actual quantity used and standard quantity allowed for estimated activity
23.
The materials price variance is calculated as
A) (actual price - standard price) ´ actual quantity
B) (actual quantity - standard quantity) ´ actual price
C) (actual price - standard price) ´ standard quantity
D) (actual quantity - standard quantity) ´ standard price
24.
During May, 6,000 pounds of raw materials were purchased at a cost of $2.60 per pound. If there was a favorable materials price variance of $900 for December, the standard cost per pound must be
A) $2.45
B) $2.75
C) none of the above
D) $2.60
Figure 9-5
Budgeted fixed overhead for the year $300,000
Budgeted direct labor hours for the year 30,000
Actual fixed overhead for August $24,000
Actual variable overhead for August $10,000
Direct labor hours worked in August 2,600
Standard variable overhead cost per direct labor hour $4
Standard direct labor hours allowed for August production 2,750

25.
Refer to Figure 9-5. The standard rate for total overhead is
A) $13
B) $14
C) None of the above
D) $4
E) $10
26.
Refer to Figure 9-5. The variable overhead efficiency variance would be
A) None of the above
B) $1,000 favorable
C) $400 favorable
D) $200 favorable
E) $600 favorable
27.
Decentralization occurs when
A) None of the above are correct.
B) authority for important decisions is delegated to lower segments of the organization
C) the firm's operations are located over a large geographic area to reduce risk
D) important decisions are made at the upper levels and the lower levels of the organization are responsible for implementing the decisions
28.
Types of responsibility centers include all of the following EXCEPT
A) contribution centers
B) investment centers
C) profit centers
D) cost centers
29.
The Production Department is most likely considered to be a(n)
A) cost center
B) revenue center
C) investment center
D) profit center
30.
In a variable costing system, product cost includes
A) direct labor, variable overhead, fixed overhead
B) direct materials, direct labor, variable overhead
C) direct materials, variable overhead, fixed overhead
D) direct materials, direct labor, fixed overhead
Figure 10-8

Burke Company began the year with no inventories of work in process or finished goods. The company uses an actual cost system, and actual costs for the year were as follows:
Variable costs:
Direct materials $36 per unit
Direct labor $24 per unit
Manufacturing overhead $16 per unit
Selling expenses $8 per unit

Fixed costs:
Manufacturing overhead $180,000 per month
Selling and administrative $80,000 per month

During the first three months of the year, production and sales in units were as follows:
Production Sales
January 30,000 30,000
February 30,000 26,000
March 30,000 34,000
Total 90,000 90,000

The company sells its product for $120 per unit. Costs remained stable throughout the year.
31.
Refer to Figure 10-8. Burke Company’s unit cost of production for February under variable costing would be
A) $60
B) $84
C) None of the above
D) $82
E) $76
32.
Refer to Figure 10-8. Burke Company’s unit cost of production for March under absorption costing would be
A) $60
B) $84
C) $82
D) None of the above
E) $76
33.
Refer to Figure 10-8. Burke Company’s income for February under variable costing would be
A) $580,000
B) $676,000
C) $756,000
D) $936,000
E) None of the above
34.
Lean manufacturing is an approach to manufacturing that focuses on
A) sequential processing rather than cell manufacturing
B) production supply rather than customer demand
C) eliminating waste and maximize customer value
D) acceptable quality levels, rather than zero-defect quality philosophy
35.
According to the textbook authors, 90% or more of a product's life-cycle costs are determined during
A) decline stage.
B) development stage.
C) growth stage.
D) maturity stage.
36.
All of the following are methods for determining transfer prices except
A) Sequential transfer prices
B) Negotiated transfer prices
C) Market price based transfer prices
D) All the above are transfer pricing methods
E) Variable cost-based transfer prices
37.
A corporation has two divisions, the Parts Division and the Appliance Division. The Appliance Division currently buys its switches from an outside supplier for $25 each. It needs 4,000 switches a year. The Parts Division makes switches, and has recorded the following information:
Parts Division – Outside sale of switches:
Price $27
Direct materials $10
Direct labor $ 2
Variable overhead $ 4
Fixed overhead $ 4
The Appliance Division wants to buy the 4,000 switches from the Parts Division. The two will negotiate a transfer price. The Parts Division has made it clear that they only have 3,000 units of excess capacity. However, the Appliance Division has pointed out that the Parts Division will avoid $1 per unit in variable costs if the transfer occurs. What is the logical average lowest transfer price that the Parts Division would accept (assuming the Parts Division did not want to lower their divisional net income and all 4,000 units are transferred)?
A) None of the above
B) $26
C) $16.75
D) $17.75
E) $15
38.
Negotiated transfer prices are:
A) Used when buying and supplying divisions independently agree on a price.
B) Never used in practice
C) Agreed to by divisions and union management
D) Negotiated between a division and corporate headquarters
E) Negotiated with external customers
39.
Gorf Products had the following variances for the year 2009:
Direct labor rate variance $9,000 U
Total direct labor variance $21,000 F
These variances were based on a standard of 6,000 total labor hours allowed (to produce 1,000 actual units) and a standard of $20 per hour of labor.
What was the actual rate paid this period?
A) $22
B) None of the above
C) $20
D) $21
E) $18
40.
The Bobby Knight Chair Company produces chairs that are known for their exceptional accuracy when thrown. In the current year, the company budgeted production of 50,000 units using 50,000 units of raw materials at a total cost of $100,000. Actual output was 52,000 units using 50,000 units of materials at a unit cost of $2.10 per unit. The direct material price and quantity (usage)variances for the period are
A) $10,000 favorable and $0
B) $5,000 unfavorable and $4,200 favorable
C) Nove of the above are correct
D) $5,200 unfavorable and $4,200 favorable
E) $5,000 unfavorable and $4,000 favorable
41.
Which of the following transfer pricing methods is least likely to favor the seller?
A) I think all of these methods favor the seller
B) Full absorption costing plus 5%
C) Allowing the seller and buyer to negotiate a price
D) Variable manufacturing costs plus 5%
E) Market prices
42.
Stretch budget targets are (most likely) associated with a:
A) very tall employees
B) bottom-up budget approach
C) an ethical budget approach
D) top-down budget approach
E) easy-to-achieve budget approach
43.
A business segment manager can increase segment ROI results from one measurement period to the next by:
A) decreaseing long-term liabilities
B) decreasing asset turnover
C) A segment manager would never be concerned with ROI
D) decreasing assets
E) decreasing net income
44.
If a manager intentionally understates revenue or overstates expenses in the budget process in order to produce favorable variances then this manager is producing
A) budgetary stretch budgets
B) budgetary slack
C) budgetary participation
D) none of the above
E) budgetary over-estimation erros
45.
Burger Publishing has two divisions which operate autonomously. Their results for 2005 were as follows:
Indianapolis Bloomington
Sales 7,000,000 8,000,000
Contribution Margin 4,000,000 5,000,000
Operating Income 2,000,000 3,000,000
Investment Base 8,000,000 13,000,000
Long-term Liabilities 1,000,000 3,000,000
The company’s desired rate of return is 10%.
Which division has the lowest return on investment and lowest residual income?

A) Bloomington, Indianapolis
B) Both measures are identical
C) Indianapolis, Indianapolis
D) Indianapolis, Bloomington
E) Bloomington, Bloomington