Question 1. Which of the following costs are not included in finished goods inventory?
a. Direct labor
b. Factory overhead
c. Company President's salary
d. Direct Materials
e. None of the above
Question 2. Indirect labor is a:
a. Nonmanufacturing cost
b. Raw materials cost
c. Product cost
d. Period cost
e. None of the above
Question 3. A company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If the company will break even at this level of sales, what are the fixed costs?
a. $100,000
b. $160,000
c. $200,000
d. $300,000
e. None of the above
Question 4. A manufacturing company reported the following year-end information:
Beginning work in process inventory $360,000
Beginning raw materials inventory $100,000
Ending work in process inventory $300,000
Ending raw materials inventory $160,000
Raw materials purchased $320,000
Direct labor $300,000
Manufacturing overhead $200,000
The company's cost of goods manufactured for the year is:
a. $760,000
b. $820,000
c. $700,000
d. $880,000
e. None of the above
Question 5. Which of the following is not an example of a cost that varies in total as the number of units produced changes?
a. Electricity per KWH to operate factory equipment
b. Direct materials cost
c. Insurance premiums on factory building
d. Wages of assembly worker
e. None of the above
Question 6. Variable costs as a percentage of sales for Apple Inc. are 70%, current sales are $500,000, and fixed costs are $150,000. How much will operating income change if sales increases by $50,000?
a. $35,000 increase
b. $35,000 decrease
c. $15,000 increase
d. $15,000 decrease
e. None of the above
Question 7. If fixed costs are $400,000 and variable costs are 80% of sales, what is the break-even point?
a. $80,000
b. $320,000
c. $400,000
d. $2,000,000
e. None of the above
Question 8. A budget is most likely to be effective if
a. It is used to assess blame when things do not occur according to plans
b. It is not used to evaluate a manager's performance
c. Employees and managers at the lower levels do not get involved in the budgeting process
d. It has top management support
e. None of the above
Question 9. Production and sales estimates for March for a company are as follows:
Estimated inventory (units), Mach 1 ............................................... 10,000
Desired inventory (units), March 31..................................................19,000
Expected sales volume (units) ............................................................30,000
The number of units expected to be manufactured in March is:
a. 29,000
b. 39,000
c. 40,000
d. 59,000
e. None of the above
Question 10. Randy Corporation sells a single product. Budgeted sales for the year are anticipated to be 640,000 units, estimated beginning inventory is 100,000 units, and desired ending inventory is 80,000 units. The quantities of direct materials expected to be used for each unit of finished product are given below.
Material A .50 lb. Per unit @ $ .60 per pound
Material B 1.00 lb. Per unit @ $1.50 per pound
Material C 1.20 lb. Per unit @ $1.10 per pound
The amount of direct material A to be purchased during the year is:
a. $540,000
b. $186,000
c. $183,000
d. $620,000
e. None of the above
Question 11. A department has budgeted monthly manufacturing overhead cost of $90,000 plus $3 per direct labor hour. If a flexible budget report reflects $174,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was:
a. 88,000 direct labor hours
b. 28,000 direct labor hours
c. 58,000 direct labor hours
d. Cannot be determined
e. None of the above
Question 12. If an investment center has generated a controllable margin of $60,000 and sales of $300,000, what is the return on investment for the investment center if average operating assets were $500,000 during the period?
a. 12%
b. 20%
c. 48%
d. 60%
e. None of the above
Question 13. A company manufactures a product with a unit variable cost of $50 and a unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000 units were produced and sold. The company has a one-time opportunity to sell an additional 3,000 units at $70 each in a foreign market which would not affect its present sales. If the company has sufficient capacity to produce the additional units, acceptance of the special order would affect net income as follows:
a. Income would decrease by $12,000
b. Income would increase by $12,000
c. Income would increase by $210,000
d. Income would increase by $60,000
e. None of the above
Question 14. A company has three product lines, one of which reflects the following results:
Sales $170,000
Variable expense $100,000
Contribution margin $70,000
Fixed expenses $110,000
Net loss $(40,000)
If this product line is eliminated, 60% of the fixed expenses can be eliminated and the other 40% will be allocated to other product lines. If management decides to eliminate this product line, the company's net income will:
a. Increase by $40,000
b. Decrease by $70,000
c. Decrease by$4,000
d. Increase by $4,000
e. None of the above