Question 1
Opportunity cost is best described by which of the following?
Benefits foregone by choosing a particular alternative course of action
Costs that were incurred in the past and cannot be changed
The distribution of all products to be sold
Expected future costs that differ among alternatives
Question 2
A relevant cost is best described by which of the following?
A factor that restricts production or sales of a product
Cost of developing, producing, and delivering a product or service
Costs that were incurred in the past and cannot be changed
Expected future costs that differ among alternatives
Question 3
Contribution margin per unit is best described by which of the following?
Sales price per unit minus fixed cost per unit
Sales price per unit minus variable cost unit
Sales price per unit minus fixed and variable costs per unit
Units sold time contribution margin ratio
Question 4
Which of the following is a sunk cost?
Operating costs for a new vehicle
Trade in value of old vehicle
Purchase price of vehicle to be traded in
Purchase price of new vehicle
Question 5
Managers should consider ________ when making any sort of decision.
only fixed costs
sunk costs
only variable costs
revenues that differ among alternatives
Question 6
Managers should consider all of the following when deciding whether to accept a special order, except
available excess capacity.
the variable costs associated with the special order.
the effect of the order on regular sales.
fixed costs that will not be affected by the order.
Question 7
Blue Technologies manufactures and sells DVD players. Great Products Company has offered Blue Technologies $22 per DVD player for 10,000 DVD players. Blue Technologies’ normal selling price is $30 per DVD player. The total manufacturing cost per DVD player is $12 and consists of variable costs of $14 per DVD player and fixed overhead costs of $4 per DVD player. (NOTE: Assume excess capacity and no effect on regular sales.)
How much are the expected increase (decrease) in revenues and expenses from the special sales order?
Expected increase in revenues $220,000; expected increase in expenses $140,000
Expected increase in revenues $220,000; expected increase in expenses $40,000
Expected increase in revenues $300,000; expected increase in expenses $140,000
Expected increase in revenues $220,000; expected increase in expenses $120,000
Question 8
Which of the following types of cash outlays has its own budget?
Capital expenditures
Dividends
Income taxes
All of the above
Question 9
A company should ________ when projecting cash receipts for a given month.
include only cash collections from sales made in that month
only list COD sales made in that month
only list credit sales made in that month
include cash to be collected in that month regardless of when the sale was made
Question 10
The term cash budget is best defined by which of the following?
A company’s plan for purchases of property, plant and equipment, and other long-term assets
Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance
A system for evaluating the performance of each responsibility center and its manager
A budget that projects cash inflows and outflows and the end of period budgeted balance sheet
Question 11
Which of the following budgets projects cash inflows and outflows and the budgeted balance sheet?
Purchases budget
Capital expenditures budget
Financial budget
Cash budget
Question 12
Which of the following is an example of a financial budget?
Budgeted balance sheet
Sales budget
Budgeted income statement
Operating expenses budget
Question 13
Eastern Corporation collects 10% in the second month following sale, 55% in the month following sale and 35% of a month’s sales in the month of sale. Budgeted sales for the upcoming four months are:
April budgeted sales$100,000
May budgeted sales$150,000
June budgeted sales$230,000
July budgeted sales$180,000
The amount of cash that will be collected in July is budgeted to be
$63,000.
$204,500.
$173,000.
$197,000.
Question 14
Romona Company expects its November sales to be 20% higher than its October sales of 165,000. All sales are on credit and are collected as follows: 35% in the month of the sale and 60% in the following month. Purchases were $110,000 in October and are expected to be $140,000 in November. Purchases are paid 40% in the month of purchase and 60% in the following month. The cash balance on November 1 is $13,500. The cash balance on November 30 will be
$46,300.
$59,800.
$2,050.
$32,800.
Question 15
Which of the following is a disadvantage of decentralization?
Unit managers may not understand the big picture of the company.
Management does not have time to concentrate on long-term strategic planning.
Unit managers have decreased motivation and retention.
Managers receive training and experience to allow advancement in the organization.
Question 16
The reservations department for a car rental chain is likely to be classified as a(n)
cost center.
investment center.
profit center.
revenue center.
Question 17
The production line at Morningstar Farms is most likely treated as a(n)
investment center.
cost center.
profit center.
revenue center.
Question 18
The regional sales department for Xerox copiers is most likely treated as a(n)
cost center.
investment center.
profit center.
revenue center.
Question 19
The Corn Flakes product line at Kellogg is most likely treated as a(n)
cost center.
investment center.
profit center.
revenue center.
Question 20
The subscription sales manager for The New York Times would be in charge of a(n)
cost center.
investment center.
profit center.
revenue center.
Question 21
The CEO of Banana Republic, a division of The Gap, Inc., would be in charge of a(n)
cost center.
investment center.
profit center.
revenue center.
Question 22
Culinary Kitchen Supply produces bamboo cutting boards. The standard material cost for the bamboo used in each lamp is $18 per square foot. Each board requires 3 square feet of bamboo. In August, the company produced 1,200 cutting boards. There were 3,400 square feet of bamboo used during the month. The bamboo used had an actual cost $20 per square foot. What was the materials quantity variance in August for bamboo?
$3,600 favorable
$3,600 unfavorable
$4,000 favorable
$4,000 unfavorable
Question 23
Sole Purpose manufactures beach shoes that use a canvas as the main raw material. Data related to the shoes for June follows:
Standard quantity per unit of output (yards)4.5
Standard price per yard$10.50
Actual materials purchased in yards16,500
Actual cost of materials purchased$90,450
Actual materials used in production (yards)16,000
Actual outputs in units3,600
What is the materials quantity variance for canvas for June?
$1,645 favorable
$2,100 favorable
$1,645 unfavorable
$2,100 unfavorable
Question 24
Madden Corporation manufactures t-shirts, which is its only product. The standards for t-shirts are as follows:
Standard direct materials cost per yard$ 8
Standard direct materials quantity per t-shirt (yards)1.5
During the month of May, the company produced 1,250 t-shirts. Related production data for the month follows:
Actual yards of direct material purchased1,400
Actual direct materials total cost$ 15,500
What is the direct materials quantity variance for the month?
$ 4,300 favorable
$ 4,300 unfavorable
$ 3,800 favorable
$ 3,800 unfavorable
