China EMBA – August 2005
Final Exam
Name: Andy Wu
- D Managerial accounting has changed in recent years because of:
A.increased global competition.
B.the emergence of new industries.
C.an increased focus on the customer.
D.all of the above factors.
- B Dale Company, which applies overhead at the rate of 190% of direct labor cost, began work on job no. 101 during June. The job was completed in July and sold during August, having accumulated direct material and labor charges of $27,000 and $15,000, respectively. On the basis of this information, the total overhead applied to job no. 101 amounted to:
A.$0.
B.$28,500.
C.$51,300.
D.$70,500.
- D Lancer charges manufacturing overhead to products by using a predetermined application rate, computed on the basis of labor hours. The following data pertain to the current year:
Budgeted manufacturing overhead: $1,080,000
Actual manufacturing overhead: $945,000
Budgeted labor hours: 45,000
Actual labor hours: 31,500
Which of the following choices denotes the correct status of manufacturing overhead at year-end?
A.Overapplied by $135,000.
B.Underapplied by $135,000.
C.Overapplied by $189,000.
D.Underapplied by $189,000.
- B Which of the following is the proper sequence of events in an activity-based costing system?
A.Identification of cost drivers, identification of cost pools, calculation of cost application rates, assignment of cost to products.
B.Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products.
C.Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates.
D.Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products.
China EMBA – August 2005
Final Exam
Use the following to answer questions 5-8:
Ernst Company currently uses traditional costing procedures, applying $300,000 of overhead to products X and Y on the basis of direct labor hours. The firm is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.
Product / Pool No. 1(Driver: DLH) / Pool No. 2
(Driver: SU) / Pool No. 3
(Driver: PC)
X / 400 / 25 / 1,300
Y / 600 / 75 / 700
Pool Cost / $60,000 / $140,000 / $100,000
5.A The overhead cost allocated to product X by using traditional costing procedures would be:
A.$120,000.
B.$124,000.
C.$176,000.
D.$180,000.
6.D The overhead cost allocated to product Y by using traditional costing procedures would be:
A.$120,000.
B.$124,000.
C.$176,000.
D.$180,000.
7.B The overhead cost allocated to product X by using activity-based costing procedures would be:
A.$120,000.
B.$124,000.
C.$176,000.
D.$180,000.
8.C The overhead cost allocated to product Y by using activity-based costing procedures would be:
A.$120,000.
B.$124,000.
C.$176,000.
D.$180,000.
9. B Hampton manufactures products X and Y, applying overhead on the basis of labor hours. X requires a variety of complex manufacturing procedures and consumes significant productive resources. Y, on the other hand, is relatively simplistic in nature. What would an activity-based costing system likely disclose about products X and Y as a result of Hampton's current accounting procedures?
X / YA. / Undercosted / Undercosted
B. / Undercosted / Overcosted
C. / Overcosted / Undercosted
D. / Overcosted / Overcosted
10.B Which of the following choices correctly denotes managerial functions that are commonly associated with budgeting?
Planning / PerformanceEvaluation / Coordination
of Activities
A. / Yes / Yes / No
B. / Yes / Yes / Yes
C. / Yes / No / No
D. / Yes / No / Yes
11.A A budget serves as a benchmark against which:
A.actual results can be compared.
B.allocated results can be compared.
C. actual results become inconsequential.
D.allocated results become inconsequential.
12. D Which of the following statements best describes the relationship between the sales-forecasting process and the master-budgeting process?
A.The sales forecast is typically completed after completion of the master budget.
B.The sales forecast is typically completed approximately halfway through the master-budget process.
C.The sales forecast is typically completed before the master budget and has no impact on the master budget.
D.The sales forecast is typically completed before the master budget and has significant impact on the master budget.
13.D Which of the following outcomes is not typically associated with participative budgeting?
A.Employees make significant attempts in trying to achieve budgetary goals.
B.Budget preparation time can be somewhat lengthy.
C.The problem of budget padding may surface.
D.Employee morale may suffer.
14.D The term "management by exception" is best defined as:
A.choosing exceptional managers.
B.controlling actions of subordinates through acceptance of management techniques.
C.investigating unfavorable variances.
D.devoting management time to investigate significant variances.
Use the following to answer questions 15-16:
The following data relate to product no. 89 of Des Moines Corporation:
Direct material standard: 3 square feet at $2.50 per square foot
Direct material purchases: 30,000 square feet at $2.60 per square foot
Direct material consumed: 29,200 square feet
Manufacturing activity, product no. 89: 9,600 units completed
15.B The direct-material quantity variance is:
A.$1,000F.
B.$1,000U.
C.$1,040F.
D.$1,040U.
16.D The direct-material price variance is:
A.$2,880U.
B.$2,920F.
C.$2,920U.
D.$3,000U.
Use the following to answer questions 17-18
The following data relate to product no. 33 of La Quinta Corporation:
Direct labor standard: 5 hours at $14 per hour
Direct labor used in production: 45,000 hours at a cost of $639,000
Manufacturing activity, product no. 33: 8,900 units completed
17.D The direct-labor rate variance is:
A.$8,900F.
B.$8,900U.
C.$9,000F.
D.$9,000U.
18.B The direct-labor efficiency variance is:
A.$7,000F.
B.$7,000U.
C.$7,100F.
D.$7,100U.
Use the following to answer questions 19-20:
Benson Company, which uses a standard cost system, budgeted $600,000 of fixed overhead when 40,000 machine hours were anticipated. Other data for the period were:
Actual units produced: 10,000
Standard production time per unit: 3.9 machine hours
Fixed overhead incurred: $620,000
Actual machine hours worked: 42,000
19.D Benson's fixed-overhead budget variance is:
A.$10,000 favorable.
B.$15,000 favorable.
C.$20,000 favorable.
D.$20,000 unfavorable.
20.D Benson's fixed-overhead volume variance is:
A.$10,000 favorable.
B.$15,000 favorable.
C.$20,000 favorable.
D.$15,000 unfavorable.
- A When managers of subunits throughout an organization strive to achieve the goals set by top management, the result is:
A. goal congruence.
B.planning and control.
C.responsibility accounting.
D.delegation of decision making.
22.D Which of the following is not an example of a responsibility center?
A.Cost center.
B.Revenue center.
C.Profit center.
D.Contribution center.
23. C If the head of a hotel's food and beverage operation is held accountable for revenues and costs, the food and beverage operation would be considered a(n):
A.cost center.
B.revenue center.
C.profit center.
D.investment center.
24. D A responsibility center in which the manager is held accountable for the profitable use of assets/capital is commonly known as a(n):
A.cost center.
B.revenue center.
C.profit center.
D.investment center.
E.contribution center.
25. C Applebaum Enterprises had a sales margin of 8%, sales of $3,000,000, and invested capital of $2,000,000. The company's ROI was:
A.5.33%.
B.7.00%.
C.12.00%.
D.20.00%.
26. D Which of the following describes the goal that should be pursued when setting transfer prices?
A.Maximize profits of the buying division.
B.Maximize profits of the selling division.
C.Allow top management to become actively involved when calculating the proper dollar amounts.
D.Establish incentives for autonomous division managers to make decisions that are in the overall organization's best interests (i.e., goal congruence).
27. A McKenna's Florida Division is currently purchasing a part from an outside supplier for $29 per unit. The company's Alabama Division, which has excess capacity, makes and sells this part for external customers at a variable cost of $22 and a selling price of $34. If Alabama begins sales to Florida, it (1) will use the general transfer-pricing rule and (2) will be able to reduce variable cost on internal transfers by $4. If sales to outsiders will not be affected, Alabama should establish a transfer price of:
A.$18.
B.$22.
C.$30.
D.$34.
28. B Capital-budgeting decisions primarily involve:
A.emergency situations.
B.long-term decisions.
C.short-term planning situations.
D.cash inflows and outflows in the current year.
29. C Which of the following is taken into account by the net-present-value method?
A Project's Immediate Cash Flows / Cash Flows During a Project's Life / Time Value of MoneyA. / Yes / No / No
B. / Yes / Yes / No
C. / Yes / Yes / Yes
D. / No / Yes / Yes
30. A Which of the following choices correctly states the rules for project acceptance under the net-present-value method and the internal-rate-of-return method?
Net Present Value / Internal Rate of ReturnA. / Positive total / Greater than hurdle rate
B. / Positive total / Less than hurdle rate
C. / Negative total / Greater than hurdle rate
D. / Negative total / Less than hurdle rate
31. D The internal rate of return:
A.ignores the time value of money.
B.equates a project's cash inflows with its cash outflows.
C.equates a project's cash outflows with its expenses.
D.equates the present value of a project's cash inflows with the present value of the cash outflows.
32. C Which of the following would be considered a "source" of cash for purposes of constructing a statement of cash flows?
A)a decrease in accounts payable.
B)dividends paid to the company's own shareholders.
C)an increase in accrued liabilities.
D)an increase in prepaid expenses.
33. A In a statement of cash flows, a change in accounts receivables would be classified as:
A)an operating activity.
B)a financing activity.
C)an investing activity.
D)a noncash item that need not appear on the statement of cash flows.
34. C In a statement of cash flows, a change in the plant and equipment account would ordinarily be classified as:
A)an operating activity.
B)a financing activity.
C)an investing activity.
D)a noncash item that need not appear on the statement of cash flows.
35. B In a statement of cash flows, a change in the common stock account would ordinarily be classified as:
A)an operating activity.
B)a financing activity.
C)an investing activity.
D)a noncash item that need not appear on the statement of cash flows.
36. C The following information relates to Siem, Inc. for last year:
Net income...... / $5,000Net increase in all current assets except cash...... / $43,000
Net decrease in current liabilities...... / $27,000
Dividends paid on common stock...... / $25,000
Depreciation expense...... / $30,000
Gain on sale of building...... / $11,000
What is Siem's net cash provided (used) by operating activities for last year on the statement of cash flows? (Assume that current liabilities do not contain any notes payable.)
A)$8,000
B)$(17,000)
C)$(46,000)
D)$(71,000)
Use the following to answer questions 37-41:
Selected data (in thousands of dollars) from Ostrander Corporation's financial statements are presented below:
Balance Sheet Data:Year 2 / Year 1
Cash...... / $32 / $28
Marketable securities...... / $169 / $172
Accounts receivable (net)...... / $210 / $204
Merchandise inventory...... / $440 / $420
Equipment (net)...... / $480 / $440
Total assets...... / $1,397 / $1,320
Current liabilities...... / $370 / $368
Total liabilities...... / $790 / $750
Common stock outstanding..... / $226 / $210
Retained earnings...... / $381 / $360
Income Statement Data:
Year 2
Sales (all on account)...... / $4,175
Cost of goods sold...... / $2,880
Interest expense...... / $50
Income tax...... / $120
Net income...... / $175
37.C Ostrander Corporation's acid-test (quick) ratio for Year 2 is closest to:
A)1.73
B)1.87
C)1.11
D)0.54
38.B Ostrander Corporation's inventory turnover for Year 2 is closest to:
A)6.54
B)6.69
C)6.85
D)9.70
39.A Ostrander Corporation's average collection period (age of receivables) for Year 2 is closest to:
A)18.10 days
B)26.61 days
C)17.83 days
D)18.36 days
40.D Ostrander Corporation's times interest earned for Year 2 is closest to:
A)4.50
B)7.70
C)3.50
D)6.90
41.D Ostrander Corporation's debt-to-equity ratio at the end of Year 2 is closest to:
A)3.49
B)1.85
C)2.07
D)1.30