6 7 questions 1 when making operational decisions managers should use fixed costs in 4308989

6.7   Questions

1) When making operational decisions, managers should use ________ fixed costs instead of ________ fixed costs.

A) total; per unit

B) per unit; total

C) separable; joint

D) joint; separable

2) LL Company produces and sells a product that has variable costs of $9 per unit and fixed costs of $200,000 per year.  If production decreases from 50,000 to 40,000 units, the cost per unit will ________.

A) increase by $1

B) increase by $13

C) decrease by $1

D) decrease by $14

3) Melissa Company produces and sells a product that has variable costs of $8 per unit and fixed costs of $240,000 per year.  If 20,000 units are produced and sold in a year, what is the cost per unit?

A) $5

B) $8

C) $12

D) $20

4) Zach Company produces and sells a product that has a variable costs of $7 per unit and fixed costs of $200,000 per year.  If 40,000 units are produced and sold in a year, what is the cost per unit?

A) $7

B) $10

C) $12

D) $17

5) Joshua Company produces and sells a product that has variable costs of $7 per unit and fixed costs of $200,000 per year.  If production increases from 20,000 units to 25,000 units, the unit cost will ________.

A) increase by $35,000

B) decrease by $2 per unit

C) decrease by $8 per unit

D) stay the same

6) Future costs are relevant if they are the same under all feasible alternatives.

7) Only unit costs computed using the same level of production should be compared.

6.8   Questions

1) A widespread problem in practice is that the decision model used by managers for ________ and the model used by their superiors in ________ are different.

A) outsourcing; incremental analysis

B) outsourcing; differential analysis

C) decision making; performance evaluation

D) operational decisions; joint costing

2) Conflicts in the decision-making process can arise when superiors evaluate a manager's performance using a model consistent with the decision model used by the manager.

3) Generally, companies use aggregate measures of performance when conducting performance evaluations of managers.

question early in 2017 sheridan equipment company sold 500 rollomatics during 2017 a 4304522

Question

Early in 2017, Sheridan Equipment Company sold 500 Rollomatics during 2017 at $6,100 each. During 2017, Sheridan spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

Prepare 2017 entries for Sheridan. Assume that Sheridan estimates the total cost of servicing the warranties will be $55,000 for 2 years. (If no entry is required, select “No Entry” for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Early in 2017, Sheridan Equipment Company sold 500 Rollomatics during 2017 at $6,100 each. During 2017, Sheridan spent $21,000 servicing the 2-year assurance warranties that accompany the Rollomatic. All applicable transactions are on a cash basis.

 

 

7 variable costing considers fixed manufacturing overhead costs as a n a inventoriab 4308500

7) Variable costing considers fixed manufacturing overhead costs as a(n) ________.

A) inventoriable cost

B) product cost

C) future cost

D) immediate expense

8) The only difference between the net income between variable costing and absorption costing is the treatment of ________.

A) variable selling costs

B) variable administrative costs

C) fixed selling costs

D) fixed manufacturing overhead costs

9) Variable costing is also called ________.

A) functional costing

B) indirect costing

C) absorption costing

D) the contribution approach

10) ________ is used for external reporting.

A) Absorption costing

B) Variable costing

C) Direct costing

D) The contribution margin approach

11) The variable-costing method regards fixed manufacturing costs as a period expense when incurred.

12) Variable costing is more important for external reports than internal reports.

13) Fixed manufacturing overhead costs are excluded from product costs under absorption costing.

13.5   Questions

1) To compute contribution margin under variable costing, we deduct ________ and ________ from sales.

A) variable manufacturing costs; fixed manufacturing costs

B) variable selling costs; fixed manufacturing costs

C) variable administrative costs; fixed manufacturing overhead costs

D) variable manufacturing costs; variable selling and administrative costs

2) Product costs for variable costing include direct materials, direct labor and ________.

A) variable selling costs

B) fixed manufacturing overhead costs

C) variable manufacturing overhead costs

D) variable manufacturing overhead costs plus variable selling costs

3) When the variable costing method is used, fixed factory overhead appears on the income statement as a ________.

A) component of cost of goods sold

B) component of cost of goods sold and production volume variance

C) production volume variance

D) fixed expense

objective 7 1 in the service sector rather than machines usually represent s the 4312068

Objective 7

1) In the service sector, ________ rather than machines usually represent(s) the capacity constraint, which underscores the importance of budgeting even in nonmanufacturing organizations.

A) people

B) knowledge

C) familiarity with processes

D) potential for sales

2) ________ occur(s) when a superior simply tells subordinates what their budget will be.

A) Traditional budgeting

B) Stretch goals

C) Beyond budgeting approach

D) Budget slack

3) How is the role of budgeting similar for a manufacturing firm and a not-for-profit organization?

Objective 8

1) Zero-based budgeting requires that proponents of discretionary expenditures justify these outlays for each budgeting period.

2) When the operating budget is used as a control device, managers are more likely to be motivated to budget higher sales than actually anticipated.

3) In the beyond budgeting approach, targets are developed based on stretch goals tied to peers, competitors, and key global benchmarks.

4) Traditional budgeting takes a top-down approach.

5) _________ mean(s) that the organization will attempt to reach much higher goals with the current budget.

A) Traditional budgeting

B) Stretch goals

C) The beyond budgeting approach

D) Budget slack

6) ________ occur(s) when managers ask subordinates to discuss their ideas about the budget, but no joint decision-making occurs.

A) Traditional budgeting

B) Stretch targets

C) The beyond budgeting approach

D) Budget slack

7) Describe some of the drawbacks of using the operating budget as a control device.

1

8 for trend analysis to work correctly the accountant uses the a beginning percentag 4303072

 

8) For trend analysis to work correctly, the accountant uses the:

A) beginning percentage.

B) base year.

C) common-size statement.

D) horizontal analysis.

 

9) Which analysis deals with the percentage of changes in certain items over several years?

A) Vertical analysis

B) Ratio analysis

C) Trend analysis

D) Common-size statement

10) The revenue of Carol's Environmental Services for Years 1, 2, and 3 are $40,000, $60,000 and $80,000, respectively. Year 1 is the base year. The trend percentage for Year 2 is:

A) 50%.

B) 150%.

C) 200%.

D) 133%.

 

11) The sales of Mary's Services for Years 1, 2, and 3 are $25,000, $45,000, $60,000, respectively. The trend percentage for Year 3 is:

A) 42%.

B) 240%.

C) 140%.

D) 58%.

 

12) Net income was $45,000 in Year 1 and $60,000 in Year 2. The percentage increase in net income was:

A) 33.33%.

B) 133.33%.

C) (25%).

D) (33.33).

 

13) What was the percentage of decrease in the Accounts Receivable account if the receivables were $80,000 in Year 1, and $60,000 in Year 2?

A) (25%)

B) 33.33%

C) (33.33%)

D) 25%

14) In a common-size income statement, selling expenses are 55%. This means that they are 55% of:

A) net income.

B) net sales.

C) gross profit.

D) net profit.

 

15) If Cara's Piano sales increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000, then vertical analysis based on sales would show the following for cost of goods sold (rounded to the nearest percent):

A) 40% and 20%.

B) 10% and 30%.

C) 50% and 67%.

D) 67% and 40%.

 

16) An expression of the amount of each item in a statement shown as a percentage of some designated total for purposes of comparison is called:

A) horizontal analysis.

B) earnings per share analysis.

C) return on total assets.

D) vertical analysis.

 

17) If current assets were $100,000 in 20×7 and $88,000 in 20×8, what was the amount of increase or decrease? (round to nearest percent):

A) The percentage increase is 13.64%.

B) The percentage decrease is 12%.

C) The percentage decrease is 13.64%.

D) The percentage increase is 12%.

 

 

37 journalize the following transactions for pets r us mar 5sold a truck for 10 000 4303474

 

37) Journalize the following transactions for Pets R Us:

 

Mar. 5Sold a truck for $10,000 that cost $15,000 and had an accumulated depreciation of $12,000.

Mar. 10A machine costing $13,000 with accumulated depreciation of $10,500 was destroyed in a fire. No claim was filed.

 

May 15Traded in a machine costing $25,000, with $19,000 of accumulated depreciation, for a new machine costing $32,000 with a trade-in allowance of$ 9,000.

38) Prepare journal entries for the following for Bartz, Inc.

 

May 11Replaced the engine in a Van #1, paying cash of $5,400.

May 18Paid cash for a tune-up of the engine in Van #2 of $570.

May 29Paid cash to add a lift to Van #2 of $3,700

39) A computer server system, which had cost $250,000 and had accumulated depreciation of $170,000, was traded for a new system with a fair market value of $245,000. The old system and cash of $190,000 were given for the new system. Prepare the journal entry for the exchange of these similar assets.

40) A computer server system, which had cost $250,000 and had accumulated depreciation of $170,000, was traded for a new system with a fair market value of $245,000. The old system and cash of $210,000 were given for the new system. Prepare the journal entry for the exchange of these similar assets assuming the income tax method is used to record the exchange.

41) Define and compare capital expenditures and revenue expenditures.

 

 

11 depreciation tax deductions result in tax savings that partially offset the cost 4302606

 

11) Depreciation tax deductions result in tax savings that partially offset the cost of acquiring the capital asset.

 

12) The use of an accelerated method of depreciation for tax purposes would usually increase the present value of the investment.

 

13) In the net present value (NPV) method, after-tax cash flows should be used instead of pre-tax cash flows when taxes are a consideration.

 

14) A decrease in the tax rate will decrease the net present value (NPV) for a given capital budgeting project.

15) The tax effects are significant in capital budgeting decisions.

 

16) Businesses may opt not to claim the full amount of available capital cost allowance.

 

17) The disposal of a machine (or any depreciable asset) results in a lost tax shield.

 

18) After-tax cash-operating flows are equal to

A) (one minus the tax rate) times (net income).

B) (one minus the tax rate) times (operating income) plus CCA.

C) (one minus the tax rate) times (sales less costs excluding CCA).

D) sales less (one minus the tax rate) times (cash costs).

E) (one minus the tax rate) times (sales less costs including CCA).

 

19) When considering the net cash inflows resulting from a capital-budgeting decision, taxes will

A) reduce the amount of the cash savings by the tax rate.

B) increase the amount of the cash savings by the tax rate.

C) increase the amount of the cash savings by (1 – tax rate).

D) reduce the amount of the cash savings by (1 – tax rate).

E) increase the amount of the cash savings by (1 + tax rate).

20) A capital proposal is projected to result in annual savings of $25,000. What is the after-tax cash flow if the tax rate is 35%?

A) $25,000

B) $16,250

C) $8,750

D) $7,500

E) $5,000

 

 

 

31 this control ensures that the correct and most current files are being updated a 4306072

31) This control ensures that the correct and most current files are being updated.

A) Cross-footing balance test

B) Data matching

C) File labels

D) Write-protect mechanism

32) This batch processing data entry control sums the number of items in a batch.

A) Financial total

B) Hash total

C) Record count

D) Sequence check

33) This data entry control compares the ID number in transaction data to a master file to verify that the ID number exists.

A) Reasonableness test

B) User review

C) Data matching

D) Validity check

34) File labels are an example of

A) data entry controls.

B) output controls.

C) processing controls.

D) source data controls.

35) A computer operator accidentally used the wrong master file when updating a transaction file. As a result, the master file data is now unreadable. Which control could best have prevented this from happening?

A) Internal header label

B) Validity check

C) Check digit

D) Parity check

36) Chaz Finnerty called the IT Help Desk in a huff. “I'm trying to open an Excel file and I get a message that says that the file is locked for editing. What's going on?” The answer is likely that

A) the file is corrupted due to a computer virus.

B) there is no problem. Chaz is editing the file, so it is locked.

C) concurrent update controls have locked the file.

D) Chaz probably opened the file as read-only.

37) This control protects records from errors that occur when two or more users attempt to update the same record simultaneously.

A) Concurrent update controls

B) Cross-footing balance test

C) Data conversion controls

D) Recalculation of batch totals

38) Modest Expectations Investment Services (MEIS) allows customers to manage their investments over the Internet. If customers attempt to sell more shares of a stock than they have in their account, an error message is displayed. This is an example of a

A) reasonableness test.

B) field check.

C) validity check.

D) limit check.

39) Modest Expectations Investment Services (MEIS) allows customers to manage their investments over the Internet. If customers attempt to spend more money than they have in their account, an error message is displayed. This is an example of a

A) reasonableness test.

B) field check.

C) validity check.

D) limit check.

40) The Spontaneous Combustion Rocket Shoppe in downtown Fargo, North Dakota, generates three quarters of its revenue from orders taken over the Internet. The revenue clearing account is debited by the total of cash and credit receipts and credited by the total of storefront and Internet sales. This is an example of a

A) data integrity test.

B) zero-balance test.

C) trial balance audit.

D) cross-footing balance test.

79 which of the following demonstrates a poor internal control procedure a the bookk 4314205

79.Which of the following demonstrates a poor internal control procedure? 

A. The bookkeeper makes cash deposits and records journal entries related to cash, while the treasurer prepares the bank reconciliation.

B. The president, who does no bookkeeping, prepares the bank reconciliation each month.

C. The treasurer signs all checks after the bookkeeper prepares the supporting documents.

D. One bookkeeper prepares cash deposits and the other bookkeeper enters the collections in the journal and ledger.

80.The cash records and the bank statement of Frankel Company showed the following at the end of February 2016: Outstanding checks as of the beginning of February 2016, $8,000; checks written by Frankel Company according to its books during February 2016, $50,000; and checks cleared by the bank during February 2016, $54,000. What was the amount of the outstanding checks at the end of February 2016? 

A. $2,000.

B. $4,000.

C. $6,000.

D. $8,000.

81.The cash account and the December bank statement of Gomez Company showed the following: deposits made by Gomez Company during December $90,000; deposits reflected on the December bank statement, $88,000; and deposits in transit on November 30, $5,000. What was the amount of deposits in transit at the end of December? 

A. $10,000.

B. $7,000.

C. $5,000.

D. $2,000.

82.When preparing the monthly bank reconciliation, the accountant for Farris Corporation discovered that a check correctly written to one of Farris' suppliers for $159 had been incorrectly recorded in the books as $195. Which of the following statements is correct with respect to the bank reconciliation process? 

A. The cash balance per the books will be decreased.

B. The cash balance per the bank statement will be increased.

C. The cash balance per the bank statement will be decreased.

D. The cash balance per the books will be increased.

83.When preparing a bank reconciliation, which of the following would be deducted from the company's cash balance? 

A. Interest income paid by the bank.

B. The dollar amount of deposits in transit.

C. The dollar amount of outstanding checks.

D. The bank service charges included on the bank statement.

84.Merchandise was sold on credit for $10,000, terms 2/10, n/30. Which of the following journal entry descriptions correctly describes the cash collection? 

A. Cash is debited for $10,000 and accounts receivable is credited for $10,000 if the collection is within the discount period.

B. Cash is debited for $10,000, accounts receivable is credited for $9,800, and sales discounts is credited for $200 if the collection is within the discount period.

C. Cash is debited for $10,000, accounts receivable is credited for $9,800, and sales discounts is credited for $200 if the collection is after the discount period.

D. Cash is debited for $10,000 and accounts receivable is credited for $10,000 if the collection is after the discount period.

85.Merchandise was sold on credit for $30,000, terms 3/15, n/30. Which of the following journal entry descriptions correctly describes the cash collection?

A. Cash is debited for $25,500 and accounts receivable is credited for $25,500 if the collection is within the discount period.

B. Cash is debited for $29,100, sales discounts is debited for $900, and accounts receivable is credited for $30,000 if the collection is within the discount period.

C. Cash is debited for $30,000, accounts receivable is credited for $29,100, and sales discounts is credited for $900 if the collection is within the discount period.

D. Cash is debited for $29,100 and accounts receivable is credited for $29,100 if the collection is after the discount period.

86.Which of the following does not correctly describe the following journal entry?

Cashxxx

Credit card discountxxx

Accounts receivable xxx

A. Current assets decrease.

B. Gross profit decreases.

C. Net sales decreases.

D. Net income is not affected.

87.Which of the following correctly describes the following journal entry?

Cashxxx

Sales discountsxxx

Accounts receivable xxx

A. The gross profit does not change.

B. Net income decreases.

C. Current assets increase.

D. Net sales increases.

88.Which of the following does not correctly describe the following journal entry?

Sales returns and allowancesxxx

Accounts receivable xxx

A. Current assets decrease.

B. Gross profit decreases.

C. Net sales decreases.

D. Operating expenses increase.

6-1

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21 a company that uses the perpetual inventory method purchases inventory of 1 000 o 4311528

21) A company that uses the perpetual inventory method purchases inventory of $1,000 on account with terms of 2/10, net/30.  Defective inventory of $200 is returned 2 days later and the accounts are appropriately adjusted.  If the company paid the vendor 25 days later, which of the following entries would be made to record the payment?

A) $800 debit to Accounts payable and an $800 credit to Cash

B) $784 debit to Accounts payable, a $16 debit to Inventory and an $800 credit to Cash

C) $16 debit to Inventory, an $800 debit to Accounts payable and an $816 credit to Cash

D) $800 debit to Accounts payable, a $16 credit to Inventory and a $784 credit to Cash

22) FOB shipping point means that the:

A) seller normally pays the transportation costs.

B) buyer normally pays the transportation costs.

C) buyer and the seller split the shipping costs.

D) shipping costs are billed to the seller.

23) The terms on an invoice are 3/10, n/25.  This means that a:

A) discount of 10% is allowed if paid in 3 days.

B) discount of  3% is allowed if paid in 10 days.

C) discount of  25% is allowed if paid in 10 days.

D) discount of 3% is allowed if paid after 25 days.

24) An invoice in the amount of $600.00 for merchandise purchased is shown with a 4/10, n/30 discount.  The amount to pay on or before the tenth day is:

A) $552.50.

B) $540.25.

C) $576.00.

D) $600.00.

25) An invoice is dated April 28 for $235.00 and is shown with payment terms of 5/10, n/30.  If the invoice is paid on May 12, the amount to pay will be:

A) $235.00.

B) $211.50.

C) $223.25.

D) $230.00.

26) Which of the following means that the shipment is free on board at the point of shipment and the buyer pays all shipping costs?

A) FOB destination

B) FOB shipping point

C) COD

D) 4/10, EOM

27) FOB destination means that the:

A) seller normally pays the transportation costs.

B) buyer normally pays the transportation costs.

C) buyer and the seller split the shipping costs.

D) shipping costs are billed to the buyer.

28) A company that uses the perpetual inventory method purchases inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, net/30. The company paid the shipper $100 cash for freight in.   Which of the following entries would be made to record payment to the vendor if the payment is made within 10 days?

A) $1,960 debit to Accounts payable and a $1,960 credit to Cash

B) $2,000 debit to Accounts payable, a $100 debit to Inventory and a $1,960 credit to Cash

C) $2,000 debit to Accounts payable, a $40 credit to Inventory and a $1,960 credit to Cash

D) $1,960 debit to Accounts payable, a $40 debit to Inventory and a $2,000 credit to Cash

29) A company that uses the perpetual inventory method purchased inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, net/30. The company paid the shipper $100 cash for freight in.   Company paid the vendor 9 days after the sale.  Assuming this was the only transaction affecting inventory, and no beginning balance, what would the cost basis of the inventory be?

A) $1,960

B) $2,000

C) $2,060

D) $2,100

30) A company that uses the perpetual inventory method purchased inventory for $2,000 from a vendor on account, FOB shipping point, with terms of 2/10, net/30.  The company paid the shipper $100 cash for Freight in.  The company then returned $200 of damaged goods and got an allowance from the vendor.   Company paid the vendor 8 days after the sale.  Assuming this was the only transaction affecting inventory, and no beginning balance, what would the cost basis of the inventory be?

A) $1,764

B) $1,864

C) $2,100

D) $1,900

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