Question 1 Ben Gordon, Inc

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Question 1

Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $660,000. The company produces 300,000 wheels and 600,000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels?

    $264,000

   $282,856

   $165,000

    $220,000

 

Question 2

Which of the following will not result in an unfavorable controllable margin difference?

 

    Sales under budget; costs over budget

    Sales under budget; costs under budget

    Sales exceeding budget; costs over budget

    Sales exceeding budget; costs under budget

 

Question 3

Scorpion Production Company planned to use 1 yard of plastic per unit budgeted at $81 a yard. However, the plastic actually cost $80 per yard. The company actually made 3,900 units, although it had planned to make only 3,300 units. Total yards used for production were 3,960. How much is the total materials variance?

 

    $4,860 U

    $48,600 U

    $900 U

    $3,960 F

 

Question 4

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?

 

    Department managers' performances should not be evaluated based on actual results to budgeted results.

    Department managers should only be held accountable for controllable variances for their departments.

    Department managers should be held accountable for all variances from budgets for their departments.

    Department managers should be credited for favorable variances even if they are beyond their control.

 

Question 5

Financial and managerial accounting are similar in that both:

 

    have the same primary users.

    have reports that are prepared quarterly and annually.

    deal with the economic events of an enterprise.

    produce general-purpose reports.

 

Question 6

What is the primary difference between a static budget and a flexible budget?

 

    The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.

    The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.

    The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management.

    The static budget contains only fixed costs, while the flexible budget contains only variable costs.

 

Question 7

It costs Garner Company $12 of variable and $5 of fixed costs to produce one bathroom scale which normally sells for $35. A foreign wholesaler offers to purchase 3,000 scales at $15 each. Garner would incur special shipping costs of $1 per scale if the order were accepted. Garner has sufficient unused capacity to produce the 3,000 scales. If the special order is accepted, what will be the effect on net income?

 

    $45,000 increase

    $6,000 increase

    $6,000 decrease

    $9,000 decrease

 

Question 8

Which of the following statements concerning users of accounting information is incorrect?

 

    Management is considered an internal user.

    Taxing authorities are considered external users.

    Regulatory authorities are considered internal users.

    Present creditors are considered external users.

 

Question 9

The entry to record the acquisition of raw materials on account is:

 

Raw Materials Inventory Accounts Payable

    Manufacturing Overhead  Raw Materials Inventory Accounts Payable

    Accounts Payable Raw Materials Inventory

    Work in Process Inventory Accounts Payable

 

Question 10

Which of the following is not an underlying assumption of CVP analysis?

 

    Sales mix is constant.

    Beginning inventory is larger than ending inventory.

    Cost classifications are reasonably accurate.

    Changes in activity are the only factors that affect costs.

 

Question 11

Henson Company began the year with retained earnings of $380,000. During the year, the company recorded revenues of $500,000, expenses of $380,000, and paid dividends of $40,000. What was Henson’s retained earnings at the end of the year?

 

    $460,000

    $500,000

    $840,000

    $540,000

 

Question 12

Differences between a job order cost system and a process cost system include all of the following except the:

 

    unit cost computations.

    documents used to track costs.

    point at which costs are totaled.

    flow of costs.

 

Question 13

Danner Corporation reported net sales of $650,000, $720,000, and $780,000 in the years 2016, 2017, and 2018, respectively. If 2016 is the base year, what percentage do 2018 sales represent of the base?

 

    20%

    120%

    108%

    83%

 

Question 14

An activity-based overhead rate is computed as follows:

 

    actual overhead divided by estimated use of cost drivers.

    actual overhead divided by actual use of cost drivers.

    estimated overhead divided by estimated use of cost drivers.

    estimated overhead divided by actual use of cost drivers.

 

Question 15

If a plant is operating at full capacity and receives a one-time opportunity to accept an order at a special price below its usual price, then:

 

    the order will likely be rejected.

    the order will likely be accepted.

    fixed costs are not relevant.

    only variable costs are relevant.

 

Question 16

Which statement is correct?

 

    The use of the cash basis of accounting violates both the revenue recognition and expense recognition principles.

    As long as management is ethical, there are no problems with using the cash basis of accounting.

    As long as a company consistently uses the cash basis of accounting, generally accepted accounting principles allow its use.

    The cash basis of accounting is objective because no one can be certain of the amount of revenue until the cash is received.

 

Question 17

At September 1, 2017, Baxter Inc. reported Retained Earnings of $423,000. During the month, Baxter generated revenues of $60,000, incurred expenses of $36,000, purchased equipment for $15,000 and paid dividends of $6,000. What is the balance in Retained Earnings at September 30, 2017?

 

    $24,000 credit

    $441,000 credit

    $423,000 debit

    $426,000 credit

 

Question 18

In performing a vertical analysis, the base for sales revenues on the income statement is:

 

    net sales.

    net income.

    cost of goods available for sale.

    sales revenue.

 

Question 19

Which of the following statements is not true?

 

    Operating leverage refers to the extent to which a company’s net income reacts to a given change in sales.

    When a company’s sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.

    Companies that have higher fixed costs relative to variable costs have higher operating leverage.

    When a company’s sales revenue is increasing, high operating leverage is good because it means that profits will increase rapidly.

 

Question 20

Hollis Industries produces flash drives for computers, which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?

 

    25%

    65%

    35%

    75%

 

Question 21

Miller Manufacturing’s degree of operating leverage is 1.5. Warren Corporation’s degree of operating leverage is 3. Warren’s earnings would go up (or down) by ________ as much as Miller’s with an equal increase (or decrease) in sales.

 

    2 times

    1/2 times

    4.5 times

    1.5 times

 

Question 22

The investigation of materials price variance usually begins in the:

 

    first production department.

    controller's office.

    accounts payable department.

    purchasing department.

 

Question 23

The Mac Company has four plants nationwide that cost $350 million. The current fair value of the plants is $300 million. The plants will be reported as assets at:

 

    $600 million.

    $300 million.

    $350 million.

    $700 million.

 

Question 24

If there are no units in process at the beginning of the period, then:

 

    the units to be accounted for will equal the units transferred out and the units in process at the end of the period.

    the units started into production will equal the number of units transferred out.

    only one computation of equivalent units of production will be necessary.

    the company must be using a job order cost system.

 

Question 25

Which one of the following is an example of a period cost?

 

    A box cost associated with computers.

    Workers' compensation insurance on factory workers' wages allocated to the factory.

    A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer.

    A manager's salary for work that is done in the corporate head office.

 

Question 26

Which is the last step in developing the master budget?

 

 

    Preparing the budgeted balance sheet

    Preparing the cash budget

    Preparing the cost of goods manufactured budget

    Preparing the budgeted income statement

 

Question 27

Are advanced receipts from customers treated as revenue at the time of receipt? Why or why not?

 

    Yes, they are treated as revenue at the time of receipt because the company has access to the cash.

    Yes, the intent of the company is to perform the work and the customer is confident that the services will be completed.

    No, the amount of revenue cannot be adequately determined until the company completes the work.

    No, revenue cannot be recognized until the work is performed.

 

Question 28

La More Company had the following transactions during 2016:

 

    Sales of $9,000 on account

    Collected $4,000 for services to be performed in 2017

    Paid $3,750 cash in salaries for 2016

    Purchased airline tickets for $500 in December for a trip to take place in 2017

 

What is La More’s 2016 net income using accrual accounting?

 

    $9,750

    $5,750

    $5,250

    $9,250

 

Question 29

Kimble Company applies overhead on the basis of machine hours. Given the following data, compute overhead applied and the under- or overapplication of overhead for the period:

 

Estimated annual overhead cost     $1,600,000

Actual annual overhead cost           $1,575,000

Estimated machine hours                 400,000

Actual machine hours                       390,000 

 

    $1,560,000 applied and $15,000 underapplied

    $1,560,000 applied and $15,000 overapplied

    $1,600,000 applied and $15,000 overapplied

    $1,575,000 applied and neither under- nor overapplied

 

Question 30

Based on the following data, what is the amount of working capital?

 

Accounts payable………………………………………………………..$64,000

Accounts receivable……………………………………………………..114,000

Cash……………………………………………………………………….  70,000

Intangible assets…………………………………………………………100,000

Inventory…………………………………………………………………. 138,000

Long-term investments…………………………………………………..160,000

Long-term liabilities……………………………… ……………………...200,000

Short-term investments…………………………………………………...80,000

Notes payable (short-term)………………………………………………..56,000

Property, plant, and equipment………………………………………..1,340,000

Prepaid insurance……………………………………………………….......2,000

 

    $284,000

    $332,000

    $326,000

    $370,000