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Multiple Choices Questions - Management Accounting

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1. Return on investment (ROI) can be increased by:
a. increasing sales
b. decreasing operating assets
c. decreasing operating income
d. decreasing asset turnover

2. Randall Company makes and distributes outdoor play equipment. Last year sales were $2,400,000, operating income was $600,000, and the assets used were $3,000,000.The return on investment (ROI) is:
a. 20%
b. 80%
c. 25%
d. 125%

3. When making screening decisions using the net present value method, a project is acceptable if
a. the NPV is greater than the hurdle rate.
b. the NPV is greater than the IRR.
c. the NPV is positive.
d. the NPV is negative.

4. Minne Corp is considering the purchase of a new piece of equipment. When discounted at a hurdle rate of 8%, the project has a net present value of $24,580. When discounted at a hurdle rate of 10%, the project has a net present value of ($28,940). The internal rate of return of the project is
a. zero.
b. between zero and 8%.
c. between 8% and 10%.
d. greater than 10%.

5. An analysis that reveals whether changing the underlying assumptions would affect the decision is a
a. net present value analysis.
b. internal rate of return analysis.
c. payback period analysis.
d. sensitivity analysis

6. Jonas Inc. is considering whether to lease or purchase a piece of equipment. The total cost to lease the equipment will be $120,000 over its estimated life, while the total cost to buy the equipment will be $75,000 over its estimated life. At Jonas's required rate of return, the net present value of the cost of leasing the equipment is $73,700 and the net present value of the cost of buying the equipment is $68,000. Based on financial factors, Jonas should
a. lease the equipment, saving $45,000 over buying.
b. buy the equipment, saving $45,000 over leasing.
c. lease the equipment, saving $5,700 over buying.
d. buy the equipment, saving $5,700 over leasing.
Information for the next three questions

Community Manufacturing Inc., developed the following standard costs for direct material and direct labor for one of their major products, the 30-gallon heavy-duty plastic container.

Standard quantity Standard price
Direct materials 0.20 pounds $25 per pound
Direct labor 0.10 hours $15 per hour

During May, Community produced and sold 10,000 containers using 2,200 pounds of direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an average wage of $14.75 per hour.

7. May's direct material price variance was:
a. $2,800 favorable
b. $2,200 favorable
c. $5,000 unfavorable
d. None of the above is correct.

8. May's direct material quantity variance was:
a. $2,800 unfavorable
b. $2,200 favorable
c. $5,000 unfavorable
d. None of the above is correct.

9 May's direct labor rate variance was:
a. $750.00 unfavorable
b. $262.50 favorable
c. $487.50 favorable
d. indeterminable using the above information

THE FOLLOWING INFORMATION APPLIES TO next three questions
The following information for the second quarter of 2006 pertains to Huffman Company:

Month Sales Purchases
April $45,000 $24,000
May $60,000 $30,000
June $75,000 $42,000

? Cash is collected from customers in the following manner:
Month of sale 30%
Month following the sale 70%

? 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month.

? Labor costs are 20% of sales. Other operating costs are $22,500 per month (including $6,000 of depreciation). Both of these are paid in the month incurred.

? The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is required at the end of the month. Money can be borrowed in multiples of $1,500.
* No loans outstanding on June 1.

10. How much cash will be collected from customers in June?
a. $64,500
b. $70,500
c. $75,000
d. None of the above is correct.

11. How much cash will be paid to suppliers in June?
a. $34,800
b. $28,000
c. $44,000
d. None of the above is correct.

12. How much cash will be disbursed for labor and operating costs in June?
a. $31,500
b. $35,000
c. $44,200
d. $48,200

14. Jackel Company produces hand tools. A sales budget for the next four months is as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Jackel Company's ending finished goods inventory policy is 10% of the following month's sales. What is budgeted finished goods inventory for May?
a. 1,000
b. 1,300
c. 1,600
d. 2,100
13. In which order are the following developed?
A = Production plan B = Materials purchasing plan
C = Demand forecast D = Sales plan
a. first to last: A, B, C, D
b. first to last: C, D, A, B
c. first to last: D, C, B, A
d. first to last: C, A, D, B

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Managerial Accounting - Multiple Choice Questions

Question 1:
What is the biggest disadvantage of ABC?

a. It does not provide costing information needed for GAAP purposes.
b. It causes management to make frivolous decisions.
c. It often causes managers to argue about the best activity measure.
d. It is expensive.

Question 2:
In performing a vertical analysis, the base for sales revenues on the income statement is

a. net sales.
b. sales.
c. net income.
d. cost of goods available for sale.

Question 3:
Rigsby Company had no beginning work in process. During the period, 5,000 units were completed, and there were 500 units of ending work in process. How many units were started in production?

a. 5,500
b. 5,000
c. 4,500
d. 500

Question 4:
Kaiser Inc. uses job order costing for its brand new line of homework machines. The cost incurred for production during 2006 totaled $6,000 of materials and $5,000 of conversion costs. The company ships all goods as soon as they are completed which results in no finished goods inventory on hand at the end of any year. Beginning work in process totaled $5,000, and the ending balance is $3,000. During the year, the company completed 40 machines. How much is the cost per machine?

a. $275
b. $400
c. $225
d. $325

Question 5:
Which of the following is a limitation of activity-based costing?

a. Can only be used with process costing
b. Managers realize that the nature of each product determines its profitability
c. Some arbitrary allocations continue
d. It increases product costs

Question 6:
A process with no beginning work in process, completed and transferred out 10,000 units during a period and had 5,000 units in the ending work in process that were 50% complete. How much is equivalent units of production for the period for conversion costs?

a. 12,500 equivalent units
b. 15,000 equivalent units
c. 17,500 equivalent units
d. 7,500 equivalent units

Question 7:
SO-3 The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.

a. True
b. False

Question 8:
Crater Go-carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

a. $5,000 increase
b. $17,500 increase
c. $22,500 increase
d. $35,000 increase

Question 9:
Which one of the following is true of the CVP income statement?

a. It is part of accounting information provided to all financial statement users.
b. It is used by internally by management.
c. It provides users the amount of gross profit of a company.
d. It will reflect the same net income as that reported on the traditional income statement.

Question 10:
Faucet Company reported the following information for 2006:

budgeted sales sept oct nov dec
$240,000 $310,000 $290,000 360,000

All sales are on credit
Costumers amonts on account are collected 50% in the month of sale and 50% the following month.

How much is the November 30, 2006 budgeted Accounts Receivable?

a. $300,000
b. $180,000
c. $155,000
d. $145,000

Question 11:
What sources of information does a manufacturing company use to determine cost of goods sold?

a. Only the sales budget
b. Only the cost of purchases budget
c. The materials budget, the labor budgets and the overhead budgets
d. The sales and the cost of purchases budget

Question 12:
What might an unfavorable price variance for direct materials indicate?

a. That the purchasing manager purchased too much inventory
b. That production scheduling problems were a problem
c. That the purchasing manager was unable to negotiate better prices during the period
d. That the supply in the market exceeded the demand of the materials

Question 13:
What does the controllable variance measure?

a. Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied
b. Whether a company incurred more or less overhead costs than allowed
c. The efficiency of using variable overhead resources
d. Whether the production manager is able to control the production facility

Question 14:
Choco Latte Shop can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $45 and takes three machine hours to make and Product B has a unit contribution margin of $32 and takes two machine hours to make. There are 1,200 machine hours available to manufacture a product. What should Choco Latte Shop do?

a. Make Product A which creates $13 more profit per unit than Product B does
b. Make Product B which creates $1 more profit per constraint than Product A does
c. Make Product B because more units can be made and sold than product A
d. The same total profits exists regardless of which product is made.

Question 15:
Project A has a higher rate of return than Project B. Which statement is true about Project A?

a. It is more attractive than Project B.
b. It is less attractive than Project B.
c. It is less than the cost of capital.
d. It is higher than the hurdle rate.

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