Exploring Cost Accounting: Key Concepts and Applications

Published: 11 months ago

Exploring Cost Accounting: Key Concepts and Applications

14. 101.GAAP requires trading and available­for­sale investments to be recorded a.at their fair value...

101.GAAP requires trading and available­for­sale investments to be recorded

a.at their fair value

b.at their historical cost

c.at their market value

d.at their net realizable value

102.Changes in the value of available­for­sale securities

a.are reported as part of stockholders' equity

b.are recognized on the income statement

c.are not recognized

d.are recognized on the income statement and as part of stockholders' equity

103.All of the following are disadvantages of fair value use except

a.fair values may not be readily obtainable

b.fair values may cause more fluctuations as change occurs from period to period

c.comparability between companies may be impacted by different fair value measurement

d.fair values only affect balance sheet accounts

104.Financial statements include assets listed at

a.all of these

b.their fair value

c.their historical cost

d.their market value

105.All of the following are factors contributing to the trend for regulators to adopt accounting principles using fair valueconcepts except

a.a greater percentage of total assets existing as receivables and securities

b.pressure on regulators to adopt an international set of accounting principles and standards

c.hybrid measurement methods within GAAP that conflict with each other

d.the ease of applying market values to assets and liabilities

106.Edison Corporation paid a dividend of $10 per share on its $100 par preferred stock and $4 per share on its $20 parcommon stock.  The market value of the common stock is $80 per share.  Edison’s dividend yield is

a.5%

b.10%

c.25%

d.20%

107.A company that has 25,000 shares of $5.00 par value common stock issued and outstanding paid a dividend of$0.40 per share.  The market value of the stock is $16 per share.  The company’s dividend yield is

a. 2.5%

b. 400%

c. 16%

d. 40%

108.The dividend yield is measured as

a.Dividends per share of common stock/Market price per share of common stock

b.Dividends per share of preferred stock/Market price per share of common stock

c.Dividends per share of common stock × Market price per share of preferred stock

d.Dividends per share of preferred stock × Market price per share of preferred stock

109.On July 5, Winter Company had a market price of $58 per share of common stock. For the prior year, Winter Co.had paid an annual dividend of $3.48 per share. What is the dividend yield for Winter Company?

a. 6.0%

b. 0.6%

c. 16.67%

d. 1.67%

110.Which of the following is nota part of comprehensive income?

a.foreign currency items

b.cash flows from stock investments

c.unrealized gains and losses on available-for-sale securities

d.pension liability adjustments

111.Which of the following would be considered an "other comprehensive income" item?

a.net income

b.extraordinary loss related to flood

c.gain on disposal of discontinued operations

d.unrealized loss on available-for-sale securities

112.Companies may report comprehensive income on each of the statements below except

a.income statement

b.separate statement of comprehensive income

c.statement of cash flows

d.retained earnings statement

15. 21.The following is not true about prejudice: a.Prejudice is a preconceived notion or opinion about.

21.The following is not true about prejudice:

a.Prejudice is a preconceived notion or opinion about someone.

b.Prejudice can function as a defense mechanism, protecting individuals from facing undesirable aspects of themselves by projecting them onto others.

1.                 Prejudice is the same as discrimination.


2.                At the root of prejudice is fear, low self-esteem, ignorance, and feelings of inferiority.

22.___________________, in his very moving book, Escape From Slavery, tells the story of his village in the Sudan being pillaged and his being taken as a slave for many years. In 2000, he became the first escaped slave to testify before the Senate Committee on Foreign Relations in hearings on Sudan.

a.  Francis Bok

b.  Deng Gai

c.  Luol Deng

d.  Manute Bol

23.Philip Zimbardo, who conducted the now-classic Stanford Prison Experiment in 1971, addresses the perplexing issue of how average, decent people become perpetrators of evil. He calls this

a.the Abu Ghraib phenomenon.

b.the Lucifer effect.

c.the Devil’s workshop.

d.the Stanford Prison Experiment Phase II.

24.The search for meaning and purpose in life is not

a.the result of your active thinking and choosing.

b.accompanied by a degree of anxiety.

1.                 automatically bestowed on you.


2.                one that lasts a lifetime.

25.Being secure about your values implies that you

a.will change your values without giving the matter considerable thought.

b.will be able to respect values of others that may differ from your own.

c.need to impose your values on other people.

d.avoid interacting with people whose values differ from yours.

26. At its worst, living without meaning and values can

1.                             result in suicide.


2.                             cause moderate distress.


3.                              lead to boredom and stagnation.


4.                             reduce one’s productivity at work.

27. As an expert witness in the trial of a military policeman involved in the Abu Ghraib prisoner abuse, Zimbardo describes how __________________forces transformed a good guard into a bad guard.

a.intrapsychic

b.hormonal

c.situational

d.neurological

28. _________________________ believes that the antidote to evil is heroism, and he has spearheaded the nonprofit Heroic Imagination Project.

a.Irvin Yalom

b.Philip Zimbardo

c.Francis Bok

d.Martin Seligman

e.Tal Ben-Shahar

29. Spirituality is often viewed as

1.                 a journey


2.                an odyssey


3.                 a pilgrimage


4.                an expedition into the meaning of life.


5.                 all of the above

30. ___________________ is at the foundation of healing in Step programs for people struggling with addictions to alcohol and mood-altering substances.

1.                 Medication


2.                Tough love


3.                 Spirituality


4.                Solitude

16. 11) When examining a master budget, where does a company find the planned expenditures for...

11) When examining a master budget, where does a company find the planned expenditures for facilities and equipment?

A) operating expense budget

B) capital budget

C) operating budget

D) purchases budget

12) A sales budget is a prediction of sales under a given set of conditions.

13) Accurate sales forecasting is essential to effective budgeting.

14) Sales forecasts are usually prepared under the direction of the top sales executive.

15) The sales budget should be the responsibility of line management.

16) The most forward-looking and least detailed budget is the strategic plan.

17) A decision made during long-range planning includes whether to delete a product from a company's product line.

17. 11.If goodwill is traceable to the incoming partner, the new partner's capital balance equals a.

11.If goodwill is traceable to the incoming partner, the new partner's capital balance equals

12.Palit buys Quincy's partnership interest in the Q-R-S partnership. Quincy thus retires, leaving Reale and Susien as Palit's co-partners. Prior to Palit entering the partnership, Quincy, Reale, and Susien split profits and losses equally. Palit pays $75,000 for Quincy's capital which, at the time, totaled $60,000. No revaluation of partnership assets or liabilities occurs at the time. In recording this event on the partnership books

13.If an existing partner withdraws from a partnership,

14.If goodwill is suggested by the consideration paid to a withdrawing partner,

Scenario 14-1

Callie is admitted to the Adams & Beal Partnership under the bonus method. Callie contributes cash of $20,000 and non-cash assets with a market value of $30,000 and book value of $15,000 in exchange for a 20% ownership interest in the new partnership. Prior to the admission of Callie, the capital of the existing partnership was $130,000 and an appraisal showed the partnership net assets were fairly stated.

15.Refer to Scenario 14-1. What will be Callie's initial capital balance?

16.Refer to Scenario 14-1. Adams & Beal shared profits and losses at a ratio of 80/20, respectively.

Which of the following bonus amounts would be recorded?

17.Assume the existing capital of a partnership is $100,000. Two partners currently own the partnership and split profits 40/60. A new partner is to be admitted and will contribute net assets with a fair value of $50,000. An appraisal of existing partnership assets indicates accounts receivable overstated by $10,000, inventory overstated by $12,000 and land understated by $25,000. What is the total capital of the new partnership if the bonus method is being used?

18.Assume that the capital of an existing partnership is $90,000 and all existing assets reflect fair market values. If an incoming partner acquires a 40% interest in the partnership for $55,000, the goodwill traceable to the incoming partner is

19.Assume that the capital of an existing partnership is $130,000 and that existing assets are overvalued by $10,000. If an incoming partner acquires a 25% interest in the partnership for $37,000, goodwill traceable to the incoming partner is ____.

20.The following is the priority sequence in which liquidation proceeds will be distributed for a partnership:

18. 11) Try-Us-First Motors manufactures and sells off-road vehicles. The September sales were...

11) Try-Us-First Motors manufactures and sells off-road vehicles. The September sales were $6,000,000. Monthly design costs are $112,000 and rework is running at $75,000 per month. Its painting department is fully automated and requires substantial inspection to keep the machines operating properly. An improperly painted vehicle is very expensive to correct, and inspection hours for the 8,000 vehicles painted in September totaled 2,000 hours by 14 employees, who earn an average of $28 an hour. Ten litres of paint were used on average for each vehicle. The standard amount of paint per vehicle is nine litres. The cost of inspection for September was equal to the budgeted amount of $56,000.

What are appraisal costs as a percentage of sales?

A) 0.93%

B) 1.25%

C) 1.87%

D) 2.20%

E) 2.80%

12) Supplier evaluations are an example of

A) appraisal costs.

B) prevention costs.

C) internal failure costs.

D) design costs.

E) external failure costs.

13) Internal failure costs include

A) field repairs.

B) rework.

C) liability claims

D) warranty expenses.

E) supplier evaluations.

14) Prevention costs include all of the following EXCEPT

A) quality training.

B) design engineering.

C) product testing.

D) supplier evaluations.

E) testing of new materials.

15) Appraisal costs include all of the following EXCEPT

A) inspection.

B) spoilage.

C) product testing.

D) process inspection.

E) online product manufacturing.

16) External failure costs include all of the following EXCEPT

A) scrap.

B) customer support.

C) liability claims.

D) transportation costs on repaired products.

E) warranty costs.

17) Costs incurred by a nonconforming product detected before it is shipped to customers are

A) prevention costs.

B) appraisal costs.

C) internal failure costs.

D) external failure costs.

E) design costs.

18) Preventive equipment maintenance is an example of

A) prevention costs.

B) appraisal costs.

C) internal failure costs.

D) external failure costs.

E) rework costs.

19) An example of a nonfinancial measure for customer satisfaction is

A) delivery delay.

B) employee turnover.

C) number of defects on the production line.

D) process yield.

E) number of employees trained.

20) An example of a nonfinancial measure for customer satisfaction is

A) Average manufacturing time for for key products.

B) Contribution margin.

C) Percentage of products that fail soon after delivery.

D) Number of employees trained on managing bottleneck operations.

E) Number of units reworked.

Use the information below to answer the following question(s).

Dylan Products has a budget of $1,200,000 in 2015 for prevention costs. If it decides to automate a portion of its prevention activities, it will save $90,000 in variable costs. The new method will require $40,000 in training costs and $150,000 in annual equipment costs. Management is willing to adjust the budget for an amount up to the cost of the new equipment. The budgeted production level is 210,000 units.

Appraisal costs for the year are budgeted at $500,000. The new prevention procedures will save appraisal costs of $50,000. Internal failure costs average $20 per failed unit of finished goods. The internal failure rate is expected to be 4% of all completed items. The proposed changes will cut the internal failure rate by one-half. Internal failure units are destroyed. External failure costs average $48 per failed unit. The company's average external failures average 2.5% of units sold. The new proposal will reduce this rate to 1%. Assume all units produced are sold and there are no ending inventories.

21) What is the net change in the budget of prevention costs if the procedures are automated in 2015? Will management agree with the changes?

A) $100,000 decrease, yes

B) $90,000 decrease, yes

C) $190,000 increase, no

D) $100,000 increase, yes

E) $90,000 increase, no

22) How much will appraisal costs change assuming that the new prevention methods reduce material failures by 30% in the appraisal phase?

A) $150,000 decrease

B) $229,000 decrease

C) $50,000 increase

D) $50,000 decrease

E) $84,000 decrease

23) How much will internal failure costs change if the internal product failures are reduced by 50% with the new procedures?

A) $168,000 decrease

B) $126,000 decrease

C) $ 84,000 decrease

D) $ 84,000 increase

E) $50,000 decrease

24) How much do external failure costs change if all the changes are as the new prevention procedures anticipated? Assume all units produced are sold and there are no ending inventories.

A) $126,000 decrease

B) $156,400 decrease

C) $100,800 decrease

D) $158,900 decrease

E) $151,200 decrease