MULTIPLE CHOICE
1. Which of the following statements is true? (Points : 2)
2. Which of the following is not a possible commonly used term for costs that can be eliminated by taking a specified course of action? (Points : 2)
3. Hickory Home Company manufactures and sells two lines of furniture, case goods and upholstery. During the most recent accounting period, the Case Goods and Upholstery Divisions sold 15,000 and 2,000 units, respectively. The company's most recent financial statements are shown below:
Case Goods Division Upholstery Division
Sales $800,000 $200,000
Less: cost of goods sold:
Unit-level production cost 620,000 150,000
Gross margin 180,000 50,000
Less: operating expenses:
Unit-level selling and admin.expense 30,000 25,000
Corporate-level facility exp. (fixed) 26,000 26,000
Net income (loss) $124,000 $ (1,000)
If unit sales for both divisions increased 10%, the company would report which of the following? (Points : 2)
4. Select the correct statement regarding relevant costs and revenues. (Points : 2)
5. Home Safety Products currently outsources an electrical switch that is a component in its sprinkler systems. The switches are purchased for $12 each. The company is considering making the switches internally and has conducted a study to determine what the cost would be. Below are projected annual costs:
Unit-level costs $ 8
Batch-level costs per year $15,000
Product-level costs per year $10,000
Allocated facility-level costs $20,000
The company needs 10,000 of the switches each year. If Home Safety decides to make the parts under these conditions, the relevant cost per unit will be: (Points : 2)
6. Centennial Tours is trying to decide which one of two tours it will introduce. The costs and revenues associated with each alternative are listed below:
Tour A Tour B
Projected revenue $7,000 $11,000
Variable costs 1,000 6,000
Fixed costs 3,000 3,000
Profit $3,000 $1,000
What are the incremental (differential) costs of Tour B? (Points : 2)
7. For purposes of decision making, avoidable costs are costs that: (Points : 2)
8. Expected future revenues that differ among the alternatives under consideration are referred to as: (Points : 2)
9. Which of the following costs generally is an example of a product-level cost? (Points : 2)
10. Brannon Company plans to add a new item to its product line. Two possible products are under consideration. Each unit of Product A costs $12 to produce and has a contribution margin of $6, while each unit of Product B costs twice as much and has a contribution margin of $8. What is the differential revenue for this decision? (Points : 2)
11. Planning concerned with long-range decisions such as defining the scope of the business is referred to as: (Points : 2)
12. Expressing plans for a business in financial terms is commonly called: (Points : 2)
13. Select the incorrect statement about budgeting and human behavior. (Points : 2)
14. Which of the following budgets or schedules uses data contained in the selling and administrative expense budget? (Points : 2)
15. Which of the following is not a budgeted financial statement? (Points : 2)
16. Which of the following items will not appear on a cash budget? (Points : 2)
17. Select the incorrect statement. (Points : 2)
18. Maddon Company estimated that its inventory purchases for January and February 2010 would be $300,000 and $370,000, respectively. The company generally pays for 60% of its inventory purchases in the month of purchase because it receives a 2% discount for timely payment. The remaining 40% of purchases are paid for in the following month, and there is no discount for these payments. What will be the amount of cash payments for inventory in February 2010? (Points : 2)
19. The budgeting process that involves adding a month to the end of the budget period at the end of each month, thus maintaining a twelve-month planning horizon, is referred to as: (Points : 2)
20. Select the correct equation format for the purchases budget. (Points : 2)
Click here for the solution: Hickory Home Company manufactures and sells two lines of furniture, case goods and upholstery
