Question 1
Which of the following best describes an “opportunity cost”?

The distribution of all products to be sold

Costs that were incurred in the past and cannot be changed

Benefits foregone by not choosing an alternative course of action

Expected future costs that differs among alternatives

Question 2
What is the name given to choosing among different alternative investments due to limited resources?

Capital rationing

Resource allocation

Capital investing

Resource rationing

Question 3
The practice of directing executive attention to important deviations from budgeted amounts is called management by:





Question 4
The Mad Hatter Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.

End of current year End of prior year
Net sales revenue (all credit) $ 1,200,000
Cost of goods sold $ 725,000
Gross profit $ 475,000
Selling/general expenses $ 280,000
Interest expense $ 42,000
Net Income $ 153,000

Current assets $ 112,000 $ 82,000
Long-term assets $ 505,000 $ 440,000
Total assets $ 617,000 $ 522,000
Current liabilities $ 57,000 $ 52,000
Long-term liabilities $ 275,000 $ 245,000
Common stockholders’ equity $ 415,000 $ 225,000
Total liabilities and stockholders’ equity $ 617,000 $ 522,000
Inventory and prepaid expenses account for $30,000 of the current year’s current assets.
Average inventory for the current year is $25,000.
Average net accounts receivable for the current year is $45,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $37,000.
The market price per share of common stock is $20.

What is the earnings per share for the current year?





Question 5
Return on investment and revenue growth would be examples of:

financial perspective.

customer perspective.

internal business perspective.

learning and growth perspective.

Question 6
Glow Sticks Corporation manufactures and sells glow-in-the-dark necklaces for $10 each. The company has the capacity to produce 25,000 necklaces in a year, but is currently producing and selling 20,000 necklaces per year. The company currently is incurring the following costs at its current production level of 20,000 necklaces:

Variable manufacturing costs $ 60,000
Fixed manufacturing costs $ 90,000
Variable selling and administrative costs $ 75,000
Fixed selling and administrative costs $ 50,000
An amusement park is interested in purchasing the excess capacity of 5,000 necklaces if it can receive a special price. This special order would not affect Glow Sticks Corporation’s regular sales or its cost structure. Glow Sticks Corporation’s profits would increase from this special order if the special order price per necklace is greater than:





Question 7
Roberts Corporation has an ROI of 23%, total assets of $5,250,000, and current liabilities of $950,000. What is Roberts Corporation’s operating income?





Question 8
The following information relates to Bonny Unlimited for the past two years.

Account Current year Prior year
Net sales (all credit) $250,000 $180,000
Cost of goods sold $115,000 $110,000
Gross profit $135,000 $ 70,000
Income from operations $ 32,000 $ 30,000
Interest expense $ 4,000 $ 7,000
Net income $ 24,000 $ 18,000
Cash $ 16,000 $ 14,000
Accounts receivable, net $ 20,000 $ 31,000
Inventory $ 52,000 $ 44,000
Prepaid expenses $ 2,000 $ 1,000
Total current assets $ 90,000 $ 90,000
Total long-term assets $100,000 $120,000
Total current liabilities $ 60,000 $ 90,000
Total long-term liabilities $ 22,000 $ 78,000
Common stock, no par,
2,000 shares, market value $90 per share $ 40,000 $ 40,000
Retained earnings $ 68,000 $ 2,000
What is the current ratio for the current year?





Question 9
Gutierrez Company budgeted 10,000 pounds of direct materials costing $21.50 per pound to make 5,000 units of product. The company actually used 10,200 pounds of direct materials costing $24.00 per pound to make the 5,000 units. What is the direct materials efficiency variance?

$4,800 favorable

$4,300 unfavorable

$4,800 unfavorable

$4,300 favorable

Question 10
Which of the following types of analysis include common-sized financial statements?

Horizontal analysis

Trend analysis

Vertical analysis

Ratio analysis

Question 11
Which of the following goals of a performance evaluation system is accomplished when a company’s actual results are compared to the results of competitors?

Motivating unit managers

Communicating expectations


Promoting goal congruence

Question 12
Outdoor Creations sells its patio heaters for $300 each. Its variable cost is $220 per heater. Fixed costs are $40,000 per month for volumes up to 1,000 patio heaters. Above 1,000 heaters, monthly fixed costs are $62,000. What is the budgeted operating income at a level of 1,300 heaters per month?





Question 13
(Present value tables are needed.) Miami Marine Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down to two: the B14 Model and the F54 Model. Financial data about the two choices follows.

B14 Model F54 Model
Investment $ 320,000 $ 240,000
Useful life (years) 8 8
Estimated annual net cash inflows for useful life $ 75,000 $ 40,000
Residual value $ 30,000 $ 10,000
Depreciation method Straight-line Straight-line
Required rate of return 14% 10%
What is the total present value of future cash inflows from the B14 Model?





Question 14
Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00. Actual current year sales were 55,000 units at $22.00 per unit. Actual variable costs, budgeted at $15.00 per unit, totaled $14.00 per unit. Budgeted fixed costs totaled $400,000, while actual fixed costs amounted to $420,000. What is the sales volume variance for total revenue?

$110,000 unfavorable

$100,000 favorable

$110,000 favorable

$100,000 unfavorable

Question 15
Which department listed below would most likely be responsible for a “direct material price variance”?

Marketing department

Personnel department

Production department

Purchasing department

Question 16
Green Garden Supply budgeted three hours of direct labor per unit at $10.00 per hour to produce 500 units of product. The 500 units were completed using 1,600 hours of direct labor at $10.50 per hour. What is the direct labor efficiency variance?

$1,050 favorable

$1,000 favorable

$1,000 unfavorable

$1,050 unfavorable

Question 17
Which term below best describes “the comprehensive budget”?

Sensitivity analysis

Responsibility center

Master budget

Operating budget

Question 18
Rong Company expects cash sales for July of $15,000, and a 20% monthly increase during August and September. Credit sales of $6,000 in July should be followed by 10% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

$12,150 and $8,640

$18,000 and $5,400

$21,600 and $4,860

$13,500 and $7,200

Question 19
Operating activities resulting from the sales of goods and services relate to:

the income statement.

retained earnings reported on the balance sheet.

assets and liabilities reported on the balance sheet.

net income on the retained earnings statement.

Question 20
Vera Enterprises has in its inventory 1,000 damaged handbags that cost $20,000. The handbags can be sold in their present condition for $12,000, or repaired at a cost of $13,000 and sold for $31,000. What is the opportunity cost of selling the handbags in their present condition?





Question 21
If a company decides to outsource and then has freed capacity, the decision on what to do with that freed capacity would be based upon:

unavoidable fixed costs.

opportunity costs.

avoidable fixed costs.

none of the above.

Question 22
Which of the following is the correct order of the sections on a statement of cash flows?

Operating, financing, investing

Investing, operating, financing

Financing, investing, operating

Operating, investing, financing

Question 23
Richol Corporation is considering an investment in new equipment costing $180,000. The equipment will be depreciated on a straight-line basis over a five-year life and is expected to generate net cash inflows of $45,000 the first year, $65,000 the second year, and $90,000 every year thereafter until the fifth year. What is the payback period for this investment? The equipment has no residual value.

2.00 years

2.37 years

2.78 years

4.00 years

Question 24
The Tandem division of the Great Adventures Cycles Company had the following results last year (in thousands).

Sales $ 4,000,000
Operating income $ 480,000
Total assets $ 2,000,000
Current liabilities $ 300,000
Management’s target rate of return is 10% and the weighted average cost of capital is 8%. Its effective tax rate is 40%.

What is the Tandem division’s Return on Investment (ROI)?





Question 25
Horvath Corporation had beginning inventory of 22,000 units and expects sales of 76,500 units during the year. Desired ending inventory is 19,500 units. How many units should Horvath Corporation produce?

79,000 units

35,000 units

74,000 units

118,000 units