ACC 400 FINAL EXAM
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1.
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Which
of the following is not a characteristic of managerial accounting?
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A.
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Reports
are used primarily by insiders rather than by persons outside of the
business entity.
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B.
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Its
purpose is to assist managers in planning and controlling business
operations.
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C.
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Information
must be developed in conformity with generally accepted accounting
principles or with income tax regulations.
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D.
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Information
may be tailored to assist in specific managerial decisions.
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2.
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In
comparison with a financial statement prepared in conformity with generally
accepted accounting principles, a managerial accounting report is less likely
to:
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A.
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Focus
upon the entire organization as the accounting entity.
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B.
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Focus
upon future accounting periods.
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C.
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Make
use of estimated amounts.
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D.
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Be
tailored to the specific needs of an individual decision maker.
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3.
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Alton
Company produces metal belts. During the current month, the company incurred
the following product costs:
Raw materials $100,000
Direct labor $75,000
Electricity used in the Factory $25,000
Factory foreperson salary $3,750
Maintenance of factory machinery $2,000
Alton Company's total product costs:
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D.
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$28,750.
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Particulars
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Amount
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Raw materials
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$ 1,00,000
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Direct labor
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$ 75,000
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Electricity used in the Factory
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$ 25,000
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Factory foreperson salary
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$ 3,750
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Maintenance of factory machinery
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$ 2,000
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Total product cost
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$
2,05,750
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4.
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Objectives
of a cost accounting system
What
are the major objectives of a cost accounting system in a manufacturing
company?
Solution:
There
are 2 most important management objectives: to make available managers with
useful in sequence for planning and cost be in charge of functions and to
settle on unit manufacturing costs. A manufacturing corporation usually uses
an accomplished job cost sheet which contains a Cost Summary and Unit Costs.
This contain the total and unit costs of the following:
Direct
materials is the raw material utilized in production whose cost or expenses
are directly identify or traceable to the products manufactured
Direct
labor is take-home pay and other payroll costs of workers whose efforts are
directly perceptible to the products they contrived Manufacturing overhead is
a catch all classification, which includes all manufacturing costs other than
the costs of direct materials and direct labor.
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Sue's
Soup Products uses a process costing system with two processing departments:
the Mixing and Cooking Department and the Canning Department. Work in process
inventories are reduced to zero each month. In March, the Mixing and Cooking
Department incurred manufacturing costs of $63,000 to mix 42,000 gallons of
soup. The Canning Department incurred manufacturing costs of $9,000. A total
of 170,000 cans of soup were transferred to the finished goods warehouse
during the month.
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5.
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Refer
to the information above. The journal entry to record the transfer of soup
out of the Mixing and Cooking Department during March would include:
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A.
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A
debit to Work in Process Inventory, Mixing and Cooking Department of
$63,000.
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B.
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A
credit to Work in Process Inventory, Canning Department of $72,000.
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C.
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A
debit to Finished Goods Inventory of $72,000.
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D.
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A
credit to Work in Process Inventory, Mixing and Cooking Department of
$63,000.
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6.
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Refer
to the information above. The journal entry to record the transfer of soup
out of the Canning Department during March would include:
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A.
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A
credit to Work in Process Inventory, Canning Department of $9,000.
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B.
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A
credit to Work in Process Inventory, Canning Department of $63,000.
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C.
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A
debit to Finished Goods Inventory of $72,000.
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D.
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A
credit to Finished Goods Inventory, Mixing and Cooking Department of
$72,000.
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7.
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Refer
to the information above. The unit cost per gallon of soup transferred to the
Canning Department during March was:
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$63,000/42,000 = $1.50
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Summit
Products, Inc. is interested in producing and selling an improved widget.
Market research indicates that customers would be willing to pay $90 for such
a widget and that 50,000 units could be sold each year at this price. The
current cost to produce the widget is estimated to be $65.
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40.
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8.
Refer to the information above. If Summit Products requires a 25% return on
sales to undertake production, what is the target cost for the new
widget?
90 x .25= 22.5
90-22.5= 67.50
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41.
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9. Refer to the information above. Summit has
learned that a competitor plans to introduce a similar widget at a price of
$80. In response, Summit may reduce its selling price to $80. If Summit
requires a 25% return on sales, what is the target cost for the new widget?
80 x .25= 20.0
80-20= 60.00
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42.
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10. Refer to the information above. At a price
of $80, Summit's market research indicates that it can sell 60,000 units per
year. Assuming Summit can reach its new target cost, how will Summit's profit
at the $80 price compare to what it would have earned in the absence of the
competitor's product?
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A.
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Profit
will be $75,000 higher.
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B.
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Profit
will be $75,000 lower.
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C.
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Profit
will be unaffected if Summit can reach the revised target cost.
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37.
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11.
A 45% contribution margin ratio means that:
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A.
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The
company should contribute 45% of its operating income to qualified
charities for maximum tax benefits.
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B.
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55%
of the company's revenue is consumed by fixed and variable costs.
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C.
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The
company's revenue has increased by 45% during the current accounting
period.
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D.
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45% of
the company's revenue is available to cover fixed costs and to contribute
toward operating income.
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41.12.
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12.
If the monthly sales volume required to break even is $190,000 and monthly
fixed costs are $55,900, the contribution margin ratio is closest to:
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Mitchell
Corporation manufactures a single product. The selling price is $85 per unit,
and variable costs amount to $68 per unit. The fixed costs are $16,500 per
month.
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13.
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Refer
to the information above. What is the contribution margin ratio of Mitchell's
product?
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14.
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Refer
to the information above. What is the monthly sales volume in dollars
necessary to break-even?
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15.
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Refer
to the information above. How many units must be sold each month to earn a
monthly operating income of $8,000? (Round your final answer to the next
whole number.)
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16.
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Refer
to the information above. What will be Mitchell's monthly operating income if
1,800 units are sold each month?
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17.
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Which
factor is not relevant in deciding whether or not to accept a special
order?
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A.
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Incremental
revenue that will be earned.
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B.
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Additional
costs that will be incurred.
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C.
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The
effect that the order will have on the company's regular sales volume and
selling prices.
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D.
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The
average cost of production if the special order is accepted.
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18.
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The
primary difference between profit centers and cost centers is that:
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A.
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Profit
centers generate revenue.
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B.
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Cost
centers incur costs.
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C.
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Profit
centers are evaluated using return on investment criteria.
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D.
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Profit
centers provide services to other centers in the organization.
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19.
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An
investment center:
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A.
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Is a
profit center for which management is able to objectively measure the cost
of the assets used in the center's operations.
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B.
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Is
a cost center for which management is able to identify the original amount
invested.
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C.
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May
be either a cost center or a profit center.
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D.
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Is
a subunit of the organization that provides services to other centers
within the organization.
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20.
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Which
of the following is not considered an operating budget?
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A.
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Manufacturing
cost budget.
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C.
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Capital
expenditures budget.
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21.
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A
budget that can be easily adjusted to show budgeted revenues, costs, and cash
flows at different levels of activity is known as:
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22.
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Explain
what is meant by "profit rich, yet cash poor".
Solution:
Firms
have to often tie up large arithmetic of cash in
direct
materials,
work
in process, and
finished
goods inventories.
As
finished goods are sold, cash carry on to remain tied up in accounts
receivable. consequently, a business may be coverage record profits, yet
still experience cash flow problems.
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23.
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There
will be a favorable materials price variance if:
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A.
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The
standard price per unit is less than the actual price per unit.
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B.
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The
standard price per unit is greater than the actual price per unit.
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C.
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The
actual quantity purchased is greater than expected.
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D.
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The
actual quantity purchased is less than expected.
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24.
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Greenleaf's
flexible budget for June, based on actual output, called for the use of
10,000 square feet of materials at a standard cost of $9.90 per square foot.
Company records show that the actual price paid for the materials used in
June was $9.70 per square foot, and that the direct materials price variance
for the month was $2,090 favorable. The materials quantity variance for
Greenleaf's June operations was:
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D.
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Impossible
to determine from the data given.
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Maple
Company's flexible budget, based upon the number of equivalent units
produced, called for the use of 5,000 square yards of fabric at a standard
cost of $2.45 per square yard. The Production Department actually used 5,200
square yards costing $2.35 per square yard during June.
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25.
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Refer
to the information above. The materials price variance for Maple Company for
June is:
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Eagle
Company uses a standard cost system which has provided the following data:
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26.
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Refer
to the information above. The direct labor rate variance for the period
was:
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27.
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Identify
the criticisms of using ROI (Return on investment) as the only performance
measure.
Return
on investment (ROI) gives a methodical method for appraise a product line or
organization segment. It is a % that can be worn to contrast financial
performance from corner to corner products and/or business segments.
Criticisms of ROI contain: motivating short-term oriented decision making,
managers select to below invest in products with satisfactory ROI's from the
firm's viewpoint, complexity in matching invested capital with sales and
operating earnings, focal point only on financial actions, and ignoring other
important components of the value chain
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28.
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Explain
the importance of incentive systems for motivating performance.
Solution:
Employees
might have targets and objectives that be at variance from those of the
organization. Motivation systems give a instrument that helps align employee
goals with persons of the association by drawing concentration to the
company's goals, by choosing to calculate particular components of
performance, and by satisfying employees for the actual result associated
with those machinery of performance being measured
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29.
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Capital
budget audit
Briefly
discuss the reasons that a company's management would conduct a regular
capital budget audit.
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A firm will behavior a capital budget audit in arranges to
guard alongside excessively hopeful or pessimistic approximation in the capital
budgeting process. For that kind of estimates arise for that reason employees
are regularly appraise on outcomes that depend on the sum and type of capital
investments chosen. If employees comprehend that a capital budget audit will be
commence, they will be less probable to furnish biased approximation of
quantities central to the capital budgeting calculations
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30.
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Accounting
terminology
Listed
below are nine technical accounting terms introduced or emphasized in this
chapter:
Each
of the following statements may (or may not) describe one of these technical
terms. In the space provided beside each statement, indicate the accounting
term described, or answer "None" if the statement does not
correctly describe any of the terms.
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(a) The amount by which sales revenue exceeds total variable cost expressed
as a percentage of sales.
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(b) The amount by which sales volume exceeds the break-even point.
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(c) The study of financial statements by a potential investor or creditor as
a means of evaluating the profitability and solvency of a business.
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(d) A type of activity that has a causal effect in the occurrence of a
particular cost.
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(e) The level of sales at which revenue equals operating expenses.
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(f) A cost that responds to changes in sales volume by less than a
proportionate amount.
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(g) A mathematical technique used to determine the fixed and variable
elements of a mixed or semi-variable cost.
a) Contribution
margin ratio
(b) Margin of safety
(c) None
(d) Cost driver
(e) Break-even
point
(f) None
(g) High-low method
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