ACC 400 Final Examination Solution
ACC 400 Final Examination
Solution
Final Examination Solution
1. Which of the following is not a characteristic
of managerial accounting?
·
Reports are used
primarily by insiders rather than by persons outside of the business entity.
·
Its purpose is to
assist managers in planning and controlling business operations.
·
Information must be
developed in conformity with generally accepted accounting principles or with
income tax regulations.
·
Information may be
tailored to assist in specific managerial decisions.
2. In comparison with a financial statement
prepared in conformity with generally accepted accounting principles, a
managerial accounting report is less likely to:
·
Focus upon the entire
organization as the accounting entity.
·
Focus upon future
accounting periods.
·
Make use of estimated
amounts.
·
Be tailored to the
specific needs of an individual decision maker.
3.
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:
1. $175,000.
750.$30,750.
750.$205,750.
751.$28,750.
4. Objectives of a cost accounting system
What are the major
objectives of a cost accounting system in a manufacturing company?
5. 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:
·
A debit to Work in
Process Inventory, Mixing and Cooking Department of $63,000.
·
A credit to Work in Process
Inventory, Canning Department of $72,000.
·
A debit to Finished
Goods Inventory of $72,000.
·
A credit to Work in
Process Inventory, Mixing and Cooking Department of $63,000.
6. Refer to the information above. The journal
entry to record the transfer of soup out of the Canning Department during March
would include:
·
A credit to Work in
Process Inventory, Canning Department of $9,000.
·
A credit to Work in
Process Inventory, Canning Department of $63,000.
·
A debit to Finished
Goods Inventory of $72,000.
·
A credit to Finished
Goods Inventory, Mixing and Cooking Department of $72,000.
7. Refer to the information above. The unit cost
per gallon of soup transferred to the Canning Department during March was:
·
$1.50.
·
$1.62.
·
$1.71.
·
$1.83.
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.
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?
·
$65.00
·
$67.50
·
$80.00
·
Some other amount.
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?
·
$80.00.
·
$60.00.
·
$23.75.
·
$20.00.
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?
·
Profit will be $75,000
higher.
·
Profit will be $75,000
lower.
·
Profit will be
unaffected if Summit can reach the revised target cost.
·
None of these.
11. A 45% contribution margin ratio means that:
·
The company should
contribute 45% of its operating income to qualified charities for maximum tax
benefits.
·
55% of the company’s
revenue is consumed by fixed and variable costs.
·
The company’s revenue
has increased by 45% during the current accounting period.
·
45% of the company’s
revenue is available to cover fixed costs and to contribute toward operating
income.
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:
·
29%.
·
71%.
·
23%.
·
340%.
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.
13. Refer to the information above. What is the
contribution margin ratio of Mitchell’s product?
·
65%.
·
80%.
·
72%.
·
20%.
14. Refer to the information above. What is the
monthly sales volume in dollars necessary to break-even?
·
$82,500.
·
$66,500.
·
$97,059.
·
$77,500.
15. 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.)
·
971 units.
·
1,442 units.
·
122,500 units.
·
353 units.
16. Refer to the information above. What will be
Mitchell’s monthly operating income if 1,800 units are sold each month?
·
$153,000.
·
$136,500.
·
$30,600.
·
$14,100.
17. Which factor is not relevant in deciding
whether or not to accept a special order?
·
Incremental revenue
that will be earned.
·
Additional costs that
will be incurred.
·
The effect that the
order will have on the company’s regular sales volume and selling prices.
·
The average cost of
production if the special order is accepted.
18. The primary difference between profit centers
and cost centers is that:
·
Profit centers
generate revenue.
·
Cost centers incur
costs.
·
Profit centers are
evaluated using return on investment criteria.
·
Profit centers provide
services to other centers in the organization.
19. An investment center:
·
Is a profit center for
which management is able to objectively measure the cost of the assets used in
the center’s operations.
·
Is a cost center for
which management is able to identify the original amount invested.
·
May be either a cost
center or a profit center.
·
Is a subunit of the
organization that provides services to other centers within the organization.
20. Which of the following is not considered an
operating budget?
·
Manufacturing cost
budget.
·
Production schedule.
·
Capital expenditures
budget.
·
Sales forecast.
21. A budget that can be easily adjusted to show
budgeted revenues, costs, and cash flows at different levels of activity is
known as:
·
A flexible budget.
·
A master budget.
·
A production budget.
·
A multi-level budget.
22. Explain what is meant by “profit rich, yet
cash poor”.
23. There will be a favorable materials price
variance if:
·
The standard price per
unit is less than the actual price per unit.
·
The standard price per
unit is greater than the actual price per unit.
·
The actual quantity
purchased is greater than expected.
·
The actual quantity
purchased is less than expected.
24. 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:
·
$1,000 favorable.
·
$4,455 unfavorable.
·
$4,365 favorable.
·
Impossible to
determine from the data given.
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.
25. Refer to the information above. The materials
price variance for Maple Company for June is:
·
$520 favorable.
·
$990 favorable.
·
$30 unfavorable.
·
$520 unfavorable.
Eagle Company uses a
standard cost system which has provided the following data:
26. Refer to the information above. The direct
labor rate variance for the period was:
·
$425 favorable.
·
$360 favorable.
·
$360 unfavorable.
·
$425 unfavorable.
27. Identify the criticisms of using ROI (Return
on investment) as the only performance measure.
28. Explain the importance of incentive systems
for motivating performance.
29. Capital budget audit
Briefly discuss the
reasons that a company’s management would conduct a regular capital budget
audit.
30. 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.
____ (a) The amount by
which sales revenue exceeds total variable cost expressed as a percentage of
sales.
____ (b) The amount by
which sales volume exceeds the break-even point.
____ (c) The study of
financial statements by a potential investor or creditor as a means of
evaluating the profitability and solvency of a business.
____ (d) A type of
activity that has a causal effect in the occurrence of a particular cost.
____ (e) The level of
sales at which revenue equals operating expenses.
____ (f) A cost that
responds to changes in sales volume by less than a proportionate amount.
____ (g) A
mathematical technique used to determine the fixed and variable elements of a
mixed or semi-variable cost.
No comments:
Post a Comment