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ACC 400 Final Examination Answers
ACC/400 FINAL EXAM
1.
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Which of the following is not
a characteristic of managerial accounting?
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:
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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4.
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Objectives of a cost accounting systemWhat
are the major objectives of a cost accounting system in a manufacturing
company?
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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:
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:
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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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?
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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?
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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?
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:
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?
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:
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:
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?
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”.
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23.
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There will be a favorable
materials price variance if:
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:
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.
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28.
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Explain the importance of
incentive systems for motivating performance.
29.
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Capital budget auditBriefly
discuss the reasons that a company’s management would conduct a regular
capital budget audit.
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30.
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Accounting terminologyListed 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.
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