ACC 400 Final Examination Answers
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ACC 400 Final Examination Answers
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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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:
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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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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?
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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”.
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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.
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28.
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Explain the
importance of incentive systems for motivating performance.
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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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