1. ACC 400 FINAL EXAM
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1. Which of the following is not a characteristic of managerial accounting?
A. Reports are used primarily by insiders rather than by persons outside of the business entity.
B. Its purpose is to assist managers in planning and controlling business operations.
C. Information must be developed in conformity with generally accepted accounting principles or with
income tax regulations.
D. 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:
A. Focus upon the entire organization as the accounting entity.
B. Focus upon future accounting periods.
C. Make use of estimated amounts.
D. Be tailored to the specific needs of an individual decision
3. Alton Company produces metal belts. During the current month, the company incurred the following
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:
2. A. $175,000.
Raw materials $ 1,00,000
Direct labor $ 75,000
Electricity used in the Factory $ 25,000
Factory foreperson salary $ 3,750
Maintenance of factory machinery $ 2,000
Total product cost $ 2,05,750
4. Objectives of a cost accounting system
What are the major objectives of a cost accounting system in a manufacturing company?
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.
3. 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.
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. A debit to Work in Process Inventory, Mixing and Cooking Department of $63,000.
B. A credit to Work in Process Inventory, Canning Department of $72,000.
C. A debit to Finished Goods Inventory of $72,000.
D. 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. A credit to Work in Process Inventory, Canning Department of $9,000.
B. A credit to Work in Process Inventory, Canning Department of $63,000.
C. A debit to Finished Goods Inventory of $72,000.
D. 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:
4. D. $1.83.
$63,000/42,000 = $1.50
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 $65.40.
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?
D. Some other amount.
90 x .25= 22.5
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
5. 80-20= 60.00
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
A. Profit will be $75,000
B. Profit will be $75,000 lower.
C. Profit will be unaffected if Summit can reach the revised target cost.
D. None of these.
11. A 45% contribution margin ratio means that:
A. The company should contribute 45% of its operating income to qualified charities for maximum
B. 55% of the company's revenue is consumed by fixed and variable costs.
C. The company's revenue has increased by 45% during the current accounting period.
D. 45% of the company's revenue is available to cover fixed costs and to contribute toward
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:
7. 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?
14. Refer to the information above. What is the monthly sales volume in dollars necessary to break-
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.)
A. 971 units.
B. 1,442 units.
C. 122,500 units.
8. D. 353 units.
16. Refer to the information above. What will be Mitchell's monthly operating income if 1,800 units are
sold each month?
17. Which factor is not relevant in deciding whether or not to accept a special order?
A. Incremental revenue that will be earned.
B. Additional costs that will be incurred.
C. The effect that the order will have on the company's regular sales volume and selling prices.
D. The average cost of production if the special order is
18. The primary difference between profit centers and cost centers is that:
A. Profit centers generate
B. Cost centers incur costs.
C. Profit centers are evaluated using return on investment criteria.
D. Profit centers provide services to other centers in the organization.
9. 19. An investment center:
A. Is a profit center for which management is able to objectively measure the cost of the assets
used in the center's operations.
B. Is a cost center for which management is able to identify the original amount invested.
C. May be either a cost center or a profit center.
D. 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?
A. Manufacturing cost budget.
B. Production schedule.
C. Capital expenditures budget.
D. 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. A flexible budget.
B. A master budget.
C. A production budget.
D. A multi-level budget.
22. Explain what is meant by "profit rich, yet cash poor".
Firms have to often tie up large arithmetic of cash in
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.
23. There will be a favorable materials price variance if:
A. The standard price per unit is less than the actual price per unit.
B. The standard price per unit is greater than the actual price per
C. The actual quantity purchased is greater than expected.
D. 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:
A. $1,000 favorable.
11. B. $4,455 unfavorable.
C. $4,365 favorable.
D. 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
25. Refer to the information above. The materials price variance for Maple Company for June is:
B. $990 favorable.
C. $30 unfavorable.
D. $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:
A. $425 favorable.
B. $360 favorable.
D. $425 unfavorable.
27. 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
28. Explain the importance of incentive systems for motivating performance.
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
13. 29. Capital budget audit
Briefly discuss the reasons that a company's management would conduct a regular capital
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
14. 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.
a) Contribution margin ratio
(b) Margin of safety
(d) Cost driver
(e) Break-even point
(g) High-low method