1. ACC 400 Final Exam Answer
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ACC 400 Final Exam Answer
ACC/400 FINAL EXAM
1.
Which of the following is nota 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 statementprepared in conformity with generallyaccepted accounting principles,
a managerial accounting reportis less likelyto:
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 maker.
3.
Alton Companyproduces metal belts.During the currentmonth,the companyincurred 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$2,000Alton Company’s total productcosts:
A. $175,000.
B. $30,750.
C.$205,750.

2. D. $28,750.
4.
Objectives of a costaccounting systemWhatare the major objectives ofa costaccounting system in a
manufacturing company?
Sue’s Soup Products uses a process costing system with two processing departments:the Mixing and
Cooking Departmentand the Canning Department.Work in process inventories are reduced to zero
each month.In March, the Mixing and Cooking Departmentincurred manufacturing costs of$63,000 to
mix 42,000 gallons ofsoup.The Canning Departmentincurred 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 outof the Mixing and
Cooking Departmentduring 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 outof the Canning
Departmentduring 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 costper gallon of soup transferred to the Canning Department
during March was:
A. $1.50.
B. $1.62.
C. $1.71.
D. $1.83.

3. SummitProducts,Inc. is interested in producing and selling an improved widget.Market research indicates
that customers would be willing to pay $90 for such a widgetand that 50,000 units could be sold each year
at this price. The current costto produce the widgetis estimated to be $65.
40.
8. Refer to the information above. If SummitProducts requires a 25% return on sales to undertake
production,whatis the target costfor the new widget?
A. $65.00.
B. $67.50.
C. $80.00.
D. Some other amount.
41.
9. Refer to the information above.Summithas learned thata competitor plans to introduce a similar widget
at a price of $80. In response,Summitmayreduce its selling price to $80.If Summitrequires a 25% return
on sales,whatis the target cost for the new widget?
A. $80.00.
B. $60.00.
C. $23.75.
D. $20.00.
42.
10. Refer to the information above. At a price of $80, Summit’s marketresearch indicates thatit can sell
60,000 units per year. Assuming Summitcan reach its new target cost, how will Summit’s profitatthe $80
price compare to whatit would have earned in the absence ofthe competitor’s product?
A. Profit will be $75,000 higher.
B. Profit will be $75,000 lower.
C. Profit will be unaffected if Summit can reach the revised target cost.
D. None of these.
37.
11. A 45% contribution margin ratio means that:
A.
The company should contribute 45% of its operating income to qualified charities
for maximum tax benefits.
B. 55% of the company’s revenue is consumed by fixed and variable costs.

4. 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 operating income.
41.12.
12. If the monthlysales volume required to break even is $190,000 and monthlyfixed costs are $55,900,
the contribution margin ratio is closestto:
A. 29%.
B. 71%.
C. 23%.
D. 340%.
Mitchell Corporation manufactures a single product.The selling price is $85 per unit,and variable costs
amountto $68 per unit. The fixed costs are $16,500 per month.
13.
Refer to the information above.What is the contribution margin ratio ofMitchell’s product?
A. 65%.
B. 80%.
C. 72%.
D. 20%.
14.
Refer to the information above.What is the monthlysales volume in dollars necessaryto break-even?
A. $82,500.
B. $66,500.
C. $97,059.
D. $77,500.
15.
Refer to the information above.How manyunits mustbe sold each month to earn a monthlyoperating
income of$8,000? (Round your final answer to the next whole number.)
A. 971 units.

5. B. 1,442 units.
C. 122,500 units.
D. 353 units.
16.
Refer to the information above.What will be Mitchell’s monthlyoperating income if1,800 units are sold each
month?
A. $153,000.
B. $136,500.
C. $30,600.
D. $14,100.
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 accepted.
18.
The primarydifference between profit centers and cost centers is that:
A. Profit centers generate revenue.
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.
19.
An investmentcenter:
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.

6. D.
Is a subunit of the organization that provides services to other centers within the
organization.
20.
Which of the following is notconsidered an operating budget?
A. Manufacturing cost budget.
B. Production schedule.
C. Capital expenditures budget.
D. Sales forecast.
21.
A budgetthat can be easilyadjusted to show budgeted revenues,costs,and cash flows atdifferent 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 whatis meantby “profit rich, yet cash poor”.
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 unit.
C. The actual quantity purchased is greater than expected.
D. The actual quantity purchased is less than expected.
24.
Greenleaf’s flexible budgetfor June, based on actual output, called for the use of 10,000 square feetof
materials ata standard costof $9.90 per square foot. Company records show thatthe actual price paid for
the materials used in June was $9.70 per square foot, and that the directmaterials price variance for the
month was $2,090 favorable. The materials quantityvariance for Greenleaf’s June operations was:
A. $1,000 favorable.
B. $4,455 unfavorable.

7. C. $4,365 favorable.
D. Impossible to determine from the data given.
Maple Company’s flexible budget,based upon the number ofequivalentunits produced,called for the use
of 5,000 square yards of fabric at a standard costof $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 Companyfor June is:
A. $520 favorable.
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.
C. $360 unfavorable.
D. $425 unfavorable.
27.
Identify the criticisms ofusing ROI(Return on investment) as the only performance measure.
28.
Explain the importance ofincentive systems for motivating performance.

8. 29.
Capital budget auditBriefly discuss the reasons that a company’s management
would conduct a regular capital budget audit.
30.
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 notcorrectly describe any of the terms.
____ (a) The amountby which sales revenue exceeds total variable costexpressed as a percentage of
sales.
____ (b) The amountby which sales volume exceeds the break-even point.
____ (c) The study of financial statements bya potential investor or creditor as a means ofevaluating 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 atwhich revenue equals operating expenses.
____ (f) A costthat responds to changes in sales volume byless than a proportionate amount.
____ (g) A mathematical technique used to determine the fixed and variable elements ofa mixed or semi -
variable cost.