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ACCT 346 Week 8 Final Exam Page 1 1. (TCO 1) A difference between actual costs & planned costs (Points : 4) should be investigated if the amount is exceptional. indicates that the planned c... ost was poorly estimated. indicates that the manager is doing a poor job. should be ignored unless it involves the cost of ingredients. 2. (TCO 1) Which of the following is not likely to be a fixed cost? (Points : 4) Direct materials Rent Depreciation Salary of the human resources director 3. (TCO 2) Which of the following is not a manufacturing cost? (Points : 4) Manufacturing overhead Direct materials Direct labor Administrative expenses 4. (TCO 2) A job-order costing system is likely used by a (Points : 4) soft drink bottler breakfast cereal manufacturer paint manufacturer custom home builder 5. (TCO 3) Equivalent units are calculated by (Points : 4) taking the units needed to complete the beginning inventory, adding units started & taking the equivalent units in ending inventory taking the units completed plus the equivalent units in ending inventory. taking the total units to account for & subtracting equivalent units in ending inventory taking units started plus units transferred out. 6. (TCO 3) The Freedom Corporation’s painting department had a beginning inventory of 580 units, which had direct material costs of $22,715. During June, 9,290 units were started & costs of $1,268,085 were incurred for direct material. Ending inventory consists of 1,000 units, which are 35% complete with respect to direct material. What is the cost per equivalent unit for direct material? (Points : 4) $40.00 $137.00 $140.00 $159.00 7. (TCO 4) Which of the following is not an assumption of C-V-P analysis? (Points : 4) Costs can be accurately separated into fixed & variable components. Fixed costs remain constant within the relevant range. Total variable costs are proportioned to the level of activity. Selling price per unit declines after the break-even point is reached. 8. (TCO 4) The contribution margin per unit is the difference between (Points : 4) total revenue & total fixed costs selling price & variable costs per unit anticipated level of sales & break-even sales budgeted fixed costs & actual fixed costs 9. (TCO 5) Full costing (Points : 4) is the same as absorption costing. considers fixed manufacturing overhead as part of the cost of inventory. often does not provide the information needed for C-V-P analysis. All of the above choices are correct. 10. (TCO 5) Which of the following is not true when units sold exceed units produced? (Points : 4) Full costing & variable costing will yield the same net income. Full costing will assign some fixed manufacturing costs to the units in ending inventory. Net income will be higher under variable costing than under full costing. Inventory levels will decrease. 11. (TCO 6) Cost-plus contracts are common in which of the following industries? (Points : 4) Manufactured home builders Soft drink bottlers Defense contractors Newspaper publishers 12. (TCO 6) Which of the following is not generally true when a company compares ABC & traditional costing? (Points : 4) ABC uses more cost drivers ABC allocates cost based solely on production volume ABC is more expensive ABC is less likely to undercost complex, low volume products 13. (TCO 7) Fixed costs that will be eliminated if a particular course of action is undertaken are called (Points : 4) optional costs opportunity costs direct costs avoidable costs Page 2 1. (TCO 7) Two or more products that result from common inputs are called (Points : 4) split products joint products combination products common products 2. (TCO 8) Activity based pricing seeks to (Points : 4) charge customers with the costs they are creating. make greater profits by charging all customers more. maintain all customers in the customer base. all of the above. 3. (TCO 8) When deciding to accept or reject a special order, which of the following costs would most likely not be relevant? (Points : 4) The wages of direct labor to make the order. Depreciation on the machinery used to make the order. The raw material used to make the order. The electricity used to run the machine to make the order. 4. (TCO 9) Present value techniques (Points : 4) ignore cash flows that will occur more than ten years in the future. are a way of converting future dollars into equivalent current dollars. provide more conservative results than similar time value of money computations. treat dollars received today the same as dollars received in the future. 5. (TCO 9) The internal rate of return (Points : 4) takes into account the time value of money. is the rate of return that equates the present value of future cash flows to the initial investment. both A & B neither A nor B 6. (TCO 10) A method of budget preparation that requires all budgeted amounts to be justified by the department, even if the amounts were supported in prior periods, is called (Points : 4) variance budgeting. flexible budgeting. current period budgeting. zero base budgeting. 7. (TCO 10) Which budget is prepared first? (Points : 4) Cash disbursement budget Production budget Capital budget Sales budget 8. (TCO 10) The difference between standard costs & budgeted costs is that standard costs (Points : 4) refer to a single unit while budgeted costs refer to the cost, at standard, for the total number of budgeted units. are calculated under ideal conditions, while budgeted costs are calculated for attainable conditions. are calculated for material while budgeted costs are calculated for labor. are part of the management accounting system, while budgets are part of the financial accounting system. 9. (TCO 10) The overhead volume variance indicates that (Points : 4) raw materials have been wasted. management has done a poor job of controlling costs. the quantity of production differed from what was anticipated. labor rates were higher than expected. 10. (TCO 10) A subunit that has responsibility for controlling cost but not revenues is a(n) (Points : 4) profit center. cost center. investment center. business center. 11. (TCO 10) Which of the following is not an advantage of decentralization for a company? (Points : 4) Subunit managers have better information. Subunit managers will act to benefit the organization as a whole. Subunit managers can respond quicker to changing circumstances. Subunit managers can receive training to move into top level management positions. 12. (TCO 10) The ratio that measures the return earned independently of how the firm is financed is the (Points : 4) return on stockholders' equity. price earnings ratio. earnings per share. return on assets. Page 3 1. (TCO 1) Distinguish between product costs & period costs. Define both types of costs & provide examples. (Points : 20) 2. (TCO 6) Pacific Airlines has three service departments; ticketing, baggage handling, & aircraft maintenance. Costs of these departments are allocated to two revenue producing departments, domestic & international flights. Costs for the service departments are not separated into fixed & variable & the totals are as follows: Ticketing $4,000,000 Baggage handling $2,000,000 Aircraft maintenance $6,000,000 Air miles are as follows: Domestic 5,000,000 International 20,000,000 (a) Allocate the service department costs based on air miles. (b) Evaluate World Airlines use of air miles as a basis for allocation. Do you think the cause- and-effect relationship is strong? (c) Suggest alternative methods to allocate the service department costs. (Points : 25) 3. (TCO 10) Gina's Boutique makes custom jewelry. One item, the guru necklace, is a best seller & sales in units for the first quarter are as follows: January 100,000 units February 150,000 units March 180,000 units Desired ending inventory is budgeted at 20% of next month sales. Compute production for February. (Points : 25) 0 1524904754 Essay 9 4. (TCO 2) Singleton Company is trying to determine a predetermined manufacturing overhead. Estimated overhead for the upcoming year is $600,000. Budgeted machine hours are 120,000 hours, & budgeted labor hours are 15,000 hours at a rate of $20.00 per hour. Compute the predetermined overhead rate based on: (a) Machine hours (b) Direct labor hours (c) Direct labor dollars (Points : 25) Page 4 1. (TCO 9) A project will require an initial investment of $600,000 & is expected to generate the following cash flows: Year 1 $100,000 Year 2 $250,000 Year 3 $250,000 Year 4 $200,000 Year 5 $100,000 (a) What is the project's payback period? (b) If the required rate of return is 20% & taxes are ignored, what is the project's net present value? (Points : 25) 2. (TCO 4) Legal Docs Inc is a legal services firm that files incorporation papers for small businesses. They charge $1,000 per application. This year's income statement shows the following: Sales $1,295,000 Variable Expenses $1,023,000 Contribution margin $272,000 Fixed costs $250,000 Profit $22,000 Required: (a) Compute the break-even point in units. (b) Compute the contribution margin ratio. (c) Compute the current margin of safety. (d) How many applications must the company sell to make a profit of $350,000? (Points : 25) 3. (TCO 5) The following data has been taken from Air-Tite company in its first year of business. Units produced 100,000 Units sold 80,000 Units in ending inventory 20,000 Fixed manufacturing overhead $400,000 (a) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if full absorption costing is used. (b) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if variable costing is used. (c) Compute the amount of fixed manufacturing overhead that would be included in ending inventory under full absorption costing. (Points : 25) 80) Identify which statement about "currently attainable standards" is NOT true. . Because they allow for waste, they usually result in favorable variances. . Employees usually view these goals as reasonable. . They allow for normal spoilage & nonproductive time. . They represent projections of what will probably be attained. 81) Identify which of the following statements about "perfection standards" is true. . They are expressions of the most efficient performance possible. . All of these answers are correct . It is generally believed that they have a negative influence on employee morale. . They usually result in unfavorable variances. 2) Which statements describe the principal reason(s) why investors & creditors use financial statement analysis? 1. To assess the risks associated with expected returns 2. To establish recommended dividend & interest payments 3. To evaluate top & middle level management 4. To predict the amount of expected returns A. 1 & 4 B. 3 & 4 C. 1 & 2 D. 1, 2, & 3 83) Which of the following statements is incorrect with respect to creditors & equity investors? A. Creditors are concerned with assessing the short term liquidity of a company. B. Creditors are concerned with assessing the long term solvency of a company. C. Both creditors & equity investors are concerned about security prices. D. Equity investors are concerned about dividend payments. [Show More]

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