accounting 1-6

Which of the following variances is least likely to be investigated by a manager following the management by exception principle?

A favorable variance in property taxes levied by the city.

Which of the following is not a product cost?

Corporate controller's salary

Which of the following documents is not used to accumulate product costs in a job order costing environment?

Customer invoice

A company replaces its accounting information system, marketing information system, sales information system, and production information system with a single, integrated software solution.

Enterprise Resource planning

Which of the following would be a feasible explanation for a favorable direct materials quantity variance?

Purchased higher quality materials than specified in the standard.

Reese Manufacturing has a current breakeven point of 475,642 units. To reduce the breakeven point, Reese Manufacturing should

increase the contribution margin.

Bottom-up budget planning is more efficient than top-down planning because the operational managers have a better grasp of reality than top management, so that fewer changes need to be made after the budget has been submitted for review.

false

Controlling activities compare actual annual results to planned annual results for the purpose of awarding managers' bonuses.

false

Ethical behavior is governed by laws and rules.

false

If a company sells more than one product, it cannot use CVP analysis to examine the effect of changes in costs on operating income.

false

If an organization has a published code of conduct, its employees will not become involved in unethical behavior.

false

Once a company has prepared a budget for the year, no changes can be made to the budget during the year.

false

The amount of net income presented on a functional income statement will be different from the amount of net income presented on a contribution margin format income statement.

false

The goal of management accounting is to provide accurate financial records for external reporting.

false

The gross margin percentage and the markup percentage are essentially the same.

false

The scattergraph method provides the most accurate cost function estimates.

false

The standard cost of a product is the total budgeted manufacturing cost for all units of the product that the company expects to make in one year.

false

When actual unit sales differ from budgeted unit sales, the static budget variance is adequate information for managers to understand the variance in sales revenue.

false

Meg Thomas maintains a membership at Woodridge Health and Fitness that costs her $120 per month. The membership fee would be considered a

fixed cost

The cost of goods manufactured

is recorded as a debit to the Finished Goods Inventory account.

A company requires its suppliers to deliver components in orders of 25 every two hours rather than in orders of 2,000 once every month.

just-in-time inventory management

Macintosh Corporation leases a copy machine for a monthly fee of $100 plus a charge of $0.01 per copy. Macintosh's copy cost would be considered a

mixed cost

A company decides to implement a system of regional distribution centers to better meet the delivery needs of customers.

supply chain management

If the cost of goods sold is greater than the cost of goods manufactured, then

the Finished Goods Inventory has decreased during the period.

If the actual average wage rate is $4.80 per direct labor hour, but the standard wage rate is $5.00 per direct labor hour,

the direct labor rate variance will be favorable.

If the actual cost of direct materials is $5.00 per unit while the standard cost of direct materials is $4.50 per unit,

the direct materials price variance will be unfavorable.

Which of the following is not an area of focus on a balanced scorecard?

suppliers

All other things equal, a 20% increase in the number of units sold will yield a 20% increase in net income.

false

At the breakeven point, sales revenue and total contribution margin are equal.

false

Mountain Pictures, Ltd., applies overhead at a rate of $10 per direct labor hour. At the end of June, the company had accumulated 7,650 direct labor hours and incurred $81,250 in manufacturing overhead. For the month of June, manufacturing overhead was

$81,250 actual overhead less ($10 x 7,650) = $76,500 applied overhead equals $4,750 underapplied overhead. $4,750

Jordan Graft Images sells framed prints of various college landmarks. Jordan purchases the prints from his supplier for $30 and sells them through his website for $65. Jordan's fixed expenses are $89,250. What is Jordan's breakeven point in units?

$89,250/ ($65 - $30) = 2,550 units.

A company is preparing its cash budget for the second quarter of the year. It has $10,000 in cash on March 31. Sales for the quarter are expected to be $300,000, all in cash. Operating expenses are expected to be $65,000, which includes $15,000 of depreciation. Cash expenses are paid in the month incurred. Cash payments for merchandise inventory purchases are expected to be $270,000. The desired cash balance on June 30 is $20,000. How much financing will the company need during the quarter?

$10,000 + $300,000 - ($65,000 - $15,000) - $270,000 - $20,000 = ($30,000)

Deaton, Inc. sells computer backpacks. The company purchases the backpacks from its supplier for $15 and sells them to office supply stores for $25. Deaton's fixed expenses are $100,000. What is Deaton's breakeven point in sales dollars?

$100,000/ ($10/$25) = $250,000.

Festive Foods Caterers' income statement for last month follows. What is Festive Foods' degree of operating leverage? Sales $200,000 Variable expenses 60,000 Contribution margin 140,000 Fixed expenses 120,000 Net operating income $20,000

$140,000/ $20,000 = 7

Hickman & Reid manufactures hand-sewn silk ties. The company applies overhead using direct labor hours as the application base. The direct labor quantity standard for making a tie is 6 minutes. The company estimates overhead to be $2,250,000 for the coming year, based on production of 1,500,000 ties. The standard overhead cost per tie is

$2,250,000/ 1,500,000 =$1.50

Jenkins Jewelers operates with a 30% contribution margin. If Jenkins's sales increase by $20,000, operating income will increase by

$20,000 x 30% = $6,000

Weaver Mills uses a job order costing system to account for its production of specialty fabrics. On January 31 the company reported the following balances in its inventory accounts: $50,975 in Raw Materials, $24,950 in Work in Process, and $15,080 in Finished Goods. On January 31, the total of all open job order cost sheets would be

$24,950.

If the beginning balance in the Raw Materials Inventory account for May was $27,500, the ending balance in the same account for May was $28,750, and $128,900 of materials were used during the month, the materials purchased during the month cost (CMA adapted)

$28,750 + $128,900 - $27,500 = $130,150

Dunn Family Auto Repairs offers several services ranging from tire patching to complete transmission rebuilding. Since labor is the main cost of these services, the company charges customers a markup on the worker's wage rate. The most skilled workers earn $25 per hour; Dunn charges customers $40 per hour. If Dunn applies the same markup percentage to each worker, what price will the company charge for a worker who earns $15 per hour?

$40/ $25 = 1.6; $15 X 1.6 = $24

In planning for the upcoming year, managers of Manilon Industries estimated $447,000 in manufacturing overhead, 20,000 direct labor hours, and 60,000 machine hours. If overhead is applied based on direct labor hours, what is the predetermined overhead rate for the coming year?

$447,000/ 20,000 DLH = $22.35/ DLH

Conrad Steel sells bridge supports. Currently, the company's sales revenue is $5,000,000. If Conrad's controller has calculated the company's breakeven point to be $3,975,000, what is the company's margin of safety?

$5,000,000 - $3,975,000 = $1,025,000.

Carpenter Western Wear is a retail clothing store in Lubbock, Texas. On average, the store earns a 40% gross margin on its merchandise. The owner, Carol Carpenter, wants to add jewelry to the sales mix. Carol believes that her customers won't pay more than $50 for a bracelet. If she wants to maintain the same average gross margin, what is the maximum wholesale cost she should pay for bracelets?

$50 X 40% = $20; $50 - $20 = $30

Marisol's Parasols sells novelty umbrellas for $10 each. Marisol's variable costs are $4 per unit, and her fixed expenses are $3,000 per month. If Marisol's tax rate is 25%, how many umbrellas must Marisol sell each month if she wants to earn $9,000 in net income?

$9,000/ 1 - .25 = $12,000; ($12,000 + $3,000)/ ($10 - $4) = 2,500

Hurst Motors applies overhead based on direct labor hours. In completing the 300 motors in job 4329, the company incurred $10,500 in direct materials and 60 direct labor hours at $15 per hour. The predetermined overhead rate is $65 per direct labor hour. What is the unit cost of the motors produced in job 4329?

($10,500 + (60 x $15) + (60 x $65) = $15,300; $15,300 / 300 =$51

Bargain Booksellers sold 40,000 books in April and 65,000 books in December. Shipping costs for the two months were $150,000 and $200,000, respectively.Using these two months' data, the shipping cost function is best estimated as

($200,000 - $150,000)/(65,000-40,000) = $2.00 + 70000

Pete's Pretzel Stand sells jumbo pretzels for $2 each. Pete's variable cost per pretzel is $0.50, and total fixed expenses are $3,000 per month. If Pete wants to earn a monthly operating income of $9,000, how many pretzels must he sell during the month?

($3,000 + $9,000)/ ($2.00 - $.50) = 8,000

Mike Morriss conducted a regression analysis on Morriss Medical Supplies' catalog printing costs for last year, which resulted in the following equation:$5x + $750. If Morriss plans to print 500 catalogs in 2011, what are the printing costs expected to be?

($5 x 500) + $750 =$3,250.

Marvin's Garden Supply is preparing its cash budget for the fourth quarter. The inventory manager has provided the following budgeted materials purchases amounts: October—$58,000, November—$80,000, December—$74,000. Historically, Marvin's has paid for 20 percent of its purchases in the month of purchase, 70 percent in the month following the purchase, and 10 percent in the second month after the purchase. What is Marvin's budgeted cash payments for purchases in December?

(.10 X 58,000) + (.70 X $80,000) + (.20 X $74,000) = $76,600

Johnson Corporation used 20,000 pounds of material to make 18,000 bottles of Glime. The standard allows 1.2 pounds of material at a cost of $3.00 per pound for each bottle of Glime. Johnson's direct materials quantity variance is

(18,000 X 1.2) - 20,000] X $3.00 = $4,800 F

Stacy Moore is preparing the materials purchases budget for the second quarter. The production manager has provided the following production budget: April—65,000 units, May—50,000 units, June—70,000 units. Each unit requires 8 pounds of direct materials, and Stacy wants to maintain an ending inventory equal to 20 percent of the next month's production needs. How many pounds of material will Stacy budget to purchase in May?

(50,000 X 8) + (70,000 X 8 X .20) - (50,000 X 8 X .20) = 432,000.

Montelone Images, a photography studio, sells two photo packages. The standard package has a contribution margin of $5, and the deluxe package has a contribution margin of $12. Montelone sells five standard packages for every one deluxe package. If fixed expenses total $74,000, how many standard and deluxe packages must be sold to break even?

10,000 standard; 2,000 deluxe $74,000/[(5 X $5) + $12] = 2,000; 2,000 X 5 = 10,000; 2,000 X 1 = 2,000

Blalock Training sells three online training courses in database programming skills. For every 12 people who take the introductory course, 5 take the intermediate course and 3 take the advanced course. Blalock's CFO has calculated a breakeven point of 10,000 courses. How many of those 10,000 courses will be introductory?

10,000/ (12 + 5 + 3) = 500; 500 X 12 = 6,000

Dawson Enterprises' current degree of operating leverage is 8. A planned promotion campaign is expected to increase sales by 15%. What is the expected increase in operating income?

15% x 8 = 120

Agee Machining had one job in Work in Process Inventory at the beginning of the month, job number 1376. The costs incurred to date on that job included $17,500 in direct materials, $22,000 in direct labor, and $33,000 in overhead. During the month, Agee added $1,000 in direct materials and $7,000 in direct labor. If Agee's predetermined overhead rate is 160% of direct labor costs, how much overhead should be applied to job 1376 for the month?

160% x $7,000 = $11,200

Which of the following would be considered direct materials?

2-liter plastic bottles used by Coca-Cola.

Bongo Company is planning to make 1,000 drums in March. Each drum requires 2.5 feet of high-quality wood, which costs $7.00 per foot. What standard material cost per drum would the company use to plan for production?

2.5 feet x $7/ foot = $17.5

Stoner Concrete Creations purchased 5,000 pounds of ready-mix concrete during March at a price of $0.75 per pound. The company used 4,500 pounds of the mix during the month. The standard price for the concrete mix was $0.80 per pound. Stoner's direct materials price variance for March is

5,000 * ($0.80 - $0.75) = $250 F

Modesto Company produces and sells Product Alpha. In budgeting for production needs, the company requires that 20 percent of the next month's sales be on hand at the end of each month. Budgeted sales of Product Alpha over the next four months are: June July August September Budgeted unit sales 30,000 40,000 60,000 50,000 Budgeted production for August would be

60,000 + (.20 X 50,000) - (.20 X 60,000) = 58,000

Which of the following would be considered part of Nike's supply chain?

All of these are in Nike's supply chain.

Which of the following would not be a component of manufacturing overhead for an automobile manufacturer?

Automobile windshields.

Which of the following statements about budgeting is not true?

Budgets should always be prepared by top management, since executives see the "big picture."

The budgeted year-end Accounts Payable balance, which must be entered on the pro-forma balance sheet, can be found on which budget?

Cash Payments for Materials Budget

Which of the following is not a limiting assumption of multiproduct CVP analysis?

Fixed cost per unit remains constant within the relevant range.

Which of the following is not characteristic of managerial accounting?

Focusing on historical cost information

Martin Bradstone is gathering information to complete the direct labor budget for next quarter. Which of the following will he not need to complete the budget?

Predetermined overhead rate

The contribution margin is calculated as

Sales revenue - Total variable expenses.

All other things equal, an increase in the number of units sold will

all of these

Which of the following affects the price a company charges under cost-plus pricing?

all of these

Assume a company sells 10,000 units: 5,000 of product A and 5,000 of product B. Product A has a contribution margin of $6.00 per unit, while Product B has a contribution margin of $4.00 per unit. If the sales mix changes to 5,500 units of Product A and 4,500 units of product B, which of the following is true?

all of these are true

Ellis McCormick and Elaine Sury are owners of MeetingKeeper, a company that sells personalized daily planners. Last month, the company sold 1,500 planners at a price of $6 per planner. Variable costs were $2.40 per unit; fixed expenses were $3,600. This month, Ellis and Elaine have decided to spend $2,000 to advertise in the local newspaper. They believe that the additional advertising will generate 25% more sales volume than last month. What will be this month's operating income?

[1.25 x 1,500 x ($6.00 -$2.40)] - $3,600 - $2,000 = $1,150.

Gorrells and Sunn builds high-quality homes ranging in price from $235,000 to $1,030,000. John Ellis, a local physician, has asked Gorrells and Sunn to show him some house plans. Dr. Ellis has selected a plan that calls for $314,000 in building materials,$200,000 in labor, and $41,000 in add-ons, but he doesn't want to pay more than $585,000 for his home. Gorrells and Sunn typically prices its homes based on the total cost of construction plus 18%. a)What price would Gorrells and Sunn normally quote for this house plan? b)What is the target cost Gorrells and Sunn would need to meet to sell the house for $585,000 at a 18% markup?

a) 654,900 b) 495,763

A company begins to evaluate its performance using metrics such as customer satisfaction, training hours per employee, and average cycle time in addition to traditional financial measures, such as earnings per share.

balanced score card

Max Deane purchased a lower grade of material than specified by the standard. A likely result of this purchase will be

both b and c.

Joe Sneed requested $50,000 in his budget to cover advertising expenses he believed would cost only $35,000. This is an example of

budgetary slack.

Stewart Statues had overapplied overhead totaling $50,000 during the year, which is considered to be immaterial. To dispose of this overapplied overhead, Stewart should

decrease Cost of Goods Sold by $50,000

The predetermined overhead rate is calculated as

estimated overhead divided by estimated activity level.

A company that utilizes a just-in-time inventory system will not report any inventory on the balance sheet.

false

A variable cost remains constant in total with changes in activity level.

false

Marcie Scott owns several laundromats in Morrisville. Identify each of the following actions she performs as a planning, controlling, evaluating, or decision-making activity. Marcie prepares a budget for the next year. Marcie chooses to replace the 10-year-old washing machines with the latest model Marcie looks at her income statement for the last month to see how well the business performed. Marcie checks the change machine to make sure that it dispenses four, and only four, quarters for each dollar bill inserted.

planning decision making evaluating controlling

Direct materials price variances are usually the responsibility of the

purchasing manager

Which of the following is not a typical component of a code of conduct?

salary scales

The master budget process usually begins with the

sales budget.

The difference between the flexible budget and the static budget is known as the

sales volume variance.

The cost of an advertising campaign for a new product would be classified as

selling, general, and administrative expense.

A company whose strategy is to build market share would be least interested in knowing its

short-term profits

A contribution format income statement presents all expenses by behavior rather than by function.

true

A flexible budget reports budgeted revenues and costs that should have resulted from the actual level of sales achieved during the period.

true

A markup percentage can be calculated as Markup/Cost.

true

All other things equal, a company can increase its operating leverage by converting commission-based salespeople to salaries.

true

Managerial accounting information need not comply with generally accepted accounting principles.

true

Operational planning converts a strategic plan into short-term action steps.

true

The pro-forma balance sheet is the final financial statement to be prepared because information from both the statement of cash flows (or cash budget) and the income statement flows into the balance sheet.

true

The standard wage rate includes more items than just the hourly rate paid directly to the employee.

true