Accounting II Final

The condensed income statement of Fletcher Inc. for the past year is as follows: Product F G H Total Sales $300,000 $210,000 $340,000 $850,000 Cost of goods sold: Variable costs $180,000 $180,000 $220,000 $590,000 Fixed costs 50,000 50,000 40,000 140,000 Total cost of goods sold $230,000 $230,000 $260,000 $730,000 Income (loss) from operations $ 70,000 $(20,000) $ 80,000 $120,000 Management is considering the discontinuance of the manufacture and sale of Product G at the beginning of the current year. The discontinuance would have no effect on the total fixed costs and expenses or on the sales of Product F and Product H. What is the amount of change in income for the current year that will result from the discontinuance of Product G?

$30,000 decrease

The Darwin Company reports the following information: Sales $76,500 Direct materials used 7,300 Depreciation on factory equipment 4,700 Indirect labor 5,900 Direct labor 10,500 Factory rent 4,200 Factory utilities 1,200 Sales salaries expense 15,600 Office salaries expense 8,900 Indirect materials 1,200 Product costs are

$35,000

If the fixed costs are $400,000 and the unit contribution margin is $20, what amount of units must be sold in order to have zero profit?

20,000 units

Jacob Inc. has fixed costs of $240,000, the unit selling price is $32, and the unit variable costs are $20. What are the old and new break-even sales (units) if the unit selling price increases by $4?

20,000 units and 15,000 units

If the fixed costs are $500,000, the unit selling price is $55, and the unit variable costs are $30, what is the breakeven sales (units) if the fixed costs are increased by $80,000?

23,200 units

Finished goods inventory is reported on the

balance sheet as a current asset

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

contribution margin ration

In most business organizations, the chief management accountant is called the

controller

What term is used to describe the process of monitoring operating results and comparing actual results with the expected results?

controlling

Connor Company's fixed costs are $400,000, the unit selling price is $25, and the unit variable costs are $15. What is the break-even sales (units) if the variable costs are increased by $2?

50,000 units

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

insurance premiums on factory building

All of the following are examples of indirect labor except

machine operators

The primary goal of managerial accounting is to provide information to

management

The difference between the current sales revenue and the sales at the break-even point is called the

margin of safety

Costs that remain constant in total dollar amount as the level of activity changes are called

mized costs

For purposes of analysis, mixed costs are

separated into their variable and fixed cost components

Which of the following is not an example of a cost that varies in total as the number of units produced changes?

straight-line depreciation on factory equipment

Which of the following is not an advantage of the average rate of return method?

takes into consideration the time value of money

Contiribution margin is

the excess of sales revenue over variable cost

The contribution margin ratio is

the same as the profit-volume ratio

What is the purpose of the statement of cost of goods manufactured?

to determine the amount transferred to finished goods

Which of the following statements is false?

There is no overlap between financial and managerial accounting.

Materials must have which two qualities in order to be classified as direct materials?

They must be an integral part of the finished product and be a significant portion of the total product cost.

Cost behavior refers to the manner in which

a cost changes as the related activity changes

Which of the following is not a characteristic of useful managerial accounting reports?

adhere to GAAP

A series of equal cash flows at fixed intervals is termed a(n)

annuity

Delaney Company is considering replacing equipment that originally cost $600,000 and that has $420,000 accumulated depreciation to date. A new machine will cost $790,000, and the old equipment can be sold for $8,000. What is the sunk cost in this situation?

$180,000

The Darwin Company reports the following information: Sales $76,500 Direct materials used 7,300 Depreciation on factory equipment 4,700 Indirect labor 5,900 Direct labor 10,500 Factory rent 4,200 Factory utilities 1,200 Sales salaries expense 15,600 Office salaries expense 8,900 Indirect materials 1,200 Period costs are

$24,500

Sage Company is operating at 90% of capacity and is currently purchasing a part used in its manufacturing operations for $15 per unit. The unit cost for the business to make the part is $20 including fixed costs and $11 excluding fixed costs. If 30,000 units of the part are normally purchased during the year but could be manufactured using unused capacity, what would be the amount of differential cost increase or decrease from making the part rather than purchasing it?

$120,000 cost decrease

Given the following data: Beginning raw materials inventory $30,000 Materials purchased 65,000 Ending raw materials inventory 40,000 What is the amount of raw materials used?

$55,000

If the cost of a direct material is a small portion of total production cost, it may be classified as part of

factory overhead cost

If the fixed costs are $1,200,000, the unit selling price is $240, and the unit variable costs are $110, what is the amount of sales required to realize an operating income of $200,000?

10,769 units

Piper Technology's fixed costs are $1,500,000, the unit selling price is $250, and the unit variable costs are $130, what is the amount of sales required to realize an operating income of $200,000?

14,167 units

Use this information for Nebraska Corporation to answer the questions that follow. The management of Nebraska Corporation is considering the purchase of a new machine costing $490,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for Years 1 through 5 are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability: Year Income from Operations Net Cash Flow 1 $100,000 $180,000 2 40,000 120,000 3 40,000 100,000 4 10,000 90,000 5 10,000 120,000 53) The average rate of return for this investment is

16%

When Isaiah Company has fixed costs of $120,000 and the contribution margin is $30, the break-even point is

16,000 units

If the fixed costs are $450,000, the unit selling price is $75, and the unit variable costs are $50, what are the old and new break-even sales (units) if the unit selling price increases by $10?

18,000 units and 12,857 units

Which of the following accounts will be found on the income statement?

Cost of Goods Sold

The production department is proposing the purchase of an automatic insertion machine. It has identified three machines and has asked the accountant to analyze them to determine the best cash payback. Which machine has the best payback period? Machine A Machine B Machine C Annual cash flow $ 40,000 $ 50,000 $ 75,000 Initial cost 300,000 250,000 500,000

Machine B

As production increases, the fixed cost per unit

decreases

Which of the following describes the behavior of the fixed cost per unit?

decreases with increasing production

The amount of increase or decrease in revenue that is expected from a particular course of action as compared with an alternative is

differential revenue

The cost of wages paid to employees directly involved in the manufacturing process in converting materials into finished products is classified as

direct labor cost

The cost of a manufactured product generally consists of which of the following costs?

direct labor cost, direct materials cost, and factory overhead cost

Prime costs are

direct materials and direct labor

Which of the following is an advantage of the cash payback method?

easy to use

All of the following would be reported on the balance sheet as a current asset except

facotry overhead

Conversion costs are

factory overhead and direct labor

Costs other than direct materials cost and direct labor cost incurred in the manufacturing process are classified as

factory overhead cost

What term is used to describe the process of developing the organization's objectives and translating those into courses of action?

planning

Managerial accounting reports are

prepared according to management needs

Which of the following is most associated with financial accounting?

prepared in accordance with GAAP

Which of the following describes the behavior of a variable cost per unit?

remains constant with changes in the activity level

Which of the following costs is a mixed cost?

rental costs of $10,000 per month plus $0.30 per machine hour of use

Which of the following is an example of a cost that varies in total as the number of units produced changes?

salary of a production supervisor

In cost-volume-profit analysis, all costs are classified into the following two categories:

variable costs and fixed costs

All of the following employees hold line positions at Facebook except

vice president of finance

Goods that are partially completed by a manufacturer are

works in process inventory