Acct 202 Chapters 1-3 Test

A company's product sells for $150 and has variable costs of $60 associated with the product. What is its contribution margin ratio? 10% 40% 60% 90% (150-60)

60% (150-60= 90 ) (90/150= 60%)

What does CVP mean

Cost Volume Profit. To use CVP, you must be able to break costs out into fixed costs and variable costs

what is step cost

a fixed cost with a short relevant range

When fixed costs decrease and all other variables remain unchanged, the break-even point will ________. remain unchanged increase decrease produce a lower contribution margin

decrease

When sales price increases and all other variables are held constant, the break-even point will ________. remain unchanged increase decrease produce a lower contribution margin

decrease

Managerial accounting produces information: to meet the needs of external users that is often focused on the future to meet the needs of investors that follows the rules of GAAP

that is often focused on the future

Fraud involves

the deliberate misuse of ones job for personal gain, through the deliberate misuse of the employers assets

Which of the following is the primary source of revenue for a manufacturing business? the production of products from raw materials the purchase and resale of finished products the provision of intangible goods and services both the provision of services and the sale of finished goods

the production of products from raw materials

Two types of fraud are

theft of assets and fraudulent financial reporting

what is the balanced scorecard (BSC)

this approach uses both financial and non-financial measures in evaluating all attributes of the organizations procedures. This approach differs from the traditional approach of only using financial measures to evaluate a company, a department, or an employee.

what are fixed costs

total cost does not change with volume

what is the cost equation (or total costs)

total cost= fixed cost+ variable cost per unit * #of units

Total costs for ABC Distributing are $250,000 when the activity level is 10,000 units. If variable costs are $5 per unit, what are their fixed costs? $240,000 $200,000 (250,000- (5x * 10,000)= 200,000 $260,000 Their fixed costs cannot be determined from the information presented.

$200,000 (250,000- (5x * 10,000)= 200,000

what is the formula for finding BEP (Break even point)

Fixed Costs/Contribution margin per unit

Which of the following represents the components of the income statement for a service business? Sales Revenue - Cost of Goods Sold = gross profit Service Revenue - Operating Expenses = operating income Sales Revenue - Cost of Goods Manufactured = gross profit Service Revenue - Cost of Goods Purchased = gross profit

Service Revenue - Operating Expenses = operating income

what is the formula for CMR (Contribution margin ratio)

The contribution margin ratio which is (Revenue (can also be known as SP per unit)-Variable Costs)= Contribution Margin. Then the Contribution Margin/Revenue= contribution margin ratio. CMR is the difference between a company's sales and variable expenses, expressed as a percentage. The closer a contribution margin percent, or ratio, is to 100%, the better. The higher the ratio, the more money is available to cover the business's overhead expenses, or fixed costs.

what are the factors that must exist for a person to commit fraud (called the fraud triangle)

opportunity financial pressure rationalization or attitude

What are conversation costs

DL and Factory overhead

What are prime costs

DM and DL

what is corporate social responsibility (CSR)

Evaluating an organization's effects on the environment and on social welfare, and taking responsibility for those effects

what is the foreign corrupt practices act of 1977

also called FCPA. requires SEC companies to have good internal controls

what is the sarbanes-oxley act of 2002?

also called SOX. established rules to protect the public from fraudulent or predatory practices by corporations and other business entities. The act increased transparency in financial reporting by corporations, and established a system of internal corporate checks and balances.

what are direct costs

directly traceable to a single cost object

Management accounting: emphasizes special-purpose information relates to the company as a whole is limited to strictly cost figures is controlled by GAAP

emphasizes special-purpose information

what are mixed costs

have both variable and fixed costs

When variable costs increase and all other variables remain unchanged, the break-even point will ________. remain unchanged increase decrease produce a lower contribution margin

increase

Variable costs are expenses that ________. remain constant on a per-unit basis but change in total based on activity level remain constant on a per-unit basis and remain constant in total regardless of activity level decrease on a per-unit basis as activity level increases remain constant in total regardless of activity level within a relevant range

remain constant on a per-unit basis but change in total based on activity level

what are variable costs

total costs change in direct proportion to volume (add DM+DL+Indirect Material+ Variable Manufacturing Overhead)

What do you do to try and prevent fraud?

urge adherence to company policies promote efficient operations ensure reliable accounting protect assets interanal auditors whistleblowing program annual audits

A company's contribution margin per unit is $25. If the company increases its activity level from 200 units to 350 units, how much will its total contribution margin increase? $1,250 $3,750 $5,000 $8,750

$3,750 Given that: (the steps) Increase in Number of goods sold (350 - 200) 150 units Contribution Margin per unit $25 . Increase in Contribution Margin = Contribution Margin per unit x Increase in Number of goods sold = 25 x 150 = 3,750

The law that specifically prohibits payments to foreign officials in order to attain business is known as ________. FCPA- (Foregin Corrupt Practices Act) requires SEC companies to have good internal controls AICPA SOX IFRS

FCPA

What are the key differences between financial accounting and managerial accounting?

Financial accounting focuses on external users, such as investors, creditors, government, etc. The reports are usually standardized and based on historical matters. Managerial accounting focuses on internal users, such as managers, employees, supervisors, etc. The reports should be useful and helpful to managers and usually need to be timely. The reports are based on future and estimated matters.

Which of the following statements is incorrect? The practice of management accounting is fairly flexible. The information gathered from management accounting is not required by law. Management accounting focuses mainly on the internal user. Reports produced using management accounting must follow GAAP.

Reports produced using management accounting must follow GAAP.

Which of the following represents the components of the income statement for a manufacturing business? Sales Revenue - Cost of Goods Sold = gross profit Service Revenue - Operating Expenses = gross profit Service Revenue - Cost of Goods Manufactured = gross profit Sales Revenue - Cost of Goods Manufactured = gross profit

Sales Revenue - Cost of Goods Sold = gross profit

Which of the following represents the components of the income statement for a merchandising business? Sales Revenue - Cost of Goods Sold = gross profit Service Revenue - Operating Expenses = gross profit Sales Revenue - Cost of Goods Manufactured = gross profit Service Revenue - Cost of Goods Purchased = gross profit

Sales Revenue - Cost of Goods Sold = gross profit

high low method formula

Variable Cost Per Unit= (high volume costs-low volume costs) / (high volume units - low volume units)

what is the formula for sales

Variable costs + Fixed Costs

what are product costs

also called manufacturing costs; attach to the product and go where the products go. To inventory if not sold. To cost of goods sold if sold. Transportation to get materials in is a product cost. Anything that says "Factory" in it will be a product cost.

what are period costs

also called non-manufacturing costs; do not attach to the product and go directly to the income statement when incurred. Transportation to deliver materials to customer is a period cost

The amount of a unit's sales price that helps to cover fixed expenses is its ________. contribution margin profit variable cost stepped cost

contribution margin

A company's attempts to utilize sustainable business practices with regard to its employees, the environment, and society are known as ________. a balanced scorecard corporate social responsibility total quality management value chain

corporate social responsibility

Managerial Accounting can provide useful information to aid in

determining the costs of an organization's products and services, planning future activities, and comparing actual results to planned results

Which of the following would not be classified as manufacturing overhead? indirect materials indirect labor direct labor property taxes on factory

direct labor

what are all the manufacturing costs

direct materials direct labor factory manufacturing overhead- all manufacturing costs except DM and DL

what is Just in time (JIT) manufacturing?

inventory system that companies use to increase efficiency and decrease waste by receiving goods only as they are needed within the production process, thereby reducing warehousing costs. This method requires accurate forecasting. Managerial accountants work together with purchasing and production schedulers in keeping the flow of materials accurate and efficient.

what is the margin of safety

measure of risk; difference between expected (estimated) sales and breakeven sales. Can be in Sales dollars or in units. The larger the margin of safety, the better.

Which of the following is not considered a product cost? direct materials direct labor indirect materials selling expense

sellling expense

what are indirect costs

provides a benefit to multiple cost objects; therefore not directly traceable to a single cost object

what is operating leverage

relationship between fixed costs and variable costs

Fixed costs are expenses that ________. vary in response to changes in activity level remain constant on a per-unit basis increase on a per-unit basis as activity increases remain constant as activity changes

remain constant as activity changes

What is the law that protects investors from fraudulent financial accounting activity? FASB SACS SOX- established rules to protect the public from fraudulent or predatory practices by corporations and other business entities. The act increased transparency in financial reporting by corporations, and established a system of internal corporate checks and balances. CPAS

sox