ACCT 2102 Test 3

Which of the following describes a profit center?

Management is ONLY held responsible for generating revenue and controlling costs

What statement best explains an inventory turnover ratio of 24

On average, the company is selling and replacing its inventory 24 times during a year

Which of the following tells management how much income is earned from every sales dollar generated?

Sales Margin

If the standard direct material cost per unit is $10 and the standard direct material cost is $5 per pound, which of the following formulas correctly calculates the direct material input ratio?

$10 per unit/ $5 per pound

Which of the following formulas CAN be used to calculate total direct labor variance?*

- DL rate + DL efficiency - (actual DL hours logged) (actual rate per hour) - (standard DL hours allowed) (standard rate per hour) - actual DL cost - expected DL cost for actual activity level

Which of the following statements describes a favorable variance?

Actual revenue was higher than expected and actual expenses were lower than expected

Which of the following statement is not a question that can be answered by the Statement of Cash Flows?

By how much did Assets exceed Liabilities at the end of the period?

Which of the following transactions would be a source of cash reported in the investing activities section of the Statement of Cash Flows?

Cash received from the sale of equipment

For which of the following cost categories do manufacturers prepare standards?

Direct Material Direct Labor Manufacturing Overhead

Which of the following variances can first be calculated at the point of purchase?

Direct Material Price

Which of the following ratios is typically used as the basis for dividend distribution and the future value of a company's stock?

Earnings per share

An increasing EPS indicates that the company is paying out more cash dividends to shareholders than in previous periods

False

True/ False: Horizontal analysis states each item on a financial statement relative to a base amount

False

True/ False: If all sales are made on account, the only piece of information you would need to calculate the cash received from customers during the period is the net change in Accounts Receivable

False

True/ False: Management by exception dictates that only unfavorable variances be investigated

False

True/ False: an increasing debt to equity ratio would indicate that a company is financing more its operations with equity than in the past

False

True/ False: if a company's operations are decentralized, only the top-level management group is allowed to make decisions

False

True/ False: the production manager is held responsible for all direct material and direct labor variances

False

True/ False: the total direct material variance can always be calculated by adding the DM price variance and the DM quantity variance

False

True/ False: to calculate the cash dividends paid to shareholders during the period, only information from the comparative Balance Sheet is needed

False

Assuming all merchandise purchases are made on account, which of the following pieces of information would you NOT need to know in order to calculate the cash payments to suppliers during the period?

Sales Revenue

Which of the following correctly calculates segment margin?

Sales Revenue- Variable Costs- Traceable Fixed Costs

Which of the following is always true if a company has a relatively high accounts receivable turnover ratio?

The company is quickly converting sales on account to cash

Which of the following is not an advantage of decentralization?

The potential for the duplication of costs and efforts is eliminated

True/ False: A responsibility center is a segment for which the manager is held responsible for certain activities

True

True/ False: A standard cost is a budget for a single unit of product

True

True/ False: An increasing days' sales in receivables ratio, on average, indicates that it is taking a company longer to collect its credit sales

True

True/ False: Companies are typically decentralized along product lines, by geographic regions, or through responsibility centers

True

True/ False: The ratios that are important to a creditor typically differ from the ratios that are important to a shareholder

True

True/ False: a positive residual income indicates that the segment's Return on Investment is greater than the company's target rate of return

True

True/ False: the Selling, General, and Adminsitrative expenses reported on the Income Statement could include some noncash expenses

True

True/ False: the operating section of the Statement of Cash Flows can be prepared using either the direct or indirect method

True

Which of the following is incorrect with regard to a company's current ratio?

the current ratio is calculated by dividing total liabilities by total stockholders' equity

Which of the following correctly lists the three categories of activities reported on the Statement of Cash Flows?

operating, investing, and financing

Which of the following is not a common method of analyzing financial statements?

product cost analysis

Which of the following formulas can NOT be used to calculate the total direct labor variance?

standard DL rate per hour (actual DL hours logged - DL hours allowed for actual activity level)

Which of the following statements best defines the direct material price variance?

the difference between the actual cost per unit of input and the standard cost per unit of input

Which of the following statements accurately describes a flexible budget variance?

the difference between the company's actual operating results and the budgeted created for its actual level of activity