ACCT exam 3
Avoidable fixed costs
include costs that may be eliminated as a result of discontinuing the product.
Unavoidable fixed costs
include fixed costs that continue to be incurred even if the product line is discontinued.
A sunk cost ________.
includes costs that have been incurred in the past and cannot be changed
Benchmarking ________.
may help a manager motivate employees and provide a measure to evaluate performance
The combined cash budget ________.
merges budgeted cash collections and cash payments to project the firm's ending cash position
Capital expenditure budgets ________.
reveal a manager's intent to invest in new property, plant, or equipment
Capital expenditure budgets
reveal a manager's intent to invest in new property, plant, or equipment.
Cash collections budgets
reveal an organization's expected cash collections.
Cash payments budgets
reveal when the organization intends to pay for its direct materials, purchases, direct labor costs, manufacturing overhead costs, operating expenses, capital expenditures, and income taxes.
When making decisions, managers should consider
revenues that differ between alternatives
Inventory kept on hand to account for increases in consumer demand or machine malfunction in case of emergency is ________.
safety stock
Which of the following is NOT a potential drawback of outsourcing?
Outsourcing can be a lower cost alternative.
Which of the following is NOT a benefit of outsourcing?
Outsourcing involves giving up control over quality and scheduling.
________ help guide managers to what they should do to make the business more profitable
Prescriptive analytics
Mike's Auto Service reported information about the cost associated to sell as is or process further. The managerial accountant expects to earn $200,000 of revenue from selling parts as is. State whether the managerial accountant should "Process Further" or "Do Not Process" based on the Decision Rule.
Process further because the extra revenue from processing further is more than the extra cost of processing further.
________ costs include costs that may be eliminated as a result of discontinuing the product
Avoidable fixed
Which of the following is a benefit of budgeting which helps a manager motivate employees and evaluate performance?
Benchmarking
Quantity of Direct Materials to Purchase in the Direct Materials Budget
Quantity of Direct Materials needed for Production + Desired Direct Materials Ending Inventory - Direct Materials Beginning Inventory
________ refers to the result of operating income or loss for each individual product line
Segment margin income
________ entails the planning and establishment of long-term goals which range years into the future.
Strategic planning
Which of the following costs is irrelevant to business decisions?
Sunk costs
Big data is a catchphrase used to refer to data that are often characterized by six V's.
Volume Velocity Variety Veracity Value Vulnerability
Contract manufacturers
are manufacturers who only make products for other companies instead of for themselves.
What are the required inputs for the FORECAST.LINEAR function?
calculates future values based on the results of a linear regression. The required inputs for this function are the known or existing x-axis and y-axis values.
Combined cash budgets
combine the budgeted cash collections and cash payments to project the company's ending cash position.
The ________ merges the budgeted cash collections and cash payments to project the firm's ending cash position.
combined cash budget
Comprehensive Budget
comprehensive planning document for the entire organization.
master budget
comprehensive planning document for the entire organization.
operating budget
consists of budgets to run the daily operations at the workplace.
Segment Margin Income Statement
contains NO allocation of common fixed costs on the statement.
A merchandising company uses a comprehensive budget, which includes a ________.
cost of goods sold. Merchandising firms do NOT use production budgets, direct materials budgets, or direct labor budgets
When pricing a product, managers must consider which of the following costs?
All costs
Which of the six Vs refers to the fact that the data can range from structured numeric data, such as those in general ledger systems, to unstructured data in the form of e-mails, videos, audio, and the like?
Variety
Planning
assists managers to direct the daily business operations.
Strategic planning ________.
entails the planning and establishment of long-term goals which extend years into the future
Relevant information
expected future data that differ among alternatives.
A manager can project the collection of cash and forecast an organization's budgeted balance sheet by using a(n) ________.
financial budget
Slack
flexibility in a budget to provide a means to absorb costs of overbudgeting expenses or underbudgeting revenue
Price takers
have little or no control over the prices of their products or services.
Prescriptive analytics
help guide managers to what they should do to make the business more profitable. Prescriptive analytics seek to determine what should be done
Flexible budgets
help the manager when changes in budgeted sales figures occur and adjust for different volumes of activity.
Diagnostic analytics
help uncover the root cause of the current state. In business, a company might use diagnostic analytics to uncover why the current customer order fulfillment time is slow.
Coordination and communication
helps a manager coordinate activities with other individuals and groups at the workplace.
Collect on delivery (COD)
is a collection term to receive payment upon delivery of a product.
Opportunity cost
is the benefit foregone by choosing a particular course of action.
The comprehensive budget ________.
is the comprehensive planning document for the entire organization
Benchmarking
may help a manager motivate employees and provides a measure to evaluate performance.
A special order ________
occurs when a customer requests a one-time order at a reduction in the sales price
In business, companies can use ________ to build models that will predict the future state.
predictive analytics
Cost-plus pricing ________
starts with the product's total costs and adds a desired profit to determine a cost-plus price
Target price
the price a company strives to set for a product or service.
Cost of Goods Sold (COGS)
Number of Unit Sales × Manufacturing Cost per Unit
________ refers to a company having work performed overseas.
Offshoring
Target costing
begins with the market price of a product and subtracts the company's desired profit to determine the product's target total cost
Which Excel function will predict the point at which a regression line crosses the y-axis?
The INTERCEPT function in Excel predicts the point at which a regression line crosses the y-axis.
line of credit
a lending tool the company can use to draw money as needed at a specified rate of interest, for a specified amount of time, paying on the actual amount owed instead of a closed-end note.
The starting point for creating the budget is ________.
actual or prior year budgeted data
Descriptive analytics
describe what has happened or what is happening. This type of analytics is useful for understanding the current state
A merchandising company uses a comprehensive budget, which includes all of the following EXCEPT a(n) ________.
direct labor budget
rolling budget
ensures the effective annual business operations for a 12-year period.
Sensitivity analysis
helps the manager acknowledge how changes in various scenarios might impact the company's financial results.
Sustainable practices
include outcomes to enhance organizational results and include sustainable practices while planning budgets.
Safety stock is ________.
inventory kept on hand to account for increases in consumer demand
Participative budgeting
involves multiple levels of management including lower-level managers who provide real-world knowledge to the establishment of goals.
A ________ is a lending tool the company can use to draw money as needed at a specified rate of interest, for a specified amount of time, paying on the actual amount owed instead of a closed-end note.
line of credit
Zero-based budgeting
refers to a budget which starts at a zero balance and all funds a manager may use must be justified in the budget.
Offshoring ________
refers to a company having work performed overseas
Outsourcing
refers to contracting an outside company to reduce a product or perform a service
Variety
refers to the fact that big data includes many different types of data from many different sources. These data can range from structured numeric data, such as those in general ledger systems, to unstructured data in the form of e-mails, videos, audio, and the like.
Segment margin income
refers to the result of operating income or loss for each individual product line
Predictive analytics
seek to forecast what will happen in the future. In business, companies can use predictive analytics to build models that will predict the future state
The ________ contain(s) NO allocation of common fixed costs
segment margin income statement
In making short-term special decisions, the decision-maker should
separate variable costs from fixed costs.
A managerial accountant needs to make a sell or continue to process decision about a product. The managerial accountant should continue manufacturing the product instead of selling the product if ________.
the extra revenue is greater than the extra cost to continue manufacturing a product
A special order should be rejected when ________
the price of the special order is NOT more than variable costs of the order
Actual or prior year budgeted data is ________.
the starting point for creating the budget
Safety stock
typically a component of the production budget. excess stock usually on location to prevent a stock out.
Units Needed for Sales + Desired Ending Inventory - Units in Beginning Inventory is the formula to compute ________.
units to produce
financial budget
useful to a manager who needs to project cash payments and forecast the budgeted balance sheet.
Which of the following answers describes the benefits of the financial budget?
A manager who uses this budget can compile the capital expenditure budget, the cash budget, and the budgeted balance sheet.
Which of the following is NOT true about credit card sales and budgets?
A sale is shown on the operating expense budget, two months after the sale.
Which of the following is TRUE about credit card sales and budgets?
A sale is shown on the sales budget, in the same month as the sale.
Which of the following is a TRUE statement about a special order?
A special order occurs when a customer requests a one-time order at a reduction in the sales price
Which of the following budgets reveal a manager's intent to invest in new property, plant, or equipment?
Capital expenditure budget
Which of the following is a quantitative forecasting method?
Causal model
Which of the following budgets is the comprehensive planning document for the entire organization?
Comprehensive budget
Which of the following is NOT a component of the direct labor budget?
Cost of goods sold
With the ________, interviews are conducted individually with a panel of experts to collect opinions and knowledge about a situation. Information from the experts is gathered one individual at a time to prevent bias and group consensus. The experts' responses are compiled into a forecast, often after follow-up questions about the initial interviews.
Delphi method
Which of the following is NOT a component of the combined cash budget?
Depreciation as a cash expense is NOT a component of the combined cash budget.
In business, a company will often keep a running tally, or dashboard, of key statistics such as the defect rate, average customer response time, average number of products in the shopping cart, ratio of new to returning customers, and so forth. What type of data analytics does this represent?
Descriptive analytics
Expected Total Sales Revenue is the computation for sales revenue.
Expected Number of Unit Sales × Expected Sales Price per Unit
The computation for sales revenue is ________.
Expected Number of Unit Sales × Expected Sales Price per Unit
Expected Number of Unit Sales × Expected Sales Price per Unit = ________.
Expected Total Sales Revenue
You have prepared the scatterplot and trendline above from the data provided. Although you can use the graph to predict sales volume for 250 coupons, which Excel function will be most helpful in developing an exact value?
FORECAST.LINEAR
Which of the following is NOT considered when determining whether to sell or process further?
How much revenue will be earned on all other product lines
Which of the following is NOT relevant in the thought process to make a "Sell as Is" or "Process Further" decision
Identifying all costs except the cost of extra revenue from processing further
Which of the following is NOT relevant in the thought process to make a "Sell as Is" or "Process Further" decision?
Identifying all costs except the cost of extra revenue from processing further
In the scatterplot and trendline shown above, which option extends the trendline past the highest observation on the x-axis?
The Excel "forecast forward" feature visually shows what will happen if the relationship between a predictor variable (x = coupons) and outcome variable (y = coffee sales) continues to hold at higher volumes.
What value has been entered in the forecast forward period within the Format Trendline dialogue box?
The Excel "forecast forward" feature visually shows what will happen if the relationship between a predictor variable (x = coupons) and outcome variable (y = coffee sales) continues to hold at higher volumes. Since the highest data point appears at roughly the 200 coupon point on the x-axis, it appears that 100 has been entered in the forecast forward period within the Format Trendline dialog box. This would extend the line from 200 coupons to 300 coupons.
When using the INTERCEPT function in Excel, what data is required?
The INTERCEPT function requires known or existing x-axis and y-axis values to identify the point at which the trendline intersects the y-axis.
The managerial accountant at Local Produce Services expects to collect 40% of its credit sales in the month after the sale and 60% two months after the sale. Assume credit sales in January were $200,000 and February sales were $100,000. Jan Credit Sales = 200000 Feb Credit Sales = 100000 What is the anticipated cash collection of credit sales in March from January and February sales?
The anticipated cash collections of January and February credit sales in March is $160,000. The other answers are not correct. January: 60% × $200,000 = $120,000 February: 40% × $100,000 = $40,000 $120,000 + $40,000 = $160,000
The managerial accountant at Local Produce Services expects to collect 40% of its credit sales in the month after the sale and 60% two months after the sale. Assume credit sales in January were $200,000 and February sales were $100,000. January credit sales $200,000 February credit sales $100,000 What is the anticipated cash collection of credit sales in March from January and February sales?
The anticipated cash collections of January and February credit sales in March is $160,000. The other answers are not correct. January: 60% × $200,000 = $120,000 February: 40% × $100,000 = $40,000 $120,000 + $40,000 = $160,000
Stripes and Stars Manufacturing produces and manufactures two types of products. Product I uses 600 machine hours to produce, and Product II uses 2 machine hours to produce. What is the total contribution margin at full capacity of each product combined?
The contribution margin at full capacity is $273,000. The other answers are not correct. Product 1: $145 × 600 = $87,000 Product II: $155 × 1,200 = $186,000 $87,000 + $186,000 = $273,000
Cindy's Manufacturing Services produces and manufactures two types of products. Product I uses 800 machine hours to produce, and Product II uses 2 machine hours to produce. What is the total contribution margin at full capacity of the combined products?
The contribution margin at full capacity is $299,500. The other answers are not correct. Product I: $165 × 500 = $82,500 Product II: $155 × 1,400 = $217,000 $87,000 + $186,000 = $299,500
Sal's Manufacturing manufactures and sells couches and tables. The following data was reported by the managerial accountant. The company can manufacture two couches per machine hour and one table per machine hour. The company's production capacity is 800 machine hours per month. What is the contribution margin per machine hour for the couches?
The contribution margin per machine hour for the couches is $500. $600 - $350 = $250 contribution margin per couch Couches per hour = 2 × $250 = $500
Tim's Manufacturing manufactures and sells sofas and futons. The following data was reported by the managerial accountant. The company can manufacture 2 sofas per machine hour and 1 futon per machine hour. The company's production capacity is 700 machine hours per month. What is the contribution margin per machine hour for the sofas?
The contribution margin per machine hour for the sofas is $700. $750 - $400 = $350 contribution margin per sofa Sofas per hour = 2 × $350 = $700
Sandspring Resorts manufactures pool supplies. Ladders and diving boards are produced locally and sold online. Based on the information listed below, what is the contribution margin ratio for ladders and diving boards?
The contribution margin ratio for ladders and diving boards is 33.33%; 40%. Ladders: $500 / $1,500 = 33.33% Diving boards: $40 / $100 = 40%The contribution margin ratio for ladders and diving boards is 33.33%; 40%. Ladders: $500 / $1,500 = 33.33% Diving boards: $40 / $100 = 40%
Stripes and Stars Manufacturing produces and manufactures sweat shirts and socks. Based on the information listed below, what is the contribution margin ratio for sweat shirts and socks?
The contribution margin ratio for sweat shirts and socks is 40%; 67%. The other answers are not correct. Sweat shirts: $8 / $20 = 40% Socks: $12 / $18 = 67%
Josh's Manufacturing Company reported fixed manufacturing overhead of $2,500,000, and produced 2,600,000 total units. The variable manufacturing costs were $1.50 per unit. What is the cost per unit using absorption costing?
The cost per unit using absorption costing is $2.46. The other answers are not correct. $2,500,000 / 2,600,000 units = $.96 $1.50 + $.96 = $2.46
Sandy's Manufacturing Service reported fixed manufacturing overhead of $3,783,000 and produced 3,900,000 total units. The variable manufacturing costs were $1.50 per unit. What is the cost per unit using absorption costing?
The cost per unit using absorption costing is $2.47. The other answers are not correct. $3,783,000 / 3,900,000 units = $.97 $1.50 + $.97 = $2.47
Marla's Antique Shoppe reported that the toal monthly cost to produce authentic antiques is $10,500,000. The managerial accountant needs a gross profit of $50,000 to meet monthly expenses. What is the cost-plus price?
The cost-plus price is $10,550,000. The other answer choices are not correct. $10,500,000 + $50,000 = $10,550,000
Sam's Auto Repair reported that the total monthly cost to produce parts is $50,000. The managerial accountant needs a gross profit of $5,500 to meet monthly expenses. What is the cost-plus price?
The cost-plus price is $55,500. The other answer choices are not correct. $50,000 + $5,500 = $55,500
Which of the following is important to a manager at a merchandising company when preparing the comprehensive budget?
The length of time between sales and deposits
When using VLOOKUP, where must the lookup value be located in the table array?
The lookup value must be in the leftmost column of the table array.
Page Incorporated manufactures automotive parts that sell for $80 each. The manager reported 280 defective parts in inventory, which cost $50 to reproduce. The manager can sell the defective parts for $20 each, or process the parts further for $30 each, and then sell them for the standard sales price. Which of the following should the managerial accountant recommend for action?
The managerial accountant should recommend for action of repairing the defective parts for an $8,400 net increase in operating income.
You have been asked to evaluate a special order which includes several items and wish to determine the variable costs associated with each item in the order. You have a file that contains order information for all orders in the past three years. It includes item numbers, descriptions, sales prices, and variable costs per unit. Which Excel function will be most helpful in locating the variable cost per unit for each item?
The most helpful Excel function in this situation is VLOOKUP. This function looks for a value in the leftmost column of a table, and then returns a value in the same row from a column you specify.
Sandy's Sewing Service has 500 damaged silk remnants that cost $25,000. The damaged silk remnants could be sold as is for $10,000, or repaired for $15,000 and then sold for $55,000. Compute the opportunity cost of selling the damaged silk remnants without the repairs.
The opportunity cost of selling the damaged silk remnants without the repairs is $40,000. The other answers are not correct. Sale price after repair costs = $55,000 - $15,000 = $40,000
Blake's Repair Services has 2,000 damaged radios that cost $40,000. The radios could be sold as is for $20,000, or repaired for $30,000 and then sold for $65,000. Compute the opportunity cost of selling the radios without the repairs.
The opportunity cost of selling the radios without the repairs is $35,000. The other answers are not correct. Sale price after repair costs = $65,000 - $30,000 = $35,000
Which of the following is NOT important to a manager at a merchandising company when preparing the comprehensive budget?
The production budget
When should a manager accept a special order job?
The special reduced sales price is high enough to cover the incremental costs of filling the order
Martha's Delivery Service reported total variable cost of $2,000,000. The managerial accountant reported 950,000 total number of units. What is the target variable cost per unit?
The target variable cost per unit is $2.11. The other answers are not correct. $2,000,000 / 950,000 = $2.11
Tina's Manufacturing Company reported total variable cost of $1,000,000. The managerial accountant reported 50,000 total number of units. What is the target variable cost per unit?
The target variable cost per unit is $20. The other answers are not correct. $1,000,000 / 50,000 = $20
The managerial accountant at Hill's Development Services expects to collect 30% of its credit sales in the month after the sale and 40% two months after the sale. Assume credit sales in December were $100,000 and November sales were $90,000. November credit sales $90,000 December credit sales $100,000 What is the anticipated cash collection of credit sales in January from November and December sales?
The total cash the managerial accountant expects to collect in January from November and December sales is $66,000. The other answers are not correct. December sales 30% × $100,000 = $30,000 November sales 40% × $90,000 = $36,000 $30,000 + $36,000 = $66,000
Which of the following represents the formula to compute the total units to produce in the production budget?
Units Needed for Sales + Desired Ending Inventory - Units in Beginning Inventory
The formula to compute the direct labor budget is ________.
Units to be Produced × Direct Labor per Unit × Direct Labor Cost per Hour = Total Direct Labor Cost
The managerial accountant at Monumental Industries reported an upcoming sale of desks. Each desk requires .60 direct labor hours to produce. Monumental has a direct labor rate of $14 per direct labor hour to produce the product. The managerial accountant reported that the production budget indicates that the production schedule consists of 800 desks in January and 1,000 desks in February. What is the total direct labor budgeted cost together for January and February?
The total direct labor budgeted cost together for January and February is $15,120. The other answers are not correct. 800 + 1,000 = 1,800 1,800 × .60 = 1,080 hours 1,080 hours × $14 = $15,120
Monumental Industries manufactures desks. Each desk requires .30 direct labor hours to produce. Monumental has a direct labor rate of $12 per direct labor hour. The managerial accountant reported that the production budget indicates that the production schedule consists of 800 desks in September and 900 desks in October. What is the total direct labor budgeted cost together for September and October?
The total direct labor budgeted cost together for September and October is $6,120. The other answers are not correct. 800 + 900 = 1,700 1,700 × .3 = 510 hours 510 hours × $12 = $6,120
Blake's Manufacturing sells unfinished wood pieces for $150 each. The manager reported 280 defective wood pieces in inventory, which cost $20 to refabricate. The manager can sell the defective pieces for $30 each, or process the wood further for $10 each, and then sell them for the standard sales price. What is the total incremental income from further processing?
The total incremental income from further processing is $30,800.
Blake's Manufacturing sells unfinished wood pieces for $150 each. The manager reported 280 defective wood pieces in inventory, which cost $20 to refabricate. The manager can sell the defective pieces for $30 each, or process the wood further for $10 each, and then sell them for the standard sales price. What is the total incremental income from further processing?
The total incremental income from further processing is $30,800. Normal selling price: $150 - Sold "as is" price per unit: $30 Incremental revenue per unit $120 Incremental revenue per unit $120 - Cost to repair each unit $10 Incremental income per unit from processing further $110 Number of defective units 280 X Incremental Income per unit from processing further $110 Total incremental income from further processing $30,800
The Paper Mill expects to sell 9,000 reams of paper in November and 12,000 in December for $5 each. What is the total sales revenue for the sales budget during October and November?
The total sales revenue for the sales budget during November and December is $45,000 November; $60,000 December. The other answers are not correct. November: 9,000 × $5 = $45,000 December 12,000 × $5 = $60,000
The Paper Mill expects to sell 6,000 reams of paper in October and 8,000 in November for $6 each. What is the total sales revenue for the sales budget during October and November?
The total sales revenue for the sales budget during October and November is $36,000 October; $48,000 November. The other answers are not correct. October: 6,000 × $6 = $36,000 November: 8,000 × $6 = $48,000.
Customer World provides services to customers and allows customers to pay by credit card. On Thursday, a customer purchased a case of flash drives for $65 and used a credit card to pay. The credit card company charges Computer World a transaction fee equal to $0.25 + 2% of the total charge. What is the transaction fee Customer World must pay on this sale?
The transaction fee Customer World must pay on this sale is $1.55. The other answers are not correct. $0.25 + (2% ×$65) = $0.25 + $1.30 = $1.55
Customer World provides products and services to customers and allows customers to pay by credit card. On Thursday, a customer purchased a computer for $600 and used a credit card to pay. The credit card company charges Computer World a transaction fee equal to $0.20 + 1% of the total charge. What is the transaction fee Customer World must pay on this sale?
The transaction fee Customer World must pay on this sale is $6.20. The other answers are not correct. $0.20 + (1% × 600) = $0.20 + $6 = $6.20
Which of the following is NOT an outcome of the combined cash budget?
Total liabilities and stockholders' equity
Units to Produce in the Production Budget
Units Needed for Sales + Desired Ending Inventory - Units in Beginning Inventory