Exam 3

Trio Inc. reported retained earnings of $540,048 on December 31, 2017. During the year, Trio recorded net income of $148,583 and paid dividends of $63,538 . The company had no other transactions that affected retained earnings. What must retained earnings have been on December 31, 2016?

$455,003 Beginning retained earnings can be backed into from ending retained earnings and the flows to retained earnings. Adding back the dividends and subtracting out the income will give us the retained earnings Trio began the year with: $540,048 + $63,538 - $148,583 = $455,003 .

Ace Systems Inc. reported the following in its annual income statement: Basic earnings per share of $2.13 and diluted earnings per share of $2.11. There were 4,042 million weighted average basic shares outstanding during the year. What approximate net income, did the company report for the year?

$8,609 million Net income = basic EPS × Average number of shares outstanding during the year. Thus, net income is $2.13 × 4,042 million = $8,609 million.

Teton, Inc., reported a net gain of $39,330 on its foreign assets due to the weakening of the U.S. dollar during the year. In the same year, the company disclosed gains of $910,860 on its derivatives and hedges and a $107,160 unrealized gains on its trading securities. The company also reported a $528,390 loss on the sale of some equipment. Which of the following best describes the impact of these transactions on Teton, Inc.'s accounts?

$950,190 increase to accumulated other comprehensive income. Only the gain on Teton's foreign currency translation and the gain on its available-for-sale securities should be included in accumulated other comprehensive income. These items are kept separate from income until sold and hence do not impact it.

Organizational Exs

-Apple Inc. reorganizes production facilities from a layout in which all similar types of machines are grouped together to a layout in which a set of machines is designated for the production of a particular product and that set of machines is grouped together. -A company eliminates the position of supervisor and has each work group elect a team leader. -Tesla empowers employees to halt production if a quality problem is identified. -The decision to allow staff architects to follow a specific project through to completion. -The decision to organize the workforce into project teams.

Tucker Pup's Pet Resort offers dog boarding services in Chicago. Assume that in March, when dog-days occupancy was at an annual low of 150 days, the average cost per dog-day was $65. In July, when dog-days were at a capacity level of 600, the average cost per dog-day was $20. (a) Develop an equation for monthly operating costs.

150*65=9750 600*20=12000 (12000-9750)/(600-150)=$5 12000-(5*600)=9000 The correct answer is: 9000+5x

Tucker Pup's Pet Resort offers dog boarding services in Chicago. Assume that in March, when dog-days occupancy was at an annual low of 150 days, the average cost per dog-day was $65. In July, when dog-days were at a capacity level of 600, the average cost per dog-day was $20. (b) Determine the average boarding cost per dog-day at an annual volume of 4,500 dog-days.

9000 from a *12 months= 108000 4500*5=22500 108000+22500= 130500 130500/4500= The correct answer is: 29

strategy exs

Budget time for study, sleep, and relaxation Overlap police patrols so that there are always police cars on major thoroughfares Lower prices and costs Select the most scenic route to drive between Las Vegas and Denver

Mixed Exs

Electric power in a factory Automobiles rented on the basis of a fixed charge per day plus an additional charge per mile driven Maintenance costs at a hospital Rent on a photocopy machine charged as a fixed amount per month plus an additional charge per copy The costs of operating a research department Electric power in a restaurant

Line Exs

Home Furnishings Store Manager Manager, Plant 2 President Sales Manager, District 1

Financial Accounting

Income statement, balance sheet, and statement of cash flows Must conform to external standards Highly aggregated statements Keeps records of assets and liabilities Typically prepared quarterly or annually Often used to obtain financing

Goal Exs

Locate fire stations so that the average response time is less than five minutes Achieve a 12 percent market share Graduate from college

Staff Exs

Maintenance Payroll Advertising Human Resources Design Engineering Property Accounting Controller

Variable Exs

Memory chips in a computer assembly plant Wages paid to production employees for the time spent working on products Raw materials used in production Sales commissions Cost of goods sold in a bookstore Lumber used by a house construction company Laser printer paper for a department printer

Number of employees is most appropriate as a cost driver for which of the following types of activity costs? Select one: A. Assembly B. Machining C. Payroll D. Purchasing

Payroll

mission exs

Provide shelter for the homeless Provide an above-average return to investors Protect the public Answer

Net income is generally viewed as a more inclusive measure of performance than comprehensive income.

Rationale: Comprehensive income is a more inclusive notion of company performance because it includes all recognized changes in equity that occur during a period, except those resulting from investments by owners and distribution to owners. The correct answer is 'False'.

The three analyses that comprise strategic cost management include each of the following except: Select one: A. Strategic position analysis B. Ratio analysis C. Cost driver analysis D. Value chain analysis

Rationale: Strategic cost management has been defined to include all of the above except ratio analysis. The correct answer is: Ratio analysis

Step Exs

Salaries of quality inspectors when each inspector can evaluate a maximum of 1,000 units per day Salaries paid to temporary instructors in a college as the number of course sessions varies

Fixed Exs

Salary of the department manager Real estate taxes Straight-line depreciation on office equipment Straight-line depreciation on a building The cost of hiring a dance band for three hours

On its year end balance sheet, Wells Inc. reports treasury stock at cost of $4,687 million. The company has a total of 1,172,513,618 shares issued and 1,082,986,591 shares outstanding. What average price did Walgreen pay for treasury shares?

The correct answer is: $52.35 treasury stock cost/(issues shared-shares outstanding)

Which of the following best describes corporate governance? Select one: A. What is permitted under the law B. Understanding the difference between right and wrong C. The system of policies, processes, laws, and regulations that affect the way a company is directed and controlled D. The moral quality, fitness, or propriety of a course of action that can injure or benefit people

The correct answer is: The system of policies, processes, laws, and regulations that affect the way a company is directed and controlled

Strategic Position Analysis is best defined as

an organization's basic way of competing to sell products and services. Rationale: Strategic position analysis involves the fundamental choices companies make for positioning itself in the market in relation to competitors. The correct answer is: an organization's basic way of competing to sell products and services.

Managerial Accounting

may be subjective May measure time or customer satisfaction future oriented Has a greater emphasis on cost-benefit analysis Special-purpose reports Decision-making tool

Ethics Mission Controlling Goal Cost drivers quality balance sheet income statement strategic cost mgt financial accounting activity cost driver mngerial accounting resources Product differentiation

Ethics- the propriety of taking some action Mission- basic purpose toward which activities are directed Controlling-comparing budget with actual results Goal-increase y 2020 sales by 10% over 2019 Cost drivers-factors that influence cost quality- the degree to which meets customer expectation balance sheet-reports co financial decision income statement-shows results of ops for a period of time strategic cost mgt-making decisions concerning specific cost drivers financial accounting-for external users activity cost driver-packing order for ship mngerial accounting-for internal decisions resources-consumed by activities Product differentiation-reduces customer price sensitivity

Structural Exs

-Northbrook Mall decides to build space for 80 additional stores. -Canon decides to start making high-volume photocopy equipment to compete head-to-head with Xerox. -IBM Corporation decides to stop making personal computers. -A cable television company decides to start offering telephone service. -The decision to be a regional leader in computer-assisted design services. -The decision to expand the market area by establishing an office in another state. -The decision to use only Henderson staff rather than relying on subcontractors. -The decision to build a new headquarters facility with areas for design and administration as well as storage and maintenance of construction equipment.

Activity Exs

-The number of meals a cafeteria serves -The number of miles a taxi is driven. -The number of tons of grain a ship loads. -The process of grading building sites and preparing forms for foundations. -The process of receiving approval from government authorities along with appropriate permits for each project. -The process of conducting extensive client interviews to assess the exact needs for Henderson services. -The daily process of inspecting the progress on various construction projects.

K&N Jewelry Shop estimated overhead cost for the coming year will be $15,000 and 5,000 direct labor hours will be worked. The amount of overhead cost applied by K&N Jewelry Shop to one of its jobs, if the jobs required 10 direct labors hours to complete, would be

Rationale: Predetermined overhead rate = $15,000 / 5,000 direct labor hours = $3 per labor hour Jobs overhead applied = $3 x 10 direct labor hours = $30 The correct answer is: $ 30

A goal is best defined as

Rationale: A goal is related to an objective, as opposed to mission and strategy which have to do with the fundamental purpose and implementation of a plan. The correct answer is: a definable and measurable objective.

When a job is completed in a job order costing system, the final cost of the job is determined by summing up Select one: A. the various costs on the job cost sheet. B. the work-in-process inventory subsidiary ledgers. C. the finished goods activities report. D. the statement of costs of goods manufactured.

Rationale: A job cost sheet is used in a job costing system to accumulate all of the costs incurred to complete the job. The correct answer is: the various costs on the job cost sheet.

Examples of activity cost drivers include all of the following except Select one: A. machine time spent working on a product. B. inspecting incoming raw materials. C. deciding how to arrange raw materials inventory within the warehouse. D. receiving (loading) raw materials into the warehouse.

Rationale: Activity cost drivers include all of the above except deciding how to arrange raw materials in the warehouse, which is an example of an organizational cost driver. The correct answer is: deciding how to arrange raw materials inventory within the warehouse.

What is the purpose for using predetermined overhead rates? Select one: A. Use of predetermined overhead rates serves all the above purposes B. Delays in product costing can be avoided C. Variation in cost assignment due to short-term variations in volume can be prevented D. Variation in cost assignment due to seasonality can be prevented

Rationale: As stated in the text, predetermined overhead rates serve to (a) enable accountants to determine costs earlier than if using actual costs, (b) prevents variations in costs due to the uneven occurrence of cost throughout the year, and (c) prevent short-term variations in unit cost due to volume variations. The correct answer is: Use of predetermined overhead rates serves all the above purposes

Managerial accounting is primarily focused on

Rationale: As the name implies, managerial accounting focuses on the information needs of managers internal to the business, unlike financial accounting, which addresses the information needs of investors, creditors, and other external stakeholders. The correct answer is: providing managers with relevant information to help achieve organizational goals.

Paris Corp. obtained the following information from the Raw Materials Inventory account and purchasing records for the second quarter of the current year: Beginning Raw Materials $5,000 Ending Raw Materials $3,000 April Purchases $4,000 May Purchases $2,000 June Purchases $2,000 The amount of Raw Materials used this period was:

Rationale: Beginning Raw Materials ($5,000) + Purchases for the quarter ($4,000 + $2,000 + $2,000)= Raw Materials Available ($13,000) - Ending Raw Materials ($3,000)= Raw Materials Used ($10,000) The correct answer is: $10,000

Ethics deals with Select one: A. the propriety of a course of action. B. the fitness of a course of action. C. the moral quality of a course of action.

Rationale: While difficult to define, ethics involves all of the above: fitness, moral quality, and propriety of course of action. The correct answer is: all of the above.

Why might a company repurchase its own stock? Select one: A. It believes that the market undervalues its shares B. To offset dilutive effects of employee stock options granted C. To recognize an economic gain when the treasury shares are later sold for a profit D. To improve earnings per share by reducing the denominator

Rationale: Companies may repurchase shares to keep the outstanding shares constant in order to reduce the dilutive effect on earnings per share that may occur when employees exercise stock options. The correct answer is: All of the above

Kimberly-Clark recently repurchased 6.198 million shares of common stock at a cost of $778 million. One plausible reason for this is that the company feels that its stock is overvalued at the current market price.

Rationale: Companies often repurchase their own stock to send a message to the investment community that their stock is undervalued. If the company believed its stock was overvalued, there would be no rationale to buy an overpriced security. The correct answer is 'False'.

Fieldman Corp. obtained the following information from its accounting records: Sales $19,000 Beginning Finished Goods Inventory $12,000 Ending Finished Goods Inventory $ 8,000 Cost of Goods Sold $ 9,000 The Cost of Goods Manufactured this period equals:

Rationale: Ending Finished Goods Inventory ($8,000) + Cost of Goods Sold ($9,000) - Beginning Finished Goods Inventory ($12,000) = Cost of Goods Manufactured ($5,000) The correct answer is: $ 5,000

Discretionary fixed costs are also known as Select one: A. committed fixed costs. B. capacity costs. C. managed fixed costs. D. mixed costs.

Rationale: Management decides during each budget period how much it will spend on discretionary items such as charitable contributions and training. These costs are not related to the capacity of operations. The correct answer is: managed fixed costs.

This is an organizational cost driver for a discount department store chain:

Rationale: Organizational cost drivers are choices that a company makes regarding the organization of activities. Deciding on the arrangement of merchandise in a store would be an example of an organizational cost driver. The correct answer is: The decision to rearrange merchandise within a store

Fixed costs do not respond to Select one: A. changes in committed expenditures. B. capital expenditures made by the company. C. discretionary investments in the company. D. short-term changes in the amount of activity.

Rationale: Over the short term, fixed costs are indifferent to activity level changes. For example the cost of property taxes on a building would not change based on activity volume differences. The correct answer is: short-term changes in the amount of activity.

To compete on the basis of price, the seller must most carefully manage

Rationale: Price competition depends on managing costs, including not only the initial selling price but the total cost of ownership throughout the life of the product. The correct answer is: cost.

Product or service differentiation involves

Rationale: Product or service differentiation involves offering something that the competition does not offer and for which the customer is willing to pay a premium. It may be related to customer service, technological leadership, or even market image. The correct answer is: creating something that is perceived as unique and worth a premium price.

Which one of the following items is not a component of contributed capital? Select one: A. Preferred stock B. Retained earnings C. Common stock D. Additional paid-in capital E. All of the above

Rationale: Retained earnings is a separate component of stockholders' equity section. It is typically referred to as "earned" capital The correct answer is: Retained earnings

Step costs Select one: A. have no relation to number of units produced. B. are variable within narrowly defined ranges of activity, but constant over wider ranges of activity. C. increase with each additional unit produced. D. are constant within certain ranges of activity but differ outside those ranges of activity.

Rationale: Step costs behave as fixed costs within a relatively narrow range, but increase to a higher level when that range is exceeded. A typical example of step costs is an inspection cost where each inspector can handle a fixed volume of product. The correct answer is: are constant within certain ranges of activity but differ outside those ranges of activity.

Which best describes par value for a stock? Select one: A. An arbitrary amount set by the company for each share of stock B. The value of the stock if it is not sold for a premium or discount C. The current market value of the stock D. The value at which stock shares were originally issued

Rationale: The par value is an arbitrary amount specified in the corporate charter for each share of stock. Generally it has no substance from a financial reporting or analysis perspective. The correct answer is: An arbitrary amount set by the company for each share of stock

Which of the following costs is best classified as fixed costs with respect to volume? Select one: A. Salaries of quality inspectors in a production facility B. Parts used in manufacturing digital cameras C. Electricity used to heat, light, and cool a hospital D. Depreciation of a copy machine in the Human Resource Department

Rationale: Typically, depreciation cost on assets (buildings and equipment) in a staff department such as Human Resources remains constant irrespective of the volume of output. The correct answer is: Depreciation of a copy machine in the Human Resource Department

Which of the following should not be included in accumulated other comprehensive income? Select one: A. Minimum pension liability B. Currency translation adjustment C. Gains and losses on derivatives and hedges D. Unrealized gains and losses on trading securities E. None of the above

Rationale: Unrealized gain on trading securities is recorded in the income statement rather than as equity, while all the other three items should be categorized within comprehensive income. The correct answer is: Unrealized gains and losses on trading securities

The range of operations that falls within the capacity of the current level of fixed costs is referred to as the Select one: A. relevant range. B. operating range. C. linear average. D. marginal range.

Rationale: When developing a cost model for a firm or segment of a firm, that model is only relevant within the range of capacity of the fixed costs. For example if the current level of fixed cost of $10 million represents a capacity of 2 million units of output, that cost model cannot be used to estimate the cost of producing more than 2 million units. The correct answer is: relevant range