Accounting Final Exam Questions

Niles company produces only one product. Monthly fixed expenses are $12,000 monthly unit sales are 2,500 and the unit of contribution margin is $12. How much is net profit? a) $18,000 b) $42,000 c) $30,000 d) $0

a) $18,000

Berkley Co. has the following budgeted sales: January $160,000, February $230,000, and March $200,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during March are: a) $209,000. b) $215,000. c) $200,000. d) $249,000.

a) $209,000.

Variable Costs for Hogan Inc are 25% of sales. its selling price is $70 per unit. If Hogan sells one more unit then break-even units, how much will the profit increase? a) 52.25 b) 17.50 c) 20 d) 280

a) 52.25

Klinc, Inc. wants to sell a sufficient quantity of products to earn a profit of $70,000. If the unit sales price is $10, unit variable cost is $8, and total fixed costs are $120,000, how many units must be sold to earn income of $70,000? a) 95,000 units b) 23,750 units c) 950,000 units d) 70,000 units

a) 95,000 units

Why is identification of a relevant range important? a) Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. b) It directly impacts the number of units of product a customer buys. c) It is a cost that is incurred by a company that must be accounted for. d) It is required under GAAP.

a) Cost behavior outside of the relevant range is not linear, which distorts CVP analysis.

Which of the following is not a financial budget? a) Manufacturing overhead budget b) Cash budget c) Budgeted balance sheet d) Capital expenditure budget

a) Manufacturing overhead budget

Hoot Division of Taylor Company's operating results include: controllable margin, $400,000; sales $4,400,000; and operating assets, $1,600,000. The Hoot Division's ROI is 25%. Management is considering a project with sales of $200,000, variable expenses of $120,000, fixed costs of $80,000; and an asset investment of $275,000. Should management accept this new project? a) No, since ROI will be lowered. b) Yes, since ROI will increase. c) Yes, since additional sales always mean more customers. d) No, since a loss will be incurred.

a) No, since ROI will be lowered.

Which of the following is not considered an advantage of using standard costs? a) Standard costs can be used as a means of finding fault with performance. b) Standard costs can reduce clerical costs. c) Standard costs can be useful in setting prices for finished goods. d) Standard costs can make employees "cost-conscious."

a) Standard costs can be used as a means of finding fault with performance.

What does the controllable variance measure? a) The efficiency of using variable overhead resources b) Whether the production manager is able to control the production facility c) Whether a company incurred more or less overhead costs than budgeted d) Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied

a) The efficiency of using variable overhead resources

The break-even point is where a) contribution margin equals total fixed costs b) total sales equal total variable costs c) total sales equal total fixed costs d) total variable costs equal total fixed costs

a) contribution margin equals total fixed costs

a static budget is usually appropriate in evaluating a manager's effectiveness in controlling a) fixed manufacturing costs and fixed selling and administrative expenses b) variable manufacturing costs and variable selling and administrative expenses c) fixed manufacturing costs and variable selling and administrative expenses d) variable manufacturing costs and fixed selling and administrative expenses

a) fixed manufacturing costs and fixed selling and administrative expenses

In evaluating the margin of safety, the a) higher the margin of safety ratio, the greater the margin of safety b) break-even point is not relevant c) higher margin of safety ratio, the lower the fixed costs d) higher dollar amount, the lower the margin of safety

a) higher the margin of safety ratio, the greater the margin of safety

If a company anticipates that other sales will be affected by the acceptance of a special order, then a) lost sales should not be considered in the incremental analysis. b) the order will only be accepted if the plant is below capacity. c) lost sales should be considered in the incremental analysis. d) the order should not be accepted.

a) lost sales should not be considered in the incremental analysis.

Within the relevant range, the variable cost per unit a) remains constant at each activity level b) decreases as production increases c) differs at each activity level d) increases as production increases

a) remains constant at each activity level

Debit balances in variance accounts represent a) unfavorable variances. b) favorable variances. c) favorable for price variances; unfavorable for quantity variances. d) favorable for quantity variances; unfavorable for price variances.

a) unfavorable variances.

A company purchases 16.000 pounds of materials. The materials price variance is $4,000 favorable. What is the difference between the standard and actual price paid for the materials? a) $1.00 b) $0.25 c) $4.00 d) Cannot be determined from the data provided.

b) $0.25

nformation on Francesca direct labor costs for the month of July is as follows: Actual Rate $12 Standard hours 11,000 Actual hours 10,000 Direct labor variance 4,000 unfavorable What was the standard rate for July? a) $12.36 b) $11.60 c) $12.40 d) $11.63

b) $11.60

Kitzman Inc. produces a product requiring 3 direct labor hours at $15 per hour. During January, 2,000 products are produced using 6,300 direct labor hours. Kitzman actual payroll during January was $98,280. What is the labor quantity variance? Question options: a) $4,680 U b) $4,500 U c) $4,680 F d) $4,500 F

b) $4,500 U

Lerner Merchandising has budgeted its activity for December according to the following: Sales $800,000 Budgeted depreciation $20,000 Cash Balance December 1 $20,000 Selling and administrative expenses are $70,000 in cash Merchandise inventory is $24,000 Invoice cost for merchandising purchases is 75% of sales price How much is budgeted for cash disbursements for December? a) $666,000 b) $670,000 c) $690,000 d) $600,000

b) $670,000

The total variance is $35,000. The total materials variance is $8,000. The total labor variance is twice the total overhead variance. What is the total overhead variance? a) $4,500 b) $9,000 c) $13,500 d) $8,000

b) $9,000

Aldo Manufacturing recorded operating data for its auto accessories division for the year. Sales Revenue $750,000 Contribution margin $150,000 Total direct fixed costs $90,000 Average total operating assets $400,000 How much is ROI for the year if management is able to identify a way to improve the contribution margin by $40,000, assuming fixed costs are held constant? a) 47.5% b) 25.0% c) 15.0% d) 13.3%

b) 25.0%

A company is considering purchasing factory equipment that costs $320,000 and is estimated to have no salvage value at the end of its8-year useful life. If the equipment is purchased, annual revenues are expected to be $90,000 and annual operating expenses exclusive of depreciation expense are expected to be $40,000. The straight-line method of depreciation would be used. If the equipment is purchased, the annual rate of return expected on this equipment is a) 31.3%. b) 6.25%. c) 3.125%. d) 15.6%

b) 6.25%.

A company has total fixed costs of $150,00 and a contribution margin ratio of 20%. the total sales necessary to break even are a) 562,500 b) 750,000 c) 187,500 D) 150,000

b) 750,000

The cash payback formula is a) Cost of capital investment ¸ Net income. b) Cost of capital investment ¸ Annual cash inflow. c) Average investment ¸ Net income. d) Average investment ¸ Annual cash inflow.

b) Cost of capital investment ¸ Annual cash inflow.

Which of the following statements is false? a) The overhead volume variance indicates whether plant facilities were used efficiently during the period. b) The costs that cause the overhead volume variance are usually controllable costs. c) The overhead volume variance relates solely to fixed costs. d) The overhead volume variance is favorable if standard hours allowed for output are greater than the standard hours at normal capacity.

b) The costs that cause the overhead volume variance are usually controllable costs.

The perspectives included in the balanced scorecard approach include all of the following except the a) internal process perspective. b) capacity utilization perspective. c) learning and growth perspective. d) customer perspective.

b) capacity utilization perspective.

Which of the following is not an indirect fixed cost a) company president's salary b) profit center supervisory salaries c) depreciation on the company building hosing several profit centers d) company personnel department costs

b) profit center supervisory salaries

Hilbert Company recorded operating data for it's shoe division for the year. The company's desired return is 5% Sales $1,000,000 Contribution Margin $220,000 Total direct fixed costs $120,000 Average operating costs $400,000 Which one of the following reflects the controllable margin for the year? a) 22% b) 55% c) $100,000 d) $220,000

c) $100,000

Lane Company's direct materials budget shows total cost of direct materials purchases for January $250,000, February $300,000 and March $350,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are a) $320,000. b) $300,000. c) $330,000. d) $260,000.

c) $330,000.

Flamingo Music produces 60,000 CDs on which to record music. The CDs have the following costs: Direct Materials $11,000 Direct Labor $15,000 Variable Overhead $3,000 Fixed Overhead $7,000 Flamingo could avoid $6,000 in fixed overhead costs if it acquires the CDs externally. If cost minimization is the major consideration and the company would prefer to buy the60,000 units externally, what is the maximum external price that Flamingo would expect to pay for the units? a) $30,000 b) $29,000 c) $35,000 d) $36,000

c) $35,000

The following monthly data for Hepburn Inc which produces only one product. Selling price per unit $42, unit variable expenses $14, total fixed expenses $84,000 and actual sales for the month of June 4000 units a) $1,000 b) $126,000 c) $42,000 d) $84,000

c) $42,000

The formula for the materials quantity variance is a) (SQ × AP) - (SQ × SP) b) (AQ × AP) - (AQ × SP) c) (AQ × SP) - (SQ × SP) d) (AQ × AP) - (SQ × SP)

c) (AQ × SP) - (SQ × SP)

Of the following choices, which contain both a traceable fixed cost and a common fixed cost? a) profit center manager's salary and time keeping costs for a responsibility center's employees b) Company president's salary and company personnel department costs c) Company personnel department costs and time keeping costs for a responsibility center's employees d) Depreciation on a responsibility center's equipment and supervisory salaries for the center

c) Company personnel department costs and time keeping costs for a responsibility center's employees

Which of the following valuations of operating assets is not readily available from the accounting records? a) Both cost and market value b) Book value c) Market value d) Cost

c) Market value

The overhead volume variance relates only to a) variable overhead costs. b) both variable and fixed overhead costs. c) fixed overhead costs. d) all manufacturing costs.

c) fixed overhead costs.

For better management acceptance, the flow of input data for budgeting should begin with the a) accounting department. b) top management. c) lower levels of management. d) budget committee.

c) lower levels of management.

The amount by which actual or expected sales exceeds break-even sales is referred to as a) contribution margin b) unanticipated profit c) margin of safety d) target net income

c) margin of safety

A cost the cannot be changed by any present or future decision a) incremental cost b) opportunity cost c) sunk cost d) variable cost

c) sunk cost

The contribution margin ratio increases when a) variable costs as a percentage of sales increase. b) fixed costs increase. c) variable costs as a percentage of sales decrease. d) fixed costs decrease.

c) variable costs as a percentage of sales decrease.

If the standard hours allowed are less than the standard hours at normal capacity, the volume variance Question options: a) cannot be calculated. b) will be favorable. c) will be unfavorable. d) will be greater than the controllable variance.

c) will be unfavorable.

The following information was taken from Yen Company's cash budget for the month of July: beginning cash $480,000 Cash Recipes $304,000 Cash Disbursements $44,000 If the company has a policy of maintaining a minimum end of the month cash balance of $350,000, the amount the company would have to borrow is a) $130,000. b) $46,000. c) $240,000. d) $110,000.

d) $110,000.

A company uses 20,000 pounds of materials for which it paid $5.00 a pound. The materials price variance was $15,000 unfavorable. What is the standard price per pound? a) $0.75 b) $5.75 c) $5.00 d) $4.25

d) $4.25

Red Company produces1,000 units of a necessary component with the following costs: Direct Materials $34,000 Direct Labor $15,000 Variable Overhead $8,000 Fixed Overhead $10,000 Red's Company could avoid $6,000 in fixed overhead costs if it acquires the components externally. If cost minimization is the major consideration and the company would prefer to buy the components, what is the maximum external price that Red Company would accept to acquire the1,000 units externally? a) $57,000 b) $61,000 c) $59,000 d) $63,000

d) $63,000

A company's planned activity level for next year is expected to be 200,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable indirect materials $280,000 indirect labor $400,000 supplies $40,000 Fixed Depreciation $120,000 Taxes $30,000 Supervision $100,000 A flexible budget prepared at the 160,000 machine hours level of activity would show total manufacturing overhead costs of a) $576,000. b) $720,000. c) $696,000. d) $826,000.

d) $826,000.

Shine Company uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $48,000 variable and $276,000 fixed. If Shine had actual overhead costs of $321,000 for 18,000 units produced, what is the difference between actual and budgeted costs? a) $3,000 unfavorable b) $3,000 favorable c) $9,000 unfavorable d) $9,000 favorable

d) $9,000 favorable

Hansen's variable cost are 30% of sales. The company is contemplating an advertising campaign that will cost $33,000. If sales are expected to increase $70,000 by how much will the company's net income increase? a) 37,000 b) 49,000 c) 12,000 d) 16,000

d) 16,000

If the required direct materials purchases are 36,000 pounds, the direct materials required for production is three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds? a) 36,000 b) 18,000 c) 90,000 d) 54,000

d) 54,000

The purchasing agent of the Eldridge Company ordered materials of lower quality in an effort to economize on price. What variance will most likely result? a) Favorable materials quantity variance b) Favorable total materials variance c) Unfavorable materials price variance d) Unfavorable labor quantity variance

d) Unfavorable labor quantity variance

The production budget shows expected unit sales are 100,000. The required production units are 104,000. What are the beginning and desired ending finished goods units, respectively? a. 10,000 6,000 b. 6,000 10,000 c. 4,000 10,000 d. 10,000 4,000 a) c. b) d. c) b. d) a.

d) a.

A company is deciding on whether to replace some old equipment with new equipment. Which of the following is not a relevant cost for incremental analysis? a) annual operating cost of the new equipment b) annual operating cost of the old equipment c) net cost of the new equipment d) accumulated depreciation on old equipment

d) accumulated depreciation on old equipment