C213 Accounting WGU Topic 6 thru 11
Cost drivers
A more accurate allocation of manufacturing overhead and product costing can take place when costs are assigned on the basis of: Direct labor hours Production volume Machine setups Cost drivers
Factory supervisors' salaries
An example of a stepped fixed cost is: Direct materials Commissions Factory supervisors' salaries Depreciation
Visual-fit method
Another name for the scattergraph method of analyzing mixed costs is the: High-low method Regression analysis method Engineering method Visual-fit method
Regulating
Which of the following is NOT a function of management? Planning Analyzing Regulating Controlling
It measures the profitability of an entity.
Which of the following is NOT a purpose of the statement of cash flows? It provides investors with information about the investing and financing activities of an entity. It provides information about an entity's cash receipts and payments over a period of time. It highlights changes in managerial strategy regarding investments and finances. It measures the profitability of an entity.
Accountants must audit all 10-Q reports.
Which of the following is NOT one of the effects that the Securities Exchange Act of 1934 had on accountants? Accountants must audit all 10-K reports. Accountants must audit all 10-Q reports. Accountants' work is subject to approval by the SEC All of these are effects of the Securities Exchange Act of 1934.
The Foreign Corrupt Practices Act
Which of the following is NOT usually considered a component of a company's control environment? The audit committee The Foreign Corrupt Practices Act Management's philosophy and operating style The organizational structure
All of these are characteristic of a well-designed document.
Which of the following is a characteristic of a well-designed document? It is easily interpreted and understood. It is formatted so that it can be handled quickly and efficiently. It has been designed with all possible uses in mind. All of these are characteristic of a well-designed document. 1 / 1 (100.0%) Answer: All of these are characteristic of a well-designed document.
Preparing operational budgets
Which of the following is a short-run planning decision? Defining the organization's mission Performing a strategic market analysis Purchasing an industrial printing press Preparing operational budgets
Both Revenues = Variable costs + Fixed costs and Revenues − Variable costs = Fixed costs are correct
A firm will break even when: Revenues − Variable costs = Fixed costs Revenues = Variable costs + Fixed costs Revenues = Variable costs − Fixed costs Both Revenues = Variable costs + Fixed costs and Revenues − Variable costs = Fixed costs are correct
Profit graph
A graph that only plots profits and losses, and omits costs and revenues, is called a: Scattergraph Profit graph Cost-volume-profit graph Revenue graph
Opinions about the reliability of internal controls
According to Sarbanes-Oxley, which one of the following services is an accounting firm permitted to provide to its audit client? Internal audit outsourcing services Legal services and expert services unrelated to the audit Opinions about the reliability of internal controls Bookkeeping or other services related to the accounting records or financial statements
Audit committee
According to Sarbanes-Oxley, who are auditors required to report to and be retained by? Chief Financial Officer Internal auditors Chief Executive Officer Audit committee
All of these are correct
Activity-based costing is most useful when there are variations in: Production volume Size of products Complexity of products All of these are correct
Variance computation
All of the following are involved in the management function of planning EXCEPT: Variance computation Capital budgeting Strategic planning Operational budgeting
Overstating liabilities
All of the following are likely to be methods that could be used to conduct fraud EXCEPT Overstating receivables Overstating liabilities Creating fictitious invoices Not recording various expenses
Income smoothing
As William is preparing the end of year financial statements, he has been asked to reconsider the timing of revenues and expenses in order to report less volatile earnings. This is an example of Meeting external expectations Income smoothing Meeting internal targets Window dressing
Meeting external expectations
As William is preparing the end of year financial statements, he has been asked to review the accrual judgments and estimates to see if the originally calculated net loss can be changed to a net profit. This is an example of Meeting internal targets Income smoothing Window dressing Meeting external expectations
Window dressing
As William is preparing the end of year financial statements, he realizes that the earnings are not quite up to par for the large loan application that is being currently processed. He decides to stretch the assumptions just enough to be able to meet the requirements for the loan application. This is an example of Meeting external expectations Income smoothing Window dressing Meeting internal targets
Have larger losses below the break-even point
As compared to a company with a low operating leverage, a company with a high operating leverage will: Never be at the break-even point Have larger losses below the break-even point Have smaller losses below the break-even point Have smaller profits above the break-even point
Cash provided by financing activities: $300,000 - $100,000 = $200,000
Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net cash provided by (used in) financing activities? $200,000 $150,000 $300,000 $100,000
Cash provided by operating activities: $2,000,000 - $1,500,000 - $20,000 - $120,000 + $10,000 + $6,000 = $376,000
Avondale Inc. had the following cash transactions during 2012: Sales receipts $2,000,000 Inventory payments 1,500,000 Interest payments 20,000 Wage payments 120,000 Dividend receipts 10,000 Interest receipts 6,000 Equipment purchased 150,000 Stock of Canton Company purchased 50,000 Stock issued 300,000 Repaid a note (nonoperating) 100,000 What was Avondale's net cash provided by (used in) operating activities? $516,000 $360,000 $376,000 $2,016,000
Total number of parts: (350 x 8) + (400 x 6) + (600 x 4) = 7,600 Cost per part: $6,000 / 7,600 = $0.79 (rounded)
Bird's Eye View manufactures three different sizes of bird cages: small (for finches and canaries), medium (for cockatiels and small parrots), and large (for cockatoos and other large parrots). The company has recently implemented an activity-based costing system. Bird's Eye View has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Materials handling Labor hours $ 55,000 Automated processing Machine hours 40,000 Plastic parts insertion Number of parts 6,000 Inspections Labor hours 29,000 Packaging Orders shipped 31,000 Total indirect manufacturing cost $161,000 The following information relates to each size of bird cage and next year's anticipated manufacturing operations: Large Medium Small Units to be produced 350 400 600 Orders to be shipped 180 200 250 Number of parts per unit 8 6 4 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 What is Bird's Eye View cost per cost driver for parts insertion for next year (rounded)? $0.25 per part $7.56 per part $21.18 per part $0.79 per part
Cash collections: ($120,000 x 10%) + ($130,000 x 50%) + ($100,000 x 40%) = $117,000
Cheroke Company had an accounts receivable balance of $16,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during March should be: $117,000 $130,000 $113,000 The answer cannot be determined
Total labor hours: (350 x 2) + (400 x 2) + (600 x 2) = 2,700 Cost per labor hour: $29,000 / 2,700 = $10.74 (rounded)
Bird's Eye View manufactures three different sizes of bird cages: small (for finches and canaries), medium (for cockatiels and small parrots), and large (for cockatoos and other large parrots). The company has recently implemented an activity-based costing system. Bird's Eye View has identified five different production activities as well as the best cost driver for each activity. Each activity and driver is listed below, along with the budgeted amount that is associated with each activity for next year. Budgeted Activity Cost Driver Costs Materials handling Labor hours $ 55,000 Automated processing Machine hours 40,000 Plastic parts insertion Number of parts 6,000 Inspections Labor hours 29,000 Packaging Orders shipped 31,000 Total indirect manufacturing cost $161,000 The following information relates to each size of bird cage and next year's anticipated manufacturing operations: Large Medium Small Units to be produced 350 400 600 Orders to be shipped 180 200 250 Number of parts per unit 8 6 4 Machine hours per unit 4 2 1 Labor hours per unit 2 2 2 What is Bird's Eye View cost per cost driver for inspections for next year (rounded)? $11.48 per part $3.58 per part $1.18 per part $10.74 per part
All of these are needed to compute break-even point
Block Company sells three products, each with a different per-unit contribution margin. To compute Block Company's break-even point in units, it is necessary to know: The company's total fixed costs The sales mix All of these are needed to compute break-even point The per-unit contribution margin of each product sold
Cash collected from accounts receivable: $134,400 + $44,400 - $33,600 = $145,200
Burke Corporation had accounts receivable of $44,400 on April 1 and $33,600 on April 30. How much cash was collected from accounts receivable during April if Burke's April sales on account totaled $134,400? $123,600 $145,200 $134,400 $100,800
All of these are correct
C-V-P analysis is useful to managers in: All of these are correct Evaluating decisions Planning Controlling decisions
Planning
C-V-P analysis, while useful for several purposes, is primarily useful in: Controlling decisions Financing decisions Evaluating decisions Planning
The answer cannot be determined
Cheroke Company had an accounts receivable balance of $16,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during February should be: $112,000 $128,000 $129,000 The answer cannot be determined
The answer cannot be determined
Cheroke Company had an accounts receivable balance of $60,000 at December 31, 2013. Projected sales for the first three months of 2014 are: January $120,000 February 130,000 March 100,000 All sales are credit sales. Cheroke Company usually collects 40% of its sales during the month of sale, 50% in the month following the sale, and 10% in the second month following the sale. Given the information above, cash collections during January should be: $108,000 $88,000 $128,000 The answer cannot be determined
Cost driver
Company A allocates one type of overhead cost on the basis of movement of materials. The number of movement of materials processed is an example of a(n): Cost driver Cost pool Overhead rate Pool rate
Investing activities: $1,450 + $14,250 + x + $3,500 = $5,650 x = ($13,550)
Dahbi Corporation has the following financial information available: Operating activities $14,250 Financing activities $ 3,500 Beginning cash balance $ 1,450 Ending cash balance $ 5,650 Given this information, what is the amount of cash provided by (used in) Dahbi's investing activities? $13,550 $17,750 ($13,550) ($24,850)
Changing the useful life of a depreciable asset and fully disclosing it in the notes.
Earnings management through aggressive accounting is best exemplified by Changing the useful life of a depreciable asset and fully disclosing it in the notes. Timing transactions such that large one-time gains and losses occur in the same quarter. Capitalizing as assets expenditures that have no future economic benefit. Changing the interest rate used in accounting for leases without describing the change in the notes to the financial statements.
Decrease as activity levels increase
Fixed costs per unit: Remain constant as activity levels increase Increase as activity levels increase Decrease as activity levels increase None of these are correct
Financing needed: $35,000 + $405,000 - $430,000 - $21,000 = (11,000)
For 2011, Raster Graphics forecasts cash receipts of $405,000 and cash disbursements of $430,000. If the beginning cash balance is $35,000 and the desired ending balance is $21,000, how much must Raster borrow during the year? $10,000 $0 $11,000 $25,000
Have a larger number of cost pools
For greater accuracy when using activity-based costing, management accountants should: Have a larger number of cost pools Compute a plant-wide rate of allocation based on volume Use the just-in-time inventory system Carefully estimate the total amount of overhead costs
Break-even point: $200,000 / ($500 - $300) = 1,000
Given the equation $500X = $300X + $200,000, the break-even point in units is: 20,000 30,000 200,000 1,000
Management's desire to improve
Good management accounting is motivated by: Government regulators Accounting rules Management's desire to improve All of these are correct
Fixed costs
If a company has a positive contribution margin, the maximum amount of loss that it can have is equal to its: Variable costs Fixed costs Fixed and variable costs None of these are correct
No cost driver should be selected; the costs should be treated as common costs
If a cost activity does NOT have any production-related cost driver that matches up with changes in the amount of overhead cost associated with the activity then: No cost driver should be selected; the costs should be treated as common costs Any basis can be selected as a cost driver Direct labor hours should be used as the cost driver Number of items produced should be the cost driver.
Facility support activity
If activity-based costing is used, security guard wages would be classified as a: Facility support activity Unit-level activity Product line activity Batch-level activity
All of these are true
If the total amount for Insurance Expense is inadvertently posted to Prepaid Insurance at the end of the year, what will be the effect on the year-end financial statements? Net income will be overstated All of these are true Owner's equity will be overstated Expenses will be understated
Disagreements in judgment
If two different accountants were to estimate the percentage of customers who will NOT pay their accounts (bad debts), they could arrive at different estimates. These differing estimates would affect the financial statements. Such differences in assessing estimates are due to Disagreements in judgment Lack of internal controls Errors in accounts and ledgers Fraudulent financial reporting
The point where the line crosses the cost axis
In the scattergraph method fixed costs are: The point where the line crosses the cost axis The point where the line crosses the activity axis The highest point in the graph Represented by the slope of the line
Forecasted cash paid in March = $10,000 + $60,000 + $60,000 = $130,000 From January purchases = $100,000 x .10 = $10,000 From February purchases = $120,000 x .50 = $60,000 From March purchases = $150,000 x .40 = $60,000
Kimball Co. wishes to forecast it cash disbursements relating to inventory for the month of March. Estimated purchases of inventory in January, February, and March are $100,000, 120,000, and $150,000, respectively. Kimball typical pays for 40 percent of its inventory purchased in the month of purchase, 50 percent in the month following purchase, and the remaining 10% in the second month following the purchase. Given this information, forecasted cash paid for inventory in March is: $130,000 $150,000 $133,000 $120,000
Cash collected in March: ($25,000 x 12%) + ($40,000 x 25%) + ($30,000 x 60%) = $31,000
LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales? $18,000 $28,600 $31,000 $30,000
Manufacturing cost per batch: (20 x $6) + (4 x $12) + (4 x $8) + ($3,200 / 100) = $232 Manufacturing cost per vest: $232 / 10 = $23.20
Mackie Co. manufactures hunting clothing. The standard variable costs to produce one batch of the Big Mac vests are as follows: direct material average cost is $6 per yard; average yards per batch is 20; direct labor average rate per hour is $12; average hours per batch is 4; variable overhead average rate per hour is $8; average hours per batch is 4. The standard monthly fixed costs are as follows: manufacturing overhead is $3,200; selling and administrative costs are $1,900. Mackie Co. produces 100 batches per month. (Ten vests are produced in each batch.) What is the manufacturing cost per vest? $12.00 $5.10 $25.10 $23.20
Cost pool for engineering changes: ($75,000 x 25%) + ($90,000 x 30%) + ($105,000 x 40%) + ($85,000 x 50%) = $130,250
Maggie's Motors manufactures boat motors. Maggie is shifting from a traditional costing system to an activity-based costing system. She has started by identifying four overhead cost activities. Listed below is the table that Maggie created identifying the cost activities and the percentage of time spent on each activity by various factory employees. Ordering Repairing Inspecting Engineering parts equipment motors changes Maintenance person 0% 75% 0% 25% Production foreman 15% 15% 40% 30% Factory superintendent 10% 0% 50% 40% Accountant 50% 0% 0% 50% Maggie also gathered the total overhead cost associated with each factory employee which is shown below: Maintenance person $ 75,000 Production foreman 90,000 Factory superintendent 105,000 Accountant 85,000 Using the information above, compute the amount of the cost pool associated with engineering changes. $130,250 $105,000 $66,500 $88,500 1 / 1 (100.0%) Answer: $130,250 Cost pool for engineering changes: ($75,000 x 25%) + ($90,000 x 30%) + ($105,000 x 40%) + ($85,000 x 50%) = $130,250
Cost pool for repairing equipment: ($75,000 x 75%) + ($90,000 x 15%) = $69,750
Maggie's Motors manufactures boat motors. Maggie is shifting from a traditional costing system to an activity-based costing system. She has started by identifying four overhead cost activities. Listed below is the table that Maggie created identifying the cost activities and the percentage of time spent on each activity by various factory employees. Ordering Repairing Inspecting Engineering parts equipment motors changes Maintenance person 0% 75% 0% 25% Production foreman 15% 15% 40% 30% Factory superintendent 10% 0% 50% 40% Accountant 50% 0% 0% 50% Maggie also gathered the total overhead cost associated with each factory employee which is shown below: Maintenance person $ 75,000 Production foreman 90,000 Factory superintendent 105,000 Accountant 85,000 Using the information above, compute the amount of the cost pool associated with repairing equipment. $66,500 $85,000 $88,500 $69,750
Is a more conservative cost structure
Maintaining low fixed costs and high variable costs rather than high fixed costs and low variable costs: Is a more conservative cost structure Is a more risky cost structure Is an equally risky cost structure Results in a higher contribution margin
Strategic matching
Most companies that engage in earnings management typically do NOT go beyond which of the following activities on the earnings management continuum? Change in methods or estimates with little or no disclosure Non-GAAP accounting Change in methods or estimates with full disclosure Strategic matching
Net cash inflow from operating activities: $9,000 + $4,000 - $7,000 - $500 = $5,500
Ojeda Corporation had the following cash flows during 2012. The company uses the direct method of preparing a statement of cash flows. Cash receipt from the issuance of stock $20,000 Cash received from customers 9,000 Dividends received on long-term investments 4,000 Cash paid for wages 7,000 Cash paid for insurance 500 Cash paid for dividends 3,000 Cash paid to purchase building 30,000 Loan made to another company 10,000 Given this information, net cash inflow (outflow) from operating activities is $8,500 $5,500 $15,000 $3,500
Fixed costs and variable costs
Operating leverage deals primarily with the relationship between: Sales revenue and net income Debt and equity Fixed costs and variable costs Variable costs and contribution margin
A measure of risk
Operating leverage is: A measure of operating performance None of these are correct A measure of risk The proportion of total units represented by each product
Graph C
Refer to the figure below. A charge for electricity that is based on a flat rate plus a variable cost after a certain number of kilowatt-hours are used follows which of the following cost behavior patterns? Graph A Graph B Graph C Graph D
The relative proportions of different products that constitute total sales
Sales mix refers to: The mix of fixed and variable costs on the products sold during the year The different contribution margins achieved on the different products during the year The relative proportions of different products that constitute total sales The differing volumes of sales from year to year
($116,000 + $189,000) / ($40,600 + $103,950) = 47%
Stella Signs sells two different products. Following are the monthly revenues and costs: Sales Variable Revenue Costs Product A $116,000 $ 40,600 Product B $189,000 $103,950 Determine the total contribution margin ratio at the current sales mix. 53% 55% 45% 47%
Selling price: 200,000X - (0.6X x 200,000) - $600,000 = $120,000 X = $9.00
Stone Company plans to sell 200,000 calculators. The fixed costs are $600,000, and the variable costs are 60% of the selling price. If the company wants to realize a profit of $120,000, the selling price of each calculator must be: $7.50 $5.00 $9.00 $10.00
Total manufacturing cost: $100 + 40 + (15 x $3) + (3 x $20) + (15 x $1) + 8 = $268
The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $100 of direct materials, $40 of direct labor, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The total manufacturing cost per tent is: $140 $255 $128 $268 0 / 1 (0.0%) Answer: $268 Total manufacturing cost: $100 + 40 + (15 x $3) + (3 x $20) + (15 x $1) + 8 = $268
Cost of assembling per tent: 15 x $1.00 = $15
The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The cost of assembling per tent is: $15.00 $3.00 $45.00 $20.00
Cost of sewing per tent: 3 hrs x $20 = $60
The Dormir Company uses an activity-based costing system to account for its process of manufacturing camping tents. Each tent has $140 of direct materials, includes 15 parts, and requires 3 hours of machine time. Information on conversion costs, manufacturing activities, and cost drivers is listed below. Cost Per Manufacturing Activity Cost Driver Unit Material handling Number of parts $ 3.00 Sewing Machine hours 20.00 Assembling Number of parts 1.00 Testing Number of finished units 8.00 The cost of sewing per tent is: $20.00 $300.00 $60.00 $160.00
Conducts inspections of accounting firms
The Public Company Accounting Oversight Board Conducts inspections of accounting firms Reviews tax returns of public companies Establishes requirements for entry into the CPA profession Enforces compliance with the Foreign Corrupt Practices Act
All of these are correct
The Sarbanes-Oxley Act establishes Constraints on auditors Independent oversight of auditors All of these are correct Constraints on company management
Manufacturing overhead
The allocation of which of the following can cause the greatest errors when computing product costs? Direct materials Manufacturing overhead Direct labor All of these are correct
Defining the problem
The first step in management planning is: Identifying reasonable alternative courses of action Choosing and implementing the best alternative Evaluating the alternatives Defining the problem
Beginning cash balance: x + $309,800 - $118,000 - $190,000 = $5,600 x = $3,800
The following financial information is available for the year 2012: Operating activities $ 309,800 Investing activities ($118,000) Financing activities ($190,000) Ending cash balance $ 5,600 Given this information, what is the beginning cash balance? $112,400 $3,800 $1,800 $72,600
Batch-level cost per batch: $600,000 / 80 batches = $7,500 Product line cost per product line: $400,000 / 50 lines = $8,000 Manufacturing overhead for Product 1: ($7,500 x 20) + ($8,000 x 10) = $230,000 Gross margin for Product 1: $1,400,000 - $200,000 - $600,000 - $230,000 = $370,000
The following information is available for Dakota Company: Product 1 Product 2 Sales $1,400,000 $1,800,000 Direct materials (200,000) (400,000) Direct labor (600,000) (600,000) Manufacturing overhead* (500,000) (500,000) Gross margin $ 100,000 $ 300,000 *allocated based on direct labor hours Dakota Company has decided to allocate its manufacturing overhead cost using activity-based costing. Manufacturing overhead will be allocated based on batch-level and product line manufacturing as follows: Total Manufacturing Overhead Costs Product 1 Product 2 Batch-level manufacturing overhead $600,000 20 batches 60 batches Product line manufacturing overhead $400,000 10 lines 40 lines What is Dakota Company's gross margin for Product 1 using activity based costing? $370,000 $450,000 $520,000 $400,000
Batch-level cost per batch: $600,000 / 80 batches = $7,500 Product line cost per product line: $400,000 / 50 lines = $8,000 Manufacturing overhead for Product 2: ($7,500 x 60) + ($8,000 x 40) = $770,000 Gross margin for Product 2: $1,800,000 - $400,000 - $600,000 - $770,000 = $30,000
The following information is available for Dakota Company: Product 1 Product 2 Sales $1,400,000 $1,800,000 Direct materials (200,000) (400,000) Direct labor (600,000) (600,000) Manufacturing overhead* (500,000) (500,000) Gross margin $ 100,000 $ 300,000 *allocated based on direct labor hours Dakota Company has decided to allocate its manufacturing overhead cost using activity-based costing. Manufacturing overhead will be allocated based on batch-level and product line manufacturing as follows: Total Manufacturing Overhead Costs Product 1 Product 2 Batch-level manufacturing overhead $600,000 20 batches 60 batches Product line manufacturing overhead $400,000 10 lines 40 lines What is Dakota Company's gross margin for Product 2 using activity based costing? $480,000 $30,000 $350,000 $300,000
Does all of these items
The indirect method of preparing a statement of cash flows Results in the same net cash flow from operating activities as the direct method Is the method most often used in practice Involves adjusting the net income figure for any noncash expenses Does all of these items 0 / 1 (0.0%) Answer: Does all of these items
All of these are correct
The internal control structure of a company is a system of policies and procedures established to Ensure accurate accounting records All of these are correct Safeguard assets Promote operational efficiency
Salary of the CEO
The product costs of a software development company would NOT include: Computer programmers' salaries Supplies used by programmers Salary of the CEO Computer lease
Financing activity
The repayment of the principal on a loan used to finance the purchase of equipment should be classified as a(n) Operating activity Financing activity Noncash transaction Investing activity
Separating mixed costs into their variable and fixed components
The scattergraph method is a useful tool for: Working outside the relevant range Determining the break-even point Separating mixed costs into their variable and fixed components Analyzing abrupt changes in cost behavior
Summarizes all cash inflows and outflows of an entity for a given period of time
The statement of cash flows Is intended primarily to provide necessary information for assessing the profitability of an entity Summarizes all cash inflows and outflows of an entity for a given period of time Is a required statement only for those companies using cash-basis accounting Provides a connecting link between two consecutive income statements
None of these
The statement of cash flows replaces the Balance sheet Statement of financial position Income statement None of these
Controller
The top accountant in most large organizations is usually called the: Chief executive officer Sales' manager Controller Chief financial officer
A single measure of activity
The traditional overhead cost allocation system assumes a simple relationship between overall overhead cost and Cost of goods sold A single measure of activity Beginning raw materials inventory Number of headquarters staff
Variable costs and fixed costs
The two components of a mixed cost are: Variable costs and relevant costs Variable costs and fixed costs Relevant costs and fixed costs Variable costs and opportunity costs
Operating activities
Those transactions and events that enter into the determination of net income are reported under which section of the statement of cash flows? Operating activities Investing activities Financing activities Significant noncash investing and financing activities 1 / 1 (100.0%) Answer: Operating activities
Highest contribution margin
To maximize its profits, a company should pay the highest sales commissions on those products with the: Lowest fixed costs Highest contribution margin Lowest variable costs Highest prices
More products with the highest contribution margin are sold
Total contribution margin will increase in a two-product firm if total units sold remain the same and: Fixed costs decrease More products with the lowest contribution margin are sold More products with the highest contribution margin are sold Fewer products with the highest contribution margin are sold
Products consume overhead costs
Traditional product costing systems (e.g. job order costing and process costing) usually assume that: Products consume overhead costs Activities consume overhead costs Overhead costs are insignificant All of these are correct
Total variable costs
Use the cost-volume-profit graph below to answer the following question(s). 11.5 Graph Area E on the cost-volume-profit graph represents the: Total costs Total variable costs Total fixed costs Revenues
Total fixed costs
Use the cost-volume-profit graph below to answer the following question(s). 11.5 Graph Area F on the cost-volume-profit graph represents the: Revenues Total fixed costs Total costs Total variable costs
Loss area
Use the cost-volume-profit graph below to answer the following question(s). Graph 11.5 On the cost-volume-profit graph, the area between point G, the origin of the graph, and the point at which Line B crosses the sales axis represents the: Fixed costs Total costs Loss area Profit area
Break-even point
Use the profit graph below to answer the following question(s). Graph 11.5 Point E on the profit graph represents the: Profit area Loss area Total costs Break-even point
Multiple-product firm where products are quite different
Usually activity-based costing would be significantly more accurate than traditional product costing in a: Multiple-product firm where products are quite similar Multiple-product firm where products are quite different One-product firm Multiple-product firm that has separate manufacturing facilities for each product
Break even: 8,000x - ($25 x 8,000) - $360,000 = $0 x = $70
Violet Company typically has $360,000 of fixed costs and $25 of variable costs per unit. Violet plans to sell 8,000 units this period. In order for Violet to break-even, what price should Violet charge per unit? $45 $20 $70 $25
Total costs: $51,000 + (8,000 x $12) = $147,000
What are the total costs for a company with per-unit variable costs of $12 and total fixed costs of $51,000 if it sells 8,000 units of product? $147,000 $96,000 $125,000 $51,000
Form 10-K
What is the detailed report that companies file annually with the Securities and Exchange Commission? Form 8-K Form 10-K Form 10-Q Form S-16
Discuss the problem with the immediate supervisor.
What is the first step a business professional should take when confronted with a situation that may involve an ethical conflict? Discuss the problem with the immediate supervisor. Resign from the organization. Use an objective advisor to help clarify issues. Refrain from discussing the problem with anyone.
Certified Public Accountant
What is the most common professional designation for external auditors? Certified Internal Auditor Certified Professional Accountant Certified Public Accountant Certified External Auditor
When the company issues new debt or stock securities to the public
When does the Securities and Exchange Commission (SEC) typically require a company to submit a registration statement to the SEC for approval? When the company has experienced a major fraud When the company receives a disclaimer of opinion from the external auditors When the company receives a qualified opinion from the external auditors When the company issues new debt or stock securities to the public
10-Q
Which form must be filed quarterly by all publicly held corporations? 10-Q 10-K 8-K 8-Q
Prepare the primary financial statements
Which of the following activities would internal auditors NOT typically perform in a large company? Assist with increasing the efficiency of operations Evaluate internal controls Detect fraud Prepare the primary financial statements
Authorization, record keeping, and custody of assets
Which of the following are the three functions that should be performed by separate departments or individuals? Record keeping, validation, and authorization Record keeping, validation, and classifying Authorization, purchasing, and custody of assets Authorization, record keeping, and custody of assets
Analytical procedures
Which of the following audit processes attempts to identify areas that may deserve attention by using techniques such as comparative ratio analysis? Analytical procedures Confirmation Sampling Observations
Make loans to executive officers and directors
Which of the following does Sarbanes-Oxley NOT require management to do? Make loans to executive officers and directors Support a much stronger board and audit committee in each public company Prepare a statement to accompany the audit report Develop and enforce an officer code of ethics
Every year, Doug is required to take one full week of vacation time.
Which of the following is an example of an independent check on performance? Every year, Doug is required to take one full week of vacation time. Every evening, Shellie makes a back-up file of all transactions recorded in the computer that day, burns the back-up file onto a CD and then locks the CD into a fire-proof vault for the night. Greg is in charge of recording receipt of payments made to accounts receivable, while Susan is in charge of making deposits to the bank. John, a clerk, is authorized to perform transactions as large as $5,000 but must maintain authorization from Andrea to perform larger transactions.
All of these are correct.
Which of the following is an incentive that influences auditors to remain independent and to provide fair and reliable financial information? Management would be taking a large legal risk if they interfere with the auditors. External auditors are taking a large legal risk if they allow their independence and integrity to be compromised. Auditors have a reputation to protect. All of these are correct.
Identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and use the cost data to make decisions
Which of the following is the correct sequence of the five steps of implementing and using an activity-based costing system? Use the cost data to make decisions, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and identify overhead cost activities Identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, identify measurable cost drivers, assign overhead, and use the cost data to make decisions Identify measurable cost drivers, assign overhead, identify overhead cost activities, analyze individual overhead costs in terms of those cost activities, and use the cost data to make decisions Identify overhead cost activities, identify measurable cost drivers, assign overhead, analyze individual overhead costs in terms of those cost activities, and use the cost data to make decisions
Change in cost ÷ change in activity
Which of the following is the formula used to calculate the slope of the regression line on a scattergraph? Fixed costs ÷ change in activity Change in cost ÷ change in activity Change in activity ÷ change in cost Fixed costs ÷ change in cost
Operating, investing, and financing
Which of the following is the typical sequencing of activities on the statement of cash flows? Investing, financing, and operating Investing, operating, and financing Operating, financing, and investing Operating, investing, and financing
Fraudulent accounting is the result of intentional errors in the accounting records.
Which of the following is true about fraudulent accounting? None of these are true. Fraudulent accounting is the result of intentional errors in the accounting records. Fraudulent accounting is the result of unintentional errors in the accounting records. Fraudulent accounting results when different people arrive at different conclusions based on the same set of facts.
Time value of money
Which of the following items is NOT a key factor involved in cost-volume-profit (C-V-P) analysis? Sales revenue The mix of products sold Fixed and variable costs Time value of money
Depreciation expense
Which of the following items would be reported on a statement of cash flows prepared by the indirect method but NOT by the direct method? Cash paid for dividends Cash received from issuance of stock Depreciation expense Cash received from the sale of a building
Management accounting principles
Which of the following principles are the LEAST uniform and are NOT mandatory? All of these are equally uniform and mandatory Management accounting principles Financial reporting principles Tax reporting principles
Low-volume unique products
Which of the following products usually consumes the highest amount of overhead costs per unit? Low-volume standard products Low-volume unique products High-volume standard products High-volume unique products
Generally Accepted Auditing Standards
Which of the following requires CPAs to provide reasonable assurance that significant fraud or misstatement is NOT present in financial statements? Generally Accepted Auditing Standards Sarbanes-Oxley Act Generally Accepted Accounting Principles Foreign Corrupt Practices Act
The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement.
Which of the following statements is NOT true? The statement of cash flows sheds some light on a company's ability to generate income in the future. The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement. The statement of cash flows does not replace the income statement. The statement of cash flows provides details as to how the cash account changed during a period.
Errors are not intentional and when detected are immediately corrected.
Which of the following statements is true about errors in the financial statements of a company? Errors are a result of intentional mistakes made while recording or posting transactions. Errors are not intentional and when detected are immediately corrected. Errors are usually an intentional attempt at fraud. Errors are not intentional and therefore do not need to be corrected.
The collection of accounts receivable
Which of the following transactions is LEAST likely to be a separate item on a statement of cash flows prepared using the indirect method? The issuance of stock The payment of dividends The collection of accounts receivable The sale of equipment 0 / 1 (0.0%) Answer: The collection of accounts receivable
Dividends paid
Which of the following would NOT be included in the operating activities section of the statement of cash flows? Dividends received Interest received Interest paid Dividends paid
A decrease in accounts receivable
Which of the following would be added to net income on a statement of cash flows prepared using the indirect method? A decrease in accounts payable Dividends received A decrease in accounts receivable A gain from the sale of equipment
Cash received from the sale of a land
Which of the following would be classified as an investing activity on a statement of cash flows? Cash paid for interest Cash used to repay principal amounts borrowed Cash received from the sale of a land Cash received from dividends
Factory equipment
Which of the following would most likely NOT be considered a facility support activity? Factory equipment Depreciation on headquarters building Executive salaries Property taxes
Bolts of cloth in a clothing factory
Which of the following would most likely be considered a variable cost? Depreciation Rent Property taxes Bolts of cloth in a clothing factory
All of these are correct
Which one of the following is NOT an ethical guideline that the Institute of Management Accountants (IMA) requires its members to follow? Not disclose confidential information Maintain objectivity when communicating information to decision makers Act with both actual and apparent integrity in all situations All of these are correct
Cash outflow: $1,200,000 - $37,500 = $1,162,500
Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead. Given the information above, total cash outflows for 2011 would be: $1,162,500 $454,500 $1,200,000 $417,000
Cash available: (1,500,000 x 20%) + (1,500,000 x 80% x 60%) = $1,020,000 Total cash needed: $1,200,000 - $37,500 + $45,000 = $1,207,500 Total cash borrowed: $1,020,000 - $1,207,500 = ($187,500)
Winthrop Merchandising is preparing its budget for 2011 (its first year of operation). Sales for the year are budgeted at $1,500,000; 20% are cash sales and 80% are credit sales. The company expects to collect 60% of all credit sales in 2011. Budgeted expenses are $1,200,000. These expenditures include $37,500 for depreciation and $745,500 for variable manufacturing overhead. If the desired ending cash balance is $45,000, how much must Winthrop borrow during the year? $187,500 $180,000 $142,500 $225,000
Cost drivers
With activity-based costing, overhead costs are assigned using: Product costs Cash flows Cost drivers Direct labor hours
Linear
Within the relevant range, variable costs are considered to be: Linear Stepped Curvilinear Mixed
Opportunity cost
You want to go skiing for the day. However, you realize you are scheduled to work. If you call in sick and do not go to work, the wages you will not earn (assuming you are an hourly employee) are considered a(n): Opportunity cost Sunk cost Differential cost Out-of-pocket cost
Out-of-pocket cost
You want to go skiing for the day. The cost of the lift ticket would be considered a(n): Indirect cost Sunk cost Out-of-pocket cost Opportunity cost
Ending cash balance: $1,875 + $6,450 - $4,735 - $1,200 = $2,390
Yuka Company had a beginning cash balance of $1,875. In addition, Yuka Company reported the following items from its cash flow statement: Operating activities $6,450 Investing activities ($4,735) Financing activities ($1,200) Given this information, Yuka Company's ending cash balance is $515 $2,390 $2,480 $3,590 1 / 1 (100.0%) Answer: $2,390 Ending cash balance: $1,875 + $6,450 - $4,735 - $1,200 = $2,390
