ACC 231 Exam 1

Cuddly Toys makes a large teddy bear that currently sells for $62 per bear. At a production level of 20,000 bears per year, the bears have a total unit cost of $50 per bear. The total unit cost is comprised of variable costs of $45 per bear and fixed costs of $5 per bear (or total fixed costs of $100,000 ÷ 20,000 bears). The company has been approached by a new customer who wants to buy 5,000 large bears for $47 apiece. What is the effect on operating profit if the special order is accepted? $10,000 increase to operating profit $10,000 decrease to operating profit $15,000 increase to operating profit $15,000 decrease to operating profit None of the above.

$10,000 increase to operating profit

Jordan Inc. manufactures water polo balls, which sell for $50. The company expects to incur the following costs during the coming year: variable manufacturing cost, $15 per unit; variable selling and administrative cost, $5 per unit; fixed manufacturing cost, $35,000; and fixed selling and administrative cost, $25,000. What is the break-even volume in sales dollars? $50,000 $65,000 $75,000 $100,000 None of the above

$100,000

Sipco, Inc., a wholesaler, purchased $175,000 of inventory during the year, incurred transportation-in costs of $21,000, and shipping costs to customers of $14,000. The company had $10,000 of inventory on hand at the beginning of the year and $7,000 on hand at the end of the year. What is the cost of goods for the year? $178,000 $193,000 $199,000 $213,000 None of the above.

$199,000

Soapy's Suds makes and sells root beer. Its beginning work in process was $12,000 and the ending work in process was $10,000. During the year, Soapy used $45,000 of direct materials and incurred $30,000 of direct labor in production. Its cost of goods manufactured for the period was $97,000. How much manufacturing overhead did Soapy incur during the period? $20,000 $22,000 $24,000 $26,000 None of the above.

$20,000

James Company had the following costs at a production level of 30,000 units of product: direct materials, $45,000; direct labor, $60,000; variable manufacturing overhead, $15,000 and fixed manufacturing overhead, $30,000. If the same cost pattern persists, what would be the total cost of production at a level of 50,000 units? $170,000 $210,000 $230,000 $250,000 None of the above.

$230,000

Abbott Company incurred the following costs during the year: utilities (60% factory), $5,000; insurance (75% factory), $4,000; direct materials, $20,000; indirect materials, $3,000; direct labor, $30,000; and indirect labor, $5,000. What is the amount of conversion costs incurred during the year? $36,000 $44,000 $77,000 $94,000 None of the above.

$44,000

Bent Tree incurred the following unit costs during 2011: variable manufacturing cost, $27; fixed manufacturing cost, $10; variable marketing and administrative cost, $8; and fixed marketing and administrative cost, $6. During 2011, Bent Tree produced 30,000 units and sold 25,000 units of product. The selling price was $67 per unit. What was Bent Tree's total gross margin? $400,000 $750,000 $800,000 $1,000,000 None of the above.

$750,000

Bent Tree incurred the following unit costs during 2011: variable manufacturing cost, $27; fixed manufacturing cost, $10; variable marketing and administrative cost, $8; and fixed marketing and administrative cost, $6. During 2011, Bent Tree produced 30,000 units and sold 25,000 units of product. The selling price was $67 per unit. What was Bent Tree's total contribution margin? $400,000 $750,000 $800,000 $1,000,000 None of the above.

$800,000

Aspen Corporation has two divisions, East and West. Its corporate office is separate from these divisions and incurred $190,000 in administrative costs during the 2010. These costs are allocated to the divisions based on their individual revenues. During 2010, the East and West divisions had revenues of $1,800,000 and $2,200,000, respectively. How much of the administrative cost should be assigned to the East division based on the cost allocation rule described? $76,000 $85,500 $95,000 $104,000 None of the above.

$85,500

A retailer called Little Big Brother sells video games. The games sell for $40 each. The variable costs consist of the purchase price of $20 per video game. The store's annual fixed costs are $250,000 and the company's income tax rate is 40%. What is the volume of sales dollars required to earn an after-tax target profit of $120,000? $500,000 $740,000 $900,000 $1,100,000 None of the above

$900,000

Summit Manufacturing had $10,000 of direct materials on hand at the beginning of the year and $9,000 on hand at the end of the year. During the year, the company purchased $42,000 of direct materials, and incurred $22,000 of direct labor and $17,000 of manufacturing overhead. The company had $26,000 of inventory in work in process at the beginning of the year and $12,000 at the end of the year. What is the cost of goods manufactured for the year? $68,000 $82,000 $94,000 $96,000 None of the above.

$96,000

Summit Company manufactures and sells three products; X, Y, and Z. Last year sales of these products were 20,000 units of X, 30,000 units of Y and 50,000 units of Z. The unit contribution margins are $5 for X, $4 for Y, and $3 for Z. Assuming the product mix remains the same and that fixed costs are $222,000, how many units of X must Summit sell to break even? 10,000 12,000 22,200 44,400 None of the above

12,000

Hale & Hearty Inc. currently sells 10,000 treadmills for $520 each. Variable costs relating to this product are $320 per unit and fixed costs total $1,200,000. What is the company's margin of safety? 2,000 units 4,000 units 6,000 units 8,000 units None of the above

4,000 units

Key West Inc. manufactures inflatable kayaks. Each kayak sells for $350. At a production level of 10,000 units, the total variable manufacturing cost is $1,200,000 and the fixed manufacturing cost in total is $420,000. At this level of activity, the company will incur variable selling and administrative costs of $900,000 and fixed selling and administrative costs of $770,000. How many units have to be sold to break even? 5,100 6,700 8,500 10,000 None of the above

8,500

Which of the following statements regarding costs and expenses is not correct? An expense is a cost charged against revenue in an accounting period. We incur costs whenever we give up (sacrifice) resources, regardless of whether we account for it as an asset or an expense. If the cost is recorded as an asset, it becomes an expense when the asset has been consumed. Accounting systems typically capture and record both outlay costs and opportunity costs. All of the above are correct statements.

Accounting systems typically capture and record both outlay costs and opportunity costs.

Which of the following statements regarding budgets is not correct? Budgets help managers decide whether their goals can be achieved and, if not, what modifications are necessary. As part of the planning and control process, managers prepare budgets containing expectations about revenues and costs for the coming period. Budgeting is very important to the financial success of individuals and organizations. A budget is the financial plan of the revenues and resources needed to carry out activities and meet financial goals. All of the above are correct statements.

All of the above are correct statements.

Which of the following is a value-added activity? Product design Production Marketing Customer service All of the above are examples of value-added activities.

All of the above are examples of value-added activities.

What does the Sarbanes-Oxley Act of 2002 require the CEO and CFO to do? Take responsibility for signing financial statements. Stipulate that the financial statements do not omit material information. Disclose that they have evaluated the company's internal controls. Disclose that they have notified the company's auditors and the audit committee of the board of any fraud that involves management. All of the above are requirements of the Sarbanes-Oxley Act of 2002.

All of the above are requirements of the Sarbanes-Oxley Act of 2002.

Which of the following statement(s) relating to CVP analysis with spreadsheets is (are) correct? Once the data are entered, an analysis tool such as Goal Seek can be used to find the volume associated with a given desired profit level. A Microsoft Excel worksheet is ideally suited to doing CVP. An extremely simple Microsoft Excel spreadsheet can easily be edited to analyze alternative scenarios (also called what-if analyses). Statements B and C are correct. All of the above statements are correct.

All of the above statements are correct.

Which is of the following statements regarding cost accounting information is not correct? Cost accounting information is designed for managers. Cost accounting information is commonly used in financial accounting information. The primary purpose of cost accounting information is to provide information to management Cost accounting information is governed by generally accepted accounting principles (GAAP) in the United States and international financial reporting standards (IFRS) in many other countries. All of the above are correct statements.

Cost accounting information is governed by generally accepted accounting principles (GAAP) in the United States and international financial reporting standards (IFRS) in many other countries.

Which of the following is not an overarching ethical principle of the IMA Statement of Ethical Professional Practice? Discipline Fairness Honesty Objectivity All of the above are the overarching ethical principles.

Discipline

Which of the following is an information technology that links the various processes of an enterprise into a single comprehensive system? Activity-based costing Enterprise resource planning Just-in-time Six Sigma None of the above.

Enterprise resource planning

Assume that you are a cost accountant who is a member of the Institute of Management Accountants (IMA). If you are faced with an ethical conflict, what should you do? Resign from the company. Follow the established policies that deal with them and, if the policies do not resolve the conflict, you should consider discussing the matter with superiors. Go directly to the audit committee with the information. All of the above. None of the above.

Follow the established policies that deal with them and, if the policies do not resolve the conflict, you should consider discussing the matter with superiors.

Which of the following statements regarding assumptions and limitations of CVP analysis is not correct? CVP analysis relies on certain assumptions and these assumptions might limit the applicability of the results for decision making. The limitations are due to the assumptions that the cost analyst makes; that is, they are not inherent limitations to the method of CVP analysis itself. The assumptions of constant unit variable cost and constant unit prices for all levels of volume as important limitations of CVP analysis. If unit prices change (for example, if the unit prices are lower for higher volumes), CVP analysis cannot be used. CVP analysis is a tool that the manager can use to help with decisions.

If unit prices change (for example, if the unit prices are lower for higher volumes), CVP analysis cannot be used.

If a company decides to increase its selling price by $4 per unit because of an increase in its variable labor cost of $4 per unit, what impact will these two changes have on the break-even volume in units? It will decrease. It will increase. It will not be impacted. It will change, but the direction of the change cannot be determined using the information provided. None of the above.

It will not be impacted.

If a company produces or purchases units just in time for use, thereby keeping inventories at a minimum, which of the following methods is it using? Activity-based costing Enterprise resource planning Just-in-time Lean accounting None of the above.

Just-in-time

Which of the following is an example of a nonvalue-added activity? Research and development (R&D) Purchasing Reworking defective units Distribution All of the above are examples of value-added activities.

Reworking defective units

Which of the following describes the set of activities that transforms raw resources into the goods and services end users (households, for example) purchase and consume and also includes the treatment or disposal of any waste generated by the end users? Supply chain Cost driver Value chain Balanced scorecard None of the above.

Value chain

Operating leverage refers to the extent to which an organization's cost structure is made up of: variable costs. manufacturing costs. operating costs. fixed costs. product costs.

fixed costs.

After-tax target profit equals the before-tax operating profit: plus income taxes. multiplied by (1 + tax rate). multiplied by (1- tax rate). divided by (1 tax - rate). None of the above.

multiplied by (1- tax rate).