Accounting Final Exam

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $240,000. What was Teller's 2016 net income? a. $300,000 b. $540,000 c. $1,260,000 d. $1,800,000

a. $300,000

For Jacobs Company, the predetermined overhead rate is 70% of direct labor cost. During the month, $600,000 of factory labor costs are incurred of which $140,000 is indirect labor. Actual overhead incurred was $320,000. The amount of overhead debited to Work in Process Inventory should be: a. $322,000 b. $320,000 c. $420,000 d. $460,000

a. $322,000

In 2016, Teller Company sold 3,000 units at $600 each. Variable expenses were $420 per unit, and fixed expenses were $270,000. The same selling price, variable expenses, and fixed expenses are expected for 2017. What is Teller's break-even point in units for 2017? a. 1,500 b. 643 c. 450 d. 750

a. 1,500

30. Danny's Lawn Equipment has actual sales of $800,000 and a break-even point of $520,000. How much is its margin of safety ratio? a. 35% b. 46% c. 54% d. 65%

a. 35%

Weatherspoon Company has a product with a selling price per unit of $200, the unit variable cost is $110, and the total monthly fixed costs are $300,000. How much is Weatherspoon's contribution margin ratio? a. 45% b. 55% c. 150% d. 182%

a. 45%

What is the key factor in determining sales mix if a company has limited resources? a. Contribution margin per unit of limited resource b. The amount of fixed costs per unit c. Total contribution margin d. The cost of limited resources

a. Contribution margin per unit of limited resource

What is work in process inventory generally described as? a. Costs applicable to units that have been started in production but are only partially completed b. Costs associated with the end stage of manufacturing that are almost always complete and ready for customers c. Costs strictly associated with direct labor d. Beginning stage production costs associated with labor costs dealing with bringing in raw materials from the shipping docks

a. Costs applicable to units that have been started in production but are only partially completed

The costs that are easiest to trace directly to products are a. direct materials and direct labor. b. direct labor and overhead. c. direct materials and overhead. d. none of the above; all three costs are equally easy to trace to the product.

a. direct materials and direct labor.

If standard costs are incorporated into the accounting system, a. it may simplify the costing of inventories and reduce clerical costs. b. it can eliminate the need for the budgeting process. c. the accounting system will produce information which is less relevant than the historical cost accounting system. d. approval of the shareholders is required.

a. it may simplify the costing of inventories and reduce clerical costs.

The labor costs that have been identified as indirect labor should be charged to a. manufacturing overhead. b. direct labor. c. the individual jobs worked on. d. salary expense.

a. manufacturing overhead.

A shift from low-margin sales to high-margin sales a. may increase net income, even when there is a decline in total units sold. b. will always increase net income. c. will always decrease net income. d. will always decrease units sold.

a. may increase net income, even when there is a decline in total units sold.

A company has total fixed costs of $240,000 and a contribution margin ratio of 20%. The total sales necessary to break even are a. $960,000. b. $1,200,000. c. $300,000. d. $288,000.

b. $1,200,000.

Edmiston Company reported the following year-end information: beginning work in process inventory, $80,000; cost of goods manufactured, $750,000; beginning finished goods inventory, $50,000; ending work in process inventory, $70,000; and ending finished goods inventory, $40,000. How much is Edmiston's cost of goods sold for the year? a. $750,000 b. $760,000 c. $740,000 d. $770,000

b. $760,000

The per-unit standards for direct labor are 1.5 direct labor hours at $15 per hour. If in producing 2,400 units, the actual direct labor cost was $46,000 for 3,000 direct labor hours worked, the total direct labor variance is a. $2,400 unfavorable. b. $8,000 favorable. c. $5,000 unfavorable. d. $8,000 unfavorable.

b. $8,000 favorable.

Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,500,000. The average number of days in inventory during the year was a. 365 days. b. 60.8 days. c. 50.7 days. d. 30 days.

b. 60.8 days.

Which of the following is a true statement about process cost systems? a. In process cost systems, costs are accumulated but not assigned. b. A process cost system has one work in process account for each process. c. A process cost system has one work in process account for each job. d. Unit costs are not computed in process cost systems.

b. A process cost system has one work in process account for each process.

When a sale occurs between divisions of the same company, which transfer pricing approach may lead to the selling division overpricing its product? a. Cost based transfer pricing b. Market-based transfer pricing c. Negotiated transfer pricing d. Cost-plus transfer pricing

b. Market-based transfer pricing

The financial budgets include the a. cash budget and the selling and administrative expense budget. b. cash budget and the budgeted balance sheet. c. budgeted balance sheet and the budgeted income statement. d. cash budget and the production budget.

b. cash budget and the budgeted balance sheet.

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the a. two cash effects can be netted and presented as one item in the investing activities section. b. cash inflow and cash outflow should be reported separately in the investing activities section. c. two cash effects can be netted and presented as one item in the financing activities section. d. cash inflow and cash outflow should be reported separately in the financing activities section.

b. cash inflow and cash outflow should be reported separately in the investing activities section.

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

b. contribution margin equals total fixed costs.

In cost-plus pricing, the markup consists of a. manufacturing costs. b. desired ROI. c. selling and administrative costs. d. total cost and desired ROI.

b. desired ROI.

A favorable variance a. is an indication that the company is not operating in an optimal manner. b. implies a positive result if quality control standards are met. c. means that standards are too loosely specified. d. all of the above.

b. implies a positive result if quality control standards are met.

Lending money and collecting the loans are a. operating activities. b. investing activities. c. financing activities. d. Non-cash investing and financing activities.

b. investing activities.

Managerial accounting information a. pertains to the entity as a whole and is highly aggregated. b. pertains to subunits of the entity and may be very detailed. c. is prepared only once a year. d. is constrained by the requirements of generally accepted accounting principles.

b. pertains to subunits of the entity and may be very detailed.

The investigation of materials price variance usually begins in the a. first production department. b. purchasing department. c. controller's office. d. accounts payable department.

b. purchasing department.

Reducing reliance on human workers and instead investing heavily in computers and online technology will a. reduce fixed costs and increase variable costs. b. reduce variable costs and increase fixed costs. c. have no effect on the relative proportion of fixed and variable costs. d. make the company less susceptible to economic swings.

b. reduce variable costs and increase fixed costs.

The statement of cash flows a. must be prepared on a daily basis. b. summarizes the operating, financing, and investing activities of an entity. c. is not required by GAAP. d. is a special section of the income statement.

b. summarizes the operating, financing, and investing activities of an entity.

In performing a vertical analysis, the base for prepaid expenses is a. total current assets. b. total assets. c. total liabilities and stockholders' equity. d. prepaid expenses.

b. total assets.

Using vertical analysis, what percentage is assigned to Net Income? Net Sales = 300; COGS = 180; Gross Profit = 120; Operating Expenses = 45; Net Income = 75 a. 625% b. 40% c. 25% d. None of these answer choices are correct.

c. 25%

Cost of goods manufactured is calculated as follows: a. Beginning Work in Process + direct materials used + direct labor + manufacturing overhead + ending Work in Process. b. Direct materials used + direct labor + manufacturing overhead - beginning Work in Process + ending Work in Process. c. Beginning Work in Process + direct materials used + direct labor + manufacturing overhead - ending Work in Process. d. Direct materials used + direct labor + manufacturing overhead - ending Work in Process - beginning Work in Process.

c. Beginning Work in Process + direct materials used + direct labor + manufacturing overhead - ending Work in Process.

If annual overhead costs are expected to be $750,000 and direct labor costs are expected to be $1,000,000, then if the activity base is direct labor costs: a. $1.33 is the predetermined overhead rate. b. for every dollar of manufacturing overhead, 75 cents of direct labor will be assigned. c. for every dollar of direct labor, 75 cents of manufacturing overhead will be assigned. d. a predetermined overhead rate cannot be determined.

c. for every dollar of direct labor, 75 cents of manufacturing overhead will be assigned.

Financing activities involve a. lending money. b. acquiring investments. c. issuing debt. d. acquiring long-lived assets.

c. issuing debt.

The cost-plus pricing approach's major advantage is a. it considers customer demand. b. that sales volume has no effect on per unit costs. c. it is simple to compute. d. it can be used to determine a product's target cost.

c. it is simple to compute.

Managerial accounting information is generally prepared for a. stockholders b. creditors c. managers d. regulatory agencies

c. managers

The transfer price approach that conceptually should work the best is the a. cost-based approach. b. market-based approach. c. negotiated price approach. d. time-and-material pricing approach.

c. negotiated price approach.

Often the most difficult part of computing accurate unit costs is determining the proper amount of _________ to assign to each product, service, or job. a. direct materials b. direct labor c. overhead d. direct materials and direct labor

c. overhead

Companies that sell products whose prices are set by market forces are called a. price givers. b. price leaders. c. price takers. d. price setters.

c. price takers.

The primary purpose of the statement of cash flows is to a. provide information about the investing and financing activities during a period. b. prove that revenues exceed expenses if there is a net income. c. provide information about the cash receipts and cash payments during a period. d. facilitate banking relationships.

c. provide information about the cash receipts and cash payments during a period.

A process cost accounting system is most appropriate when a. a variety of different products are produced, each one requiring different types of materials, labor, and overhead. b. the focus of attention is on a particular job or order. c. similar products are mass-produced. d. individual products are custom made to the specification of customers.

c. similar products are mass-produced.

16. A variable cost is a cost that a. varies per unit at every level of activity. b. occurs at various times during the year. c. varies in total in proportion to changes in the level of activity. d. may or may not be incurred, depending on management's discretion.

c. varies in total in proportion to changes in the level of activity.

Oxnard Industries produces a product that requires 2.6 pounds of materials per unit. The purchase price is $2 per pound, but a 2% discount is usually taken. Freight costs are $.10 per pound, and receiving and handling costs are $.07 per pound. The standard direct materials price per unit of product is a. $5.10. b. $5.20. c. $2.13 d. $5.54

d. $5.54

Fixed costs are $3,000,000 and the unit contribution margin is $150. What is the break-even point? a. $7,500,000 b. $20,000,000 c. 7,500 units d. 20,000 units

d. 20,000 units

Bear, Inc. estimates its sales at 200,000 units in the first quarter and that sales will increase by 20,000 units each quarter over the year. They desire to maintain ending finished goods inventories at 25% of the next quarter's budgeted sales volume. Production in units for the second quarter should be budgeted at a. 245,000. b. 230,000. c. 305,000. d. 225,000.

d. 225,000.

Which of the following would not be an adjustment to net income using the indirect method? a. Depreciation Expense b. An increase in Prepaid Insurance c. Amortization Expense d. An increase value in Land

d. An increase value in Land

Which of the following is NOT a batch-level activity? a. Purchase ordering b. Equipment setups c. Inspection d. Assembling

d. Assembling

Which of the following is not a proper match-up? a. Long range planning ↔ Strategies b. Budgeting ↔ Short-term goals c. Long-range planning ↔ 5 years d. Budgeting ↔ Long-term goals

d. Budgeting ↔ Long-term goals

The equation which reflects a CVP income statement is a. Sales = Cost of goods sold + Operating expenses + Net income. b. Sales + Fixed costs = Variable costs + Net income. c. Sales - Variable costs + Fixed costs = Net income. d. Sales - Variable costs - Fixed costs = Net income.

d. Sales - Variable costs - Fixed costs = Net income.

Advances in computerized systems, technological innovation, and automation have changed the manufacturing environment drastically by a. an increasing proportion of direct labor costs and an increasing proportion of overhead costs. b. an increasing proportion of direct labor costs and a decreasing proportion of overhead costs. c. a decreasing proportion of direct labor costs and a decreasing proportion of overhead costs. d. a decreasing proportion of direct labor costs and an increasing proportion of overhead costs.

d. a decreasing proportion of direct labor costs and an increasing proportion of overhead costs.

Prices are set by the competitive market when a. the product is specially made for a customer. b. there are no other producers capable of manufacturing a similar item. c. a company can effectively differentiate its product from others. d. a product is not easily distinguished from competing products.

d. a product is not easily distinguished from competing products.

An activity-based overhead rate is computed as follows: a. actual overhead divided by actual use of cost drivers. b. estimated overhead divided by actual use of cost drivers. c. actual overhead divided by estimated use of cost drivers. d. estimated overhead divided by estimated use of cost drivers.

d. estimated overhead divided by estimated use of cost drivers.

A budget period should be a. monthly. b. for a year or more. c. long-term. d. long enough to provide an obtainable goal under normal business conditions.

d. long enough to provide an obtainable goal under normal business conditions.

32. In a CVP income statement, a selling expense is generally a. completely a variable cost. b. completely a fixed cost. c. neither a variable cost nor a fixed cost. d. partly a variable cost and partly a fixed cost.

d. partly a variable cost and partly a fixed cost.

Long-term creditors are usually most interested in evaluating a. liquidity and solvency. b. solvency and marketability. c. liquidity and profitability. d. profitability and solvency.

d. profitability and solvency.

The total materials variance is equal to the a. materials price variance. b. difference between the materials price variance and materials quantity variance. c. product of the materials price variance and the materials quantity variance. d. sum of the materials price variance and the materials quantity variance.

d. sum of the materials price variance and the materials quantity variance.

The general formula for the minimum transfer price is: minimum transfer price equals a. fixed cost + opportunity cost. b. external purchase price. c. total cost + opportunity cost. d. variable cost + opportunity cost.

d. variable cost + opportunity cost.