ACCT 308 Exam 1 Homework Questions

Which of the following is not one of the data analysis techniques? Predictive analytics Diagnostic analytics Prescriptive analytics Definitive analytics

Definitive analytics

The relationship between a company's revenues, costs, volume of sales, and consequently profit, is called

cost-volume-profit (CVP) analysis.

For financial statement reporting, Inventories are reported as

current assets on the balance sheet.

Fred's break-even point for his "Fred's Fantastic" (FF) sport drink is 19000 bottles per year. Fred thinks the market for his FF drink is closer to 15000 bottles per year. Therefore, Fred would like to reduce his break-even point. Fred should

decrease his variable costs.

Within the relevant range, if a company's level of production decreases, variable costs

decrease in total, but remain the same per unit.

A line with a positive slope indicates that the

dependent variable increases due to an increase in the independent variable.

Conversion costs are equal to

direct labor + manufacturing overhead.

Prime costs are defined as

direct materials + direct labor.

Direct costs include

direct materials and direct labor.

Product costs consist of

direct materials, direct labor, and manufacturing overhead.

A _____________ helps an organization, whether for profit or nonprofit, turn its purpose into action by establishing the direction of the entity.

strategic plan

Contribution margin is

the difference between sales and variable costs.

If the (X,Y) relationship is purely variable,

the equation of a line becomes Y = m(X).

If costs are purely fixed in determining the cost line equation,

the equation of the line becomes Y = b.

Sammy's Snow Cone Stand has been selling an average of 850 snow cones per week over the first five months of this year. Sammy's sells each cone for $2. Each snow cone incurs variable costs of $0.75, and Sammy's weekly fixed costs are $900. What is the stand's weekly margin of safety in units?

130 cones

Your company has been provided with the following steps for an organization's decision-making framework. What is the appropriate order for the steps? 1. Calculate relevant costs and benefits for each option. 2. Implement your choice. 3. Clearly outline the problem and its related unknowns. 4. Select the option that maximizes the benefit to the organization and meets required qualitative criteria. 5. Identify suitable options and gather relevant qualitative and quantitative information, making informed assumptions as need be.

3, 5, 1, 4, 2

Which governing body establishes professional standards for the accounting industry?

American Institute of Certified Public Accountants (AICPA)

Which of the following statements regarding fixed costs and degree of operating leverage (DOL) is correct? A decrease in fixed costs of 50% will cause the DOL to increase by 50%. An increase in fixed costs of 30% will cause the DOL to decrease by 60%. An increase in fixed costs typically represents an investment in infrastructure by a company and results in a higher DOL. An increase in fixed costs typically represents an investment in infrastructure by a company and results in a lower DOL.

An increase in fixed costs typically represents an investment in infrastructure by a company and results in a higher DOL.

The margin of safety is equal to the amount that current or budgeted sales levels exceed which one of the following? Operating profit Break-even sales Fixed costs Net income

Break-even sales

Section 302 of the Sarbanes-Oxley Act of 2002 (SOX) requires that

CFOs and CEOs of public companies certify the accuracy of their reported financial information.

Which of the following statements about cost accounting is correct? Cost accounting has an external focus. Cost accounting is very narrow in scope. Cost accounting helps owners and managers make decisions about their companies. Cost accounting cannot be tied to all functional areas of a company.

Cost accounting helps owners and managers make decisions about their companies.

Which of the following items would appear on the income statement of a merchandiser but usually not on the income statement of a service provider? Revenues Cost of goods sold Net income Operating expenses

Cost of goods sold

Which statement regarding the degree of operating leverage (DOL) is correct? DOL is calculated as contribution margin divided by operating income. DOL is calculated as gross margin divided by net income after taxes. DOL is calculated as pretax income before interest and tax divided by sales revenues. DOL is calculated as net income divided by total fixed manufacturing costs.

DOL is calculated as contribution margin divided by operating income.

Which of the following statements is true regarding accounting in the management decision-making process? The format and content of internal financial reports are determined by the framework, principles, and rules of GAAP and/or IFRS. The scope of external financial reports and the level of detail within is kept private, as it is broader and more detailed than internal reports. External financial reports and records are created from the same database of financial transactions that populate the internal financial reports for decision-making purposes. Financial reports and records initiate the entire decision-making process for management.

External financial reports and records are created from the same database of financial transactions that populate the internal financial reports for decision-making purposes

Which of the following statements regarding a relatively high degree of operating leverage is correct? Firms with higher operating leverage will see a slower decline in profits as sales volume decreases. Firms with higher operating leverage will see a steeper increase in variable costs as sales volume increases. Firms with higher operating leverage will see a steeper increase in operating profit as sales volume increases. Firms with higher operating leverage will see a steeper increase in fixed costs and expenses as sales volume increases.

Firms with higher operating leverage will see a steeper increase in operating profit as sales volume increases.

Which of the following is an accurate statement regarding gross margin and contribution margin? All variable costs are subtracted from sales to arrive at both the contribution margin and the gross margin. All fixed and variable costs are subtracted from sales to arrive at both the gross margin and the contribution margin. Contribution margin and gross margin represent the same concept and therefore the terms may be used interchangeably. Gross margin is reached by subtracting both variable and fixed manufacturing costs from sales, while contribution margin is reached by subtracting all variable costs from sales.

Gross margin is reached by subtracting both variable and fixed manufacturing costs from sales, while contribution margin is reached by subtracting all variable costs from sales.

The fixed portion of the cost equation is called the

Intercept coefficient.

Licard Wineries Inc. sold 700 bottles of vintage burgundy in April at a price of $120 each. Licard incurs $45 in variable costs for each bottle of vintage burgundy and has total monthly fixed costs of $50000. Which of the following statements is correct? Licard operated at a loss of $2500 for the month. Licard operated at a profit of $2500 for the month. Licard operated at its break-even point for the month. Licard operated at a level at which contribution margin was less than fixed costs.

Licard operated at a profit of $2500 for the month.

Which of the following statements is correct? A strategic plan conveys the idea of a coordinated, consolidated, short-term, organization-wide plan. Many strategic plans include both short-term and long-term goals to direct the organization toward arriving at its vision. Once an organization determines its mission, it does not need to change it. Only for-profit entities need purpose and direction normally detailed in a strategic plan.

Many strategic plans include both short-term and long-term goals to direct the organization toward arriving at its vision.

The correct flow of the steps in the creation of an organization's strategic plan is

Mission and Vision→Goals and Objectives→Strategies and Initiatives→Measures and Targets→Results

The weighted-average contribution margin (WACM) is most useful when working with which of the following? Products with low variable costs. Products with high contribution margins. Multiple products or product lines with a known sales mix. Multiple products that are profitable even with high break-even points.

Multiple products or product lines with a known sales mix.

Which of the following is a period cost? Factory rent Factory depreciation Office depreciation Factory insurance

Office depreciation

Which of the following is considered to be a risk of the high-low method? The relevant range Outliers Requires judgment Requires software to handle all the data points

Outliers

Which type of data analytics uses observations and patterns detected to shape future decisions?

Predictive analytics

In choosing a strategy, a business begins by undertaking a thorough examination of itself and the industry within which it operates by performing a ______________ analysis. mission and vision statement

SWOT

The contribution margin income statement will show which of the following calculations? Sales revenues minus operating income. Sales revenues minus manufacturing costs. Sales revenues minus fixed costs. Sales revenues minus variable costs.

Sales revenues minus variable costs.

In creating a scatter plot using Excel, which of the following is true? Upon selecting the data then scatter chart icon, the scatter chart is displayed with the data. After the scatter chart icon is selected, the date selected. The cost driver is graphed on the horizontal axis. The chart title is selected at the same time the data is selected to ensure the chart contains the proper title once created.

The cost driver is graphed on the horizontal axis.

What is the common goal of the high-low method and the regression method?

To separate total costs into their fixed and variable cost components to help in predicting future costs with a derived equation.

Which of the following statements is correct regarding the management of costs for businesses when activity levels may change rapidly? Fixed costs are more manageable than variable costs. Both fixed costs and variable costs are easily managed. Variable costs are more manageable than fixed costs. Both variable costs and fixed costs are difficult to manage.

Variable costs are more manageable than fixed costs.

Which of the statements regarding the relevant range for a business is true? No relationship exists between the relevant range for a business and fixed costs and capacity. Within the relevant range for a business, the fixed costs and capacity will always change with the change in the activity level. Within the relevant range for a business, fixed costs stay fixed or constant when the activity level changes. Within the relevant range for a business, variable costs stay fixed or constant when the activity level changes.

Within the relevant range for a business, fixed costs stay fixed or constant when the activity level changes.

A cost driver is a(n)

activity that causes a particular cost.

The Chief financial officer is responsible for

all processes within the finance and accounting functional areas and an important player in strategic decisions for the company.

Visualizing data on a scatter-plot

allows the user to see actual data points.

Bloom's Taxonomy is a useful reference for every lifelong learner since the hierarchy of learning helps to recognize that

ascending to the highest level implies mastery of the levels that precede it.

Diagnostic analytics

attempts to make sense of the observations and/or patterns detected.

The primary difference in reporting between cost accounting and financial accounting is that

cost accounting reports support internal management decision-making whereas financial accounting reports present financial statement information to external users and decision-makers who do not work for the company.

In calculating the contribution margin, variable selling and administrative costs are

included in the variable costs.

A mixed cost

includes both a variable cost and a fixed cost component.

The "line of best fit" created in the regression method to generate a straight-line equation

is used to estimate future costs.

Section 404 of the Sarbanes-Oxley Act of 2002 (SOX) requires that

management of public companies recognize their responsibility for establishing internal controls and provide an assessment of the effectiveness of those internal controls.

An organization's __________ is its purpose; its reason for existing.

mission

An organization's strategic plan includes its why, where and how for its purpose represented by

mission, vision, strategy

Use of a scatter-plot

mitigates the risk of using outliers as a basis for the cost equation.

In graphing the "line of best fit" in the regression method

none of the data points have to touch the cost line.

Ethics

reflect expected behavior left up to the principles, conscience, and decision-making of an individual person.

Opportunity costs

relate to decision-making but are not reported on the financial statements.

Gross margin equals

sales less cost of goods sold.

Assuming all units produced are sold for a business, then the operating income computed in a contribution margin income statement as compared to a gross margin income statement is

the same amount.

The regression method

uses every point in a data set to create a straight-line equation to estimate future costs.

The _____________ comprises the required series of processes, and activities within them, that transform a product or service from thought to finish.

value chain

Contribution margin is defined as revenue less

variable costs.