Accounting Exam 2

Which of the following is true? A) Practical standards are based on ideal conditions B) A standard cost is the budgeted cost for one unit C) Standards should never be updated D) Ideal standards are based on currently attainable conditions

B) A standard cost is the budgeted cost for one unit

Which of the following is not an advantage of decentralization? A) Use of expert knowledge B) Achieving goal congruence C) Frees top management's time D) Improved customer relations

B) Achieving goal congruence

Which of the following ratios measures a company's ability to pay current liabilities? A) Debt ratio B) Acid-test, or quick, ratio C) Inventory turnover D) Dividend yield

B) Acid-test, or quick, ratio

The direct labor rate variance can be defined as which of the following? A) Standard hours allowed x​ (Actual rate​ - Standard​ rate) B) Actual hours x​ (Actual rate​ - Standard​ rate) C) Standard rate x​ (Actual hours​ - Standard hours​ allowed) D) Actual rate x​ (Actual hours​ - Standard hours​ allowed)

B) Actual hours * (Actual rate - standard rate)

Which term described the situation in which a manager intentionally overbudgets expenses or underbudgets revenue? A) Benchmarking B) Budgetary slack C) Participative budgeting D) Strategic planning

B) Budgetary slack

After identifying potential capital investments, the next step in the capital budgeting process is which of the following? A) Performing post-audits of the capital investments B) Estimating the future net cash inflows of the investments C) Engaging in the capital rationing D) Analyzing potential investments through at least one of the four methods

B) Estimating in the future net cash inflows of the investments

A(n) ________ variance is the result when actual revenues are higher than budgeted, or actual expenses are lower than budgeted A) Unfavorable B) Favorable C) Profit D) Cost

B) Favorable

Which of the following provides a year-to-year comparison of a company's performance in two different years? A) Ratio analysis B) Horizontal analysis C) Vertical analysis D) Time study analysis

B) Horizontal analysis

Which of the following is not true about the fixed overhead volume variance? A) If production volume is lower than originally anticipated, then fixed overhead cost would be under allocated B) If production volume is greater than originally anticipated, the variance will be unfavorable C) It is partially the result of incorrectly estimating the level of activity when calculating the predetermined fixed manufacturing overhead rate D) It is partially the result of treating fixed overhead costs as if they were variable for allocating the costs to individual units of production

B) If production volume is greater than originally anticipated, the variance will be unfavorable

On January​ 1, 2016, the newly renamed Julius Tower​ reopened, replacing the Roman Tower. In addition to renovating the existing rooms and suites in the former Roman​ Tower, 20 guest rooms were added to the tower. What type of responsibility center would the Julius Tower be​ considered? A) Investment B) Profit C) Revenue D) Cost

B) Profit

Which of the following ratios is used to measure profitability? A) Times interest earned B) Rate of return on net sales C) Current ratio D) Days' sales in receivables

B) Rate of return on net sales

Which of the following is not an advantage of using standard costs? A) Standards serve as cost benchmarks B) Standards can cause unintended behavioral consequences C) Standards are useful for budgeting D) Standards can simplify bookkeeping

B) Standards can cause unintended behavioral consequences

When performing vertical analysis, each line on the balance sheet is computed as a percentage of which of the following? A) Total cash flows B) Total assets C) Total stockholder's equity D) Total liabilities

B) Total assets

A trend study compares financial performance against A) Other companies within the industry B) The previous years C) A selected base year D) The company's first year of operations

C) A selected base year

Which of the following methods focuses on the operating income an asset generates rather than the net cash inflows it generates? A) Payback period B) Internal rate of return C) Accounting rate of return D) Net present value

C) Accounting rate of return

Keys to making short-term decisions include which of the following? A) Using a contribution margin approach that separates variable costs from fixed costs B) Focusing on relevant revenues, costs and profits C) Both of the above D) None of the above

C) Both of the above

Which of the following budgets is unique to merchandising companies? A) Direct materials budget B) Operating expenses budget C) Cost of goods sold, inventory and purchase budget D) Production budget

C) Cost of goods sold, inventory and purchase budget

In making "sell as is" decisions, companies should consider all of the following EXCEPT for A) Incremental costs that would be incurred by processing further B) Incremental revenues that would be earned by processing further C) Costs incurred up to the​ "sell as​ is" decision point D) All of the above should be considered.

C) Costs incurred up to the​ "sell as​ is" decision point

Working capital is defined as A) Cash minus current liabilities B) Current liabilities plus current assets C) Current assets minus current liabilities D) Current liabilities minus current assets

C) Current assets minus current liabilities

Leverage refers to how companies finance their operations with A) Issued stock B) Treasury stock C) Debt D) Inventory

C) Debt

Which of the following is generally undesirable? A) Increase in times-interest-earned ratio B) Decrease in days' sales in receivables C) Decrease in inventory turnover D) Decrease in debt ratio

C) Decrease in inventory turnover

A budget that is prepared for a different level of volume than originally anticipated in order to gain better insights is known as what? A) Master budget B) Adjusted budget C) Flexible budget D) Variance budget

C) Flexible budget

The variable overhead rate variance can be defined as which of the following? A) Actual hours x​ (Actual rate​ - Standard​ rate) B) Standard hours allowed x​ (Actual rate​ - Standard​ rate) C) Actual rate x​ (Actual hours​ - Standard hours​ allowed) D) Standard rate x​ (Actual hours​ - Standard hours​ allowed)

A) Actual hours x​ (Actual rate​ - Standard​ rate)

The direct material price variance can be defined as which of the following? A) Actual quantity purchased * (Actual price -Standard Price) B) Actual price * (Actual quantity used - standard quantity allowed) C) Standard price * (Actual quantity used - standard quantity allowed) D) Standard quantity allowed * (Actual price - standard price)

A) Actual quantity purchased * (Actual price - standard price)

Which of the following is not true about standard costing systems? A) At the end of the period, the variances are closed to the Sales Revenue account B) A standard cost income statement shows cost of goods sold at standard, along with all of the variances needed to adjust cost of goods sold back to actual C) Each type of variance has its own general ledger account D) Standard costs are used to record the manufacturing costs entered into the inventory accounts

A) At the end of the period, the variances are closed to the Sales Revenue account

All of the following measure turnover, except A) Current ratio B) Accounts payable turnover C) Days' sales outstanding D) Accounts receivable turnover

A) Current ratio

Which of the following is true? A) Favorable variances are variances that cause operating income to be higher than budgeted B) Unfavorable variances should always be interpreted as "bad news" for the company C) Favorable variances should always be interpreted as "good news" for the company D) Management by exception means that managers investigated all favorable variances but not all favorable variances

A) Favorable variances are variances that cause operating income to be higher than budgeted

When potential capital investments of different size are compared, management should choose the one with the A) Highest profitability index B) Highest NPV C) Lowest IRR D) Lowest NPV

A) Highest profitability index

Which of the following is not an advantage that Caesars may experience from using standard costing? A) Improved focus on operational performance measures and visual management B) Simplified bookkeeping C) Creates cost benchmarks by which to judge actual costs D) Usefulness in budgeting

A) Improved focus on operational performance measures and visual management

In terms of responsibility centers, a large corporate division would be considered A) Investment center B) Profit center C) Cost center D) Revenue center

A) Investment center

Suppose Caesars' accounts receivable turnover is 15. What does that mean? A) It takes Caesars an average of 15 days to collect all of its credit sales B) It takes Caesars an average of 15 days to pay its accounts payable C) Caesars pays off its accounts payable 15 times per year D) Caesars collects all of its sales on accounts 15 times per year

A) It takes Caesars an average of 15 days to collect all of its credit sales

Which of the following is true? A) Only debit card transaction fees are limited by law B) Both credit card and debit card transaction fees are limited by law. C) Neither credit card nor debit card transaction fees are limited by law. D) Only credit card transaction fees are limited by law

A) Only debit card transaction fees are limited by law

In a ________ center, a Caesars manger would be accountable for both revenues and costs A) Profit B) Revenue C) cost D) Investment

A) Profit

When performing vertical analysis, each line item on the income statement is computed as a percentage of which of the following? A) Sales revenue B) Net income C) Costs of goods sold D) Operating expenses

A) Sales revenue

An investment's NPV is calculated as which of the following? A) The present value of net cash inflows from the investment minus the investment's initial investment B) The investment's initial investment minus the present value of the investment C) The future value of the investment minute the investment's initial investment D) The investment's initial investment minus the future value of the investment

A) The present value of net cash inflows from the investment minus the investment's initial investment

When resources are constrained, which of the following should be used to guide product mix decisions? A) The products' contribution margin per unit of constraint B) The products' gross margin per unit of constraint C) The products' contribution margin D) The products' gross margin

A) The product's contribution margin per unit of constraint

Which of the following is false? A) The volume variance is due to causes other than volume. B) The flexible budget is prepared using the actual volume achieved during the period. C) The master budget variance can be split into two​ components: a volume variance and a flexible budget variance. D) The difference between actual results and the master budget is called the master budget variance.

A) The volume variance is due to causes other than volume

Which of the following is not a valid strategy for determining a transfer price? A) Using the price set by GAAP B) Using some definition of cost C) Using the market price D) Using a negotiated price

A) Using the price set by GAAP

Which of the following accurately describes the decision rule that Caesars should follow in regards to investing in capital assets? A) If NPV is negative, the project earns more than the required rate of return, so Caesars should invest B) If NPV is positive, the project earns less than the required rate of return, so Caesars should not invest C) If NPV is positive, the project earns more than the required rate of return, so Caesars should invest D) There is not a decision rule listed regarding investing in capital assets that Caesars should follow

C) If NPV is positive, the project earns more than the required rate of return, so Caesars should invest

What is the formula to calculate the times-interest-earned ratio? A) Net income / Net interest B) Operating income / Interest expense C) Income from operations / interest expense D) Interest revenue / operation expense

C) Income from operations / Interest expense

Which of the following capital budgeting methods that incorporate the time value of money calculates the investment's unique rate of return? A) Payback period B) Net present value C) Internal rate of return D) Accounting rate of return

C) Internal rate of return

Which of the following is false with regards to the payback period? A) The payback period is the length of time it takes to recover the initial cost of the capital investment B) All else being equal, a shorter payback period is more desirable than a longer payback period C) It is computed as follows, regardless of whether cash flows are equal or unequal: Initial investment/Expected annual net cash inflow D) The payback period gives no indication of the investment's profitability

C) It is computed as follows, regardless of whether cash flows are equal or unequal: Initial investment/Expected annual net cash inflow

Which of the following is not true about the fixed overhead budget variance? A) It is the difference between actual fixed overhead and budgeted fixed overhead B) It is sometimes referred to as the fixed overhead spending variance C) It is the difference between the budgeted fixed overhead and the standard fixed overhead allocated to production D) It can be either favorable or unfavorable

C) It is the difference between the budgeted fixed overhead and the standard fixed overhead allocated to production

​"Hours of employee​ training" would be a key performance indicator​ (KPI) for which of the four balanced scorecard​ perspectives? A) Customer B) Internal business C) Learning and growth D) Financial

C) Learning and growth

The comprehensive planning document for the entire organization is called the ____ budget A) Cash B) Operating C) Master D) Financial

C) Master

A segment margin is the operating income generated by subtracting A) Only common fixed expenses from a segment's contribution margin B) All expenses from a segment's sales revenue C) Only direct fixed expenses from a segment's contribution margin D) All fixed expenses from a segment's contribution margin

C) Only direct fixed expenses from a segment's contribution margin

A(n) _________ cost is a budget for a single unit of a product A) Ideal B) Flexible C) Standard D) Actual

C) Standard

The direct material quantity variance can be defined as which of the following? A) Actual quantity purchased * (Actual price -Standard Price) B) Actual price * (Actual quantity used - standard quantity allowed) C) Standard price * (Actual quantity used - standard quantity allowed) D) Standard quantity allowed * (Actual price - standard price)

C) Standard price * (Actual quantity used - Standard quantity allowed)

The direct labor efficiency variance can be defined as which of the following? A) Actual rate x​ (Actual hours​ - Standard hours​ allowed) B) Actual hours x​ (Actual rate​ - Standard​ rate) C) Standard rate x​ (Actual hours​ - Standard hours​ allowed) D) Standard hours allowed x​ (Actual rate​ - Standard​ rate)

C) Standard rate * (Actual hours​ - Standard hours​ allowed)

The internal rate of return is which of the following? A) The accounting rate of return minus 1% B) The internal management's minimum required rate of return C) The interest rate that makes the NPV of an investment equal to zero D) The amount of time it takes to recoup the initial investment

C) The interest rate that makes the NPV of an investment equal to zero

Which is true of price-setters? A) Their pricing approach emphasizes target costing. B) They are in highly competitive markets. C) Their pricing approach emphasizes​ cost-plus pricing. D) Their products lack uniqueness.

C) Their pricing approach emphasizes cost-plus pricing

What does net working capital measure? A) Profitability B) Leverage: overall ability to pay debts C) Turnover and cash conversion cycle D) Ability to pay current liabilities with current assets

D) Ability to pay current liabilities with current assets

Benefits of budgeting include A) Coordination and communication B) Benchmarking C) Planning D) All of the above

D) All of the above

Companies often decentralize their operations by A) Product line B) Customer base C) Geographic area D) All of the above

D) All of the above

The time value of money depends on which of the following factors? A) Number of periods B) Principal amount C) Interest rate D) All of the above

D) All of the above

Which of the following is a benefit of budgeting? A) Force managers to plan B) Promote a coordination and communication C) Provide a benchmark to motivate employees D) All of the above

D) All of the above

Which of the following is true about the Direct Labor Rate Variance? A) Tells managers how much of the labor variance is due to paying a higher or lower hourly wage rate than anticipated B) It is calculated as Actual Hours * (Actual rate - standard rate) C) The human resources and production supervisors are primarily responsible for explaining this variance D) All of the above

D) All of the above

Which of the following should be considered for special order decisions? A) Whether the special price will be high enough to cover incremental costs of filling the order B) Whether the special order will affect regular sales in the long run C) Whether excess capacity exists D) All of the listed choices should be considered in special order decisions.

D) All of the listed choices should be considered in special order decisions

Which of the following factors does not affect the time value of money? A) Number of periods B) Interest rate C) Principal amount D) Breakeven point

D) Breakeven point

Which of the following is used to compare one company against another or against an industry average, using percentages as a comparison mechanism? A) Horizontal statement B) Comparison statement C) Percentage statement D) Common-size statement

D) Common-size statement

Which variance would tell Caesars' managers how much of the total labor variance is due to using a different amount of worker hours than anticipated? A) Fixed overhead budget variance B) Direct materials price variance C) Direct labor rate variance D) Direct labor efficiency variance

D) Direct labor efficiency variance

In order for information to be relevant it must be ______ data that ______ among alternatives A) Past; differs B) Past; is similar C) Future; is similar D) Future; differs

D) Future; differs

​"Number of new products​ developed" would be a key performance indicator​ (KPI) for which of the four balanced scorecard​ perspectives? A) Customer B) Financial C) Learning and growth D) Internal business

D) Internal business

The ______ budget is the comprehensive planning document for the entire organization A) Production B) Sales C) Operating D) Master

D) Master

What is the formula to calculate Caesars Entertainment Corporation's return on investment (ROI)? A) Operating income ÷ Sales B) Sales ÷ Total assets C) Total assets ÷ Sales D) Operating income ÷ Total assets

D) Operating income ÷ Total assets

Which of the following is false? A) Outsourcing decisions should take into consideration the intended use of freed capacity B) Contract manufacturers are manufacturers that make products for other companies C) Outsourcing decisions are often referred to as "make-or-buy" decisions D) Outsourcing refers to having work performed overseas

D) Outsourcing refers to having work performed overseas

Which of the following is false? A) Sunk costs are never relevant to a decision B) Relevant information always regards the future C) Relevant information always differs among alternatives D) Relevant information is always financial in nature

D) Relevant information is always financial in nature

Return on investment (ROI) can be restated as which of the following? A) Residual income x sales margin B) Sales margin​ / capital turnover C) Residual income​ / sales margin D) Sales margin x capital turnover

D) Sales margin x capital turnover

In order to convert the average annual net cash inflow from the asset back to the average annual operating income from the asset, one must A) Divide by annual depreciation expense B) Add annual depreciation expense C) Multiply by annual depreciation expense D) Subtract annual depreciation expense

D) Subtract annual depreciation expense

Costs that have already occurred and cannot be changed regardless of any future action taken are known as A) Short-term costs B) Breakeven costs C) Fixed costs D) Sunk costs

D) Sunk costs

Which of the following is true for merchants that accept payments made by Visa, Mastercard, and other forms of "plastic"? A) Retail cards​ (such as Target and​ Kohl's charge​ cards) have similar transaction fees to those issued by Visa and MasterCard. B) Transaction fees are generally a fixed amount per month. C) Credit card fees are usually lower than debit card fees. D) Transaction fees should be budgeted for in the operating expenses budget.

D) Transaction fees should be budgeted for in the operating expenses budget.

If Caesars selected total assets as its base and reported each balance sheet item as a percentage of total assets, what type of analysis is Caesars performing? A) Trend analysis B) Benchmark analysis C) Horizontal analysis D) Vertical analysis

D) Vertical analysis