Acis 2116 exam 3
Which of the following statements is true regarding absorption costing?
It assigns all manufacturing costs, both fixed and variable, to units of product. Correct
Which of the following statements is true with respect to the labor rate variance?
It is computed using the actual hours worked.
Which of the following statements is false regarding job-order costing?
It is used for manufacturing companies, but not service companies
Which of the following statements is true regarding the profitability index?
It is used for preference decisions.
Which of the following statements is true regarding job-order costing?
It is used in situations where many different products, each with unique features, are produced each period.
Which of the following statements is true regarding the payback period?
It measures the length of time that it takes for a project to recover its initial cost from the net cash inflows that it generates.
In variable costing, a complete definition of unit product cost includes:
Direct materials, direct labor, and variable manufacturing overhead.
Which of the following equations is true?
Dollar sales for a segment to break even = Segment traceable fixed expenses ÷ Segment contribution margin (CM) ratio.
Which of the following statements is true when computing the net cash provided by (used in) operating activities using the indirect method?
If the accounts payable balance increases during the period, the amount of the increase is added to net income.
Which of the following statements is true when computing the net cash provided by (used in) operating activities?
If the accounts receivable balance decreases during the period, the amount of the decrease is added to net income.
Which of the following statements is true when computing the net cash provided by (used in) operating activities?
If the accounts receivable balance increases during the period, the amount of the increase is subtracted from net income.
Which of the following statements is false regarding absorption costing?
It relies on a predetermined overhead rate to apply direct material cost to units of product.
Which of the following statements is true regarding the internal rate of return?
It represents the rate of return earned by an investment project
Assume a company sold a piece of equipment that had an original cost of $15 million and accumulated depreciation of $10 million. The cash proceeds from the sale were $8 million and the gain on the sale was $3 million. Which of the following statements is true when the indirect method is used to prepare the operating activities section of the company's statement of cash flows?
It will include an adjustment that subtracts $3 million from net income.
When making volume trade-off decisions managers should:
never produce more of a product than is demanded by customers.
The term capital budgeting describes how companies:
plan significant investments in projects that have long-term implications.
Avoidable costs are always:
relevant costs.
Differential costs are always:
relevant costs.
Assume that a company is considering buying a new piece of equipment for $280,000 that would have a useful life of five years and a salvage value of $30,000. The equipment would generate the following estimated annual revenues and expenses: Revenues $ 120,000 Less operating expenses: Commissions$ 15,000 Insurance5,000 Depreciation50,000 Maintenance 30,000 100,000 Net operating income $ 20,000 using the tables provided. The company also believes that this investment would provide some annual intangible benefits that are difficult to quantify. Assuming a discount rate of 15%, the minimum dollar value per year that must be provided by the equipment's intangible benefits to justify the $280,000 investment is closest to:
step 1: find npv step 2: minimum dollar value per year to justify investment= npv/ annuity factor
The cost of goods manufactured is:
the amount transferred from Work in Process to Finished Goods.
Assume that a company buys a new machine for $120,000 that has a useful life of six years and a $20,000 salvage value. The machine will reduce operating costs by $25,000 per year. What is the payback period for this investment?
4.8 years
Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The internal rate of return on this investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
21% initial investment/ cost= factor of internal rate of return use the factor of internal rate of return to find the answer on Table 2 on the 5 period line
Assume that a company makes 30,000 units of Part A each year. At this level of production, the company's accounting system reports the following cost per unit: Direct materials$ 16Direct labor10Variable manufacturing overhead4Fixed manufacturing overhead8Total cost per unit$ 38 An outside supplier has offered to sell the company 30,000 parts per year for a price of $33 per part. The company believes that $160,000 of the fixed manufacturing overhead cost being allocated to this part will continue to be incurred even if the part is purchased from the outside supplier. What is the financial advantage (disadvantage) of buying the parts from the outside supplier?
(10000) avoidable variable manufacturing +avoidable fixed manufacturing =total manufacturing avoidable costs Cash paid to supplier -total manufacturing avoidable costs = financial advantage
Assume a company is considering buying 10,000 units of a component part rather than making them. A supplier has agreed to sell the company 10,000 units for a price of $40 per unit. The company's accounting system reports the following costs of making the part: **reference #10 on practice for numbers***** Three-fourth's of the traceable fixed manufacturing overhead relates to supervisory salaries and the remainder relates to depreciation of equipment with no salvage value. If the company chooses to buy this component part from a supplier, then the supervisor who oversees its production would be discharged. What is the financial advantage (disadvantage) of buying 10,000 units from the supplier?
(20000) find 3/4 of the traceable fixed manufacturing OH DM+DL+VMO+FMO,traceable= price of making
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value)$ 500,000 Annual revenues and costs: Sales revenues$ 300,000 Variable expenses$ 130,000 Depreciation expense$ 50,000 Fixed out-of-pocket costs$ 40,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. If the company's discount rate is 12%, then the net present value for this investment is closest to:
(31350) find the net cash flow then multiply by the discount rate at the 5 year period = present value intial investment - present value = net present value
Assume that a company is considering buying a new piece of equipment for $250,000 that would have a useful life of five years and a salvage value of $30,000. The equipment would generate the following estimated annual revenues and expenses: Revenues $ 120,000 Less operating expenses: Commissions$ 15,000 Insurance5,000 Depreciation44,000 Maintenance30,000 94,000 Net operating income $ 26,000 using the tables provided. Assuming a discount rate of 15%, what is the net present value of this investment?
(450) step 1: find annual cash flow= revenue- operating expenses step 2: find PV lump sum,5yr, 15% and Annuity,5yr, 15% step 3: cf1-5= annuity pv* annual cf cf5= lump sum pv* salvage value step4: npv= (cf15+CF5) - initial investment
Assume the following excerpts from a company's balance sheet: Beginning Balance : Ending Balance Property, plant, and equipment$ 3,750,000 : 3,500,000 Long-term investments $950,000 : $ 1,100,000 During the year, the company did not purchase any property, plant, and equipment. It sold equipment that had accumulated depreciation of $150,000 for a loss of $20,000. The company did not sell any long-term investments during the period. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
(70,000) step 1: find original cost of the equipment: credits= beginning balance + debits - ending balance step 2: find book value of the equipment=original cost- accum depreciation step 3: find cash proceeds from sale of equipment= book value-loss on the sale step 4: find purchases of long term investments: debits= ending balance + credits- beginning balance step 5: find net cash used by investing activities= cash proceeds- purchase of long-term investments
Assume the following excerpts from a company's balance sheet: Beginning BalanceEnding BalanceProperty, plant, and equipment$ 3,500,000$ 3,750,000 Long-term investments$ 950,000$ 1,100,000 During the year, the company sold a piece of equipment for $200,000. The equipment originally cost $500,000 and had accumulated depreciation of $290,000. The company did not sell any long-term investments during the period. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
(700000) find the additions to PPE by finding debits Beginning balance + Debit - Credit = Ending balance find the purchases of long term purchases by finding debits Beginning balance + Debit - Credit = Ending balance debits for PPE debits for Long term purchases + cash proceeds from sale of equipment = net cash provided by investing activiting
Assume that a company manufactures and sells a variety of products, one of which it refers to as Product A. The company is considering dropping Product A because the income statement for this product is reporting a net operating loss as shown below: *Look at question 27**** If Product A is dropped, the company would transfer its product-line manager to another department and discontinue a search for a new manager that the company anticipated paying a salary of $45,000. The general factory overhead and purchasing department expenses are common costs that the company allocates to all of its products using total sales dollars as the allocation base. The equipment used to manufacture Product A does not wear out through use and it has no resale value. What is the financial advantage (disadvantage) of dropping Product A?
(72000) forgone contribution margin -avoided salary -advertising - insurance = finanacial advantage
Assume that a company is considering a capital investment project with a four-year time horizon and the following cash flows: Cost of new equipment $210,000 Working capital required $50,000 Annual net cash inflows $100,000 Maintenance and repairs in third year $40,000 Salvage value of equipment in fourth year $30,000 using the tables provided. Assuming the company's required rate of return is 20%, the profitability index of the project is closest to:
1.05 step 1: calculate the present value of cash inflows= CF yr1*lump sum factor+cfyr2*lump2+(cfyr3-maintenance)* lump3+(cfyr4+salvage+ working capital)*lump4 step 2: profitability index=pvcf/ investment requires ;investment required= cost of investment+ working capital
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value)$ 400,000 Annual revenues and costs: Sales revenues$ 300,000 Variable expenses$ 130,000 Depreciation expense$ 50,000 Fixed out-of-pocket costs$ 40,000 Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided. Assuming a discount rate of 12%, this proposal's profitability index is closest to:
1.17 find the net cash flow multiply by discount rate at 5 yr period= present value present value/ initial investment = profitability index
Assume a retailing company has two departments—Department A and Department B. The company's most recent contribution format income statement follows: TotalDepartment A Department BSales$ 800,000$ 350,000$ 450,000 Variable expenses 320,000120,000200,000 Contribution margin480,000230,000250,000 Fixed expenses400,000140,000260,000 Net operating income (loss)$ 80,000$ 90,000$ (10,000) The company says that $120,000 of the fixed expenses being charged to Department B are sunk costs or allocated costs that will continue if the segment is discontinued. However, if Department B is discontinued the sales in Department A will drop by 12%. What is the financial advantage (disadvantage) of discontinuing Department B?
137600 loss in contribution margin(B)+ loss in cont margin(A) - reelevant fixed exp
Assume a company has two products—A and B—that emerge from a joint process. A total of 2,000 units of Product A are produced from the joint process. Product A can be sold at the split-off point for $16 per unit, or it can be processed further for an additional total cost of $16,000 and then sold for $25 per unit. What is the incremental revenue earned by further processing Product A?
18000 after split off unit* number of total units - before split off unit* number of total units
Assume a company has three products—A, B, and C—that emerge from a joint process. The selling prices and outputs for each product at the split-off point are as follows: Product Selling PriceOutputA$ 33per pound14,000poundsB$ 29per pound18,000poundsC$ 24per pound19,000pounds Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: ProductAdditional Processing CostsSelling PriceA$ 65,000$ 37per poundB$ 72,000$ 34per poundC$ 70,000$ 30per pound What is financial advantage (disadvantage) of further processing Product B?
18000 after split off unit* number of total units - before split off unit* number of total units - additional cost = financial advantage
Assume a company has two products—A and B—that emerge from a joint process. Product A has been allocated $24,000 of the total joint costs of $48,000. A total of 2,000 units of Product A are produced from the joint process. Product A can be sold at the split-off point for $16 per unit, or it can be processed further for an additional total cost of $16,000 and then sold for $25 per unit. What is the financial advantage (disadvantage) of further processing Product A?
2000 after split off unit* number of total units - before split off unit* number of total units - additional cost = financial advantage
Assume that a company provided the following statement of cash flows (all sales are on account): Operating activities: Net income $ 45 Adjustments to convert net income to a cash basis: Depreciation$ 15 Decrease in accounts receivable2 Increase in inventory(10) Increase in accounts payable411 Net cash provided by (used in) operating activities 56 Investing activities: Additions to property, plant, & equipment(40) Net cash provided by (used in) investing activities (40) Financing activities: Issuance of common stock5 Cash dividends paid(14) Net cash provided by (used in) financing activities (9) Net increase in cash and cash equivalents 7 Beginning cash and cash equivalents 6 Ending cash and cash equivalents $ 13 If the company's sales were $200, then its cash collections from customers were:
202 Sales + accounts recievable= Cash collections from customers
Assume a company's balance sheet showed beginning and ending balances in the Long-Term Investments account of $1,100,000 and $900,000, respectively. The company sold a long-term investment that cost $300,000 and recorded a gain on this sale of $15,000. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
215000 orginal cost on long term investment +gain on sale = 315000 find debit Beginning balance + Debit - Credit = Ending balance After finding debit
Assume a company sold a piece of equipment that had an original cost of $500,000 and accumulated depreciation of $300,000. The cash proceeds from the sale were $220,000. The gain on the sale was $20,000. Based solely on the information provided, the company's net cash provided by (used in) investing activities would be:
220000 cash proceeds from sale
Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300 units of a slightly customized version of one of its products for $42. The normal selling price of this product is $48 per unit. It can fulfill the order using existing manufacturing capacity. The company's accounting system estimates the following unit product cost for this product: Per Unit Direct materials$ 18 Direct labor12 Manufacturing overhead10 Total cost$ 40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range. Assuming that this decision will have no effect on sales to other customers, what is the financial advantage (disadvantage) of accepting the special order?
2700 3$(VMO) varies which makes it avoidable/ relevant DM+DL+VMO= cost per unit revenue - cost= advantage(disadvantage)
Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and no salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. What is the net present value of this investment? Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using table.
3,159 find discount rate units using the table discount rate* cost = present value present value- investment= Net present value
Assume that a company buys a new machine for $220,000 that has a useful life of five years and a $20,000 salvage value. The new machine will replace an old machine that can be sold for a salvage value of $10,000. The machine will generate incremental contribution margin of $60,000 per year. The only fixed expense associated with the new machine is its annual depreciation of $40,000 per year. What is the payback period for this investment?
3.5 years cost of new machine - old machine salvage value = investment required Investment required / net cash inflow = payback period
Assume the following information for a capital budgeting proposal with a five-year time horizon: Initial investment: Cost of equipment (zero salvage value)$ 500,000 Annual revenues and costs: Sales revenues$ 300,000 Variable expenses$ 130,000 Depreciation expense$ 50,000 Fixed out-of-pocket costs$ 40,000 The payback period for this investment is closest to:
3.85 investment required/ net cash flow= payback period revenues- cash expenses(depreciation isn't a cash exp)= net cash inflow
Assume a company has three products—A, B, and C—that emerge from a joint process. The selling prices and outputs for each product at the split-off point are as follows: ProductSelling PriceOutputA$ 33per pound14,000poundsB$ 29per pound18,000poundsC$ 24per pound19,000pounds Each product can be processed further beyond the split-off point. The additional processing costs for each product and their respective selling prices after further processing are as follows: ProductAdditional Processing CostsSelling PriceA$ 65,000$ 37per poundB$ 72,000$ 34per poundC$ 88,000$ 30per pound What is financial advantage (disadvantage) of further processing if the company decides to further process all three products?
35000 after split off unit* number of total units - before split off unit* number of total units - additional cost = financial advantage do that for each product
Assume a company manufactures many products, one of which normally sells for $48 per unit. The company's accounting system reports the following unit product cost for this product: Per Unit Direct materials$ 18 Direct labor12 Manufacturing overhead10 Total cost$ 40 The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced. .A customer has approached the company with an offer to buy 300 units of a customized version of the product mentioned above for $39. The company can fulfill this order using existing manufacturing capacity. To accommodate the customer's desired product design, the company would incur additional direct materials cost per unit of $3. It would also have to buy a special tool for $520 that has no other use or resale value after the special order
380 DM(revised)+DL+MO(revised) + special tool price= cost revenue-cost
Assume a company is considering using available space to make 10,000 units of a component part that it has been buying from a supplier for a price of $40 per unit. The company's accounting system estimates the following costs of making the part: **reference #11 on practice for number***** One-half of the traceable fixed manufacturing overhead relates to a supervisor that would have to be hired to oversee production of the part. The remainder of the traceable fixed manufacturing overhead relates to depreciation of equipment that the company already owns. This equipment has 20,000 units of unused capacity, no resale value, and it does wear out through use. What is the financial advantage (disadvantage) of making 10,000 units instead of buying them from the supplier?
40000 find 3/4 of the traceable fixed manufacturing OH DM+DL+VMO+FMO,traceable= price of making
Assume that a company is considering purchasing a new piece of equipment for $240,000 that would have a useful life of 10 years and a salvage value of $24,000. The new equipment would cost $20,000 per year to operate and it would replace an old piece of equipment that costs $60,000 per year to operate. The old equipment currently being used could be sold for a salvage value of $40,000. The payback period for the new equipment is closest to: Multiple Choice
5 years step 1. initial investment = purchase price - salvage value step 2. annual net cash inflow= old operation cost- new op cost step 3. payback period= initial investment / annual net cash inflow
Assume a company makes only three products, A, B, and C: Product AProduct BProduct CEstimated customer demand in units700600800 Selling price per unit$ 80$ 65$ 45 Variable cost per unit$ 35$ 26$ 20 Machine-hours per unit2.53.01.25 The company has only 2,700 machine-hours available. What is the highest total contribution margin that the company can earn if it makes optimal use of its constrained resource?
50600 selling - Var = cont margin cont margin / machine hr = cont margin per unit estimated customer demand * machine hours per unit= machine-hours needed to meet demand constraint determines what machine hours are used (greatest to least). lastly, the contribution margin per machine hr* machine hr used = total contribution margin
Assume that a company is considering purchasing a machine for $100,000 that will have a seven-year useful life and a $16,000 salvage value. The machine will lower operating costs by $18,000 per year and increase sales volume by 1,000 units per year. The company earns a contribution margin of $3.00 per unit. The company also expects this investment to provide qualitative benefits that it is struggling to incorporate into its financial analysis. Assuming the company's required rate of return is 17%, the minimum dollar value per year that must be provided by the machine's qualitative benefits to justify the $100,000 investment is closest to: Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
5344 find the present value for operating cost and salvage value for salvage value use table one for operating cost use table two include contribution margin this time multiple their respective discounted rates by their cost to get Present value(PV) Initial investment-(PV cost + PV salvage value)= NPV NPV/ factor for annuity(table two)= minimum dallor value per year.
Assume that a company is considering purchasing a machine for $50,000 that will have a five-year useful life and a $5,000 salvage value. The machine will lower operating costs by $17,000 per year. The company's required rate of return is 18%. The net present value of this investment is closest to:Click here to view Exhibit 14B-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using the tables provided.
5344 find the present value for operating cost and salvage value for salvage value use table one for operating cost use table two multiple their respective discounted rates by their cost to get Present value(PV) Initial investment-(PV cost + PV salvage value)= NPV
Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows: Annual sales5,000units Unit selling price$ 60 Unit variable costs: Production$ 33.00 Selling$ 6.00 Incremental fixed costs per year: Production$ 35,000 Selling $ 45,000 If the company adds this new product, it expects the contribution margin of other product lines to drop by $18,500 per year. What is the lowest price the company could charge and still break-even on the new product?
58.70 add up the costs along with the contribution margin drop per unit. costs /annual sales = per unit Var production +Var Selling +Production per unit +Selling per unit + drop in contribution margin per unit =lowest break even
Assume a company's net cash provided by operating activities is $86,000. It provided the following excerpts from its balance sheet: This YearLast Year Current assets: Accounts receivable$ 40,000$ 46,000 Inventory$ 53,000$ 50,000 Prepaid expenses$ 13,000$ 11,000 Current liabilities: Accounts payable$ 38,000$ 44,000 Accrued liabilities$ 18,000$ 15,000 Income taxes payable$ 13,000$ 10,000 Also assume the company incurred a loss on the sale of equipment of $4,000 and the credits to its accumulated depreciation account are $21,000.Based solely on the information provided, the company's net income would be:
60000 Current Accounts inverse Current Liabilities are the same use those two rules to find net adjusted to net income net cash provided by operating activities is 86000 - net adjusted to net income = net income
Assume a company is considering adding a new product. The expected cost and revenue data for this product are as follows: Annual sales5,000units Unit selling price$ 60 Unit variable costs: Production$ 33 Selling$ 6 Incremental fixed costs per year: Production$ 35,000 Selling$ 45,000 If the company adds the new product, it expects the contribution margin of other product lines to drop by $18,500 per year. What is the financial advantage (disadvantage) of adding the new product?
6500 find cont margin subtract fixed costs = incremental NOI substract contribution margin droppage
Which of the following equations is used to calculate the simple rate of return?
Annual incremental net operating income ÷ Initial investment
Assume that a company is planning to invest $150,000 in a project that will last three years. The project will produce the following net cash inflows: Year 1$ 60,000 Year 2$ 75,000 Year 3$ ? using the tables provided.Assuming the project's internal rate of return is exactly 16%, the expected net cash inflow for year 3 is closest to:
66,388 step 1: find lump factor yr 1, yr 2, and yr 3 Step 2: find pv yr1,2= cf*lump factor step 3:find pv of yr 3= initial investment-pv yr1- pv yr2 step 4: net cf inflow yr3= pv yr3/ lump factor yr3
Assume a company had net income of $60,000. It provided the following excerpts from its balance sheet: This YearLast Year Current assets: Accounts receivable$ 46,000$ 46,000 Inventory$ 53,000$ 53,000 Current liabilities: Accounts payable$ 44,000$ 49,000 Income taxes payable$ 10,000$ 14,000 If the company did not sell any noncurrent assets during the period and its depreciation charges for the period were $21,000, then based solely on the information provided, the net cash provided by operating activities would be:
72000 Current Accounts inverse Current Liabilities are the same use those two rules to find net cash provided by operating expenses
Assume a company had net income of $60,000 that included a gain on the sale of equipment of $4,000. It provided the following excerpts from its balance sheet: This YearLast Year Current assets: Accounts receivable$ 40,000$ 46,000 Inventory$ 53,000$ 50,000 Prepaid expenses$ 13,000$ 11,000 Current liabilities: Accounts payable$ 38,000$ 44,000 Accrued liabilities$ 18,000$ 15,000 Income taxes payable$ 13,000$ 10,000 If the credits to the company's accumulated depreciation account were $21,000, then based solely on the information provided, the company's net cash provided by (used in) operating activities would be:
78000 Current Accounts inverse Current Liabilities are the same
******Assume that a company is considering purchasing a new piece of equipment for $240,000 that would have a useful life of 10 years and no salvage value. The new equipment would cost $20,000 per year to operate and it would replace an old piece of equipment that costs $60,000 per year to operate. The old equipment currently being used could be sold for a salvage value of $40,000. The simple rate of return for the new equipment is closest to:
8.00% old operating cost - new operating cost - depreciation (new equipment/useful life) = annual incremental Net operating income cost of new piece of equipment - salvage value of old equipment = initial investment annual incremental Net operating income/initial investment= simple rate of return
Which of the following statements is true when the indirect method is used to determine the net cash provided by operating activities?
A gain recorded on the sale of a noncurrent asset is subtracted from net income in the operating activities section of the statement of cash flows.
Which of the following statements is false regarding the net present value method?
A net present value of zero indicates that the project should be rejected.
The first step of the indirect method is to:
Add depreciation charges to net income.
Which of the following statements is false? A. Variable costing treats fixed administrative expense as a period cost. B. Variable costing treats sales commissions as a product cost. C. Variable costing treats variable manufacturing overhead as a product cost. D. Variable costing treats fixed manufacturing overhead as a period cost.
B. Variable costing treats sales commissions as a product cost.
Which of the following is the basic equation for asset accounts?
Beginning balance + Debits − Credits = Ending balance
Which of the following statements is false? A. Absorption costing treats fixed administrative expense as a period cost. B. Absorption costing treats sales commissions as a period cost. C. Absorption costing treats fixed manufacturing overhead as a period cost. D. Absorption costing treats variable manufacturing overhead as a product cost.
C. Absorption costing treats fixed manufacturing overhead as a period cost.
Which of the following statements is false? A. Finished goods inventory is included in a balance sheet. B. Finished goods inventory includes direct materials used in production. C. Finished goods inventory includes actual manufacturing overhead costs assigned to jobs completed during the period. D. Finished goods inventory includes direct labor costs.
C. Finished goods inventory includes actual manufacturing overhead costs assigned to jobs completed during the period.
Which of the following cash flows relates to a company's investing activities?
Collecting the principal on a loan to another entity
When making volume trade-off decisions managers should focus on which of the following?
Contribution margin per unit of the constraining resource
Which of the following statements is true? A. Variable costing treats direct materials as a period cost. B. Variable costing treats direct labor as a period cost. C. Variable manufacturing overhead as a period cost. D. Variable costing treats fixed manufacturing overhead as a period cost.
D. Variable costing treats fixed manufacturing overhead as a period cost.
Which of the following four options is true? ChoicesCapital Budgeting MethodDoes Consider the Time Value of MoneyDoes Consider Cash Flows Option 1Payback methodYesNo Option 2Net present value methodNoYes Option 3Internal rate of return methodYesYes Option 4Simple rate of returnYesNo
Option 3
Prepare an income statement for a merchandising company using Contribution format
Sales - Variable exp( w/ cogs) = Contribution Margin - Fixed expenses =Net operating Income
Prepare an income statement for a merchandising company using traditional format
Sales -Cost of goods sold =Gross Margin -Selling and Admin exp =Net operating income
Which of the following cash flows relates to a company's investing activities?
Selling property, plant, and equipment
A standard cost card does not explicitly mention which of the following?
Standard indirect materials cost per unit
The standard direct material cost per unit of finished goods is computed in which of the following ways?
Standard quantity per unit of finished goods × standard price per unit of direct material
When the indirect method is used to determine the net cash provided by operating activities, the gain on the sale of a noncurrent asset is:
Subtracted from net income to ensure the amount of the gain is excluded from net cash provided by (used in) operating activities.
When a company pays a dividend it:
Subtracts the amount of the dividend in the financing activities section of the statement of cash flows.
Which of the following should be ignored when making decisions?
Sunk costs
Assume that you are trying to decide between watching a movie at the local theatre or renting a movie at home. After watching the movie at your chosen venue, you plan to order a pizza to be delivered to your home. Regarding the decision at hand, the cost of the pizza is a:
future cost that does not differ between the alternatives.
If a company's accrued liabilities balance increases during the period, when the indirect method is used:
The amount of the increase is added within the operating activities section of the statement of cash flows.
If the operating activities section of a company's statement of cash flows includes an addition of $15 related to accounts receivable, then it means that:
The cash collections from customers were $15 greater than the credit sales.
Assume that a company's accounts payable balance does not change during the period. If the company's operating activities section of its statement of cash flows (prepared using the indirect method) includes a deduction of $15 related to inventory, then it means that:
The cash paid for inventory purchases was $15 greater than the cost of goods sold.
Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be relevant to the decision?
The contribution margin earned by this product line
The depreciation charges added to net income represent:
The credits to the Accumulated Depreciation account during the period.
Which of the following costs is not relevant when deciding whether to keep or replace a piece of equipment?
The original cost of the asset that would be replaced.
Which of the following capital budgeting methods considers cash flows, but not the time value of money?
The payback method
Assume a merchandising company is deciding whether to keep or drop one of the many product lines that it sells at its retail store location. Which of the following would be irrelevant to the decision?
The store manager's salary
Which of the following statements is true with respect to the direct and indirect methods?
They are two equivalent ways to compute the net cash provided by (used in) operating activities.
The journal entry to record the purchase of raw materials includes:
a debit to Raw Materials.
The journal entry to record the requisition of direct materials for use in production includes:
a debit to Work in Process.
Which of the following statements is true? a. Contribution margin − fixed expenses = net operating income b. Contribution margin + net operating income = sales c. Sales − contribution margin = net operating income d. Sales + variable expenses = contribution margin
a. Contribution margin − fixed expenses = net operating income Correct
Every decision involves choosing between:
at least two alternatives.
Which of the following statements is false? A. The break-even point is the level of sales at which the total contribution margin equals the total fixed costs. B. Operating leverage is a measure of how sensitive fixed costs are to a given percentage change in dollar sales. C. Margin of safety is the excess of budgeted or actual dollar sales over the break-even dollar sales. D. Sales mix refers to the relative proportions in which a company's products are sold.
b. Operating leverage is a measure of how sensitive fixed costs are to a given percentage change in dollar sales.
Which of the following statements is false? a. Variable costing treats direct materials as a product cost. b. Variable costing treats fixed manufacturing overhead as a product cost. c. Variable costing treats variable manufacturing overhead as a product cost. d. Variable costing treats direct labor as a product cost.
b. Variable costing treats fixed manufacturing overhead as a product cost.
Which of the following statements is false? A. The break-even point is the level of sales at which the total contribution margin equals the total fixed costs. B. Operating leverage is a measure of how sensitive net operating income is to a given percentage change in dollar sales. C. Margin of safety is the excess of break-even dollar sales over the budgeted or actual dollar sales. D. Sales mix refers to the relative proportions in which a company's products are sold.
c. Margin of safety is the excess of break-even dollar sales over the budgeted or actual dollar sales.