ACC 222 Exam #1
Juanita Corporation uses a job-order costing system and applies overhead on the basis of direct labor cost. At the end of October, Juanita had one job still in process. The job cost sheet for this job contained the following information:Direct materials $ 480Direct labor $ 150Manufacturing overhead applied $ 600An additional $100 of labor was needed in November to complete this job. For this job, how much should Juanita have transferred to finished goods inventory in November when it was completed?
$1,730
Gilchrist Corporation bases its predetermined overhead rate on the estimated machine-hours for theupcoming year. At the beginning of the most recently completed year, the Corporation estimated themachine-hours for the upcoming year at 79,000 machine-hours. The estimated variable manufacturingoverhead was $7.38 per machine-hour and the estimated total fixed manufacturing overhead was$2,347,090. The predetermined overhead rate for the recently completed year was closest to:
$37.09 per machine-hour
A company has a budgeted level of fixed overheads of £385,000 and the overhead recovery rate is£4.25 per machine hour. What machine hours (approx.) would we expect to use?
90,600
Natcher Corporation's accounts receivable at the end of Year 2 was $126,000 and its accounts receivable at the end of Year 1 was $130,000. The company's inventory at the end of Year 2 was $127,000 and its inventory at the end of Year 1 was $120,000. Sales, all on account, amounted to $1,380,000 in Year 2. Cost of goods sold amounted to $800,000 in Year 2. The company's operating cycle for Year 2 is closest to:
90.2 days
A strategic plan may best be described as:
A broad long term plan
In contrast to traditional costing, __________________________ is allocating the overhead cost bycreating overhead rates based on activities that company performs.
ABC (Activity Based Costing)
In __________________ system, all manufacturing costs - direct material, direct labor, and fixed andvariable manufacturing overhead- are assigned to units of products.
Absorption Costing
A ______________ is used to charge manufacturing overhead cost to jobs that is established in advance for each period. It is also known as overhead rate.
Absorption rate
Which one of the following items is relatively unimportant in decision making?
Accruals and prepayments
Quick Ratio is also called__________.
Acid-Test Ratio
Which of the following is true of an Activity-Based Costing (ABC) system?
An activity-based costing system will provide a more accurate apportionment of overheads to products than absorption costing.
A cost centre is
An area for which costs are accumulated
Which of the following cost classification categories is almost identical to a relevant cost?
Avoidable cost
Zack Company has a current ratio of 2.5. What will be the effect of a purchase of inventory with cash on the acid-test ratio and on working capital? Acid-Test Ratio Working Capital A) decrease decrease B) decrease no effect C) no effect decrease D) no effect no effect
Choice B =decrease, no effect
A ________________________ is a __________________ in which each financial statement account is expressed as a percentage.
Common-size financial statement, vertical analysis
The ability to implement policies in order to gain economic benefits
Condescending
Which equation below is valid for the statement of financial position?
Current Assets + NonCurrent Assets = Current Liabilities + Non Current Liabilities + Equity
Which of the following indicates the short-term standing of the business?
Current Ratio
Net Gearing Ratio is also called_____________.
Debt to Equity ratio
Which of the following indicates the company's ability to repay its debt to creditors and stockholders?
Debt-to-Equity Ratio
Which one is not considered as cash equivalents?
Deposits in Bank
Which of the following is NOT a period cost?
Depreciation of factory maintenance equipment
_______________________ can be easily and conveniently traced to a unit of product or cost objects.
Direct cost
Which of the following costs below can be considered in the category of "cost objects"?
Direct cost and indirect cost
Which of the following statements concerning direct and indirect costs is NOT true?
Direct cost varies in proportion to changes in the activity level
Which ratio does measure the accounting performance of the company?
DuPont Formula
An example of a production overhead would be:
Factory manager's supervisory costs
A cost that differs from one month to another is known as a sunk cost True or False?.
False
Direct manufacturing cost is also called manufacturing overhead (MOH). True or False?
False
In determining whether a company's financial condition is improving or deteriorating over time, vertical analysis of financial statement data would be more useful than horizontal analysis.
False
The private company can report its Price/Earnings (P/E) ratio to its owners. True or False?
False
True or False Direct costs are allocated to the cost object using a cost-allocation method.
False
Paying a dividend to stockholders is ____________
Financing activity
Which statement below is true?
Fixed cost per unit is inversely related to the level of the activity.
Which costs may normally be ignored when determining whether to close a factory for a short period?
Fixed costs
According to ___________________________balance sheet layout, in the standard layout, assets are presented starting with noncurrent assets followed by current assets, and equity is presented first, followed by noncurrent liabilities and current liabilities. It is more common in the UK.
From least liquid to most liquid
Both International Financial Reporting Standards (IFRS) and the US Generally Accepted Accounting Principles (U.S. GAAP) require that the balance sheet distinguish between current and noncurrent assets and between current and noncurrent liabilities and present these as separate classifications, but both do not have any specific requirement to prepare the balance sheet and income statement in accordance with a specific layout. However, there are two formats for the layout of a classified balance sheet: "from least liquid to most liquid" and "from most liquid to least liquid". Fill in the blank: According to ___________________________balance sheet layout, assets are presented starting with current assets followed by non-current assets. Liabilities start with current liabilities and non-current liabilities, then followed by equity. It is more common in the USA.
From most liquid to least liquid
Which of the following indicates the performance of the company?
Gross Margin Percentage
.................................. compares the companies' balance sheet or income statement over two or more accounting periods. It makes side by side comparison analysis.
Horizontal analysis
Common cost is a type of _____________
Indirect cost
Selling Property, Plant, and Equipment (PPE) is a/an___________ activity in the cash flow statements.
Investing
Lending money to another entity is ____________
Investing activity
Which multiple choice is true for the balance sheet?
It reports the financial position of the company at a given point of time, such as of December 31, 20XX. Therefore, it is also called as the 'snapshot' of the company in a specific time.
It is a common type of absorption costing system and it is a method of allocating costs toheterogeneous products that are readily identified by individual units, batches, etc. Construction,furniture, aircraft, and service industries commonly use _________________________ .
Job Costing
Which of the following statements is NOT true?
Management accounting practices are laid down by the Accounting Standards Board
__________________includes all manufacturing costs except direct material and direct labor.
Manufacturing Overhead
Paying interest to lenders (suppliers) is ________________
Operating activity
Which of the following is true?
Overhead absorption rates will normally be based on estimates of what costs are expected tobe.
Absorption costing is closely related to which of the following cost elements?
Overheads
As a company's' management accountant you would be primarily concerned with:
Preparing plans and forecasts for the future activities of the business
It is a method of allocating costs to homogeneous products by averaging costs over large numbers ofnearly identical products. Chemical, oil, plastics, mining, cement, food processing, and glass industriesuse ___________________________.
Process Costing
Which one is not a current asset?
Property, Plant, and Equipment (PPE)
Which one of the following items is NOT a management accounting function?
Purchasing
Which of the following costs below can be considered in the category of "decision making"?
Relevant Cost and Irrelevant Cost
Which of the following best describes total fixed cost?
Remains constant irrespective of the level of activity
Which one is not a current liability?
Retained Earnings
Which ratio does not belong to asset management category?
Return on Asset
Contribution margin is:
Sales less variable production, variable selling, and variable administrative expenses.
Overhead absorption exercises will be most useful where:
Selling prices can be based on costs (Cost Plus Pricing or Full Cost Pricing).
reports the cash-in and cash-out of the company, so it provides information about the liquidity of the company.
Statement of Cash Flows
The Balance Sheet is also called _________________________________
Statement of Financial Position
What does a management accountant mean by control?
The ability to implement policies in order to gain economic benefits
Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?
The amount paid to the individual who stains a chair.
Under-recovery (underapplied) of overheads occurs when:
The overhead charged to production is lower than the actual overhead incurred.
Prime cost can be defined as:
The total direct costs of manufacturing a product
Which of the following indicates "how well the assets of the business deployed".
Total Asset Turnover
Which statement below is true?
Total variable cost is directly related to the level of the activity.
Common cost is a synonym for indirect cost. True or False?
True
Is the Income Statement also called "Profit and Loss Statement"?
True
Is this statement below true or false? Fixed cost remains constant regardless of changes in the level of the activity. However, per unit basis, the average fixed cost per unit varies inversely with the changes in the activity.
True
The cost driver is a factor, such as a machine hour, labor hour, beds occupied, etc., that causes overhead costs. True or False
True
Total Fixed cost remains constant regardless of the changes in the level of the activity. True or False?
True
Variable cost per unit remains constant regardless of the changes in the level of the activity. True or False?
True
Vertical analysis of financial statements is accomplished by preparing common-size statements.
True
............................analysis of financial statements is accomplished by preparing common-size statements.
Vertical
The salary paid to the president (CEO) of a company would be classified on the income statement as a(n):
administrative expense.
The salary paid to the president of a company would be classified on the income statement as a(n):
administrative expense.
Manufacturing overhead includes:
all manufacturing costs except direct labor and direct materials.
Which of the following would be added to the net income in the operating activities section of a statement of cash flows prepared using the indirect method?
an increase in accrued liabilities.
__________________ is a document that shows the quantity of each type of direct material requiredto make a product.
bill of materials
Managers use management accounting information to ________
communicate, develop, and implement strategies
A ________ is anything for which a measurement of costs is desired.
cost object
Product costs that have become expenses can be found in:
cost of goods sold.
A ________ is a grouping of individual indirect cost items.
cost pool
Assigning direct costs to a cost object is called ________.
cost tracing
Which of the following would most likely be the user of financial accounting information?
current shareholder
A company's current ratio is greater than 1. Purchasing raw materials on credit would:
decrease the current ratio.
Management accounting ________.
focuses on estimating future revenues and costs
The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchanged. The company's price-earnings ratio would: Hint: EPS Ratio: Net Income/ Number of Common Shares Outstanding P/E Ratio= Market Price Per Share/EPS
increase
Selling used equipment at book value for cash will:
increase working capital.
The cost allocation base (cost driver) ________.
is a systematic way to link indirect costs to cost objects
_____________ is a form that records the direct materials, direct labor, and manufacturing overheadcost charged to a job.
job cost sheet
Financial accounting ________.
must comply with GAAP
Job costing ________.
records the flow of costs for each product or service
Which of the following groups would be least likely to receive detailed management accounting reports?
stockholders
Conversion Cost is _____________
the sum of direct labor and manufacturing overhead
________________ is a document that is used to record the amount of time an employee spends on various activities.
time ticket
In the vertical analysis, on the balance sheet (statement of financial position), each line item in the asset section is presented/expressed as a percentage of ........................ cash account
total assets
Job costing is ________.
used by businesses to price unique products for different jobs
he following details relate to a particular company: Machining AssemblyTotal cost center overhead: £120,000 £180,000Machine hours: 15,000 9,000Labor hours: 2,000 8,000The most appropriate overhead rate to use for the machining department would be:
£8 per direct machine hour
