ACCY 200 Final Exam

When revenues are earned, the financial statement effects typically include:

-an increase to sales or service revenues -an increase to net income

Multi-step income statements commonly report subtotals for:

-gross profit -income from operations -income before taxes

Inventory shrinkage is commonly caused by:

-obsolescence -theft -errors

In a periodic inventory system:

-the Purchase Returns and Allowances and Freight-in accounts are used -Inventory counts are required to determine cost of goods sold -periodically making a physical count of the inventory on hand

How is performance evaluated for a profit center?

Actual segment margin compared to budgeted segment margin

Which of the following is the correct calculation for the contribution margin ratio? A) sales revenue divided by contribution margin B) contribution margin divided by variable costs C) contribution margin divided by sales revenue D) sales revenue divided by variable costs

C) contribution margin divided by sales revenue

Which of the following cost classifications would NOT be considered relevant in comparing decision alternatives? A) opportunity cost B) differential cost C) sunk cost

C) sunk cost

In managerial accounting control is achieved by:

Comparing planned activity to actual performance results

ROI= Margin * Turnover What is the formula to calculate Turnover?

Turnover= Sales/ Operating assets

Most entities satisfy the accounting criteria for recognizing an expense when:

a cost is incurred in the revenue generating process

An excess of cost of goods manufactured over cost of goods sold for the period represents:

an increase in finished goods inventory

Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because:

arbitrarily allocated costs may not behave in the way assumed in the allocation method

Gains differ from revenues because gains:

are not a result of the entity's ongoing, central operations.

indirect costs describe costs that

are not traceable to a cost object

A predetermined overhead rate is used to:

assign indirect costs to cost objects

When considering the make or buy decision, the relevant cost of making a component product part is the cost that can be _______ by acquiring the component part from an outside supplier.

avoided

A set of integrated financial and operating performance measures that communicates an organization's priorities associated with achieving strategic goals is known as a:

balanced scorecard

In the statement of cash flows, an increase in the account receivable balance from the beginning of the period to the end of the period would:

be subtracted from net income because this means that revenues were more than cash collected

A performance report for direct labor shows a variance between the budget and actual amounts. This difference is a:

budget variance

The total variance for any particular cost component is referred to as the:

budget variance

Advertising expenditures and research and development costs are recorded as expenses in the period incurred under U.S. GAAP. This approach is justified:

by the objectivity and conservatism concepts

When preparing a performance report, the flexing budget is necessary in order to:

calculate more accurate variances

When considering the decision for solving production mix problems involving multiple products and scarce production resources, the decision should focus on:

contribution margin per unit of scarce resource

The contribution margin format income statement is organized by:

cost behavior classifications

Examples of fixed costs:

executive salaries, property taxes, building depreciation

Expressing fixed costs on a per unit basis of activity is misleading because:

fixed cost per unit decrease as activity increases

As the level of activity decreases:

fixed cost remains constant in total

The primary difference between absorption costing and direct costing is the treatment of:

fixed manufacturing overhead

The operating condition when all available production resources are being utilized is known as

full capacity

Relevant costs in short-run decision-making are

future costs that represent differences between decision alternatives

The operating condition when some available production resources are not being utilized is known as

idle capacity

The ingredients of the product that are put into the production process to make the finished product are known as:

raw materials

Examples of product costs

raw materials, direct labor, manufacturing overhead

To be recognized, revenues must meet both the ___________ and ________ criteria.

realization; earned

When comparing entity financial ratios with industry ratios:

relative values at a point in time may not be significant

A cost classification used in analyzing short-run costs of decision alternatives and represent future differences between the alternatives are known as __________ costs

relevant

When a cost formula is used to describe a mixed (semi-variable) cost behavior pattern, total costs are expected to increase and per unit variable costs are expected to:

remain constant as the level of activity increases

A budgeting approach that implies little or no input from lower levels of management is known as the:

top-down approach

The indifference point is found between alternative cost structures when _______ are equal for both alternatives.

total costs

A term used synonymously with direct costing is ___________

variable costing

Examples of period costs

Advertising expense, sales commissions, interest on long-term debt, delivery expense, office manager salary

Which of the following accounts/captions are not every included in the calculation for Gross Profit? A) Revenues B) Cost of Goods Sold C) General and Selling Expenses D) Net Sales

C) General and Selling Expenses

Which of the following is not usually considered a measure of an entity's liquidity? A) current ratio B) acid-test ratio C) cash ratio D) working capital

C) cash ratio

Most entities satisfy the accounting criteria for recognizing revenue when:

a product is delivered or a service is provided.

If the net variance of a business using standard costing is significant relevant to total production cost, the net variance should be:

allocated between WIP and FG inventories and cost of goods sold

When considering two decision alternatives, _____________ costs are those costs that have been assigned to a product or activity using some sort of arbitrary process and will not differ given the decision alternatives.

allocated costs

The process of using cost information to assess and manage the activities of the organization is known as

cost management

The analytical technique that explains the impact on profit for any changes taking place in revenues, costs, or volume of activity is known as:

cost-volume-profit analysis or CVP analysis

Under applied overhead represents a _______ balance in the Manufacturing Overhead account that results from actual overhead costs in excess of applied overhead

debit

When considering two decision alternatives, ______ costs are those costs that would result from selecting one alternative instead of the other

differential

Revenue may be recognized:

if a company trades inventory at its usual selling price for newspaper advertising.

The term noncontrollable cost:

implies that there is really nothing the manager can do to influence the amount of cost

Gains are reported as other ________ (assets/income/equity) after the firm's operating expenses have been shown and income from operations has been reported

income

Gains are________ in an entity's net assets resulting from incidental transactions or nonoperating activities

increases

The key to analyzing a sell as is or process further decision is to determine that:

incremental revenues exceed incremental costs

Using management by exception to determine what budget variances to investigate suggests that you would:

investigate if the variance is significant

cost accounting is a subset of:

managerial accounting

The acquisition of resources or services from outside the organization as opposed to producing those resources or services internally is known as:

outsourcing

An example of a product cost is:

production line maintenance costs

An example of a cost that is noncontrollable in the short run is:

property taxes

The term describing the contribution of a segment of an organization to the common fixed expenses and operating income of the organization is __________ margin

segment

Income from operations is:

sometimes used in the ROI calculation

An organization's value chain refers to:

the sequence of functions and related activities that add value for the customer

In the statement of cash flows, depreciation and amortization expense is added back to net income because:

these expenses do not affect cash, but were subtracted in the determination of net income

Which of the following will cause income determined with absorption costing to be higher than income determined with direct costing?

units produced are greater than units sold

The contribution margin format income statement:

uses a behavior pattern classification for costs rather than a functional cost classification approach

The part of the variable overhead budget variance due to the difference between actual variable overhead cost and the standard cost allowed for the actual inputs used is called the:

variable overhead spending variance

Which of the following is an accurate statement regarding a statement of cash flows?

All material operating, investing, and financing activities are included.

When considering pricing decision alternatives, a ____________ cost is the minimum cost that can be incurred which allows for a desired profit to be earned at a predetermined selling price.

target cost

Knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes:

the effect on net income will depend on the behavior pattern of various costs

As the level of activity increases:

Fixed cost per unit decreases. (Fixed costs do not change as activity increases or decreases. If activity increases, then, total fixed costs divided by total activity will decrease.)

A management technique that involves focusing attention on those activities that have a significant variance, with the objective of understanding why the variance occurred is known as:

Management by exception

Which of the following calculates residual income?

Operating income - Required ROI $

Operating income using the contribution margin format income is calculated as:

Revenue- variable expenses = contribution margin - fixed expenses

Managerial accounting as contrasted to financial accounting:

Supports internal planning decisions and is focused on the future

Characteristics of sunk costs:

The cost is never relevant in decision- making. The cost is never a differential cost. The cost has been incurred and cannot be eliminated.

The term, "earned," in revenue recognition refers to which of the following?

The entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits.

The major difference between the indirect and the direct method of a statement of cash flows appears in which of the following activities section(s)?

The operating activities section only.

The management process is illustrated through a series of management key activities referred to as:

The planning and control cycle

The term, "realization," in revenue recognition refers to which of the following?

The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash.

In order for a cost formula to forecast the total of fixed costs and variable cost expected to be incurred, it must be based on a specific level of:

activity

To achieve a more refined cost application for the assignment of overhead costs to products manufactured, the use of a single predetermined overhead rate is being replaced by:

activity-based costing

The use of activity-based costing information to support the decision-making process is known as:

activity-based management

The performance of an investment center is determined by comparing:

actual and budgeted ROI based on segment margin and assets controlled by the segment

The concept of matching revenue and expense refers to the fact that:

all costs incurred in the process of earning revenues during a period are recorded as expenses in that period.

Drilling down to varying levels of an organization for the purpose of observing separate and specific cost measurement information is a process for describing

cost objects

The preferred format for a segmented income statement emphasizes:

direct and common fixed costs

A cost that is clearly traceable to a product or activity such that the cost would not be incurred if the product or activity were discontinued is known as a ________ cost

direct cost

An example of a cost likely to have an indirect relationship with products being manufactured is:

electricity costs for packaging equipment

product cost=

manufacturing cost

period cost=

non-manufacturing cost

When an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization:

only direct revenues and direct expenses should be assigned to segments

Contribution margin is defined as revenues minus:

operating expenses

If the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio, which of the following is true?

operating income will increase

When considering decision alternatives, an _________ cost can be measured as the income that could have been earned on an asset, based on the potential rate of return that is lost or sacrificed when one alternative use of the asset is chosen over another.

opportunity cost

The best reason for flexing a budget is to:

permit a more accurate determination of variances

Flexible budgeting recognizes cost behavior patterns for budgeted items. The original budget amount for variable items based on __________ activity is adjusted by calculating a budget allowance on ______ activity for the period.

planned; actual

If cash is not expected to be received within a year, revenue usually is measured by the ________ value of the amount expected to be received.

present

An investment center performance measure designed to avoid the risk of suboptimization is:

residual income

Starting with gross sales, the sales returns and allowances and sales discounts are then ________ to arrive at the ______ sales for reporting purposes

subtracted; net