ACC 211 Final Study Questions

Which category of inventory represents goods that are ready to sell? a. Direct Materials b. Finished Goods c. Work in Process

b. Finished Goods

Which balanced scorecard perspective relates to making sure we don't have inefficient methods in our company? a. Financial Perspective b. Internal Business Process Perspective c. Customer Perspective d. Learning and Growth / Infrastructure Perspective

b. Internal Business Process Perspective

Which category of ratios measures a company's ability to meet its short-term and long-term obligations? a. Liquidity b. Leverage c. Profitability

b. Leverage

Does the Economic Value Added calculation use operating income or net income? a. Operating Income b. Net Income

b. Net Income

The total budget variance should be broken down into what two types of variances? a. Sales and Manufacturing Variances b. Price and Usage Variances c. Production and Marketing Variances

b. Price and Usage Variances

Avoidable fixed costs should be considered in a decision to make or buy a component. True or False

True

In deciding on whether to accept a special order, you want to consider both the additional revenues as well as the additional costs. True or False

True

The ABC approach to assigning costs to both customers and suppliers is done by tracing costs to activities then assigning costs based on activity drivers. True or False

True

The income statement of a service firm would NOT have costs of goods sold. True or False

True

How do you calculate contribution margin? a. Sales - COGS b. Sales - Variable Cost c. Sales - Fixed Cost d. Sales - Total Cost

b. Sales - Variable Cost

The total cost for month supervisory cost in a factory is $4,500 regardless of how many hours the supervisor works, or the quantity of output achieved. This cost is: a. Strictly variable b. Strictly fixed c. A mixed cost d. A step cost

b. Strictly fixed

When doing a vertical analysis on the balance sheet, what is typically used as the base? a. Cash b. Total Assets c. Total Liabilities d. Retained Earnings

b. Total Assets

How are direct costs handled from a product/service costing perspective? a. Allocated to products/services b. Traced to products/services c. Neither d. Both

b. Traced to products/services

If we used more materials than we planned to, would that represent a favorable or unfavorable variance? a. Favorable b. Unfavorable

b. Unfavorable

The quick ratio differs from the current ratio in that it: a. excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible default on payment. b. is a stricter test of a company's ability to pay its current debts as they are due. c. represents the amount of cash on hand instead of the amount of working capital.

b. is a stricter test of a company's ability to pay its current debts as they are due.

Tangerine Inc. produces plastic grocery bags. Tangerine has developed a static budget for the month of July based on 9,000 direct labor hours. During the quarter, the actual activity was 10,000 direct labor hours. Data for July are summarized as follows: Static Budget Actual Costs Variance DM Cost $106,000 $128,000 $22,000 U Power $50,000 $57,000 $7,000 U Plant Supervisor Salary $9,000 $9,000 $0 Total $165,000 $194,000 $29,000 U Comparing the static budget to the actual costs, we can conclude that: a. direct materials variance is favorable. b. power variance is unfavorable. c. the plant manager was clearly not efficient. d. the plant manager should be dismissed.

b. power variance is unfavorable.

A mixed cost is comprised of which of the following terms? a. A variable cost component b. A fixed cost component c. Both d. Neither

c. Both

Which budgeting practice presents an ethical issue? a. Pseudoparticipation b. Setting standards too high c. Budgetary Slack

c. Budgetary Slack

Which ratio tells an investor the portion of earnings that a company gives in dividends? a. Dividend yield b. Earnings per share c. Dividend payout ratio

c. Dividend payout ratio

The inventory cost computer under absorption costing is _____ the inventory cost computed using variable costing. a. Equal to b. Half of c. Greater than d. Twice as much

c. Greater than

Victryl Company applies overhead based on direct labor hours. At the beginning of the year, Victryl estimates overhead to be $700,000, machine hours to be 200,000, and direct labor hours to be 35,000. During February, Victryl has 5,000 direct labor hours and 10,000 machine hours. If the actual overhead for February is $98,300, what is the overhead variance?

$1,700

Elite Company had originally expected to earn operating income of $140,000 in the coming year. Elite's degree of operating leverage is 2.6. Recently, Elite revised its plans and now expects to increase sales by 25% next year. What is the percent change in operating income expected in the coming year?

$231,000

Freshy Milk company produces dairy equipment. Most of its jobs have a number of units per job. The company has two different departments through which all jobs pass. Overhead is applied using a plant wide rate of $15 per direct labor hour. Direct labor wages average $6 an hour. Units produced is 34,000 units. Direct materials $30,000 DL cost Dept. A $50,000 Dept. B $10,000 Machine hours used Dept. A 300 Dept. B 3,100 Compute the total cost of job #3.

$240,000

Standlar Company makes wireless speakers. The standard model price is $360 and variable expenses are $210. The deluxe model is $500 and variable expenses are $300. The superior model price is $1,600 and variable expense per unit is $600. Total fixed expenses are $300,000. Generally, Standlar sells 8 standard models and 4 deluxe models for every superior model sold. What is the total package contribution margin?

$3,000

L.A. company had the following data for the month: Units sold: 2,100 Units made: 1,800 Selling price: $14 per unit Fixed overhead: $2.00 per unit Fixed selling expenses: $3,600 total Variable costs per unit: Direct materials $4.00 Direct labor $3.20 Variable overhead $1.00 Variable selling expense $0.40 What is operating income under absorption costing? a. $3,540 b. $7,980 c. $11,340 d. $4,140

$3,540

L.A. company had the following data for the month: Units sold: 2,100 Units made: 1,800 Selling price: $14 per unit Fixed overhead: $2.00 per unit Fixed selling expenses: $3,600 total Variable costs per unit: Direct materials $4.00 Direct labor $3.20 Variable overhead $1.00 Variable selling expense $0.40 What is operating income under variable costing? a. $3,540 b. $7,980 c. $11,340 d. $4,140

$4,140

Alpha Technology produces two products: Excellent Laptops and Outstanding Computers. The two products use two overhead activities, which have the following costs: Setting up equipment $3,000 Machining $15,000 The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Laptops Computers Direct Labor $25,000 $10,000 Direct Materials $20,000 $5,000 Expected Production in Units 3,000 3,000 Machine hours 850 2,000 Setup hours 80 75 Calculate the overhead cost per unit for excellent laptops using a plantwide rate based on direct labor costs.

$4.25 per laptop

A company provided the following data: Sales $540,000 Variable cost $378,000 Fixed costs $120,000 Expected production and sales in units 40,000. What is the break-even point in sales dollars?

$400,000

Jackson Company invests in a new piece of equipment costing $40,000. The equipment is expected to yield the following amounts per year for the equipment's four-year useful life: Cash Revenues: $60,000 Cash Expenses: ($32,000) Depreciation: ($10,000) Income: $18,000 Cost of Capital: 14% What is the net present value of this investment in equipment?

$41,592

Refer to the information from the financial statements of Debruce Corp. for year 2 and year 1: Year 1 Year 2 Net Income $110,000 $123,000 Cash Dividends 42,000 38,000 Price per Share 16.00 13.00 Earning per Share 0.84 0.74 Outstanding Stock 140,000 100,000 What is the dividend payout ratio for Year 2?

38%

Assume that a company takes 10,000 hours to produce 50,000 units of a product. What is the velocity for the company?

5 units per hour

Bonzit Company estimated the following at the beginning of the year: Assembly Testing Total OH $700,000 $100,000 $800,000 DL Hours 150,500 40,500 191,000 Machine Hours 37,000 72,000 109,000 Bonzit uses departmental overhead rates. In the assembly department, direct labor hours are used to apply and in the testing department, machine hours are used to apply. What are the predetermined rates for the assembly and testing departments respectively?

Assembly: $4.65 per direct labor hour Testing: $1.39 per machine hour

A constraint is always a tangible thing affecting our business. True or False

False

Having a risky investment doesn't change the desired payback period. True or False

False

The cost of equipment purchased last year should be included in the cost of alternative when deciding to make or buy a component. True or False

False

While making short-run decisions in a business, you should only consider quantitative factors. True or False

False

Would the costs of setting up the equipment be a unit-level or a nonunit-level activity (batch, product, or facility) cost?

Nonunit-level

The activity driver for the shipping activity of Withstand Inc. is the number of orders shipped. Product A uses 30 orders, and Product B uses 70 orders. Calculate the consumption ratios for products A and B.

Product A: 0.30 Product B: 0.70

Sales mix in units is 80% Product X and 20% Product Y. Product X Product Y Unit selling price $10.00 $10.00 Unit variable costs: Manufacturing $6.00 $7.00 Selling $1.00 $1.00 Total variable costs $7.00 $8.00 Monthly fixed costs: Manufacturing $90,000 Selling and admin $50,000 Total fixed costs $140,000 What is the total monthly sales volume in units required to break-even?

Product X: 40,000 units Product Y: 10,000 units

Lisa's Dress Company, a retailer, had cost of goods sold of $180,000 last year. The beginning inventory balance was $13,000 and the ending inventory balance was $18,000. What is the company's average inventory turnover ratio and average inventory turnover in days?

Ratio: 11.613 Days: 31.4

Fixed costs increase as output volume changes. a. True b. False

b. False

Hats and More Company had the following beginning and ending inventory balances for the current year ended December 31: Jan 1 Dec 31 Materials $11,000 $8,800 WIP $19,800 $18,700 Finished Goods $23,100 $18,150 In addition, direct labor costs of $33,000 were incurred, manufacturing overhead equaled $46,200, materials purchased were $29,700, and selling and administrative costs were $24,200. Hats & More Company sold 27,500 units of product during the year at a sales price of $5.25 per unit. What were the total manufacturing costs for the year? a. $111,100 b. $102,000 c. $123,000 d. $106,500

a. $111,100

The operations of Smits Corporation are divided into the Child Division and the Jackson Division. Projections for the next year are as follows: Child Jackson Total Sales Revenue $250,000 $180,000 $430,000 Variable Expenses $90,000 $100,000 $190,000 Contribution Margin $160,000 $80,000 $240,000 Dir. Fixed Expenses $75,000 $62,500 $137,500 Segment Margin $85,000 $17,500 $102,500 Allocated Com. Cost $35,000 $27,500 $62,500 Total Rel. Benefit (loss) $50,000 $10,000 $40,000 Operating income for Smits Corporation as a whole if the Jackson Division were dropped would be: a. $22,500 b. $40,000 c. $50,000 d. $60,000

a. $22,500

Forward Company makes all of its sales on account. Forward's accounts receivable payment experience is as follows: Percent paid in the month of sale 30% Percent paid in the month after sale 65% Percent paid in the second month after sale 3% Forward provided information on sales as follows: September $120,000 October $140,000 November $220,000 December (expected) $260,000 What are the expected cash receipts in December? a. $225,200 b. $210,400 c. $50,000 d. $250,000 e. $179,000

a. $225,200

No. of toys purchased Total cost of materials 100,000 $20,000 200,000 $40,000 300,000 $60,000 What is the total materials cost at a production level of 220,000 toys with no fixed costs? a. $44,000 b. $88,000 c. $22,000 d. $132,000

a. $44,000

Using the monthly cost formula below, if machines hours are budgeted at 6,000 for the year, what is the total fixed electricity cost? Total Electricity Cost = $440 + ($6.10 * MH) a. $5,280 b. $440 c. $41,880 d. $36,600

a. $5,280

Calculate the contribution margin ratio if sales is $1,200 and variable costs are $800. a. 33% b. 67% c. 50%

a. 33%

What is the sales mix if a company expects to sell 10,000 laptops, 5,000 tablets, and 2,500 phones? a. 4:2:1 b. 1:2:4 c. 3:2:1 d. 1:2:3

a. 4:2:1

Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. What is the discount factor we need to find the investment amount? a. 5.33493 b. 6.71008

a. 5.33493

For both the price and rate variance shortened equations (the dollar variances for materials and labor, respectively), do you multiply by actual or standard (quantity or hours)? a. Actual (Quantity or Hours) b. Standard (Quantity or Hours)

a. Actual (Quantity or Hours)

Would the buying division or the selling division be more apt to choose a cost-based transfer price? a. Buying Division b. Selling Division

a. Buying Decision

If Department A inspects a small sample of each batch of products produced and Department C inspects each product produced, which department's activities are nonunit-level? a. Department A b. Department C

a. Department A

What is X? Beginning Inventory of Materials + Purchases - X = Ending Inventory of Materials a. Direct Materials Used in Production b. Cost of Goods Sold c. Direct Labor d. Cost of Goods Manufactured

a. Direct Materials Used in Production

Standards should be calculated for which two product costs? a. Direct Materials and Direct Labor b. Direct Materials and Overhead c. Direct Labor and Overhead

a. Direct Materials and Direct Labor

For which type of analysis do you compare year over year? a. Horizontal b. Vertical

a. Horizontal

What is the idea that lower-level managers should get involved in the budgeting process and not just have a budget forced upon them? a. Participative Budgeting b. Pseudoparticipation c. Incentivized Budgeting

a. Participative Budgeting

Would a manufacturing company that makes reusable water bottles use process costing or job order costing? a. Process Costing b. Job Order Costing

a. Process costing

In the cost formula below, which element would be the slope? Total Cost = Fixed Cost + (Variable Rate * Output) a. Variable rate b. Fixed cost c. Total cost d. Output

a. Variable rate

In going from the sales budget to the production budget, adjustments to the sales budget need to be made for: a. finished goods inventories. b. cash receipts. c. factory overhead costs. d. selling expenses.

a. finished goods inventories.

An after-the-fact flexible budget: a. is useful for control. b. is used to provide the expected cost for a range of activity levels. c. is used only when the actual level of activity is the same as the static budget level of activity. d. is the key to receiving frequent feedback from customers. e. All of these are correct.

a. is useful for control.

Is the cash budget part of the operating budget or the financial budget? a. Operational b. Financial

b. Financial

Given the job information below, what is the balance in finished goods? Job 1: $250, incomplete Job 2: $275, complete and sold Job 3: $260, complete Job 4: $250, incomplete a. $250 - Job 1 only b. $260 - Job 3 only c. $275 - Job 2 only d. 4500 - Jobs 1 and 4

b. $260 - Job 3 only

Barker Company calculated the NPV of a project and found it to be $63,900. The project's life was estimated to be 8 years. The required rate of return used for the NPV calculation was 10%. The project was expected to produce annual after-tax cash flows of $135,000. Discount factor: 5.33493. What was the initial investment amount? a. $135,000 b. $656,316 c. $784,116

b. $656,316

What is the fixed cost per unit at a production level of 25,00 units? Total Cost = $1,750,000 + ($125 * units) a. $35 b. $70 c. $125

b. $70

During September, 40,000 units were produced. The standard quantity of materials allowed per unit was 5 pounds at a standard cost of $2.50 per pound. If there was a favorable usage variance of $25,000 for September, the actual quantity of materials used must have been: a. 210,000 pounds. b. 190,000 pounds. c. 105,000 pounds. d. 95,000 pounds.

b. 190,000 pounds.

Payson Manufacturing is considering an investment in a new automated manufacturing system. The new system requires an investment of $1,200,000 and has the following expected annual cash flows: $150,000, $150,000, $400,000, $450,000, and $100,000. Calculate the payback period. a. 4 years b. 4.5 years c. 5 years

b. 4.5 years

Which type of budget is based on the actual level of activity? a. Before-the-fact b. After-the-fact

b. After-the-fact

A good investment will earn: a. Back its original investment b. Back its original investment and a reasonable return c. A reasonable return

b. Back its original investment and a reasonable return

What type of responsibility center would a production department be? a. Revenue Center b. Cost Center c. Profit Center d. Investment Center

b. Cost Center

Which overhead rate should give you a more accurate applied overhead amount? a. Plantwide rate b. Departmental rate

b. Departmental rate

What is the correct formula for the predetermined overhead rate? a. Actual Overhead / Estimated Activity b. Estimated Overhead / Estimated Activity c. Actual Overhead / Actual Activity d. Estimated Overhead / Actual Activity

b. Estimated Overhead / Estimated Activity

Using the monthly cost formula below, if machines hours are budgeted at 600 for November, what is the total variable electricity cost? Total Electricity Cost = $440 + ($6.10 * MH) a. $4,100 b. $440 c. $3,660

c. $3,660

If a clerk spends 40% of her time counting parts and 60% of her time inspecting parts, how much of her $60,000 salary should be assigned to inspections? a. $60,000 b. $24,000 c. $36,000 d. $30,000

c. $36,000

Bickford Company plans to sell 135,000 units in November and 180,000 units in December. Bickford's policy is that 10% of the following month's sales must be in ending inventory. On November 1, there were 14,000 units in inventory. It takes 30 minutes of direct labor time to make on unit. Direct labor wages average $17 per hour. Variable overhead is applied at the rate of $5 per direct labor hour. Fixed overhead is budgeted at $56,500 per month. What is the budgeted overhead for November? a. $444,500 b. $280,700 c. $404,000 d. $348,420 e. $192,920

c. $404,000

Rahn Booth invested $1,300,000 in a project that pays him an even amount per year for 5 years. The payback period is 2.5 years. How much cash does Rahn receive each year (assuming after-tax cash flows)? a. $650,000 b. $433,000 c. $520,000

c. $520,000

Bluebird Company constructed the following formula for monthly utility cost: Total utility cost = $1,200 + ($8.10 * labor hours) Assume that 775 labor hours are budgeted for the month of April. Bluebird Company incurs 9,600 labor hours for the year. a. $76,560 b. $78,960 c. $92,160 d. None

c. $92,160

The Perfect Tool Company (South America Division) produced 80,000 saw blades during the year. It took 1.5 hours of labor per blade at a rate of $8.50 per hour. However, its standard labor rate is $8.00. Its labor efficiency variance was an unfavorable $40,000. What is Perfect's standard hours allowed for a volume of 80,000 blades? a. 210,000 hours b. 189,000 hours c. 115,000 hours d. 125,000 hours

c. 115,000 hours

Which formula represents the total budget variance? a. Actual Cost + Planned Cost b. Planned Cost - Estimated Cost c. Actual Cost - Planned Cost

c. Actual Cost - Planned Cost

What does the break-even point represent? a. How many units must be sold to cover fixed cost. b. How many units must be sold to cover variable cost. c. How many units must be sold to cover all cost.

c. How many units must be sold to cover all cost

Blaylock Company wants to buy a numerically controlled (NC) machine to be used in producing specially machined parts for manufacturers of tractors. The outlay required is $384,000. The NC equipment will last 5 years with no expected salvage value. The expected after-tax cash flows associated with the project are $510,000 annual cash revenues and $360,000 annual cash expenses. What is the IRR? a. IRR is between 18% and 20% b. IRR is between 20% and 25% c. IRR is between 25% and 30%

c. IRR is between 25% and 30%

ColorPro uses Part 87A in the production of color printers. Unit manufacturing costs for part 87A are: Direct materials $8 Direct labor $2 Variable overhead $1 Fixed overhead $4 ColorPro uses 100,000 units of 87A per year. Filbert Company has offered to sell ColorProp 100,000 units of 87A per year for $12. Fixed overhead is unavoidable. Now suppose that ColorPro discovers that other costs will increase by $7,000 per year if the component is purchased rather than made internally. Should ColorPro make or buy the part? a. Make the part because it will save $100,000 over buying it. b. Buy the part because it will save $100,000 over making it. c. Make the part because it will save $107,000 over buying it. d. Buy the part because it will save $107,000 over making it. e. Make the part because it will save $10,000 over buying it.

c. Make the part because it will save $107,000 over buying it.

Besides multiplying Margin times Turnover to get ROI, what is the other method of calculating ROI? a. Operating Income / Sales b. Sales / Average Operating Assets c. Operating Income / Average Operating Assets d. Sales / Operating Income

c. Operating Income / Average Operating Assets

The cost of reconfiguring our machines to go from making laptops to tablets is what type of cost? a. Unit-level b. Batch-level c. Product-sustaining d. Facility-sustaining

c. Product-sustaining

Costs from which part of the value chain do NOT get included in period costs? a. Research and development b. Customer service c. Production d. Distribution

c. Production

Return on sales is also called what? a. Earnings per sale b. Income earned per sale c. Profit margin

c. Profit margin

Which budget is the foundation of the rest of the operating budgets? a. Cash Budget b. Direct Materials Budget c. Sales Budget d. Production Budget

c. Sales Budget

Which of the following costs is NOT relevant to a decision to sell a product at split-off or process the product further and then sell the product? a. the selling price of the product after further processing b. the selling price of the product at split-off c. joint costs allocated to the product d. the additional processing costs after split-off

c. joint costs allocated to the product

A budget prepared for a particular level of activity is a(n): a. operational budget. b. ABC budget. c. static budget. d. flexible budget. e. variable budget.

c. static budget.

Hats and More Company had the following beginning and ending inventory balances for the current year ended December 31: Jan 1 Dec 31 Materials $11,000 $8,800 WIP $19,800 $18,700 Finished Goods $23,100 $18,150 In addition, direct labor costs of $33,000 were incurred, manufacturing overhead equaled $46,200, materials purchased were $29,700, and selling and administrative costs were $24,200. Hats & More Company sold 27,500 units of product during the year at a sales price of $5.25 per unit. What was the amount of cost of goods manufactured for the year? a. $101,000 b. $124,000 c. $100,000 d. $112,200

d. $112,200

The formula to calculate sales dollars to earn a target income is: a. (Total Fixed Costs + Target Income) / Unit Contribution Margin b. Total Fixed Costs / Unit Contribution Margin c. Total Fixed Costs / Contribution Margin Ratio d. (Total Fixed Costs + Target Income) / Contribution Margin Ratio

d. (Total Fixed Costs + Target Income) / Contribution Margin Ratio

What is the payback period for the project beta? Project Beta Initial Investment: $200,000 Cash Inflow Year 1: $90,000 Cash Inflow Year 2: $90,000 Cash Inflow Year 3: $40,000 Cash Inflow Year 4: $50,000 Cash Inflow Year 5: $70,000 a. 2 years b. 4.5 years c. 3.5 years d. 2.5 years

d. 2.5 years

A California hospital decided to streamline its surgical suite operation. In order to speed things up, the nurses in charge studied how much time patients actually spent in various activities. They found that on average, a patient scheduled for an operation spent about 1.50 hours waiting and 2.00 hours in moving from lab to x-ray to the operating room. The average operation takes 1.50 hours. What is the manufacturing cycle efficiency (MCE)? a. 100% b. 36% c. 50% d. 30% e. 60%

d. 30%

Which of the following would probably be a variable cost in a soda bottling plant? a. Direct labor b. Bottles c. Power to run the bottling machine d. All of the above

d. All of the above

If applied overhead was $150 and actual overhead was $135, was it under- or overapplied? Would it be an addition or subtraction to COGS? a. Underapplied, Addition to COGS b. Underapplied, Subtraction to COGS c. Overapplied, Addition to COGS d. Overapplied, Subtraction to COGS

d. Overapplied, Subtraction to COGS

Division a had ROI of 15% last year. The manager of division A is considering an additional investment for the coming year. What step will the manager likely choose to take? a. Accept the investment as long as it provides positive operating income. b. Accept the investment as long as its ROI is positive. c. Reject the investment if it returns more the 15% ROI. d. Reject the investment if it returns less than 15% ROI. e. Reject the investment if it returns an ROI equal to 15%.

d. Reject the investment if it returns less than 15% ROI.

Which of these isn't a nonvalue-added activity? a. Moving goods b. Storing goods c. Inspecting goods d. Selling goods

d. Selling goods

The fixed overhead volume variance is a measure of: a. the cost of overspending on fixed overhead items. b. the effect of the actual output differing from the output used to calculate the predetermined fixed overhead rate. c. the cost of unused activity capacity acquired. d. both A and B. e. both A and C. f. Both B and C. g. All of the above.

f. Both B and C.