Accounting final 2023
A common way to price services is
time and materials pricing
The high-low method uses ___ points to estimate the cost equation.
two
Characteristics of budgets include: (Check all that apply.)
typically cover a month, quarter or one year. expressed in dollars. formal statement of a company's plans.
Reports to ______ managers are usually less detailed because they need to concentrate on the key issues.
upper level
A cost changes in proportion to changes in volume of activity.
variable
Under a _____ costing income statement, only variable costs related to production are included in product costs.
variable
When using the high-low method, the slope represents
variable cost per unit
When making keep or replace decisions, management should consider the: (Check all that apply.)
variable manufacturing cost of the new equipment sale of the existing equipment variable manufacturing cost of the existing equipment
During the period, a company reports Sales of $38,000, Cost of Goods Sold of $20,000, and Income of $1,500. Profit margin is:
$1,500 / $38,000 = 3.9%
A company had a standard sales price of $1.79 per unit and expected to sell 10,000 units. Due to a downturn in the economy, the product was marked down to $1.59 per unit and the company only sold 9,500 units. Calculate the sales price variance.
$1,900 U ($1.59-$1.79)x9500=$1,900U
A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the amount of budgeted income tax expense will be $
$10,668 $118,800 - $48,500 = $70,300 - $1,500 - $250 - $41,880 = $26,670 x 40% = $10,668
ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct labor variance.
$24,400 U $374,400 - (35,000 units x 1 hr x $10/hr) = $24,400 U
Direct materials are $15 per unit; direct labor is $7 per unit and variable overhead costs are $2 per unit. If total product costs are $27, what are fixed costs per unit?
$3 Reason: Total unit cost is $27. Direct materials $15 + direct labor $7 + variable overhead $2 = $24. Therefore, fixed costs per unit = $27 - 24 = $3.00.
If direct materials per unit are $20, direct labor per unit is $10, variable overhead per unit is $2, and fixed overhead per unit is $1, total product cost per unit is $
$33 20+10+2+1 = 33
A company has a margin of safety of 20%. If expected sales are $50,000, then break-even sales are:
$40,000 (50,000-x)/50,000=20%. x = $40,000.
XYZ Company makes one product and has calculated the following amounts for direct materials: AQ x AP = $150,000; AQ x SP = $145,000; SQ x SP = $152,000. Compute the direct materials price variance.
$5,000 U $150,000 - $145,000 = $5,000 U
The fixed budget indicates sales of $50,000. Actual sales were $55,000. The variance is:
$5,000 favorable
ABC Company has set the following standards for one unit of product: Direct materials: 0.5 pounds @ $1.00 per pound; Direct labor: 1 hour @ $10.00 per hour. The company produced 35,000 units and had the following actual costs: Direct materials: 18,000 pounds at a total cost of $17,280; Direct labor: 36,000 hours at a total cost of $374,400. Compute the direct materials price variance
$720 F $17,280/18,000=.96 actual cost. $1.00-.96=.04 x 18,000 lbs = $720 F
The formula to determine the materials to be purchased is
(units to produce times materials required for each unit) plus desired ending materials inventory minus beginning materials inventory
Some disadvantages of relying solely on financial measures include that: (Check all that apply.)
- some profitable opportunities may be rejected to keep return on investment high - residual income is not as useful when comparing investment centers of different sizes - They can encourage managers to focus too heavily on short-term financial goals
Match the cost variance component to its definition.
-Actual Quantity- The input used to manufacture the quantity of output -Standard Quantity-The expected input for the quantity of output. -Actual Price-The amount paid to acquire input Standard Price-The expected price6^
When evaluating special offer decisions, management should consider: (Check all that apply.)
-Existing sales -Available capacity -Incremental revenues -Incremental costs
A flexible budget has which of the following characteristics?
-Useful for evaluating past performance -Often based on several levels of activity -Useful to compare different scenarios
LMN Company produces a product that sells for $1. The company has production costs of $600,000, half of which are fixed costs. Assuming production and sales of 750,000 units, the contribution margin per unit is $
0.60
List the individual budgets of the master budget in the order in which they are prepared, with the first on top
1- sales budget 2- production budget 3- direct materials, direct labor and factory overhead 4- cash budgets
List the steps in allocating costs to operating departments and preparing departmental income statements, with the first step on top.
1. Accumulate direct expenses by department 2. Allocate indirect expenses across departments 3. Allocate service department expenses to operating departments 4. Prepare departmental income statements
List the steps of the decision making process, with the first step on top.
1.) Define the decision 2.) Identify alternatives 3.) Collect relevant information 4.) Select the course of action 5.) Analyze and assess decision
List the time and materials price steps in the correct order: Instructions
1.compute the time charge in $ per hour of direct labor toggle button compute the time charge in $ per hour of direct labor 2.compute the materials markup percentage toggle button compute the materials markup percentage 3.estimate the number of direct labor hours and total direct materials cost and the markup toggle button estimate the number of direct labor hours and total direct materials cost and the markup.
A retail store has 10,000 square feet of space and incurs rent costs of $5,000 per month. If Department A uses 2,000 square feet of space, the amount of rent allocated to the department will be $
1000 5,000/10,000=.5 .5*2,000=1,000
A company began the year with $500 in raw materials and purchased $10,250 more during the year. If the company has $725 in raw materials at the end of the year, then they would report direct materials used of $ on the schedule of cost of goods manufactured.
10025
A company is considering an investment opportunity with a cost of $5,000 that will provide future cash flows of $8,000. The cash flows for the investment for the next 4 years are: $1,000, $2,000, $3,000 and $2,000. Assume a required rate of return of 10%. The NPV is $ (rounded to nearest dollar).
1182
A manufacturing company has budgeted direct labor hours of 940 at a budgeted direct labor hour rate of $15. The budgeted fixed cost is $950 per month. The total budgeted overhead cost will be $
15050 940*15=14,100 14,100+950=15,050
A company has the following budget information: Sales: $118,800; COGS: $48,500; Depreciation expense: $1,500; Interest expense: $250; Other expenses: $41,880. If the company budgets 40% for income tax expense, the budgeted net income will be $
16,002
A manufacturing company's sales budget indicates the following sales: January: $30,000; February: $20,000; March: $15,000. The company expects 80% of the sales to be on account. Credit sales are collected 30% in the month of the sale and 70% in the month following the sale. The total cash receipts collected during March will be $
17800
A company incurred the following costs: $6,000 for indirect labor; $26,000 for direct labor; $2,500 for utilities for the factory building; $10,300 for factory equipment depreciation; $8,700 for office equipment depreciation. The total overhead costs reported on the schedule of cost of goods manufactured is $
18800
RST Company produces a product that has a selling price of $10 per unit and variable cost of $6 per unit. The company's fixed costs are $30,000. If the company sells 15,000 units, the degree of operating leverage is
2 30,000/15,000
A company is considering two capital investments. Each requires an initial investment of $15,000 and has a 4 year useful life. Investment A has expected cash inflows of $5,000 each year for the 4 years for total cash inflows of $20,000. Investment B has the following expected cash flows: Year 1: $8,000; Year 2: $6,000; Year 3: $4,000; Year 4: $2,000; Total cash flows: $20,000. Calculate the payback period for Investment B.
2.25 years
A company is considering a capital investment of $16,000 in new equipment which will improve production and increase cash flows for the next five years at the following amounts: Year 1: $8,000; Year 2: $6,000; Year 3: $5,000; Year 4: $6,000; Year 5: $5,000. The payback period is years.
2.4
A company sells 800 units at $16 each, has variable costs of $12 per unit, and fixed costs of $1,200. Income is $
2000
A manufacturing company has budgeted production of 5,000 units for May and 4,400 units in June. Each unit requires 3 pounds of materials at a cost of $10 per pound. On May 1, there are 2,750 pounds of materials on hand. The company desires an ending materials inventory of 60% of the next month's materials requirements. The total cost of direct materials purchases for May will be $
201700
A merchandising company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. Sales personnel are paid a salary plus commission. Salaries are expected to be $5,000 per month and the commission is 10% of sales. Additionally, advertising is expected to be $600 per month. The total selling expenses for the quarter will be $.
25,800 (25,000 x 10%)+(30,000 x 10%)+(35,000 x 10%)+(5,000x3)+(600x3)= $25,800
A company produces a product with variable costs of $2.50 per unit. The product sells for $5.00 per unit. The company has fixed costs of $3,000 and desires a target income of $10,000. The sales level in dollars to achieve the desired target income is $
26000 (5.00/2.50)=2 (3,000+10,000)=13,000 13,000*2= 26,000
A company's sales budget indicates the following sales: January: 25,000; February: 30,000; March: 35,000. Beginning inventory is 12,000 units and the company desires ending inventory of 45% of the next month's sales. Units to be produced in January will be
26500
An investment that costs $5,000 will produce annual cash flows of $3,000 for 3 years. Using a required return of 8%, the investment will generate a NPV of $ (rounded to nearest dollar).
2731
A manufacturing company's sales budget indicates the following sales: January: $25,000; February: $30,000; March: $35,000. The company expects 70% of the sales to be on account and the remainder to be cash sales. Credit sales are collected in the month following the sale. The total cash collected during March will be $
31500
Actual sales volume for a period is 5,000 units. Budgeted sales volume is 4,500. Actual selling price per unit is $15 and budgeted price per unit is $15.75. The sales price variance is $
3750
A manufacturing division has an average assets of $1,800,000 and income of $720,000. The division's return on investment is %.
40%
JP Service Company has budgeted direct labor hours of 100 and direct labor cost per hour of $25 for data analysis personnel and budgeted direct labor hours of 50 and direct labor cost per hour of $30 for staff accountants. JP Service Company's cost of direct labor is $
4000
A manufacturing company has units to produce of 940 units for the month. Each unit requires 3.5 hours of labor to produce. The cost of direct labor is $15 per hour. The total cost of direct labor for the month will be $
49350
A company has fixed costs of $50,000 while manufacturing a product that has variable costs of $4 per unit and sells for $14 per unit. The break-even point is _____ units.
5,000 $50,000 / ($14 - $4) = 5,000 units
During the period, a company reports Sales of $48,000, Cost of Goods Sold of $28,000, and Income of $2,500. Profit margin is:
5.2% 2500/48,000=5.2%
A company incurs advertising costs of $10,000. The company's three selling departments have the following sales: Department 1—$10,000; Department 2—$30,000; Department 3—$40,000. Advertising is allocated based on percent of sales. The amount of advertising allocated to Department 3 will be $
5000
Maker's Company produces a product that has a variable cost of $4 per unit. The company's fixed costs are $40,000. The product sells for $12 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $3, but increase fixed costs by $5,000. The revised break-even point in dollars is $
60,000 (40,000 + 5,000) / [(12 - 3)/12]= $60,000
If a company has $2,000,000 in average assets, and desires to earn a return on investment of 30%, the company will need to earn income of $
600000 2,000,000*.3=600,000
A merchandising company's budget includes the following data for January: Sales: $400,000; COGS: $270,000; Administrative salaries: $1,250; Sales commissions: 5% of sales; Advertising: $10,000; Depreciation on store equipment: $25,000; Rent on administrative building: $30,000; Miscellaneous administrative expenses: $5,000. The total general and administrative expenses on the January general and administrative expense budget will be $
61,250 25,000+1,250+5,000+30,000
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. How many units must be produced to break-even
7,500 ($30,000)/($10-$6) = 7,500 unit
RST Company produces a product that has a variable cost of $6 per unit. The company's fixed costs are $30,000. The product sells for $10 per unit. The company is considering purchasing a new manufacturing machine which would improve efficiency. The new machine would decrease the variable cost to $4, but increase fixed costs by $15,000. The revised break-even point in dollars is $
75000
A company budgets the following direct materials purchases: April: $70,000; May $90,000; June: $60,000. All purchases are on account and the company pays 25% of purchases in the month of the purchase and the remaining amount in the following month. Cash payments for June for direct materials is $
82500
A company is considering an investment opportunity with a cost of $5,000 that will provide future cash flows of $8,000. The cash flows for the investment for the next 4 years are: $1,000, $1,000, $2,000 and $4,000. Assume a required rate of return of 10%. The NPV is $
970
Match each figure on the budgeted balance sheet to the previously prepared budget from which the figure is derived.
Accounts receivable - Sales budget Income tax payable - Income statement budget Bank loan payable - Cash budget
CALCULATE COST OF GOODS SOLD
BEGINNING FINISHED GOODS + COST OF GOODS MANUFACTURED - ENDING FINISHED GOODS = COST OF GOODS SOLD
A flexible budget prepared (before/after) the period begins allows management to make adjustments to increase profits or decrease losses. I
Before
A variance is the difference between the actual quantity of input used and the standard quantity of input that should have been used
Blank 1: quantity, usage, or efficiency
Budgeted performance considers all of the following in relation to a benchmark: (Select all that apply).
Company factors Industry factors Economic factors
Which of the following is the correct formula?
Cost variance = (AQ x AP) - (SQ x SP)
Which report is more effective in evaluating the performance of profit centers?
Departmental contribution to overhead reports
Which of the following are product costs for a manufacturer? (Check all that apply
Depreciation on the factory equipment Direct materials
DIFFERENCE BETWEEN DIRECT COSTS AND INDIRECT COSTS
Direct Costs traceable to a single cost object - Indirect Costs cannot be easily traced to a single cost object
HOW TO CALCULATE AND ALLOCATE OVERHEAD COSTS
Estimated Predetermined overhead rate overhead costs Estimated activity base
True or false: Controllable costs are the same as direct costs
False
True or false: On a scatter diagram, costs are plotted on the horizontal axis.
False
True or false: Volume variances are due to not producing at the predicted (expected) activity level. Therefore, the volume variance does not need to be investigated.
False
Match the four perspectives of the balanced scorecard with questions managers are trying to answer.
Financial-What do our owners think of us? Customer-What do our customers think of us? Internal processes-Which of our operations are critical to customers? Innovation and learning-How can we improve?
Match each example below to the correct cost type
Fixed - Depreciation Variable - Direct materials Mixed - Water and electricity
Match each example below to the correct cost type
Fixed---Office salaries Mixed---Sales rep pay which includes salary plus commission Variable---direct materials
THREE COMMON TOOLS OF FINANCIAL ANALYSIS
Horizontal - compares across time Vertical - compares to a base amount Ratio - key relations between financial statement items
In a make or buy decision, management should consider: (Check all that apply.)
Incremental costs Workload product quality Employee morale
Costs incurred to produce or purchase two or more products at the same time are called costs
Joint
XYZ Company makes one product and has calculated the following amounts for direct labor: AH x AR = $84,000; AH x SR = $83,000; SH x SR = $85,000. Compute the direct labor cost variance
Labor cost variance = total actual cost - total standard cost. $84,000 - $85,000 = $1,000 F
Which of the following are direct costs for a shoe manufacturer? (Check all that apply.)
Leather used in the shoes Shoe laborers who make the shoes
THE FOUR BUILDING BLOCKS OF FINANCIAL STATEMENT ANALYSIS AND WHAT THEY ANALYZE
Liquidity and efficiency • Solvency • Profitability Market prospects
A manufacturing company would typically prepare all of the following budgets except:
Merchandise inventory budget
Match the capital budgeting method to its specific characteristic.
Payback period matches ChoiceIgnores the time value of money Accounting rate of return matches ChoiceUses income rather than cash flows Net present value matches ChoiceCan reflect changes in risk over a project's life Internal rate of return matches ChoiceAllows comparisons of projects of different sizes
The formula to calculate the profitability index is:
Present Value of Net Cash Flows / Initial Investment
A variance is the difference between the actual price per unit and the standard price per
Price
A company produces two products. Product A sells for $25, has variable costs of $15, and requires 2 machine hours to produce. Product B sells for $35, has variable costs of $20, and requires 5 machine hours to produce. 40,000 machine hours are available. The company can sell all it can make of either product. Which statement is true?
Product A should be produced because it will provide greater contribution margin per machine hour.
DIFFERENCE BETWEEN PRODUCT COSTS AND PERIOD COSTS AND HOW THEY ARE ACCOUNTED FOR
Product costs are those production costs necessary to create a product (inventory) Period costs are NON-productions costs - expensed as incurred
Determine if the following costs would be considered direct or indirect for a division which manufactures bicycles.
Property insurance—Indirect Depreciation on manufacturing equipment—Direct
Which of the following are indirect costs for the finishing department of a furniture manufacturer? (Check all that apply.)
Rent on the manufacturing facility Plant manager's salary Electricity cost for the plant
Which of the following are period costs for a manufacturer? (Check all that apply.)
Rent on the office building Salary for administrative staff Sales commissions
A company incurred $1,000 in costs to produce 500 units which normally sell for $1,500. Upon inspection, it was determined the units were defective and reworking the units would cost an additional $1.50 per unit. The defective units can be sold as is for $1.00 each. How should the company handle the defective units?
Rework the units which will generate incremental income of $250. Income if sold as is:$1.00 x 500 = $500 revenue:$3 x 500 = $1,500 costs to rework $1.50 x 500 = $750 Incremental income = $750 - $500 = $250
The first step in preparing the master budget is planning the budget
Sales
Preset costs for delivering a product or service under normal conditions are called cost
Standard
When recording journal entries for production costs using a standard cost accounting system, the debit to Work in Process Inventory is for the ______ amount.
Standard
A manufacturing company has an unfavorable volume variance. Which statement is true?
The company did not reach its predicted operating level.
A company currently makes a component used in production. The per unit costs incurred to make the component include: Direct materials: $5; Direct labor: $2; Overhead: $4; Total cost: $11. Twenty-five percent of the overhead costs are considered incremental. The company can purchase the component from another source for $10. The company should do which of the following?
The company should make the components because incremental costs are $2 less than the purchase price. Total cost to make = $5+2+(4 x 25%)=$8 $10-$8=$2
A responsibility accounting performance report contains which of the following items? (Check all that apply.)
The difference between actual and budgeted amounts A list of all controllable costs Budgeted amounts Actual amounts
Which of the following is the correct statement about fixed costs?
The fixed cost per unit will decrease when volume increases.
Which of the following are correct statements about the internal rate of return (IRR)? (Check all that apply.
The higher the IRR, the better. IRR uses the time value of money.
Which of the following is the correct statement about variable costs
The variable cost per unit does not change when volume changes.
Which of the following is the correct statement about variable costs?
The variable cost per unit does not change when volume changes.
VARIABLE AND FIXED COSTS
Total fixed costs do NOT change when activity changes (rent) Total variable costs DO change in proportion to activity changes (materials)
True or false: When considering the elimination of a segment, management should eliminate a segment if income increases from elimination.
True
True or false: A production budget is unique in that it does not show costs; it is always expressed in units of product.
True A production budget shows the number of units to be produced, not dollar amounts.
True or false: Volume variances are due to not producing at the predicted (expected) activity level. Therefore, the volume variance does not need to be investigated.
_ False
Budget reports are commonly prepared for: (Check all that apply).
a month. a year. a quarter.
A company receives a special order of 10,000 units of product. The potential customer is willing to pay $0.75 per unit. Current sales are $90,000 and current costs are $75,000 for 90,000 units. If the order is accepted, costs will increase to $82,000. If the company has the capacity to accept the order without affecting current sales, the company should:
accept the order, because income will increase by $500 Potential sales revenue=.75 x 10,000=$7,500 Increase in costs = $82,000-75,000=$7,000 $7,500-7,000=500
The standard overhead applied is based on the ______ level of activity multiplied by the predetermined overhead rate.
actual
The overhead variance is the difference between:
actual total overhead and the standard overhead applied
Incremental or differential costs are costs in making decisions
additional
The formula to calculate the accounting rate of return is:
annual income/average investment
Most companies prepare a(n) ______ budget that is separated into ______ budgets.
annual; quarterly or monthly
Transfer prices: (Check all that apply.)
are transfers within the same company. have a direct impact on division income.
Budgeting guidelines that help insure budgeting is a positive motivating force include: (Check all that apply.)
attainable goals. the opportunity to explain differences between actual and budgeted amounts. participatory budgeting.
If a company uses straight-line depreciation, the average investment is calculated as: (Check all that apply.)
beginning book value + salvage value)/2. (initial investment + salvage value)/2.
A capital investment evaluation method that measures the expected time until the present value of the net cash flows equals the initial investment is:
break-even time
The formula to compute the budgeted direct labor cost for a service firm is:
budgeted direct labor hours times direct labor cost per hour
The formula to compute the units to purchase in a merchandise purchases budget is:
budgeted sales units plus desired ending merchandise inventory units minus beginning merchandise inventory units
The process of evaluating and planning for long-term investments is called budgeting.
capital
The reporting of expected cash receipts and cash payments related to the sale and purchase of plant assets is reported on the expenditures budget.
capital
The _ conversion cycle measures the average time it takes to convert cash outflows into cash inflows.
cash
The break-even point is the sales level at which a company
contribution margin equals fixed costs. has income of $0.
A cost that a manager can determine or influence is called a(n) cost.
controllable
A departmental contribution to overhead report is based on:
controllable costs
Cost-volume-profit analysis helps managers predict how changes in and levels affect income.
cost and sales
When preparing a scatter diagram, the estimated line of cost behavior is drawn on a scatter diagram to show the relation between:
cost and unit volume
A department that incurs costs without generating revenues is considered a(n):
cost center
The accounting department of a manufacturing company is a(n):
cost center
At the end of the accounting period, if the net amount of the variances is immaterial, the variance accounts are closed to:
cost of goods sold
A price-setter company will use more:
cost-plus pricing methods
Managers make assumptions in CVP analysis. These assumptions include: (Check all that apply.)
costs are linear within the relevant range. costs can be classified as variable or fixed.
When recording journal entries for production costs using a standard cost accounting system, the favorable variances are recorded as ______ and the unfavorable variances are recorded as ______.
credits, debits
The cash conversion cycle is computed as:
days' sales in accounts receivable plus days' sales in inventory minus days' payable outstanding
Assuming all other factors remain constant, if sales price per unit increases, then the break-even point will
decrease
A measure to assess the effect of changes in the level of sales on income is the :
degree of operating leverage
Profit centers commonly use _____ to report profit center performance:
departmental income statements
Step 1 of computing a standard overhead rate is to:
determine an allocation base
Consider a service company that provides carpet cleaning. Classify the cost of the hourly workers who clean carpets for customers
direct
Departmental income statements include
direct and indirect expenses
When compared to the budgeted amount, if the actual cost or revenue contributes to a higher income, then the variance is considered
favorable
A cost remains unchanged when the volume of activity changes within the relevant range.
fixed
The balanced scorecard is a unique system of performance measures in that it: (Check all that apply.)
has a focus on customer satisfaction. has financial and nonfinancial measures. has multiple perspectives.
When resources are constrained and products use different inputs, the company should produce the product with the:
highest contribution margin per unit of the constrained resource
Decisions related to allocating expenses include: (Check all that apply).
how to allocate service department expenses how to allocate indirect expenses
A company's required rate of return computed as an average of the rate the company must pay to its lenders and investors is called:
hurdle rate
The decision rule for NPV includes: (Check all that apply).
if an asset's future net cash flows yield a positive net present value, invest. when comparing projects with similar initial investments and risk, select the one with the highest net present value.
A company has a degree of operating leverage of 2.5. If sales increase by 10%, then profits will:
increase by 25% 2.5/10
The decision rule for segment elimination is to eliminate a segment if income _____ from elimination.
increases
costs, also called differential costs, are the additional costs from selecting a certain course of action.
incremental
When making sell or process decisions, management should consider: (Check all that apply.)
incremental costs of processing further. revenue from selling after further processing. revenue from selling as is.
When making scrap or rework decisions, management should consider: (Check all that apply.)
incremental costs. revenue from selling defective units as scrap.
The discount rate that results in a net present value of $0 is the:
internal rate of return
_____ refers to the availability of resources to pay short-term cash requirements. Analysis is aimed at a company's funding requirements
liquidity
Each of the following are methods used to separate mixed costs into their fixed and variable components except
low-high method
Capital budgeting is used to evaluate the purchase of:
machine
Which of the following are examples of an overhead allocation base:
machine hours direct labor hours
Jack works on the production line at an assembly plant. Jack receives a base salary plus $1.25 per unit assembled. This is an example of a ______ cost.
mixed
Transfer pricing can use the following approaches:
negotiated price cost market-based
The capital investment evaluation method that subtracts the initial investment from the discounted future net cash flows from the investment at the required rate of return is the:
net present value
Of the four capital budgeting methods, which ones reflect the time value of money? (Check all that apply).
net present value and internal rate of return
Evaluating manager's performance based solely on financial measures has limitations. Therefore, companies should consider using measures to help evaluate manager performance.
nonfinancial
The capital budgeting evaluation method that measures the expected amount of time to recover the initial investment amount is the:
payback period
The process of evaluating and planning for long-term investments is called budgeting.
positive NPV of $3,121. $10,000 x 3.3121=$33,121. $33,121-$30,000=$3,121.
The main factors that can cause a variance include the following. Select all that apply.
price variance and quantity variance
Which of the following are factors indicating that a company is a price-taker
product not branded product not unique strong competition
A manufacturer will prepare a budget which shows the number of units to be produced during a period
production
A _____ center manager is evaluated on their success in generating income.
profit center
A department that is evaluated on their success in generating income is a(n):
profit center
Sales mix is the (volume/proportion/mix) ________ of the sales volume for each product.
proportion
All of the following individuals work to help set standard costs:
purchasing managers managerial accountants engineers
A statistical method for identifying cost behavior is called
regression
A company purchased 'manufacturing equipment 5 years ago for $50,000. Book value is currently $5,000 and the remaining useful life is 3 years. The equipment incurs variable manufacturing costs of $30,000. The company is considering replacing the equipment. The new equipment will cost $75,000, have a useful life of 3 years, and is more efficient and, therefore, only costs $10,000 in variable manufacturing costs to operate each year. The vendor is willing to accept the old equipment with a selling price of $20,000. The company should:
replace the old equipment because the total net increase in income will be $5,000 [$75,000 + ($10,000 x 3 years) - $20,000] = $(85,000) ($30,000) x 3 = $(90,000) $90,000-$85,000=5,000
Budget compare actual results to budgeted results.
reports
A manufacturing company currently produces 1,000 units of a product at a cost of $5,000. The units sell for $7,000. Alternatively, the company can process the units further to produce a refined product that will sell for $10,000. The additional processing will cost $4,000. The company should:
sell as is because the incremental income of selling as is versus processing further will increase income by $1,000 $10,000-$4,000=$6,000 $7000-$6000=1,000
A company is considering several investment opportunities. The investments have been evaluated using payback period and break-even time. Only one project will be chosen and time value of money is important. The company should choose the project which the:
shortest break-even time
A(n) variance occurs when management pays an amount different from the standard price to acquire an overhead item.
spending
The difference between the actual amount paid and the standard price paid to purchase an overhead item is called a
spending variance
Preset costs for delivering a product or service under normal conditions are called costs.
standard
Costs developed which identify what products should cost are called
standard costs
It is appropriate to use the profitability index to evaluate investment decisions when
the amounts invested differ substantially
It is appropriate to use the profitability index to evaluate investment decisions when:
the amounts invested differ substantially
An example of a cost that a department manager would not control is:
the manager's own salary
Standard costs have which of the following characteristics? (Check all that apply.)
they are preset costs for delivering a product or service under normal conditions they are used to help management understand reasons for variances production managers help determine production requirements for a unit of product
