acct final review

What is the earnings per share on common stock?

$1.25 ($149,500 − $49,500) ÷ 80,000

Variable costs as a percentage of sales for Craig, Inc., are 72%, current sales are $600,000, and operating income is $61,000. What is the amount of fixed costs?

$107,000 (72% of $600,000 is $432,000. Sales − Variable Costs = Contribution Margin = $600,000 − $432,000 = $168,000. Contribution Margin − Operating Income = Fixed Costs = $168,000 − $61,000 = $107,000.)

The estimated budget for factory overhead is $144,000, and the estimated direct labor hours are 12,000. Actual factory overhead is $156,000. What is the predetermined overhead rate?

$12 (144,000/12,000)

Total direct materials costs are $124,500, fixed costs are $79,500, and units produced are 15,000. What is the direct materials cost per unit?

$124,500 ÷ 15,000 = $8.30

Based on the following data, what is the amount of quick assets?

$20,000 + $47,000 + $30,000 = $97,000.

If sales are $462,000, variable costs are 72% of sales, and operating income is $42,000, what is the operating leverage?

$3.08 (Sales = $462,000. Variable Costs = $462,000 × 0.72 = $332,640. Operating Leverage = ($462,000 − $332,640) ÷ $42,000 = 3.08.)

An accounting firm, Shultz & Worsk, accumulates costs associated with individual cases using job order costing. For the upcoming year, the firm estimates that it will use 33,000 hours of direct labor for professional staff at an hourly rate of $165 per hour. Estimated total overhead costs are $1,122,000. The firm allocates overhead costs to individual client services on the basis of direct labor hours of its professional staff. What is the firm's predetermined overhead rate for the upcoming year?

$34 (1,122,000/33,000)

Variable manufacturing costs are $70 per unit, and fixed costs are $120,000. Sales are estimated to be 4,800 units. How much would absorption costing operating income differ between a plan to produce 4,800 units and a plan to produce 6,000 units?

6,000 units − 4,800 units = 1,200 units; 1,200 units × ($120,000 ÷ 6,000 units) = $24,000

A law firm, Morris & Morris, accumulates costs associated with individual cases using job order costing. On August 5, the firm charged 210 hours of professional (lawyer) time to the Micro Systems Co. breach of contract suit to prepare for the trial, at a rate of $380 per hour. What is the journal entry for this transaction?

Debit Work in Process and credit Salaries Payable for $79,800

A balance sheet for a manufacturing company includes which of the following inventory accounts?

Direct Labor Work in Process Inventory Merchandise Inventory Factory Overhead Work in process inventory

The formula for the dividend yield is

Dividends per Share of Common Stock ÷ Market Price per Share of Common Stock.

Which of the following is an example of a service industry?

Education Aerospace Pharmaceutical products Home construction Education

Which of the following positions would have a salary or wage that is classified as a factory overhead cost by a baking company?

Factory supervisor Salesperson Company president Baker Factory supervisor

Which of the following would be classified as an indirect cost by a baking company?

Flour Salaries of bakers Frosting Salaries of production supervisors Salaries of production supervisors

which of the following is not a quick asset

Inventories Accounts Receivable Temporary Investments Cash Inventories

Which of the following manufacturing companies would most likely use process costing?

Pencil factory Custom sailboat factory Made-to-order furniture manufacturer Home building company Pencil factory

Which of the following expenses is included in the inventory accounts on the balance sheet for a baking company?

President's salary expense Bad debts expense Depreciation expense on factory equipment Salespersons' travel expenses Depreciation expense on factory equipment

Which costs remain the same in total despite changes in the level of activity?

Product costs Fixed costs Variable costs Mixed costs Fixed costs

Which of the following is not a solvency ratio?

Ratio of liabilities to stockholders' equity Days' sales in inventory Times interest earned ratio Ratio of fixed assets to long-term liabilities Days sales in inventory

Return on total assets formula

Return on Total Assets = (Net Income + Interest Expense) ÷ Average Total Assets

Night Flights is preparing a contribution margin report segmented by route. What is the contribution margin ratio for the New York/Chicago route

Revenue ($760 × 12,000 passengers) $9,120,000 Fuel ($25 × 97,600 miles)(2,440,000) Wages ($45 × 97,600 miles)(4,392,000) Food ($7 × 12,000 passengers)(84,000) Selling ($70 × 12,000 passengers)(840,000) Contribution margin$1,364,000 Contribution margin ratio:$1,364,000 ÷ $9,120,000 = 15.0%

The formula to compute the asset turnover is

Sales ÷ Average Total Assets (excluding long-term investments).

Which of the following statements regarding the differences between managerial accounting applications for manufacturing and service companies is true?

Service companies do not have a work in process inventory or a finished goods inventory.

cost of goods sold formula

Starting inventory + purchases − ending inventory = cost of goods sold

can be calculated by modifying the break-even equation.

Target profit

Which of the following is true when using the concept of contribution margin in managerial decision making?

The contribution margin ratio is most useful when the increase or decrease in sales volume is measured in sales dollars. Contribution margin is rarely useful for providing insight into the profit potential of a company. The contribution margin ratio is not helpful in developing business strategies. The unit contribution margin is most useful when the increase or decrease in sales volume is measured in sales dollars. The contribution margin ratio is most useful when the increase or decrease in sales volume is measured in sales dollars.

Vertical analysis formula

VA= Item/Base amount(100)

A cost-volume-profit chart is also called a

break-even chart.

A company that is leveraged is one that

contains debt financing so as to increase the return on an investment.

Contribution margin ratio is

contribution margin divided by sales.

A company will use managerial accounting reports to help with

determining product selling prices.

Predetermined overhead rate formula

estimated manufacturing overhead/estimated activity base

When comparing data from job cost sheets, one reason for higher direct materials costs would be

excess waste and scrap.

What is included on an annual report

financial statements, statements from the CEO and Board Chair, and key activities and accomplishments, notes to the financial statements, an auditor's report, management discussion and analysis section.

Costs that are constant in total and vary per unit based on the level of activity changes are called __________ costs.

fixed

The equation for the break-even point in sales units is

fixed costs divided by unit contribution margin.

In a service company, the unit of analysis can influence whether costs are defined as

fixed or variable.

Companies with high fixed costs will normally have

high operating leverage.

When direct materials costs per unit are plotted on the vertical axis of a graph and units produced are plotted on the horizontal axis, a unit variable cost appears as a

horizontal straight line.

A company's ratio of liabilities to stockholders' equity decreased from 0.6 to 0.4 during the year. This is a(n)

improvement in the margin of safety for creditors.

In job order costing, __________ make up the work in process ledger.

job cost sheets

Job order costing records product costs by

jobs

A company's ability to convert assets into cash is called

liquidity

Management's analysis of the results of operations and its opinion about future performance are found in the

management discussion and analysis section.

The purpose of a cost system is to

measure, record, and report product costs.

When analyzing job cost sheets, excess waste and scrap could be the result of

poor quality materials.

A cost system that accumulates costs for each manufacturing department or process is called

process costing

Contribution margin ratio is also referred to as

profit-volume ratio.

Which of the following measures an important financial relationship as a single number?

ratio

A __________ is prepared when materials that have been ordered are received and inspected.

receiving report

In a common-sized income statement, which of the following is given a percentage of 100%?

sales

Contribution margin is

sales revenue minus variable costs.

An advantage of job order costing is that it allows companies to compare unit product costs to

similar jobs

In a cost-volume-profit chart, the

slope of the total costs line is dependent on the variable cost per unit.

Excess inventory increases all of the following except

storage costs. depreciation expense on existing equipment. insurance expense. property taxes. depreciation expense on existing equipment.

Managerial accounting helps companies make decisions about

the product costs of direct materials and direct labor.

Sales mix is

the relative distribution of sales among the products sold by a company.

On a job cost sheet, the formula to determine unit product cost is

total product costs divided by units produced.

Contribution margin is the excess of sales over

variable costs.

Unit variable costs may be affected by changes in the

wage rate of direct labor.

In service companies, __________ is supported by a cost ledger with a job cost sheet for each client.

work in process

Fritz, Inc.'s unit selling price is $74, the unit variable costs are $43, fixed costs are $150,000, and current sales are 10,000 units. How much will operating income change if sales increase by 5,000 units?

$74 − $43 = $31 per unit. Thus, the additional 5,000 units would provide a $155,000 (5,000 units × $31) increase to operating income.

Total fixed costs are $72,000, total variable costs are $120,000, and units produced are 8,000. What is the fixed cost per unit?

$9 ($72,000 ÷ 8,000 = $9)

If fixed costs are $1,890,000, the unit selling price is $250, and the unit variable costs are $110, what is the amount of sales (in units) required to realize an operating income of $350,000?

($1,890,000 + $350,000) ÷ ($250 − $110) = 16,000 units.

If net income is $145,000 and interest expense is $30,000 for Year 2, what is the return on total assets for Year 2?

($145,000 + $30,000) ÷ {[($630,000 + $60,000 + $900,000) + ($560,000 + $40,000 + $700,000)] ÷ 2} = $175,000 ÷ $1,445,000 = 12.1%

Variable costs for Oswego Company were 35% of sales, and sales were $415,000. Fixed costs were $80,000. What was the operating income?

($415,000 × 0.35) = $145,250. Operating Income = Sales − Variable Costs − Fixed Costs = $415,000 − $145,250 − $80,000 = $189,750.

Given the following costs and activities for Falcon Company electrical costs, use the high-low method to calculate Falcon's variable electrical costs per machine hour.

($7,300 − $4,500) ÷ (20,000 − 10,000) = $0.28 per unit

The times interest earned ratio is computed as

(Income Before Income Tax + Interest expense) / Interest expense

The formula for earnings per share on common stock is

(Net Income − Preferred Dividends) ÷ Shares of Common Stock Outstanding.

Given the following information, what is the ratio of liabilities to stockholders' equity?

2.0 (390,000/200,0000) [rounded]

If fixed costs are $387,000, the unit selling price is $40, and the unit variable costs are $25, what is the break-even sales (in units)?

25,800 (Break-Even = Fixed Costs ÷ Contribution Margin. Contribution Margin = Selling Price − Unit Variable Cost. $387,000 ÷ ($40 − $25) = 25,800 units.)

Super Sleep Hotel has 2,200 guests who stayed for two nights and rented 140 rooms. How many guest nights did the hotel have during this period?

4,400

What is the cost of goods sold

5,060+84,430= 89,490-4,800=84,690

Which of the following statements regarding cost systems is true?

A company must use either job order costing or process costing for all of its products and services. A manufacturer must only use process costing. A company may use job order costing for some of its products and process costing for other products. Service companies can only use process costing. A company may use job order costing for some of its products and process costing for other products.

__________ is a measure of the relative mix of a business's variable costs and fixed costs, computed as contribution margin divided by operating income.

Operating leverage

Which of the following is not a profitability ratio?

Asset turnover Price-earnings ratio Times interest earned Return on stockholders' equity Times interest earned

cost of goods manufactured formula

Beginning WIP inventory + total manufacturing costs - ending WIP inventory

Which of the following is the correct formula for determining cost of goods manufactured?

Beginning Work in Process Inventory + Total Manufacturing Costs − Ending Work in Process Inventory

If fixed costs are $410,000 and the unit contribution margin is $20, how many units must be sold in order to realize an operating income of $210,000?

Break-Even = Fixed Costs ÷ Contribution Margin = $410,000 ÷ $20 = 20,500 units. Break-Even + Desired Income = (Fixed Costs + Desired Operating Income) ÷ Contribution Margin = ($410,000 + $210,000) ÷ $20 = 31,000.

If fixed costs are $196,800, the unit selling price is $38, and the unit variable costs are $22, what are the old and new break-even sales (units) if the unit selling price increases by $4?

Break-Even = Fixed Costs ÷ Contribution Margin. Contribution Margin = Selling Price − Unit Variable Cost. $196,800 ÷ ($38 − $22) = 12,300 units. New Break-Even = Fixed Costs ÷ New Contribution Margin. New Contribution Margin = New Selling Price − Unit Variable Cost = $196,800 ÷ [($38 + $4) − $22] = 9,840 units.

In which analytical method are no dollar amounts shown?

Common-sized statement

Which of the following products or services would most likely be accounted for using job order costing?

Custom aircraft manufacturer Bottled water Ice cream Gasoline Custom aircraft manufacturer

Job order costing will be used by which of the following manufacturing companies?

Custom limousine factory Paper towel factory Pencil factory Candy factory Custom Limousine factory

A company will use managerial accounting reports to do which of the following?

Hire graphic artists to create new print ads. Report payroll tax information to government agencies. Consider the implementation or upgrade of computerized manufacturing processes. Replace office equipment in the sales office. Consider the implementation or upgrade of computerized manufacturing processes.

What type of analysis is indicated by the following?

Horizontal analysis

Variable costs as a percentage of sales for Seaside, Inc., are 70%, current sales are $600,000, and fixed costs are $110,000. How much will operating income change if sales increase by $75,000?

If variable costs are 70% of sales, then 70% of $75,000 equals $52,500. The change in sales minus variable costs equals the change in operating income: $75,000 − $52,500 = $22,500.

The total manufacturing costs incurred is determined by using which of the following?

Income tax payable Direct labor Selling expenses Amortization of company patents Direct Labor

A hotel will use job order costing for which of the following expenses?

Maid services Room service Soap and shampoo expenses Swimming pool expenses Room service

Which of the following would be determined using managerial accounting reports?

Manufacturing cost of each item produced

How much of the U.S. economic activity as measured by gross domestic product is represented by services?

Nearly 80%

Accounts receivable turnover formula

Net credit sales/Avg Accounts Receivable

Shore Co. sells two products: Kayaks and Motors. Last year, Shore sold 12,600 units of Kayaks and 23,400 units of Motors. If last year's fixed costs totaled $906,525, what was Shore Co.'s break-even point in units?

The sales mix is calculated based on adding the units of each product to get the total units. Then each product is divided by the total units. 12,600 Kayaks + 23,400 Motors = 36,000 total units. Kayaks' proportion is 12,600 ÷ 36,000 = 35%. Motors' proportion is 23,400 ÷ 36,000 = 65%.Unit selling price of Kayaks and Motors: ($120 × 0.35) + ($80 × 0.65)= $94Unit variable cost: ($80 × 0.35) + ($60 × 0.65) = $67Unit contribution margin: ($40 × 0.35) + ($20 × 0.65)= $27Break-Even Sales (units) = Fixed Costs ÷ Unit Contribution Margin Break-Even Sales (units) = $906,525 ÷ $27 = 33,575 units

In a vertical analysis of a balance sheet, which of the following would be shown at 100%?

Total liabilities and stockholder's equity

The profit-volume chart plots the difference between which two items?

Total sales and total costs

Which of the following conditions would cause the break-even point to increase?

Unit selling price increases Unit variable cost decreases Unit variable cost increases Total fixed costs decrease Unit variable cost increases

Operating income can be determined using

absorption and variable costing.

Understanding cost behavior depends on knowledge of

activity drivers.

Break-even analysis for a service company involves identifying the correct measure of

activity for the unit of analysis.

An example of a type of company with high fixed costs is a(n)

airline manufacturer.

For services, billing a customer can be done

at the end of the month. in advance. once the work is completed.