ACC 526 Mid Term Exam, Exams of Accounting

Download ACC 526 Mid Term Exam and more Exams Accounting in PDF only on Docsity! ACC 526 Mid Term Exam Period Costs - CORRECT ANSWER - Costs that are matched with the revenue of a specific time period and charged to expense as incurred. Indirect Labor - CORRECT ANSWER - Work of factory employees that has no physical association with the finished product, or it is impractical to trace the costs to the good produced. Product Costs - CORRECT ANSWER - costs that are a necessary and integral part of producing the finished product Manufacturing Overhead - CORRECT ANSWER - Manufacturing costs that are indirectly associated with the manufacture of the finished product. Managerial Accounting - CORRECT ANSWER - A field of accounting that provides economic and financial information for internal users. Direct Labor - CORRECT ANSWER - The work of factory employees that can be physically and directly associated with converting raw materials into finished goods. Manufacturing Overhead - CORRECT ANSWER - Identify: Factory supervisor's salary Period Costs - CORRECT ANSWER - Identify: Supplies for the general office Direct Materials - CORRECT ANSWER - Identify: Rubber latex purchased for the use in the manufacture of automobile tires Period Costs - CORRECT ANSWER - Identify: Advertising Manufacturing Overhead - CORRECT ANSWER - Identify: Rent on factory equipment Period Costs - CORRECT ANSWER - Identify: Utility cost for the store Period Costs - CORRECT ANSWER - Identify: Salary paid to the company's chief executive officer Manufacturing Overhead - CORRECT ANSWER - Identify: Salary paid to mechanics who maintain and repair factory equipment Direct Labor - CORRECT ANSWER - Identify: Wages paid to assembly-line workers who install interiors in automobiles a. deal with the economic events of an enterprise - CORRECT ANSWER - Financial and managerial accounting are similar in that both: a. deal with the economic events of an enterprise. b. produce general-purpose reports. c. have the same primary users. d. have reports that are prepared quarterly and annually. c. the product is sold - CORRECT ANSWER - Product costs are expenses on the income statement when: a. the product completes the manufacturing process. b. the order is received for the product. c. the product is sold. d. raw materials for the product are purchased. a. $22,500 15,500 + 44,500 - 37,500 = - CORRECT ANSWER - Super Tread Inc. is a large manufacturer of auto tires. Super Tread has provided the following information: Sales Revenue $55,000 Beginning Finished Goods Inventory $15,500 Cost of Goods sold $37,500 Cost of Goods Manufactured $44,500 Calculate the amount of ending Finished Goods Inventory reported on Super Tread's balance sheet. c. $1,135,000 Direct Materials (81,000+360,000-59,000) + Direct Labor (471,000) + Factory Overhead (19,000+24,000+268,000) + Work-in-Process (26,000-55,000) - CORRECT ANSWER - Payton Corporation provided the following information for the year: Beginning Balance - Work-in-Process Inventory $26,000 Ending Balance - Work-in-Process Inventory $55,000 Beginning Balance - Direct Materials 81,000 Ending Balance - Direct Materials 59,000 Purchases - Direct Materials 360,000 Direct Labor 471,000 Indirect Labor 19,000 Depreciation on Factory Plant and Equipment 24,000 Plant Utilities and Insurance 268,000 What was the amount of the cost of goods manufactured for the year? a. $1,363,000 b. $1,193,000 c. $1,135,000 d. $1,164,000 c. $86,620 Product Costs = Direct Materials (27,500) + Direct Labor (36,000) + factory repair and maintenance (920) + Manufacturing equipment depreciation (1,200) + Indirect materials (8,000) + Indirect labor (13,000) - CORRECT ANSWER - The following relates to Harrison, Inc: c. Variable Cost per Unit = $15.00 and Total Fixed Cost = $400 d. Variable Cost per Unit = $8.33 and Total Fixed Cost = $267 c. both (a) and (b) - CORRECT ANSWER - Fixed costs are costs that: a. remain the same in total regardless of changes in the activity level b. vary inversely with activity on a per unit basis c. both (a) and (b) c. Neither (a) nor (b) variable costs - CORRECT ANSWER - Costs that vary in total directly and proportionately with changes in the activity level. break-even point - CORRECT ANSWER - The level of activity at which total revenues equal total costs. Relevant Range - CORRECT ANSWER - The range of the activity index over which the company expects to operate during the year. fixed costs - CORRECT ANSWER - costs that remain the same in total regardless of changes in the activity level Contribution Margin - CORRECT ANSWER - the amount of revenue remaining after deducting variable costs cost behavior analysis - CORRECT ANSWER - the study of how specific costs respond to changes in the level of business activity b. 10% Sales (25*1000) = 25,000 Margin of Safety/Sales (25000) = 2500/25000 = 0.10 Margin of Safety = Budgeted Sales (25000) -Breakeven Sales = 25000-22500 = 2500 Breakeven Sales = Fixed Cost (18,000) / PV ratio = 18000/.80 = 22500 PV Ratio = Contribution / Sales (25000) = 20000/25000 = .80 Contribution = Sales (25000) - Variable Cost (5*1000 = 5000) = 20000 - CORRECT ANSWER - Domino Industries makes a product that sells for $25 per unit. The product has a $5 per unit variable cost and total fixed costs of $18,000. At budgeted sales of 1,000 units, the margin of safety ratio is a. 80% b. 10% c. 20% d. 90% a. $100,000 (5*20000) - CORRECT ANSWER - CMA, Inc. produces a product that has a variable cost of $2.50 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 per unit and the company desires to earn a target profit of $20,000. What amount of sales will be necessary to earn the desired profit? a. $100,000 b. $40,000 c. $60,000 d. $20,000 a. 12,000 (30,000/2.50) - CORRECT ANSWER - AMC, Inc. produces a product that has a variable cost of $2.50 per unit. The company's fixed costs are $30,000. The product is sold for $5.00 a unit and the company desires to earn a $20,000 profit. The breakeven in units for AMC is which of the following amounts? a. 12,000 b. 4,000 c. 6,000 d. 5,000 c. $0.5625 Contribution Margin per unit = Sales Price per unit ($1) - Variable Price per unit [(260,000+90,000) / 800,000] = 0.4375 = 0.5625 - CORRECT ANSWER - Clear Springs Bottling Company produces a soft drink that is sold for a dollar. The company pays $400,000 in production costs, of which $260,000 are variable production costs. General, selling and administrative costs amount to $290,000 of which $90,000 are variable costs. Assuming production and sales of 800,000 units, what is the amount of contribution margin per unit? a. $0.3125 b. None of these are correct c. $0.5625 d. $0.1375 a. $120,000 Sales Revenue - Variable expenses = 20,000 (10-4) - CORRECT ANSWER - Cinder Block industries currently produces and sells 20,000 units of product at a selling price of $10. The product has variable costs of $4 per unit and a fixed cost of $50,000. The company currently earns a total contribution margin of: a. $120,000 b. $200,000 c. $50,000 d. $70,000 Planning - CORRECT ANSWER - ___ establishes goal Describe a financial accountant. - CORRECT ANSWER - provides historical information to external users in accordance with GAAP Describe a managerial accountant. - CORRECT ANSWER - - provides detailed financial information and non financial information to internal users for decision making, planning, and control purposes - planning, directing, controlling Control - CORRECT ANSWER - ___ assesses whether goals were achieved. Describe the hierarchy of typical organization. - CORRECT ANSWER - Board of directors CEO VP and CFO Controller, treasurer, and internal auditor Managerial accountant, financial accountant, and tax accountant Describe IMA and ethical decision making. - CORRECT ANSWER - Use resources provided by internal company policies Four standards: competence, confidentiality, integrity, credibility Yes, consult an attorney regarding your rights! Describe ERP systems. - CORRECT ANSWER - - benefits must outweigh cost of implement - recording, sorting, analyzing, and reporting financial information for internal users - instant worldwide updates Describe manufacturing costs - CORRECT ANSWER - costs (product costs) are classified as DM, DL or MFOH and expensed when sold Describe nonmanufacturing costs. - CORRECT ANSWER - costs (period costs) are not related to production and are classified as selling costs or general and administrative costs and expensed in the period in which it was incurred Describe inventory accounts. - CORRECT ANSWER - - raw material inventory account - work-in-process inventory account - finished goods inventory account - ALL asset accounts on the balance sheet - COGS is recorded as an expense when inventory is sold and appears on the income statement, NOT balance sheet! Describe income statement of merchandising company. - CORRECT ANSWER - - merchandise inventory account - use term net purchases - include schedule of COGS in income statement Describe job costing - CORRECT ANSWER - used for unique products Describe process costing - CORRECT ANSWER - used for batches of identical units Describe material requisition - CORRECT ANSWER - used for transferring raw materials to WIP and identifies the job in which the materials will be used by using a timesheet to track workers hours on each job 3. When units produced is less than units sold, variable costing yields the highest profit general and admin costs - CORRECT ANSWER - ___ are costs related to the overall management of an organization which include accounting, HR, legal, executive, and IT selling costs - CORRECT ANSWER - ___ are costs incurred to obtain customer orders and provide customers with a finished product which include advertising, sales commission, salaries for marketing and advertising personnel, etc. normal costing - CORRECT ANSWER - ___ is the use of a predetermined overhead rate rather than actual data to apply overhead to jobs. It averages the costs out over the course of a year. under applied OH - CORRECT ANSWER - ___ occurs when actual overhead costs are higher than overhead applied to jobs; MFO has a debit balance at this time. This occurs because fewer costs were applied to jobs than were actually incurred. Often transferred to COGS to correct as a debit over applied OH - CORRECT ANSWER - ___ occurs when actual overhead costs are lower than overhead applied to jobs; MFO has a credit balance at this time. This happens because more costs were applied to jobs than were actually incurred. Often transferred to COGS to correct as a credit. job costing - CORRECT ANSWER - ___ records revenues and costs for each job/unique product I.e., custom home, custom furniture, etc. Process costing - CORRECT ANSWER - ___ records revenues and costs for batches of identical units of products, I.e., soft drinks, milk, lumber, paper, etc. variable - CORRECT ANSWER - ___ costs which change in total with direct proportion to changes in volume and per unit cost remains constant. relevant range - CORRECT ANSWER - The range of activity index over which the company expects to operate during the year is the ___. Investing Activity; Source of Cash - CORRECT ANSWER - Sold a warehouse for $750,000 Operating Activity; Source of Cash - CORRECT ANSWER - Reported a profit of $100,000. Financing Activity; Use of Cash - CORRECT ANSWER - Retired long-term bonds Financing Activity; Use of Cash - CORRECT ANSWER - Paid cash dividends of $350,000 Financing Activity, Source of Cash - CORRECT ANSWER - Obtained a mortgage for a new building from a local bank Investing Activity; Use of Cash - CORRECT ANSWER - Purchased a new robotic system Financing Activity; Source of Cash - CORRECT ANSWER - Issued a long-term note payable Investing Activity; Use of Cash - CORRECT ANSWER - Purchased a 40% interest in a company Operating Activity; Use of Cash - CORRECT ANSWER - Reported a loss for the year Financing Activity; Source of Cash - CORRECT ANSWER - Negotiated a long-term loan Operating activity; Use of Cash - CORRECT ANSWER - Reported a loss for the year ($472,000) Operating Activity; Source of Cash - CORRECT ANSWER - Reported profits for $6,608,000 for the most recent year Financing Activity; Source of Cash - CORRECT ANSWER - Issued bonds with a six- year maturity date for $1,888,000 Financing Activity; Use of Cash - CORRECT ANSWER - Retired a long-term note payable Investing Activity; Source of Cash - CORRECT ANSWER - Sold a 30% interest in a company Financing Activity; Use of Cash - CORRECT ANSWER - Paid cash dividends of $1,888,000 Investing Activity; Source of Cash - CORRECT ANSWER - Sold a new plant for $4,720,000 Investing Activity; Use of Cash - CORRECT ANSWER - Purchased equipment for $472,000 Financing Activity; Source of Cash - CORRECT ANSWER - Issued common stock for $944,000 Deducted from net income - CORRECT ANSWER - Gain on sale of an asset Deducted from net income - CORRECT ANSWER - Increase in accounts receivable Added to Net Income - CORRECT ANSWER - Decrease in prepaid insurance Added to Net Income - CORRECT ANSWER - Amortization expense Added to Net Income - CORRECT ANSWER - Increase in accounts payable Added to Net Income - CORRECT ANSWER - Uncollectible accounts expense Deducted from Net Income - CORRECT ANSWER - Decrease in Wages payable Deducted from Net Income - CORRECT ANSWER - Increase in inventories Added to Net Income - CORRECT ANSWER - Depreciation expense b. serves as a control figure for the statement of cash flows - CORRECT ANSWER - The difference between the beginning and ending cash balances shown on the balance sheet a. is added to net income to obtain total cash flows. b. serves as a control figure for the statement of cash flows. c. is deducted from net income to obtain net cash inflows. d. is the source of all investing and financing activities. e. is both "deducted from net income to obtain net cash inflows" and "the source of all investing and financing activities". e. All of the these - CORRECT ANSWER - Sources of cash include a. profitable operations b. the issuance of long-term debt c. the sale of long-term assets d. the issuance of capital stock e. All of these b. cash collections from customers were less than the revenues reported. - CORRECT ANSWER - An increase in accounts receivable is deducted from net income to obtain operating cash flows because a. cash collections decreased due to declining gross margins. b. cash collections from customers were less than the revenues reported. c. cash collections increased due to increasing sales. d. cash collections from customers were reduced by cash payments to vendors. e. None of these e. need "cash dividends" and "the purchase of long-term assets". - CORRECT ANSWER - Uses of cash include a. cash dividends. b. the sale of old equipment c. the purchase of long-term assets d. need "cash dividends" and "the sale of old equipment" e. need "cash dividends" and "the purchase of long-term assets" a. 1,000,000 b. 1,253,000 c. 2,653,000 d. (120,000) d. $45,000 (912,500-1,162,500) + 295,000 - CORRECT ANSWER - Murray Company earned net income of $450,000 in 20X2. Murray provided the following information: Murray Company Comparative Balance Sheets At December 31, 20X1 and 20X2 20X1 20X2 Bonds Payable - 295,000.00 Mortgage payable 50,000.00 - Common stock 187,500.00 187,500.00 Paid-in capital in excess of par 140,000.00 140,000.00 Retained earnings 912,500.00 1,162,500.00 Compute the financing cash flows for the current year. a. 35,000 b. 90,000 c. 15,000 d. 45,000 a. The sum of the operating, investing, and financing cash flows must equal the change in cash from 20X1 to 20X2. - CORRECT ANSWER - Explain the role of the change in cash flow in the statement of cash flows. 20X1 20X2 Cash $1,473,000 $2,260,000 a. The sum of the operating, investing, and financing cash flows must equal the change in cash from 20X1 to 20X2. b. The operating cash flow must be greater than the change in cash from 20X1 to 20X2. c. The sum of the operating, investing, and financing cash flows must greater the change in cash from 20X1 to 20X2. d. The sum of the operating and financing cash flows must equal the change in cash from 20X1 to 20X2. c. $787,000 - CORRECT ANSWER - Blaylock Company provided the following information: Cash 20X1 - 1,473,000 20X2 - 2,260,000 Calculate the change in cash c. 20 units per hour; 0.05 hour(s) - CORRECT ANSWER - Kolby Company takes 1,335 to produce 26,700 units of a product. What is the velocity? Cycle Time? Round to two decimal places. a. 15 units per hour; 0.05 hour (s) b. 20 units per hour; 1 hour(s) c. 20 units per hour; 0.05 hour(s) d. 5 units per hour; 0.10 hour(s) Satisfying patient needs; nursing hours - CORRECT ANSWER - providing nursing care coordinating nursing activities; number of nurses - CORRECT ANSWER - supervising nurses providing meals to patients; number of meals - CORRECT ANSWER - feeding patients cleaning and delivering clothes and bedding; pounds of laundry - CORRECT ANSWER - laundering bedding and clothes therapy treatments directed by physician; hours of therapy - CORRECT ANSWER - providing physical therapy using equipment to monitor patient conditions; monitoring hours - CORRECT ANSWER - monitoring patients managerial accounting oriented - CORRECT ANSWER - Ben Heald, head of production, wondered whether it would be more cost effective to buy parts partially assembled or to buy individual parts and assemble them at the Arben factory. Is this managerial accounting oriented or financial accounting oriented? financial accounting oriented - CORRECT ANSWER - The president of Arben reminded Jenna that the stockholders' meeting was coming up, and he needed her to prepare a PowerPoint presentation showing the income statement and balance sheet information for last year. Is this managerial accounting oriented or financial accounting oriented? Managerial accounting oriented - CORRECT ANSWER - Ellen Johnson, vice president of sales, has decided to expand the sales offices for next year. She sent Jenna the information on next year's rent and depreciation information for budgeting purposes. Is this managerial accounting oriented or financial accounting oriented? Financial accounting oriented - CORRECT ANSWER - Jenna's assistant, Mike, received the information from Ellen on depreciation and added it to depreciation expenses and accumulated depreciation on office equipment. Is this managerial accounting oriented or financial accounting oriented? Managerial accounting oriented - CORRECT ANSWER - Jenna compared the budgeted spending on materials used in production with the actual spending on materials used in production. Materials spending was significantly higher than expected. She set up a meeting to discuss this outcome with Ben Heald so that he could explain it. Is this managerial accounting oriented or financial accounting oriented? e. Cost leadership and product differentiation - CORRECT ANSWER - In terms of strategic positioning, which two general strategies may be chosen by a company? a. Responsibility accounting and cost center management b. Increasing customer value and decreasing supplier orientation c. Time Management and production efficiency d. Staff resource management and expense control e. Cost leadership and product differentiation e. All of these - CORRECT ANSWER - An effective managerial accounting system should track information about an organization's activities in which of the following areas? a. Sales and Advertising b. Marketing c. Purchasing d. Design E. All of these e. All of these - CORRECT ANSWER - Which of the following is a characteristic of managerial accounting? a. It identifies nonfinancial information useful to internal users b. It measures nonfinancial information that is useful for controlling costs. c. Subjective information may be used. d. It is broad-based and multidisciplinary. e. All of these Decision Making - CORRECT ANSWER - What is the managerial accounting objective(s) that are applicable for each scenario: planning, controlling (including performance evaluation), or decision making. Laboratory Manager: An HMO approached me recently and offered us its entire range of blood tests. It provided a price list revealing the amount it is willing to pay for each test. In many cases, the prices are below what we normally charge. I need Airline manufacturing (e.g., 767s) Process - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Personal computer assembly Process - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Furniture making (e.g., computer desks sold at discount stores) Job-order - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Custom furniture making Job-order - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Dental services Process - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Paper manufacturing Process - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Nut and bolt manufacturing Job-order - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Auto repair Job-order - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Architectural services Job-order - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Landscape design services Process - CORRECT ANSWER - Identify each of the following types of businesses as either job-order of process costing. Flashlight manufacturing