ACC400 FINAL EXAM PHOENIX

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1. Which of the following is not a characteristic of managerial accounting?
A. Reports are used primarily by insiders rather than by persons outside of the
business entity.
B. Its purpose is to assist managers in planning and controlling business
operations.
C. Information must be developed in conformity with generally accepted accounting
principles or with income tax regulations.
D. Information may be tailored to assist in specific managerial
decisions.
2. In comparison with a financial statement prepared in conformity with generally accepted
accounting principles, a managerial accounting report is less likely to:
A. Focus upon the entire organization as the
accounting entity.
B. Focus upon future accounting
periods.
C. Make use of estimated
amounts.
D. Be tailored to the specific needs of an individual
decision maker.
3. Alton Company produces metal belts. During the current month, the company incurred
the following product costs:
Raw materials $100,000
Direct labor $75,000
Electricity used in the Factory $25,000
Factory foreperson salary $3,750
Maintenance of factory machinery $2,000
Alton Company’s total product costs:

A. $175,00
0.
B. $30,75
0.
C. $205,75
0.
D. $28,75
0.
4.
Objectives of a cost accounting system
What are the major objectives of a cost accounting system in a manufacturing
company?

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Sue’s Soup Products uses a process costing system with two processing departments:
the Mixing and Cooking Department and the Canning Department. Work in process
inventories are reduced to zero each month. In March, the Mixing and Cooking
Department incurred manufacturing costs of $63,000 to mix 42,000 gallons of soup.
The Canning Department incurred manufacturing costs of $9,000. A total of 170,000
cans of soup were transferred to the finished goods warehouse during the month.
5.

Refer to the information above. The journal entry to record the transfer of soup out of
the Mixing and Cooking Department during March would include:
A. A debit to Work in Process Inventory, Mixing and Cooking Department of
$63,000.
B. A credit to Work in Process Inventory, Canning Department of
$72,000.
C. A debit to Finished Goods Inventory of
$72,000.
D. A credit to Work in Process Inventory, Mixing and Cooking Department
of $63,000.

Refer to the information above. The journal entry to record the transfer of soup out of
the Canning Department during March would include:
A. A credit to Work in Process Inventory, Canning Department of
$9,000.
B. A credit to Work in Process Inventory, Canning Department of
$63,000.
C. A debit to Finished Goods Inventory of
$72,000.
D. A credit to Finished Goods Inventory, Mixing and Cooking Department of
$72,000.

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Refer to the information above. The unit cost per gallon of soup transferred to the
Canning Department during March was:

A. $1.5
0.
B. $1.6
2.
C. $1.7
1.

D. $1.8
3.

40.

Summit Products, Inc. is interested in producing and selling an improved widget.
Market research indicates that customers would be willing to pay $90 for such a
widget and that 50,000 units could be sold each year at this price. The current cost to
produce the widget is estimated to be $65.
8. Refer to the information above. If Summit Products requires a 25% return on sales
to undertake production, what is the target cost for the new widget?

A. $65.0
0.
B. $67.5
0.
C. $80.0
0.

41.

D. Some other
amount.
9. Refer to the information above. Summit has learned that a competitor plans to
introduce a similar widget at a price of $80. In response, Summit may reduce its
selling price to $80. If Summit requires a 25% return on sales, what is the target cost
for the new widget?

A. $80.0
0.
B. $60.0
0.
C. $23.7
5.
D. $20.0
0.
42.

10. Refer to the information above. At a price of $80, Summit’s market research
indicates that it can sell 60,000 units per year. Assuming Summit can reach its new
target cost, how will Summit’s profit at the $80 price compare to what it would have
earned in the absence of the competitor’s product?

A. Profit will be $75,000
higher.
B. Profit will be $75,000
lower.

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C. Profit will be unaffected if Summit can reach the revised
target cost.
D. None of
these.
37.

11. A 45% contribution margin ratio means that:

A. The company should contribute 45% of its operating income to qualified charities
for maximum tax benefits.
B. 55% of the company’s revenue is consumed by fixed and
variable costs.
C. The company’s revenue has increased by 45% during the current
accounting period.
D. 45% of the company’s revenue is available to cover fixed costs and to contribute
toward operating income.
41.12.

12. If the monthly sales volume required to break even is $190,000 and monthly fixed
costs are $55,900, the contribution margin ratio is closest to:
A. 29%
.
B. 71%
.
C. 23%
.
D. 340
%.

Mitchell Corporation manufactures a single product. The selling price is $85 per unit,
and variable costs amount to $68 per unit. The fixed costs are $16,500 per month.
13.

Refer to the information above. What is the contribution margin ratio of Mitchell’s
product?
A. 65%
.
B. 80%
.
C. 72%
.
D. 20%
.

14.

Refer to the information above. What is the monthly sales volume in dollars necessary
to break-even?

A. $82,50
0.
B. $66,50
0.
C. $97,05
9.
D. $77,50
0.
15.

Refer to the information above. How many units must be sold each month to earn a
monthly operating income of $8,000? (Round your final answer to the next whole
number.)

A. 971
units.
B. 1,442
units.
C. 122,500
units.

16.

D. 353
units.
Refer to the information above. What will be Mitchell’s monthly operating income if
1,800 units are sold each month?

A. $153,00
0.
B. $136,50
0.
C. $30,60
0.
D. $14,10
0.

17.

Which factor is not relevant in deciding whether or not to accept a special order?

A. Incremental revenue that will be
earned.
B. Additional costs that will be
incurred.
C. The effect that the order will have on the company’s regular sales volume and
selling prices.
D. The average cost of production if the special order is
accepted.
18.

The primary difference between profit centers and cost centers is that:

A. Profit centers generate
revenue.
B. Cost centers incur
costs.
C. Profit centers are evaluated using return on investment
criteria.

19.

D. Profit centers provide services to other centers in the
organization.
An investment center:

A. Is a profit center for which management is able to objectively measure the cost of
the assets used in the center’s operations.
B. Is a cost center for which management is able to identify the original
amount invested.
C. May be either a cost center or a profit
center.
D. Is a subunit of the organization that provides services to other centers within the
organization.
20.

Which of the following is not considered an operating budget?

A. Manufacturing cost
budget.
B. Production
schedule.

C. Capital expenditures
budget.
D. Sales
forecast.

21.

A budget that can be easily adjusted to show budgeted revenues, costs, and cash
flows at different levels of activity is known as:

A. A flexible
budget.
B. A master
budget.
C. A production
budget.
D. A multi-level
budget.
22.

Explain what is meant by "profit rich, yet cash poor".

23.

There will be a favorable materials price variance if:

A. The standard price per unit is less than the actual price
per unit.
B. The standard price per unit is greater than the actual price
per unit.
C. The actual quantity purchased is greater than
expected.
D. The actual quantity purchased is less than
expected.
24.

Greenleaf’s flexible budget for June, based on actual output, called for the use of
10,000 square feet of materials at a standard cost of $9.90 per square foot. Company
records show that the actual price paid for the materials used in June was $9.70 per
square foot, and that the direct materials price variance for the month was $2,090
favorable. The materials quantity variance for Greenleaf’s June operations was:

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A. $1,000
favorable.
B. $4,455
unfavorable.
C. $4,365
favorable.

D. Impossible to determine from the data
given.

Maple Company’s flexible budget, based upon the number of equivalent units
produced, called for the use of 5,000 square yards of fabric at a standard cost of
$2.45 per square yard. The Production Department actually used 5,200 square yards
costing $2.35 per square yard during June.
25.

Refer to the information above. The materials price variance for Maple Company for
June is:

A. $520
favorable.
B. $990
favorable.
C. $30
unfavorable.
D. $520
unfavorable.
Eagle Company uses a standard cost system which has provided the following
data:

26.

Refer to the information above. The direct labor rate variance for the period
was:
A. $425
favorable.
B. $360
favorable.
C. $360
unfavorable.
D. $425
unfavorable.

27.

Identify the criticisms of using ROI (Return on investment) as the only performance
measure.

28.

Explain the importance of incentive systems for motivating performance.

29.

Capital budget audit
Briefly discuss the reasons that a company’s management would conduct a
regular capital budget audit.

30.

Accounting terminology
Listed below are nine technical accounting terms introduced or emphasized in this
chapter:

Each of the following statements may (or may not) describe one of these technical
terms. In the space provided beside each statement, indicate the accounting term
described, or answer "None" if the statement does not correctly describe any of the
terms.
____ (a) The amount by which sales revenue exceeds total variable cost expressed as
a percentage of sales.
____ (b) The amount by which sales volume exceeds the break-even point.
____ (c) The study of financial statements by a potential investor or creditor as a
means of evaluating the profitability and solvency of a business.
____ (d) A type of activity that has a causal effect in the occurrence of a particular
cost.
____ (e) The level of sales at which revenue equals operating expenses.
____ (f) A cost that responds to changes in sales volume by less than a proportionate
amount.
____ (g) A mathematical technique used to determine the fixed and variable elements
of a mixed or semi-variable cost.