ACC 561 Final Exam 3 Sets

SET 1

1. Which of the following is an advantage of corporations relative to partnerships and sole proprietorships?
Reduced legal liability for investors
Harder to transfer ownership
Lower taxes
Most common form of organization


2. Dividends _____.
represent an expense and are an operating activity
represent an obligation and are an operating activity
represent a distribution of earnings and are a financing activity
represent an asset and are an investing activity


3. Below is a partial list of account balances for LBJ Company:

Cash $15,000
Prepaid insurance 5,000
Accounts receivable 2,500
Accounts payable 3,000
Notes payable 6,000
Common stock 10,000
Dividends 500
Revenues 15,000
Expenses 13,000

What did LBJ Company show as total debits?

$34,000
$36,000
$70,000
$31,000


4. Under the accrual basis of accounting, revenues are recorded and reported _____.
when companies receive payments for jobs performed or products provided
when companies have provided products or performed services
when companies receive payments prior to providing products or performing services
when companies receive payments after providing products or performing services


5. In a period of increasing prices, which inventory cost flow assumption will result in the highest amount of net income?
LIFO
The average cost method
FIFO
Income tax expense for the period will be the same under all assumptions.


6. Equipment was purchased for $55,000 on January 1, 2011. Freight charges of $2,200 were incurred and there was a cost of $1,800 for installation. It is estimated the equipment will have a $5,500 salvage value at the end of its 5-year useful life. Depreciation expense for 2011 using the straight-line method will be _____.
$10,340
$10,700
$10,260
$9,900


7. Payne Corporation issues 100 twenty-year, 6%, $1,000 bonds dated July 1, 2010, at 94. The journal entry to record the issuance will show a _____.
debit to Cash of $100,000
credit to Bonds Payable of $94,000
credit to Premium on Bonds Payable of $4,000
debit to Discount on Bonds Payable of $6,000


8. Accounts receivable arising from sales to customers amounted to $80,000 and $120,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $2,000,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is _____.

$2,040,000
$2,000,000
$1,200,000
$1,960,000


9. If you are making comparisons within a company to detect changes in financial relationships and significant trends, you are performing what type of analysis?
Industry averages analysis
Intercompany analysis
Common-size analysis
Intracompany analysis


10. The formula for performing horizontal analysis is _____.
(Current Year Amount minus Base Year Amount) divided by Current Year Amount
Base Year Amount divided by Current Year Amount
Current Year Amount minus Base Year Amount
(Current Year Amount minus Base Year Amount) divided by Base Year Amount


11.Horizontal analysis of comparative financial statements includes the _____.
development of common-size statements
calculation of liquidity ratios
calculation of dollar amount changes and percentage changes from the previous year to the current year
evaluation of financial statement data that expresses each item in a financial statement as a percentage of a base amount


12. A common measure of solvency is the _____.
asset turnover
current cash debt coverage ratio
cash debt coverage ratio
current ratio


13. Stockholders would be most interested in which of the following ratios?
Days in inventory
Free cash flow
Current ratio
Average collection period


14. To calculate the market value of a bond, we need to _____.
multiply the bond price times the interest rate
calculate the present value of the principal only
calculate the present value of the interest only
calculate the present value of both the principal and interest payments

SET 2

1. An unfavorable materials quantity variance would occur if
A) more materials were purchased than were used.
B) actual pounds of materials used were less than the standard pounds allowed.
C) actual labor hours used were greater than the standard labor hours allowed.
D) actual pounds of materials used were greater than the standard pounds allowed.


2. Fleck's standard quantities for 1 unit of product include 2 pounds of materials and 1.5 labor hours. The standard rates are $3 per pound and $10 per hour. The standard overhead rate is $12 per direct labor hour. The total standard cost of Fleck's product is
A) $21.
B) $25.
C) $33
D) $39.


3. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090.

Tools-N-Time’s total material variance is
A) $300 F.
B) $90 U.
C) $310 U.
D) $400 U.


4. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090.

Tools-N-Time's materials price variance is
A) $90 U.
B) $310 F.
C) $400 F.
D) $700 F.


5. Tools-N-Time has a standard of 1.5 pounds of materials per unit, at $4 per pound. In producing 2,000 units, Tools-N-Time used 3,100 pounds of materials at a total cost of $12,090.

Tools-N-Time's materials quantity variance is
A) $90 F.
B) $310 U.
C) $400 U.
D) $700 U.


6. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970.

Tools-N-Time's total labor variance is
A) $770 U.
B) $800 U.
C) $1,030 F.
D) $1,930 F.


7. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970.

Tools-N-Time's labor price variance is
A) $770 U.
B) $800 U.
C) $1,030 F.
D) $1,930 F.


8. Tools-N-Time has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units, Tools-N-Time used 3,850 hours of labor at a total cost of $46,970.

Tools-N-Time's labor quantity variance is
A) $770 U.
B) $1,030 F.
C) $1,800 F.
D) $1,930 F.


9. The standard quantity allowed for the units produced was 6,500 pounds, the standard price was $2.50 per pound, and the materials quantity variance was $375 favorable. Each unit uses 1 pound of materials. How many units were actually produced?
A) 6,350
B) 6,500
C) 15,875
D) 6,650


10. A company developed the following per-unit standards for its product: 2 gallons of direct materials at $6 per gallon. Last month, 3,000 gallons of direct materials were purchased for $17,100. The direct materials price variance for last month was
A) $17,100 favorable.
B) $450 favorable.
C) $900 favorable.
D) $900 unfavorable.


11. The per-unit standards for direct materials are 2 pounds at $4 per pound. Last month, 11,200 pounds of direct materials that actually cost $42,400 were used to produce 6,000 units of product. The direct materials quantity variance for last month was
A) $3,200 favorable.
B) $2,400 favorable.
C) $3,200 unfavorable.
D) $5,600 unfavorable.


12. The per-unit standards for direct labor are 1.5 direct labor hours at $12 per hour. If in producing 2,400 units, the actual direct labor cost was $36,800 for 3,000 direct labor hours worked, the total direct labor variance is
A) $1,920 unfavorable.
B) $6,400 favorable.
C) $4,000 unfavorable.
D) $6,400 unfavorable.


13. The standard rate of pay is $10 per direct labor hour. If the actual direct labor payroll was $39,200 for 4,000 direct labor hours worked, the direct labor price (rate) variance is
A) $800 unfavorable.
B) $800 favorable.
C) $1,000 unfavorable.
D) $1,000 favorable.


14. The standard number of hours that should have been worked for the output attained is 10,000 direct labor hours and the actual number of direct labor hours worked was 10,500. If the direct labor price variance was $10,500 unfavorable, and the standard rate of pay was $15 per direct labor hour, what was the actual rate of pay for direct labor?
A) $14 per direct labor hour
B) $12 per direct labor hour
C) $16 per direct labor hour
D) $15 per direct labor hour


15. A company purchases 15,000 pounds of materials. The materials price variance is $6,000 favorable. What is the difference between the standard and actual price paid for the materials?
A) $2.00
B) $.40
C) $2.50
D) $10.00


16. A company uses 40,000 gallons of materials for which it paid $9.00 a gallon. The materials price variance was $80,000 favorable. What is the standard price per gallon?
A) $2.00
B)

SET 3

1) Department performance reports can be used to help department heads determine _____.

A. who is primarily responsible for any deviations from plans

B. how effectively and efficiently the department is operating

C. how effectively the department is operating

D. how efficiently the department is operating

2) Performance reports _____.

A. ignore areas that are presumed to be running smoothly

B. are deviations from a plan

C. are quantitative expressions of action plans

D. provide feedback by comparing results with plans and by highlighting deviations from plans

3) According to the Financial Executives Institute, one function of controllership is _____.

A. reporting and interpreting financial information

B. provision of capital

C. investments

D. short term financing

4) Which of the following is not a major factor causing changes in management accounting today?

A. Increasing importance of the service sector of the economy is not a major factor.

B. E-commerce is not a major factor.

C. Declining work ethic is not a major factor.

D. Increased global competition is not a major factor.

5) Ethical accountants are important to society because _____.

A. none of these answers is correct

B. they will not go to prison and waste taxpayers' money

C. they pay their taxes

D. the information produced is reliable

6) According to the Institute of Management Accountants' Statement of Ethical Professional Practice, the standard of competence includes:

A. All of these answers are correct

B. disclosing all relevant information

C. the ongoing development of the accountant's knowledge and skills

D. avoiding actual or apparent conflicts of interest

7) Which scorecard function is associated with making non-routine decisions?

A. None of these answers is correct

B. Problem solving is associated with making non-routine decisions.

C. Scorekeeping is associated with making non-routine decisions.

D. Attention directing is associated with making non-routine decisions.

8) The primary users of management accounting information are _____.

A. governmental regulatory authorities

B. bankers

C. internal decision makers

D. suppliers

9) _____ is the field of accounting that develops information for external decision makers such as stockholders, suppliers, banks, and government regulatory agencies.

A. Tax accounting

B. Auditing

C. Management accounting

D. Financial accounting

10) Etiwanda Company's accountant recorded a debit to Accounts Payable and a credit to Cash. This transaction will_____.

A. decrease Cash and increase Accounts Payable

B. increase Cash and decrease Accounts Payable

C. increase Cash and increase Accounts Payable

D. decrease Cash and decrease Accounts Payable

11) The _____ is also called the statement of financial position.

A. balance sheet

B. income statement

C. statement of retained earnings

D. statement of cash flows

12) The _____ is not one of the three major financial statements.

A. income statement

B. statement of cash flows

C. balance sheet

D. statement of equity position

13) The accounting convention of _____ guides the relative sophistication of the accounting system.

A. cost benefit

B. objectivity

C. conservatism

D. materiality

14) The accounting convention of _____ means selecting the method of measurement that yields the gloomiest immediate results.

A. objectivity

B. cost benefit

C. materiality

D. conservatism

15) The use of acquisition cost less depreciation in valuing an asset on the balance sheet is the logical result of the _____ accounting convention.

A. materiality

B. conservatism

C. continuity

D. cost-benefit

16) The statement of cash flows is used for all of the following except_____.

A. evaluating the creditworthiness of the organization

B. determining a company's ability to pay its debts when they are due

C. showing the relationship of net income to changes in cash

D. revealing commitments that may restrict future courses of action

17) The Rebecca Company acquired merchandise inventory costing $10,000 on September 1. The company will not pay for the inventory until October 1. This transaction will affect the Rebecca Company by increasing the Merchandise Inventory account by $10,000 and _____.

A. decreasing the Capital account by $10,000

B. decreasing the Accounts Payable account by $10,000

C. increasing the Accounts Payable account by $10,000

D. increasing the Capital account by $10,000

18) Nonoperating items on the income statement_____.

A. appear on the income statement immediately after gross profit

B. reflect the effects of financial management decisions

C. are revenues and expenses arising from adjusting entries

D. appear only on corporate income statements

19) Output measures of both resources and activities are _____.

A. variable activities

B. stages of production

C. cost drivers

D. fixed activities

20) Which value chain function would include advertising costs?

A. The marketing function would include advertising costs.

B. The customer service function would include advertising costs.

C. The distribution function would include advertising costs.

D. The production function would include advertising costs.

21) Number of engineering hours is a likely cost driver for which value chain function?

A. The production function has number of engineering hours as a likely cost driver

B. The design function has number of engineering hours as a likely cost driver.

C. The research and development function has number of engineering hours as a likely cost driver.

D. The marketing function has number of engineering hours as a likely cost driver.

22) Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as follows:

Direct materials $195

Direct labor 126

Variable factory overhead 51

Total fixed costs for the period are $456,840. The contribution margin per desk is _____.

A. $126

B. $108

C. $195

D. $51

23) If the sales price per unit is $100, the unit variable cost is $75, and total fixed costs are $150,000, then the break even volume in dollar sales rounded to the nearest whole dollar is _____.

A. $600,000

B. $150,000

C. $200,000

D. $1,500

24) Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor. If total fixed costs are $435,000, then the break even volume in dollars is _____.

A. $1,023,529

B. $1,450,000

C. $621,429

D. $435,000

25) The _____ method of measuring cost functions is the least reliable.

A. visual fit

B. high low

C. simple least squares regression

D. multiple least squares regression

26) _____ of approximating cost functions does not involve the analysis of past costs.

A. Visual fit analysis

B. High low analysis

C. Engineering analysis

D. least-squares regression

27) Managers should apply two principles to obtain accurate and useful cost functions. These principles are ____.

A. plausibility and reliability

B. plausibility and believability

C. reliability and validity

D. believability and validity

28) The change from traditional costing to activity-based costing may reveal that _____.

A. low volume products are overcosted

B. high volume products are overcosted

C. both high and low volume products are overcosted

D. both high and low volume products are undercosted

29) _____ need cost accounting systems.

A. Service organizations and nonprofit organizations

B. Manufacturing firms and service organizations

C. Manufacturing firms and nonprofit organizations

D. Manufacturing firms, service organizations, and nonprofit organizations

30) _____ is an example of the external financial reporting purpose of the cost management systems.

A. The product mix to optimize profitability

B. The cost of a manufacturing process

C. The amount of inventory that should appear on the balance sheet

D. Budget reporting

31) A sales forecast is _____.

A. the same as a sales budget that will generate a desired level of sales

B. the result of decisions to create conditions

C. a prediction of sales under a given set of conditions

D. all of these answers are correct

32) _____ models are mathematical models of the master budget that can react to any set of assumption about sales, costs, and product mix.

A. Accounting

B. Financial planning

C. Budgeting analysis

D. Futuring

33) A _____ gives the expected sales under a given set of conditions.

A. budget forecast

B. sales budget

C. sales prediction

D. sales forecast

34) A _____ gives the expected sales under a given set of conditions.

A. budget forecast

B. sales budget

C. sales prediction

D. sales forecast

35) Important factors considered by sales forecasters include all of the following except _____.

A. competitors' activities

B. marketing research studies

C. past patterns of sales

D. the desired level of sales

36) The master budget includes forecasts for all of the following except _____.

A. balance sheets

B. number of employees

C. sales

D. cash disbursements

37) The master budget quantifies targets for all of the following except _____.

A. markets

B. production

C. sales

D. cost driver activity

38) _____ are components of a master budget.

A. A continuous budget and a static budget

B. An operating budget and a financial budget

C. A strategic plan and an operating budget

D. A cash budget and an activity budget

39) Differences between the static budget and the flexible budget are due to _____.

A. problems of cost control

B. poor usage of material and labor

C. a combination of price and material variances

D. actual activity differing from expected activity levels

40) Cost allocation base refers to the _____.

A. cost driver

B. total costs to be allocated

C. total allocated costs

D. cost objectives

41) The use of budgeted service department cost rates protects using departments from _____.

A. service department efficiencies

B. price fluctuations

C. service outages

D. all of these answers are correct

42) The preferred guidelines for allocating service department costs include _____.

A. identifying the direct and indirect costs

B. evaluating performance using allocated costs for each service department

C. establishing part or all of the details regarding cost allocation in advance of rendering the service

D. allocating variable- and fixed-cost pools simultaneously

43) Murphy Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:

Maintenance Personnel Mixing Finishing

Direct dept. costs $126,000 $84,000 $105,000 $175,000

Square footage 800 400 1,600 1,200

Number of employees 8 12 24 32

If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Mixing is _____.

A. $31,500

B. $58,500

C. $63,000

D. $78,000

44) Gomez Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year _____.

Maintenance Personnel Mixing Finishing

Direct dept. costs $126,000 $84,000 $105,000 $175,000

Square footage 800 400 1,600 1,200

Number of employees 8 12 24 32

If the step-down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Mixing is:

A. $36,000

B. $42,750

C. $42,000

D. $63,000

45) Serena Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year:

Maintenance Personnel Mixing Finishing

Direct dept. costs $126,000 $84,000 $105,000 $175,000

Square footage 800 400 1,600 1,200

Number of employees 8 12 24 32

If the step-down method is used to allocate costs and the Maintenance Department is allocated first, then the amount of overhead that would be allocated from Maintenance to Finishing is _____.

A. $42,750

B. $31,500

C. $57,000

D. $47,250

46) In absorption costing, costs are separated into the major categories of_____.

A. manufacturing and nonmanufacturing

B. manufacturing and fixed

C. fixed and variable

D. variable and nonmanufacturing

47) Absorption costing assigns _____ to the product.

A. variable and fixed manufacturing costs

B. all variable costs

C. all fixed and variable costs

D. variable manufacturing costs

48) factory overhead appears on the absorption-costing income statement as_____.

A. a production volume variance

B. part of cost of goods sold

C. part of cost of goods sold and as a production volume variance

D. a fixed expense

49) Identify which of the following is not a characteristic of a management control system.

A. A management control system motivates individuals throughout the organization to act in concert.

B. A management control system encourages short term profitability.

C. A management control system coordinates forecasting sales and cost driver activities, budgeting, and measuring and evaluating performance.

D. A management control system aids and coordinates the process of making decisions.

50) _____ is the first step in designing a management control system.

A. Preparing financial statements

B. Establishing organizational goals

C. Distinguishing between profit centers and cost centers

D. Evaluating management's performance

51) _____ is (are) the most basic component of a management control system.

A. The stockholder's preferences

B. The organization's goals

C. Top management's preferences

D. The organization's long-range budget

52) The following information is available for the Peter Company:

Sales $500,000

Invested Capital 312,500

ROI 10%

The return on sales is _____.

A. 1.000%

B. 6.250%

C. none of these answers is correct

D. 10.000%

53) _____ is a measure of income or profit divided by the investment required to obtain that income or profit.

A. Return on investment

B. Capital turnover

C. Residual income

D. Return on sales

54) The following information is available for the Peter Company:

Sales $150,000

Invested Capital 156,250

ROI 10%

The return on sales is _____.

A. 10.00%

B. none of these answers is correct

C. 62.50%

D. 10.42%