ACCT 303 Final Practice Exam 1. The objectives of cost allocation are to: A.

Motivate, provide incentives, and determine fair awards. B. Accurately define, divide and spread direct costs. C. Value, measure, and interpret cost data. D. Connect, communicate, and discern information. E. Define, refine, and re-define indirect costs. 2. Which one of the following methods uses units of output to allocate joint costs to joint products? A. Net realizable value method. B. Physical units method. C. Net sales value method. D. Sales value at split-off method. E. Activity-based costing. 3. An overhead cost that can be traced directly to either a service or production department: A. Is called a "flow through" cost. B. Requires less allocation effort. C. Is charged directly to that department. D. Must be variable. E. Must be fixed. 4. The direct method of departmental cost allocation ignores: A. The managers' bias. B. Accrual accounting. C. Tax implications D. Long-term implications. E. Reciprocal flows.

5. Russell Co. produces three products U, V, and W from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $70,000. Sales values and costs needed to evaluate Russell's production policy follow.

The amount of joint costs allocated to product U using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar): A. $19,266. B. $32,110. C. $23,333. D. $14,000. E. $32,667.

6. Russell Co. produces three products U, V, and W from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $70,000. Sales values and costs needed to evaluate Russell's production policy follow.

The amount of joint costs allocated to product U using the sales value at split-off method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar): A. $19,266. B. $32,110. C. $18,624. D. $28,496. E. $17,345.

7. Russell Co. produces three products U, V, and W from a joint process. Each product may be sold at the split-off point or processed further. Additional processing requires no special facilities, and production costs of further processing are entirely variable and traceable to the products involved. Last year all three products were processed beyond split-off. Joint production costs for the year were $70,000. Sales values and costs needed to evaluate Russell's production policy follow.

The amount of joint costs allocated to product U using the net realizable value method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar): A. $24,159. B. $28,496. C. $18,624. D. $17,345. E. $32,110. 8. The Insurance Plus Company has two service departments actuarial and premium rating, and two production departments marketing and sales. The distribution of each service department's efforts to the other departments is shown below:

The direct operating costs of the departments (including both variable and fixed costs) were as follows: Actuarial $50,000. Premium Rating $40,000. Marketing $60,000. Sales $70,000. The total cost accumulated in the marketing department using the direct method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar): A. $52,857. B. $60,000. C. $112,857. D. $130,000. E. $142,857.

9. Regression analysis is better than the high-low method of cost estimation because regression analysis: A. Is mathematical. B. Can provide greater precision and reliability. C. Fits its data into a mathematical equation. D. Takes less time. E. Is a statistical method. 10. A data point that is outside the normal distribution of data, called an "outlier," is often removed from the data set before analysis because it: A. Is obviously due to an inaccuracy in the calculations. B. Can distort the results of the data analysis. C. Has an upward bias on the statistical measures in regression. D. Will always add bias to the results of a high-low analysis. 11. Thompson Refrigerators Inc. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.

Using the high-low method, unit variable overhead cost is calculated to be: A. $1.35. B. $1.15 C. $1.40. D. $1.65. E. $1.25.

12. Thompson Refrigerators Inc. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.

Using the high-low method, total monthly fixed overhead cost is calculated to be: A. $5,326.10 B. $5,462.80 C. $5,661.90 D. $5,890.30 E. $5,972.40 13. CalcuCo hired Effner & Associates to design a new computer-aided manufacturing facility. The new facility was designed to produce 300 computers per month. The variable costs for each computer are $660 and the fixed costs total $74,700 per month. The average cost per unit, if the facility normally expects to operate at eighty-five percent of capacity, is calculated to be (round to nearest cent): A. $952.94. B. $909.00. C. $936.67. D. $971.25. E. $942.47. 14. Nellibell's Caf bakes croissants that are sold to local restaurants and grocery stores in the Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When 720 croissants are baked, the average cost is $0.65. What is the total cost when 670 croissants are baked? A. $568. B. $588. C. $448. D. $532. E. $500.

15. Sterling Glass Company uses the high-low method to analyze mixed costs. The following information relates to the production data for the first six months of the year.

How should the cost function be properly stated? A. Y = $2,025 + $2.50H. B. Y = $3,890 + $2.00H. C. Y = $4,085 + $2.00H. D. Y = $5,260 + $2.50H. 16. The breakeven point is: A. The point at which revenues equal total cost plus a desired profit. B. The point at which revenues equal variable cost and profit is zero. C. The point at which revenues equal fixed cost and profit is zero. D. The point at which revenues meet the budget target. 17. Calculating the margin of safety measure will help a firm answer which of the following questions? A. Will we break even? B. Are we using our debt wisely? C. How much will profits change if sales change? D. How much profit will we earn? E. How much revenue can we lose before we drop below the breakeven point? 18. The difference between sales price and unit variable cost is the: A. Unit contribution margin. B. Total contribution margin. C. Contribution margin ratio. D. Margin of safety. E. Breakeven point.

19. Premium Beds is a retailer of luxury bed frames located in Los Angeles, California. Due to a recent industry-wide financial crisis, the CFO of Premium Beds fears a significant drop in the firm's upcoming income stream. The CFO asked you to use the company financial information provided below.

The annual breakeven point in unit sales is calculated to be: A. 1,600 units. B. 2,000 units. C. 3,400 units. D. 1,300 units. E. 2,600 units. 20. Premium Beds is a retailer of luxury bed frames located in Los Angeles, California. Due to a recent industry-wide financial crisis, the CFO of Premium Beds fears a significant drop in the firm's upcoming income stream. The CFO asked you to use the company financial information provided below.

The annual breakeven point in dollar sales is calculated to be: A. $4,800,000. B. $4,500,000. C. $4,100,000. D. $4,600,000. E. $4,300,000.

21. Premium Beds is a retailer of luxury bed frames located in Los Angeles, California. Due to a recent industry-wide financial crisis, the CFO of Premium Beds fears a significant drop in the firm's upcoming income stream. The CFO asked you to use the company financial information provided below.

If 4,000 bed frames were sold, the firm's operating income would be: A. $1,240,000. B. $1,280,000. C. $1,200,000. D. $1,340,000. E. $1,120,000. 22. Power Cords Corp. expected to sell 42,000 industrial power cords. Fixed costs were $1,650,000; unit sales price was $3,750; and unit variable costs were $2,250. Power Cord Corp.'s margin of safety in sales dollars is calculated to be: A. $153,375,000. B. $187,550,000. C. $159,295,000. D. $171,100,000. E. $142,925,000. 23. Power Cords Corp. expected to sell 42,000 industrial power cords. Fixed costs were $1,650,000; unit sales price was $3,750; and unit variable costs were $2,250. Power Cord Corp.'s margin of safety ratio is calculated to be: A. 91.59%. B. 97.38%. C. 90.71%. D. 99.47%. E. 93.15%.

24. Framing House, Inc. produces and sells picture frames. Variable costs are $17 per frame, and fixed costs for the year total $130,000. The selling price is $25 per frame. The sales units required to make a before-tax profit of $15,000 are calculated to be: A. 16,850 units. B. 11,625 units. C. 20,675 units. D. 28,350 units. E. 18,125 units. 25. Framing House, Inc. produces and sells picture frames. Variable costs are $17 per frame, and fixed costs for the year total $130,000. The selling price is $25 per frame. The sales dollars required to make a before-tax profit of $20,000 are calculated to be: A. $445,650. B. $468,750. C. $476,350. D. $406,150. E. $412,050. 26. EZ Carry Corp. is the maker of high quality golf bags. They currently have three different lines of bags which they sell to sporting goods and golf shops throughout the world. EZ Carry sells a constant mix of 4 small bags for each medium sized bag and 5 medium bags for each large sized bag. Total fixed costs are $2,027,562.

The breakeven point in units would be: A. 32,400 small, 8,100 medium, 1,620 large. B. 34,808 small, 8,700 medium, 1,740 large. C. 37,010 small, 9250 medium, 1,850 large. D. 38,505 small, 9,625 medium, 1,925 large. 27. The following information pertains to Korning Corp.:

How many total units must be sold to obtain an after-tax profit of $47,775? A. 780 units. B. 894 units. C. 955 units. D. 1,021 units.

28. Framing House, Inc. produces and sells picture frames. Variable costs are $17 per frame, and fixed costs for the year total $130,000. The selling price is $25 per frame. The sales dollars required to make an after-tax profit of $10,000, given an income tax rate of 20 percent, are calculated to be(round intermediate calculation(s) to nearest whole number): A. $436,500 B. $439,000 C. $442,750 D. $460,000 E. $445,325 29. Framing House, Inc. produces and sells picture frames. Variable costs are $17 per frame, and fixed costs for the year total $130,000. The selling price is $25 per frame. The sales units required to make a before-tax profit of $15,000 are calculated to be: A. 16,850 units. B. 11,625 units. C. 20,675 units. D. 28,350 units. E. 18,125 units. 30. A master budget is typically prepared for: A. A period of one year. B. Top management only. C. Headquarters only. D. Strategic business units only. E. Product lines only. 31. A plan of dollar amounts to be spent on long-term projects is called a: A. Cash budget. B. Capital budget. C. Rolling budget. D. Sales budget. E. Rolling financial forecast. 32. A plan that shows the cash balance on hand at the beginning of a budget period, expected cash flow from operations, cash flows from investing activities, cash flows from financing activities, and an ending cash balance is called a(n): A. Capital budget. B. Operating budget. C. Financial flows budget. D. Cash budget. E. Cash receipts budget.

33. A plan that states the units or costs of merchandise to be purchased by a retailer or wholesaler during the budget period is called a: A. Production budget. B. Merchandise purchases budget. C. Accounts payable budget. D. Cash payments budget. E. Cost of goods sold budget.

34. A plan showing the units of goods expected to be sold and the expected revenue from sales, which is the cornerstone of the master budget, is called the: A. Cash budget. B. Sales receipts budget. C. Sales forecast. D. Cash receipts budget. E. Sales budget. 35. Which of the following statements about budgeting is not true? A. Budgeting is an aid to planning and control. B. Budgets create standards for performance evaluation. C. Budgets help coordinate the activities of the entire organization. D. Budgeting forces managers to think ahead and formalize long-range objectives. E. Budgeting eliminates the need for day-to-day monitoring of operations. 36. ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March? A. 3,500. B. 4,500. C. 5,000. D. 5,500. E. 7,500. 37. Joe's Mart policy is to have 20% of the next month's sales on hand at the end of the current month. Projected sales for August, September, and October are 25,000 units, 20,000 units, and 30,000 units, respectively. How many units must be purchased in September? A. 16,000. B. 17,000. C. 22,000. D. 26,000. E. 28,000.

38. Cripe Corporation maintains ending inventory for each month at 5% of the following month's sales. It predicted the following sales (in units) for the first four months of the coming year:

How many units should be produced in March? A. 2,810. B. 2,850. C. 2,970. D. 2,990. E. 4,250. 39. The Johann's Professional Service Company expects 70% of sales for cash and 30% on credit. The company collects 80% of its credit sales in the month following sale, 15% in the second month following sale, and 5% are not collected. Expected sales for June, July, and August are $54,000, $48,000, and $44,000, respectively. What are the company's expected total cash receipts in August? A. $45,920. B. $61,400. C. $87,600. D. $54,200. 40. Salich Manufacturing Corporation has provided the following sales budget information:

Cash sales are normally 40% of total sales and the credit sales are expected to be collected in the month following the month of sale. The amount of cash expected to be received from customers in September is: A. $24.000. B. $55,000. C. $57,000. D. $58,000. E. $60,000.

41. Worton Distributing expects its September sales to be 25% higher than its August sales of $150,000. Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month. Purchases are paid 25% in the month of purchase and 75% in the following month. The beginning cash balance on September 1 is $10,000. The ending cash balance on September 30 would be: A. $56,250. B. $56,500. C. $65,250. D. $66,250. E. $76,250. 42. Ardel Co. budgeted to sell 200,000 units of Zbox in September. Production of one unit of Zbox required two pounds of aluminum and five pounds of steel. The beginning inventory and the desired ending inventory in units are:

How many units of Zbox are to be manufactured during September? A. 150,000. B. 189,000. C. 200,000. D. 201,000. E. 202,000. 43. Ardel Co. budgeted to sell 200,000 units of Zbox in September. Production of one unit of Zbox required two pounds of aluminum and five pounds of steel. The beginning inventory and the desired ending inventory in units are:

How many pounds of aluminum does Ardel Co. need to purchase during September if Ardel plans to manufacture 150,000 units of Zbox in September? A. 143,000 pounds. B. 157,000 pounds. C. 286,000 pounds. D. 293,000 pounds. E. 300,000 pounds.

44. Ardel Co. budgeted to sell 200,000 units of Zbox in September. Production of one unit of Zbox required two pounds of aluminum and five pounds of steel. The beginning inventory and the desired ending inventory in units are:

How many pounds of steel powder does Ardel Co. need to purchase during September if Ardel plans to manufacture 150,000 units of Zbox in September? A. 725,000 pounds. B. 745,000 pounds. C. 750,000 pounds. D. 755,000 pounds. E. 775,000 pounds. 45. Information pertaining to Yekstop Corp.'s sales revenue is presented below.

Management estimates that 4 percent of credit sales are eventually uncollectible. Of the collectible credit sales, 65 percent are likely to be collected in the month of sale and the remainder in the month following the sale. The company desires to begin each month with an inventory equal to 75 percent of the sales projected for the month. All purchases of inventory are on open account; 30 percent will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. The purchase costs are approximately 60 percent of the selling prices. Total budgeted cash collections in December are: A. $556,512. B. $375,216. C. $495,080. D. $502,568. E. $506,780.

46. Information pertaining to Yekstop Corp.'s sales revenue is presented below.

Management estimates that four percent of credit sales are eventually uncollectible. Of the collectible credit sales, sixty-five percent are likely to be collected in the month of sale and the remainder in the month following the sale. The company desires to begin each month with an inventory equal to seventy-five percent of the sales projected for the month. All purchases of inventory are on open account; thirty percent will be paid in the month of purchase, and the remainder paid in the month following the month of purchase. The purchase costs are approximately sixty percent of the selling prices. Total budgeted inventory purchases in November are: A. $258,750. B. $316,350. C. $384,000. D. $489,150. E. $527,250.