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ACC 400 Final Examination Answers

ACC/400 FINAL EXAM

Which of the following is not a characteristic of managerial accounting?

Reports are used primarily by insiders rather than by persons outside of the business
A.
entity.

B. Its purpose is to assist managers in planning and controlling business operations.

1.

Information must be developed in conformity with generally accepted accounting

C.
principles or with income tax regulations.

D. Information may be tailored to assist in specific managerial decisions.

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.
2.

B. Focus upon future accounting periods.

 C. Make use of estimated amounts.

D. Be tailored to the specific needs of an individual decision maker.

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 Companys total product costs:

A. $175,000.
3.

B. $30,750.

C. $205,750.

D. $28,750.
Objectives of a cost accounting systemWhat are the major objectives of a cost
4.
accounting system in a manufacturing company?

Sues 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.
 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.

5.
C. A debit to Finished Goods Inventory of $72,000.

A credit to Work in Process Inventory, Mixing and Cooking Department of

D.
$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.

6.

C. A debit to Finished Goods Inventory of $72,000.

D. A credit to Finished Goods Inventory, Mixing and Cooking Department of $72,000.

Refer to the information above. The unit cost per gallon of soup transferred to the
Canning Department during March was:
A. $1.50.

B. $1.62.
7.

C. $1.71.

D. $1.83.
 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. $65.00.

B. $67.50.
40.

C. $80.00.

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. $80.00.

B. $60.00.
41.

C. $23.75.

D. $20.00.

10. Refer to the information above. At a price of $80, Summits market research
indicates that it can sell 60,000 units per year. Assuming Summit can reach its new
target cost, how will Summits profit at the $80 price compare to what it would have
42. earned in the absence of the competitors product?
A. Profit will be $75,000 higher.
 B. Profit will be $75,000 lower.

C. Profit will be unaffected if Summit can reach the revised target cost.

D. None of these.

11. A 45% contribution margin ratio means that:

The company should contribute 45% of its operating income to qualified charities
A.
for maximum tax benefits.

B. 55% of the companys revenue is consumed by fixed and variable costs.

37.

C. The companys revenue has increased by 45% during the current accounting period.

45% of the companys revenue is available to cover fixed costs and to contribute
D.
toward operating income.
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%.
41.12.

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.
 Refer to the information above. What is the contribution margin ratio of Mitchells
product?
A. 65%.

B. 80%.
13.

C. 72%.

D. 20%.

Refer to the information above. What is the monthly sales volume in dollars
necessary to break-even?
A. $82,500.

B. $66,500.
14.

C. $97,059.

D. $77,500.

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.

15. B. 1,442 units.

C. 122,500 units.

D. 353 units.
 Refer to the information above. What will be Mitchells monthly operating income if
1,800 units are sold each month?
A. $153,000.

B. $136,500.

16.
C. $30,600.

D. $14,100.

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.

17.
The effect that the order will have on the companys regular sales volume and selling
C.
prices.

D. The average cost of production if the special order is accepted.

The primary difference between profit centers and cost centers is that:
A. Profit centers generate revenue.

B. Cost centers incur costs.

18.

C. Profit centers are evaluated using return on investment criteria.

D. Profit centers provide services to other centers in the organization.

19. An investment center:
 Is a profit center for which management is able to objectively measure the cost of the
A.
assets used in the centers operations.

Is a cost center for which management is able to identify the original amount
B.
invested.

C. May be either a cost center or a profit center.

Is a subunit of the organization that provides services to other centers within the
D.
organization.

Which of the following is not considered an operating budget?

A. Manufacturing cost budget.

B. Production schedule.
20.

C. Capital expenditures budget.

D. Sales forecast.

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.
21.

C. A production budget.

D. A multi-level budget.

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

22.
 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.
23.

C. The actual quantity purchased is greater than expected.

D. The actual quantity purchased is less than expected.

Greenleafs 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 Greenleafs June operations
was:
A. $1,000 favorable.

B. $4,455 unfavorable.
24.

C. $4,365 favorable.

D. Impossible to determine from the data given.

Maple Companys 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.
Refer to the information above. The materials price variance for Maple Company for
25.
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:

Refer to the information above. The direct labor rate variance for the period was:
A. $425 favorable.

B. $360 favorable.
26.

C. $360 unfavorable.

D. $425 unfavorable.

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

27.
 Explain the importance of incentive systems for motivating performance.

28.

Capital budget auditBriefly discuss the reasons that a companys management

would conduct a regular capital budget audit.
29.

Accounting terminologyListed 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.

30. ____ (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.