Acc240 Financial Accounting (Uses of Accounting Information II): At-Home Final Exam (35 MCQs)

Acc240 Uses of Accounting Information II 
At-Home Final Exam (3 hour limit, 35 MCQs) 

1. Opportunity cost is best described by which of the following? 
Benefits foregone by choosing a particular alternative course of action 
Costs that were incurred in the past and cannot be changed 
The distribution of all products to be sold 
Expected future costs that differ among alternatives 

2. Contribution margin per unit is best described by which of the following? 
Sales price per unit minus fixed cost per unit 
Sales price per unit minus variable cost unit 
Sales price per unit minus fixed and variable costs per unit 
Units sold time contribution margin ratio 

3. Fixed costs that may be avoided in the future are referred to as 
relevant costs. 
opportunity costs. 
replacement costs. 
sunk costs. 

4. All of the following are relevant to the decision to replace equipment except the 
cost of old equipment. 
selling price of old equipment. 
future maintenance costs of old equipment. 
cost of new equipment. 

5. Managers should consider ________ when making any sort of decision. 
only fixed costs 
sunk costs 
only variable costs 
revenues that differ among alternatives 

6. Managers should consider all of the following when deciding whether to accept a special order, except 
available excess capacity. 
the variable costs associated with the special order. 
the effect of the order on regular sales. 
fixed costs that will not be affected by the order. 

7. Samson Incorporated provided the following information regarding its only product: 
Sales price per unit 50 
Direct materials used 160,000 
Direct labor incurred 185,000 
Variable manufacturing overhead 120,000 
Variable selling and administrative expenses 70,000 
Fixed manufacturing overhead 65,000 
Fixed selling and administrative expenses 12,000 
Units produced and sold 20,000 

Assume no beginning inventory. 

Assuming there is excess capacity, what would be the effect on operating income of accepting a special order for 1,200 units at a sale price of $47 per product? The 1,200 units would not require any variable selling and administrative expenses. (NOTE: Assume regular sales are not affected by the special order.) 
Increase by $84,300 
Decrease by $28,500 
Increase by $24,300 
Increase by $28,500 

8. Which of the following types of cash outlays has its own budget? 
Capital expenditures 
Dividends 
Income taxes 
All of the above 

9. The term capital expenditures budget is best described by which of the following? 
Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance 
A system for evaluating the performance of each responsibility center and its manager 
A company's plan for purchases of property, plant and equipment, and other long-term assets 
A budget that projects cash inflows and outflows and the end of period budgeted balance sheet 

10 .The ________ technique asks what a result will be if a predicted amount is not achieved or if an underlying assumption changes. 
sensitivity analysis 
ratio analysis 
risk analysis 
strategic analysis 

11. The term cash budget is best defined by which of the following? 
A company's plan for purchases of property, plant and equipment, and other long-term assets 
Details as to how the company expects to go from the beginning cash balance to the desired ending cash balance 
A system for evaluating the performance of each responsibility center and its manager 
A budget that projects cash inflows and outflows and the end of period budgeted balance sheet 

12. Which of the following is an example of a financial budget? 
Budgeted balance sheet 
Sales budget 
Budgeted income statement 
Operating expenses budget 

13. Sharon Corporation collects 15% in the second month following sale, 45% in the month following sale and 35% of a month's sales in the month of sale. The company has found that 5% of their sales are uncollectible. Budgeted sales for the upcoming four months are: 
August budgeted sales 300,000 
September budgeted sales 280,000 
October budgeted sales 330,000 
Novermber budgeted sales 260,000 

The amount of cash that will be collected in November is budgeted to be 
$286,500. 
$285,500. 
$91,000. 
$281,500. 

14. Brockman Company is preparing its cash budget for the upcoming month. The budgeted beginning cash balance is expected to be $35,000. Budgeted cash disbursements are $123,000, while budgeted cash receipts are $130,000. Brockman Company wants to have an ending cash balance of $48,000. How much would Brockman Company need to borrow to achieve its desired ending cash balance? 
$6,000 
$90,000 
$42,000 
$55,000 

15. The human resources department for Kohl's Department Stores would most likely be classified as a(n) 
cost center. 
investment center. 
profit center. 
revenue center. 

16. Which of the following is a disadvantage of decentralization? 
Unit managers may not understand the big picture of the company. 
Management does not have time to concentrate on long-term strategic planning. 
Unit managers have decreased motivation and retention. 
Managers receive training and experience to allow advancement in the organization. 

17. The maintenance department at Continental Airlines is likely to be classified as a(n) 
cost center. 
investment center. 
profit center. 
revenue center. 

18. Lubrizol is a chemical company that specializes in producing lubricants. Lubrizol was acquired in 2011 for $9 billion by investment holding company Berkshire Hathaway. Lubrizol is likely to be classified as a(n) 
cost center. 
investment center. 
profit center. 
revenue center. 

19. The production line at Morningstar Farms is most likely treated as a(n) 
investment center. 
cost center. 
profit center. 
revenue center. 

20. A product line at PepsiCo (such as the Pepsi Max product line) is most likely treated as a(n) 
cost center. 
profit center. 
investment center. 
revenue center. 

21. The subscription sales manager for The New York Times would be in charge of a(n) 
cost center. 
investment center. 
profit center. 
revenue center. 

22. Culinary Kitchen Supply produces bamboo cutting boards. The standard material cost for the bamboo used in each lamp is $18 per square foot. Each board requires 3 square feet of bamboo. In August, the company produced 1,200 cutting boards. There were 3,400 square feet of bamboo used during the month. The bamboo used had an actual cost $20 per square foot. What was the materials quantity variance in August for bamboo? 
$3,600 favorable 
$3,600 unfavorable 
$4,000 favorable 
$4,000 unfavorable 

23. Sole Purpose manufactures beach shoes that use a canvas as the main raw material. Data related to the shoes for June follows: 
Standard quantity per unit of output (yards) 4.50 
Standard price per yard 10.50 
Actual materials purchased in yards 16,500 
Actual cost of materials purchased 90,450 
Actual materials used in production (yards) 16,000 
Actual outputs in units 3,600 

What is the materials quantity variance for canvas for June? 
$1,645 favorable 
$2,100 favorable 
$1,645 unfavorable 
$2,100 unfavorable 

24. Rzepka Corporation manufactures jeweled cell phone cases. The following materials standards have been established for the jewels used to decorate the cell phone cases. 
Standard quantity per case (grams) 3.50 
Standard price per gram of jewels 3.00 

The following data relates to the production of the cell phone cases during June: 
Actual jewels purchased and used (grams) 1,400 
Actual cost of jewels purchased 4,100 
Actual number of cases produced 500 

What is the materials price variance for jewels in June? 
$100 favorable 
$100 unfavorable 
$4,200 favorable 
$4,200 unfavorable 

25. How is the direct labor efficiency variance calculated? 
The difference between the standard labor hours allowed and the actual labor hours used multiplied by the actual labor rate 
The difference between the standard labor hours allowed and the actual labor hours used multiplied by the standard labor rate 
The difference between the standard labor hours and the actual labor hours used 
The difference between the standard labor rate and the actual labor rate 

26. A favorable direct labor efficiency variance might indicate that 
higher skilled workers were used that performed the task slower than expected. 
higher skilled workers were used that performed the task faster than expected. 
lower skilled workers were paid a higher wage than expected. 
lower skilled workers were paid a lower wage than expected. 

27. A favorable direct labor efficiency variance and an unfavorable direct labor rate variance might indicate which of the following? 
Unskilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate 
Unskilled workers using less actual hours than standard, paid a lesser rate per hour than the standard rate 
Skilled workers using less actual hours than standard, paid at a higher rate per hour than the standard rate 
Skilled workers using more actual hours than standard, paid at a higher rate per hour than the standard rate 

28. The ________ variance measures whether the quantity of direct labor used to make the actual number of outputs is within the standard allowed for that number of outputs. 
production volume 
overhead flexible budget 
rate 
efficiency 

29. The process of choosing among different alternative investments due to limited resources is referred to as 
capital investing. 
capital rationing. 
resource rationing. 
resource allocation. 

30. The term ________ is described as a formal means of analyzing long-range investment alternatives 
annuity 
time value of money 
payback period 
capital budgeting 

31. The term ________ is best described as a relationship among principal, interest rate, and time. 
capital budgeting 
time value of money 
payback period 
annuity 

32. The term ________ is best described as a stream of equal periodic payments. 
time value of money 
capital budgeting 
annuity 
payback period 

33. Gomez Corporation is considering two alternative investment proposals with the following data: 
Proposal X Proposal Y 
Investment $ 850,000 $ 468,000 
Useful life 8 years 8 years 
Estimated annual net cash inflows for eight years $ 125,000 $ 78,000 
Residual value $ 40,000 $ - 
Depreciation method Straight-line Straight-line 
Required rate of return 14% 10%

How long is the payback period for Proposal X? 
10.90 years 
6.00 years 
6.80 years 
21.25 years 

34. (Use present value tables in textbook.) Renfroe Corporation is considering the purchase of a machine that would cost $22,712 and would have a useful life of 5 years. The machine would generate $6,300 of net annual cash inflows per year for each of the 5 years of its life. The internal rate of return on the machine would be closest to 
8%. 
10%. 
12%. 
14%. 

35. (Use present value tables in textbook.) Lenardi Corporation is evaluating the purchase of a new machine that would have an initial cost of $125,000. This new machine would have a profitability index of 1.25. The company's discount rate is 12%. What is the present value of the net cash inflows of the new machine project? 
$15,000 
$156,250 
$100,000 
$1,041,667
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