Acc346 Managerial Accounting: Week 8 Final Study Guide (25 MCQs and 7 Problems)_Version 2

Acc346 Managerial Accounting
Week 8: Final (Version 2)

Page 1

1. (TCO 1) The principle managers follow when they only investigate significant departures from the plan is commonly known as (Points : 4)
small amounts don't matter
only materials and labor deserve attention
management by exception
exceptional costs yield exception results

2. (TCO 1) Marco Diner produced and sold 2,000 bagels last month and had fixed costs of $6,000. If production and sales are expected to increase by 10% next month, which of the following statements is true? (Points : 4)
Total fixed costs will increase.
Total fixed costs will decrease.
Fixed cost per unit will increase.
Fixed cost per unit will decrease.

3. (TCO 2) Which of the following is not a manufacturing cost? (Points : 4)
Manufacturing overhead
Direct materials
Direct labor
Administrative expenses

4. (TCO 2) An allocation base is (Points : 4)
a common characteristic that jobs share, which is used to spread the overhead costs among the various jobs.
the minimum amount of overhead assigned to a job.
used to determine how many labor hours were needed to complete a job.
used to authorize the release of materials from the storeroom to the production area.

5. (TCO 3) Why is it necessary to compute equivalent units separately for materials and conversion costs? (Points : 4)
Mistakes are made in the accounting for these costs
Materials and conversion enter the production process at different rates
Conversion costs are more difficult to estimate
None of the above reasons are true

6. (TCO 3) In the assembly department, all the direct materials are added at the beginning of the processing. Beginning Work in Process inventory consists of 2,000 units with a direct materials cost of $31,860. During the period, 15,000 units are started and direct materials costing $250,000 are charged to the department. If there are 1,000 units in ending inventory, what is the cost per equivalent unit? (Points : 4)

7. (TCO 4) Regression analysis (Points : 4)
uses all the available data points to estimate a cost equation
can be performed by many spreadsheet programs
provides an equation that can be used to estimate total costs at different levels
all of the above

8. (TCO 4) Beaudreaux Motors is operating at its break-even point of 16,000 units. Which of the following statements is not true? (Points : 4)
The amount of the company’s total costs equals the amount of its revenues.
The company’s fixed costs equal its variable costs.
The company’s profit equals zero.
Assuming no other changes, if the company sold more units, it would earn a profit.

9. (TCO 5) Which of the following is treated as a product cost in full costing? (Points : 4)
Sales commissions
Administrative salaries
Factory supervisor
Security at corporate headquarters

10. (TCO 5) Which of the following is not true when units sold exceed units produced? (Points : 4)
Full costing and variable costing will yield the same net income.
Full costing will assign some fixed manufacturing costs to the units in ending inventory.
Net income will be higher under variable costing than under full costing.
Inventory levels will decrease.

11. (TCO 6) Cost-plus contracts are common in which of the following industries? (Points : 4)
Manufactured home builders
Soft drink bottlers
Defense contractors
Newspaper publishers

12. (TCO 6) Which of the following is not generally true when a company compares ABC and traditional costing? (Points : 4)
ABC uses more cost drivers
ABC allocates cost based solely on production volume
ABC is more expensive
ABC is less likely to undercost complex, low volume products

13. (TCO 7) Which of the following is never considered in incremental analysis? (Points : 4)
Incremental revenues
Sunk costs
Incremental profit
Differential costs

Page 2

1. (TCO 7) The value of benefits foregone by selecting one alternative over another is a(n) (Points : 4)
sunk cost
incremental benefit
differential revenue
opportunity cost

2. (TCO 8) Target costing (Points : 4)
starts with the features a customer wants and what they will pay for them.
is used after the product is designed.
focuses on including all features in a product that a customer may want.
all of the above.

3. (TCO 8) Which of the following are relevant in deciding whether to accept or reject a special order? (Points : 4)
The impact the order will have on existing business.
The price that will be charged on the special order.
The incremental cost of filling the special order.
All of the above.

4. (TCO 9) The required rate of return used to compute net present value is related to the firm's (Points : 4)
contribution margin.
depreciation methods.
fixed costs.
cost of capital.

5. (TCO 9) Which of the following techniques uses time value of money? (Points : 4)
Payback period
Internal rate of return
Accounting rate of return
Relative sales value method

6. (TCO 10) Which of the following is not a reason that actual results may deviate from planned performance? (Points : 4)
A bottom-up approach to budgeting was used.
Managers have done a particularly good or particularly poor job of managing operations.
Conditions have changed since the budget was developed.
The budget was poorly conceived and constructed.

7. (TCO 10) The amount of direct material that must be purchased during a period depends on the amount of direct material (Points : 4)
needed for production.
available in the beginning inventory.
desired as ending inventory.
All of the above are correct.

8. (TCO 10) The difference between standard costs and budgeted costs is that standard costs (Points : 4)
refer to a single unit while budgeted costs refer to the cost, at standard, for the total number of budgeted units.
are calculated under ideal conditions, while budgeted costs are calculated for attainable conditions.
are calculated for material while budgeted costs are calculated for labor.
are part of the management accounting system, while budgets are part of the financial accounting system.

9. (TCO 10) Which of the following are components of a direct labor variance? (Points : 4)
Rate and efficiency
Attainable and ideal
Price and quantity
Volume and controllable

10. (TCO 10) Which of the following is a responsibility that distinguishes an investment center manager from a profit center manager? (Points : 4)
Setting prices for products
Controlling costs
Generating revenues
Significant influence over investment decisions

11. (TCO 10) Why is ROI better than income as a measurement of performance for an investment center? (Points : 4)
ROI follows GAAP
ROI is simpler to compute than income
ROI considers the amount invested as well as the net income
ROI is forward looking

12. (TCO 10) Asset turnover is a measure of (Points : 4)
how quickly a company is moving its inventory.
how quickly a company is turning it accounts receivable into cash.
the overall efficiency with which the company uses its assets to generate revenues.
how rapidly the market believes the company will grow.

Page 3

1. (TCO 1) Many U.S. businesses have changed their management philosophies to become more competitive. These changes include:
• Marketing strategies aimed at global markets.
• Emphasis on customer satisfaction, including focus on product quality.
• Large investments in new production technologies.
• Creation of management teams with representatives from many functional areas.
• Development of real-time business information systems.
How can managerial accounting support these changes so that businesses can compete successfully? (Points : 20)

2. (TCO 6) Booth Financial Services, LLC has two revenue producing departments, Financial Planning and Business Consulting. The accounting department is trying to determine the best method to allocate $1,000,000 of common costs (secretarial staff, reception personnel, etc), either by salary or number of employees. Information on the revenue departments are as follows:
Department Employees Salaries
Financial Planning 150 employees $10,000,000
Business Consulting 50 employees $5,000,000

(a) Allocate the $1,000,000 common costs to the two revenue departments using both methods.
(b) Why are allocations called arbitrary? (Points : 25)

3. (TCO 10) Charlie Corp sells it products on both credit and cash basis. Monthly sales are sold 20% for cash, 80% for credit. Credit sales are collected 40% in the month of sale and 60% the following month. Sales for the first quarter are as follows:
January $100,000
February $150,000
March $125,000

Compute cash collections for February. (Points : 25)

4. (TCO 2) Coyote Trading uses a predetermined manufacturing overhead rate of $12 per machine hour. Last year the company had actual overhead of $898,000 and 75,000 machine hours.
(a) Compute the amount of manufacturing overhead applied.
(b) Compute the amount of over/underapplied overhead.
(c) What is the disposition of the over/under applied overhead? (Points : 25)

2. (TCO 4) Legal Docs Inc is a legal services firm that files incorporation papers for small businesses. They charge $1,000 per application. This year's income statement shows the following:
Sales $1,295,000
Variable Expenses $1,023,000
Contribution margin $272,000
Fixed costs $250,000
Profit $22,000

(a) Compute the break-even point in units.
(b) Compute the contribution margin ratio.
(c) Compute the current margin of safety.
(d) How many applications must the company sell to make a profit of $350,000? (Points : 25)

3. (TCO 5) The following data has been taken from Air-Tite company in its first year of business.
Units produced 100,000
Units sold 80,000
Units in ending inventory 20,000
Fixed manufacturing overhead $400,000

(a) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if full absorption costing is used.
(b) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if variable costing is used.
(c) Compute the amount of fixed manufacturing overhead that would be included in ending inventory under full absorption costing. (Points : 25)
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