ACC-350 Final Exam
1) Five Seasons is a merchandiser of packed foods. The company provides the following information for the year 2015:
Sales
... [Show More] Revenue $140,000
Cost of Goods Sold $63,000
Operating Expenses $67,500
Net Income $9,500
Number of Units Sold 27,000
How much was the unit cost per unit of product sold?
A) $3.14
B) $5.18
C) $2.33
D) $0.82
2) Jezebel Company incurred fixed costs of $300,000. Total costs, both fixed and variable, are $450,000 when 50,000 units are produced. It sold 35,000 units during the year. Calculate the variable cost per unit.
A) $9
B) $12
C) $6
D) $3
3) True or False: Purely Pizza Company sells pizzas in two different sizes—medium and large. The number of medium pizzas sold is twice the number of large pizzas sold. The contribution margin of a medium pizza is $10 and the contribution margin of a large pizza is $16. The weighted average contribution margin is $15.
Answer is TRUE
4) Jame Company sells glass vases at a wholesale price of $3 per unit. The variable cost of manufacture is $1.75 per unit. The fixed costs are $7,500 per month. Jame sold 5,500 units during this month. Calculate Jame's operating income (loss) for this month.
A) $9,000
B) $625
C) ($625)
D) ($7,500)
5) Which of the following formulae is the right formula for calculating contribution margin ratio?
A) Contribution margin ratio = Contribution margin + Net sales revenue
B) Contribution margin ratio = Contribution margin ÷ Net sales revenue
C) Contribution margin ratio = Contribution margin × Net sales revenue
D) Contribution margin ratio = Contribution margin - Net sales revenue
6) True or False: The NPV method of evaluating capital investments suggests that a project with positive net cash inflows that exceed the cost of the investment should be accepted.
Answer is FALSE
7) A3+ has prepared its 3rd quarter budget and provided the following data:
Jul Aug Sep
Cash collections $50,000 $40,000 $48,000
Cash payments:
Purchases of inventory 31,000 22,000 18,000
Operating expenses 12,000 9,000 11,600
Capital expenditures 13,000 25,000 0
The cash balance on June 30 is projected to be $4,000. The company has to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and has to pay interest every month at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. The loan balance should be repaid in increments of $5,000 whenever there is surplus cash.
How much will the company have to borrow at the end of July?
A) $0
B) $5,000
C) $15,000
D) $10,000
8) A summary of significant accounting policies and explanations of specific items on the financial statements will be given in:
A) the balance sheet.
B) the income statement.
C) notes to financial statements.
D) the report of independent registered public accounting firm.
9) When the total fixed costs increases, the breakeven point:
A) increases.
B) decreases.
C) decreases proportionately.
D) remains the same.
10) The vertical analysis statement of Nobell Inc. is as below:
The figure 47.0% shown for gross profit in 2016 signifies that:
A) gross profit is equal to 47.0% of net income.
B) gross profit is increased by 47.0% over the previous year.
C) gross profit is 47.0% of net sales revenue.
D) gross profit is 47.0% of cost of goods sold.
11) True or False: If both favorable and unfavorable variances exist, then the variance is determined to be favorable or unfavorable based on which one is the larger amount.
Answer is TRUE
12) True or False: A flexible budget is prepared to represent different levels of sales volume.
Answer is TRUE
13) Which of the following will most likely be considered an indirect material cost for a bakery?
A) Spices
B) Flour
C) Milk
D) Eggs
14) True or False: A contribution margin income statement classifies costs by function; that is, costs are classified as either product costs or period costs.
Answer is FALSE
15) Which of the following correctly describes the accounting for advertising costs?
A) Advertising costs are product costs and are expensed as incurred.
B) Advertising costs are period costs and are expensed as incurred.
C) Advertising costs are product costs and are expensed when the manufactured product is sold.
D) Advertising costs are period costs and are expensed when the manufactured product is sold.
16) Healthier Cook Company manufactures two products: toaster ovens and bread machines. The following data are available:
Toaster Ovens Bread Machines
Sale price $80 $150
Variable costs $40 $70
Healthier Cook can manufacture six toaster ovens per machine hour and four bread machines per machine hour. Healthier Cook's production capacity is 1,800 machine hours per month. What is the contribution margin per machine hour for toaster ovens?
A) $235
B) $320
C) $7
D) $20
17) Which of the following amounts of a flexible budget change with changes in sales volume?
A) selling price per unit
B) total fixed costs
C) variable expense per unit
D) total contribution margin
18) Clay Corporation manufactures two styles of lamps—a Bedford Lamp and a Lowell Lamp. The following per unit data are available:
Bedford Lamp Lowell Lamp
Sale price $25 $35
Variable costs $17 $23
Machine hours required for 1 lamp 2 4
Total fixed costs are $30,000. Marketing data indicate that the company can sell up to 8,000 units of the Bedford lamp and up to 4,000 units of the Lowell lamp. Machine hour capacity is 25,000 hours per year. What product mix will deliver the optimum operating income?
A) 4,500 Bedford lamps, 4,000 Lowell lamps
B) 12,500 Bedford lamps, zero Lowell lamps
C) 8,000 Bedford lamps, 2,250 Lowell lamps
D) 7,500 Bedford lamps, 3,000 Lowell lamps
19) The benefit foregone by not choosing an alternative course of action is referred to as a(n):
A) opportunity cost.
B) sunk cost.
C) variable cost.
D) incremental cost
20) True or False: A budget represents the plans that a company has in place to achieve its goals.
Answer is TRUE
21) True or False: The times-interest-earned ratio is also known as interest-coverage ratio.
Answer is TRUE
22) Which of the following is a capital budgeting method?
A) return on assets
B) net present value
C) inventory turnover
D) return on equity
23) A manufacturer has budgeted sales for the first quarter of the next year to be 30,000 units. The inventory in hand at the beginning of quarter is 5,000 units. The desired ending inventory is 10,000 units. Calculate the budgeted production for the quarter.
A) 10,000 units
B) 35,000 units
C) 25,000 units
D) 40,000 units
24) True or False: The IMA Standards of Ethical Practice include confidentiality, competence, credibility, and integrity.
Answer is TRUE
25) Delleate Inc. has prepared the following purchases budget:
Month Budgeted Purchases
June $67,000
July 72,500
August 76,300
September 73,700
October 69,200
All purchases are paid for as follows: 10% in the month of purchase, 50% in the following month, and 40% two months after purchase. Calculate balance of Accounts payable at the end of October.
A) $77,680
B) $91,760
C) $69,330
D) $74,290
26) Which capital budgeting method uses accrual accounting, rather than net cash flows, as a basis for calculations?
A) payback
B) accounting rate of return
C) net present value
D) internal rate of return
27) Zenith Fashions uses standard costs for their manufacturing division. From the following data, calculate the fixed overhead cost variance.
Actual fixed overhead $30,000
Budgeted fixed overhead $25,000
Standard overhead allocation rate $7
Standard direct labor hours per unit 2 DLHr
Actual output 2,000 units
A) $3,000 F
B) $3,000 U
C) $5,000 F
D) $5,000 U
28) Which of the following is a major consideration when analyzing a special order?
A) the price must be high enough to cover any incremental costs to fill the order
B) the company must have a good stock turnover ratio
C) the profit margin of the special sale must be higher than the regular sales
D) the sunk costs of the decision must not exceed the irrelevant costs
29) Jasper Inc. reports the following cost information for March:
Cost of Goods Manufactured $75,000
Manufacturing Overhead 18,250
Finished Goods Inventory, March 1 4,500
Finished Goods Inventory, March 31 2,650
Work-in-Process Inventory, March 1 9,670
Work-in-Process Inventory, March 31 1,250
Direct Materials Used 25,300
What is the cost of goods sold for March?
A) $83,420
B) $73,150
C) $76,850
D) $82,150
30) Which of the following is used to charge the cost of direct labor to the production?
A) Debit for standard quantity for actual production times standard cost per hour
B) Credit for standard quantity usage for actual production times actual cost per hour
C) Debit for actual quantity times standard cost per hour
D) Credit for standard quantity for actual production times standard cost per hour
31) True or False: CVP analysis assumes that the selling price per unit does not change as volume changes.
Answer is TRUE
32) The management technique whereby managers concentrate on results that are outside the accepted parameters is called management by:
A) variance.
B) standard.
C) exception.
D) budget.
33) Which of the following describes the term time value of money?
A) Money can be used only at certain times and only for certain purposes.
B) Money loses its purchasing power over time through inflation.
C) Wasted time can result in wasted money.
D) Value of a dollar received today will be higher than that received after some time.
34) The relationship between total liabilities and total assets is known as the:
A) debt ratio.
B) debt to equity ratio.
C) current ratio.
D) earnings per share.
35) An unfavorable sales volume variance in operating income suggests a(n):
A) increase in number of actual units sold.
B) decrease in number of actual units sold when compared to the expected number of units sold.
C) increase in variable expenses per unit.
D) decrease in fixed costs.
36) Which of the following is the correct formula to measure cost variance?
A) Cost Variance = (Actual Cost + Standard Cost) ÷ Actual Quantity
B) Cost Variance = (Actual Cost - Standard Cost) × Actual Quantity
C) Cost Variance = (Actual Cost + Standard Cost) + Actual Quantity
D) Cost Variance = (Actual Cost - Standard Cost) - Actual Quantity
37) Which of the following formulas represents cost of goods sold for a merchandising business?
A) Beginning Inventory - Ending Inventory = Cost of Goods Sold
B) Purchases and Freight In - Ending Inventory = Cost of Goods Sold
C) Ending Inventory + Purchases and Freight In - Beginning Inventory = Cost of Goods Sold
D) Beginning Inventory + Purchases and Freight In - Ending Inventory = Cost of Goods Sold
38) Gladeer Company is evaluating an investment that will cost $520,000 and will yield cash flows of $300,000 in the first year, $200,000 in the second year, and $100,000 in the third and final year. Use the tables below and determine the internal rate of return.
Present value of $1:
8% 9% 10% 11%
1 0.926 0.917 0.909 0.901
2 0.857 0.842 0.826 0.812
3 0.794 0.772 0.751 0.731
4 0.735 0.708 0.683 0.659
5 0.681 0.65 0.621 0.593
The IRR of the project will be:
A) between 9% and 10%.
B) less than 8%
C) less than 9%, more than 8%
D) more than 10%
39) Which of the following best describes horizontal analysis?
A) comparing figures from year to year for the same company
B) expressing each figure as a percentage of a budgeted figure
C) comparing a company's financial statements with other companies
D) calculating key ratios to evaluate performance
40) Fixed costs that do not differ between two alternatives are:
A) irrelevant to the decision.
B) considered opportunity costs.
C) considered irrelevant to the decision.
D) important only if they represent a material dollar amount. [Show Less]