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Acc346 Managerial Accounting: Week 8 (25 MCQs and 7 Problems)

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Acc346 Managerial Accounting

Week 8 

(Part 1 – 25 MCQs;  Part 2 – 7 Essay/Problems)

1. (TCO 1) A difference between actual costs and planned costs (Points : 4)

should be investigated if the amount is exceptional.

indicates that the planned cost was poorly estimated.

indicates that the manager is doing a poor job.

should be ignored unless it involves the cost of ingredients.

 

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) A form used to accumulate the cost of producing an item is called a(n) (Points : 4)

job-cost sheet

material requisition

balance sheet

invoice

 

5. (TCO 3) Why do we compute equivalent units differently for raw materials and conversion costs?  (Points : 4)

Raw materials are more difficult to count

Conversion costs are more difficult to count

They are introduced into the process at different times

None of the above

 

6. (TCO 3) The Freedom Corporation’s painting department had a beginning inventory of 580 units, which had direct material costs of $22,715. During June, 9,290 units were started and costs of $1,268,085 were incurred for direct material. Ending inventory consists of 1,000 units, which are 35% complete with respect to direct material. What is the cost per equivalent unit for direct material? (Points : 4)

$40.00

$137.00

$140.00

$159.00

 

7. (TCO 4) The range of activity for which estimates of cost behavior are likely to be accurate is the (Points : 4)

incremental range

margin of safety

relevant range

range of opportunity

 

8. (TCO 4) The number of units that must be sold to exactly cover its fixed and variable costs is the (Points : 4)

contribution margin

break-even point

relevant range

margin of safety

 

9. (TCO 5) Which of the following is treated as a product cost in variable costing? (Points : 4)

Sales commissions

Administrative salaries

Fixed manufacturing overhead

Direct labor

10. (TCO 5) When the number of units sold is equal to the number of units produced, net income using full costing will be (Points : 4)

greater than net income under variable costing

equal to net income using variable costing

less than income using variable costing

none of the above

 

11. (TCO 6) A contract which specifies that the supplier will be paid for the cost of production as well as some fixed amount or percentage of cost is called a(n) (Points : 4)

approved overrun.

cost-plus contract.

allocation plan.

indirect cost budget.

12. (TCO 6) The traditional approach to cost allocation (Points : 4)

tends to over-cost high volume core products.

usually requires more cost pools than ABC.

attempts to identify the activities that cause costs.

produces more accurate costs than any other method.

13. (TCO 7) Fixed costs that will be eliminated if a particular course of action is undertaken are called (Points : 4)

optional costs

opportunity costs

direct costs

avoidable costs

 

1. (TCO 7) Two or more products that result from common inputs are called (Points : 4)

split products

joint products

combination products

common products

 

2. (TCO 8) Which of the following statements about price, demand and profit is most generally true? (Points : 4)

As price increases, demand increases

As demand increases, prices increase

As prices increase, demand decreases

As price increases, profits decrease

 

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) Which of the following is not a component of a time value of money problem? (Points : 4)

The amount of cash received.

The time until the cash is received.

The opportunity costs of the alternative actions.

The required rate of return.

 

5. (TCO 9) The internal rate of return (Points : 4)

takes into account the time value of money.

is the rate of return that equates the present value of future cash flows to the initial investment.

both A and B

neither A nor B

 

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 cash budget alerts management to all of the following except? (Points : 4)

Stockouts will cause customer dissatisfaction

The cash balance will be very low

Excess cash will be available for investment

Significant capital acquisitions are planned

 

8. (TCO 10) The difference between the standard and actual cost is a(n) (Points : 4)

actual cost overrun.

variance by exception.

slack amount.

standard cost variance.

 

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) The type of center that has responsibility for generating revenue as well as controlling costs is a(n) (Points : 4)

investment center.

cost center.

business center.

profit center.

 

11. (TCO 10) Responsibility accounting holds managers responsible for (Points : 4)

all costs charge to their department.

all direct cost of their department plus part of the allocated company costs.

only costs they have personally approved.

only costs they can control.

 

12. (TCO 10) The ratio that measures the return earned independently of how the firm is financed is the (Points : 4)

return on stockholders’ equity.

price earnings ratio.

earnings per share.

return on assets.

 

Part 2:

1. (TCO 1) Distinguish managerial accounting from financial accounting. Include a brief discussion of the differences in the types of information provided to users as well as the differences of the users of the accounting information. (Points : 20)

 

2. (TCO 6) Pacific Airlines has three service departments; ticketing, baggage handling, and aircraft maintenance. Costs of these departments are allocated to two revenue producing departments, domestic and international flights. Costs for the service departments are not separated into fixed and variable and the totals are as follows:

Ticketing     $4,000,000

Baggage handling    $2,000,000

Aircraft maintenance    $6,000,000

Air miles are as follows:

Domestic     5,000,000

International     20,000,000

(a) Allocate the service department costs based on air miles.

(b) Evaluate Pacific Airlines use of air miles as a basis for allocation.  Do you think the cause-and-effect relationship is strong?

(c) Suggest alternative methods to allocate the service department costs. (Points : 25)

 

3. (TCO 10) Gina’s Boutique makes custom jewelry. One item, the guru necklace, is a best seller and sales in units for the first quarter are as follows:

January 100,000 units

February 150,000 units

March 180,000 units

Desired ending inventory is budgeted at 20% of next month sales.

Compute production for February. (Points : 25)

 

4. (TCO 2) Singleton Company is trying to determine a predetermined manufacturing overhead. Estimated overhead for the upcoming year is $600,000. Budgeted machine hours are 120,000 hours, and budgeted labor hours are 15,000 hours at a rate of $20.00 per hour. Compute the predetermined overhead rate based on:

(a) Machine hours

(b) Direct labor hours

(c) Direct labor dollars (Points : 25)

 

Page 2

1. (TCO 9) A project will require an initial investment of $600,000 and is expected to generate the following cash flows:

Year 1    $100,000

Year 2    $250,000

Year 3    $250,000

Year 4    $200,000

Year 5    $100,000

(a) What is the project’s payback period?

(b) If the required rate of return is 20% and taxes are ignored, what is the project’s net present value? (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

Required:

(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 200,000

Units sold 180,000

Units in ending inventory 20,000

Fixed manufacturing overhead $600,000

(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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