charter oak acc102 final exam

Question 1

1.

1.

1. Accepting a special order is profitable whenever the revenue from the special order exceeds:

A) The average unit cost of production multiplied by the number of units in the order.

B) The incremental cost of producing the order.

C) The materials and direct labor costs of producing the order.

D) The fixed manufacturing costs for the period.

Answer

		A
		B
		C
		D

4 points

Question 2

1.

2. Which of the following would be an example of a sunk cost?

A) The cost of a new oil burner that replaced a destroyed one.

B) The cost of an old inefficient oil burner that will be replaced by a more modern and efficient one.

C) Depreciation expense.

D) Lost revenue from a bad debt.

Answer

		A
		B
		C
		D

4 points

Question 3

1.

3. Hardware Hut manufactured 100 personal computers at a cost of $55,000. It can sell them as is for $90,000 or install hard disks in them and sell them for $130,000. The $55,000 original manufacturing cost is:

A) An out-of-pocket cost because it has already been paid.

B) A sunk cost because it is not relevant to the decision.

C) An incremental cost because it is relevant to the decision.

D) A fixed cost because it will remain the same no matter which action is

Answer

		A
		B
		C
		D

4 points

Question 4

1.

Use the following to answer question 4:

Louis Industries normally produces and sells 5,000 keyboards for personal computers each month. Variable manufacturing costs amount to $24 per unit, and fixed costs are $144,000 per month. The regular sales price of the keyboards is $85 per unit. Louis has been approached by a foreign company that wants to purchase an additional 1,000 keyboards per month at a reduced price. Filling this special order would not affect Louis's regular sales volume or fixed manufacturing costs.

4. Refer to the information above. Assume that the price offered by the foreign company is $42 per unit. Accepting the special order will cause Louis's operating income to:

A) Increase by $18,000.

B) Decrease by $2,000.

C) Decrease by $33,000.

D) Decrease by $35,000.

Answer

		A
		B
		C
		D

4 points

Question 5

1.

5. An example of a revenue center is

A) The accounting department in a manufacturing company

B) The maintenance department of a university

C) The furniture department of a retail department store

D) The human resources department in a hospital

Answer

		A
		B
		C
		D

4 points

Question 6

1.

Use the following to answer questions 6-7:

Tap's Department Store prepares monthly income statements by sales departments. These income statements are organized to show contribution margin, performance margin, and responsibility margin for each sales department, as well as operating income for the store as a whole.

6. Refer to the information above. The monthly salaries of the employees of the store's Accounting Department should be classified as a:

A) Common fixed cost.

B) Traceable fixed cost.

C) Committed fixed cost.

D) Controllable fixed cost.

Answer

		A
		B
		C
		D

4 points

Question 7

1.

Use the following to answer questions 6-7:

Tap's Department Store prepares monthly income statements by sales departments. These income statements are organized to show contribution margin, performance margin, and responsibility margin for each sales department, as well as operating income for the store as a whole.

7. Refer to the information above. Depreciation of the fixtures and equipment used exclusively in a particular sales department should be classified as a:

A) Common fixed cost.

B) Variable cost.

C) Controllable fixed cost.

D) Committed fixed cost.

Answer

		A
		B
		C
		D

4 points

Question 8

1.

8. Flexible budgeting may be used for profit centers by applying cost-volume-profit relationships to the actual level of:

A) Units produced.

B) Resources consumed.

C) Costs incurred.

D) Sales achieved.

Answer

		A
		B
		C
		D

4 points

Question 9

1.

9. Skyways, Inc. uses a flexible budget. Skyways produced 15,000 units in May incurring direct materials cost of $19,200. Its master budget for the year projected direct materials cost of $360,000, at a production volume of 288,000 units. A flexible budget for May should reflect direct materials cost of:

A) $19,200.

B) $18,750.

C) $21,000.

D) $18,150.

Answer

		A
		B
		C
		D

4 points

Question 10

1.

10. If the standard quantity of materials is 79,200 units @ $0.15 per unit and the actual quantity is 90,000 units @ $0.12 per unit then the total materials cost variance is

A) 2,700 Favorable

B) 1,620 Unfavorable

C) 1,080 Favorable

D) 2,700 Unfavorable

Answer

		A
		B
		C
		D

4 points

Question 11

1.

11. Excessive overtime hours worked by direct labor workers often results in:

A) An unfavorable labor rate variance.

B) A favorable labor rate variance.

C) A favorable materials price variance.

D) An unfavorable materials price variance.

Answer

		A
		B
		C
		D

4 points

Question 12

1.

12. A labor efficiency (usage) variance is most likely to occur if:

A) Employees are paid at an overtime wage rate.

B) Employees are inefficient and units must be reworked.

C) Labor cost per unit exceeds materials costs per unit.

D) Employee turnover rates are low.

Answer

		A
		B
		C
		D

4 points

Question 13

1.

13. Residual income can be defined as

A) That income left over after dividends are paid out

B) Operating earnings minus return on investment

C) Operating earnings minus a minimum acceptable return

D) Operating earnings minus a minimum acceptable return times invested capital

Answer

		A
		B
		C
		D

4 points

Question 14

1.

14. Lacy Stores has sales of $1,640,000, cost of sales of

$680,000, and operating expenses of $304,000. What is Lacy's return on sales?

A) 58.5%.

B) 41.5%.

C) 60%.

D) 40%.

Answer

		A
		B
		C
		D

4 points

Question 15

1.

Use the following to answer questions 15-17:

The following information regarding Winn, Inc. is available:

Sales.	$1,600,000
Cost of goods sold.	700,000
Operating expenses.	500,000
Operating income.	400,000
Average invested capital.	2,500,000

15. Refer to the information above. What is the return on investment for Winn, Inc?

A) 64%.

B) 25%.

C) 16%.

D) 8%.

Answer

		A
		B
		C
		D

4 points

Question 16

1.

Use the following to answer questions 15-17:

The following information regarding Winn, Inc. is available:

Sales.	$1,600,000
Cost of goods sold.	700,000
Operating expenses.	500,000
Operating income.	400,000
Average invested capital.	2,500,000

16. Refer to the information above. What is the return on sales for Winn, Inc.?

A) 16%.

B) 25%.

C) 48%.

D) 60%.

Answer

		A
		B
		C
		D

4 points

Question 17

1.

Use the following to answer questions 15-17:

The following information regarding Winn, Inc. is available:

Sales.	$1,600,000
Cost of goods sold.	700,000
Operating expenses.	500,000
Operating income.	400,000
Average invested capital.	2,500,000

17. Refer to the information above. What is the capital turnover for Winn, Inc.?

A) 32%.

B) 48%.

C) 64%.

D) 84%.

Answer

		A
		B
		C
		D

4 points

Question 18

1.

18. Calculate the residual income assuming the following information:

Operating earnings.	$300,000
Minimum acceptable return.	15%
Invested capital.	1,500,000

A) $225,000.

B) $100,000.

C) $75,000.

D) $45,000.

Answer

		A
		B
		C
		D

4 points

Question 19

1.

19. When using the net present value method for evaluating an investment, an increase in the required rate of return will:

A) Make it more difficult to accept the investment.

B) Make it less difficult to accept the investment.

C) Not effect the decision if the length of the investment's benefits remain constant.

D) Not be a consideration because it is not used in the net present value method.

Answer

		A
		B
		C
		D

4 points

Question 20

1.

20. Hempstead Corporation is considering the purchase of new equipment costing initially $74,000. The equipment has an estimated life of 6 years with no salvage value. Straight-line depreciation is to be used. Net annual after tax cash flow is estimated to be $24,000 for 6 years. The payback period is:

A) 1.2300 years.

B) 3.0833 years.

C) 5.0799 years.

D) 6.0000 years.

Answer

		A
		B
		C
		D

4 points

Question 21

1.

21. An investment cost $60,000 with no salvage value, a 5 year useful life and had an expected annual increase in net income of $5,000. Straight line depreciation is used. What is the expected rate of return on this investment?

A) 2.8%

B) 20%

C) 8.3%

D) 10.4%

Answer

		A
		B
		C
		D

4 points

Question 22

1.

22. A machine cost $44,000 and had a useful life of 4 years and a residual value of $8,000. What is the net present value of the machine if the annual cash flow is $16,000 and the company uses a discount rate of 10%. The annuity table shows the present value of $1 at 10% for 4 years is 0.683. The present value of an ordinary annuity of $1 discounted at 10% for 4 years is 3.170.

A) $56,184

B) $50,720

C) $12,184

D) ($7,712)

Answer

		A
		B
		C
		D

4 points

Question 23

1.

23. An unfavorable overhead volume variance results from:

Answer

		A) An unfavorable overhead spending variance
		B) Poor decisions made by the production manager.
		C) Producing at levels of output which exceed normal output levels
		D) Producing at levels of output which fall short of normal output levels

4 points

Question 24

1.

24. Standard costs:

Answer

		A) Are the same for all companies in a given industry
		B) Are the costs that should be incurred to produce a product under normal conditions.
		C) May be used in job order cost systems but not in process cost accounting systems
		D) Should be revised upward when actual costs are higher then expected because of waste and inefficiency.

4 points

Question 25

1.

25. If the actual amount of direct materials used in production was less than the standard amount allowed for units produced, there was:

Answer

		A) A favorable materials price variance
		B) A unfavorable total materials variance
		C) An unfavorable materials quantity variance
		D) A favorable materials quantity variance

4 points

Question 26

1.

26. The term "out of pocket cost" is often used to describe costs which have not yet been incurred and which may vary among alternative courses of action>

Answer

True

False

2 points

Question 27

1.

27. In determining whether to scrap or to rebuild defective units of product, the cost already incurred in producing the defective units is not relevant.

Answer

True

False

2 points

Question 28

1.

28. Products resulting from a shared manufacturing process are referred to as complimentary products.

Answer

True

False

2 points

Question 29

1.

29. Incremental analysis rarely requires the decision maker to exercise judgment.

Answer

True

False

2 points

Question 30

1.

30. Opportunity costs refer to benefits actually obtained by deciding to pursue alternative courses of action.

Answer

True

False

2 points

Question 31

1.

31. Profit centers generate revenues and expenses.

Answer

True

False

2 points

Question 32

1.

32. Responsibility margin is useful in evaluating the consequences of short-run marketing strategies, while contribution margin is more useful in evaluating long - term profitability.

Answer

True

False

2 points

Question 33

1.

33. The responsibility margin is the contribution margin less common fixed costs.

Answer

True

False

2 points

Question 34

1.

34. In an income statement segmented by sales departments, salaries to departmental salespeople would be an example of "common" fixed cost.

Answer

True

False

2 points

Question 35

1.

35. Return on assets and residual income are two commonly used measures of an investment cost center's performance.

Answer

True

False

2 points

Question 36

1.

36. The typical starting point of a master budget would be to prepare a budgeted balance sheet.

Answer

True

False

2 points

Question 37

1.

37. A debt service budget summarizes cash payments required for interest, and includes those required to pay down the principal.

Answer

True

False

2 points

Question 38

1.

38. Flexible budgeting may be viewed as combining the concepts of budgeting with cost-volume-profit analysis.

Answer

True

False

2 points

Question 39

1.

39. A favorable variance occurs when actual costs are less than standard costs.

Answer

True

False

2 points

Question 40

1.

40. A standard cost is the per unit cost actually incurred under normal operating conditions.

Answer

True

False

2 points

Question 41

1.

41. Return on investment (ROI) tells us how much earnings can be expected for the average invested dollar.

Answer

True

False

2 points

Question 42

1.

42. The balance scorecard approach attempts to measure whether an organization is meeting its strategic goals.

Answer

True

False

2 points

Question 43

1.

43. Operating earnings rather than net income is used to compute return on sales.

Answer

True

False

2 points

Question 44

1.

44. The value chain starts with the supplier and ends with the consumer.

Answer

True

False

2 points

Question 45

1.

45. Capital investment refers to large expenditures to purchase plant assets. develop new products, or sell more company stock.

Answer

True

False

2 points

Question 46

1.

46. The present value of a future cash flow is the amount you would pay today for the right to receive the future amount.

Answer

True

False

2 points

Question 47

1.

47. In selecting among alternative investment opportunities, the investment with the shortest payback period is the most desirable alternative?

Answer

True

False

2 points

Question 48

1.

48. When straight line depreciation is used, the average carrying value of an asset with no salvage value is equal to the asset's original cost divided by its estimated useful life.

Answer

True

False

2 points

Question 49

1.

49. The recognition of depreciation expense often causes the annual net income of an investment to be less than the amount of its annual net cash flows.

Answer

True

False

2 points

Question 50

1.

50. To determine the average investment over the life of an asset, divide the total depreciation of the investment by two.

Answer

True

False