ACC240 Uses of Accounting Information II

ACC240 Uses of Accounting Information II

Uses of Accounting Information II

At-Home Final Exam

The exam has 35 Multiple Choice questions worth 4 points each. This exam is worth 140 points total.

Please make sure you have answered all questions prior to submitting. Once answers are submitted, you will not be able to return to this section.

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Question

1 of 35

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

Question

2 of 35

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

Question

3 of 35

Fixed costs that may be avoided in the future are referred to as

relevant costs.

opportunity costs.

replacement costs.

sunk costs.

Question

4 of 35

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.

Question

5 of 35

Managers should consider ________ when making any sort of decision.

only fixed costs

sunk costs

only variable costs

revenues that differ among alternatives

Question

6 of 35

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.

Question

7 of 35

Samson Incorporated provided the following information regarding its only product:

Sales price per unit	$50.00
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

Question

8 of 35

Which of the following types of cash outlays has its own budget?

Capital expenditures

Dividends

Income taxes

All of the above

Question

9 of 35

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

Question

10 of 35

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

Question

11 of 35

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

Question

12 of 35

Which of the following is an example of a financial budget?

Budgeted balance sheet

Sales budget

Budgeted income statement

Operating expenses budget

Question

13 of 35

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.

Question

14 of 35

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

Question

15 of 35

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.

Question

16 of 35

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.

Question

17 of 35

The maintenance department at Continental Airlines is likely to be classified as a(n)

cost center.

investment center.

profit center.

revenue center.

Question

18 of 35

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.

Question

19 of 35

The production line at Morningstar Farms is most likely treated as a(n)

investment center.

cost center.

profit center.

revenue center.

Question

20 of 35

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.

Question

21 of 35

The subscription sales manager for The New York Times would be in charge of a(n)

cost center.

investment center.

profit center.

revenue center.

Question

22 of 35

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

Question

23 of 35

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)	4.5
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

Question

24 of 35

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)	3.5
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

Question

25 of 35

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

Question

26 of 35

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.

Question

27 of 35

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

Question

28 of 35

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

Question

29 of 35

The process of choosing among different alternative investments due to limited resources is referred to as

capital investing.

capital rationing.

resource rationing.

resource allocation. Question 30 of 35 The term ________ is described as a formal means of analyzing long-range investment alternatives

annuity

time value of money

payback period

capital budgeting

Question

31 of 35

The term ________ is best described as a relationship among principal, interest rate, and time.

capital budgeting

time value of money

payback period

annuity

Question

32 of 35

The term ________ is best described as a stream of equal periodic payments.

time value of money

capital budgeting

annuity

payback period

Question

33 of 35

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

Question

34 of 35

(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%.

Question

35 of 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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