Sarah and Madison **** at Accounting - Flashcards

Q: Which of the following is considered part of the controlling process?

Keeping the company\'s activities on track

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Managerial accounting applies to all types of businesses, including service, merchandising, and manufacturing, as well as to all forms of business organizations.?

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True

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Which of the following statements is not true about managerial accounting?

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It is highly aggregated

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Which of the following statements is true about managerial accounting?

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It provides more detailed information than financial accounting does.

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Managerial accounting

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places emphasis on special-purpose information.

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All of the following are distinguishing features of managerial accounting except

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independent audits.

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Planning is the process of keeping the company's activities on track.

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False

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Which of the following are considered to be management's three broad functions?

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Planning, directing, and controlling

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Which of the following is considered part of the controlling process?

answer

Keeping the company's activities on track

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The management of an organization performs several broad functions. They are

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planning, directing, and controlling.

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After passage of the Sarbanes-Oxley Act of 2002

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CEOs and CFOs must certify that financial statements give a fair presentation of the company's operating results.

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The management function that requires management to look ahead and establish objectives is

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planning.

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The process of keeping the company's activities on track is

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controlling.

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Indirect material costs are easily traced to products because of their physical association with the finished product.

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False

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Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product.

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True

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Which one of the following is not a manufacturing cost?

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Advertising cost

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Which of the following answer choices lists the three manufacturing costs?

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Direct materials, direct labor, and manufacturing overhead

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Which of the following costs would a computer manufacturer include in manufacturing overhead?

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Depreciation on testing equipment

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Which of the following is not an element of manufacturing overhead?

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Sales manager's salary.

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Manufacturing overhead includes all of the following except

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direct materials.

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On average, studies have shown that the smallest component of total manufacturing cost is

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direct labor

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Product costs are costs that are a necessary and integral part of producing the finished product.

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True

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Barry's BarBQue incurred the following costs: $1,400 for ribs, 45 hours of labor to cook the ribs at $10 per hour, $50 for seasoning and sauce, $300 for signs to advertise the ribs, $150 to clean the grill after cooking the ribs, and $100 of administrative costs. How much are total product costs?

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$2,050

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Which group of costs consists of only product costs?

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Direct labor, indirect labor, factory utilities

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Direct materials are a product cost, Manufacturing cost, period cost?(yes or no)

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yes, no, no

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Indirect labor is a

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product cost.

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Which of the following costs are classified as a period cost?

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Wages paid to a cost accountant department supervisor.

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Product costs include each of the following except

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selling and administrative expenses.

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Each of the following is a period cost except

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indirect labor.

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Pharmco incurred the following costs while manufacturing its product: Materials used in production, $120,000; factory depreciation, $60,000; property taxes on the administrative offices, $12,000; labor costs of assembly-line workers, $95,000; factory supplies used, $8,000; advertising expense, $13,000; property taxes on the factory, $20,000; delivery expense, $23,000; salaries of the sales staff, $53,000; and sales commissions, $17,000. The total product costs for Pharmco are

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$303,000.

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Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory.

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False

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Which of the following would you find on the income statement of a manufacturing company, but not on the income statement of a merchandising company?

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Cost of goods manufactured

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One key difference appears when comparing the income statements of a manufacturing company to a merchandising company. What is that difference?

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Manufacturing companies use cost of goods manufactured and merchandising companies use cost of goods purchased.

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For the year, Redder Company has cost of goods manufactured of $600,000, beginning finished goods inventory of $200,000, and ending finished goods inventory of $250,000. The cost of goods sold is

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$550,000.

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Cost of goods available for sale is reported on the income statement of

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a merchandising company and a manufacturing company.

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For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to

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cost of goods manufactured.

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The principal difference between a merchandising and a manufacturing income statement is the

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cost of goods sold section

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Fixed costs are costs that remain the same per unit regardless of changes in the activity level.

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False

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What type of cost remains the same per unit at every level of activity?

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Variable cost.

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Which statement describes a fixed cost?

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When activity declines, its cost per unit increases.

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Variable costs are costs that

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vary in total directly and proportionately with changes in the activity level, remain the same per unit at every activity level.

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The range over which a company expects to operate during a year is called the relevant range of the activity index.

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True

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Why is determination of a relevant range important?

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Cost behavior outside the relevant range may be distorted.

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Which of the following is likely to contain a linear relationship between costs and activities?

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Which of the following is likely to contain a linear relationship between costs and activities?

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The relevant range is

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the range over which the company expects to operate during a year.

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Mixed costs change proportionately with changes in the activity level.

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False

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Mixed costs

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are costs that vary as activity level changes, but do not stay the same per unit like variable cost.

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Which type of cost are delivery costs at Hernandez?

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Mixed.(look back at #11 of practice problems)

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Which type of costs are delivery costs at Walco?

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Mixed.(look at #12 of practice problems)

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Mixed costs consist of a

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variable cost element and a fixed cost element.

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Your phone service provider offers a plan that is classified as a mixed cost. The cost per month is $50 flat rate for the first 1,000 minutes plus $0.35 for each minute exceeding 1,000 minutes. If you use 1,200 minutes this month, your cost will be

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$120.

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Costs that change in total but not proportionately with changes in the activity level are

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mixed costs.

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An example of a mixed cost is

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utility costs.

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Cost-volume-profit analysis assumes that changes in activity are the only factors that affect costs.

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True

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When companies prepare a detailed CVP income statement, they provide more detail about specific variable costs but not fixed cost items.

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False

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Which one of the following is not an assumption of cost-volume-profit analysis?

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Changes in activity and sales mix are the only factors that affect costs.

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Which one of the following is not an assumption of CVP analysis?

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Profit for the period is constant.

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One of the following is not involved in CVP analysis. That factor is

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fixed costs per unit.

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Cost-volume-profit analysis includes all of the following assumptions except

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the behavior of costs is curvilinear throughout the relevant range.

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CVP analysis considers the interrelationships among all of the following components except

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fixed costs per unit.

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On a CVP income statement

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Sales - Variable costs = Contribution margin.

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Cournot Company sells 100,000 wrenches for $12 a unit. Fixed costs are $300,000, and net income is $200,000. What should be reported as variable expenses in the CVP income statement?

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$700,000.

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How much is Deighan's contribution margin?

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$48,000

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How much is Starwise's contribution margin?

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$56,000

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The contribution margin ratio is computed by multiplying contribution margin by unit selling price.

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False

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What is contribution margin?

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The amount available to cover fixed costs and contribute to profits.

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Which one of the following is correct concerning contribution margin?

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It is helpful in determining the effect of changes in sales on net income.

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Contribution margin

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is revenue remaining after deducting variable costs, may be expressed as contribution margin per unit.

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When comparing a traditional income statement to a CVP income statement

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net income will always by identical on both.

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Contribution margin is

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the amount available to cover fixed costs and contribute to income for the company.

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At the break-even point, contribution margin equals total variable costs.

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False

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The amount of income or loss at each level of sales can be derived from the total sales and total cost lines in a CVP graph.

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True

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Werth Company produces tie racks. Its estimated fixed costs for the year are $288,000, and the estimated variable costs per unit are $14. Werth expects to produce and sell 60,000 racks at a price of $20 per unit. How many units will be sold at breakeven?

answer

48,000.

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Panera Bread sells a box of bagels for $6 with a contribution margin of 62.5%. Its fixed costs are $150,000 per year. How much sales in dollars does Panera Bread need to break-even per year if bagels are its only product?

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$240,000.

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Brownstone Company's contribution margin ratio is 30%. If Brownstone's sales revenue is $100 greater than its break-even sales in dollars, its net income

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will be $30.

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Gossen Company is planning to sell 200,000 pliers for $4 per unit. The contribution margin ratio is 25%. If Gossen will break even at this level of sales, what are the fixed costs?

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$200,000.

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The break-even point can be

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computed from a mathematical equation, computed by using contribution margin, derived from a cost-volume-profit graph.

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The break-even point in dollars is computed by dividing

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fixed costs by contribution margin ratio

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At the break-even point

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contribution margin equals total fixed costs.

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Walden Company expects to sell 500,000 units for $6 per unit. The contribution margin ratio is 30%. If Walden will break even at this level of sales, fixed costs are

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$900,000.

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Benson Company produces flash drives for computers which have variable costs of $10 per flash drive to produce. Each flash drive sells for $20 each. During the current month, 1,000 flash drives were sold. Fixed costs for the current month were $4,500. If variable costs increase by 10%, what happens to the breakeven level in units for the month for Benson Company?

answer

It increases by 50 units.

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Dahlia Company sells a product which has a unit selling price of $5. Variable costs are 60% of the sales and total fixed costs are $200,000. The number of units that the Dahlia Company must sell to break even is

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100,000 units

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Maya Company manufactures a product which sells for $20 each. Each unit of product has a variable cost of $5 to manufacture. Fixed costs normally incurred are $60,000. Maya Company is considering automating the manufacturing process, which would require a capital investment which would increase fixed costs by $30,000. As a result of the automation, variable costs would decrease by 20%. What would the new breakeven level in units be for Maya Company if it decides to automate the manufacturing process?

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5,625 units.

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Target net income is an income objective for individual product lines set by management.

answer

True

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Moss, Inc. has total fixed costs of $56,000 and a contribution margin ratio of 40%. Moss wants to generate net income totaling $35,000. How much will sales revenue be at Moss' target net income?

answer

$227,500.

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Palms, Inc. wants to sell enough palm trees to earn a profit of $20,000. If the unit sales price is $40, unit variable cost is $22, and total fixed costs are $120,400, how many trees must be sold to earn a profit of $20,000?

answer

7,800.

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The mathematical equation for computing required sales to obtain target net income is: Required sales =

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variable costs + fixed costs + target net income.

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Required sales in dollars to meet a target net income is computed by dividing

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fixed costs plus target net income by contribution margin ratio.

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Bergman Company has total fixed costs of $350,000 and a contribution margin ratio of 20%. Hampton's target net income is $250,000. Sales in dollars to meet the target net income would be

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$3,000,000.

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Simmons Company has required sales of $1,500,000 to meet its target net income. It has fixed costs of $200,000 and the contribution margin ratio is 40%. The company's target net income is

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$400,000.

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Budgeting facilitates the coordination of activities within the business by correlating the goals of each segment with overall company objectives.

answer

True

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Which one of the following is not a benefit of budgeting?

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It provides assurance that the company will achieve its objectives.

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Which one of the following is a primary benefit of budgeting?

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It provides definite objectives for evaluating performance.

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Which of the following is not a benefit of budgeting?

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It enables disciplinary action to be taken at every level of responsibility.

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A budget

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is the primary method of communicating agreed-upon objectives throughout an organization.

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Which of the following are correct statements about a budget?

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It is a formal written statement of management's plans for a specified future time period, It becomes an important basis for evaluating performance, It promotes efficiency and serves as a deterrent to waste and inefficiency.

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The primary benefits of budgeting include all of the following except it

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requires only top management to plan ahead and formalize goals.

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The most common budget period is one month.

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False

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The chief accountant (controller) has responsibility for coordinating the preparation of the budget.

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False

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Which one of the following is necessary if a company expects its budget to be effective?

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The company must have a sound organizational structure.

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Which of the following is one of the factors that must be present if budgets are to be effective?

answer

The company must have a sound organizational structure.

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The essentials of effective budgeting do not include

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top-down budgeting.

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Compared to budgeting, long-range planning generally has the

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longer time period.

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The most common budget period is a

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year.

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Coordinating the preparation of the budget is the responsibility of the

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budget committee.

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Long-range planning usually encompasses a period of

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at least five years.

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The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.

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True

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The budgeted income statement is the starting point in preparing financial budgets.

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False

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The production budget is the first budget prepared in the master budget.

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False

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The direct materials budget shows both the quantity and cost of direct materials to be purchased.

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True

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Which of the following lists includes only financial budgets?

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Budgeted balance sheet, cash budget, and the capital expenditures budget.

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A sales budget is

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management's best estimate of sales revenue for the year.

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The formula for the production budget is budgeted sales in units plus

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desired ending finished goods units less beginning finished goods units.

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Direct materials inventories are kept in pounds in Byrd Company, and the total pounds of direct materials needed for production is 9,500. If the beginning inventory is 1,000 pounds and the desired ending inventory is 2,200 pounds, the total pounds to be purchased are

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10,700.

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Operating budgets include all of the following except the

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capital expenditure budget.

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Each of the other budgets in the master budget depends on the

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sales budget.

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In the direct materials budget, the quantity of direct materials to be purchased is computed by adding direct materials required for production to

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desired ending direct materials less beginning direct materials.

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The direct labor budget and the manufacturing overhead budget are prepared directly from the

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production budget.

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At the beginning of the year, Goldenrod had beginning inventory of 2,000 scooters. Goldenrod estimates it will sell 5,000 units during the first quarter of the current year, with a 10% increase in sales each quarter. It is Goldenrod's policy to maintain an ending inventory equal to 20% of the next quarter's budgeted sales. Each scooter costs $100 to produce and sold for $150. How much is the budgeted sales revenue for the third quarter of the current year?

answer

$907,500.

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Microtech plans to sell 2,000 computers in April; 1,900 in May; and 2,000 in June. The company keeps 15% of the next month's sales as ending inventory. How many units should Microtech produce in May?

answer

1,915.

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Tomy Toys is planning to sell 200 action figures and to produce 190 action figures in July. Each action figure requires 100 grams of plastic and a half hour of direct labor. The cost of the plastic used in each action figure is $5 per 100 grams. Employees of the company are paid at a rate of $15.00 per hour. Manufacturing overhead is applied at a rate of 120% of direct labor costs. Tomy Toys has 90,000 grams of plastic in its beginning inventory and wants to have 80,000 grams in its ending inventory. What is the amount of budgeted direct labor cost for the month of July?

answer

$1,425.

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The formula for computing the direct labor budget is to multiply the direct labor cost per hour by the

answer

total required direct labor hours.

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How much is Windathon's selling expense budget for June?

answer

$85,850

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How much is budgeted net income for May?

answer

$4,480.

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Each of the following budgets is used in preparing the budgeted income statement except the

answer

capital expenditure budget.

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Which one of the following budgets is considered to be the most important financial budget?

answer

Cash budget.

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How much cash is budgeted to be received during August?

answer

$312,000.

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How much are budgeted cash disbursements for June?

answer

$118,400.

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The format of a cash budget is

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Beginning cash balance + Cash receipts - Cash disbursements +/- Financing = Ending cash balance.

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Expected direct materials purchases in Read Company are $70,000 in the first quarter and $90,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is paid in the following quarter. The budgeted cash payments for purchases in the second quarter are

answer

$78,000

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Financial budgets consist of all of the following except the

answer

budgeted income statement.

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The budget that is often considered to be the most important financial budget is the

answer

cash budget.

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The cash budget contains sections for each of the following except

answer

capital expenditures.

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At the beginning of the year, Opal Company has a cash balance of $23,000. During the year, the company expects cash disbursements of $160,000, and cash receipts of $140,000. If Opal Company requires an ending cash balance of $20,000, how much must the company borrow?

answer

$17,000.

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