A306 Healy final exam practice questions AND CORRECT ANSWERS 100% LATEST EDITION 2024 GUARANTEED GRADE A+

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Which statement best describes management accounting? A) management accounting is mainly focused on past results. B) Management accounting reports are rules based using GAAP. C) the main users of m ... anagement accounting info are outside the firm. D) management accounting reports are prepared following the National Management Accounting Standards (NMAS) E) Management accounting is primarily used for decision making. answer: E which of the following statements is false? A) creditors would be a user of financial accounting information. B) management accounting information is used to develop budgets. C) financial accounting information emphasizes decisions for the future. D) reports based on management accounting info are created when required. answer: C which of the following statements is false? A) prime costs are always direct costs. B) manufacturing costs can be direct or indirect. C)selling & admin costs are only indirect. D) direct labor is both a prime cost and a conversion cost. answer: C during the month of April, direct labor cost totaled $16000 and direct labor cost was 50% of prime cost. If total manufacturing costs during April were $78000, the manufacturing overhead was...: A) $62,000 B) $32,000 C) $46,000 D) $16,000 answer: C explanation: Direct material= 16k (if DL 50% of prime costs then DL=DM) + Direct Labor= 16k + MOH= ? =total Mfg cost of 78k (16k+16k+ ?= 78k) ?= 46,000 Shannon would like to open a full size Scoop Shop. Assume floor space is available at a rental rate of $30,000 per year in increments of 1,000 square feet. If Shannon needs 2,500 square feet, how much will she pay in rent for the year? A. $30,000 B. $60,000 C. $75,000 D. $90,000 answer: D explanation: even though she only needs 2500 square feet, she must pay in increments of 1,000 square feet. SO she will have to buy 3,000 square feet. 30k * 3= $90,000 Which of the following statements are true? A) opportunity cost is the value of the next best option B) indirect manufacturing costs are called manufacturing overhead C) al product costs are direct. D) sunk costs are relevant to a decision. E) costs on the financial income statement are organized by a product and period. F) A, B, and E answer: F if the scoop shop sold 14,000 cakes at $25 per cake, how much will profit increase if 1 more cake is sold? Given information= Revenues: $350,000 gross margin: $189,000 contribution margin: $148,000 Net Operating income: $63,000 A) $25.00 B) $13.50 C) $10.57 D) $4.50 answer: C if a company's revenue is $600,000, net operating income is $135,000 and product costs are $215,000 then: A) the company's gross margin totals $350k B) the company's period costs are $215k C) the company's period costs cannot be determined D) the company's contribution margin totals $450k E) the company's gross margin totals $385k answer: E explanation: revenues- product costs= gross margin During October, Diaz Company's sales volume increased by 40% compared to the previous month's volume. If the selling price per unit, unit variable cost, and total fixed cost remained the same, which of the following statements regarding October's results is false? A) the firm's contribution margin ratio was unchanged B) the firm's unit contribution margin increased C) the firm's total variable costs increased D) the firm's breakeven point was unchanged answer: B explanation: the only thing that would have changed would have been volume which means CM ratio and UCM stayed the same. Which of the following statements correctly indicates how to calculate breakeven volume (where profit will be zero)? A) variable costs divided by unit contribution margin B) profit divided by sales volume C) fixed costs divided by unit contribution margin D) variable costs divided by fixed costs answer: C Coffee Klatch is an espresso stand in a downtown office building. The monthly average variable expense ratio and fixed costs are 36% and $1280, respectively. How much revenue needs to be generated to breakeven? A) $3556 B) $2000 C) $1741 D) $1280 answer: B explanation: at breakeven, fixed costs= contribution margin. If revenues= CM/CM ratio, and variable expenses are 36%, then contribution margin ratio is 64%. FC/CM= Breakeven so $1280/64% = $2000 Pear Co estimates that it will require 160,000 direct labor hours to meet the coming period's estimated production level. In addition, the company estimates total fixed manufacturing overhead at $200,000 and variable manufacturing overhead costs of $2.75 per direct labor hour. Actual direct labor hours for the period were 150,000. How much manufacturing overhead was applied to jobs for the period? A. $200,000 B. $440,000 C. $640,000 D. $600,000 E. $412,500 F. $187,500 answer: D explanation: estimated VMOH= $2.75 estimated FMOH= $200k/160k hours= $1.25 total est MOH rate= $2.75+$1.25= $4.00 actual direct labor hours * est MOH 150k*$4= $600,000 Job WR53 at NW Fab, Inc. required $200 of direct materials and 10 direct labor hours at $15 per hour. Estimated total overhead for the year was $760,000 and estimated direct labor hours were 20,000. What would be recorded as the cost of job WR53? a. $200. b. $350. c. $380. d. $730. answer: D explanation: DM: $200 DL: $15*10 hrs= $150 MOH= (760k/20k)*10 hrs= $380 Total cost (add all)= $730 Commercial service has been invited to bid on the Monroe county school renovation project. Bids are normally made at 150% markup of total cost. The estimated total cost of the project is $764,280. What bid should Commercial Service make? A) $764,280 B) $1,146,420 C) $1,910,700 answer: C explanation: cost+ (markup % * cost)= selling price (1.5 * $764,280)+ $764280 = $1,910,700 The following estimates were used in preparing the predetermined OH rate at the beginning of the year: computer hours=85,000 fixed MOH= $1,275,000 var MOH per computer hr= $3 actual operating data for the year included: computer hrs= 60,000 MOH= $1,350,000 What was the company's MOH allocation rate for the year? A) $15.00 B) $18.00 C) $22.50 D) $25.50 answer: B explanation: VMOH= $3 FMOH= 1275000/85000 = $15 total: $18 A company is considering a new labor saving machine to increase production efficiency. Sales will remain at $300,000 and 5,000 units. DM, DL, VMOH, and FMOH will be $70k, $80k, $10k, and $60k respectively. The machine rents for $3000 per year and will save $15000 in labor costs. Which are the relevant costs for this decision? A) sales and direct materials B) direct materials and direct labor C) direct labor and rent on new machine D) all expenses answer: C A company is considering a new labor saving machine to increase production efficiency. Sales will remain at $300,000 and 5,000 units. DM, DL, VMOH, and FMOH will be $70k, $80k, $10k, and $60k respectively. The machine rents for $3000 per year and will save $15000 in labor costs. What is the financial advantage/disadvantage if the machine is rented? (how much will NOI increase or decrease?) A) decrease $3000 B) increase $15000 C) increase $12000 D) decrease $12000 answer: C explanation: relevant costs are machine rent and direct labor costs. So $15000 savings on DL - $3000 rent cost= $12000 increase in net operating income A company has 2 divisions; Cereal division and Poptart division. How much common fixed cost of $25,000 can be avoided by eliminating the Poptart division? A) none of it B) some of it C) all of it answer: A explanation: a common fixed cost cannot be eliminated by removing a product When making make-or-buy decisions, managers should consider: A) alternative uses for any facility currently being used to make the product B) the costs of direct materials included in making the product C) qualitative factors such as whether the supplier can deliver the item on time and to the company's quality standards D) all of the above answer: D Northern Optical ordinarily sells the X-lens for $50. The variable production cost is $10, the fixed production cost is $18 per unit, and the variable selling cost is $1. A customer has requested a special order for 10,000 units of the X-lens to be imprinted with the customer's logo. This special order would not involve any selling costs, but Northern Optical would have to purchase an imprinting machine for $50,000. There is ample idle capacity to fulfill the order and the imprinting machine has no further use after this order. What is the minimum price per unit Northern Optical will accept? a. $34 b. $29 c. $16 d. $15 answer: D explanation: variable production cost * special order units $10* 10000= $100,000 cost + $50k special machine $150k total cost divided by 10,000 units = $15 per unit Colonial Heritage's supplier of hardwood will only be able to supply 2,000 feet of wood this month. Assume the company follows the plan we have proposed (chairs left; tables right): Unit CM: $50....$200 Board feet/unit: 2...10 CM per board foot: $25...$20 production order: chairs first..... tables second how much is the company willing to pay above the usual price to obtain more hardwood? A) $40 per board foot B) $25 per board foot C) $20 per board foot D) zero answer: C explanation: tables earn an additional $20 of contribution margin and profit, so paying anything above $20 per board foot of extra hardwood would cause company to lose money. Chapman Company sells its product for $42 per unit. The company's unit product cost, based on the full capacity of 400,000 units, is as follows: Direct materials $8 Direct labor $10 Manufacturing overhead $12 A special order offering to buy 40,000 units has been received from a foreign distributor. The only selling costs that would be incurred on this order would be $6 per unit for shipping. The company has sufficient idle capacity to manufacture the additional units. Assume that 2/3 of the manufacturing overhead is a fixed cost. In negotiating a price for the special order, the minimum acceptable selling price per unit should be: A) $22 B) $28 C) $30 D) $36 answer: B explanation: DM cost: $320k DL cost: $400k MOH cost: 1/3 $12 40k= $160k shipping cost: $240k total cost per unit: $1,120,000/40k= $28 per unit which of the following could be a constrained resource: A) direct materials B) factory space C) machine hours D) all of the above answer: D ABC company is considering an investment to automate its production process. The new equipment will allow ABC company to save $75,000 each year in labor costs. The company requires a maximum payback period of 5 years. What is the maximum investment that can be made in the project to be selected? A) $15000 B) $75000 C) $150000 D) $375000 answer: D explanation: x/75000=5 years. Solve for x. The internal rate of return measures: A) how quickly the initial investment can be recouped B) the discount rate at which the net present value of the project is zero C) the profitability of an investment D) the rate at which future cash flows must be invested in order to obtain profitability answer: B Holland company owns the mineral rights to land that has a deposit of ore. The company is deciding whether to purchase equipment and open a mine on the property. The mine would be depleted and closed in 5 years and the equipment would be sold for its salvage value. What is the amount of net operating cash flows to be used to calculate the NPV? info given: initial investment- $325k EUL of equip in yrs- 5 salvage value- $0 addl annual rev (cash)- $250k addl annual op rev (cash)- $155k cost of capital- 12% A) $275k B) $250k C) $155k D) $95k answer: D to rank capital projects, management should consider: A) the profitability index for projects evaluated using NPV B) the larger positive NPV if the projects have the same initial investment C) projects whose IRR is greater than the company's cost of capital D) projects whose IRR results in a positive NPV E) all of the above answer: E Which statement below regarding budgets is false? A) budgets are a means of allocating resources B) the budget process requires managers to coordinate and communicate with each other C) the top down approach to budgeting increases the time to prepare the budget D) the participative approach to budgeting is more team based E) none of these answer: C April and May production are expected to be 1,000 and 2,000 units, respectively. Each unit requires 1.1 yards of fabric and the company desires to keep yards of fabric on hand equal to 10% of the following months production. It is expected that ending raw materials inventory on March 31 will contain 110 yards of fabric. How many yards need to be purchased for April production? A) 990 yards B) 1100 yards C) 1210 yards D) 1320 yards answer: C explanation: production needs: 1100 (1.1 * 1000) end inv.: 220 (2000 1.1 0.1) total required: 1320 beg. inv (subtract): 110 mat. to buy: 1210 units CS Inc is preparing its budget for next year. Below are the assumptions being used: - 20,000 units will be sold at $52 per unit - average selling price per unit will exceed the average purchase price of materials by 30% - labor will be 1 hour per 20 units @ $25 per hour - fixed expenses (which includes $5000 for depreciation) will equal 6% of budgeted revenues Net operating income is budgeted to be: A) $952,600 B) $640,600 C) $165,600 D) $152,600 answer: D explanation: selling price: 20k * $52= $1040000 purchase price: 1040000/1.3 = $800,000 labor cost: (20k/20)*$25= $25000 fixed expenses: $1040000*0.06= $62400 total income: $152,600 which of the following budgets is affected by the sales budget? A) production budget B) cash budget C) selling and administrative budget D) all of the above answer: D which of the following budgets is not directly impacted by the production budget? A) direct materials budget B) MOH budget C) sales budget D) none of the above answer: C [Show More]

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