ACCT 302 FINAL MIDTERM 1

Financial accounting provides the primary source of information for

preparing the income statement for shareholders and other external parties

Which of the following is true of management accounting information?

It helps with the coordination of elements of the value chain

Which of the following differentiates cost accounting and financial accounting?

Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties

Place the five steps in the decision-making process in the correct order:

A = Obtain information

B = Make decisions by choosing among alternatives

C = Identify the problem and uncertainties

D = Implement the decision, evaluate performance, and learn

E = Make predictions about the future

C A E B D

A budget

is an aid for coordinating what needs to be done to execute a plan

Budget serves as much as a control tool as a planning tool because

it is a benchmark against which actual performance can be compared

Which of the following statements is true of direct costs?

A direct cost of one cost object can be an indirect cost of another cost object.

Which of the following is an indirect cost for a car assembly plant where the cost object is the car being produced?

The night security officer at the factory

When 24,000 units are produced, fixed costs are $24 per unit. Therefore, when 20,000 units are produced, fixed costs will

increase, (24,000×24/20000)

The cost components of a heater include $35 for the compressor, $11 for the sheet molded compound frame, and $74 per unit for assembly. The factory machines and tools cost is $55,000. The company expects to produce 1,300 heaters in the coming year. What cost function best represents these costs?

Y = 55,000 + 120X, Per unit costs: 35+11+74

Which of the following is true?

Product costs are held in inventory accounts on the balance sheet before being expensed on the income statement.

Which of the following is a period cost?

The salary of salespersons

COGS

Beginning WIP + Manufacturing cost during the year - Ending WIP

When 20,000 units are produced, fixed costs are $16 per unit. Therefore, when 40,000 units are produced, fixed costs will:

decrease to $8 per unit (20,000 x $16)/40,000=8)

Work in process inventory increased by $42,000 in January. Finished goods inventory decreased by $56,000 in January. What was Titan Company’s cost of goods sold for January?

(230,000+$300,000+$152,000-$42,000) + 56,000

COGM

DM+DL+MOH-Increase on WIP

Which of following is true about the assumptions underlying basic CVP analysis?

Only selling price, variable cost per unit, and total fixed costs are known and constant

Pacific Company sells only one product for $12 per unit, variable production costs are $3 per unit, and selling and administrative costs are $1.70 per unit. Fixed costs for 11,000 units are $6,000. The operating income is ________ when 11,000 units are sold.

12 − 3 − 1.70 - ($6,000 / 11,000)

The contribution margin income statement

can be used to predict operating income at different levels of activity

Sparkle Jewelry sells 20,000 units resulting in $1,200,000 of sales revenue, $900,000 of variable costs, and $240,000 of fixed costs. Suppose the income tax rate is 30% and the company’s goal is to have $70,000 after-tax net income. How many units does the company need to sell? (Round to the nearest whole unit.

($1,200,000 − $900,000) / 20,000 = $15, $70,000/(1-30%)=$100,000

($240,000+$100,000) / $15 = 22,667 units

Sales of Blistre Autos are 380,000, variable cost is 230,000, and fixed cost is 90,000. Calculate the operating leverage of the company

$380,000 - $230,000 - $90,000 = $60,000

Operating leverage = ($380,000 - $230,000)/$60,000 = 2.50 times

f a company has a degree of operating leverage of 5 and sales volume increases by 30%, then

profit will increase by 5 × 30%

Which of the following companies will use a process costing system?

An oil refining company

Why might Springfield Corp. prefer normal costing over actual costing?

Indirect costs are assigned to a job on a timely basis

Which of the following statements is true of a peanut-butter costing system?

A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.

Which of the following is true of refinement of a costing system?

It reduces the use of broad averages for assigning the cost of resources to cost objects

Which of the following statements is true of activity-based costing?

Activity based costing is more suited to companies with high product diversity than companies with single product line

________ costs support the organization as a whole

Facility-sustaining

For a company with diverse products, undercosting overhead of a product will lead to

misallocating indirect costs of another product