Accounting 2302 Exam 1

Management accounting:

emphasizes special purpose information

What is the law that protects investors from fraudulent financial accounting activity?

SOX

External users of accounting information would include ______.

investors

The stockholders of a company are:

the owners

What year was the Sarbanes-Oxley Act enacted?

2002

An inventory system that organizations use to increase efficiency and decrease waste is _____.

just-in-time manufacturing

Management accountants help the management of an organization in their planning function through _____.

strategic planning

Which of the following is false regarding strategic planning?

It is the sole responsibility of supervisors.

Internal users of accounting information would not include _____.

creditors

The managers of an organization are responsible for performing several broad functions. They are _____.

planning, controlling, and evaluating

Which of the following is the primary source of revenue for a manufacturing business?

the production of products from raw materials

Which of the following would not be classified as manufacturing overhead?

direct labor

Which of the following methods of cost estimation relies on only two data points?

the high-low method

Which of the following is the primary source of revenue for a service business?

providing intangible goods and services

Which of the following represents the components of the income statement for a merchandising business?

Sales Revenue - Cost of Goods Sold = gross profit

Fixed costs are expenses that _____.

remain constant as activity changes

Which of the following represents the components of the income statement for a service business?

Service Revenue - Operating Expenses = operating income

Conversion costs include all of the following except:

direct materials purchased

Which of the following is the primary source of revenue for a merchandising business?

the purchase and resale of finished products

Which of the following is not considered a product cost?

selling expense

A company wants to earn an income of $60,000 after-taxes. If the tax rate is 32%, what must be the company’s pre-tax income in order to have $60,000 after-taxes?

$88,235

When sales price decreases and all other variables are held constant, the break-even point will ______.

increase

The amount of a unit’s sales price that helps to cover fixed expenses is its ______.

contribution margin

A company has pre-tax or operating income of $120,000. If the tax rate is 40%, what is the company’s after-tax income?

$72,000

Break-even for a multiple product firm ______.

can be calculated by dividing total fixed costs by the contributing margin of a composite unit

When fixed costs increase and all other variables remain unchanged, the contribution margin will ______.

remains unchanged

When sales price increases and all other variables are held constant, the break-even point will ______.

decrease

A company sells its product for $80 per unit and has per-unit variable costs of $30. What is the contributing margin per unit?

$50

If the sales mix in a multi-product environment shifts to a higher volume in low contributing margin products, the break-even point will ______.

increase because the per composite unit contribution margin will decrease

A company’s product sells for $150 and has variable costs of $60 associated with the product. What is its contributing margin per unit?

$90