ACCT 346 Final Exam 2

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ACCT 346 Final Exam 2

1. (TCO 1) Performance reports often compare current period performance with (Points : 4)

Performance in a prior period.
Planned (budgeted) performance.
Both A and B are correct.
Neither A nor B is correct.


2. (TCO 1) Which of the following is not likely to be a fixed cost? (Points : 4)

Direct materials
Salary of the human resources director


3. (TCO 2) Ice Box Company manufactures refrigerators. Which of the following items is most likely to be an indirect material cost for Ice Box Company? (Points : 4)

Factory supervisor’s salary
Lubricant for refrigerator door hinges
Glass shelves for the refrigerators
Refrigerator motors


4. (TCO 2) A form used to accumulate the cost of producing an item is called a(n) (Points : 4)

job-cost sheet
material requisition
balance sheet


5. (TCO 3) Why is it necessary to compute equivalent units separately for materials and conversion costs? (Points : 4)

Mistakes are made in the accounting for these costs
Materials and conversion enter the production process at different rates
Conversion costs are more difficult to estimate
None of the above reasons are true


6. (TCO 3) The Freedom Corporation’s painting department had a beginning inventory of 580 units, which had direct material costs of $22,715. During June, 9,290 units were started and costs of $1,268,085 were incurred for direct material. Ending inventory consists of 1,000 units, which are 35% complete with respect to direct material. What is the cost per equivalent unit for direct material? (Points : 4)


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7. (TCO 4) The range of activity for which estimates of cost behavior are likely to be accurate is the (Points : 4)

incremental range
margin of safety
relevant range
range of opportunity


8. (TCO 4) Beaudreaux Motors is operating at its break-even point of 16,000 units. Which of the following statements is not true? (Points : 4)

The amount of the company’s total costs equals the amount of its revenues.
The company’s fixed costs equal its variable costs.
The company’s profit equals zero.
Assuming no other changes, if the company sold more units, it would earn a profit.


9. (TCO 5) Which of the following is treated as a product cost in variable costing? (Points : 4)

Sales commissions
Administrative salaries
Fixed manufacturing overhead
Direct labor


10. (TCO 5) When the number of units sold is equal to the number of units produced, net income using full costing will be (Points : 4)

greater than net income under variable costing
equal to net income using variable costing
less than income using variable costing
none of the above


11. (TCO 6) Cost-plus contracts are common in which of the following industries? (Points : 4)

Manufactured home builders
Soft drink bottlers
Defense contractors
Newspaper publishers


12. (TCO 6) Which of the following steps is not involved in the ABC approach? (Points : 4)

Identify activities which cause costs to be incurred.
Allocate costs to products based on activity usage.
Group costs of activities into cost pools.
Improve processes based on benchmarking


13. (TCO 7)  Which of the following is never considered in incremental analysis? (Points : 4)

Incremental revenues
Sunk costs
Incremental profit
Differential costs

Page 2

1. (TCO 7) Two or more products that result from common inputs are called (Points : 4)

split products
joint products
combination products
common products


2. (TCO 8) Activity based pricing seeks to (Points : 4)

charge customers with the costs they are creating.
make greater profits by charging all customers more.
maintain all customers in the customer base.
all of the above.


3. (TCO 8) Which of the following are relevant in deciding whether to accept or reject a special order? (Points : 4)

The impact the order will have on existing business.
The price that will be charged on the special order.
The incremental cost of filling the special order.
All of the above.


4. (TCO 9) The required rate of return used to compute net present value is related to the firm’s (Points : 4)

contribution margin.
depreciation methods.
fixed costs.
cost of capital.


5. (TCO 9) Which of the following techniques uses time value of money? (Points : 4)

Payback period
Internal rate of return
Accounting rate of return
Relative sales value method


6. (TCO 10) In a bottom-up approach to budgeting (Points : 4)

the CFO alone determines the budget.
only the budget for the next month is prepared.
lower level managers are the primary source of budget information.
the production budget is prepared before the sales budget.


7. (TCO 10) The cash budget alerts management to all of the following except? (Points : 4)

Stockouts will cause customer dissatisfaction
The cash balance will be very low
Excess cash will be available for investment
Significant capital acquisitions are planned


8. (TCO 10) The standard cost is (Points : 4)

same as actual cost
the cost that should have been incurred to produce an item or service
useful only to manufacturing firms
calculated after production is completed


9. (TCO 10) Which of the following are components of a direct labor variance? (Points : 4)

Rate and efficiency
Attainable and ideal
Price and quantity
Volume and controllable


10. (TCO 10) Which of the following is a responsibility that distinguishes an investment center manager from a profit center manager? (Points : 4)

Setting prices for products
Controlling costs
Generating revenues
Significant influence over investment decisions


11. (TCO 10) Responsibility accounting holds managers responsible for (Points : 4)

all costs charge to their department.
all direct cost of their department plus part of the allocated company costs.
only costs they have personally approved.
only costs they can control.


12. (TCO 10) Which ratio measures the rate earned on total capital provided by the owners? (Points : 4)

Return on assets
Return on stockholders’ equity
Earnings per share
Price earnings ratio


  1. (TCO 1) Distinguish managerial accounting from financial accounting. Include a brief discussion of the differences in the types of information provided to users as well as the differences of the users of the accounting information. (Points : 20)
    1. (TCO 6) Booth Financial Services, LLC has two revenue producing departments, Financial Planning and Business Consulting. The accounting department is trying to determine the best method to allocate $1,000,000 of common costs (secretarial staff, reception personnel, etc), either by salary or number of employees. Information on the revenue departments are as follows:
    Financial Planning150 employees$10,000,000


    Business Consulting50 employees$5,000,000

    (a) Allocate the $1,000,000 common costs to the two revenue departments using both methods.
    (b) Why are allocations called arbitrary? (Points : 25)

    1. (TCO 10) Gina’s Boutique makes custom jewelry. One item, the guru necklace, is a best seller and sales in units for the first quarter are as follows:January 100,000 units
      February 150,000 units
      March 180,000 unitsDesired ending inventory is budgeted at 20% of next month sales.Compute production for February. (Points : 25)
    1. (TCO 2) Acme Fireworks uses a traditional overhead allocation based on direct labor hours. For the current year overhead is estimated at $1,000,000 and direct labor hours are budgeted at 200,000 hours. Actual hours worked were 195,000 and actual overhead was $978,000.(a) Compute the predetermined manufacturing overhead rate.
      (b) Compute the applied manufacturing overhead.    (c) Compute the amount of over/under applied manufacturing overhead. (Points : 25)
    2. (TCO 9) A project will require an initial investment of $600,000 and is expected to generate the following cash flows:Year 1    $100,000
      Year 2    $250,000
      Year 3    $250,000
      Year 4    $200,000
      Year 5    $100,000(a) What is the project’s payback period?
    3. TCO 4) Copper Queen Hotel is interested in estimating fixed and variable costs so the hotel can make more accurate projections of costs, break-even and profits. The hotel is in a resort area and busy from November through March. In July and August, the hotel has only a 50 percent occupancy rate. Classify each of the following costs as fixed, variable or mixed.A. Depreciation of the building
      B. Salaries of restaurant staff
      C. Salaries of hotel manager, desk manager, accounting clerks
      D. Soap, shampoo and other toiletries in the bathrooms
      E. Laundry costs (cost of bed linens, table cloths, cleaning products, depreciation on cleaning equipment.
      F. Food and beverage costs
      G. Grounds Maintenance (Points : 25)
    4. TCO 5) The following data has been taken from Air-Tite company in its first year of business.Units produced 100,000
      Units sold 60,000
      Units in ending inventory 40,000
      Fixed manufacturing overhead $500,000(a) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if full absorption costing is used.
      (b) Compute the amount of fixed manufacturing overhead that would be expensed in the current year if variable costing is used.
      (c) Compute the amount of fixed manufacturing overhead that would be included in ending inventory under full absorption costing. (Points : 25)



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