ACC 561 Final Exam Questions

_____ models are mathematical models of the master budget that can react to any set of
assumption about sales, costs, and product mix.

A. Budgeting analysis
B. Accounting
C. Futuring
D. Financial planning

A sales forecast is _____.

A. a prediction of sales under a given set of conditions

B. the same as a sales budget that will generate a desired level of sales
C. all of these answers are correct
D. the result of decisions to create conditions

A _____ gives the expected sales under a given set of conditions.

A. sales prediction
B. budget forecast
C. sales forecast
D. sales budget

A _____ gives the expected sales under a given set of conditions.

A. sales prediction
B. budget forecast
C. sales forecast
D. sales budget

A _____ gives the expected sales under a given set of conditions.

A. sales prediction
B. budget forecast
C. sales forecast
D. sales budget

_____ need cost accounting systems.

A. Manufacturing firms and service organizations
B. Manufacturing firms and nonprofit organizations
C. Manufacturing firms, service organizations, and nonprofit organizations
D. Service organizations and nonprofit organizations
_____ probably would not be used as a measure of activity in a flexible budget.
A. Sales volume
B. Number of machine hours used
C. Number of hours worked by salespeople
D. Number of direct labor hours worked

_____ are components of a master budget.

A. A continuous budget and a static budget
B. An operating budget and a financial budget
C. A strategic plan and an operating budget
D. A cash budget and an activity budget

The master budget quantifies targets for all of the following except _____.
A. markets
B. production
C. sales
D. cost driver activity

Costs are allocated for all the following purposes except to

A. determine inventory levels
B. obtain reimbursement
C. predict the economic effects of planning and control decisions
D. compute income and asset valuation

The following information is available for the Peter Company: Sales $150,000 Invested Capital
156,250 ROI 10% The return on sales is _____.
A. 10.00%
B. 62.50%
C. 10.42%
D. none of these answers is correct

Jewel Company's revenues are $300 and invested capital is $240. Expenses are currently 60% of
sales. Jewel Company's current return on investment is _____.
A. 50%
B. 80%
C. 100%
D. none of these answers are correct
Speedo Company's revenues are $300 on invested capital of $240. Expenses are currently 70% of
sales. If Angelo Company can reduce its invested capital by 20%, return on investment will
be _____.
A. 75%
B. 18.75%
C. 93.75%
D. 46.88%

is the first step in designing a management control system.

A. Evaluating management's performance
B. Preparing financial statements
C. Establishing organizational goals
D. Distinguishing between profit centers and cost centers

is (are) the most basic component of a management control system.

A. The organization's long-range budget
B. The stockholder's preferences
C. The organization's goals
D. Top management's preferences

Identify which of the following is not a characteristic of a management control system.

A. A management control system aids and coordinates the process of making decisions.
B. A management control system motivates individuals throughout the organization to act in concert.
C. A management control system encourages short term profitability.
D. A management control system coordinates forecasting sales and cost driver activities, budgeting, and
measuring and evaluating performance

Absorption costing assigns _____ to the product.

A. variable and fixed manufacturing costs
B. all variable costs
C. variable manufacturing costs
D. all fixed and variable costs

In absorption costing, costs are separated into the major categories of_____.
A. fixed and variable
B. manufacturing and fixed
C. manufacturing and nonmanufacturing
D. variable and nonmanufacturing

factory overhead appears on the absorption-costing income statement as_____.

A. a production volume variance
B. part of cost of goods sold
C. a fixed expense
D. part of cost of goods sold and as a production volume variance

Martinez Company has two service departments, Maintenance and Personnel, as well as two
production departments, Mixing and Finishing. Maintenance costs are allocated based on
square footage while personnel costs are allocated based on number of employees. The
following information has been gathered for the current year: Maintenance Personnel
Mixing Finishing Direct dept. costs $50,400 $33,600 $42,000 $5,600 Square footage 1,600
800 3,200 2,400 Number of employees 16 24 48 64 If the step down method is used to
allocate costs and the Maintenance Department is allocated first, then the amount of
overhead that would be allocated from Personnel to Maintenance is _____.
A. $3,539
B. $4,200
C. $4,998
D. $0

Department performance reports can be used to help department heads determine _____.
A. who is primarily responsible for any deviations from plans
B. how effectively and efficiently the department is operating
C. how effectively the department is operating
D. how efficiently the department is operating

According to the Institute of Management Accountants' Statement of Ethical Professional

Practice, the standard of competence includes:
A. the ongoing development of the accountant's knowledge and skills
B. All of these answers are correct
C. disclosing all relevant information
D. avoiding actual or apparent conflicts of interest

Which of the following is not a major factor causing changes in management accounting today?
A. Declining work ethic is not a major factor.
B. Increasing importance of the service sector of the economy is not a major factor.
C. E-commerce is not a major factor.
D. Increased global competition is not a major factor.

Ethical accountants are important to society because _____.

A. they pay their taxes
B. none of these answers is correct
C. they will not go to prison and waste taxpayers' money
D. the information produced is reliable

The primary users of management accounting information are _____.

A. bankers
B. suppliers
C. internal decision makers
D. governmental regulatory authorities

is the field of accounting that develops information for external decision makers such as
stockholders, suppliers, banks, and government regulatory agencies.
A. Auditing
B. Financial accounting
C. Management accounting
D. Tax accounting

The _____ is also called the statement of financial position.

A. income statement
B. statement of cash flows
C. statement of retained earnings
D. balance sheet

would not appear on the financial statements for a sole proprietorship.

A. Paid-in Capital
B. Unearned Sales Revenues
C. Accumulated Depreciation
D. Cost of Goods Sold

Etiwanda Company's accountant recorded a debit to Accounts Payable and a credit to Cash. This
transaction will_____.
A. increase Cash and decrease Accounts Payable
B. decrease Cash and decrease Accounts Payable
C. increase Cash and increase Accounts Payable
D. decrease Cash and increase Accounts Payable

The use of acquisition cost less depreciation in valuing an asset on the balance sheet is the logical
result of the _____ accounting convention.

A. continuity

B. materiality

C. cost-benefit

D. conservatism

Serena Company has two service departments, Maintenance and Personnel, as well as two
production departments, Mixing and Finishing. Maintenance costs are allocated based on
square footage while personnel costs are allocated based on number of employees. The
following information has been gathered for the current year: Maintenance Personnel
Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800
400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method is used to allocate
costs and the Maintenance Department is allocated first, then the amount of overhead that
would be allocated from Maintenance to Finishing is _____.
A. $57,000
B. $31,500
C. $42,750
D. $47,250
Gomez Company has two service departments, Maintenance and Personnel, as well as two production
departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while
personnel costs are allocated based on number of employees. The following information has been
gathered for the current year _____. Maintenance Personnel Mixing Finishing Direct dept. costs
$126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12
24 32 If the step-down method is used to allocate costs and the Maintenance Department is allocated
first, the amount of overhead that would be allocated from Maintenance to Mixing is:
A. $36,000
B. $42,750
C. $42,000
D. $63,000

The preferred guidelines for allocating service department costs include _____.
A. establishing part or all of the details regarding cost allocation in advance of rendering the
service
B. evaluating performance using allocated costs for each service department
C. identifying the direct and indirect costs
D. allocating variable- and fixed-cost pools simultaneously

_____ is not a type of cost allocation.

A. Allocation of costs of a particular organizational unit to products or services
B. Reallocation of costs from service departments to production departments
C. Allocation of costs to the appropriate organizational unit
D. Reallocation of costs from production departments to service departments

is a name for a system that first accumulates overhead costs for each of the activities of an
organization, and then assigns the costs of activities to the products, services, or other cost
objects that caused that activity.
A. Activity based costing
B. Transaction based accounting
C. Transaction costing
D. Cost driver accounting

The change from traditional costing to activity-based costing may reveal that _____.
A. high volume products are overcosted
B. both high and low volume products are overcosted
C. both high and low volume products are undercosted
D. low volume products are overcosted

Managers should apply two principles to obtain accurate and useful cost functions. These
principles are ____.
A. reliability and validity
B. believability and validity
C. plausibility and believability
D. plausibility and reliability

Knothole Company sells desks at $480 per desk. The costs associated with each desk are as
follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed
costs for the period are $456,840. The break-even volume in dollars is _____.
A. $2,030,400
B. none of these answers is correct
C. $456,840
D. $1,573,560
Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as
follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed
costs for the period are $456,840. The contribution margin per desk is _____.
A. $51
B. $126
C. $195
D. $108

Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs per unit total $14.00,
of which $6.25 is for direct materials and $5.25 is for direct labor. If total fixed costs are
$435,000, then the break even volume in dollars is _____.
A. $621,429
B. $435,000
C. $1,450,000
D. $1,023,52

Which value chain function would include advertising costs?

A. The production function would include advertising costs.
B. The marketing function would include advertising costs.
C. The distribution function would include advertising costs.
D. The customer service function would include advertising costs.

The accounting convention of _____ permits a company to immediately expense assets (such as a
garbage can) with small values and long useful lives.
A. objectivity
B. conservatism
C. materiality
D. continuity

The accounting convention of _____ guides the relative sophistication of the accounting system.
A. conservatism
B. materiality
C. objectivity
D. cost benefit

Limited liability means that_____.

A. the company is required to pay only current liabilities in the current year and has no obligation to
pay long term liabilities in the current year
B. corporations can have liabilities up to only a certain amount due to limits on the company's
borrowing capability
C. the creditors of the corporation have claims on only the assets of the corporation and not the
assets of the owners of the corporation
D. the creditors of a corporation can receive only up to, and no more than, the amount due to them

The Rebecca Company acquired merchandise inventory costing $10,000 on September 1. The
company will not pay for the inventory until October 1. This transaction will affect the
Rebecca Company by increasing the Merchandise Inventory account by $10,000 and _____.
A. increasing the Capital account by $10,000
B. decreasing the Capital account by $10,000
C. increasing the Accounts Payable account by $10,000
D. decreasing the Accounts Payable account by $10,000

Which value chain function would include the cost of computer-aided design equipment and cost
to develop the prototype of a product?
A. The production function would include these costs.
B. The marketing function would include these costs
C. The distribution function would include these costs.
D. The design of product, services, and processes function would include these costs.

Which of the following is not a cost driver of customer services costs?

A. Number of service calls is not a cost driver of customer services costs.
B. All of these answers are correct
C. Hours spent servicing products are not a cost driver of customer services costs.
D. Travel costs are not a cost driver of customer services costs.