ACCT4B FINAL Flashcards by Nivea Ray

The ability to generate future revenues and meet long-term obligations is referred to as.

SOLVENCY

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Intracompany standards for financial statement analysis:

Are often based on a company’s prior performance.

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Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in dollar amounts and percents, are referred to as:

Comparative statements.

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A company’s sales in 2013 were $250,000 and in 2014 were $287,500. Using 2013 as the base year, the sales trend percent for 2013 is:

115%

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Selected comparative income statement amounts for a company are shown below. Using 2013 as the base year for a horizontal analysis, compute the account with the most significant change.

Miscellaneous expense.

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In which comparative financial statements is each amount expressed as a percentage of a base amount?

Common-size comparative statements.

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A company is preparing a common-size balance sheet and wishes the base amount to be the total amount of assets. What are the 2013 and 2014 common-size percents for cash?

8.58% in 2013 and 7.85% in 2014.

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Current assets minus current liabilities is equal to:

Working capital

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Three of the most common tools of financial analysis are:

Horizontal analysis, vertical analysis, ratio analysis.

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A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is equal to the:

Profit margin ratio

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External users of financial information:

Are not directly involved in operating the company.

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An attitude of constantly seeking ways to improve company operations, including customer service, product quality, product features, the production process, and employee interactions, is called:

Continuous improvement.

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An approach to managing inventories and production operations such that units of materials and products are obtained and provided only as they are needed is called:

Just-in-time manufacturing.

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The way of doing business whose goal is to eliminate waste while satisfying the customer and providing a positive return to the company is:

Lean business model.

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Jenny, an employee of Toucan Company, used company assets for her own personal gain. This is an example of:

fraud.

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The Institute of Management Accountants has developed a code of ethics that requires management accountants to behave in certain ways. Which of the following behaviors is not required?

Timeliness.

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A fixed cost:

Does not change with changes in the volume of activity within the relevant range.

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Costs that are incurred as part of the manufacturing process but are not clearly associated with specific units of product or batches of production, including all manufacturing costs other than direct material and direct labor costs, are called:

Factory overhead

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The salary paid to the supervisor of an assembly line would normally be classified as:

Indirect labor

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Which of the following costs would not be classified as factory overhead?

Metal doorknobs used on wood cabinets produced.

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The following are all examples of product costs:

Direct material, direct labor and factory overhead.

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The comparison of a company’s financial condition and performance across time is known as:

Horizontal analysis.

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The production activities for a customized product represent a(n):

Job.

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A job order cost accounting system would best fit the needs of a company that makes:

Custom machinery.

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A document in a job order cost accounting system that is used to record the costs of producing a job is a(n):

Job cost sheet.

When raw materials are used in production and are recorded in a job cost system:

Goods in Process and Factory Overhead are debited and Raw Materials Inventory is credited.

Penn Company uses a job order cost accounting system. In the last month, the system accumulated labor time tickets totaling $24,600 for direct labor and $4,300 for indirect labor. These costs were accumulated in Factory Payroll as they were paid. Which entry should Penn make to assign the Factory Payroll?

Debit Work in Process Inventory $24,600; Debit Factory Overhead $4,300; Credit Factory Wages Payable $28,900.

Canoe Company's manufacturing accounting system uses direct labor costs to apply overhead to goods in process and finished goods inventories. Canoe Company's manufacturing costs for the year were: direct labor, $30,000; direct materials, $50,000; and factory overhead applied, $6,000. The overhead application rate was:

20.0%

The amount by which the overhead applied to jobs during a period exceeds the overhead incurred during the period is known as:

B)$2,000

Job order costing systems normally use:

Perpetual inventory systems.

A job cost sheet includes:

Direct material, direct labor, overhead.

Which of the following five types of products is least likely to be produced in a process manufacturing system?

Oil paintings.

An expression of the activity of a process as the number of units that would have been processed during a period if all effort had been applied to units that were started and finished during the period is called:

Equivalent units of production.

Which of the following is true when computing cost per equivalent unit in a FIFO process costing system?

Costs incurred in the current period are divided by the equivalent units of production.

A system of accounting in which the costs of each process are accumulated separately and then assigned to the units of product that passed through the process is a:

Process cost accounting system.

A company that applies process costing is most frequently characterized by:

Homogeneous product and high production volume.

A hybrid costing system would be most appropriate when:

A manufacturer is able to standardize processes while at the same time attempting to cater to individual customer needs.

The purchase of raw materials on account in a process costing system is recorded with a:

Debit to Raw Materials Inventory and a credit to Accounts Payable.

Direct labor and indirect labor are recorded, respectively, to:

Goods in Process and Factory Overhead.

To compute an equivalent unit of production, one must be able to reasonably estimate:

The percentage of completion.

A method of assigning overhead costs to a product using a single overhead rate is:

Plantwide overhead rate method.

The cost object(s) of the departmental overhead rate method is:

The production departments of the company.

From an ABC perspective, what causes costs to be incurred?

Activities.

Which of the following companies would be best served by a plantwide overhead rate?

A company that manufactures few products and whose operations are labor intensive.

What are three advantages of activity-based costing over traditional volume-based allocation methods?

More accurate product costing, fewer cost objects, and a direct correlation to production volume.

Consider the following activities that take place in a medical clinic. (1.) Cleaning exam rooms. (2.) Heating and air conditioning the clinic. (3.) Sending blood work to a lab. (4.) Dispensing medicine. Which of the following statements is true?

Sending blood work to the lab is a batch level activity.

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:

Cost-volume-profit analysis.

A cost that changes with volume, but not at a constant rate, is called a:

Curvilinear cost

A cost that remains constant over a limited range of volume but increases by a lump sum when volume increases beyond a maximum amount is a(n):

Step-wise cost

A cost that can be separated into fixed and variable components is called a:

Mixed cost

A cost that changes in total proportionately to changes in volume of activity is a(n):

Variable cost

The excess of expected sales over the sales level at the break-even point is known as the:

Margin of safety.

A statistical method for deriving an estimated line of cost behavior is the:

Least-squares regression method.

Which of the following is not a product cost?

Advertising costs.

Using a traditional costing approach, which of the following manufacturing costs are assigned to products?

Variable manufacturing overhead, direct materials, direct labor, and fixed manufacturing

Which of the following best describes costs assigned to the product under the variable costing method? Direct labor (DL) Direct materials (DM) Variable selling and administrative Variable manufacturing overhead Fixed selling and administrative Fixed manufacturing overhead

DL, DM, and variable manufacturing overhead.

A budget is best described as:

A formal statement of a company's future plans usually expressed in monetary terms.

Which of the following is not a benefit of following a well-designed budgeting process?

Assurance of future profits.

The most useful budget figures are developed:

From the bottom up following a participatory process.

The usual starting point for preparing a master budget is forecasting or estimating:

Sales

A quantity of merchandise or materials over the minimum needed reduce the risk of running short is called:

Safety stock.

A managerial accounting report that presents predicted amounts of the company's revenues and expenses for the budget period is called a:

Budgeted income statement.

The anticipated costs incurred under normal conditions to produce a specific product or to perform a specific service are:

Standard costs

The difference between actual and standard cost caused by the difference between the actual price and the standard price is called the:

Price variance.

An analytical technique used by management to focus on the most significant variances and give less attention to the areas where performance is satisfactory is known as:

Management by exception.

A budget based on several different levels of activity, often including both a best-case and worst-case scenario, is called a:

Flexible budget.

Which department is often responsible for the direct materials price variance?

The purchasing department.

Overhead cost variance is:

The difference between the actual overhead incurred during a period and the standard overhead applied.

A profit center:

Incurs costs and directly generates revenues.

An accounting system that provides information that management can use to evaluate the profitability and/or cost effectiveness of a department's activities is a:

Departmental accounting system.

A department that incurs costs without directly generating revenues is a:

Cost center

The salaries of employees who spend all their time working in one department are:

Direct expenses.

Expenses that are not easily associated with a specific department, and which are incurred for the benefit of more than one department, are:

Indirect expenses

Costs that the manager has the power to determine or at least strongly influence are called:

Controllable costs

An accounting system that is set up to control costs and evaluate managers' performance by assigning costs to the managers responsible for controlling them is called a(n):

Responsibility accounting system.

A single cost incurred in producing or purchasing two or more essentially different products is a(n):

Joint cost

Process time is the time:

That an order or job sits with no production applied to it.

A cost that cannot be avoided or changed because it arises from a past decision, and is irrelevant to future decisions, is called a(n):

Sunk cost

The potential benefit of one alternative that is lost by choosing another is know as a(n):

Opportunity cost

A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next five years. The $19,000 cost is an example of a(n):

Incremental cost

A cost that requires a current and/or future outlay of cash, and is usually an incremental cost, is a(n):

Out-of-pocket cost

A company paid $200,000 10 years ago for a specialized machine that has no salvage value and is being depreciated at the rate of $10,000 per year. The company is considering using the machine in a new project that will have incremental revenues of $28,000 per year and annual cash expenses of $20,000. In analyzing the new project, the $10,000 depreciation on the machine is an example of a(n):

Sunk cost

A company has the choice of either selling 600 defective units as scrap or rebuilding them. The company could sell the defective units as they are for $2.00 per unit. Alternatively, it could rebuild them with incremental costs of $0.60 per unit for materials, $1.00 per unit for labor, and $0.80 per unit for overhead, and then sell the rebuilt units for $5.00 each. What is the amount of incremental revenue from rebuilding?

$3.00 per unit.

Capital budgeting decisions usually involve analysis of:

Long-term investments only.

The process of restating future cash flows in today's dollars is known as:

Discounting.

In business decision-making, managers typically examine the two fundamental factors of:

Risk and return.

The rate that yields a net present value of zero for an investment is the:

Internal rate of return.

A minimum acceptable rate of return for an investment decision is called the:

Hurdle rate of return.