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ARMY ROTC > ACT 4B FINAL > Flashcards

ACT 4B FINAL Flashcards

1
Q

Managerial Accounting

A

A profession that involves partnering in management decision making, devising planning and performance management systems, and providing expertise in financial reporting and control to assist management in the formulation and implementation of an organization’s strategy.

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2
Q

Planning(Functions of Management)

A

Setting goals and objectives for the company and deciding how to achieve them

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3
Q

Directing

A

Overseeing the company’s day-to-day operations

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4
Q

Controlling(Functions of Management)

A

Evaluating the results of business operations against the plan and making adjustments to keep the company pressing toward its goals

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5
Q

Financial Accounting

A

External users, such as creditors, stockholders, and government regulators.

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6
Q

Cost Objective

A

Anything for which managers want to know the cost

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7
Q

Direct Cost

A

A cost that can be traced to the cost object; meaning the company can readily identify or associate the cost with the cost object.

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8
Q

Indirect Cost

A

A cost that relates to the cost object but cannot be trace specifically to it.

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9
Q

Product cost

A

Incurred by manufacturers to produce their products or incurred by merchandisers to purchase their products.

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10
Q

Period Costs

A

Cost incurred by the company that do not get treated as inventory but, rather, are expensed immediately in the period in which they are incurred

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11
Q

Cost of leasing the retail location

A

Period Cost

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12
Q

Cost of manager’ and sales associates’ salaries

A

Period cost

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13
Q

Cost of merchandise purchased for resale

A

Product Cost

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14
Q

Cost of designing the operating the company’s website

A

Period Cost

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15
Q

Cost of shipping merchandise to the store

A

Product cost

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16
Q

Cost of providing free shipping to customers who buy product online

A

Period cost

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17
Q

Cost of utilities used in running the retail locations

A

Period Cost

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18
Q

Cost of import duties paid on merchandise purchased from overseas suppliers

A

Product Cost

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19
Q

Depreciation on store shelving and shopping carts

A

Period Cost

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20
Q

Prime Cost

A

Refer to the combination of DM and DL

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21
Q

Conversion Costs

A

Combination of DL and Manufacturing overhead

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22
Q

Controllable cost

A

In the long run, meaning management is able to influence or change them

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23
Q

Uncontrollable costs

A

Cost that cannot be changed or short run by management

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24
Q

Fixed

A

Stays constant in total over a wide range of activity levels

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25
Q

Variable Cost

A

Change in direct proportion to change in volume

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26
Q

Indirect materials, machine lubricants

A

Variable cost

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27
Q

Cost of property tax, insurance, straight-line depreciation

A

Fixed

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28
Q

Manufacturing Costs

A

DL+DM+ Manufacturing overhead= Product cost

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29
Q

Process costing: Pace spends $500,000 on purchasing, cleaning, and chopping the vegetables to make 1 million jars of Picante sauce during the month. The average cost per jar of the cleaning and chopping process is as follows:
The average cost to mix and bottle each jar of sauce is $0.25

A

$500,000/1000000 jars= $.50 per jar

$.50 + $.25= $0.75 per jar

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30
Q

Job Costing

A

fitness equipment, cross-trainers, bikes, Boeing(airplanes), custom-home builders (unique houses) high-end jewelers, sofas and chairs

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31
Q

Touch Gear had an estimated $1,000,000 of MOH for the year and 62,500 DL hours, resulting in a predetermined MOH rate of $16/DL hour. By the end of the year, the company had actually incurred $975,000 of MOH cost and used a total of 60,000 Dl hours on jobs. By how much had Touch Gear overallocated or under-allocated MOH for the year?

A

$1000,000/62,500 DL =$16/DL
Actual MOH 975,000
Allocated MOH- $16 X 60,000= 960,000
975,000-960,000= 15,000 Under allocated

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32
Q

Touch Gear had an estimated $1,085,000 of MOH for the year and 60,500 DL hours, resulting in a predetermined MOH rate of $18/DL hour. By the end of the year, the company had actually incurred $825,000 of MOH cost and used a total of 63,000 Dl hours on jobs. By how much had Touch Gear overallocated or under-allocated MOH for the year?

A

825,000-1134,000= ($309,000)

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33
Q

Assume Life Fitness’s managers had chosen direct labor cost as the MOH allocation base, rather than direct labor hours. Furthermore, assume management estimates $1,200,000 of the direct labor cost of the year

A

PMOH rate= $100,000/ $1,200,000 of DL cost= .8333 or 83.33% direct labor cost
MOH allocated to Job 603= 83.33% X $10,000 direct labor cost= $8,333

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34
Q

Unit level

A

activities and cost incurred for every unit.

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35
Q

Batch-level

A

activities and cost incurred for every batch, regardless of the number of units in the batch.

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36
Q

Product-level activities

A

activities and cost incurred for a particular product, regardless of the number of units or batches of the product produce

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37
Q

Activity Cost Driver

A

Number of Parts moved, Weight of parts moved, cubic volume of parts moved, time spent moving the parts

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38
Q

Dairymaid makes organic yogurt. The only ingredients, milk and bacteria cultures, are added at the very beginning of the fermentation process. At month end, Dairymaid has 100,000 cups of yogurt that are only 25% of the way through the fermentation process. Use the equivalent unit formula to answer the following:

a. How many equivalent units of direct materials are in ending work in process?
b. How many equivalent units of conversion cost are in ending work in process?

A

physical units % of completion = EQ

100,000 X 100%= 100,000 EU of DM
100,000 x 25%= 25,000 EQ of COC

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39
Q

At the end of October, Cranston Bottling’s mixing department had “Total costs to account for” of $739,731. Of this amount, $271,596 related to direct materials costs, while the remainder related to conversion costs. The department had 52,230 total equivalent units of direct materials and 45,450 total equivalent units of conversion costs for the month. Compute the cost per equivalent unit for direct materials and the cost per equivalent unit for conversion costs.

A
  • Direct Materials Conversion Costs
    Total cost (a) $271596 $468135
    Equivalent units (b) 52230 45450
    Cost per equivalent unit (a/b) $5.2 $10.3
    *Total cost of conversion costs

= $739731 - $271596 = $468135

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40
Q

The Bruce Company is considering investing in a wind turbine to generate its own power. Any unused power wind turbine to generate its own power. Any uused power will be slod back to the local utility company. Between Cost savings and new revenues, the company expects to generate $750,000 per year in net clash inflows form the turbine. The turbine would cost $4 million and is expected to have a 20-year useful life with no residual value. Calculate the Accounting rate of return.

A

$750,000-[4,000,000-0/20yrs]/4,000,000=

13.75%

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41
Q

The Company is considering investing in a wind turbine to generate its own power. Any unsued power will be sold back to the local utility company. Between cost savings and new revenues, the company expects to generate $750,000 per year in net inflows from the turbine. The turbine would cost $4million and is expected to have a 20-year useful life with no residual value. Calculate the NPV using a 12% hurdle rate.

A

I= 12%, N= 20/7.469 X 750,000= 5,601,750-400,000=1,601750

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42
Q

The Bruce Company is considering investing in a wind turbine to generate its own power. Any unused power will be sold back to the local utility company. Between cost savings and new revenues, the company expects to generate $750,000 per year in net cash inflows from the turbine. The turbine would cost $4 million and is expected to have a 20-year useful life with no residual value. Calculate the internal rate of return (IRR).

A

4,000,000/750,000=5.33

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43
Q

NPV

A

Indicates wheter the asset will earn the company’s minimum require rate of return
Shows the excess or deficency of the asset’s present value of net cash inflows over the cost of the initial investment

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44
Q

IRR

A

Incorporates the time value of money and the asset’s net cash iflows over its entire life
Computes the project’s unique rate of return
No additional steps needed for capital rationing decsions

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45
Q

After a company has made an investment in a capital assets, what will it conduct to compare the actual net cash inflows to the project net cash inflows?

A

Post-audit

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46
Q

Examples of capital budgeting investments include all of the following except

A

Paying bonuses to the sales force
Customizing a fleet of new delivery vehicles
Installing a new computer system
building a factory

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47
Q

Which of the following affects the present value of an investment?

A
  • The interest rate
  • Number of time periods for the investment
  • Whether the investment proceeds will be paid in one lump sum or in equal payments
  • All of the above
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48
Q

When making capital rationing decisions, the size of the initial investment required may differ between alternative investments. The profitability index can be used in combination with which of the following methods to help managers choose among alternatives?

A

Net present value

49
Q

Which of the following is true regarding capital rationing decisions?

A
  • Companies should always choose the investment with the shortest payback period
  • Companies should always choose the investment with the Highest NPV
  • Companies should always choose the investment with the highest ARR.
  • NONE OF THE ABOVE
50
Q

The internal rate of return is

A

The interest rate at which the net present value of the investment is zero.

51
Q

Which of the following methods uses accrual accounting rather than net cash flows as the basis for calculations

A

Accounting rate of return

52
Q

Which of the following methods does not consider the investment’s profitability?

A

Payback

53
Q

Which of the following is the most reliable method for making capital budgeting decisions?

A

Net Present value

54
Q

Assume the Ernest Corporation has a required hurdle rate of 14% for all new investments. What does this hurdle rate mean?

A

If a potential investment has an IRR of 14% or higher, it will be analyzed futher.

55
Q

Independent vs Mutually exclusive

A

looking at opportunity costs, consider the analysis of Projects A and B. Assume that Project A has a potential return of $100,000, while Project B will only return $80,000. Since A and B are mutually exclusive, the opportunity cost of choosing B is equal to the profit of the most lucrative option (in this case, A) minus the profits generated by the selected option (B); that is, $100,000 - $80,000 = $20,000. Because option A is the most lucrative option, the opportunity cost of going for option A is $0.

56
Q

Mutually exclusive vs Independent

A

If available Projects A and B each cost $40,000 and Project C costs only $10,000, then Projects A and B are mutually exclusive. If the company pursues A, it cannot also afford to pursue B and vice versa. Project C may be considered independent. Regardless of which other project is pursued, the company can still afford to pursue C as well. The acceptance of either A or B does not impact the viability of C, and the acceptance of C does not impact the viability of either of the other projects.

57
Q

On March 31, the purchasing manager at Reynold Plastics purchased a greater quantity of raw materials than budgeted and paid the standard price for the raw materials. Which variance is directly impacted by the March 31 purchase?

A

Neither of the variances will be directly impacted.

58
Q

Andrew Taylor, a production line worker at Yani Yogurt, spilled an entire vat of milk. The milk must be discarded rather than used in yogurt. Which variance is directly impacted?

A

Direct materials quantity variance

59
Q

Mitchell Bakery uses butter in producing its pies. If the price of butter doubles, which variance is directly impacted?

A

Direct materials price variance

60
Q

A company receives an unusually high number of orders. To complete all the orders on time, the company pays employees an extra $10 per hour for every hour of overtime the employees work. Which of the following variances will be directly impacted?

A

Direct labor rate variance

61
Q

What two variances make up the direct labor variance?

A

Rate variance and efficiency variance

62
Q

The unemployment rate has increased over the past year. Allison Company finds that it is able to pay new employees a lower wage per hour than when the unemployment rate was lower a year ago. Which of the following variances will be directly impacted?

A

Direct labor rate variance

63
Q

At lean companies, employees tend to be multiskilled and cross-trained to perform a variety of tasks. These workers are valued by management and are considered to be part of the team rather than a labor force to be handled and controlled. Consequently, this

A

decreases the importance of direct labor standards

64
Q

The variable overhead rate variance may be caused by variances in the following production inputs except

A

direct materials

65
Q

What type of variance results when the budgeted fixed overhead costs incurred are greater than the actual fixed overhead costs?

A

Favorable fixed overhead budget variance

66
Q

The entry to allocate manufacturing overhead costs to production involves which of the following?

A

Debit to work in process inventory for the standard rate of overhead times the standard quantity of the allocation base allowed for actual output

67
Q

Budget committees would include all of the following people except a

A

Shareholder

68
Q

A company expects to receive which of the following benefits when it uses its budgeting process?

A
  • The planning required to develop the budget helps managers foresee and avoid potential problems before they occur
  • The budget helps to motivate employees to achieve the company’s sales growth and cost reduction goals
  • The budget provides the company’s managers with a benchmark against which to compare actual result for performance evaluation
  • All of the above
69
Q

Budgets are

A

Future oriented

70
Q

Which of the following is the starting point for the master budget?

A

The sales budget

71
Q

The income statement is part of which element of a company’s master budget?

A

The operating budgets

72
Q

The usual starting point for a direct labor budget for a manufacturer is the

A

production budget

73
Q

The following budgets are all financial budgets except for the

A

Budgeted income statement

74
Q

Which of the following expenses would not appear in a cash budget?

A

Depreciation expense

75
Q

A service company would have all of the following budgets except for:

A

A direct materials budget

76
Q

When making decisions, managers should consider

A

revenues that differ between alternatives

77
Q

In making short-term special decisions, the decision-maker should

A

Sperate variable cost from fixed costs

78
Q

Which if the following cost is irrelevant to business decisions?

A

Sunk costs

79
Q

When pricing a product, managers must consider which of the following costs?

A

All costs

80
Q

When deciding whether to sell banana powder as is or to process further to make banana bread mix, managers should ignore which of the following?

A

The costs of processing the banana powder thus far

81
Q

When making outsourcing decisions

A

The variable cost producing the product in-house is relevant

82
Q

When a company is operating at its breakeven point

A

its total revenues will be equal to its total expenses

83
Q

Total contribution margin less total fixed expenses equals

A

Operating income

84
Q

If a company sells one unit above its breakeven sales column, then its operating income would be equal to

A

The unit contribution margin

85
Q

The breakeven point on a CVP graph is

A

the intersection of the sales revenue line and the total expense line

86
Q

If the sales price of a product increases while everything else remains the same, what happens to the breakeven point?

A

The breakeven point will decrease

87
Q

What is the margin of safety?

A

the excess of expected sales over breakeven sales

88
Q

A shift in the sales mix from a product with a high contribution margin ratio towards a product with a low contribution margin ratio will cause the breakeven point to

A

increase

89
Q

Target profit analysis is used to calculate the sales volume that is needed to

A

earn a specific amount of net operating income

90
Q

Rachel runs her own hot dog stand on the U of A campus. The monthly cost of the cart rental and business permit is $300. Rachel’s contribution margin per unit is $1.50 and her contribution margin ratio is 75%. How many hot dogs does Rachel need to sell each month to break even? How much sales revenue does Rachel need to generate each month to break even?

A

(300+0)/1.50=200

(300+0)/.75= 400

91
Q

If the cost per unit remains constant over a wide range of activity levels, the cost is most likely a:

A

Variable Costs

92
Q

The cost per unit decreases as volume increases for which of the following cost behaviors?

A

Fixed and Mixed Costs

93
Q

In the cost equation y=vx+fy=vx+f, what term represents the total variable cost component?

A

vx

94
Q

Which of the following costs would most likely be a committed fixed cost for a retailer?

A

Lease payment of the store building

95
Q

Which method helps managers visualize the relationship between the cost and the total volume of the activity?

A

Scatterplot

96
Q

What method of cost behavior estimation are managers using when they use their judgment to classify costs as variable, fixed, or mixed?

A

Account analysis

97
Q

The only difference between variable costing and absorption costing is in the treatment of

A

fixed manufacturing overhead costs

98
Q

When inventories decline, operating income under variable costing will be

A

higher than operating income under absorption costing

99
Q

The Plastic Lumber Corporation wants to predict its manufacturing overhead costs by using machine hours in a simple linear regression. All of the following statements are true except:

A

manufacturing overhead costs could be referred to as the explanatory variable.

100
Q

Crane Manufacturing uses weighted-average process costing. All materials at Crane are added at the beginning of the production process. The equivalent units for materials at Crane would be

A

the units started plus the units in beginning work in process.

101
Q

An equivalent unit of conversion costs is equal to:

A

the amount of conversion costs needed to produce one unit.

102
Q

How is the cost per equivalent unit calculated?

A

Total costs to account for divided by total equivalent units

103
Q

Equivalent units are calculated for which of the following?

A

Both direct materials and conversion costs

104
Q

Insurance on a company’s buildings would most likely be classified as a ______ cost?

A

facility-level

105
Q

The legal costs associated with filing a patent for a new model of scooter at a toy manufacturer is an example of which type of activity?

A

Product-level

106
Q

Which of the following statements is false?

A

Activity-based costing can only be used by manufacturing firms.

107
Q

Which of the following is not a good reason for a paint manufacturer to use activity-based costing?

A

Most costs are direct; indirect costs are a small proportion of total costs.

108
Q

The cost of reworking defective products before shipping to customers would be classified as which type of quality costs?

A

Internal failure cost

109
Q

Which of the following companies would be most likely to use a job costing system rather than a process costing system?

A

Legal firm

110
Q

The two fundamental types of costing systems are

A

Process and job order costing

111
Q

In a job costing system, which of the following statements about materials is not correct?

A

Materials used during production are always classified as direct materials.

112
Q

What form is used to accumulate the costs of a job in a job costing system?

A

Job cost record

113
Q

The formula to calculate the amount of manufacturing overhead to allocate to jobs is

A

predetermined overhead rate times the estimated amount of the allocation base used by the specific job.

114
Q

Assigning manufacturing overhead costs and other indirect costs to jobs is called

A

cost allocation

115
Q

If the company underestimates the amount of allocation base when calculating its predetermined manufacturing overhead rate but estimates the amount of manufacturing overhead correctly, the amount of manufacturing overhead allocated for the year will be

A

overalloacated

116
Q

When a company uses direct labor, it traces the cost to the job by debiting

A

Work in Process Inventory

117
Q

Which of the following statements is true?

A

Sunk costs are irrelevant to decisions.

118
Q

Which of the following is true?

A

A marginal cost is the cost of making one more unit

ARMY ROTC (10 decks)

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