Misc 2

Question 1

Income Statement - Absorption Costing

Answer 1

Sales
(Variable COGS)
(Fixed COGS)
= Gross Margin
(Variable SGA)
(Fixed SGA)
= Operating Income

Question 2

Income Statement - Variable Costing

Answer 2

Sales 
(Variable COGS)
(Variables SGA)
= Contribution Margin
(Fixed Manufacturing Costs)
(Fixed SGA)
=Operating Income

Question 3

Margin of Safety

Answer 3

Excess of actual or budgeted sales over breakeven point sales - amount by which sales could decrease before losses occur

Question 4

Calculating Equivalent Units Under FIFO

Answer 4

Units completed during the period
Plus equivalent units in process at end of period
Less equivalent unites in process at beginning of period
= Total equivalent units for LIFO

Question 5

Steps in Developing a Master Budget

Answer 5

(1) Develop a sales forecast
(2) Determine desired level of finished goods inventory
(3) Determine the amount of finished goods that must be produced or purchased
(4) Prepare a purchase or production budget
(5) Estimate selling, administrative, and other expenses
(6) Organize preceding information into income statement
(7) Prepare a cash forecast
(8) Organize preceding information into balance sheet and statement of cash flows

Question 6

Cash Conversion Cycle Calculation

Answer 6

Inventory conversion period + Accounts Receivable Period - Accounts Payable Deferral Period

Question 7

Company Risk

Answer 7

Risk that’s specifically associated with a particular firm

Question 8

How Can Company Risk be Elimated

Answer 8

Through diversification

Question 9

What is Required Under the Revised Model Business Corporation Act to Voluntarily Dissolve a Corporation

Answer 9

A recommendation from the board of directors and subsequent approval of a majority of voting shareholders

Question 10

Three Levels of Interdependence in Integrated Planning

Answer 10

(1) Pooled
(2) Sequential
(3) Reciprocal

Question 11

Interdependence

Answer 11

The level to which work groups are organized

Question 12

Pooled Interdependence

Answer 12

Common source of resource but no interrelationship between the work groups

Question 13

Sequential Interdependence

Answer 13

The work groups coordinate the flow of information, tasks, or resources from one group to another

Question 14

Reciprocal Interdepence

Answer 14

Information, tasks, and resources are passed back and forth between the groups

Question 15

Turnaround Form

Answer 15

An output form that is later used for input

Question 16

Business Judgement Rule

Answer 16

Protects officers and directors from shareholder lawsuits alleging a lack of due care in carrying out the business of the corporation

Question 17

Requirements to Invoke the Business Judgement Rule

Answer 17

(1) Make an informed decision
(2) Eliminate a conflict of interest
(3) Have a rational basis for the decision

Question 18

Risk of Overreliance

Answer 18

Risk that results will be accepted when it’s the output of an IT system despite lack of clear support

Question 19

Business Risk

Answer 19

Risk that profits may be lower than anticipated