PTC2 Flashcards
Question 12
COST-0032B
Hoger Corporation accumulated the following cost information for its two products, A and B:
A B Total
Production volume 2,000 1,000
Total direct man. labor hrs. 5,000 20,000 25,000
Setup cost per batch $ 1,000 $ 2,000
Batch size 100 50
Total setup costs incurred $20,000 $40,000 $60,000
DMLH per unit 2 1
A traditional costing system would allocate setup costs on the basis of DMLH. An ABC system would trace costs by spreading the costs per batch over the units in a batch. What is the setup cost per unit of product A under each costing system?
Traditional
ABC
$ 4.80
$ 10.00
$ 2.40
$ 10.00
$40.00
$200.00
$ 4.80
$ 20.00
4.80 AND 10.00
Under a traditional costing system, setup costs are allocated using a cost driver, in this case, direct manufacturing labor hours. The first step is to calculate the setup costs per direct manufacturing labor hour ($60,000 incurred ÷ 25,000 total DMLH) of $2.40. Since two DMLH are needed to produce one unit of product A, the total setup cost per unit of A is ($2.40 × 2 DMLH) $4.80. Under ABC, one batch of product A creates the demand for setup activities that produce value. The setup cost per unit of A under ABC is calculated as the setup cost per batch of A ($1,000) divided by the number of units per batch (100), or, $10.00.
Which of the following statements is correct regarding the requirements of the Sarbanes-Oxley Act of 2002 for an issuer’s board of directors?
Each member of the board of directors must be independent from management influence, based on the member’s prior and current activities, economic and family relationships, and other factors.
The board of directors must have an audit committee entirely composed of members who are independent from management influence.
The majority of members of the board of directors must be independent from management influence.
The board of directors must have a compensation committee, a nominating committee, and an audit committee, each of which is composed entirely of independent members.
The board of directors must have an audit committee entirely composed of members who are independent from management influence.
Correct! SOX requires that a public company’s entire audit committee be independent.
ISP is a \_\_\_\_\_\_\_\_, SMTP is a \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ and XML is a \_\_\_\_\_\_\_\_\_\_\_\_\_\_. Protocol; company; language Company; language; protocol. Language; protocol; company Company; protocol; language
Company; protocol; language
The fixed portion of the semivariable cost of electricity for a manufacturing plant is a Period cost Product cost Yes No Yes Yes No Yes No No
No
Yes
This Answer is Correct
The cost of electricity for a manufacturing plant, whether fixed or variable, is included in factory overhead and, therefore, is a product cost.
Question 21
RMCB-0014
Use the following information to answer this question.
Invest project Cash outlay Present value of cash inflows A $1,100,000 $980,000 B 250,000 600,000 C 1,400,000 1,830,000 D 650,000 790,000
The company has $2,000,000 of financing available for new investment projects. The investment project with the highest excess profitability index is Project A. Project B. Project C. Project D.
This Answer is Correct
This answer is correct. Project B has the highest profitability index, equal to 240%. The profitability index is the present value of the cash inflows divided by the investment outlay. The calculations for all four projects are as follows:
Project Profitability index A 980,000/1,100,000 × 100 = 89.1% B 600,000/250,000 × 100 = 240% C 1,830,000/1,400,000 × 100 = 130.7% D 790,000/650,000 × 100 = 121.5%
Question 22 AICPA.101142BEC-SIM The currency or currencies of the Eurodollar market (Euromarket) include(s): U.S. Dollar EEU Euro Yes Yes Yes No No Yes No No
US DOLLAR ONLY
The currency of the Eurodollar market (also Euromarket) is the U.S. dollar; Euromarket does not use the EEU euro as its currency.
Question 23 AICPA.061245BEC-SIM The Board of Directors of Martin Manufacturing Enterprises, Inc. is meeting to consider whether they should expand their manufacturing facilities to include a product line. Although the company's current financial position and sales potential for existing products are part of the information the Board must consider, of even greater importance is external information concerning economic conditions, market projects for the new product, the cost of long-term financing alternatives, and information about potential competitors. The Board of Directors' decision process would be best supported by a Management information system (MIS). Knowledge management system (KMS). Decision support system (DSS). Executive support system (ESS).
Executive support systems (ESSs) are a subset of DSS that are especially designed for forecasting and making long-range, strategic decisions, and they place greater emphasis on external data. The need to consider a large proportion of external information in the decision process makes an executive support system (ESS) the best choice listed.
Which of the following statements concerning the sale of equity securities through crowdfunding are correct?
Crowdfunding must take place through a SEC-registered broker-dealer or funding portal.
Any company registered with the SEC may use crowdfunding.
An investor is limited in the amount that can be invested through crowdfunding during a 12-month period.
I only.
I and II only.
I and III only.
I, II, and III.
1 AND 3 ONLY
Crowdfunding must take place through a SEC-registered broker-dealer or funding portal (Statement I) and an investor is limited in the amount that can be invested through crowdfunding during a 12-month period to $100,000 (Statement III
The regression analysis results for ABC Co. are shown as y = 90x + 45. The standard error (Sb) is 30 and the coefficient of determination (r2 ) is 0.81. The budget calls for the production of 100 units. What is ABC's estimate of total costs? $3,090. $4,590. $9,030. $9,045.
$9,045.
This Answer is Correct
Total cost (y) is expressed as $90 of variable cost per unit + $45 of fixed cost. Given that x represents units, we solve for y = $90(100) + $45 = $9,045.
Related to the CFROI metric, "the required annual cash investment needed to replace fixed assets" is the definition of what? Free cash flow. Economic depreciation. Economic value added (EVA). Cash flow return on investment (CFROI).
Economic depreciation.
Lynn Manufacturing Co. prepares income statements using both standard absorption and standard variable costing methods. For Year 2, unit standard costs were unchanged from Year 1. In Year 2, the only beginning and ending inventories were finished goods of 5,000 units.
How would Lynn’s ratios using absorption costing compare with those using variable costing?
Current ratio Return on stockholders' equity Same Same Same Smaller Greater Same Greater Smaller
Greater
Smaller
This Answer is Correct
Current ratio = current assets/current liabilities. Return on stockholders’ equity = net income/average owners’ equity. Absorption costing allocates both variable and fixed manufacturing costs to inventory. Variable costing assigns only variable manufacturing cost to inventory and expenses fixed manufacturing overhead as a period cost. Therefore, ending inventory, and thus, current assets, are higher under absorption costing by the amount of fixed overhead allocated to ending inventory. The current ratio under absorption costing is, therefore, higher than under variable costing. Income in the current period is the same under both absorption costing and variable costings because the fixed overhead allocation rate has not changed, and ending inventory quantities have not changed. Therefore, total expenses recognized for the life of the firm for absorption costing are less than for variable costing by the amount of fixed overhead remaining in those 5,000 units at the end of Year 2. Thus, retained earnings are higher for absorption costing, causing the denominator of return on stockholders’ equity to be greater, and finally causing the ratio to be smaller for absorption costing.
Which of the following actions is the acknowledged preventive measure for a period of deflation? Increasing interest rates. Increasing the money supply. Decreasing interest rates. Decreasing the money supply.
Increasing the money supply.
This answer is correct because in a period of deflation the government wants to encourage borrowing and investment to promote economic growth.
