ACCOUNTING QUESTIONS

ACCOUNTING QUESTIONS

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QUESTION 1 Net sales volume variance will not be favorable:  When actual units sold is greater than budgeted sales volume  When actual units sold are less than budgeted sales volume  When the sales volume variance is favorable  Under any of the above conditions 2.5 points   QUESTION 2 Which of the following is a suggested technique for managing the budgeting process in a manner that increases employee motivation?  Measure the budget against performance only when assessing poor performers  Never alter the budget  Top management should disassociate itself from the budget  Emphasize the budget as a planning device 2.5 points   QUESTION 3 In a manufacturing setting, the purchase budget is based on:  The sales budget  The production budget  The manufacturing labor budget  The cash disbursements 2.5 points   QUESTION 4 Which of the following is not used in the formulation of economic value added (EVA)?  A minimum rate of return set by top management  After tax income  The weighted average cost of capital  Total net assets 2.5 points   QUESTION 5 ______________ is the time a product exists–from conception to abandonment.  Product life cycle  Revenue producing life  Consumable life  Introduction stage 2.5 points   QUESTION 6 Brown Division operates as a revenue center. Data for this year are as follows:  ActualBudgetSales in Units44,00040,000Selling price per unit$190$200Variable expenses per unit $140  What is the total revenue variance? $220,000 (U)  $360,000 (F)  $180,000 (F)  $220,000 (F) 2.5 points   QUESTION 7 Which of the following situations gives rise to the need for a transfer price?  Two divisions of the same company sell to the same wholesaler  Two divisions of the same company sell competing products to the same customer  Two divisions of the same company sell to one another  Both B and C 2.5 points   QUESTION 8 When determining net present value, this is commonly done to consider higher than normal risk associated with a proposed investment:  Decrease the discount rate used in the analysis  Decrease the expected cash flows  Increase the discount rate used in the analysis  Increase the required payback period 2.5 points   QUESTION 9 Which of the following capital budgeting techniques provides the decision maker with answers expressed in dollars?  Payback method  Internal rate of return  Net present value  None of the above 2.5 points   QUESTION 10 A flexible budget variance for a manufacturing cost is computed as the difference between:  Flexible budget costs and static budget costs  Actual costs and flexible budget costs  Departmental costs and cost center costs  Flexible budget costs and original budget costs 2.5 points   QUESTION 11 A precondition for effective capital budgeting requires having:  A clearly defined mission  A well-defined business strategy  Long-range goals  All of the above 2.5 points   QUESTION 12 Structuring performance reports and addressing them to individuals as group members of an organization in a manner that emphasizes factors that can be controlled by them is accomplished by using which of the following?  Absorption costing  Value chain analysis  Responsibility accounting  Relational concepts 2.5 points   QUESTION 13 Assume that the standard cost to make one unit of product includes 15 units of raw materials at a price of $3 per unit. In July, 34,000 units of raw materials were purchased for $100,800, and 30,600 units of raw materials were used to produce 2,000 units of finished product. What is the materials quantity variance?  $2,400 (U)  $1,800 (U)  $1,200 (F)  $1,200 (U) 2.5 points   QUESTION 14 Budgetary slack refers to:  Intentionally requesting more funds in the budget than needed  The time lag between budget preparation and actual operations.  Overspending the budget allowance  The time lag between budget discussions and actual preparation of budgets 2.5 points   QUESTION 15 A balanced scorecard typically includes:  Financial measures  Customer satisfaction measures  Internal processes measures  All of the above 2.5 points   QUESTION 16 The objective of standard cost variance analysis is:  To identify standard cost variances and to explain the reasons for their occurrences  To explore the reason or reasons for variation in sales prices of products offered in the company’s main line of business  To identify the standard deviation in budgeted numbers over a period of time  To purge cost data of the effects of inflation 2.5 points   QUESTION 17 Which of the following aspects related to budgeting and human behavior is not correct?  Budgets often produce strong reactions in people.  The preparation period for a participative budget is generally longer than that for an imposed budget.  A disadvantage of the use of budgets is that they always decrease employee motivation.  Personnel who do not participate in budget preparation are likely to lack a commitment in achieving their part of the budget. 2.5 points   QUESTION 18 Information for Tube division is as follows: – Net earnings for division $40,000 – Asset base for division$100,000 – Target rate of return 16% – Operating income margin 12% – Weighted average cost of capital 8%. What is Tube’s residual income?  $26,000  $24,000  $32,000  $95,200 2.5 points   QUESTION 19 Which of the following is not an advantage of ROI?  It encourages managers of departments with high ROIs to invest in average ROI projects.  It encourages managers to pay careful attention to the relationships among sales, expenses, and investment.  It encourages cost efficiency.  It discourages excessive investment in operating assets. 2.5 points   QUESTION 20 Bosworth Boots, Inc. is considering the production of a new line of boots. Based on preliminary market research, management has decided that each pair of boots should be priced at $225. Furthermore, management believes that the profit margin should be 30 percent of sales revenue. What is the target cost?  $150.75  $225.50  $260.00  $157.50 2.5 points   QUESTION 21 Birchtown Company’s budgeted sales were 5,000 units at $400 per unit. Actual sales were 4,500 units at $420 per unit. Birchtown’s sales price variance was:  $ 34,000 (U)  $100,000 (U)  $ 90,000 (F)  $ 45,000 (F) 2.5 points   QUESTION 22 The Rob Wallace Corporation has a sales budget for next month of $400,000. Cost of goods sold (all of which is merchandise) is expected to be $250,000. All goods are paid for in the month following their purchase. The beginning inventory of merchandise is $16,000, and an ending inventory of $12,000 is desired. Beginning accounts payable is $52,000. How much merchandise inventory will The Rob Wallace Corporation need to purchase next month?  $2,50,000  $1,90,000  $2,46,000  $4,00,000 2.5 points   QUESTION 23 The return on investment is computed as:  Operating income divided by sales  Operating income divided by average operating assets  Sales divided by average operating assets  Operating asset turnover divided by the operating income margin 2.5 points   QUESTION 24 Clarinet Publishing is considering the purchase of a used printing press costing $38,400. The printing press would generate a net cash inflow of $20,000 a year for 5 years. At the end of 5 years, the press would have no salvage value. The company’s cost of capital is 10 percent. The investment’s payback period in years (rounded to two decimal points) is:  2.56  2.13  1.92  3 2.5 points   QUESTION 25 Generally, the first of the following budgets to be prepared is the:  Cash budget  Operations budget  Sales budget  Purchases budget 2.5 points   QUESTION 26 In a segment report for territories, the contribution margin less direct segment fixed costs is typically called the:  Segment sales  Product sales  Territory margin  Fixed costs 2.5 points   QUESTION 27 The internal rate of return:  Does not require a predetermined discount rate  Is often used to rank investment proposals  May be compared to the cost of capital in project evaluation  All of the above 2.5 points   QUESTION 28 Assume that the standard cost to make one finished unit includes 2 hour of direct labor at $8 per hour. During April, 22,000 direct labor-hours were worked, 10,500 units of product were manufactured, and total direct labor cost was $160,000. What is the labor rate variance for April?  $ 2,000 (U)  $ 2,000 (F)  $16,000 (U)  $16,000 (F) 2.5 points   QUESTION 29 Budgets based on the actual level of output, rather than the output originally budgeted, are called:  Activity budgets  Flexible budgets  Operating budgets  Static budgets 2.5 points   QUESTION 30 Cameo Company manufactures boxes. To manufacture a box, it takes 44 units of wood and 2 units of plastic. Scheduled production of boxes for the next two months is 2,100 and 2,500 boxes, respectively. Beginning inventory is 16,000 units of wood and 120 units of plastic. The ending inventory of wood is planned to decrease 4,000 units each of the next two months, and the plastic inventory is expected to increase 20 units each of the next two months. Based on this information, the number of units of wood that Cameo needs to purchase during the first month is:  84,000 units  82,000 units  8,000 units  88,400 units 2.5 points   QUESTION 31 When an outside market exists for an intermediate product that is perfectly competitive, the ideal method of transfer pricing is generally:  The one that creates the highest margin to the selling unit  The price at which the product sells in the external market  One that is higher than what the outside market is quoting  Based on management accounting numbers 2.5 points   QUESTION 32 What is residual income?  Excess income earned after budgeted income has been achieved  The excess of investment center income over the minimum return set by management  A percentage of income received by an organization for its participation in a joint venture  Income beyond the breakeven point determined by the product’s lifecycle 2.5 points   QUESTION 33 Read Publishing is considering the purchase of a used printing press costing $84,200. The printing press would generate a net cash inflow of $37,422 a year for 3 years. At the end of 3 years, the press would have no salvage value. The company’s cost of capital is 10 percent. YearPresent Value of $1.00 @ 10% per year10.90920.82630.75140.683Determine the net present value for the investment. The investment’s net present value is: $5,480  $19,200  $76,800  $8,832 2.5 points   QUESTION 34 ______________ is (are) the difference between the sales price needed to capture a predetermined market share and the desired profit per unit.  Gross profit  Target cost  Target price  Contribution margin 2.5 points   QUESTION 35 A project under consideration has a net present value of $10,000 for a required investment of $60,000. There are no other investment options at this time. However, the assumed discount rate used to calculate the net present value is 20%. On the basis of this information alone, this project should:  Definitely be rejected because $10,000 is only 17% of $60,000  Be rejected on the basis that the project loses $50,000  Probably be approved since the net present value is greater than zero  Be accepted if the cost of capital is greater than or equal to 20 percent 2.5 points   QUESTION 36 Which of the following amounts would be classified as part of the disinvestment phase for a project?  Depreciation  Collections of accounts receivable from sales  Expenditure to return plant site to its pre-project condition  Retiring bonds issues to finance the project 2.5 points   QUESTION 37 ________________ is a systematic approach to identifying the best practices to help an organization take action to improve performance.  Target costing  ISO 9000  Activity-based management  Benchmarking 2.5 points   QUESTION 38 Tom Gilgen is considering the production of a new line of jeans. Based on preliminary market research, management has decided that each pair of jeans should be priced at $170. Furthermore, management believes that the profit margin should be 25 percent of sales revenue. What is the target cost?  $62.00  $950.75  $112.00  $127.50 2.5 points   QUESTION 39 An awareness of the impact of today’s actions on tomorrow’s costs is a concept that underlies which of the following notions?  Marginal revenue  Target pricing  Kanban systems  Life-cycle costs 2.5 points   QUESTION 40 What is a transfer price?  The amount charged for a product or service that one division provides another  The amount charged for goods and services offered to the government  An amount charged to cover the costs associated with import/export taxes  The amount charged the final consumer to cover all costs incurred along the value chain 2.5 points   Click Save and Submit to save and submit. Click Save All Answers to save all answers.