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Final Exam 1

1) Performance reports _____. A. provide feedback by comparing results with plans and by highlighting deviations from plans B. are quantitative expressions of action plans C. are deviations from a plan D. ignore areas that are presumed to be running smoothly

2) According to the Financial Executives Institute, one function of controllership is _____. A. short term financing B. investments C. provision of capital D. reporting and interpreting financial information

3) Budgets _____.


A. provide feedback by comparing results with plans and by highlighting deviations from plans B. are quantitative expressions of action plans C. are deviations from a plan D. ignore areas that are presumed to be running smoothly

4) Below is a statement from the Institute of Management Accountants’ Statement of Ethical Professional Practice. “Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.” It is an example of _____. A. confidentiality B. competence C. integrity D. objectivity

5) Ethical accountants are important to society because _____. A. the information produced is reliable B. they pay their taxes C. they will not go to prison and waste taxpayers’ money D. none of these answers is correct

6) Which of the following is not a major factor causing changes in management accounting today? A. Increased global competition is not a major factor. B. Declining work ethic is not a major factor. C. E-commerce is not a major factor. D. Increasing importance of the service sector of the economy is not a major factor.


7) Launching a new product line is an example of _____. A. planning B. decision making C. controlling D. organization

8) _____ is (are) the accounting system's effect on the decision of managers. A. Behavioral implications B. Simplicity C. The cost-benefit balance D. Computerization

9) The primary users of management accounting information are _____. A. governmental regulatory authorities B. suppliers C. internal decision makers D. bankers

10) The _____ is not one of the three major financial statements. A. income statement B. statement of equity position C. balance sheet D. statement of cash flows


11) The _____ is also called the statement of financial position. A. balance sheet B. statement of cash flows C. statement of retained earnings D. income statement

12) Etiwanda Company’s accountant recorded a debit to Accounts Payable and a credit to Cash. This transaction will_____. A. decrease Cash and increase Accounts Payable B. decrease Cash and decrease Accounts Payable C. increase Cash and increase Accounts Payable D. increase Cash and decrease Accounts Payable

13) Mr. Bryant invested $50,000 cash in a new corporation. The new corporation will record this transaction with a debit to_____. A. Cash and a credit to Retained Income for $50,000 B. Cash and a credit to Paid-in Capital for $50,000 C. Paid-in Capital and a credit to Retained Earnings for $50,000 D. Retained Earnings and a credit to Cash for $50,000

14) The accounting convention of _____ permits a company to immediately expense assets (such as a garbage can) with small values and long useful lives. A. continuity B. conservatism C. materiality D. objectivity


15) The use of acquisition cost less depreciation in valuing an asset on the balance sheet is the logical result of the _____ accounting convention. A. conservatism B. materiality C. cost-benefit D. continuity

16) Nonoperating items on the income statement_____. A. reflect the effects of financial management decisions B. appear on the income statement immediately after gross profit C. appear only on corporate income statements D. are revenues and expenses arising from adjusting entries

17) Limited liability means that_____. A. the creditors of a corporation can receive only up to, and no more than, the amount due to them B. corporations can have liabilities up to only a certain amount due to limits on the company's borrowing capability C. the company is required to pay only current liabilities in the current year and has no obligation to pay long term liabilities in the current year D. the creditors of the corporation have claims on only the assets of the corporation and not the assets of the owners of the corporation

18) The difference between a single and multiple step income statement is that a single step income statement_____. A. calculates net income using one method, whereas a multiple step income statement calculates net income under two or more methods


B. calculates gross profit and operating income, whereas a multiple step income statement does not C. shows only one year's net income, whereas a multiple step income statement shows multiple years' net income D. groups all revenues together and all expenses together, whereas a multiple step income statement separates certain revenues and expenses from each other and presents subtotals

19) Which value chain function would include the cost of computer-aided design equipment and cost to develop the prototype of a product? A. The design of product, services, and processes function would include these costs. B. The production function would include these costs. C. The marketing function would include these costs D. The distribution function would include these costs.

20) Number of engineering hours is a likely cost driver for which value chain function? A. The design function has number of engineering hours as a likely cost driver. B. The marketing function has number of engineering hours as a likely cost driver. C. The production function has number of engineering hours as a likely cost driver D. The research and development function has number of engineering hours as a likely cost driver.

21) Which of the following is not a cost driver of customer services costs? A. Travel costs are not a cost driver of customer services costs. B. Number of service calls is not a cost driver of customer services costs. C. All of these answers are correct D. Hours spent servicing products are not a cost driver of customer services costs.


22) If the sales price per unit is $100, the total fixed costs are $75,000, and the break even volume in dollar sales is $250,000, then the variable cost per unit is _____. A. $100 B. $75,000 C. $30 D. $70

23) If the sales price per unit is $100, the unit variable cost is $75, and total fixed costs are $150,000, then the break even volume in dollar sales rounded to the nearest whole dollar is _____. A. $600,000 B. $150,000 C. $200,000 D. $1,500

24) Knothole Company sells desks at $480 per desk. The costs associated with each desk are as follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed costs for the period are $456,840. The break-even volume in dollars is _____. A. $1,573,560 B. $2,030,400 C. none of these answers is correct D. $456,840

25) _____ of approximating cost functions does not involve the analysis of past costs. A. Visual fit analysis B. Engineering analysis C. least-squares regression


D. High low analysis

26) In relation to a cost function, the term reliability means_____. A. whether the cost function conforms to a given mathematical model B. how well the cost function predicts future costs C. how well the cost function explains past cost behavior D. whether the costs and activities can be easily observed

27) _____ is a method of approximating cost functions. A. Transaction analysis B. Cost driver analysis C. Product analysis D. Account analysis

28) _____ is a name for a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity. A. Cost driver accounting B. Activity based costing C. Transaction based accounting D. Transaction costing

29) _____ need cost accounting systems. A. Service organizations and nonprofit organizations B. Manufacturing firms and service organizations


C. Manufacturing firms and nonprofit organizations D. Manufacturing firms, service organizations, and nonprofit organizations

30) The change from traditional costing to activity-based costing may reveal that _____. A. low volume products are overcosted B. high volume products are overcosted C. both high and low volume products are overcosted D. both high and low volume products are undercosted

31) _____ budgeting is when budgets are formulated with the active participation of all affected employees A. Team B. Financial C. Participative D. Shared

32) _____ models are mathematical models of the master budget that can react to any set of assumption about sales, costs, and product mix. A. Financial planning B. Budgeting analysis C. Accounting D. Futuring

33) A _____ gives the expected sales under a given set of conditions. A. sales budget


B. sales prediction C. budget forecast D. sales forecast

34) Unit sales of Product A are currently 10,000, while unit sales of Product B are double those of Product A. The comÂŹpany's sales forecast will be _____, assuming sales of Product A increase by 10% and those of Product B increase by 4,000 units. A. 11,000 and 22,000 units, respectively B. 10,000 and 20,000 units, respectively C. 11,000 and 24,000 units, respectively D. none of these answers is correct

35) A _____ gives the expected sales under a given set of conditions. A. sales budget B. sales prediction C. budget forecast D. sales forecast

36) The master budget includes forecasts for all of the following except _____. A. number of employees B. sales C. balance sheets D. cash disbursements

37) The master budget quantifies targets for all of the following except _____.


A. production B. sales C. markets D. cost driver activity

38) Which of the following statements is false? A. Flexible budgets are not based on the same revenue and cost behavior assumptions as the static budget. B. Flexible budgets help provide a basis for management by exception. C. Flexible budgets are prepared for a range of activity. D. Flexible budgets are automatically matched to changes in activity levels

39) Differences between the static budget and the flexible budget are due to _____. A. poor usage of material and labor B. problems of cost control C. a combination of price and material variances D. actual activity differing from expected activity levels

40) The preferred guidelines for allocating service department costs include _____. A. evaluating performance using allocated costs for each service department B. identifying the direct and indirect costs C. establishing part or all of the details regarding cost allocation in advance of rendering the service D. allocating variable- and fixed-cost pools simultaneously

41) Costs are allocated for all the following purposes except to _____.


A. obtain reimbursement B. predict the economic effects of planning and control decisions C. determine inventory levels D. compute income and asset valuation

42) Cost allocation base refers to the _____. A. total costs to be allocated B. cost driver C. total allocated costs D. cost objectives

43) Kevin Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Finishing is _____. A. $72,000 B. $42,000 C. $31,500 D. $105,000

44) Murphy Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Mixing is _____.


A. $58,500 B. $31,500 C. $63,000 D. $78,000

45) Gomez Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year _____. Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Mixing is: A. $36,000 B. $42,750 C. $42,000 D. $63,000

46) When the variable costing method is used, fixed factory overhead appears on the income statement as a_____. A. component of cost of goods sold and as a production-volume variance B. component of cost of goods sold C. production-volume variance D. fixed expense

47) Absorption costing assigns _____ to the product. A. all fixed and variable costs B. variable manufacturing costs


C. variable and fixed manufacturing costs D. all variable costs

48) In absorption costing, costs are separated into the major categories of_____. A. manufacturing and nonmanufacturing B. manufacturing and fixed C. variable and nonmanufacturing D. fixed and variable

49) _____ is (are) the most basic component of a management control system. A. The organization’s goals B. Top management’s preferences C. The stockholder’s preferences D. The organization’s long-range budget

50) _____ is the first step in designing a management control system. A. Establishing organizational goals B. Distinguishing between profit centers and cost centers C. Preparing financial statements D. Evaluating management's performance

51) Identify which of the following is not a characteristic of a management control system. A. A management control system encourages short term profitability. B. A management control system coordinates forecasting sales and cost driver activities, budgeting, and measuring and evaluating performance.


C. A management control system motivates individuals throughout the organization to act in concert. D. A management control system aids and coordinates the process of making decisions.

52) _____ is a measure of income or profit divided by the investment required to obtain that income or profit. A. Capital turnover B. Residual income C. Return on investment D. Return on sales

53) Speedo Company’s revenues are $300 on invested capital of $240. Expenses are currently 70% of sales. If Angelo Company can reduce its invested capital by 20%, return on investment will be _____. A. 93.75% B. 46.88% C. 18.75% D. 75%

54) The following information is available for the Peter Company: Sales $500,000 Invested Capital 312,500 ROI 10% The return on sales is _____. A. 6.250% B. 1.000% C. none of these answers is correct


D. 10.000% Final Exam 2 1) Budgets _____. A. provide feedback by comparing results with plans and by highlighting deviations from plans B. are quantitative expressions of action plans C. ignore areas that are presumed to be running smoothly D. are deviations from a plan 2) Management by exception _____. A. provides feedback by comparing results with plans and by highlighting deviations from plans B. is the quantitative expression of action plans C. focuses on areas that are presumed to be running smoothly D. is a summary report of plan results 3) Department performance reports can be used to help department heads determine _____. A. who is primarily responsible for any deviations from plans B. how effectively and efficiently the department is operating C. how efficiently the department is operating D. how effectively the department is operating 4) Below is a statement from the Institute of Management Accountants' Statement of Ethical Professional Practice. “Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.� It is an example of _____. A. objectivity B. integrity C. confidentiality D. competence 5) According to the Institute of Management Accountants' Statement of Ethical Professional Practice, the standard of competence includes: A. All of these answers are correct B. disclosing all relevant information C. avoiding actual or apparent conflicts of interest D. the ongoing development of the accountant's knowledge and skills 6) Which of the following is not a major factor causing changes in management accounting today? A. Increasing importance of the service sector of the economy is not a major factor. B. E-commerce is not a major factor. C. Increased global competition is not a major factor. D. Declining work ethic is not a major factor. 7) The primary users of management accounting information are _____. A. suppliers


B. internal decision makers C. governmental regulatory authorities D. bankers 8) Which scorecard function is associated with making non-routine decisions? A. None of these answers is correct B. Problem solving is associated with making non-routine decisions. C. Attention directing is associated with making non-routine decisions. D. Scorekeeping is associated with making non-routine decisions. 9) _____ is (are) the accounting system's effect on the decision of managers. A. Computerization B. The cost-benefit balance C. Behavioral implications D. Simplicity 10) Etiwanda Company's accountant recorded a debit to Accounts Payable and a credit to Cash. This transaction will_____. A. decrease Cash and increase Accounts Payable B. increase Cash and decrease Accounts Payable C. decrease Cash and decrease Accounts Payable D. increase Cash and increase Accounts Payable 11) The _____ is also called the statement of financial position. A. balance sheet B. income statement C. statement of cash flows D. statement of retained earnings 12) The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when _____. A. cash is received or disbursed B. revenues are earned and expenses are incurred C. the accounting equation is decreased D. the transaction occurs 13) Mr. Bryant invested $50,000 cash in a new corporation. The new corporation will record this transaction with a debit to_____. A. Cash and a credit to Retained Income for $50,000 B. Retained Earnings and a credit to Cash for $50,000 C. Cash and a credit to Paid-in Capital for $50,000 D. Paid-in Capital and a credit to Retained Earnings for $50,000 14) The accounting convention of _____ guides the relative sophistication of the accounting system. A. cost benefit B. objectivity C. materiality D. conservatism


15) The accounting convention of _____ means selecting the method of measurement that yields the gloomiest immediate results. A. objectivity B. cost benefit C. conservatism D. materiality 16) The difference between a single and multiple step income statement is that a single step income statement_____. A. calculates net income using one method, whereas a multiple step income statement calculates net income under two or more methods B. groups all revenues together and all expenses together, whereas a multiple step income statement separates certain revenues and expenses from each other and presents subtotals C. shows only one year's net income, whereas a multiple step income statement shows multiple years' net income D. calculates gross profit and operating income, whereas a multiple step income statement does not 17) Limited liability means that_____. A. the creditors of a corporation can receive only up to, and no more than, the amount due to them B. the creditors of the corporation have claims on only the assets of the corporation and not the assets of the owners of the corporation C. corporations can have liabilities up to only a certain amount due to limits on the company's borrowing capability D. the company is required to pay only current liabilities in the current year and has no obligation to pay long term liabilities in the current year 18) Nonoperating items on the income statement_____. A. appear on the income statement immediately after gross profit B. appear only on corporate income statements C. reflect the effects of financial management decisions D. are revenues and expenses arising from adjusting entries 19) Number of engineering hours is a likely cost driver for which value chain function? A. The production function has number of engineering hours as a likely cost driver B. The marketing function has number of engineering hours as a likely cost driver. C. The design function has number of engineering hours as a likely cost driver. D. The research and development function has number of engineering hours as a likely cost driver. 20) Which value chain function would include advertising costs? A. The marketing function would include advertising costs. B. The production function would include advertising costs. C. The customer service function would include advertising costs. D. The distribution function would include advertising costs. 21) Which value chain function would include the cost of computer-aided design equipment and cost to develop the prototype of a product? A. The marketing function would include these costs


B. The production function would include these costs. C. The design of product, services, and processes function would include these costs. D. The distribution function would include these costs. 22) Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed costs for the period are $456,840. The contribution margin per desk is _____. A. $126 B. $51 C. $108 D. $195 23) Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs per unit total $14.00, of which $6.25 is for direct materials and $5.25 is for direct labor. If total fixed costs are $435,000, then the break even volume in dollars is _____. A. $435,000 B. $621,429 C. $1,023,529 D. $1,450,000 24) Knothole Company sells desks at $480 per desk. The costs associated with each desk are as follows: Direct materials $195 Direct labor 126 Variable factory overhead 51 Total fixed costs for the period are $456,840. The break-even volume in dollars is _____. A. $1,573,560 B. $2,030,400 C. none of these answers is correct D. $456,840 25) The _____ method of measuring cost functions is the least reliable. A. visual fit B. simple least squares regression C. multiple least squares regression D. high low 26) In relation to a cost function, the term reliability means_____. A. whether the cost function conforms to a given mathematical model B. how well the cost function predicts future costs C. how well the cost function explains past cost behavior D. whether the costs and activities can be easily observed 27) _____ is a method of approximating cost functions. A. Transaction analysis B. Product analysis C. Account analysis D. Cost driver analysis


28) _____ is a name for a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity. A. Cost driver accounting B. Transaction based accounting C. Transaction costing D. Activity based costing 29) _____ is an example of the external financial reporting purpose of the cost management systems. A. Budget reporting B. The amount of inventory that should appear on the balance sheet C. The product mix to optimize profitability D. The cost of a manufacturing process 30) The change from traditional costing to activity-based costing may reveal that _____. A. both high and low volume products are undercosted B. both high and low volume products are overcosted C. low volume products are overcosted D. high volume products are overcosted 31) A sales forecast is _____. A. all of these answers are correct B. the same as a sales budget that will generate a desired level of sales C. the result of decisions to create conditions D. a prediction of sales under a given set of conditions 32) A _____ gives the expected sales under a given set of conditions. A. sales forecast B. budget forecast C. sales budget D. sales prediction 33) _____ models are mathematical models of the master budget that can react to any set of assumption about sales, costs, and product mix. A. Futuring B. Accounting C. Financial planning D. Budgeting analysis 34) Important factors considered by sales forecasters include all of the following except _____. A. marketing research studies B. competitors' activities C. the desired level of sales D. past patterns of sales 35) A _____ gives the expected sales under a given set of conditions. A. sales budget B. budget forecast


C. sales forecast D. sales prediction 36) Unit sales of Product A are currently 10,000, while unit sales of Product B are double those of Product A. The comÂŹpany's sales forecast will be _____, assuming sales of Product A increase by 10% and those of Product B increase by 4,000 units. A. 11,000 and 22,000 units, respectively B. 11,000 and 24,000 units, respectively C. none of these answers is correct D. 10,000 and 20,000 units, respectively 37) _____ probably would not be used as a measure of activity in a flexible budget. A. Number of direct labor hours worked B. Number of machine hours used C. Number of hours worked by salespeople D. Sales volume 38) Differences between the static budget and the flexible budget are due to _____. A. poor usage of material and labor B. a combination of price and material variances C. actual activity differing from expected activity levels D. problems of cost control 39) _____ are components of a master budget. A. An operating budget and a financial budget B. A continuous budget and a static budget C. A cash budget and an activity budget D. A strategic plan and an operating budget 40) _____ is not a type of cost allocation. A. Reallocation of costs from service departments to production departments B. Allocation of costs of a particular organizational unit to products or services C. Reallocation of costs from production departments to service departments D. Allocation of costs to the appropriate organizational unit 41) Cost allocation base refers to the _____. A. cost objectives B. cost driver C. total allocated costs D. total costs to be allocated 42) The use of budgeted service department cost rates protects using departments from _____. A. all of these answers are correct B. service department efficiencies C. service outages D. price fluctuations


43) Gomez Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year _____. Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method is used to allocate costs and the Maintenance Department is allocated first, the amount of overhead that would be allocated from Maintenance to Mixing is: A. $36,000 B. $42,750 C. $42,000 D. $63,000 44) Kevin Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Finishing is _____. A. $105,000 B. $42,000 C. $31,500 D. $72,000 45) Murphy Company has two service departments, Maintenance and Personnel, as well as two production departments, Mixing and Finishing. Maintenance costs are allocated based on square footage while personnel costs are allocated based on number of employees. The following information has been gathered for the current year: Maintenance Personnel Mixing Finishing Direct dept. costs $126,000 $84,000 $105,000 $175,000 Square footage 800 400 1,600 1,200 Number of employees 8 12 24 32 If the step-down method of allocating costs is used and the Personnel Department is allocated first, then the amount of overhead that would be allocated from Personnel to Mixing is _____. A. $78,000 B. $31,500 C. $63,000 D. $58,500 46) Absorption costing assigns _____ to the product. A. all fixed and variable costs B. variable manufacturing costs C. variable and fixed manufacturing costs D. all variable costs 47) _____ is another term for variable costing. A. Absorption costing B. Full costing C. Traditional costing D. Direct costing


48) _____ is (are) used for external reporting. A. Absorption costing and variable costing B. Absorption costing C. Direct costing D. Variable costing 49) _____ is the logical integration of management accounting tools to gather and report data and to evaluate performance. A. A management control system B. An internal control system C. A financial reporting system D. A quality control system 50) _____ is the first step in designing a management control system. A. Preparing financial statements B. Establishing organizational goals C. Distinguishing between profit centers and cost centers D. Evaluating management's performance 51) _____ is (are) the most basic component of a management control system. A. The stockholder's preferences B. The organization's goals C. Top management's preferences D. The organization's long-range budget 52) _____ is a measure of income or profit divided by the investment required to obtain that income or profit. A. Return on investment B. Capital turnover C. Residual income D. Return on sales 53) The following information is available for the Peter Company: Sales $150,000 Invested Capital 156,250 ROI 10% The return on sales is _____. A. 62.50% B. 10.42% C. none of these answers is correct D. 10.00% 54) The following information is available for the Peter Company: Sales $500,000 Invested Capital 312,500 ROI 10% The return on sales is _____. A. 1.000%


B. 6.250% C. none of these answers is correct D. 10.000% Final Exam 3

1) Department performance reports can be used to help department heads determine _____. A. who is primarily responsible for any deviations from plans B. how effectively and efficiently the department is operating C. how effectively the department is operating D. how efficiently the department is operating 2) According to the Financial Executives Institute, one function of the treasurer is _____. A. government reporting B. Short term f


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