The present value of a future amount may be smaller or larger than the future value.
Investing activities include purchases and sales of property and equipment, loans made
and collected, and purchases and sales of another company’s stock.
The first step in making any decision is to consider all available alternatives.
Dividing overhead among various jobs is called overhead manipulation.
Ideal standards represent a level of performance that can be attained with reasonable
effort.
Examining a company’s statement of cash flows helps in evaluating a company’s
liquidity, but does not predict future cash flows.
After the entry is made to record the overhead applied, if the balance in the overhead
account is a credit, more overhead was actually incurred than was recorded in the Work
in Process account during the period.
Unlike the contribution margin in dollars, the contribution margin ratio cannot be used
to determine the increase in profits from a given dollar increase in sales revenue.
Generally Accepted Accounting Principles require that companies present financial
statements that include the current year and two previous years.
In evaluating whether or not to accept a special order, decision makers need to consider
only quantitative factors.
Managerial accounting provides reports and information for a range of decision makers
outside an organization.
Mixed costs are divided into their direct and indirect components.
If an organization wants to make a profit, it must generate more sales revenue than the
total costs it incurs. Which of the following is not a correct expression of the profit
equation?
a.Operating income = Sales revenue – Total variable costs – Total fixed costs
b.Operating income = Sales revenue – Discretionary costs – Fixed costs
c.Operating income = [(Sales price per unit – Variable cost per unit) x # units sold] –
Fixed cost
d.Operating income = [Contribution margin per unit x # units sold] – Fixed costs
In calculating EVA, invested capital is determined by
a. Subtracting current liabilities from total assets.
b. Subtracting total liabilities from total assets.
c. Subtracting total liabilities from long-term assets.
d. None of these answer choices are correct.
To determine the cash payments for direct materials during a period, companies prepare
a
a. Cash payment for materials budget.
b. Cash flow from operating activities.
c. Cash disbursements schedule.
d. None of these answer choices are correct.
Benchmarking is not about trying to achieve another company’s metrics, but about
a. Maintaining internal processes and customer relations to stay competitive with other
companies in the industry.
b. Replicating the successful practices that lead to their outstanding metrics.
c. Trying to outperform the other company in its best practices areas.
d. Outdoing the other company in profit and reputation.
Barr Manufacturing produces protective covers for eBookReaders. Since the covers
must be customized to each eBookReaders model, Barr uses a job order costing system.
On October 1, the company reported the following inventory balances:
During October, the following events occurred:
1> Barr purchased direct materials costing $410,000 on account.
2> Barr used $425,000 in direct materials in production.
3> Barr’s employees clocked 17,000 direct labor hours at an average wage rate of
$10.00 per direct labor hour.
4> The company incurred $169,000 in manufacturing overhead, including $20,000 in
indirect labor costs.
5> Using direct labor hours as the application base, the company applied $162,000 of
manufacturing overhead to jobs worked on in October.
6> The company completed production on jobs costing $860,000.
7> The company delivered jobs costing $1,070,000 to customer.
Required
a. Calculate the ending October balance of the direct materials, work in process, and
finished goods inventory accounts.
b. Calculate total manufacturing costs for October.
Minor Company is going to invest in a new product line. Minor estimates that the net
cash flows from the new line will be $25,000 per year. The initial investment required
to implement the new line will be $500,000. The company requires a rate of return of
8% and the new product line is expected to span a time period of 15 years. What is the
payback period for the new product line?
a. 1.6 years
b. 12.5 years
c. 20 years
d. 25 years
There is an important relation between contribution margin and profit. Which of the
following statements is not true?
a.As the number of units sold increases, total contribution margin increases, but fixed
costs remain the same.
b.As the number of units sold rises, profit increases by the additional contribution
margin per unit.
c.As the number of units sold increases, total contribution margin and fixed costs
increase.
d.As the number of units sold decreases, total contribution margin decreases, but fixed
costs remain the same.
Unit 2-3 – C
Qualitative indicators
a. Tend to be based on feelings.
b. Tend to be based on perceptions.
c. Do not rely on accounting records.
d. All of these answer choices are correct.
According to the 2011 edition of Accounting Trends and Techniques, approximately
what percentage of companies use the indirect method to report cash flows provided by
operating activities?
a. 2%
b. 33%
c. 67%
d. 98%
For a unit-level activity, the total level of activity performed varies
a. Proportionately with the number of units produced.
b. Inversely with the number of units produced.
c. Does not change with a change in activity.
d. None of these answer choices are correct..
Which of the following is a reason organizations invest in capital assets?
a. Expectation that they will generate a future return
b. Expectation that they will be used to build products
c. Both the expectation that they will generate a future return and the expectation that
they will be used to build products.
d. Neither the expectation that they will generate a future return nor the expectation that
they will be used to build products
Ledbetter Industries makes and sells outdoor canvas canopies. The selling price of each
canopy is $499. Ledbetter has provided you with the following timeline information on
an order it received for twelve canopies.
Required:
a. Calculate the delivery cycle time.
b. Calculate the manufacturing cycle time.
c. Calculate the manufacturing cycle efficiency.
Mantle, Inc. produces two types of wooden mallets, Ash and Oak, in its Miami factory.
Data relating to the mallets are given below:
A total of 600 hours are available in the Miami facility.
Required:
a. How many hours will be required to satisfy the demand for both products?
b. How much of each product should be produced to maximize Mantle ‘s operating
income?
In preparing a segment margin income statement, instead of looking for a certain phrase
that describes the cost, look for the reason the cost was incurred.
What basic information is needed in order to calculate the level of sales to reach a target
operating income? Managers often want to know how many units must be sold to reach
target net income, but the profit equation calculates operating income. How can a
manager convert net income to operating income?
The cost of storing finished goods inventory is an example of
Identify the following activities in a medical equipment plant as value-added or
non-value-added.
The 2013 and 2014 balance sheets for Ottoman Manufacturing Company appear below:
Required: Prepare a common-size balance sheet for 2014.
Estimate a cost equation from a set of cost data and predict future total cost from that
equation.
The average days to sell inventory is calculated as
Define operating leverage and explain the risks associated with the tradeoff between
variable and fixed costs.
Which of the following is the formula for calculating the percentage change in the
horizontal analysis of a financial statement?
Wood used in the manufacturing of furniture is an example of: