WILD 102 Test No 2 KEEPER COMBINED by o64e0bx

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									    102 Test No.                       Name_________________________________________________________


    Multiple Choice and True (A) / False (B)(2 points each)
    Identify the letter of the choice that best answers the question.

    1. Distorted product cost information can result in poor decisions.
    True False

    2. The plantwide overhead rate is determined by using volume-related measures.
    True False

    3. The departmental overhead rate method uses a different overhead rate for each production department.
    True False

    4. By definition, costs classified as overhead are consumed in basically the same manner regardless of the
    process involved.
    True False

    5. Management's pricing and cost decisions for a product are influenced by that product's cost assignments.
    True False

    6. ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.
    True False

    7. Financial statement analysis lessens the need for expert judgment.
    True False

    8. Financial reporting includes not only general purpose financial statements, but also information from SEC
    filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports and Webcasts.
    True False

    9. Vertical analysis is the comparison of a company's financial condition and performance across time.
    True False

    10. Ratios can be expressed as a percent, rate or proportion.
    True False

    11. The return on total assets ratio is a profitability measure.
    True False

_   12.If the current credit terms are 2/10, n/30 for Jones Inc., an accounts receivable turnover of 3 for the current year would
    be considered normal.
_   13.Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive
    guides for action.
_   14.Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general
    economic conditions.
    15. Which of the following statements is(are) true with regard to the departmental overhead rate method?
    A. It is logical to use this method when overhead resources are consumed by various products in substantially
    the same way throughout multiple departments.
    B. It is logical to use this method when overhead resources are consumed by various products in substantially
    different ways throughout multiple departments.
    C. Each department has the same rate for the same activity pool.
    D. Both A and C are true with regard to the departmental overhead rate method.
    E. Both B and C are true with regard to the departmental overhead rate method.

    16. Which of the following is(are) true?
    A. The departmental overhead method assigns overhead on the basis of volume-related measures.
    B. The departmental overhead rate method is more refined than the plantwide overhead rate method.
    C. Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single
    overhead rate.
    D. Only A and B are true statements.
    E. A, B and C are all true statements.

    17. What are three advantages of activity-based costing over traditional volume-based allocation methods?
    A. Ease of use, more accurate product costing, and more effective cost control.
    B. Fewer allocation bases, ease of use, and a direct correlation to production volume.
    C. More accurate product costing, more effective cost control, and better focus on the relevant factors for
    decision making.
    D. More accurate product costing, fewer cost objects, and a direct correlation to production volume.
    E. More accurate product costing, ease of use, less costly to implement.

    18. K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and
    $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000
    direct labor hours are planned for this next year, what is the company's plantwide overhead rate?
    A. $.02 per direct labor hour.
    B. $46.25 per direct labor hour.
    C. $36.25 per direct labor hour.
    D. $10 per direct labor hour.
    E. $.10 per direct labor hour.

    19. _. The ability of a business to earn a reasonable amount of income is referred to as the factor of:
    a. leverage
    b. profitability
    c. wealth
    d. solvency
_   20.       Which of the following is not an analysis used in assessing solvency?
    a.    inventory analysis
    b.    number of times interest charges are earned
    c.    asset turnover
    d.    accounts receivable analysis
_   21.       The difference between the current sales revenue and the sales at the break-even point is called the:
    a.    contribution margin
    b.    margin of safety
    c.    price factor
    d.    operating leverage
    22.       Which of the following is NOT an example of a cost that varies in total as the number of units produced changes?
    a.    Electricity per KWH to operate factory equipment
    b.    Direct materials cost
    c.    Straight-line depreciation on factory equipment
    d.    Wages of assembly worker
_   23.       Which of the graphs in Figure M3-1 illustrates the nature of a mixed cost?




    a. Graph 2
    b. Graph 3
    c. Graph 4
    d. Graph 1
_   24.      The systematic examination of the relationships among selling prices, volume of sales and production, costs, and
    profits is termed:
    a. contribution margin analysis
    b. cost-volume-profit analysis
    c. budgetary analysis
    d. gross profit analysis
_   25.      Contribution margin is:
    a. the excess of sales revenue over variable cost
    b. another term for volume in the "cost-volume-profit" analysis
    c. profit
    d. the same as sales revenue
_   26.      If sales are $820,000, variable costs are 62% of sales, and operating income is $260,000, what is the contribution
    margin ratio?
    a. 53.1%
    b. 38%
    c. 62%
    d. 32%
_   27.      If fixed costs are $850,000 and variable costs are 75% of sales, what is the break-even point (dollars)?
    a. $1,133,333
    b. $1,983,333
    c. $3,400,000
    d. $2,550,000

    28.    If fixed costs are $200,000, unit contribution margin $20, what number of units must be sold to have a zero profit?
    a. 25,000
    b. 20,000
    c. 200,000
    d. 10,000
_   29.     If fixed costs are $561,000 and the unit contribution margin is $8.00, what is the break-even point in units if
    variable costs are decreased by $.50 a unit?
    a. 66,000
    b. 70,125
    c. 74,800
    d. 60,000
_   30.     Which of the following conditions would cause the break-even point to increase?
    a. Total fixed costs increase
    b. Unit selling price increases
    c. Unit variable cost decreases
    d. Total fixed costs decrease
31. Upside Down, Incorporated designs custom storage spaces to eliminate clutter in both residential and
business settings. The following data pertain to a recent reporting period: (10 points) Clearly label and show
all calculations. Make work neat and easy for me to follow with answers clearly indicated.




Required
(a.) Use ABC to compute overhead rates for each activity.
(b.) Assign costs to a 3,000 square foot job that requires 70 contact hours, 20 design hours, and 14 days to
complete.

32. Joseph Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are
3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows(5 points) Clearly label
and show all calculations. Make work neat and easy for me to follow with answers clearly indicated:




(a) Calculate the company's break-even point in composite units and sales dollars.
(b) Calculate the number of units of each individual product to be sold at the break-even point.

33. The following information describes a product expected to be produced and sold by Hadley Company:




Required:
(a) Calculate the contribution margin ratio.
(b) Calculate the break-even point in dollar sales.
(c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?

(5 points) Clearly label and show all calculations. Make work neat and easy for me to follow with
answers clearly indicated
102 Test No. 2 Key


1. Distorted product cost information can result in poor decisions.
TRUE


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium
Learning Objective: C1
Wild - Chapter 017 #3



2. The plantwide overhead rate is determined by using volume-related measures.
TRUE


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Hard
Learning Objective: C2
Wild - Chapter 017 #7



3. The departmental overhead rate method uses a different overhead rate for each production department.
TRUE


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Easy
Learning Objective: C3
Wild - Chapter 017 #9



4. By definition, costs classified as overhead are consumed in basically the same manner regardless of the
process involved.
FALSE


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Easy
Learning Objective: C3
Wild - Chapter 017 #10
5. Management's pricing and cost decisions for a product are influenced by that product's cost assignments.
TRUE


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium
Learning Objective: A1
Wild - Chapter 017 #18



6. ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.
FALSE


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium
Learning Objective: A3
Wild - Chapter 017 #30



7. Financial statement analysis lessens the need for expert judgment.
FALSE


AACSB: Analytic
AACSB: Communications
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: C1
Wild - Chapter 013 #2



8. Financial reporting includes not only general purpose financial statements, but also information from SEC
filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports and Webcasts.
TRUE


AACSB: Analytic
AACSB: Communications
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Medium
Learning Objective: C2
Wild - Chapter 013 #14
9. Vertical analysis is the comparison of a company's financial condition and performance across time.
FALSE


AACSB: Analytic
AACSB: Communications
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: C4
Wild - Chapter 013 #22



10. Ratios can be expressed as a percent, rate or proportion.
TRUE


AACSB: Analytic
AACSB: Communications
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Easy
Learning Objective: P3
Wild - Chapter 013 #47



11. The return on total assets ratio is a profitability measure.
TRUE


AACSB: Analytic
AACSB: Communications
AICPA BB: Critical Thinking
AICPA BB: Industry
AICPA FN: Measurement
AICPA FN: Reporting
Difficulty: Hard
Learning Objective: P3
Wild - Chapter 013 #64
12. Which of the following statements is(are) true with regard to the departmental overhead rate method?
A. It is logical to use this method when overhead resources are consumed by various products in substantially
the same way throughout multiple departments.
B. It is logical to use this method when overhead resources are consumed by various products in substantially
different ways throughout multiple departments.
C. Each department has the same rate for the same activity pool.
D. Both A and C are true with regard to the departmental overhead rate method.
E. Both B and C are true with regard to the departmental overhead rate method.


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium
Learning Objective: C3
Wild - Chapter 017 #67



13. Which of the following is(are) true?
A. The departmental overhead method assigns overhead on the basis of volume-related measures.
B. The departmental overhead rate method is more refined than the plantwide overhead rate method.
C. Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single
overhead rate.
D. Only A and B are true statements.
E. A, B and C are all true statements.


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Hard
Learning Objective: A2
Wild - Chapter 017 #78



14. What are three advantages of activity-based costing over traditional volume-based allocation methods?
A. Ease of use, more accurate product costing, and more effective cost control.
B. Fewer allocation bases, ease of use, and a direct correlation to production volume.
C. More accurate product costing, more effective cost control, and better focus on the relevant factors for
decision making.
D. More accurate product costing, fewer cost objects, and a direct correlation to production volume.
E. More accurate product costing, ease of use, less costly to implement.


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Easy
Learning Objective: A3
Wild - Chapter 017 #79
15. K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and
$800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000
direct labor hours are planned for this next year, what is the company's plantwide overhead rate?
A. $.02 per direct labor hour.
B. $46.25 per direct labor hour.
C. $36.25 per direct labor hour.
D. $10 per direct labor hour.
E. $.10 per direct labor hour.

($2,900,000 + $800,000)/80,000 direct labor hours = $46.25 per direct labor hour


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Easy
Learning Objective: P1
Wild - Chapter 017 #81



31. Upside Down, Incorporated designs custom storage spaces to eliminate clutter in both residential and
business settings. The following data pertain to a recent reporting period.




Required
(a.) Use ABC to compute overhead rates for each activity.
(b.) Assign costs to a 3,000 square foot job that requires 70 contact hours, 20 design hours, and 14 days to
complete.




AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Hard
Learning Objective: P3
Wild - Chapter 017 #156
32. Joseph Co. has three products A, B, and C, and its fixed costs are $69,000. The sales mix for its products are
3 units of A, 4 units of B, and 1 unit of C. Information about the three products follows:




(a) Calculate the company's break-even point in composite units and sales dollars.
(b) Calculate the number of units of each individual product to be sold at the break-even point.




(a)
Break-even point in composite units = $69,000/$92 = 750 composite units
Break-even point in sales dollars = 750 x $280 = $210,000
(b) At break-even point:
750 x 3 = 2,250 units of A
750 x 4 = 3,000 units of B
750 x 1 = 750 units of C


AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium
Learning Objective: P4
Wild - Chapter 018 #151
33. The following information describes a product expected to be produced and sold by Hadley Company:




Required:
(a) Calculate the contribution margin ratio.
(b) Calculate the break-even point in dollar sales.
(c) What dollar amount of sales would be necessary to achieve a pretax income of $120,000?




AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Difficulty: Medium
Learning Objective: C3
Learning Objective: P2
Wild - Chapter 018 #147
102 Test No. 2 Summary

          Category            # of Questions
AACSB: Analytic                    18
AACSB: Communications               5
AICPA BB: Critical Thinking         5
AICPA BB: Industry                 18
AICPA FN: Measurement              18
AICPA FN: Reporting                 5
Difficulty: Easy                    7
Difficulty: Hard                    4
Difficulty: Medium                  7
Learning Objective: A1              1
Learning Objective: A2              1
Learning Objective: A3              2
Learning Objective: C1              2
Learning Objective: C2              2
Learning Objective: C3              4
Learning Objective: C4              1
Learning Objective: P1              1
Learning Objective: P2              1
Learning Objective: P3              3
Learning Objective: P4              1
Wild - Chapter 013                  5
Wild - Chapter 017                 11
Wild - Chapter 018                  2

								
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