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financial and managerial accounting
Questions and Answers of
Financial And Managerial Accounting
Lambert, Inc. manufactures several types of accessories. For the year, the knit hats andscarves line had sales of $400,000, variable expenses of $310,000, and fixed expenses of$120,000. Therefore,
Walston Company produces kitchen cabinets for homebuilders across the western UnitedStates. The cost of producing 5,000 cabinets is as follows.Walston also incurs selling expenses of $20 per cabinet.
Three of the steps in management’s decision-making process are (1) review results of decision, (2) determine and evaluate possible courses of action, and (3) make the decision. The steps are
Incremental analysis is the process of identifying the financial data that:(a) do not change under alternative courses of action.(b) change under alternative courses of action.(c) are mixed under
In making business decisions, management ordinarily considers:(a) quantitative factors but not qualitative factors.(b) financial information only.(c) both financial and nonfinancial information.(d)
A company is considering the following alternatives:Which of the following are relevant in choosing between these alternatives?(a) Revenues, variable costs, and fixed costs.(b) Variable costs and
It costs a company $14 of variable costs and $6 of fixed costs to produce product Z200 that sells for $30.A foreign buyer offers to purchase 3,000 units at $18 each. If the special offer is accepted
It costs a company $14 of variable costs and $6 of fixed costs to produce product Z200. Product Z200 sells for $30. A buyer offers to purchase 3,000 units at$18 each. The seller will incur special
Jobart Company is currently operating at full capacity.It is considering buying a part from an outside supplier rather than making it in-house. If Jobart purchases the part, it can use the released
In a make-or-buy decision, relevant costs are:(a) manufacturing costs that will be saved.(b) the purchase price of the units.(c) the opportunity cost.(d) All of the above.
Derek is performing incremental analysis in a make-or-buy decision for Item X. If Derek buys Item X, he can use its released productive capacity to produce Item Z. Derek will sell Item Z for $12,000
The decision rule in a sell-or-process-further decision is: process further as long as the incremental revenue from processing exceeds:(a) incremental processing costs.(b) variable processing
Walton, Inc. makes an unassembled product that it currently sells for $55. Production costs are $20.Walton is considering assembling the product and selling it for $68. The cost to assemble the
In a decision to retain or replace equipment, the book value of the old equipment is a (an):(a) opportunity cost.(b) sunk cost.(c) incremental cost.(d) marginal cost.
If an unprofitable segment is eliminated:(a) net income will always increase.(b) variable expenses of the eliminated segment will have to be absorbed by other segments.(c) fixed expenses allocated to
A segment of Hazard Inc. has the following data.Sales $200,000 Variable expenses 140,000 Fixed expenses 100,000 If this segment is eliminated, what will be the effect on the remaining company? Assume
Fine Line Phones is considering introducing a fashion cover for its phones. Market research indicates that 200,000 units can be sold if the price is no more than $20. If Fine Line decides to produce
Air Corporation produces air purifiers. The following per unit cost information is available:direct materials $16, direct labor $18, variable manufacturing overhead $11, variable selling and
Presented below are data for Harmon Electrical Repair Shop for next year.The desired profit margin per labor hour is $10. The material loading charge is 40% of invoice cost. Harmon estimates that
The clock division of Control Central Corporation manufactures clocks and then sells them to customers for $10 per unit. Its variable cost is $4 per unit, and its fixed cost per unit is $2.50.
Revco Electronics is a division of International Motors, an automobile manufacturer. Revco produces car radio/CD players. Revco sells its products to International Motors, as well as to other car
Target cost related to price and profit means that:(a) cost and desired profit must be determined before selling price.(b) cost and selling price must be determined before desired profit.(c) price
Classic Toys has examined the market for toy train locomotives. It believes there is a market niche in which it can sell locomotives at $80 each. It estimates that it could sell 10,000 of these
In a competitive, common-product environment, a seller would most likely use:(a) time-and-material pricing.(b) variable costing.(c) target costing.(d) cost-plus pricing.
Cost-plus pricing means that:(a) Selling price = Variable cost + (Markup percentage + Variable cost).(b) Selling price = Cost + (Markup percentage x Cost).(c) Selling price = Manufacturing cost +
Mystique Co. provides the following information for the new product it recently introduced.What would be Mystique Co.’s percentage markup on cost?(a) 125%.(b) 75%.(c) 331⁄3%.(d) 25%. Total unit
Crescent Electrical Repair has decided to price its work on a time-and-material basis. It estimates the following costs for the year related to labor.Crescent desires a profit margin of $10 per labor
Time-and-material pricing would most likely be used by a:(a) garden-fertilizer producer.(b) lawn-mower manufacturer.(c) tree farm.(d) lawn-care provider.
The Plastics Division of Weston Company manufactures plastic molds and then sells them to customers for $70 per unit. Its variable cost is $30 per unit, and its fixed cost per unit is $10. Management
Assume the same information as Question 9, except that the Plastics Division has available capacity of 10,000 units for plastic moldings. What is the minimum transfer price that the Plastics Division
The most common method used to establish transfer prices is the:(a) negotiated transfer pricing approach.(b) opportunity costing transfer pricing approach.(c) cost-based transfer pricing approach.(d)
When a company uses time-and-material pricing, the material loading charge is expressed as a percentage of:(a) the total estimated labor costs for the year.(b) the total estimated costs of parts and
Global Industries transfers parts between divisions in two countries, Eastland and Westland. Eastland’s tax rate is 8%, and Westland’s tax rate is 16%. To minimize tax payments and maximize net
AST Electrical provides the following cost information related to its production of electronic circuit boards.What is its markup percentage assuming that AST Electrical uses absorption-cost
Assume the same information as question 14 and determine AST Electrical’s markup percentage using variable-cost pricing.Data from question 14AST Electrical provides the following cost information
Use this list of terms to complete the sentences that follow.1. A ________________ shows potential sales for the industry and a company’s expected share of such sales.2. __________________ are used
Becker Company estimates that 2014 unit sales will be 12,000 in quarter 1, 16,000 in quarter 2, and 20,000 in quarter 3, at a unit selling price of $30. Management desires to have ending finished
Soriano Company is preparing its master budget for 2014. Relevant data pertaining to its sales, production, and direct materials budgets are as follows.Sales. Sales for the year are expected to total
Martian Company management wants to maintain a minimum monthly cash balance of $15,000. At the beginning of March, the cash balance is $16,500, expected cash receipts for March are $210,000, and cash
Barrett Company has completed all operating budgets other than the income statement for 2014. Selected data from these budgets follow.Sales: $300,000 Purchases of raw materials: $145,000 Ending
Asheville Company is preparing its master budget for 2014. Relevant data pertaining to its sales and production budgets are as follows.Sales. Sales for the year are expected to total 2,100,000 units.
Which of the following is not a benefit of budgeting?(a) Management can plan ahead.(b) An early warning system is provided for potential problems.(c) It enables disciplinary action to be taken at
A budget:(a) is the responsibility of management accountants.(b) is the primary method of communicating agreed upon objectives throughout an organization.(c) ignores past performance because it
The essentials of effective budgeting do not include:(a) top-down budgeting.(b) management acceptance.(c) research and analysis.(d) sound organizational structure.
Compared to budgeting, long-range planning generally has the:(a) same amount of detail.(b) longer time period.(c) same emphasis.(d) same time period.
A sales budget is:(a) derived from the production budget.(b) management’s best estimate of sales revenue for the year.(c) not the starting point for the master budget.(d) prepared only for credit
The formula for the production budget is budgeted sales in units plus:(a) desired ending merchandise inventory less beginning merchandise inventory.(b) beginning finished goods units less desired
Direct materials inventories are kept in pounds in Byrd Company, and the total pounds of direct materials needed for production is 9,500. If the beginning inventory is 1,000 pounds and the desired
The formula for computing the direct labor budget is to multiply the direct labor cost per hour by the:(a) total required direct labor hours.(b) physical units to be produced.(c) equivalent units to
Each of the following budgets is used in preparing the budgeted income statement except the:(a) sales budget.(b) selling and administrative budget.(c) capital expenditure budget.(d) direct labor
The budgeted income statement is:(a) the end-product of the operating budgets.(b) the end-product of the financial budgets.(c) the starting point of the master budget.(d) dependent on cash receipts
The budgeted balance sheet is:(a) developed from the budgeted balance sheet for the preceding year and the budgets for the current year.(b) the last operating budget prepared.(c) used to prepare the
The format of a cash budget is:(a) Beginning cash balance + Cash receipts + Cash from financing - Cash disbursements = Ending cash balance.(b) Beginning cash balance + Cash receipts - Cash
Expected direct materials purchases in Read Company are $70,000 in the first quarter and $90,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is
The budget for a merchandiser differs from a budget for a manufacturer because:(a) a merchandise purchases budget replaces the production budget.(b) the manufacturing budgets are not applicable.(c)
In most cases, not-for-profit entities:(a) prepare budgets using the same steps as those used by profit-oriented businesses.(b) know budgeted cash receipts at the beginning of a time period, so they
In Strassel Company’s flexible budget graph, the fixed cost line and the total budgeted cost line intersect the vertical axis at $36,000. The total budgeted cost line is $186,000 at an activity
Lawler Company expects to produce 40,000 units of product CV93 during the current year.Budgeted variable manufacturing costs per unit are direct materials $6, direct labor $15, and overhead $24.
Midwest Division operates as a profit center. It reports the following for the year:Prepare a responsibility report for the Midwest Division for December 31, 2014. Sales Variable costs Controllable
The service division of Metro Industries reported the following results for 2014.Management is considering the following independent courses of action in 2015 in order to maximize the return on
Glenda Company uses a flexible budget for manufacturing overhead based on direct labor hours. For 2014, the master overhead budget for the Packaging Department based on 300,000 direct labor hours was
Budgetary control involves all but one of the following:(a) modifying future plans.(b) analyzing differences.(c) using static budgets.(d) determining differences between actual and planned results.
Budget reports are prepared:(a) daily.(b) weekly.(c) monthly.(d) All of the above.
A production manager in a manufacturing company would most likely receive a:(a) sales report.(b) income statement.(c) scrap report.(d) shipping department overhead report.
A static budget is:(a) a projection of budget data at several levels of activity within the relevant range of activity.(b) a projection of budget data at a single level of activity.(c) compared to a
A static budget is useful in controlling costs when cost behavior is:(a) mixed.(b) fixed.(c) variable.(d) linear.
At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 10,000 direct labor hours, a horizontal line drawn from the total
At 9,000 direct labor hours, the flexible budget for indirect materials is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should
Under responsibility accounting, the evaluation of a manager’s performance is based on matters that the manager:(a) directly controls.(b) directly and indirectly controls.(c) indirectly
Responsibility centers include:(a) cost centers.(b) profit centers.(c) investment centers.(d) All of the above.
Responsibility reports for cost centers:(a) distinguish between fixed and variable costs.(b) use static budget data.(c) include both controllable and noncontrollable costs.(d) include only
The accounting department of a manufacturing company is an example of:(a) a cost center. (b) a profit center. (c) an investment center.(d) a contribution center.
To evaluate the performance of a profit center manager, upper management needs detailed information about:(a) controllable costs.(b) controllable revenues.(c) controllable costs and revenues.(d)
In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show:(a) profit center margin.(b) controllable margin.(c) net income.(d) income from
In the formula for return on investment (ROI), the factors for controllable margin and operating assets are, respectively:(a) controllable margin percentage and total operating assets.(b)
A manager of an investment center can improve ROI by:(a) increasing average operating assets.(b) reducing sales.(c) increasing variable costs.(d) reducing variable and/or controllable fixed costs.
The Wellstone Division operates as a profit center. It reports the following for the year.Budget Actual Sales $2,000,000 $1,860,000 Variable costs 800,000 760,000 Controllable fixed costs 550,000
Standards differ from budgets in that:(a) budgets but not standards may be used in valuing inventories.(b) budgets but not standards may be journalized and posted.(c) budgets are a total amount and
Standard costs:(a) are imposed by governmental agencies.(b) are predetermined unit costs which companies use as measures of performance.(c) can be used by manufacturing companies but not by service
The advantages of standard costs include all of the following except:(a) management by exception may be used.(b) management planning is facilitated.(c) they may simplify the costing of
Normal standards:(a) allow for rest periods, machine breakdowns, and setup time.(b) represent levels of performance under perfect operating conditions.(c) are rarely used because managers believe
The setting of standards is:(a) a managerial accounting decision.(b) a management decision.(c) a worker decision.(d) preferably set at the ideal level of performance.
Each of the following formulas is correct except:(a) Labor price variance = (Actual hours x Actual rate) - (Actual hours x Standard rate).(b) Total overhead variance = Actual overhead - Overhead
In producing product AA, 6,300 pounds of direct materials were used at a cost of $1.10 per pound. The standard was 6,000 pounds at $1.00 per pound. The direct materials quantity variance is:(a) $330
In producing product ZZ, 14,800 direct labor hours were used at a rate of $8.20 per hour. The standard was 15,000 hours at $8.00 per hour. Based on these data, the direct labor:(a) quantity variance
Which of the following is correct about the total overhead variance?(a) Budgeted overhead and budgeted overhead applied are the same.(b) Total actual overhead is composed of variable overhead, fixed
The formula for computing the total overhead variance is:(a) actual overhead less overhead applied.(b) overhead budgeted less overhead applied.(c) actual overhead less overhead budgeted.(d) No
Which of the following is incorrect about variance reports?(a) They facilitate “management by exception.”(b) They should only be sent to the top level of management.(c) They should be prepared as
In using variance reports to evaluate cost control, management normally looks into:(a) all variances.(b) favorable variances only.(c) unfavorable variances only.(d) both favorable and unfavorable
Generally accepted accounting principles allow a company to:(a) report inventory at standard cost but cost of goods sold must be reported at actual cost.(b) report cost of goods sold at standard cost
Which of the following would not be an objective used in the customer perspective of the balanced scorecard approach?(a) Percentage of customers who would recommend product to a friend.(b) Customer
Which of the following is incorrect about a standard cost accounting system?(a) It is applicable to job order costing.(b) It is applicable to process costing.(c) It reports only favorable
The formula to compute the overhead volume variance is:(a) Fixed overhead rate x (Standard hours - Actual hours).(b) Fixed overhead rate x (Normal capacity hours - Actual hours).(c) Fixed overhead
The basic tools of financial analysis are the same under both GAAP and IFRS except that:(a) horizontal analysis cannot be done because the format of the statements is sometimes different.(b) analysis
Under IFRS:(a) the reporting of discontinued items is different than GAAP.(b) the reporting of extraordinary items is prohibited.(c) the reporting of changes in accounting principles is different
Parmalane reports the following information:Sales revenue $500,000 Cost of goods sold 200,000 Operating expense 40,000 Unrealized loss on non-trading securities 10,000 Parmalane should report the
Assuming the same information as in Question 4, Parmalane should report the following using a one-statement approach under IFRS:(a) net income of $260,000 and comprehensive income of $270,000.(b) net
Indicate whether the following statements are true or false.1. Managerial accountants have a single role within an organization, collecting and reporting costs to management.2. Financial accounting
A bicycle company has these costs: tires, salaries of employees who put tires on the wheels, factory building depreciation, lubricants, spokes, salary of factory manager, handlebars, and salaries of
The following information is available for Keystone Company.Prepare the cost of goods manufactured schedule for the month of March. Raw materials inventory Work in process inventory Materials
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