ACT Final

The profit-sharing agreement for Hanson and Simi is as follows: Hanson and Simi agree to share residual profits and losses 75% to Hanson and 25% to Simi after salary allowances and interest of 10% on beginning capital balances. Salary allowances are $40,0

109,000

The process of closing the business, selling the assets, paying the liabilities, and disbursing remaining cash to the owners is called:

Liquidation

An important distinction between the direct method and the indirect method of preparing a statement of cash flows is that:

Indirect adjusts net income to convert certain items to cash base

How should purchases, sales, and depreciation of plant assets be classified in a statement of cash flows? (Assume the indirect method is used.)

As investing activities

Partner Clay's account at the beginning of the year had a credit balance of $48,000. Early in the year, Clay invested an additional $30,000 cash in the partnership. Although his share of partnership net income for the year was $83,000, Clay withdrew only

83,000

Partner Clay's account at the beginning of the year had a credit balance of $48,000. Early in the year, Clay invested an additional $30,000 cash in the partnership. Although his share of partnership net income for the year was $83,000, Clay withdrew only

91,000

An analysis of Ridgecrest Corporation's Investment in Securities account disclosed the following information for the current year:
Debit entries . . . . . . . . $175,000
Credit entries . . . . . . . 245,000
Ridgecrest Corporation's income statement includ

175,000

An analysis of Ridgecrest Corporation's Investment in Securities account disclosed the following information for the current year:
Debit entries . . . . . . . . $175,000
Credit entries . . . . . . . 245,000
Ridgecrest Corporation's income statement includ

245,000

How should the transactions involving investments in securities be classified in Ridgecrest Corporation's statement of cash flows?

Increase investing activity

Carver Company uses the indirect method to prepare its statement of cash flows. The following information has been gathered for the current period:
Loss on sale of land . . . . . . . . . . $ 10,000
Net income . . . . . . . . . . . . . . . 304,000
Deprecia

372,000

Kollar Corp.'s transactions for the year ended December 31 included the following:
� Purchased real estate for $550,000 cash which was borrowed from a bank.
� Sold investment in securities for $500,000.
� Paid dividends of $600,000.
� Issued 500 shares of

800,000

The principal difference between managerial accounting and financial accounting is that managerial accounting information is:

All of the following: very detailed, pertains to subunits of the business, internal

All of the following are characteristics of managerial accounting, except:

All of the following: officers and managers, planning, directing, controlling, no independent audits, internal reports, as frequent as needed

A product cost is deducted from revenue in the period in which:

It is incurred

Manufacturing overhead is best described as:

Costs that are indirectly associated with the manufacturer of the finished product

Overhead costs are assigned to production using an overhead application rate, whereas no such "application rate" is used to assign the costs of
direct materials and direct labor to production. The reason for this difference in procedures is that:

Labor and materials don't need a rate because they are activity based

The following information has been taken from the perpetual inventory system of Dart Mfg. Co. for the month ended July 31:
Purchases of direct materials . . . . . . . . . . . . $27,000
Direct materials used . . . . . . . . . . . . . . . . 30,000
Direct la

138,000

The following information has been taken from the perpetual inventory system of
Dart Mfg. Co. for the month ended July 31:
Purchases of direct materials . . . . . . . . . . . . $27,000
Direct materials used . . . . . . . . . . . . . . . . 30,000
Direct la

60,000

The following information has been taken from the perpetual inventory system of
Dart Mfg. Co. for the month ended July 31:
Purchases of direct materials . . . . . . . . . . . . $27,000
Direct materials used . . . . . . . . . . . . . . . . 30,000
Direct la

57,000

The following information has been taken from the perpetual inventory system of
Dart Mfg. Co. for the month ended July 31:
Purchases of direct materials . . . . . . . . . . . . $27,000
Direct materials used . . . . . . . . . . . . . . . . 30,000
Direct la

52,000

Under a job order cost system, costs are accumulated for:

For each job

Which of the following is not a characteristic of a process cost system?

All of the following: large volume of similar products, production is continuous, accumulating costs for a period of time

Equivalent full units of production represent units of:

Work done during the period as full units

Neil Company uses a job order cost system and has established a predetermied overhead application rate for the current year of 150%, based on budgeted overhead of $900,000 and budgeted direct labor cost of
$600,000. Job No. 1 was charged with direct mater

50,000

Grove Soup Products uses a process cost system with two processing departments:
the mixing department and the canning department. Work in process inventories are reduced to zero each month. In March, the mixing department incurred
manufacturing costs of $

WIP - canning 22k
WIP- mixing 22k

Grove Soup Products uses a process cost system with two processing departments:
the mixing department and the canning department. Work in process inventories are reduced to zero each month. In March, the mixing department incurred
manufacturing costs of $

Finished goods 36k
WIP canning 36k

Information relating to production in Department A for May is as follows:
May 1 Balance, 1,000 units, 75% complete
31 Balance, 500 units, 25% complete
Materials are added at the start of production. If 5,500 units were completed during May, and inventorie

4,875

During July, the equivalent full units of direct materials added to the product work on by Department A amounted to a total of 40,000 applied as follows: beginning inventory, 8,000 units; units started and completed in July, 28,000 units; and ending inven

6,000

Hamilton Company uses job order costing. Factory overhead is applied to production at a predetermined rate of 150 percent of direct-labor cost. Any overapplied or underapplied factory overhead is closed to the cost of goods sold account at the end of each

Underapplied by 2,000

In an activity-based costing system, manufacturing overhead costs are divided into separate:

Cost pools

Benefits of activity-based costing include all of the following except:

All of the following: more cost pools, enhanced control over overhead, better management decisions

During which element of manufacturing cycle time is value added to products?

Value is added when the company's operations that increase perceived worth of a product

Which of the following is not considered a goal of just-in-time inventory system?

All of the following: eliminates manufacturing inventories, increases net income, enhances quality, cuts inventory costs

The following information is available regarding the total manufacturing overhead of Peterson Company for a recent four-month period.
Direct Labor Manufacturing // Hours Overhead
May . . . . . . . . . . . . . 90,000 $230,000
June . . . . . . . . . . . . 1

$1.40

The following information is available regarding the total manufacturing overhead of Peterson Company for a recent four-month period.
Direct Labor Manufacturing // Hours Overhead
May . . . . . . . . . . . . . 90,000 $230,000
June . . . . . . . . . . . . 1

87,000

The following data are available for product no. HP27, manufactured and sold by Montgomery Corporation:
Maximum capacity with present facilities . . . 30,000 units
Total fixed cost (per period) . . . . . . . . . $851,000
Variable cost per unit . . . . . .

74 (sales price per unit - variable cost per unit)

The following data are available for product no. HP27, manufactured and sold by Montgomery Corporation:
Maximum capacity with present facilities . . . 30,000 units
Total fixed cost (per period) . . . . . . . . . $851,000
Variable cost per unit . . . . . .

11,500 (851,000 / 74)

The following data are available for product no. HP27, manufactured and sold by Montgomery Corporation:
Maximum capacity with present facilities . . . 30,000 units
Total fixed cost (per period) . . . . . . . . . $851,000
Variable cost per unit . . . . . .

2,590,000

A company's relevant range of production is:

Range of activity index over which the company expects to operate that year

In the area of cost-volume-profit analysis, the contribution margin ratio shows how much each dollar of sales contributes to:

Net income

Gamma Company manufactures two products: XL4 and SR10. Each XL4 sells for $21, and each SR10 sells for $19. Variable costs for XL4 and SR10 are $13 and $15, respectively. Gamma Company's sales mix is 25% XL4 and 75% SR10. If total fixed costs are $4,500,0

225,000

When the availability of a particular production resource is limited, managers often decide to produce those products which:

Maximize net income

Small Fry Company has sales of $1,000,000, variable costs of $400,000, and fixed costs of $450,000. Small Fry's degree of operating leverage is:

4.0

Which of the following statements concerning variable costing and absorption costing is not correct?

Variable costs: costs that vary in total directly and proportionately with changes in activity level
Absorbtion costing: job assigned to the costs of direct materials, direct labor, and both variable and fixed overhead

Husdon Co. manufactures a single product. Shown below are cost and sales data
for the first year of operations. During the year, 10,000 finished units were
manufactured, of which 8,000 were sold.
Sales (8,000 units at $110 per unit) . . . . . . . . $880,0

60

Husdon Co. manufactures a single product. Shown below are cost and sales data
for the first year of operations. During the year, 10,000 finished units were
manufactured, of which 8,000 were sold.
Sales (8,000 units at $110 per unit) . . . . . . . . $880,0

COGS: 160,000
Ending inventory: 40,000

Husdon Co. manufactures a single product. Shown below are cost and sales data for the first year of operations. During the year, 10,000 finished units were
manufactured, of which 8,000 were sold.
Sales (8,000 units at $110 per unit) . . . . . . . . $880,0

40,000

Husdon Co. manufactures a single product. Shown below are cost and sales data for the first year of operations. During the year, 10,000 finished units were
manufactured, of which 8,000 were sold.
Sales (8,000 units at $110 per unit) . . . . . . . . $880,0

COGS: 480,000
Ending inventory: 120,000

Husdon Co. manufactures a single product. Shown below are cost and sales data for the first year of operations. During the year, 10,000 finished units were
manufactured, of which 8,000 were sold.
Sales (8,000 units at $110 per unit) . . . . . . . . $880,0

120,000

Which of the following is not a benefit of a careful and thorough budgeting process?

All of the following: requires management to plan ahead, provides definite objectives for evaluating performance, early warning system, facilitates coordination of activities, greater management awareness

The following information is from the manufacturing budget and budgeted financial statements of Pinecove Industries:
Direct materials inventory, 1/1 . . . . . . . . . . . $ 52,000
Direct materials inventory, 12/31 . . . . . . . . . 64,000
Direct materials

212,000

The following information is from the manufacturing budget and budgeted financial statements of Pinecove Industries:
Direct materials inventory, 1/1 . . . . . . . . . . . $ 52,000
Direct materials inventory, 12/31 . . . . . . . . . 64,000
Direct materials

192,000

On July 1 of the current year, Nesbit Corporation prepared a cash budget for July, August, and September. All of Nesbit's sales are made on
account. The following information was used in preparing estimated cash collections:
May sales (actual) . . . . . .

73,800

A flexible budget is one that:

Projection of data for various levels of activity

Which of the following is not a valid reason for developing segment (divisional) information?

idk

May Corporation had planned to produce 60,000 units of product during the first quarter of the current year. The company prepared the following budget on May 1:
Budgeted
(60,000 units)
Variable costs:
Direct materials used . . . . . $ 24,000
Direct labor

500 U

May Corporation had planned to produce 60,000 units of product during the first quarter of the current year. The company prepared the following budget on May 1:
Budgeted
(60,000 units)
Variable costs:
Direct materials used . . . . . $ 24,000
Direct labor

$1.15 variable

The primary difference between profit centers and cost centers is that:

Cost centers do not generate revenue, profit centers incur costs and generate revenue

In a segmented (divisional) income statement, the term common fixed costs describes fixed costs that:

Costs that to more than one center

Division B of Cornell Corp. has sales of $350,000, cost of goods sold of $200,000, operating expenses of $30,000, and invested assets of $600,000. What is the rate of return on investment for Division B?

20% ((350,000-200,000-30,000) / 600,000)

Excel Manufacturers is evaluating its Shoe Division for the current year. It has decided to use the residual income approach. The Shoe Division has assets of $5,000,000. For the current year, the Shoe Division earned $725,000 in operating income. If Excel

25,000

Standard costs

Predetermined unit costs which companies use as a measure of performance

Which of the following statements about standard costs is false?

All of the following: journalist and post standard costs, maintain separate variances accounts in ledger budgeted per unit costs

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)

Normal standard

Which of the following statements is true?

idk

Unfavorable materials price and quantity variances are generally the responsibility of the

Price: purchasing
Quantity: production

Unfavorable labor rate and efficiency variances are generally the responsibility of the

Production

Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135.
68. Dillon's materials price variance is

465 F

Dillon has a standard of 1.5 pounds of materials per unit, at $6 per pound. In producing 2,000 units, Dillon used 3,100 pounds of materials at a total cost of $18,135.
69. Dillon's materials quantity variance is

600 U

Clark Company manufactures a product with a standard direct labor cost of two hours at $18.00 per hour. During July, 2,000 units were produced using 4,200 hours at $18.30 per hour.
70. The labor quantity variance was

3,600 U

Clark Company manufactures a product with a standard direct labor cost of two
hours at $18.00 per hour. During July, 2,000 units were produced using 4,200
hours at $18.30 per hour.
71. The labor price variance was

1,260 U (18x4200 // 18.30x4200)

Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $185,000 and $125,000 of variable and fixed overhead, respectively, was incurred in working 63,000 hours when 64,000 st

4,000 F

Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $185,000 and $125,000 of
variable and fixed overhead, respectively, was incurred in working 63,000 hours when 64,000 st

3,000 F

Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $185,000 and $125,000 of variable and fixed overhead, respectively, was incurred in working 63,000 hours when 64,000 st

5,000 U

Budgeted overhead for Haft, Inc. at normal capacity of 60,000 direct labor hours is $3 per hour variable and $2 per hour fixed. In May, $185,000 and $125,000 of
variable and fixed overhead, respectively, was incurred in working 63,000 hours when 64,000 st

8,000 F

Incremental costs can be defined as:

Costs associated with one additional unit of production

Opportunity costs:

Potential benefit that may be obtained by following an alternative course of action

Sunk costs:

Costs that have already been incurred and will not be changed or avoided by any present or future decision

Bombay Cycle Company manufactures annually 20,000 units of ComfortRide, a bicycle seat used on many of the company's products, and also sold directly to retailers for $30 per unit. At the current level of
production, the cost per unit to produce ComfortRi

Increase by 4,000

Dexter Industries currently manufactures and sells 20,000 power saws per month, although it has the capacity to produce 35,000 units per month. At the 20,000 unit per month level of production, the per unit cost is $30, consisting of $18 in variable costs

15,000 increase

Dexter Industries currently manufactures and sells 20,000 power saws per month, although it has the capacity to produce 35,000 units per month. At the 20,000 unit per month level of production, the per unit cost is $30, consisting of $18 in variable costs

$18

American Chemical Company (ACC) manufactures two products as part of a joint process: A1 and B1. Joint costs total $10,000. The joint costs are allocated $3,750 to A1 and $6,250 to B1. Product A1 can be sold for
$30,000, whereas product B1 can be sold for

15,000 increase

The process of evaluating financial data that change under alternative courses of action is called

Incremental analysis

If a plant is operating at full capacity and receives a one-time opportunity to accept an order at a special price below its usual price, then

You reject it because you are already operating at full capacity

Each of the following is a disadvantage of buying rather than making a component of a company's product except that

Disadvantages: faulty product, unreliable delivery

Which of the following is not relevant information in a decision whether old equipment presently being used should be replaced by new equipment?

All are relevant: new machine costs, sale of machine, variable manufacturing costs, net book value of old machine

What will most likely occur if a company eliminates an unprofitable segment when a portion of fixed costs are unavoidable?

Fixed costs will be absorbed by other products and decreases net income sometimes

Capital budgeting decisions depend in part on all of the following except the

All of the following: availability of funds, relationships among proposed projects, basic decision making approach, risk of particular project

Brady Corp. is considering the purchase of a piece of equipment that costs $20,000. Projected net annual cash flows over the project's life are:
Year Net Annual Cash Flow
1 $ 3,000
2 8,000
3 15,000
4 9,000
The cash payback period is

2.6

Use the following table,
Present Value of an Annuity of 1
Period 8% 9% 10%
1 0.926 0.917 0.909
2 1.783 1.759 1.736
3 2.577 2.531 2.487
A company has a minimum required rate of return of 9%. It is considering investing in a project which costs $350,000 and

4,340

A company's cost of capital refers to the

Rate that it must pay to obtain funds from creditors and stockholders

Using the profitability index method, the present value of cash inflows for Project Flower is $88,000 and the present value of cash inflows of Project Plant is $48,000. If Project Flower and Project Plant require
initial investments of $90,000 and $40,000

Plant

If a project's profitability index is less than 1, then

Negative net present value and you should reject it

The primary capital budgeting method that uses discounted cash flow techniques is the

Net present value method

Cleaners, Inc. is considering purchasing equipment costing $60,000 with a 6-year useful life. The equipment will provide cost savings of $14,600 and will be depreciated straight-line over its useful life with no salvage value. Cleaners requires a 10% rate

12%

The internal rate of return is the interest rate that results in a

Net present value of 0

A company projects an increase in net income of $30,000 each year for the next five years if it invests $300,000 in new equipment. The equipment has
a five-year life and an estimated salvage value of $100,000. What is the annual rate of return on this inv

15%

All of the following statements about the annual rate of return method are correct except that it

All of the following: it is based on accrual accounting data, indicates profitability, cash value is the same over time

If the internal rate of return is less than the discount rate, then the net present value of a project is

Negative

Which of the following is not a capital budgeting decision?

Are you buying or selling? Property, equipment, plants