Chapter 12 & 14 final exam
Chapter 12 & 14 final exam Accounting 132 Managerial accounting
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This 11 page Study Guide was uploaded by Ricardo Gaytan on Thursday May 5, 2016. The Study Guide belongs to Accounting 132 Managerial accounting at Illinois State University taught by Marie Dawson in Spring 2016. Since its upload, it has received 43 views.
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Accounting 132 Marie Dawson Chapter 12 & 14 final Version A— 1. T in a statement of cash flows, it changes in prepaid expenses would be classified as a noncash item that is not adjusted on the statement of cash flows 2. F When a company prepares the statement of cash flows under the indirect method an increase in depreciation expense will also increase the net cash provided by operating activities 3. T Managers should pay little attention to bottleneck operations because they have limited capacity for increased output 4. T In a decision to drop a segment, the opportunity cost of the space occupied by the segment would be the profit that could be derived from the best alternative use of the space 5. F Variable costs are always relevant costs 6. FWhen computing the net cash provided by operating activities under the indirect method on the statement of cash flows, a decrease in common stock would be added to net income 7. TUnder the indirect method of determining the net cash provided by operating activities on the statement of cash flows, increases in current assets such as prepaid expenses are subtracted from net income 8. T One of the dangers of allocating common fixed costs to a product line is that such allocations can make the line appear less profitable than it really is 9. F A sunk cost is a cost that has already been incurred but that can be avoided at least in part depending on the action a manager takes 10. T Activities such as purchases of inventory on account should be included as part of a company’s operating activities of the statement of cash flows 11. F Only the variable costs identified with a product are relevant in a decision concerning whether to eliminate the product Accounting 132 Marie Dawson Chapter 12 & 14 final 12. F A cost that will be incurred regardless of which course of action a manager takes is relevant to the managers decision 13. TTwo of more different products that are manufactured in the same production period are joint products 14. T A book value of old equipment is not a relevant cost in a decision 15. T Transactions that involve acquiring or disposing of noncurrent assets are generally classified as an investing activity on the statement of cash flows 16. T A statement of cash flows increases in a company’s capital stock accounts are treated as an increased source of cash 17. FUsing the indirect method to prepare the statement of cash flows, depreciation expense is a deduction from the net income 18. F All future costs are relevant in decision making 19 F Defective units should be detected and scrapped or reworked after the bottleneck 20. TAll other things equal, it is profitable to continue processing a joint product after the splitoff point when the incremental revenue from further processing exceeds the incremental cost 21. TCash payments to retire bonds payable are reported as a cash outflow in the statement of cash flows 35. Managers should not authorize working ___ of a work __ something that 36. Joint costs are not _____ 37. Allocation of common fixed costs to product lines and other segments of a __ __ determine if a the product line of the segment is profitable 38. In a decision variable costs are relevant costs and fixed costs are ____ 39. Dividends received on stock held on an investment are included in the operating activities and statement of cash flows Accounting 132 Marie Dawson Chapter 12 & 14 final 40.F Lending money to another entity( such as a subsidiary) is classified as a financing activity ? 51. Annie North currently works as the fry gal at Grill em’ Hot Drive but is thinking of going to grad school full time next semester. Which of the following would be considered a ____ decision? A. the cost of textbooks B. the cost of the cell phone she will need for texting during class C. lost wages at Grill ‘Em Hot D. Both A and B 52. When a multiproduct factory operated at full capacity, decision must be made about what products emphasize. In making such decisions, products should be ranked based on: A. selling price per unit B contribution margin per unit C. Unit sales volume D. contribution margin per unit of the constraining resource 53. In a statement of cash flows, a change in accounts receivables would be classified as. A. an operating activity B. a financing activity C. an investing activity D. a noncash item that need not appear on the statement of cash flows 54. The federated Bank Bell company has two divisions East and West. The divisions have the following revenues and expenses: East West Sales……………………………………. $720,000 $350,000 Variable costs……………………………370,000 240,000 Traceable fixed costs…………………….130, 000 80,000 Accounting 132 Marie Dawson Chapter 12 & 14 final Allocated corporate executive bonuses….120, 000 50,000 Net operating income (loss)……………..$100,000 $(20,000___) Management at FFB is pondering the elimination of the West division since it has shown a ___ in the past several years. If the West division were eliminated, its traceable foxed costs (the ___) could be avoided. Total corporate bonuses would be unaffected by this decision. Given the __ elimination of the West Division would result in retaining bonuses for executives and a __ operating income of: • $100,000 • $80,000 • $120,000 • $50,000 55. Hoosier company produces and sells 8000 units of product 413 each year. Each____ $10 has a contribution margin of $6. It is estimated that is product 413 is discontinued ___ $60000 in fixed costs charged to product 413 could be eliminated. The data include discontinued, overall company net operating income per year should: A increase by $2,000 B. decrease by $2,000 C_________ D decrease by $38,000 56. The management of Austin Corporation is considering dropping product R07C. Data from the companies accounting system appear below Sales$130000 Variable Expense$56000 Fixed Manufacturing expense$49000 Fixed Selling and administrative expense$35000 In the company’s accounting system all fixed expenses of the company are fully allocated to products further investigation has revealed that $34000 of the fixed manufacturing expenses and Accounting 132 Marie Dawson Chapter 12 & 14 final $20,000 of the fixed selling and administrative expenses are avoidable if product R97C is discontinued. Discontinuing the product will cause net operating income to: Aincrease by $20000 B increase by $10000 C decrease by $20000 D. decrease by $10000 57. A year ago Spritzy Soft Drink Corporation bought a stamping machine to make its cans for its cols. The cost of the machine was $60000. The machine has a useful life of 5 years and a salvage value of Zero at the end of those five years. Annual depreciation of the machine is $12,000. One year of depreciation has been recorded. The variable manufacturing cost of producing the cans is $0.05 per can. The only fixed manufacturing cost is the annual depreciation of $12,000 on the stamping machine. Spritzy needs 200,000 cans annually. Dagmadre Stamping company recently gave Spritzy an offer to supply all of its cans for the next four years at $0.07 per can. If Spritzy buys from Dagmadre, the stamping machine wouldn’t be needed and would be sold for $35,000. If Spritzy buys from Dagmadre, what will be the total depreciation decrease in income for the next four years? A $16,000 decrease B $19,000 increase C. $29,000 decrease D. $32,000 increase 58. Nebring Inc. has some material that originally costs $73500. The material has a scrap value of $45,000 as is but if reworked at a cost of $6,600 it could be sold for $58,100. What would be the incremental effect of the company’s overall profit of reworking and selling the material rather than selling it as is as scrap? A. $22,000 B. $67,600 C. $ 51,500 D. $5,900 Accounting 132 Marie Dawson Chapter 12 & 14 final E. $4______ 59. Cybill Baunt just inherited a 1958 Chevy Impala from her late Aunt Joop. Aunt Joop purchases the car 25 years ago for $5,000. Cybill is either going to sell the car for $2000 or have it restored and sell it for $16000 the restoration will cost $10,000. Cybill would be better off by how much money? A. $4,000 to have the vehicle restored B. $6,000 to have the vehicle restored C. $9,000 to have the vehicle restored D. $11,000 to have the vehicle restored 60. The Freed Company produced three products LM, ZY, EF, from a single raw material input. Product ___ be sold at the splitoff point for total revenue of $50,000 or it can be processed further at a total cost of $16,000 and then sold for $68,000. Product ZY: A. should be sold at the split off point, rather than processed further B. would increase the company’s overall net operating income by $18,000 if processed further and than ___ C. would increase the company’s overall net operating income by $68,000 if processed further and than___ D. would increase the company’s overall net operating income by $2,000 if processed further 61. Kava Inc. Manufactured industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as K65. Data concerning this product are given below. Per unit Selling price……………………………..$180 Direct materials…………………………..$29 Direct labor………………………………. $5 Variable manufacturing overhead………$4 Fixed manufacturing expense…………..$21 Accounting 132 Marie Dawson Chapter 12 & 14 final Variable selling expense………………. $2 Fixed selling and administrative expense...$17 The above per unit data are based on annual production of 4,000 units of the component. Direct labor __considered to be a variable cost. The company has received a special, one time only order for component K65. There would be no variable selling expense on this special order and the ___manufacturing overhead and fixed selling and administrative expenses of the company would ___by the order. Assuming that Kava has excess capacity and can fill the order without cutting production of any product, what is the minimum price per unit on the special order below___ should not go? • $180 • $38 • $59 • $78 62. The constraint at Pulman Corporation is time on a particular machine. The company makes three products that use the machine. Data concerning those products appear bellow. YO EG SS Selling price per unit……. $342.57 $276.46 $116.28 Variable cost per unit……$273.03 $219.88 $87.97 Minutes on the constraint...5.70 4.60 1.90 Assume that sufficient time is available on the constrained machine to satisfy demand for all but the least profitable product. Up to how much should the company be willing to pay to acquire more of the constrained recourse? • $28.31 per unit • $12.20 per min • 14.90 per min Accounting 132 Marie Dawson Chapter 12 & 14 final • $69.54 per unit 63. Sheela Dairy Corporation buys unprocessed cows’ milk from local farmers. At the dairy ,____ is broken down into cream and lowfat milk. The cream can be sold at this point or can be made into butter. Which of the following would be relevant in the decision to further process the milk. A. the amount paid to the farmer to purchase the unprocessed milk B. the cost of breaking down the unprocessed milk into cream and lowfat milk C. the portion of corporate fixed expenses that are currently being allocated to _____ D. none of these 64. In a statement of cash flows, a change in the common stock account would…. 67. An increase in the bonds payable account of $200,000 over the course of a year would be shown in the company’s statement of cash flows prepared under the indirect method as... • An addition of $200,000 under investing activities • A deduction of $200,000 investing activities • An addition of $200,000 under financing activities • A deduction of $200,000 under financing activities 68) An increase in the accumulated depreciation account of $50,000 over the course of a year would be showed in the company’s statement of cash flows prepared under the indirect method as. A). an addition to net income of $50,000 in order to arrive at net cash provided by operating activities B a deduction from net income of $50,000 in order to arrive at net cash provided by operating activities C) An addition of $50,000 under investing activities D) A deduction of $50,000 under investing activities Accounting 132 Marie Dawson Chapter 12 & 14 final 69) Gudger Corporation processes sugar cane in batches. The company purchases a batch of ____ from farmers and then crushes the cane in the company’s plant at the cost of $10. Two into___ cane fiber and cane juice, emerge from the crushing process. The cane fiber can be sold___processed further for $15 to make the end product industrial fiber that is sold for $60. The ___sold as is for $38 or processed further for $22 to make the end product of molasses that ___ the intermediate products should be processed further? A. cane fiber should be processed into industrial fiber; cane juice should not be___ B. cane fiber should not be processed into industrial fiber; cane juice should be__ C. Cane fiber should not be processed into industrial fiber; cane juice should not be ___molasses D. Cane fiber should be processed into industrial fiber; cane juice should be ___ Matching: • Differential cost A • Sunk cost B • Operating activities C • Cash equivalents D • Splitoff point E • Investing activities F • Financing activities G • Avoidable cost H • Constraint I • Joint products J 101. All transactions (other than interest payments) involving borrowing from creditors or repaying creditors as well as transactions with the companies ownersG Accounting 132 Marie Dawson Chapter 12 & 14 final 102. Any cost that has already been incurred and that cannot be changed by any decision made now or in the futureB 103. Any cost that differs between alternatives in a decisionmaking situation. The term is synonymous with avoidable cost and relevant costA 104. That point in the manufacturing process where some or all of the joint products can be recognized as individual products.E 105: Activities that affect current assets, current liabilities, or net incomeC 106. Two or more products that are produced from a common inputJ 107. Short term highly liquid investments such as Treasury bills, commercial paper, and money market fundsD 108. A cost that can be eliminated (in whole or part) by choosing one alternative over another in a decision. This term is synonymous with different cost and relevant costH 109. A limitation under which a company must operate, such as limited available machine time or new materials, that restricts the company’s ability to satisfy demand.I 110. Transactions that involve acquiring or disposing of noncurrent assets.F • Bottleneck A • Special order B • Operating activities C • Relevant cost D • Financing activities E • Cash equivalents F • Statement of cash flows G • Incremental costs H • Indirect method I • Relaxing the constraint J Accounting 132 Marie Dawson Chapter 12 & 14 final 111. Synonymous with differential cost and avoidable costs H 112. Included dividends paid to owners E 113. A method of computing the net cash provided by operating activities, investing activities, and financing activities I 114. An action that increases the amount of a constrained resource J 115. A financial statement that highlights the major activities that impact cash flows and affect the overall cash balance G 116. A machine or some other part of a process that limits the total output of the entire system A 117. A cost that differs between alternatives in a decision D 118. Begins with net income and adjustments for depreciation expense C 119. Includes marketable securities and other shortterm investments with a 90 day or less maturity F 120. A onetime order that is not considered part of the company’s normal ongoing business B
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