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Study Resources (Accounting)

MULTIPLE CHOICE 26.The costs associated with getting products and services ready for sale are known as: A.Sales costs. B.Conversion costs. C.Opportunity costs. D. Product costs. E.Costs of goods sold. 27.The costs of management salaries that are not a part of the costs of providing programs or services are referred to as: A.Period costs B.Product costs. C.Cost of goods sold. D.Conversion costs. E.None.
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1.The following table lists five decisions you might encounter as owner of a dance studio when determining whether to add a class of South American steps to their offerings.  Required: Indicate by placing an “X” in the appropriate column whether each of the following items describes a controllable or non-controllable cost. .
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6.What is the inventory equation? 7.What is the key characteristic of a manufacturing firm? 8.Why do we frequently refer to materials and labor costs as being both direct and variable? 9.What is the difference between variable manufacturing overhead and fixed manufacturing overhead? 10.Define the terms prime costs and conversion costs. 11.What are the four elements.
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TRUE/FALSE 1.To comply with GAAP, an income statement must separate direct and indirect costs. 2.Product costs always appear “below the line” for gross margin. 3.Period costs are all costs that are not product costs. 4.Period costs are added to gross margin to arrive at profit before taxes. 5.GAAP provides considerable flexibility regarding reporting formats. 6.Service firms.
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5.What do you believe are the organizational goals of a nonprofit hospital, a university, and an honor society? 6.Why do organizations pay commissions to salespeople?  What are the advantages and disadvantages of paying sales commissions from an organization’s point of view? 7.Special Forces such as the Navy SEALs and the Army Rangers.
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Short Essay 1.We know that the controllable benefits less the controllable costs of an option equal its value. Can focusing only on relevant costs and benefits ever give us value? 2.Many decisions often involve qualitative factors.  How can you reconcile this fact with the concept of relevant costs? 3.Every relevant cost is controllable..
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Exercises 1.The following are some of the costs incurred by a consulting firm. Salary paid to consultants Fee for attending training seminar Salary to office administrator Corporate office rent Cost of general-purpose software Travel to client site Required: Classify each cost as a product cost (above the line for gross margin) or a.
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Some argue that accounting systems only measure costs and not opportunity costs. Do you agree? 11.Would firms engage auditors to certify their financial statements even if they are not required to do so? (Hint: Think about the credibility of unaudited statements). Also discuss why reputation is an auditor’s primary asset.   Suppose that.
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41.Which one of the following is the best example of a long-term decision for management of a manufacturing company? A.Increasing the amount of caffeine in the company’s soft drink products.  B.Eliminating excessive use of company supplies. C.Building an assembly line for its energy drinks. D.Removing manufacturing byproducts that are deemed hazardous for storage. 42.Which.
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8.Referring to an experience that we are sometimes forced to endure, we often find ourselves saying things like, “That wasn’t too bad.” What is the implicit plan in this statement? What is the control aspect?  What implications does the assessment have for subsequent plans? 9.Control can apply to situations in which.
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46.Gate Grocery’s most popular candy barscost $0.50 each and sell for $0.75. Management determined that it had purchased 3,000 candy bars in February. It began February with 200 bars and had 150 remaining at the end of February. How much is cost of goods sold for February? A.$1,475 B.$2,287.50 C.$3,050 D.$1,525 47.Prime costs are: A.The sum.
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31.Which one of the following best represents a controllable benefit for a manufacturing plant? A.Reduce the number of security guards during holiday periods. B.Increasing the selling price of the company’s best selling product by $1.00 per unit. C.Reduce the medical benefit coverage for employees. D.Eliminate one copy machine for the human resources department. 32.Which of.
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Who are the primary users of managerial accounting information? What types of decisions do these people make? What are the key differences between financial and managerial accounting? How does ethics fit into the Decision Framework? What law prohibits managers in the United States from giving or taking bribes, even if it is the.
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3.MegaLo Mart provides the following information relating to its most recent year of operations. MegaLo Mart charges off the entire cost of transportation in to the income statement for the period. Revenues $14,568,800 Beginning inventory, 1/1 245,600 Ending inventory, 12/31 260,400 Purchases 10,950,325 Transportation in 102,500 Sales commissions 437,064 Store rent 1,435,000 Store utilities 134,675 Other administration 879,345 Required: Complete a GAAP income statement to determine MegaLo Mart’s profit.
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48.The high-low method provides: A.An exact value for variable and fixed costs. B.An estimate of both the variable and the fixed costs. C.An exact value for the fixed costs and an estimate of the variable costs. D.An estimate of the fixed costs and an exact value of the variable costs. 49.An advantage of estimating variable.
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True/False 1.The contribution margin statement groups costs by their function. 2.The contribution margin is the amount that contributes toward recovering fixed costs and earning a profit. 3.The contribution margin is well suited to evaluate short-term decision options. 4.Most firms rely on future data to estimate their cost structure. 5.Capacity costs are controllable in the short.
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MULTIPLE CHOICE 21.Controllable costs are: A.Costs that a decision maker chooses to incur, relative to doing nothing. B.The incremental expenditures relative to current expenditures. C.Not relevant. D. Both A and B. E.A, B and C. 22.Relevant benefits are: A.The controllable benefits that differ across decision options. B.Past expenditures that cannot be changed. C.Benefits that do not change as the volume.
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5Should a retail firm include the cost of receiving and stocking goods when computing inventory values? 6Many merchandising firms charge the entire amount of transportation costs to cost of goods sold. Other merchandising firms perform a year-end allocation to distribute the cost between the inventory and cost of goods sold. How.
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The Greek Corporation makes two products: Kappa and Gamma. Although each product uses a different type of raw material, the firm produces both products in its Eastern plant. The products make use of the same equipment as well. Greek Corporation produces Kappa during the day shift and Gamma during the night.
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Exercises Sarah is not currently using the fitness loft, a special area of the gym that houses state-of-the-art cardio and strength training equipment.  Based on a visit as a friend’s guest, Sarah has decided to enroll in the loft. She is deciding between buying a pass to the fitness loft (cost:.
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Short Essay You are about to graduate from college, and you have been fortunate to receive three job offers.  How will you make your decision? Briefly discuss your goals and how you would rank your options. 2.Enlarging the number of options available can never reduce opportunity cost. Is this true?   3.Jessica Wilde works.
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TRUE/FALSE 1.The benefits and costs that arise from the decision-maker’s choice of a particular option are controllable. 2.Because they seek to maximize profit, commercial organizations measure the value of a decision option as the change in profit relative to change in revenue. 3.The principle of relevance helps decision makers compare options by focusing.
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Short Essay 1Consider a consulting firm that completes large software projects that often take two or more years to complete. What is the nature of inventory for such a firm? How should it value this inventory? 2A restaurant converts inputs into substantially different outputs, a key characteristic of a manufacturing firm. Yet,.
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After years of working for others, Gina Matheson has decided to open her own florist shop. Over time, Gina has gained considerable experience in the nuances of selling flowers and flower arrangements in the retail market. She also has developed good contacts with flower wholesalers. She currently is contemplating the.
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38.The contribution margin statement: A.Focuses on revenues and fixed costs which can be controlled in the short-term. B.Focuses on revenues and variable costs which can be controlled in the short-term. C.Focuses on net income and fixed costs which can be controlled in the short-term. D.Focuses on net income and variable costs which can be.
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9As you know, direct materials, direct labor, and manufacturing overhead are the three major components of manufacturing costs. Expressing each part as a percentage of the total manufacturing cost, how do you think the percentages of these costs have changed over the last 50 years? 10Give an example of a manufacturing.
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21.The “segmented” contribution margin statement is one way firms modify the contribution margin statement to reflect GAAP. 22.Contribution margin equals revenues less variable costs. 23.When constructing segmented statements, we use the term segment in a narrow sense. 24.Fixed costs are relevant for decisions involving increasing or decreasing production volumes. 25.Common fixed costs do not.
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11.The core idea underlying estimation is that costs and benefits are the result of performing activities. 12.The principles of timeliness and traceability underlie the estimation of costs and benefits. 13.The principles of variability and traceability underlie the estimation of costs and benefits.A fixed cost does not change as the volume of activity.
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5.The following costs relate to a manufacturing organization: Sales commissions Sales manager salary Distribution costs    Production supervisor Factory rent Corporate office expenses Product components Supplies used in manufacturing Direct manufacturing labor      Plant manager salary Required: Classify the costs as product costs or period costs. Also classify the costs as variable or fixed with respect to the.
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36.The income statement for a service firm distinguishes between which of the following costs? A.Cost of goods manufactured and conversion costs. B.Costs of providing services and product costs. C.Cost of providing service and selling and administrative costs. D.Selling and administrative costs and period costs. E.None of the above. 37.A GAAP income statement combines which of the.
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Multiple Choice 28.In the short run: A.Most fixed costs are controllable B.Most fixed costs are not controllable C.Most variable costs are not controllable D.Both fixed costs and variable costs are controllable E.Neither fixed costs nor variable costs are controllable 29.A useful step for estimating controllable costs is: A.Separating product costs from administrative costs. B.Separating contribution costs from product costs. C.Separating.
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6.What is the key difference between a long-term and a short-term decision? 7.Why is it not possible to sharply distinguish between short- and long-term decisions?   8.What is the central principle underlying the estimation of revenues and costs? 9.Are revenues usually variable, mixed, or fixed?  Why?   10.What are variable, fixed, and mixed costs? .
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51.Which of the following is the best example of a variable cost? A.Monthly loan payment on a plant generator. B.Labor cost for plant employees. C.Lease payment for the office copy machine. D.General Manager’s salary. 52.In June, Ace Manufacturing Plant produced 100 units of propane canisters for sale. The total variable costs were $5,000 and the.
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Many firms in the retail industry use “mystery shoppers” to evaluate the quality of their stores and employees. In addition, audit staff for fast-food restaurants such as McDonald’s and Burger King use extensive checklists to evaluate the degree to which their franchisees are complying with company policies. On these unannounced.
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Exercises Toys Ahoy! has 1,000 action figures in inventory that cost $6.25 per unit to produce. Due to changing consumer preferences, the sales department is having great difficulty selling the action figures, and Toys Ahoy! must choose between two options. Option 1—scrap (dispose of) the action figures at a total cost.
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11.The high-low method uses two observations of aggregate cost data to estimate total fixed costs and the unit variable cost. 12.Using the high-low method, managers use the two observations pertaining to the highest and lowest activity levels because these values are most likely to define any abnormal costs. 13.An advantage of using.
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66.The Clarke Company provided the following information for the month of December: Beginning work-in-process$12,000 Ending work-in-process$9,000 Direct labor/materials used$14,000 Manufacturing overhead$7,000 The company’s cost of goods manufactured for December is: A.$42,000 B.$24,000 C.$33,000 D.$28,000 67.The Merchant Tire Company provided the following information for the month of February: Cost of goods manufactured$147,000 Beginning finished goods inventory$23,000 Cost of goods sold$129,000 The company’s balance in their.
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4.Mitchell’s Small Engine Repair Company’s accounting records show the following information relating to its inventories: Beginning Raw Materials Inventory $   45,000 Raw Materials Purchased during year 550,000 Ending Raw Materials Inventory 42,000 Beginning Work In Process Inventory 95,000 Manufacturing costs charged to operations during year 900,000 Ending Work In Process Inventory 125,000 Beginning Finished Goods Inventory 90,000 Ending Finished Goods Inventory 65,000 Required: a. What was the cost.
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Short Answer   1.What does it mean for a cost or benefit to be controllable? 2.How is value related to controllable costs and benefits? 3.What does it mean for a cost or benefit to be relevant? 4.When is a controllable cost relevant? When is a controllable cost not relevant? 5.Why does time influence the controllability of.
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56.Packaging materials is an example of: A.Fixed overhead. B.Direct material. C.Variable overhead. D.Period cost. E.Prime cost. 57.Prime costs include: A.Direct material, direct labor, and manufacturing overhead. B.Direct material and direct labor. C.Direct labor and manufacturing overhead. D.Direct material and manufacturing overhead. E.Variable overhead and fixed overhead. 58.In a typical production process, the physical flows for a manufacturer are: A.Work-in-Process Inventory→Material Inventory→Finished Goods Inventory→Cost.
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11.Unlike service firms, merchandising firms maintain an inventory of goods that they buy and sell. 12.For financial reporting purposes, merchandising firms expense the cost of items when they purchase them. 13.As with service firms, period costs appear below the line for gross margin. 14.The cost of purchasing goods from suppliers does not include.
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