Final Exam Review

The four standard GAAP financial statements answer which of the following questions?

• How many units a business needs to sell to breakeven

• How a business can be more efficient

• Which managers are performing to expectations

• Should the business close a plant

• None of the above

Which statement(s) describes managerial accounting, as presented in this class?

• A. The primary users are outside the company

• B. Reports must conform to specific standards

• C. Reports are generated on an as-needed basis

• A and C

• A and B

Below are costs incurred by a manufacturing company.

Cost of raw materials used, travel expenses for sales staff, cost of packing materials, sales commission paid, electricity used to operate machines in the factory, CEO salary

Which costs are classified as product costs on a GAAP income statement?

• Cost of raw materials used, CEO salary, cost of packing materials

• CEO salary, sales commission paid, cost of raw materials used

• Electricity used to operate machines in the factory, cost of raw materials used, cost of packing materials

• Sales commission paid, travel expenses for sales staff, CEO salary

• Cost of packing materials, travel expenses for sales staff, sales commission paid

Unit contribution margin is defined as

• Total revenue dollars less total variable expense dollars

• Total revenue dollars less total fixed expense dollars

• Selling price per unit less unit variable cost

• Selling price per unit less unit fixed cost

• Total profit before taxes dollars less total fixed expense dollars

Which statement about product costs and period expenses is true?

• Period expenses are inventoriable, but product costs are not

• The cost of goods sold is recorded on the income statement for the period

• The costs of production are accumulated in the raw materials account

• Period costs are deducted from revenues to calculate gross margin

With respect to the number of tiles produced, which costs are best classified as variable

• Janitorial supplies and utility costs

• Cost of raw materials and maintenance costs on copiers

• Human resource manager's salary and CEO's salary

• Production manager's salary and advertising on national television

• Cost of raw materials and production employee wages

The Criders Company has 12,000 units of obsolete inventory. The units originally cost $6,000.

The company can either sell them for scrap at $0.20 per unit or they can invest $2,000 to be able to sell them at a price of $0.60 per unit.

With regard to this decision, the cost of the original units would be considered:

• Relevant and sunk

• Not relevant and sunk

• Not relevant and variable

• Relevant and variable

• None of the above

Below are costs incurred by a manufacturing company.

Cost of raw materials used, travel expenses for sales staff, cost of packing materials, sales commission paid, electricity used to operate machines in the factory, CEO salary

Which costs are classified as period costs on a GAAP income statement?

• Cost of raw materials used, CEO salary, cost of packing materials

• CEO salary, sales commission paid, cost of raw materials used

• Electricity used to operate machines in the factory, cost of raw materials used, cost of packing materials

• Sales commission paid, travel expenses for sales staff, CEO salary

• Cost of packing materials, travel expenses for sales staff, sales commission paid

Capacity is the maximum volume of activity that a company can sustain with the available:

• Resources

• Discretionary orders

• Inventory

• Employees

• None of the above

Which of the following statements is false concerning capital budgeting?

• As it relates to capital expenditure decisions, cost of capital is the opportunity cost of capital required for the proposed investment

• Under the payback method to evaluate investments, we compute how long it takes to recoup the initial investment

• The two main non-discounted cash flow techniques used in capital budgeting are net present value (NPV) and cost-volume-profit (CVP)

• The simple rate of return is relatively straightforward to compute, but ignores the time value of money

• Taxes affect the amount of cash flows