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F&M Final Exam Pract
F&M Final Exam Practice
| Question | Answer |
|---|---|
| What is the effect of a company’s accounting department maintaining high ethical standards? | Accounting information will increase in value |
| Why might employees be interested in their company’s financial accounting information? | Often used in determining employee bonuses |
| Which group establishes financial accounting rules in the United States? | FASB |
| Which report is one of the three primary financial statements? | Cash flows |
| How does this transaction affect the accounting equation: A company paid $5,000 cash in advertising costs? | Assets decrease by $5,000; owner's equity decreases by $5,000 |
| A company borrowed $80,000 cash from a bank. How does this affect the accounting equation? | Assets increase by $80,000; liability increases by $80,000 |
| What is the impact of expenses on the accounting equation? | Expenses decrease owner's equity |
| Which type of account are accounts payable and notes payable both examples of? | Liability |
| What is the purpose of the financial accounting cycle? | To turn information about transactions into financial statements |
| According to the accounting equation, liabilities and equity must equal what? | Assets |
| What is an account payable? | Owed by a company that purchased goods or services from a supplier on credit |
| What is an example of a financial cost that would result from poor direct labor budgeting? | Increased hiring, training, and overtime costs |
| What does a manager have control over in a cost center? | Costs |
| What should be considered when developing a measure to evaluate the performance of a manager? | Only controllable costs |
| Why is it a mistake to include cost allocations from HQ in profit center performance measures? | Uncontrollable costs should not be included in the performance evaluation |
| Which budget includes expected cost of supplies used by office staff at HQ? | Administrative expenses budget |
| Which items are uncontrollable, external variables that make sales forecasting difficult? | Customer tastes and economic conditions |
| What is the proper accounting for a product cost? | Inventory cost until item is sold |
| How could a period cost be reported in an income statement? | Administrative expense |
| A retail company purchased $100,000 in inventory, sold $75,000. How is the $25,000 reported? | Asset in the balance sheet |
| How are wages of cashiers classified in a merchandising company? | Selling expense |
| How are wages of office staff at headquarters classified? | Administrative expense |
| What is the label for the cost of wood used in making wooden furniture? | Direct materials |
| What is the label for the cost of electricity in a furniture factory? | Manufacturing overhead |
| What is the sequence of the flow of costs in manufacturing? | Raw Materials → Work in Process → Finished Goods → Cost of Goods Sold |
| What is the CVP equation? | Sales – Variable Costs – Fixed Costs = Profit |
| What is the variable cost ratio if price = $25, variable cost = $15? | 60% |
| Why is the concept of relevant range important to a manager? | Outside the relevant range, the variable cost per unit can change |
| What does applied manufacturing overhead mean? | Amount of overhead assigned to the goods produced |
| What is the label for estimated overhead ÷ estimated activity level? | Predetermined overhead rate |
| In job order costing, how is a product cost accounted for? | Part of Cost of Goods Sold |
| What is a period cost example? | Utility bills to heat the headquarters building |
| What does ABC costing do? | Allocates overhead based on multiple activities |
| How is overhead allocated in an ABC system? | Activity rate multiplied by number of cost driver events |
| In ABC, what is the numerical measure tied to an overhead activity called? | Cost Driver |
| How are production costs treated in a process costing system? | Accumulated by process and averaged over all products made during the period |
| How is production cost per unit computed in a process costing system? | Total production cost divided by the number of units completed during the period |
| For which process is process costing appropriate? | Refining gasoline in a petroleum facility |
| Which overhead allocation method is best for mass-producing breakfast cereal? | Process costing |
| What is the correct cost flow in a job order costing system? | Raw Materials → WIP → Finished Goods → COGS |
| Which company type cannot use job order costing? | Petroleum refining plant |
| What is an example of direct materials? | Cost of aluminum in making an airplane |
| What is an example of direct labor? | Furniture assemblers in a wood furniture manufacturer |
| What is an example of manufacturing overhead? | Cost of sandpaper in making wood furniture |
| What is the effect of expenses on equity? | Decreases owner's equity |
| What is the primary function of the balance sheet? | Show company position at a specific point in time |
| What is a transaction? | Two parties exchanging something of value |
| What is retained earnings? | Equity |
| What are the three primary financial statements? | Income statement, Balance sheet, Statement of cash flows |
| What is the proper sequence of budgets in manufacturing? | Sales → Production → Direct Materials |
| What is an example of a controllable cost? | Department manager’s salary |
| What is a key function of managerial accounting? | Planning, Controlling, Evaluating |
| What is included in COGS? | Product costs |
| What are product costs? | Direct materials, direct labor, manufacturing overhead |
| What is a period cost? | Selling and administrative expenses |
| 20X9 Year-to-Year Formula | =C7/$C$7 |
| 20X9 % Sales Formula | =(C7-F7)/F7 |
| 20X8 Year-to-Year Formula | =E7/$E$7 |
| 20X8 % Sales Formula | =(F7-I7)/I7 |
| 20X7 % Sales Formula | J8=H8/H$7 |
| C7 = | 2019 |
| F7 = | 2018 |
| E7 = | 2019 % Sales |
| H7 = | 2018 % Sales |
| Which action would make the profitability of the company in 20X9 the same as in 20X7? | Increasing the proportion of gross profit to sales by about 2% |
| Based on your analysis, what should management be concerned about? | increase in operating expenses over the past two years |
| Why is the net cash for December negative while total sales for December are the highest out of the months from October through December? | December cash use is disproportionately high with respect to total sales compared to other months. |
| How can Whole Pine avoid having negative net cash flows in December? | Postpone purchasing the new equipment and do not pay cash dividends to shareholders. |
| J7 = | 20X7 % Sales |
Created by:
heavenlypure
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