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1. ACC 561 Final Exam (2nd Set)
54 Questions with ANSWERS
Answers are HERE!
1) Budgets _____.
A. ignore areas that are presumed to be running smoothly
B. are deviations from a plan
C. are quantitative expressions of action plans
D. provide feedback by comparing results with plans and by highlighting deviations from plans
2) Performance reports _____.
A. ignore areas that are presumed to be running smoothly
B. provide feedback by comparing results with plans and by highlighting deviations from plans
C. are deviations from a plan
D. are quantitative expressions of action plans
3) Department performance reports can be used to help department heads determine _____.
A. who is primarily responsible for any deviations from plans
B. how efficiently the department is operating
C. how effectively and efficiently the department is operating
D. how effectively the department is operating
4) Below is a statement from the Institute of Management Accountants' Statement of Ethical
Professional Practice. “Refrain from disclosing confidential information acquired in the course of their
work except when authorized, unless legally obligated to do so.” It is an example of _____.
A. objectivity
B. confidentiality
C. integrity
D. competence
5) Ethical accountants are important to society because _____.

2. A. none of these answers is correct
B. they pay their taxes
C. the information produced is reliable
D. they will not go to prison and waste taxpayers' money
6) According to the Institute of Management Accountants' Statement of Ethical Professional Practice,
the standard of competence includes:
A. All of these answers are correct
B. the ongoing development of the accountant's knowledge and skills
C. avoiding actual or apparent conflicts of interest
D. disclosing all relevant information
7) _____ is the field of accounting that develops information for external decision makers such as
stockholders, suppliers, banks, and government regulatory agencies.
A. Financial accounting
B. Auditing
C. Tax accounting
D. Management accounting
8) _____ refers to accounting information developed for managers within an organization.
A. Tax accounting
B. Internal auditing
C. Managerial accounting
D. Financial accounting
9) The primary users of management accounting information are _____.
A. suppliers
B. bankers
C. governmental regulatory authorities
D. internal decision makers
10) _____ would not appear on the financial statements for a sole proprietorship.
A. Unearned Sales Revenues
B. Paid-in Capital

3. C. Cost of Goods Sold
D. Accumulated Depreciation
11) The _____ is also called the statement of financial position.
A. statement of cash flows
B. income statement
C. balance sheet
D. statement of retained earnings
12) Etiwanda Company's accountant recorded a debit to Accounts Payable and a credit to Cash. This
transaction will_____.
A. decrease Cash and decrease Accounts Payable
B. increase Cash and increase Accounts Payable
C. increase Cash and decrease Accounts Payable
D. decrease Cash and increase Accounts Payable
13) Valuing assets at replacement cost to facilitate the measurement of “economic income” violates the
_____ accounting convention.
A. cost benefit
B. conservatism
C. materiality
D. objectivity
14) The use of acquisition cost less depreciation in valuing an asset on the balance sheet is the logical
result of the _____ accounting convention.
A. materiality
B. cost-benefit
C. continuity
D. conservatism
15) Mr. Bryant invested $50,000 cash in a new corporation. The new corporation will record this
transaction with a debit to_____.
A. Cash and a credit to Paid-in Capital for $50,000
B. Paid-in Capital and a credit to Retained Earnings for $50,000
C. Retained Earnings and a credit to Cash for $50,000

4. D. Cash and a credit to Retained Income for $50,000
16) The statement of cash flows is used for all of the following except_____.
A. evaluating the creditworthiness of the organization
B. revealing commitments that may restrict future courses of action
C. showing the relationship of net income to changes in cash
D. determining a company's ability to pay its debts when they are due
17) Nonoperating items on the income statement_____.
A. appear on the income statement immediately after gross profit
B. appear only on corporate income statements
C. are revenues and expenses arising from adjusting entries
D. reflect the effects of financial management decisions
18) The Rebecca Company acquired merchandise inventory costing $10,000 on September 1. The
company will not pay for the inventory until October 1. This transaction will affect the Rebecca Company
by increasing the Merchandise Inventory account by $10,000 and _____.
A. decreasing the Capital account by $10,000
B. increasing the Capital account by $10,000
C. increasing the Accounts Payable account by $10,000
D. decreasing the Accounts Payable account by $10,000
19) Which of the following is not a cost driver of customer services costs?
A. All of these answers are correct
B. Travel costs are not a cost driver of customer services costs.
C. Number of service calls is not a cost driver of customer services costs.
D. Hours spent servicing products are not a cost driver of customer services costs.
20) Which value chain function would include the cost of computer-aided design equipment and cost to
develop the prototype of a product?
A. The marketing function would include these costs
B. The design of product, services, and processes function would include these costs.
C. The production function would include these costs.
D. The distribution function would include these costs.
21) Output measures of both resources and activities are _____.

5. A. variable activities
B. stages of production
C. fixed activities
D. cost drivers
22) If the sales price per unit is $100, the total fixed costs are $75,000, and the break even volume in
dollar sales is $250,000, then the variable cost per unit is _____.
A. $30
B. $100
C. $75,000
D. $70
23) Hug Me Company produces dolls. Each doll sells for $20.00. Variable costs per unit total $14.00, of
which $6.25 is for direct materials and $5.25 is for direct labor. If total fixed costs are $435,000, then the
break even volume in dollars is _____.
A. $435,000
B. $1,023,529
C. $621,429
D. $1,450,000
24) Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as follows:
Direct materials $195
Direct labor 126
Variable factory overhead 51
Total fixed costs for the period are $456,840. The contribution margin per desk is _____.
A. $126
B. $108
C. $51
D. $195
25) _____ is a method of approximating cost functions.
A. Account analysis
B. Transaction analysis
C. Product analysis

6. D. Cost driver analysis
26) The _____ method of measuring cost functions is the least reliable.
A. multiple least squares regression
B. visual fit
C. simple least squares regression
D. high low
27) In relation to a cost function, the term reliability means_____.
A. how well the cost function explains past cost behavior
B. whether the cost function conforms to a given mathematical model
C. how well the cost function predicts future costs
D. whether the costs and activities can be easily observed
28) _____ need cost accounting systems.
A. Manufacturing firms, service organizations, and nonprofit organizations
B. Service organizations and nonprofit organizations
C. Manufacturing firms and nonprofit organizations
D. Manufacturing firms and service organizations
29) _____ is an example of the external financial reporting purpose of the cost management systems.
A. Budget reporting
B. The product mix to optimize profitability
C. The amount of inventory that should appear on the balance sheet
D. The cost of a manufacturing process
30) _____ is a name for a system that first accumulates overhead costs for each of the activities of an
organization, and then assigns the costs of activities to the products, services, or other cost objects that
caused that activity.
A. Transaction costing
B. Cost driver accounting
C. Transaction based accounting
D. Activity based costing
31) _____ budgeting is when budgets are formulated with the active participation of all affected
employees

7. A. Shared
B. Team
C. Participative
D. Financial
32) A _____ gives the expected sales under a given set of conditions.
A. sales forecast
B. sales prediction
C. sales budget
D. budget forecast
33) A sales forecast is _____.
A. all of these answers are correct
B. a prediction of sales under a given set of conditions
C. the result of decisions to create conditions
D. the same as a sales budget that will generate a desired level of sales
34) The master budget includes forecasts for all of the following except _____.
A. cash disbursements
B. sales
C. number of employees
D. balance sheets
35) Unit sales of Product A are currently 10,000, while unit sales of Product B are double those of
Product A. The com¬pany's sales forecast will be _____, assuming sales of Product A increase by 10%
and those of Product B increase by 4,000 units.
A. none of these answers is correct
B. 10,000 and 20,000 units, respectively
C. 11,000 and 22,000 units, respectively
D. 11,000 and 24,000 units, respectively
36) A sales forecast is _____.
A. all of these answers are correct
B. a prediction of sales under a given set of conditions

8. C. the result of decisions to create conditions
D. the same as a sales budget that will generate a desired level of sales
37) _____ probably would not be used as a measure of activity in a flexible budget.
A. Number of hours worked by salespeople
B. Sales volume
C. Number of direct labor hours worked
D. Number of machine hours used
38) Which of the following statements is false?
A. Flexible budgets are automatically matched to changes in activity levels
B. Flexible budgets help provide a basis for management by exception.
C. Flexible budgets are not based on the same revenue and cost behavior assumptions as the static
budget.
D. Flexible budgets are prepared for a range of activity.
39) _____ are components of a master budget.
A. A cash budget and an activity budget
B. A continuous budget and a static budget
C. A strategic plan and an operating budget
D. An operating budget and a financial budget
40) Costs are allocated for all the following purposes except to _____.
A. compute income and asset valuation
B. determine inventory levels
C. predict the economic effects of planning and control decisions
D. obtain reimbursement
41) _____ is not a type of cost allocation.
A. Reallocation of costs from production departments to service departments
B. Allocation of costs of a particular organizational unit to products or services
C. Allocation of costs to the appropriate organizational unit
D. Reallocation of costs from service departments to production departments
42) The use of budgeted service department cost rates protects using departments from _____.

9. A. all of these answers are correct
B. service outages
C. service department efficiencies
D. price fluctuations
43) Murphy Company has two service departments, Maintenance and Personnel, as well as two
production departments, Mixing and Finishing. Maintenance costs are allocated based on square
footage while personnel costs are allocated based on number of employees. The following information
has been gathered for the current year:
Maintenance
Personnel
Mixing
Finishing
Direct dept. costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the step-down method of allocating costs is used and the Personnel Department is allocated first, then
the amount of overhead that would be allocated from Personnel to Mixing is _____.
A. $78,000
B. $63,000
C. $31,500
D. $58,500
44) Martinez Company has two service departments, Maintenance and Personnel, as well as two
production departments, Mixing and Finishing. Maintenance costs are allocated based on square
footage while personnel costs are allocated based on number of employees. The following information
has been gathered for the current year:
Maintenance
Personnel
Mixing
Finishing
Direct dept. costs $50,400 $33,600 $42,000 $5,600
Square footage 1,600 800 3,200 2,400

10. Number of employees 16 24 48 64
If the step down method is used to allocate costs and the Maintenance Department is allocated first,
then the amount of overhead that would be allocated from Personnel to Maintenance is _____.
A. $0
B. $3,539
C. $4,998
D. $4,200
45) Gomez Company has two service departments, Maintenance and Personnel, as well as two
production departments, Mixing and Finishing. Maintenance costs are allocated based on square
footage while personnel costs are allocated based on number of employees. The following information
has been gathered for the current year _____.
Maintenance
Personnel
Mixing
Finishing
Direct dept. costs $126,000 $84,000 $105,000 $175,000
Square footage 800 400 1,600 1,200
Number of employees 8 12 24 32
If the step-down method is used to allocate costs and the Maintenance Department is allocated first,
the amount of overhead that would be allocated from Maintenance to Mixing is:
A. $36,000
B. $42,750
C. $42,000
D. $63,000
46) _____ is (are) used for external reporting.
A. Absorption costing and variable costing
B. Direct costing
C. Absorption costing
D. Variable costing
47) _____ is another term for variable costing.
A. Absorption costing

11. B. Direct costing
C. Traditional costing
D. Full costing
48) In absorption costing, costs are separated into the major categories of_____.
A. variable and nonmanufacturing
B. manufacturing and fixed
C. fixed and variable
D. manufacturing and nonmanufacturing
49) _____ is the first step in designing a management control system.
A. Distinguishing between profit centers and cost centers
B. Establishing organizational goals
C. Preparing financial statements
D. Evaluating management's performance
50) Identify which of the following is not a characteristic of a management control system.
A. A management control system coordinates forecasting sales and cost driver activities, budgeting, and
measuring and evaluating performance.
B. A management control system encourages short term profitability.
C. A management control system motivates individuals throughout the organization to act in concert.
D. A management control system aids and coordinates the process of making decisions.
51) _____ is the logical integration of management accounting tools to gather and report data and to
evaluate performance.
A. A management control system
B. A quality control system
C. A financial reporting system
D. An internal control system
52) Jewel Company’s revenues are $300 and invested capital is $240. Expenses are currently 60% of
sales. Jewel Company’s current return on investment is _____.
A. none of these answers are correct
B. 100%
C. 80%

12. D. 50%
53) The following information is available for the Peter Company:
Sales $500,000
Invested Capital 312,500
ROI 10%
The return on sales is _____.
A. none of these answers is correct
B. 6.250%
C. 1.000%
D. 10.000%
54) Speedo Company’s revenues are $300 on invested capital of $240. Expenses are currently 70% of
sales. If Angelo Company can reduce its invested capital by 20%, return on investment will be _____.
A. 46.88%
B. 93.75%
C. 18.75%
D. 75%