1. ACC 561 Final Exam
54/54 Questions with Answers
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1) 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
2) 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
3) According to the Financial Executives Institute, one function of the treasurer is _____.
A. government reporting
B. reporting and interpreting financial information
C. Short term financing
D. tax administration
4) Which of the following is not a major factor causing changes in management accounting today?
A. E-commerce is not a major factor.
B. Declining work ethic is not a major factor.

2. C. Increased global competition is not a major factor.
D. Increasing importance of the service sector of the economy is not a major factor.
5) 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. integrity
B. competence
C. confidentiality
D. objectivity
6) Ethical accountants are important to society because _____.
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
7) _____ refers to accounting information developed for managers within an organization.
A. Tax accounting
B. Financial accounting
C. Managerial accounting
D. Internal auditing
8) The primary users of management accounting information are _____.
A. suppliers
B. internal decision makers
C. governmental regulatory authorities
D. bankers
9) _____ is the field of accounting that develops information for external decision makers such as
stockholders, suppliers, banks, and government regulatory agencies.
A. Financial accounting

3. B. Management accounting
C. Tax accounting
D. Auditing
10) The _____ is also called the statement of financial position.
A. balance sheet
B. income statement
C. statement of retained earnings
D. statement of cash flows
11) Any event that affects the financial position of an organization and requires recording is called
a(n)_____.
A. account
B. transaction
C. posting
D. accounting change
12) _____ would not appear on the financial statements for a sole proprietorship.
A. Cost of Goods Sold
B. Paid-in Capital
C. Accumulated Depreciation
D. Unearned Sales Revenues
13) The accounting convention of _____ guides the relative sophistication of the accounting system.
A. cost benefit
B. objectivity
C. Conservatism
D. materiality
14) 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 Retained Income for $50,000
B. Cash and a credit to Paid-in Capital for $50,000
C. Retained Earnings and a credit to Cash for $50,000
D. Paid-in Capital and a credit to Retained Earnings for $50,000
15) The accounting convention of _____ means selecting the method of measurement that yields the
gloomiest immediate results.
A. objectivity
B. conservatism
C. cost benefit

4. D. materiality
16) The statement of cash flows is used for all of the following except_____.
A. determining a company's ability to pay its debts when they are due
B. evaluating the creditworthiness of the organization
C. showing the relationship of net income to changes in cash
D. revealing commitments that may restrict future courses of action
17) 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 Accounts Payable account by $10,000
B. decreasing the Capital account by $10,000
C. increasing the Accounts Payable account by $10,000
D. increasing the Capital account by $10,000
18) Nonoperating items on the income statement_____.
A. reflect the effects of financial management decisions
B. appear on the income statement immediately after gross profit
C. are revenues and expenses arising from adjusting entries
D. appear only on corporate income statements
19) Which value chain function would include depreciation on transportation cost?
A. The customer service function would include depreciation on transportation cost.
B. The marketing function would include depreciation on transportation cost
C. The distribution function would include depreciation on transportation cost.
D. The production function would include depreciation on transportation cost.
20) Which value chain function would include advertising costs?
A. The customer service function would include advertising costs.
B. The production function would include advertising costs.
C. The distribution function would include advertising costs.
D. The marketing function would include advertising costs.
21) Which of the following is not a cost driver of customer services costs?
A. Travel costs are not a cost driver of customer services costs.
B. Number of service calls is not a cost driver of customer services costs.
C. Hours spent servicing products are not a cost driver of customer services costs.
D. All of these answers are correct

5. 22) 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. $1,023,529
B. $621,429
C. $1,450,000
D. $435,000
23) If the sales price per unit is $100, the unit variable cost is $75, and total fixed costs are $150,000,
then the break even volume in dollar sales rounded to the nearest whole dollar is _____.
A. $600,000
B. $150,000
C. $200,000
D. $1,500
24) Knothole Company 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 break-even volume in dollars is _____.
A. $1,573,560
B. $2,030,400
C. $456,840
D. none of these answers is correct
25) _____ of approximating cost functions does not involve the analysis of past costs.
A. Visual fit analysis
B. Engineering analysis
C. High low analysis
D. least-squares regression
26) Managers should apply two principles to obtain accurate and useful cost functions. These principles
are ____.
A. plausibility and reliability
B. reliability and validity
C. plausibility and believability
D. believability and validity
27) In relation to a cost function, the term reliability means_____.

6. A. whether the cost function conforms to a given mathematical model
B. how well the cost function predicts future costs
C. whether the costs and activities can be easily observed
D. how well the cost function explains past cost behavior
28) _____ 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. Cost driver accounting
B. Activity based costing
C. Transaction costing
D. Transaction based accounting
29) _____ need cost accounting systems.
A. Service organizations and nonprofit organizations
B. Manufacturing firms and service organizations
C. Manufacturing firms, service organizations, and nonprofit organizations
D. Manufacturing firms and nonprofit organizations
30) _____ is an example of the external financial reporting purpose of the cost management systems.
A. The product mix to optimize profitability
B. The cost of a manufacturing process
C. Budget reporting
D. The amount of inventory that should appear on the balance sheet
31) A sales forecast is _____.
A. the result of decisions to create conditions
B. a prediction of sales under a given set of conditions
C. all of these answers are correct
D. the same as a sales budget that will generate a desired level of sales
32) _____ budgeting is when budgets are formulated with the active participation of all affected
employees
A. Team
B. Financial
C. Shared
D. Participative
33) A _____ gives the expected sales under a given set of conditions.
A. sales budget
B. sales prediction

7. C. sales forecast
D. budget forecast
34) 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. 11,000 and 22,000 units, respectively
B. none of these answers is correct
C. 11,000 and 24,000 units, respectively
D. 10,000 and 20,000 units, respectively
35) The master budget includes forecasts for all of the following except _____.
A. number of employees
B. cash disbursements
C. balance sheets
D. sales
36) A sales forecast is _____.
A. the result of decisions to create conditions
B. all of these answers are correct
C. the same as a sales budget that will generate a desired level of sales
D. a prediction of sales under a given set of conditions
37) _____ are components of a master budget.
A. An operating budget and a financial budget
B. A cash budget and an activity budget
C. A continuous budget and a static budget
D. A strategic plan and an operating budget
38) Which of the following statements is false?
A. Flexible budgets are not based on the same revenue and cost behavior assumptions as the static
budget.
B. Flexible budgets are automatically matched to changes in activity levels
C. Flexible budgets are prepared for a range of activity.
D. Flexible budgets help provide a basis for management by exception.
39) The master budget quantifies targets for all of the following except _____.
A. production
B. cost driver activity
C. markets
D. sales

8. 40) Cost allocation base refers to the _____.
A. total costs to be allocated
B. total allocated costs
C. cost objectives
D. cost driver
41) The preferred guidelines for allocating service department costs include _____.
A. evaluating performance using allocated costs for each service department
B. establishing part or all of the details regarding cost allocation in advance of rendering the service
C. allocating variable- and fixed-cost pools simultaneously
D. identifying the direct and indirect costs
42) _____ is not a type of cost allocation.
A. Reallocation of costs from service departments to production departments
B. Allocation of costs of a particular organizational unit to products or services
C. Reallocation of costs from production departments to service departments
D. Allocation of costs to the appropriate organizational unit
43) Kevin 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 Finishing is _____.
A. $72,000
B. $31,500
C. $105,000
D. $42,000
44) 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

9. 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. $58,500
B. $63,000
C. $78,000
D. $31,500
45) Serena 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,
then the amount of overhead that would be allocated from Maintenance to Finishing is _____.
A. $31,500
B. $57,000
C. $47,250
D. $42,750
46) When the variable costing method is used, fixed factory overhead appears on the income statement
as a_____.
A. fixed expense
B. production-volume variance
C. component of cost of goods sold and as a production-volume variance
D. component of cost of goods sold
47) _____ is (are) used for external reporting.
A. Absorption costing
B. Variable costing
C. Absorption costing and variable costing
D. Direct costing
48) In absorption costing, costs are separated into the major categories of_____.
A. manufacturing and nonmanufacturing
B. manufacturing and fixed
C. variable and nonmanufacturing
D. fixed and variable
49) _____ is the first step in designing a management control system.
A. Evaluating management's performance

10. B. Establishing organizational goals
C. Distinguishing between profit centers and cost centers
D. Preparing financial statements
50) _____ is (are) the most basic component of a management control system.
A.The organization's long-range budget
B.The organization's goals
C.Top management's preferences
D.The stockholder's preferences
51) Identify which of the following is not a characteristic of a management control system.
A.A management control system aids and coordinates the process of making decisions.
B.A management control system encourages short term profitability.
C.A management control system coordinates forecasting sales and cost driver activities, budgeting,
and measuring and evaluating performance.
D.A management control system motivates individuals throughout the organization to act in concert.
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. 50%
B. 100%
C. none of these answers are correct
D. 80%
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. 10.000%
B. none of these answers is correct
C. 6.250%
D. 1.000%
54) The following information is available for the Peter Company:
Sales $150,000
Invested Capital 156,250
ROI 10%
The return on sales is _____.

11. A. 10.00%
B. none of these answers is correct
C. 10.42%
D. 62.50%