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Grading Summary
CPA Exam Prep:Bus Envr & Cncpt
Question Type: Multiple Choice # Of Questions: 10
May 2013
# Correct: 9
Student Answer:
17,500 19,250 25,667 Instructor Choice "c" is correct. The ceramics manufacturer will need to sell 19,250 cups Explanation: under new cost assumptions to break even. The fact pattern provides current breakeven information and requires computation of a revised breakeven subject to new assumptions. Current Costs Costs Selling price (given) 9.00 Variable costs (given) 3.00 Contribution margin (computed) 6.00 Breakeven in units (given) Fixed costs (computed) 115,500 $ 7.50 2.25 $ 5.25 x 1.10 x 1.333 = $ = $ Assumptions Revised $
20,000 $ 105,000
Current fixed costs are computed using the breakeven formula in units as follows: Fixed costs Contribution margin per unit = Breakeven in units Fixed costs $5.25 = 20,000 Fixed costs = $5.25 x 20,000 = $105,000 Revised breakeven point in units is computed using the same formula with revised data: Fixed costs Contribution margin per unit = Breakeven in units $115,500 $6.00 = Breakeven in units 19,250 = Breakeven in units
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A company uses a standard costing system. At the end of the current year, the company provides the following overhead information: Actual overhead incurred: Variable $ 90,000 Fixed $ 62,000 Budgeted fixed overhead $ 65,000 Variable overhead rate (per direct labor hour) $ 8 Standard hours allowed for actual production 12,000 Actual labor hours used 11,000 What amount is the variable overhead efficiency variance? $8,000 favorable.
Student Answer:
$8,000 unfavorable. $6,000 favorable. $2,000 unfavorable. Instructor Choice "a" is correct. The efficiency variance compares the amount of the variable Explanation: overhead applied (at standard) to the amount of variable overhead that would have been applied at actual. If more was applied than would have been incurred, the results are favorable. Standard hours allowed 12,000 Application rate $ 8 Total 96,000 Actual hours 11,000 Application rate $ 8 Total (88,000) Variable efficiency variance $ 8,000 Choice "b" is incorrect. Results are favorable, not unfavorable. Choice "c" is incorrect. The proposed amount is the budget variance, the amount applied compared to the amount spent. Choice "d" is incorrect. The proposed answer is the variable spending variance (the actual amount spent compared to the amount applied at actual).
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The information contained in a cost of goods manufactured budget would most directly relate to the: Materials used, direct labor, overhead applied, and work-in-process
Instructor Explanation:
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Student Answer:
Many firms have made significant strides in reducing their inventories. Which of the following would be least likely to encourage managers to reduce inventory? Using variable costing. Using absorption costing. Using throughput costing. Instituting a charge against the budget for managers based on the size of the inventory. Choice "b" is correct. Absorption costing (as the name implies) absorbs fixed overhead cost into the units produced. Those units placed in inventory can absorb some of the manager's cost and raise profits. This method encourages larger inventories. Choice "a" is incorrect. Variable costing places only variable costs into products and all fixed overhead is charged to cost of goods sold. This does not give an incentive to overproduce. Choice "c" is incorrect. Throughput costing is an inventory costing method that places only variable direct material in inventoriable cost. All other costs are treated as costs of the period. This also does not give an incentive to overproduce. Choice "d" is incorrect. Clearly, putting a charge against the budget for inventory will discourage excess inventory.
Instructor Explanation:
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Instructor Explanation:
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Student Answer:
Instructor Explanation:
Which one of the following items would have to be included for a company preparing a schedule of cash receipts and disbursements for the calendar year Year 1? A purchase order issued in December Year 1 for items to be delivered in February Year 2. Dividends declared in November Year 1 to be paid in January Year 2 to shareholders of record as of December Year 1. The amount of uncollectible customer accounts for Year 1. Borrowing funds from a bank on a note payable taken out in June Year 1 and agreeing to pay the principal and interest in June Year 2. Choice "d" is correct. Borrowing funds on a note in June Year 1 would be a cash inflow in Year 1 and would have to be included in a schedule of cash receipts and disbursements for Year 1. The repayment would be a cash outflow in Year 2. Choice "a" is incorrect. A purchase order is a commitment, but not a cash event. Choice "b" is incorrect. Dividends declared are a non-cash item until paid in Year 2. Choice "c" is incorrect. Uncollectible accounts are a non-cash item.
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Which of the following forecasting methods relies mostly on judgment? Time series models.
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The controller for Durham Skates is reviewing the production cost report for July. An analysis of direct material costs reflects an unfavorable flexible budget variance of $25. The plant manager believes this is excellent performance on a flexible budget for 5,000 units of direct material. However, the production supervisor is not pleased with this result as he claims to have saved $1,200 in material cost on actual production using 4,900 units of direct material. The standard material cost is $12 per unit. Actual material used for the month amounted to $60,025. If the direct material variance was investigated further, it would reflect a price variance of: $850 unfavorable.
Student Answer:
$1,200 favorable. $1,225 unfavorable. $2,500 favorable. Instructor Choice "c" is correct. The price variance is the difference between the standard Explanation: price and the actual price times the actual volume. Standard price (given) $ 12.00 Actual price (determined above) 12.25 Difference $ .25 Times actual volume 4,900.00 Equals price variance $ 1,225.00 Use the mnemonics you learned! P = D x A
Choices "a", "b", and "d" are incorrect, based on the above calculations.
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Clay Co. has considerable excess manufacturing capacity. A special job order's cost sheet includes the following applied manufacturing overhead costs: Fixed costs Variable costs $21,000 33,000
The fixed costs include a normal $3,700 allocation for in-house design costs, although no in-house design will be done. Instead the job will require the use of external designers costing $7,750. What is the total amount to be included in the calculation to determine the minimum acceptable price for the job? Student Answer: $36,700 $40,750 $54,000 $58,050 Choice "b" is correct. The minimum acceptable selling price should include only the incremental costs associated with the order: $33,000 variable costs + $7,750 external designers costs = $40,750. Note that this is a special order (won't affect regular sales) and there is idle capacity. Choice "a" is incorrect. The $3,700 allocation of in-house design costs should not be included as it is not an incremental cost for this special order. Choice "c" is incorrect. The $21,000 fixed costs should not be included as they are not incremental costs for this special order. Choice "d" is incorrect. No part of the $21,000 fixed costs should be included as they are not incremental costs for this special order.
Instructor Explanation:
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Internal business. Learning and growth. Financial. Instructor Choice "c" is correct. Employee satisfaction and retention measures are used Explanation: under the "learning and growth" perspective of the balanced scorecard. Employee satisfaction typically correlates with productivity, employee effectiveness, and retention. Retention itself often relates to reduced retraining, increased opportunity for human resource development, and reduced investment in learning curves. Choice "a" is incorrect. The customer perspective of the balanced scorecard measures results of business operation (e.g., customer satisfaction and customer retention), not employee satisfaction and retention. Choice "b" is incorrect. The internal business perspective of the balanced scorecard measures results of business operation (e.g., improvements in throughput and other measures of efficiency), not employee satisfaction and retention. Choice "d" is incorrect. The financial perspective of the balanced scorecard measures traditional results of business operation (e.g., improved margins or improved cash flows), not employee satisfaction and retention Points Received: Comments: * Times are displayed in (GMT-07:00) Mountain Time (US & Canada) 10 of 10