Examination Final Study Guide
ACC/561 Version 4
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ACC/561 Final Examination Study Guide
This study guide will prepare you for the Final Examination you will complete in the final week. It contains
practice questions, which are related to each weeks objectives. In addition, refer to each weeks readings
and your student guide as study references for the Final Examination.
Week One: Financial Reporting and Analysis
Objective: Differentiate between financial statements.
1. The _____ is also called the statement of financial position.
a. income statement
b. balance sheet
c. statement of retained earnings
d. statement of cash flows
Objective: Differentiate between financial statements.
2. _____ is the field of accounting that develops information for external decision makers, such as
stockholders, suppliers, banks, and government regulatory agencies.
a.
Auditing
b.
c.
d.
Tax accounting
Management accounting
Financial accounting
Objective: Differentiate between financial statements.
3. The primary users of management accounting information are _____.
a. bankers
b. governmental regulatory authorities
c. internal decision makers
d. suppliers
Objective: Evaluate financial statements of nongovernment organizations.
4. 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 by _____.
a. increasing the accounts payable account by $10,000
b.
c.
d.
decreasing the accounts payable account by $10,000
increasing the capital account by $10,000
decreasing the capital account by $10,000
Objective: Evaluate financial statements of nongovernment organizations.
5. Etiwanda Companys accountant recorded a debit to the accounts payable account and a credit
to the cash account. This transaction will _____.
a. increase cash and decrease accounts payable
b.
decrease cash and increase accounts payable
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c.
d.
increase cash and increase accounts payable
decrease cash and decrease accounts payable
Objective: Evaluate financial statements of nongovernment organizations.
6. The accrual basis of accounting recognizes transactions effects on financial statements in the
period when _____.
a. revenues are earned and expenses are incurred
b.
c.
d.
cash is received or disbursed
the transaction occurs
the accounting equation is decreased
Objective: Recognize the major aspects of the regulatory environment.
7. Limited liability means that _____.
a. the corporations creditors have claims on only the assets of the corporation and not on the
b.
c.
assets of the owners of the corporation
the creditors of a corporation can receive only up to, and no more than, the amount due to them
the company is required to pay only current liabilities in the current year and has no obligation to
pay long-term liabilities in the current year
d. corporations can have liabilities up to only a certain amount due to limits on the company's
borrowing capability
Week Two: Apply Financial Information
Objective: Evaluate the financial condition of a company.
8. The accounting convention of _____ guides the significance of an item of financial data in relation
to other financial data.
a. objectivity
b.
c.
d.
cost-benefit
conservatism
materiality
Objective: Evaluate the financial condition of a company.
9. The accounting convention of _____ permits a company to immediately expense assets, such as
a garbage can, with small values and long, useful lives.
a. objectivity
b.
c.
d.
continuity
materiality
conservatism
Objective: Evaluate the financial condition of a company.
10. The accounting convention of _____ means selecting the method of measurement that yields the
gloomiest immediate results.
a. cost-benefit
b.
objectivity
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c.
d.
materiality
conservatism
Objective: Evaluate the financial condition of a company.
11. Valuing assets at market value to facilitate the measurement of economic income violates the
_____ accounting convention.
a. materiality
b.
c.
d.
matching
historical-cost
cost-benefit
Week Three: Product Costing
Objective: Differentiate between various costing methods.
12.
a.
b.
c.
d.
Absorption costing assigns _____ to the product.
variable manufacturing costs
all variable costs
all variable manufacturing and fixed manufacturing costs
all variable and fixed costs
Objective: Differentiate between various costing methods.
13. Martinez Company has two service departments, Maintenance and Personnel, and 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:
Direct department costs
Square footage
Number of employees
Maintenance
$50,400
1,600
16
Personnel
$33,600
800
24
Mixing
$42,000
3,200
48
Finishing
$5,600
2,400
64
If the step-down method is used to allocate costs and the Maintenance Department is allocated first,
then the amount of overhead allocated from Personnel to Maintenance is _____.
a. $4,998
b.
c.
d.
$4,200
$3,539
$0
Objective: Differentiate between various costing methods.
14. 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:
Direct department costs
Square footage
Number of employees
Maintenance
$126,000
800
8
Personnel
$84,000
400
12
Mixing
$105,000
1,600
24
Finishing
$175,000
1,200
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If the step-down method of allocating costs is used and the Personnel Department is allocated first,
then the amount of overhead allocated from Personnel to Finishing is _____.
a. $42,000
b.
c.
d.
$72,000
$31,500
$105,000
Objective: Differentiate between various costing methods.
15. Murphy Company has two service departments, Maintenance and Personnel, and 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:
Direct department costs
Square footage
Number of employees
Maintenance
$126,000
800
8
Personnel
$84,000
400
12
Mixing
$105,000
1,600
24
Finishing
$175,000
1,200
32
If the step-down method of allocating costs is used and the Personnel Department is allocated first,
then the amount of overhead allocated from Personnel to Mixing is _____.
a. $31,500
b.
c.
d.
$58,500
$63,000
$78,000
Objective: Make management decisions using costing methods.
16.
a.
b.
c.
d.
_____ is used for external reporting.
Absorption costing
Variable costing
Direct costing
Average costing
Objective: Make management decisions using costing methods.
17.
a.
b.
c.
d.
Launching a new product line is an example of _____.
decision making
planning
controlling
organization
Objective: Make management decisions using costing methods.
18.
a.
b.
c.
Which of the following is a cost driver of customer service costs?
Hours spent on designing products
Travel costs of the vice president of production
Number of service calls
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d.
Office rent for the accounting office
Week Four: CostVolumeProfit Analysis
Objective: Explain the components of costvolumeprofit analysis.
19. 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. $195
b.
c.
d.
$108
$51
$126
Objective: Explain the components of costvolumeprofit analysis.
20. 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, the variable cost per unit is _____.
a. $70
b.
c.
d.
$100
$75,000
$30
Objective: Use costvolumeprofit analysis and break-even analysis to make business decisions.
21. Hug Me Company produces dolls. Each doll sells for $20. Variable costs per unit total $14, 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. $1,450,000
b.
c.
d.
$1,023,529
$621,429
$435,000
Objective: Use costvolumeprofit analysis and break-even analysis to make business decisions.
22. 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.
c.
d.
$150,000
$200,000
$1,500
Week Five: Budgetary Planning and Control
Objective: Prepare various types of budgets.
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23.
a.
b.
c.
d.
Differences between the static budget and the flexible budget are caused by _____.
problems of cost control
poor usage of material and labor
a combination of price and material variances
actual activity differing from expected activity levels
Objective: Prepare various types of budgets.
24. Budgets _____.
a. are quantitative expressions of action plans
b. evaluate the accuracy of forecasted spending amounts by highlighting deviations between actual
c.
d.
expenditures and the budgeted amount
are deviations from a plan
ignore areas that are presumed to be running smoothly
Objective: Prepare various types of budgets.
25.
a.
b.
c.
d.
_____ is the first step in designing a management control system.
Evaluating management's performance
Establishing organizational goals
Preparing financial statements
Distinguishing between profit centers and cost centers
Objective: Analyze the uses of different types of budgets.
26.
a.
b.
c.
d.
The master budget quantifies targets for ___.
sales
product design
markets
efficiency activity
Objective: Analyze the uses of different types of budgets.
27.
a.
b.
c.
d.
The master budget forecasts___.
sales.
the number of employees.
the number of product designs.
cost allocation among departments.
Week Six: Decision Making
Objective: Determine relevant costs to make business decisions.
28.
a.
b.
c.
The _____ method of measuring cost functions is the least reliable.
highlow
visual-fit
simple-least-squares-regression
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d.
multiple-least-squares-regression
Objective: Determine relevant costs to make business decisions.
29. Managers should apply two principles to obtain accurate and useful cost functions. These
principles are ____.
a. plausibility and believability
b.
c.
d.
plausibility and reliability
reliability and validity
believability and validity
Objective: Determine relevant costs to make business decisions.
30.
a.
b.
c.
d.
As the cost-driver activity level increases within the relevant range, _____.
total fixed costs increase
fixed costs per unit decrease
total variable costs decrease
variable costs per unit decrease
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Answer Key
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