1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)

MULTIPLE CHOICE

1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)

2. One major difference between financial and management accounting is that _______. (Points : 1)

3. Which of the following is not a valid method for determining product cost? (Points : 1)

4. Cost accounting is directed toward the needs of _______. (Points : 1)

5. Financial accounting _______. (Points : 1)

6. Which of the following statements is true? (Points : 1)

7. Which of the following statements is false? (Points : 1)

8. The set of processes that convert inputs into services and products that consumers use is called _______. (Points : 1)

9. The balanced scorecard perspective that focuses on using a firm's intellectual capital to adapt to customer needs through product or service innovations is the ________. (Points : 1)

10. The world has essentially become smaller because of _______. (Points : 1)

11. The term "relevant range" as used in cost accounting means the range over which ______. (Points : 1)

12. When cost relationships are linear, total variable prime costs will vary in proportion to changes in ______. (Points : 1)

13. An example of a fixed cost is _______. (Points : 1)

14. A(n) ____ cost increases or decreases in intervals as activity changes. (Points : 1)

15. When the number of units manufactured increases, the most significant change in unit cost will be reflected as a(n) ________. (Points : 1)

16. A cost driver _______. (Points : 1)

17. Product costs are deducted from revenue _______. (Points : 1)

18. Which of the following is not a product cost component? (Points : 1)

19. Davis Company manufacturers desks. The beginning balance of Raw Material Inventory was $4,500; raw material purchases of $29,600 were made during the month. At month end, $7,700 of raw material was on hand. Raw material used during the month was _______. (Points : 1)

20. Urban Company manufacturers tables. If raw material used was $80,000 and Raw Material Inventory at the beginning and end of the period, respectively, was $17,000 and $21,000, what was amount of raw material was purchased? (Points : 1)

Click here for the solution: 1. In comparing financial and management accounting, which of the following more accurately describes management accounting information? (Points : 1)

Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs

13-52 Choice of Cost-Allocation Bases in Accounting Firm

Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs to jobs than just direct labor. In this way, the firm will be able to justify billings to clients.

Last year’s costs were
Direct-professional labor $ 5,000,000
Overhead 10,000,000
Total costs $15,000,000

The following costs were included in overhead:
Computer time $ 750,000
Secretarial cost 700,000
Photocopying 250,000
Fringe benefits to direct labor 800,000
Phone call time with clients (estimated but not tabulated) 500,000
Total $3,000,000

The firm’s data processing techniques now make it feasible to document and trace these costs to individual jobs. As an experiment, in December Brenda McCoy arranged to trace these costs to six audit engagements.

Two job records showed the following:
Engagement
Eagledale Company First Valley Bank
Direct-professional labor $15,000 $15,000
Fringe benefits to direct labor 3,000 3,000
Phone call time with clients 1,500 500
Computer time 3,000 700
Secretarial costs 2,000 1,500
Photocopying 500 300
Total direct costs $25,000 $21,000

1. Compute the overhead application rate based on last year’s costs.
2. Suppose last year’s costs were reclassified so that $3 million would be regarded as direct costs instead of overhead. Compute the overhead application rate as a percentage of direct labor and as a percentage of total direct costs.
3. Using the three rates computed in numbers 1 and 2, compute the total costs of engagements for Eagledale Company and First Valley Bank.
4. Suppose that client billing was based on a 30% markup of total job costs. Compute the billings that would be forthcoming in number 3.
5. Which method of costing and overhead application do you favor? Explain.

Click here for the solution: Brenda McCoy, the managing partner of McCoy, Brennan, and Cable, a public accounting firm, is considering the desirability of tracing more costs

The Balboa Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one

The Balboa Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 year, but it can sell it now to another firm in the industry for $265,000. The old machine is being depreciated by $120,000 per year, using the straight line method.

The new machine has a purchase price of $1,175,000, an estimated useful life and MACRS class life of 5 years, and an estimated salvage value of $145,000. The applicable depreciation rates are 20%, 32%, 19%, 12%, 11% and 6%. It is expected to economize on electric power usage, labor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $255,000 will be realized if the new machine is installed. The company's marginal tax rate is 35%, and it has a 12% WACC.

a) What is the initial net cash flow if the new machine is purchased and the old one is replaced?
b) Calculate the annual depreciation allowances for both machines, and compute the change in the annual depreciation expense if the replacement is made.
c) What are the incremental net cash flows in Years 1 through 5?
d) Should the firm purchase the new machine? Support your answer.
e) In general, how would each of the following factors affect the investment decision, and how should each be treated?
(1) The expected life of the existing machine decreases.
(2) The WACC is not constant but is increasing as Balboa adds more projects into its
capital budget for the year.

Click here for the solution: The Balboa Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one

Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?

13. Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?


Click here for the solution: Which method (direct or indirect) of presenting the statement of cash flows is more intuitively logical? Why?

The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year

11. The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year. Nominal GDP was $20 million this year, and the money supply was $7 million. The central bank for the One Product economy plans to increase the money supply by 10 percent next year.

a. What was the average selling price for the personal computers this year?
b. What is the expected average selling price next year for personal computers if the velocity of money remains at this year’s turnover rate? What percentage change in price level is expected to occur?
c. If the objective is to keep the price level the same next year (i.e., no inflation), what percentage increase in the money supply should the central bank plan for?
d. How would your answer in (c) change if the velocity of money is expected to be three times next year? What is it now?

Click here for the solution: The One Product economy, which produces and sells only personal computers (PCs), expects that it can sell 500 more, or 12,500 PCs, next year