ACCT 245- Business Law Exam with Complete Solution

What is a CMA - ANSWER A certified accountant that works for a single company What is a CPA - ANSWER typically works in an accounting firm and can have multiple companies as clients and they may perform multiple task including audits, advising, etc. CFE - ANSWER A certified fraud examiner CIA - ANSWER Certified internal auditor What is the name of the entity created by the Sarbanes-Oxley Act of 2002? - ANSWER PCAOB (public company accounting oversight board) AAA - ANSWER American Accounting Association FASB - ANSWER Financial Accounting Standards Board GASB - ANSWER Governmental Accounting Standards Board What is an integrated report? - ANSWER An integrated report is a concise communication about how an organization's strategy, governance, performance and prospects lead to the creation of value over the short, medium, and long-term. The management controlling function includes - ANSWER implementing plans, evaluating results, and providing feedback Unique difficulties of management accounting in service organizations include - ANSWER ill-defined output, perishability of output, labor intensity Enterprise resource planning - ANSWER used to integrate all of the company's world wide functions, departments, and data into a single system ERP (enterprise resource planning) - ANSWER help to streamline operations and enable companies to respond quickly to changing the marketplace Cost standards - ANSWER used as unit level budgets (I.e standard price) Just-in-time - ANSWER refers to an inventory management system where a small amount of inventory is kept on hand and ordered immediately as it leaves the shelf The controller - ANSWER the chief accounting officer and is in charge of the accounting process the treasurer - ANSWER is responsible for the cash and writing checks Today's business environment is characterized by - ANSWER global competition, time based competition, and a shift toward a service company Attention Directing - ANSWER analyzing variances from the budget of the cost of materials used in making a particular product Scorekeeping - ANSWER perparing the performance report Performance reports serve two functions - ANSWER evaluation function and feedback function What accounts are on manufacturers' balance sheets? - ANSWER Materials, work-in-process, and finished goods How do you compute the costs of goods manufactured? - ANSWER Add direct labor and materials and overhead + beginning work in process minus end of year balance Cost of goods manufactured - ANSWER Beginning work in process+ direct materials used + direct labor + manufacturing overhead - ending work in process Operating income - ANSWER sales revenue - cost of goods sold = gross profit - operating expenses Gross profit - ANSWER sales revenue minus cost of goods sold cost per unit - ANSWER total cost of goods sold/total number of units sold Cost of goods sold - ANSWER beginning inventory + purchases = cost of goods available for sale minus ending inventory Inventoriable product costs - ANSWER Direct materials, direct labor, and overhead (indirect materials, indirect labor, and other overhead) Period costs - ANSWER R&D, design, marketing, distribution, customer service. EXPENSED WHEN INCURRED Costs that tend to vary inversely with changes in activity level are - ANSWER Fixed costs per unit The usual basis for distinguishing between direct and indirect product costs is the economic feasibility of their tracing to a given - ANSWER cost object Total variable costs changes with - ANSWER changes in production level variable costs per - ANSWER do not change with changes in production level total fixed costs - ANSWER do not change with changes in production level Inventoriable costs become expenses - ANSWER when the units in inventory are sold Conversion costs - ANSWER Direct Labor + overhead Why are conversion costs called conversion costs? - ANSWER Because they are used to convert materials into finished goods Prime costs - ANSWER typically make up the largest cost of a product and easily traced back to the product or job Prime costs equation - ANSWER direct materials + direct labor Which of the following would be debited (increased) to assign direct labor costs actually incurred? - ANSWER Work-in-Process Inventory What would be debited to record the direct materials used? - ANSWER work-in-process inventory Finished Goods Inventory would be debited when - ANSWER a product is completed Materials inventory is debited when - ANSWER materials are purchased Predetermined overhead rate - ANSWER (total estimated overhead costs for the year)/(total estimated allocation base or cost driver for the year) Material requisition - ANSWER prepared by manufacturing personnel to request materials for the production process. What would be credited to assign the costs of indirect labor - ANSWER manufacturing overhead What would be necessary to record the purchase of materials on account using a job order costing system - ANSWER debit to materials inventory Process costing - ANSWER used in companies that produce a product that is not unique within itself What would have a high risk of cost distortion? - ANSWER A company adopting plantwide allocation system and producing many different products that use different types and amounts of resources What is true about cost allocation systems? - ANSWER They accurately determine the cost of individual jobs and also highlight the cost of wasteful activities in the production process Lean production system - ANSWER no inventory is made until a customer order has been received traditional production system - ANSWER inventory is pushed through production according to forecasted demand Backflush costing system - ANSWER the production costs are not assigned to the units until they are finished/sold External failure costs - ANSWER The lost profits from the loss of customers External failure is when - ANSWER a product has been delivered that fails to conform to quality conformance Appraisal costs - ANSWER costs incurred to ensure consistent quality of product or jobs Prevention costs - ANSWER costs that are incurred to insure "quality control" - avoid having defective products or jobs internal failure - ANSWER ability to find errors or defects prior to a product or job being delivered Steps of ABC system - ANSWER 1. Identify the activities 2. estimate the total indirect costs of each activity 3. estimate the total quantity of the cost driver 4. allocate costs to the cost object What is true of a JIT production system - ANSWER JIT produces goods in smaller batches than a traditional production system What is true of activity-based management? - ANSWER ABM recognizes that not all indirect costs are driven by the number of units produced What is true of value-engineering - ANSWER it eliminates waste in the system by making a company's processes as effective and efficient as possible Contribution margin income statement - ANSWER Sales Revenue - Variable manufacturing & variable selling and administrative = contribution margin. + Fixed costs = operating income In absorption costing - ANSWER all product costs (variable and fixed) are included as part of cost of goods