ACCT526 Midterm Exam Questions and Correct
Verified Solutions 2024 Update.
Alpha Inc. manufactures electronic gadgets. Last month, direct materials costing $500,000 were
put into production. Direct labor of $600,000 was incurred, manufacturing overhead equaled
$400,000, and selling and administrative costs totaled $500,000. The company manufactured
10,000 electronic gadgets during the month. Assume that there was no beginning or ending
work in process balances. Calculate the per-unit prime cost.
- Answer- 500,000 + 600,,000 = $110
Which of the following is the mathematical expression for calculating the cost of goods sold?
- Answer- Cost of Goods Sold = Cost of Goods Manufactured + Beginning Finished Goods
Inventory - Ending Finished Goods Inventory
Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices
to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of
hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic
software support package. Both come from mail-order companies with good reputations. The
selling price for each is identical. After some review, Adriana discovers that the cost of
operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar,
the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower
operating and maintenance costs. The agent for Confiar, however, emphasized the service
reputation of the product and the faster delivery time (Confiar can be purchased and delivered
1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar.
What is the tot - Answer- The product, its features, services and delivery speed
(using above) How does the strategic positioning differ for the two companies?
- Answer- Dantex is emphasizing low costs, and Confiar is attempting to differentiate its PC by
offering faster delivery and higher-quality service.
, ACCT526 Midterm Exam Questions and Correct
Verified Solutions 2024 Update.
4. CONCEPTUAL CONNECTION Suppose that Adriana's decision was prompted mostly by the
desire to receive the computer quickly. Informed that it was losing sales because of the longer
time to produce and deliver its products, the management of the company producing Drantex
decided to improve delivery performance by improving its internal processes. These
improvements decreased the number of defective units and the time required to produce its
product. Consequently, delivery time and costs both decreased, and the company was able to
lower its prices on Drantex. Explain how these actions translate into strengthening the
competitive position of the Drantex PC relative to the Confiar PC. Also discuss the implications
for the managerial accounting information system.
Better quality and shorter delivery time increase the ____________ of what the customer
receives, while lowering the ____________ decreases the amount paid. In t - Answer- value,
price, Drantex
The provision of accounting information for internal users is known as - Answer- managerial
accounting.
Ethical Behavior
Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a
profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given
the projections for the fourth quarter, it does not look promising. I really need that $10,000. I
know of one way that I can qualify. All I have to do is lay off my three most expensive
salespeople. After all, most of the orders are in for the fourth quarter, and I can always hire
new sales personnel at the beginning of the next year.
- Answer- A manager has a responsibility to the company as well as society. If the manager lays
off the employees, he or she ignores both of these responsibilities. In effect, the manager
would be pursuing self-interest at the expense of the company and the salespeople. While
pursuit of self-interest is not necessarily unethical, it can be if it harms others. In this case, the
manager's action could result in lower profits for the company because sales may decrease in
the long-term and unnecessary training costs will be incurred when the positions are refilled
the following year.
Similarly, it is unjust to penalize productive employees simply to earn a bonus. The right choice
is to retain the three salespeople. In ethical terms, the manager is not behaving with integrity.
, ACCT526 Midterm Exam Questions and Correct
Verified Solutions 2024 Update.
The reward system , in part, encouraged this behavior. Apparently, the manager is paid a bonus
if profits exceed 10% of planned profits. By basing rewards on a measure such as short-run
profits, the company has given the manager an incentive to manipulate earnings in the short
run. One way of manipulating annual earnings is to reduce or defer discretionary expenditures.
This type of behavior can be discouraged by proper matching of expenses with revenues and by
expanding the performance measures to include long-run factors like market share,
productivity, and personnel development. The accounting system can also be used to track
trends (e.g., training costs over time). Moreover, managers can be required to provide
extensive justification for significant changes in discretionary expenses.
The objective of profit maximization should be constrained by the requirement that profits be
achieved through - Answer- both legal and ethical means
Which of the following is a characteristic of managerial accounting? - Answer- a. There is an
emphasis on the future.
b. It is broad-based and multidisciplinary.
c. It collects financial information useful for internal decision-making.
d. There is an internal focus.
e. All of these.
Ethical Issues
Bedron Company is a closely held investment service group that has been quite successful over
the past 5 years, consistently providing most members of the top management group with 50%
bonuses. In addition, both the chief financial officer and the chief executive officer have
received 100% bonuses. Bedron expects this trend to continue.
Recently, Bedron's top management group, which holds 35% of the outstanding shares of
common stock, has learned that a major corporation is interested in acquiring Bedron. The
other corporation's initial offer is attractive and is several dollars per share higher than
Bedron's current share price. One member of management told a group of employees under
Verified Solutions 2024 Update.
Alpha Inc. manufactures electronic gadgets. Last month, direct materials costing $500,000 were
put into production. Direct labor of $600,000 was incurred, manufacturing overhead equaled
$400,000, and selling and administrative costs totaled $500,000. The company manufactured
10,000 electronic gadgets during the month. Assume that there was no beginning or ending
work in process balances. Calculate the per-unit prime cost.
- Answer- 500,000 + 600,,000 = $110
Which of the following is the mathematical expression for calculating the cost of goods sold?
- Answer- Cost of Goods Sold = Cost of Goods Manufactured + Beginning Finished Goods
Inventory - Ending Finished Goods Inventory
Adriana Alvarado has decided to purchase a personal computer. She has narrowed the choices
to two: Drantex and Confiar. Both brands have the same processing speed, 6.4 gigabytes of
hard-disk capacity, two USB ports, and a DVDRW drive, and each comes with the same basic
software support package. Both come from mail-order companies with good reputations. The
selling price for each is identical. After some review, Adriana discovers that the cost of
operating and maintaining Drantex over a 3-year period is estimated to be $300. For Confiar,
the operating and maintenance cost is $600. The sales agent for Drantex emphasized the lower
operating and maintenance costs. The agent for Confiar, however, emphasized the service
reputation of the product and the faster delivery time (Confiar can be purchased and delivered
1 week sooner than Drantex). Based on all the information, Adriana has decided to buy Confiar.
What is the tot - Answer- The product, its features, services and delivery speed
(using above) How does the strategic positioning differ for the two companies?
- Answer- Dantex is emphasizing low costs, and Confiar is attempting to differentiate its PC by
offering faster delivery and higher-quality service.
, ACCT526 Midterm Exam Questions and Correct
Verified Solutions 2024 Update.
4. CONCEPTUAL CONNECTION Suppose that Adriana's decision was prompted mostly by the
desire to receive the computer quickly. Informed that it was losing sales because of the longer
time to produce and deliver its products, the management of the company producing Drantex
decided to improve delivery performance by improving its internal processes. These
improvements decreased the number of defective units and the time required to produce its
product. Consequently, delivery time and costs both decreased, and the company was able to
lower its prices on Drantex. Explain how these actions translate into strengthening the
competitive position of the Drantex PC relative to the Confiar PC. Also discuss the implications
for the managerial accounting information system.
Better quality and shorter delivery time increase the ____________ of what the customer
receives, while lowering the ____________ decreases the amount paid. In t - Answer- value,
price, Drantex
The provision of accounting information for internal users is known as - Answer- managerial
accounting.
Ethical Behavior
Manager: If I can reduce my costs by $40,000 during this last quarter, my division will show a
profit that is 10% above the planned level, and I will receive a $10,000 bonus. However, given
the projections for the fourth quarter, it does not look promising. I really need that $10,000. I
know of one way that I can qualify. All I have to do is lay off my three most expensive
salespeople. After all, most of the orders are in for the fourth quarter, and I can always hire
new sales personnel at the beginning of the next year.
- Answer- A manager has a responsibility to the company as well as society. If the manager lays
off the employees, he or she ignores both of these responsibilities. In effect, the manager
would be pursuing self-interest at the expense of the company and the salespeople. While
pursuit of self-interest is not necessarily unethical, it can be if it harms others. In this case, the
manager's action could result in lower profits for the company because sales may decrease in
the long-term and unnecessary training costs will be incurred when the positions are refilled
the following year.
Similarly, it is unjust to penalize productive employees simply to earn a bonus. The right choice
is to retain the three salespeople. In ethical terms, the manager is not behaving with integrity.
, ACCT526 Midterm Exam Questions and Correct
Verified Solutions 2024 Update.
The reward system , in part, encouraged this behavior. Apparently, the manager is paid a bonus
if profits exceed 10% of planned profits. By basing rewards on a measure such as short-run
profits, the company has given the manager an incentive to manipulate earnings in the short
run. One way of manipulating annual earnings is to reduce or defer discretionary expenditures.
This type of behavior can be discouraged by proper matching of expenses with revenues and by
expanding the performance measures to include long-run factors like market share,
productivity, and personnel development. The accounting system can also be used to track
trends (e.g., training costs over time). Moreover, managers can be required to provide
extensive justification for significant changes in discretionary expenses.
The objective of profit maximization should be constrained by the requirement that profits be
achieved through - Answer- both legal and ethical means
Which of the following is a characteristic of managerial accounting? - Answer- a. There is an
emphasis on the future.
b. It is broad-based and multidisciplinary.
c. It collects financial information useful for internal decision-making.
d. There is an internal focus.
e. All of these.
Ethical Issues
Bedron Company is a closely held investment service group that has been quite successful over
the past 5 years, consistently providing most members of the top management group with 50%
bonuses. In addition, both the chief financial officer and the chief executive officer have
received 100% bonuses. Bedron expects this trend to continue.
Recently, Bedron's top management group, which holds 35% of the outstanding shares of
common stock, has learned that a major corporation is interested in acquiring Bedron. The
other corporation's initial offer is attractive and is several dollars per share higher than
Bedron's current share price. One member of management told a group of employees under
