Accounting Principles II Exam Review
Course Introduction
Accounting Principles II builds upon foundational accounting concepts by delving deeper into topics such as corporate accounting, managerial accounting, and analysis of financial statements. This course covers accounting for partnerships and corporations, the preparation and interpretation of cash flow statements, budgeting processes, cost accounting methods, and performance evaluation techniques. Students will gain practical skills in analyzing and recording complex business transactions, understanding internal controls, and applying accounting information for effective decision-making within organizations. The course is designed to equip students with a comprehensive understanding of advanced accounting practices essential for careers in accounting and finance.
Recommended Textbook
Horngren's Accounting The Managerial Chapters 10th Edition by Tracie L. Miller Nobles
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Page 2
Chapter 1: Introduction to Managerial Accounting
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Sample Questions
Q1) What is total quality management (TQM)?
A) a philosophy of supplying customers with superior products and services
B) an exchange of information with suppliers and customers to create efficient and effective processes
C) a software system that integrates a company's functions, departments and data into a single system
D) a system which speeds the transformation of raw materials into finished products
Answer: A
Q2) Which of the following would be classified as a prime cost?
A) Cost of raw materials
B) Depreciation on factory equipment
C) Salary of sales personnel
D) Depreciation on office furniture
Answer: A
Q3) The cost of goods manufactured includes selling expenses, administrative expenses, and manufacturing overhead.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Job Order Costing
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Sample Questions
Q1) Pandora Manufacturing purchased $95,000 of raw materials on account and $5,000 raw materials for cash. The materials will be used to produce furniture. Provide the journal entry for the purchase of materials.
Answer: \[\begin{array} { | c | r | r | }
\hline \text { Raw Materials Inventory } & 100,000 & \\
\hline \text { Accounts payable } & & 95,000 \\
\hline \text { Cash } & & 5,000 \\ \hline \end{array}\]
Q2) Underallocated overhead occurs when:
A) allocated overhead costs are less than actual overhead costs.
B) actual overhead costs are less than allocated overhead costs.
C) estimated overhead costs are greater than budgeted overhead costs.
D) estimated overhead costs are greater than actual overhead costs.
Answer: A
Q3) When direct materials are received on the production floor, they are recorded on the job cost record.
A)True
B)False
Answer: True
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Chapter 3: Process Costing
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Sample Questions
Q1) A production cost report can help managers in identifying the most profitable products.
A)True
B)False
Answer: True
Q2) At the end of an accounting period, the costs assigned to a production department can be split into the cost of units fully completed and transferred, and the cost of units partially completed and remaining in the Work-in-Process Inventory of that department.
A)True
B)False
Answer: True
Q3) Under process costing, the costs incurred by each department are recorded in a separate production cost report for each department.
A)True
B)False
Answer: True
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Page 5
Chapter 4: Cost-Volume-Profit Analysis
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Sample Questions
Q1) Williams Company has variable costs of $0.60 per unit of product. In August, the volume of production was 24,000 units and units sold were 20,000. The total production costs incurred were $31,900. What are the fixed costs per month?
A) $17,500
B) $19,900
C) $9,600
D) $14,400
Q2) Lightfoot Company sells its product for $55 and has variable costs of $30 per unit. The total fixed costs are $25,000. What will be the effect on the breakeven point in units if variable costs increase by $5 due to an increase in the cost of direct materials?
A) It will increase by 250 units.
B) It will decrease by 250 units.
C) It will decrease by 167 units.
D) It will increase by 167 units.
Q3) When the variable cost per unit increases, the total number of units required to breakeven also increases.
A)True
B)False
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Chapter 5: Master Budgets
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Sample Questions
Q1) A company with different segments using different software configurations can easily combine budget data of different segments to create the master budget.
A)True
B)False
Q2) Which of the following describes the cash budget?
A) It aids in planning to ensure the company has adequate inventory and cash on hand.
B) It captures the variable and fixed expenses of the business.
C) It depicts the breakdown of sales based on terms of collection.
D) It helps in planning to ensure the business has adequate cash.
Q3) The cash budget is the prerequisite for the master budget.
A)True
B)False
Q4) A static budget is a financial plan for a particular level of sales volume. A)True
B)False
Q5) The output of a cash budget is input for an operating budget.
A)True B)False
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Chapter 6: Flexible Budgets and Standard Cost Systems
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Sample Questions
Q1) Faas Marine Stores Company manufactures decorative fittings for luxury yachts that require highly skilled labor, and special metallic materials. Faas uses standard costs to prepare its flexible budget. For the first quarter of 2011, direct material and direct labor standards for one of their popular products were as follows: Materials: 1.5 pounds per unit; $4.00 per pound
Labor: 2.0 hours per unit; $18.00 per hour
During the first quarter, Faas produced 5,000 units of this product. At the end of the quarter, an examination of the materials records showed that the company used 7,000 pounds of materials and the direct materials cost variance was $1,750 U. Which of the following would be a logical explanation for this variance?
A) The company used more labor hours than allowed by the standards.
B) The company paid a higher rate for labor than allowed by the standards.
C) The company used greater quantity of materials than allowed by the standards.
D) The company paid a higher price for the materials than allowed by the standards.
Q2) The fixed overhead volume variance is essentially a cost variance.
A)True
B)False
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Chapter 7: Cost Allocation and Responsibility Accounting
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Sample Questions
Q1) A market-based transfer price considers the ________ when determining the price.
A) variable costs
B) sales price of goods
C) cost of the goods
D) contribution margin
Q2) Oscar prizes, a manufacturer of gift articles, uses a single plant wide rate to allocate indirect costs. The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base. Estimated overhead cost for the year is $5,000,000 and estimated machine hours are 25,000. During the year, the actual machine hours used were 30,000. Calculate the predetermined overhead allocation rate.
A) $166
B) $250
C) $200
D) $150
Q3) Communicating the expectations of top management to segment managers improves goal congruence.
A)True
B)False
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Page 9
Chapter 8: Short-Term Business Decisions
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Sample Questions
Q1) Meson Production is a price-taker. They produce large spools of electrical wire in a highly competitive market, and so they practice target pricing. The current market price is $800 per unit. The company has $3,000,000 in assets and shareholders expect a return of 6% on assets. The company provides the following information: \[\begin{array} { | l | r |r| }
\hline \text { Sales volume } & 100,000 &\text { units per year } \\
\hline \text { Variable costs } & \$ 700& \text { per unit } \\
\hline \text { Fixed costs } & \$ 12,000,000 &\text { per year } \\ \hline
\end{array}\] Currently the cost structure is such that the company cannot achieve its profit objective and must cut costs. If fixed costs cannot be reduced, how much reduction in variable cost per unit will be needed to hit the profit target?
A) reduction in variable cost per unit by $120
B) reduction in variable cost per unit by $1.80
C) reduction in variable cost per unit by $20.30
D) reduction in variable cost per unit by $21.80
Q2) Price-setters emphasize a cost-plus pricing approach.
A)True
B)False
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Page 10
Chapter 9: Capital Investment Decisions
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Sample Questions
Q1) An annuity refers to a series of equal cash flows received or paid annually.
A)True
B)False
Q2) Capital rationing is a process adopted when a company has limited resources, and it must find ways to reduce operating expenses in all of its divisions and units.
A)True
B)False
Q3) Clapton Corporation is considering an investment in new equipment costing $900,000. The equipment will be depreciated on a straight-line basis over a ten-year life and is expected to have a salvage value of $90,000. The equipment is expected to generate net cash flows of $140,000 for each of the first five years and $100,000 for each of the last five years. What is the accounting rate of return associated with the equipment investment?
A) 8.89%
B) 9.23%
C) 8.52%
D) 7.88%
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