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ACCT526 Midterm Questions & answers
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ACCT526 MidtermAlpha 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 were no beginning or ending work in process balances. Calculate the
per-unit prime cost. - ANS-500,000 + 600,,000 = $110
Which of the following is the mathematical expression for calculating the cost of goods
sold? - ANS-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 - ANS-The product, its features , services and delivery speed
(using above) How does the strategic positioning differ for the two companies? -
ANS-Dantex is emphasizing low costs, and Confiar is attempting to differentiate its PC
by offering faster delivery and higher-quality service.
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 -
ANS-value, price, Drantex
The provision of accounting information for internal users is known as - ANS-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. -
ANS-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. 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 - ANS-both legal and ethical means
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