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ACC 241 Exam 3 Study Guide 294 Questions with Verified Answers,100% CORRECT
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ACC 241 Exam 3 Study Guide 294 Questions with Verified Answers
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ACC 241 Exam 3 Study Guide 294 Questions with VerifiedAnswers
1. Forces managers to plan
2. Facilitates coordination and communication within the
business
3. Helps motivate personnel throughout organization to
meet planned objectives
4. Provides a standard for performance evaluation - CORRECT ANSWER Benefits of
Budgeting
Budgetary Slack - CORRECT ANSWER the practice of managers knowingly
including a higher amount of expenditures or a lower amount of revenue in a
budget.
Sales Budget > Production Budget > DM Budget > DL Budget > MOH Budget >
Operating Expenses Budget > Budgeted Income Statement - CORRECT ANSWER
Order of the Master Budget (Operating Budgets)
1. Cost Center
2.) Revenue Center
3.) Profit Center
4.) Investment Center - CORRECT ANSWER Four Types of Responsibility Centers
Cost Center - CORRECT ANSWER a division that incurs costs but does not directly
generate revenue.
Ex:
-production departments: packaging, distribution
-service/support departments: human resources, accounting departments
Revenue Center - CORRECT ANSWER a division that generates revenues
Ex: internet sales department
Profit Center - CORRECT ANSWER a division that generates revenues and incurs
costs.
,-Managers are evaluated on profitability of divisions
-Profit center managers often supervise both cost and revenue center managers
Ex: Tempe Walmart, Deli department of Fry's
Investment Center - CORRECT ANSWER a division that generates revenues, incurs
costs, and controls the investment of available funds.
-managers are evaluated on profitability of divisions and efficient use of assets.
Ex: subsidiary companies, Stand-alone divisions of a company
Return on Investment (ROI) - CORRECT ANSWER measures the amount of income
an investment center earns relative to the size of its assets.
Operating Income / Total assets - CORRECT ANSWER ROI Formula
Operating Income / Sales - CORRECT ANSWER Sales Margin Formula
Sales / Total Assets - CORRECT ANSWER Capital Turnover Formula
Residual Income (RI) - CORRECT ANSWER the difference between operating
income and the minimum return required on a company's assets.
=Operating Income - Minimum Acceptable Income
-OR-
=Operating Income -(Target rate of return * total assets) - CORRECT ANSWER
Residual Income Formulas
Flexible Budget - CORRECT ANSWER a budget prepared for a different level of
volume than the volume originally anticipated.
volume = actual volume
Volume Variance - CORRECT ANSWER the difference between the flexible budget
and the master budget
,Flexible Budget Variance - CORRECT ANSWER the difference between the flexible
budget and actual results
Common Causes of DM Variances - CORRECT ANSWER Price Variances:
- purchase of materials of different quality
-discounts
-freight/delivery expediting cost ("rush orders")
Quantity Variances:
-purchase of non-standard quality materials
-poorly trained or poorly supervised workers
-poorly maintained equipment
Common Causes of DL Variances - CORRECT ANSWER Rate Variances:
-Salary raise
-Salary cut
Efficiency Variances:
-Poorly trained or poorly supervised workers
-Poorly maintained equipment
-Out-of-date standards (may be applied to any variance)
1. Payback Period
2. Accounting Rate of Return (ARR)
3. Net Present Value (NPV)
4. Profitability Index
5. Internal Rate of Return (IRR) - CORRECT ANSWER Five Methods of Capital
Budgeting Analysis
Non-discounting models - CORRECT ANSWER do not consider time value of
money
-Payback Period
-Accounting Rate of Return (ARR))
Discounting models - CORRECT ANSWER consider time value of money.
-Net Present Value (NPV)
-Profitabilty Index
, -Internal Rate of Return (IRR)
Payback Period - CORRECT ANSWER the length of time to recover, in net cash
inflows, the cost of the capital investment.
(Investments with shorter payback periods are more desirable)
Payback Period with EQUAL Annual Net Cash Inflows Forumla - CORRECT ANSWER
initial investment / expected annual net cash inflow
Payback Period with UNEQUAL Annual Net Cash Inflows Formula - CORRECT
ANSWER Number of full years + (Amount to complete recovery / estimated net
cash inflow in the next year)
Accounting Rate of Return (ARR) - CORRECT ANSWER meaurses the avergae
annual rate of return over an asset's entire life
ARR Formula - CORRECT ANSWER = Average annual operating income from
asset / initial investment
=(average annual net cash inflow-annual noncash expense) / initial investment
Net Present Value (NPV) - CORRECT ANSWER the difference between the present
value of the investment's net cash inflows and the cost of the initial investment
there must be a discount rate
NPV formula - CORRECT ANSWER PV of net cash inflows - inital investment
Internal Rate of Return (IRR) - CORRECT ANSWER the discount rate that makes the
NPV of an investment zero
Annuity PV Factor - CORRECT ANSWER initial investment / annual net cash inflows
Relationship between the internal rate of return, the required rate of return, and
the net present value - CORRECT ANSWER 1. )Internal rate of return > required
rate of return the the net present value is positive
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