WGU II01 Principles of Financial and Managerial Accounting
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Free WGU II01 Principles of Financial and Managerial Accounting Questions
Which operational problem can result from maintaining too little direct materials inventory?
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Production delays caused by material shortages
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More obsolete materials remaining in storage
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Higher storage costs caused by excess inventory
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More cash invested in unused materials
Explanation
Explanation:
Correct Answer: (A) Production delays caused by material shortages
When a company keeps too little direct materials inventory on hand, it risks running out of the materials needed to keep production running smoothly, leading directly to delays,
Why Other Options are Incorrect:
B. More obsolete materials remaining in storage
This is a risk associated with holding too much inventory, not too little.
C. Higher storage costs caused by excess inventory
Excess inventory, not insufficient inventory, is what drives up storage costs.
D. More cash invested in unused materials
This describes a consequence of overstocking materials, the opposite of maintaining too little inventory.
A consulting firm allocates specific professionals and their time to individual clients based on unique client requirements. What type of costing system is the firm using?
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Activity based costing
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Job costing
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Process costing
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Standard costing
Explanation
Explanation:
Correct Answer: (B) Job costing
Since the firm assigns specific professionals and their time to individual clients based on each client's unique needs, this matches job costing's approach of tracking costs to distinct, individual engagements,
Why Other Options are Incorrect:
A. Activity based costing
ABC focuses on allocating overhead based on activities and cost drivers, not on directly assigning professional time to individual client jobs.
C. Process costing
Process costing applies to uniform, continuous production, which doesn't match individualized client engagements with unique requirements.
D. Standard costing
Standard costing involves comparing actual to predetermined costs, not tracking professional time by individual client.
A company sold inventory costing $20,000. The customer paid cash of $30,000. How does this transaction affect the selling company's accounting equation?
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Assets increase by $10,000; owners' equity increases by $10,000
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Assets increase by $20,000; owners' equity increases by $20,000
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Assets increase by $30,000; owners' equity increases by $30,000
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Assets increase by $50,000; owners' equity increases by $50,000
Explanation
Explanation:
Correct Answer: (A) Assets increase by $10,000; owners' equity increases by $10,000
Cash increases by $30,000 while inventory decreases by $20,000, for a net asset increase of \(10,000, and this net gain flows into owners' equity through retained earnings,Why Other Options are Incorrect:B. Assets increase by\)20,000; owners' equity increases by \(20,000 This only reflects the cost of the inventory removed, ignoring the actual net effect of cash received exceeding that cost.C. Assets increase by\)30,000; owners' equity increases by \(30,000 This counts only the cash received without subtracting the inventory given up, overstating the net effect.D. Assets increase by\)50,000; owners' equity increases by $50,000
This incorrectly adds the cash received and inventory cost together rather than netting them.
An accountant performing a horizontal analysis on a public company has been told by the firm's president that demand for the company's products has decreased significantly over the past two years. Prices and costs have remained the same. What should the accountant expect to see when comparing income statements?
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Revenue increasing over time
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Revenue decreasing over time
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Gross Profit decreasing over time
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Wages increasing over time
Explanation
Explanation:
Correct Answer: (B) Revenue decreasing over time
Since demand has fallen while prices and costs stayed constant, the direct and most fundamental result the accountant should expect in a horizontal analysis is declining revenue year over year, driven purely by lower unit sales,
Why Other Options are Incorrect:
A. Revenue increasing over time
This contradicts the stated decrease in demand; with unchanged prices, fewer units sold means lower, not higher, revenue.
C. Gross Profit decreasing over time
While gross profit would likely follow revenue downward, this is a secondary effect of the revenue decline rather than the most direct expectation.
D. Wages increasing over time
Wages are not directly tied to demand changes in this scenario, and nothing suggests wage costs would rise as sales fall.
Which label is given to the amount of assets consumed through business operations?
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Dividends
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Expenses
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Revenues
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Liabilities
Explanation
Explanation:
Correct Answer: (B) Expenses
Expenses represent the outflows or using up of assets that occur through a company's normal operating activities in order to generate revenue,
Why Other Options are Incorrect:
A. Dividends
Dividends are distributions of profit to owners or shareholders, not assets consumed through operations.
C. Revenues
Revenues represent inflows from providing goods or services, the opposite of assets being consumed.
D. Liabilities
Liabilities are obligations owed to others, not a measure of assets used up in operations.
Which costing methodology uses equivalent units to account for incomplete production?
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Activity-based costing
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Process costing
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Job order costing
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Standard costing
Explanation
Explanation:
Correct Answer: (B) Process costing
Process costing uses the concept of equivalent units to express partially completed units in terms of fully completed units, allowing costs to be accurately allocated between finished and in-process inventory,
Why Other Options are Incorrect:
A. Activity-based costing
Activity-based costing focuses on assigning overhead based on activities and cost drivers, not on measuring incomplete production using equivalent units.
C. Job order costing
Job order costing tracks costs by specific job or project rather than using equivalent units for continuous, incomplete production.
D. Standard costing
Standard costing compares actual costs to predetermined standard costs, and doesn't rely on the equivalent units concept for incomplete production.
According to a company's cash budget, when can company management plan to repay the company's loans?
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When forecasted cash deficits are highest
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When excess cash is available
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When forecasted cash surpluses are lowest
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When the aging of accounts receivable is available
Explanation
Explanation:
Correct Answer: (B) When excess cash is available
A cash budget helps management identify periods of surplus cash, and repaying loans during those times allows the company to reduce debt without jeopardizing its ability to cover operating needs.
Why Other Options are Incorrect:
A. When forecasted cash deficits are highest
Repaying loans during a cash deficit would worsen the company's liquidity problems rather than help.
C. When forecasted cash surpluses are lowest
Repaying debt when surplus cash is lowest risks straining the company's ability to meet other obligations.
D. When the aging of accounts receivable is available
Accounts receivable aging relates to collections management, not directly to the timing of loan repayments.
A manufacturer produces similar products that use comparable amounts of machine time, setups, inspections, and support services. Which cost allocation system should the manufacturer use?
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Production-level system
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Activity-based system
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Job order system
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Life-cycle system
Explanation
Explanation:
Correct Answer: (A) Production-level system
Since the products consume overhead resources in similar, comparable amounts, a simpler production-level (volume-based) allocation system is sufficient and appropriate, without needing the added complexity of tracking multiple distinct activities,
Why Other Options are Incorrect:
B. Activity-based system
Activity-based costing is most valuable when products consume overhead activities in significantly different amounts; here, consumption is comparable across products, making this unnecessary complexity.
C. Job order system
Job order costing is used when products or jobs are distinct and unique, not when producing similar products with comparable resource use.
D. Life-cycle system
Life-cycle costing tracks costs across a product's entire life span from development to disposal, which isn't relevant to this overhead allocation scenario.
A beverage manufacturer has monthly fixed costs of $10,000, variable costs of $1 per bottle, and a selling price of $2.50 per bottle. What monthly sales level is required to break even, rounded up to the next whole unit?
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3,731 units
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4,248 units
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6,667 units
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9,149 units
Explanation
Explanation:
Correct Answer: (C) 6,667 units
Break-even units equal fixed costs divided by contribution margin per unit: \(10,000 ÷ (\)2.50 − \(1.00) =\)10,000 ÷ \(1.50 = 6,666.67, which rounds up to 6,667 units,Why Other Options are Incorrect:A. 3,731 units This figure doesn't result from correctly dividing the fixed costs by the\)1.50 contribution margin per unit.
B. 4,248 units
This also fails to reflect the correct break-even calculation using the given fixed costs and contribution margin.
D. 9,149 units
This overstates the required units beyond what's needed to cover the $10,000 in fixed costs at a $1.50 contribution margin.
A pharmaceutical company purchases additional manufacturing equipment, increasing fixed costs. The selling price and variable cost per unit remain unchanged. How does this investment affect contribution margin and break-even volume?
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Contribution margin per unit remains unchanged; break-even units increase
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Contribution margin per unit increases; break-even units increase
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Contribution margin per unit remains unchanged; break-even units decrease
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Contribution margin per unit decreases; break-even units decrease
Explanation
Explanation:
Correct Answer: (A) Contribution margin per unit remains unchanged; break-even units increase
Since selling price and variable cost per unit are unchanged, contribution margin per unit stays the same; however, because fixed costs rose, more units are now needed to cover those higher fixed costs, raising the break-even volume,
Why Other Options are Incorrect:
B. Contribution margin per unit increases; break-even units increase
Contribution margin per unit is determined by price and variable cost, both unchanged, so it cannot increase.
C. Contribution margin per unit remains unchanged; break-even units decrease
Break-even units would increase, not decrease, since higher fixed costs require greater sales volume to cover them.
D. Contribution margin per unit decreases; break-even units decrease
Contribution margin per unit doesn't change here, and break-even units rise rather than fall due to higher fixed costs.
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