BUS/475 Final Exam Study Guide

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BUS/475 Final Exam StudyGuide1)Because the United Stateshas had along time agreement with __blank__ after the passage ofNAFTA, ___blank__ became theUS’s 2ndbiggesttrading partner.Canada, MexicoExplanation: NAFTA has allowed Mexico tohave a much greater trade relationship with the UnitedStates.2) The term generally accepted contained inthesaying“generally accepted accounting principles”meanswhat about the principles?They havesubstantial authoritative supportExplanation:Known as GAAP in the accounting world, these principle are accepted by virtually allbusinesses that conduct operations in the United States.3)Which function of managementis defined by building a dynamic organization?OrganizingExplanation: The ability to organize is considered essential when building a dynamic business.4)Billy Bob's Used Car Salesuses the specific identification methodforcosting inventory.In themonth ofJune,Billy Bobbought3cars for $6,000, $7,500, and $9,750.DuringJune, two cars aresold for $9,000a pop.Billy Bobdetermines that atJune31, the $9,750 caron the lot.What is thegross profit in June?$4,500Explanation: The solution is found bysumming up the cost of all cars, then summing up total sales,then subtracting the car still on hand to get $4,500 gross profit.5)Hostess, Inc. sells oneproduct with a contribution margin of $12 per unitand fixed costs of$74,400. Sales for the current year have reached a total of$100,000.What is the breakeven pointfor Hostess?6,200 unitsExplanation: The solution is found by using the formula 12x = 74,000. Ignore the 100,000, that numberisjust there to trick you!6) As Plant Controller, your manager asks you to reduce your overhead costs.What would be calledmanufacturing overhead?

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Factory janitorExplanation: The manufacturing process creates a mess and this requires the services of a janitor, thusbeing considered an overhead expense.7)Eachlevel of responsibilitywithin acompany’s organization chartwould becalledwhat?Responsibility reporting8)Knots Berry Farm’s variable costs are 30% of sales. Thefirmisthinking aboutan advertisingprojectthat will cost $22,000.Assumingsales areanticipatedto increaseby$40,000, by how muchwill thefirm’snet income increase?$6,000Explanation: Find the solution by multiplying 40,000 by 30%. Then add the total to 22,000 to get46,000. Simply subtract 46,000 from 40,000 to get the answer.9) What is true about thecostof an asset and the fair market value?The same on the date of acquisitionExplanation: Book value will be the same in the future, but fair market value can fluctuate with trendsin the marketplace.10)What is considereda product cost?Indirect laborExplanation: Indirect labor is often required to bring a product to necessary sales standards.11) Let’s saybudgeted costs exceed actual resultson a project, what can you expect?A favorable differenceExplanation: This means you saved some money on theproject, nice work!12) The income statement and balance sheet columns ofDouglas FurCompany's worksheetisshowingthesetotals:Income StatementBalance SheetTotals$58,000$48,000$34,000$44,000What will closing entries be necessary for?Temporary accounts only

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Explanation:The differences in debits and credits are equal in both worksheets, therefor it should onlyneed closing entries for the closing accounts.13) Which statement is true about managerial accounting?Places emphasis on special-purpose informationExplanation: Managerial accounting is designed to provide companies with information that can beused to improve internal performance.14)J32 is a company thatsellsbeer and wine. Beerhas a 10 percent profit margin, whilewine has a12percent profit margin. Beer showsa 27percent contribution margin, whilewineshowsa 25percent contribution margin.What is the better product to push on customers?WineExplanation: In this scenario, wine is shown to have higher profit margin, which is a higherconsideration when compared to contribution margins.15)Tamika has anincomethat exceedsexpenditures.What is Tamika?Saver who supplies money to the financialsystemExplanation: Tamika saves money, yet also supplies it through her expenditures.16)Mitchgets$100 as aHanukkah gift, but needs to determine where to spend the cash. He finallysettles on four different potential options. Option A, Option B, Option C, and Option D. Each optioncosts $100.At last,hechooses Option B. What is his opportunity cost?Thevalue toMitchof the option he would have chosen had Option B not been available17) Theproduction possibilities frontierwill have a straight linewhen which conditions are met?Increasing the production of one good by x units entails a constant opportunity cost in terms of theother goodExplanation: The production possibilities frontier is a way to visualize the potential manufacturingchoices of a firm.18) Inthe context ofeconomics,what is the cost of something?What youmustgive up to get itExplanation: A basic rule of economics states that the we must give something up, usually money, toobtain goods.

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19)What do we call a tax on imported goods?TariffExplanation: The government uses Tariffs to impose trade restrictions and barriers.20)Choose the correct statement about GDP?Money continuously flows fromhouseholds to government and then back to households, and GDPmeasures this flow of money.Explanation: GDP is a common economic measure to show the value of goods produced by a nation orgeographic region.21)In order to calculate GDP, market prices areoftenused tovalue final goods and services. Why?Marketprices reflect the values of goods and servicesExplanation: GDP is a common economic measure to show the value of goods produced by a nation orgeographic region.22)Choose the correct statement about GDP:Nominal GDP values production at current prices, whereas real GDP values production at constantprices.Explanation: GDP is a common economic measure to show the value of goods produced by a nation orgeographic region.23)Choose the statement that is not correct:The U.S. debt per-person is large compared with average lifetime income.Explanation: Debt levels in the USA are actually consistent with the lifetime income amounts.24) Thesectionof thebalance of payments account whichshowsall long-term flows of payments isreferred to as:Financial and capital account.25) Edward Prescott and Finn Kydlandare Nobel prize winners.Their main finding was that whenacentral bank couldtellpeople to expect zero inflation, then the Fed would be tempted to raiseoutput by increasing inflation.What is this possibility called?The time inconsistency of policyExplanation: This policy shows many of the weaknesses in the current central bank system.

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