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BUS/475 Final Exam Study Guide

Comprehensive study guide for the BUS 475 final exam.

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    BUS/ 475 Final Exam Study Guide 1 ) Because the United States has had a long time agreement with __blank __ after the passage of NAFTA, ___ blank __ became the US’s 2nd biggest trading partner. Canada, Mexico Explanation : NAFTA has allowed Mexico to have a much greater trade relationship with the United States. 2) The term generally accepted contained in the saying “ generally accepted accounting principles ” means what about the principles? They have substantial authoritative support Explanation : Known as GAAP in the accounting world, these principle are accepted by virtually all businesses that conduct operations in the United States. 3 ) W hich function of management is defined by building a dynamic organization ? Organizing Explanation : The ability to organize is considered essential when building a dynamic business. 4) Billy Bob's Used Car Sales uses the specific identification method for costing inventory. In the month of June , Billy Bob bought 3 cars for $6,000, $7,500, and $9,750 . During June , two cars are sold for $9,000 a pop . Billy Bob determines that at June 31, the $9,750 car on the lot . What is the gross profit in June ? $4,500 Explanation : The solution is found by summing 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 one product with a contribution margin of $12 per unit and fixed costs of $74,400. Sales for the current year have reached a total of $100,000. What is the breakeven point for Hostess? 6,200 units Explanation : The solution is found by using the formula 12x = 74,000. Ignore the 100,000, that number is just there to trick you! 6) As Plant Controller, y our manager asks you to reduce your overhead costs . What would be called manufacturing overhead?

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    Factory janitor Explanation : The manufacturing process creates a mess and this requires the services of a janitor, thus being considered an overhead expense. 7) Each level of responsibility within a company’s organization chart would be called what ? Responsibility reporting 8) Knots Berry Farm ’s variable costs are 30% of sales. The firm is thinking about an advertising project that will cost $22,000. Assuming sales are anticipated to increase by $40,000, by how much will the firm’s net income increase? $6,000 Explanation : Find the solution by multiplying 40,000 by 30%. Then add the total to 22,000 to get 46,000. Simply subtract 46,000 from 40,000 to get the answer. 9) What is true about the cost of an asset and the fair market value? T he same on the date of acquisition Explanation : Book value will be the same in the future, but fair market value can fluctuate with trends in the marketplace. 10) What is considered a product cost? Indirect labor Explanation : Indirect labor is often required to bring a product to necessary sales standards. 11) Let’s say budgeted costs exceed actual results on a project, what can you expect ? A favorable difference Explanation : This means you saved some money on the project, nice work! 12) The income statement and balance sheet columns of Douglas Fur Company's worksheet is showing these totals: Income Statement Balance Sheet Totals $58,000 $48,000 $34,000 $44,000 What will closing entries be necessary for? T emporary accounts only

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    Explanation : The differences in debits and credits are equal in both worksheets, therefor it should only need closing entries for the closing accounts. 13) Which statement is true about managerial accounting? P laces emphasis on special - purpose information Explanation : Managerial accounting is designed to provide companies with information that can be used to improve internal performance. 14) J32 is a company that sells beer and wine . Beer has a 10 percent profit margin, while wine has a 12 percent profit margin. Beer shows a 27 percent contribution margin, while wine shows a 25 percent contribution margin. What is the better product to push on customers? Wine Explanation : In this scenario, wine is shown to have higher profit margin, which is a higher consideration when compared to contribution margins. 15) Tamika has an income that exceeds expenditures. What is Tamika? S aver who supplies money to the financial system Explanation : Tamika saves money, yet also supplies it through her expenditures. 16) Mitch gets $100 as a Hanukkah gift, but needs to determine where to spend the cash. He finally settles on four different potential options. Option A , Option B, Option C, and Option D. Each option costs $100. At last, he chooses Option B. What is his opportunity cost? The value to Mitch of the option he would have chosen had Option B not been available 17) The production possibilities frontier will have a straight line when which conditions are met? I ncreasing the production of one good by x units entails a constant opportunity cost in terms of the other good Explanation : The production possibilities frontier is a way to visualize the potential manufacturing choices of a firm. 18) In the context of economics, what is the cost of something? W hat you must give up to get it Explanation : A basic rule of economics states that the we must give something up, usually money, to obtain goods.

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    19) What do we call a tax on imported goods? Tariff Explanation : The government uses Tariffs to impose trade restrictions and barriers. 20) Choose the correct statement about GDP? Money continuously flows from households to government and then back to households, and GDP measures this flow of money. Explanation : GDP is a common economic measure to show the value of goods produced by a nation or geographic region. 21) In order to calculate GDP , market prices are often used to value final goods and services. Why? Market prices reflect the values of goods and services Explanation : GDP is a common economic measure to show the value of goods produced by a nation or geographic region. 22) Choose the correct statement about GDP: Nominal GDP values production at current prices, whereas real GDP values production at constant prices. Explanation : GDP is a common economic measure to show the value of goods produced by a nation or geographic 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) The section of the balance of payments account which shows all long - term flows of payments is referred to as: F inancial and capital account. 25) Edward Prescott and Finn Kydland are Nobel prize winners . Their main finding was that when a central bank could tell people to expect zero inflation, then the Fed would be tempted to raise output by increasing inflation. What is this possibility called? T he time inconsistency of policy Explanation : This policy shows many of the weaknesses in the current central bank system.

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