Archives

1) All costs contain both a fixed and a variable portion. 2) On a CVP graph, total fixed costs are shown as a horizontal line. Answer: TRUE in costs and volume on a company’s profits 3) The indirect method of […]

1) When calculating the breakeven point in terms of units, fixed costs should be divided by the contribution per unit. 2) Comparative balance sheets analyze balance sheets by comparing the ending balances of two fiscal periods; usually highlighting the changes […]

1) When a company is a price-setter, it emphasizes a target costing approach to pricing. 2) It is possible to have a situation where the direct materials price variance is favorable and the direct materials quantity variance is unfavorable. Answer: […]

1) The Southern Division of Amelia Corporation had sales of $6,500,000 and operating income of $1,200,000 last year. The total assets of the Southern Division were $3,000,000, while current liabilities were $450,000. Amelia Corporation’s target rate of return is 10%, […]

1) Actual manufacturing overhead costs are accumulated as debits to a single general ledger account called manufacturing overhead. 2) Job costing is not commonly used by service firms (such as law firms) or trades people (such as auto mechanics). Answer: […]

1) The central reservation office at MegaBus is most likely treated as a(n) A) cost center B) investment center C) revenue center D) profit center 2) Yellow Company’s variable expenses are 40% of sales and have monthly fixed expenses of […]

1) The direct labor rate variance is calculated by multiplying the standard hours that should have been worked for the actual output by the difference between the standard labor rate and the actual labor rate. 2) One key to analyzing […]

1) The contribution margin per unit is how much profit each unit contributes after fixed costs are considered. 2) The cash budget helps managers determine whether or not the company will need financing in a given month. Answer: TRUE 3) […]

1) Fixed costs that will continue to exist if a product is discontinued are relevant. 2) Managerial accountants are now considered to be similar to advisors and business analysts. Answer: TRUE 3) Accrual-based accounting is not used in determining the […]

1) A sunk cost is a past cost that can be changed regardless of which future action is taken. 2) The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred […]

1) The primary managerial accounting product is the company’s audited financial statements. 2) Companies use job costing when their products or services vary in terms of materials needed, time required to complete the product, and/or the complexity of the production […]

1) If a scatter plot reveals a fairly weak relationship between cost and volume, the manager should select a different activity for modeling cost behavior. 2) If a product line has a negative contribution margin, the product is not covering […]

1) The total cost of a job shown on the job cost record is the sum of the direct materials and direct labor traced to the job divided by the manufacturing overhead allocated to the job. 2) Variable costing considers […]

1) Beta Company uses a predetermined overhead rate based on direct labor hours to allocate manufacturing overhead to jobs. The company estimated that it would incur $600,000 of manufacturing overhead during the year and that 150,000 direct labor hours would […]

1) The journal entry to record the ultimate completion of the units would include a credit to the WIP inventory account of the last sequential production department. 2) The breakeven point on a CVP graph is the point where the […]

1) ISO 9001:2008 is a certification program for companies that adhere to an international set of quality management standards and guidelines. 2) Manufacturing overhead costs cannot be directly traced to jobs. Answer: TRUE 3) Manufacturers follow four steps to implement […]

1) When a company uses the direct method to present the statement of cash flows, the payment of cash dividends reduces the amount of net cash provided by operating activities. 2) One cost that is irrelevant in decision making is […]

1) A “perfect” straight line would render an R-square value of 1.00 . 2) Process costing is used by companies that produce large numbers of identical units of production in a continuous fashion. Answer: TRUE 3) For purposes of the […]

1) A debit balance in the direct materials price variance indicates the standard cost of materials was less than the actual cost of materials. 2) Total fixed costs can be expressed as y = vx, where y = total variable […]

1) A flexible budget is a budget prepared for a different level of volume than that which was originally anticipated. 2) The accounting rate of return uses non-cash flow factors including depreciation in calculating the operating income of the asset. […]

1) The sales budget is the cornerstone of the master budget. 2) A trend percentage is computed by dividing the dollar amount of change by the base-year amount. Answer: TRUE 3) The principal amount, the interest rate, and the number […]

1) Martin Enterprises provides the following information about its single product. How many units must be sold to earn the targeted operating income? A) 13,417 B) 63,000 C) 40,900 D) 22,100 2) Brittany Furniture manufactures two products: Couches and Beds. […]

1) Merchandising companies include both wholesalers and retailers. 2) Managers’ decisions are based solely on quantitative factors. Answer: FALSE 3) When making outsourcing (make-or-buy) decisions, the focus is on how best to use available resources. Answer: TRUE 4) The end […]

1) Budgets do not provide benchmarks to help managers evaluate performance. 2) Contribution margin income statements organize costs by behavior. Answer: TRUE 3) When deciding whether to discontinue a product, managers should only consider the costs that will be saved. […]

1) All of the following are examples of cash outflows from an investing activity except A) purchase of equity securities B) loans made to another party C) purchase of commercial real estate D) purchase of treasury stock 2) The following […]

1) Decentralization allows top management to concentrate on long-term strategic planning. 2) Raw material, ruined through mistakes during production, will result in a materials quantity variance. Answer: TRUE 3) In a regression output, the “intercept coefficient” represents the fixed cost […]

1) When units are sold, Finished Goods Inventory is debited. 2) Net income is used as the base for vertical analysis percentages on the income statement. Answer: FALSE 3) When units are sold, Finished Goods Inventory is credited. Answer: TRUE […]

1) Manufacturing companies usually have three types of inventory. 2) When graphing total variable costs, the cost line begins at the origin. Answer: TRUE 3) A credit balance means that a variance is unfavorable since it decreases income (just like […]

1) The line on a graph representing total fixed costs will be a horizontal line. 2) Special orders increase income if the revenue from the order does not exceed the incremental variable and fixed costs incurred to fill the order. […]

1) The cost equation determined by regression analysis is usually more accurate than the line determined by the high-low method. 2) Sunk costs should be considered when deciding whether to sell a product as is or process it further. Answer: […]

1) The Future Value of $1 table is used to calculate how much $100 in hand today would be worth in 5 years. 2) Investors and management use the statement of cash flows to evaluate a firm’s profitability. Answer: FALSE […]

1) Crown Industries has the following information about its standards and production activity for December: Actual manufacturing overhead cost incurred, $92,500 Variable manufacturing overhead cost @ $3.25 per unit produced Fixed manufacturing overhead cost @ $1.50 per unit produced ($22,500/15,000 […]

1) At Plastastic, Inc., the beginning balance of the work in process inventory account in April of the most recent year was $19,000. Direct materials used during April totaled $130,000. Total manufacturing labor incurred in April was $180,000, 75% of […]

1) Cost-plus pricing is essentially the opposite of target-costing. 2) The fixed cost per unit of activity varies with changes in volume. Answer: TRUE 3) Horizontal analysis is the study of percentage changes in comparative financial statements. Answer: TRUE 4) […]

1) KPI in the Balanced Scorecard stands for Knowledge Profitability Index. 2) The statement of cash flows shows not only the amount of cash used during a particular time, but also how the cash was used. Answer: TRUE 3) The […]

1) What is the promotion of products and services known as? A) Customer service B) Marketing C) Distribution D) Design 2) A product is sold at $60.00 per unit, the variable expense per unit is $30, and total fixed expenses […]

1) Currently, the SEC does not require publicly-held corporations to disclose the costs related to remediation of contaminated sites. 2) The hurdle rate is the length of time it takes to recoup an investment’s initial cost from the cash inflows […]

1) Activity-based management refers to using activity-based cost information to make decisions that may increase profits while satisfying customers’ needs. 2) If manufacturing overhead allocated is less than the actual manufacturing overhead incurred, then jobs have been overcosted. Answer: FALSE […]

1) The maximum outsourcing price a company is willing to pay can be found by solving for the company’s indifference point. 2) The journal entry to record the use of direct labor in Processing Department #1 would include a debit […]

1) Service firms follow the same approach for indirect costs as manufacturing companies because they develop a predetermined indirect cost allocation rate. 2) In most circumstances, all fixed costs can be eliminated by outsourcing a product. Answer: FALSE 3) The […]

1) Managers should consider all of the following when deciding whether to accept a special order, except A) available excess capacity B) the variable costs associated with the special order C) the effect of the order on regular sales D) […]

1) When using the high-low method, the “low” point should be chosen as the data point with the lowest volume (not the lowest cost). 2) Cost distortion occurs when some products are overcosted while other products are undercosted by the […]

1) Managerial accounting has its roots in the industrial age of manufacturing. 2) The benefits of adopting ABC/ABM are higher for companies in more competitive markets. Answer: TRUE 3) Benchmarking is the comparison of year-to-year results of the company. Answer: […]

1) Under variable costing, fixed manufacturing overhead is expensed immediately as a period cost. 2) Net present value and the internal rate of return are examples of discounted cash flow models used in capital budgeting decisions. Answer: TRUE 3) The […]

1) Management uses budgeting to express its plans and to assess how well it’s reaching its goals. 2) Cost for direct materials, direct labor and manufacturing overhead are assigned to each job. Answer: FALSE 3) Two main benefits of ABC […]

1) Rent on a factory building would likely be classified as a fixed cost. 2) The total cost of a cost object can only include the direct costs that are directly traced to that cost object. Answer: FALSE 3) Budgets […]

1) The following is information about the units produced and the total manufacturing costs for Rose’s Rug Company for the past six months. Rose’s Rug Company uses the high-low method to estimate its costs. Answer the following questions: a.What is […]

1) Which of the following types of costing is used for many similar products? A) Process costing B) Batch costing C) Service costing D) Job costing 2) In a particular department, 8,200 units were started and all but 800 were […]

1) Manufacturers follow four steps to implement a manufacturing overhead allocation system. Which step is not performed before the year begins? A) Allocate some manufacturing overhead to each individual job B) Select an allocation base and estimate the total amount […]

1) The bill of materials lists all of the raw materials needed to manufacture the job. 2) The number of partially completed units multiplied by the percentage of process completed equals the number of equivalent units. Answer: TRUE 3) A […]

1) Self-check-in machines at airports are an example of capital assets. 2) Costs that differ between alternatives are irrelevant. Answer: FALSE 3) The intercept-coefficient in regression analysis yields the fixed cost portion of the total costs. Answer: TRUE 4) Total […]

1) Generally Accepted Accounting Principles (GAAP) mandates the type of product costing system (job costing or process costing) that must be used by a manufacturer. 2) Direct labor hours would be the most appropriate cost allocation base for a Machining […]

1) Direct materials are often added at a particular point in the production process. 2) The predetermined manufacturing overhead rate is calculated by dividing the total estimated manufacturing overhead costs by the total estimated amount of the allocation base. Answer: […]

1) (Present value tables are needed.) Cleveland Cove Enterprises is evaluating the purchase of an elaborate hydraulic lift system for all of its locations to use for the boats brought in for repair. The company has narrowed their choices down […]

1) Selected financial information for Brookeville Manufacturing is presented in the following table (000s omitted). What was cost of goods sold? A) $1,450 B) $1,350 C) $1,470 D) $ 790 2) Which of the following product costing systems is normally […]

1) Nemec Manufacturing uses job costing. In May, material requisitions were $44,000 ($39,000 of these were direct materials), and raw material purchases were $60,000. The end of month balance in raw materials inventory was $24,300. What was the beginning raw […]

1) Companies often try to gain more control over pricing by attempting to differentiate their products. 2) The operating activities section of the statement of cash flows is the most important section. Answer: TRUE 3) One advantage of the internal […]

1) The Top Hat Division of Blandon’s Fine Menswear had the following results last year (in thousands). Management’s target rate of return is 12% and the weighted average cost of capital is 9%. What is the Top Hat Division’s Residual […]

1) If manufacturing overhead has been underallocated during the year, it means the jobs have been undercosted. 2) The acid test ratio is a tighter measure of a company’s ability to pay current liabilities than the current ratio. Answer: TRUE […]

1) The number of warranty claims would be an example of the A) financial perspective B) customer perspective C) learning and growth perspective D) internal business perspective 2) Selected financial data for the Photocopies Division of Elizabeth’s Business Machines is […]

1) Solve the following two cases (the cases are independent). a.If you invest $5,000 today at 10% interest, what is the value of the investment at the end of 5 years? b.If you invest $1,200 at the end of each […]

1) The following information is available for three companies. The information relates to the companies’ plant assets. For each of the companies, determine the unknown amounts. Fox Co. Wolf Co. Coyote Co. Beginning plant assets, net of depreciation $860,000 $715,000 […]

1) Goal congruence is a system for evaluating the performance of each responsibility center and its manager. 2) Merchandising companies prepare a direct materials budget. Answer: FALSE 3) The flexible budget total cost formula applies only to a specific relevant […]

1) A payment of interest on a loan would be considered a A) cash outflow from investing activities B) cash outflow from operating activities C) cash outflow from financing activities D) cash outflow from depreciation 2) The manager at Wheeling […]

1) Goal congruence is more likely to be achieved at a centralized organization rather than a decentralized organization. 2) Managers use a variety of financial ratios to evaluate a company’s performance. Answer: TRUE 3) Total mixed costs increase as volume […]

1) Refusing gifts or favors that could be perceived to influence your actions is an example of which ethical standard? A) Credibility B) Integrity C) Confidentiality D) Competence 2) The ability of a company to collect receivables is measured by […]

1) A plantwide overhead rate is calculated by dividing the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year. 2) Price and quantity variances are a way to motivate employees. […]

1) If the cost savings from discontinuing a product exceed the lost revenues from discontinuing the product, it should be retained. 2) The existence of ending work in process inventory necessitates the use of the 5-step process costing procedure. Answer: […]

1) Matthew Company uses a job cost system. The overhead account shows a $5,000 overallocated balance at the end of the year. Actual overhead incurred was $100,000. Other balances are: The entry to close manufacturing overhead would include a A) […]

1) The number of equivalent units is computed before computing the cost per equivalent unit. 2) The discounted cash flow methods for capital budgeting are generally considered inferior to the payback period and the ARR because they consider the time […]

1) Managers whose bonuses are based on operating income have more incentive to increase inventory levels when variable costing is used than when absorption costing is used. 2) In process costing, units that are partially completed are accounted for the […]

1) Direct costs can be traced to specific units. 2) A performance report compares expected revenues and expenses against budgeted figures for each responsibility center. Answer: FALSE 3) The first component of the operating budget is the production budget. Answer: […]

1) The following information describes a company’s usage of direct labor in a recent period: How much is the direct labor efficiency variance? A) $8,375 favorable B) $8,375 unfavorable C) $8,500 unfavorable D) $8,500 favorable 2) Beasley Company currently sells […]

1) The cost to design and market new models would be considered a facility-level cost. 2) To calculate the weighted-average contribution margin, divide the sum of the individual product contribution margins by the sales mix in units. Answer: TRUE 3) […]

1) A rate variance for direct labor measures how well a company keeps unit prices of labor inputs within standards. 2) Non-value-added activities can be described as activities for which the customer is willing to pay. Answer: FALSE 3) Environmental […]

1) From a purely financial standpoint, if a product line has a negative contribution margin, the product line should be discontinued. 2) When creating the sales budget, management simply takes the sales from the year before and divides that total […]

1) The margin of safety can be expressed in units, in sales dollars, or as a percentage. 2) Traditional cost systems with a single-allocation base tend to overcost high-volume products and undercost low-volume products as compared to activity-based costing systems. […]

1) The ARR allows managers to compare the present value of future cash generated by a project against the cost of investing in that project. 2) A decision must be made at the point in a process where a product […]