Like the high-low method of estimating the fixed and variable components of a mixed
cost, regression analysis uses a statistical technique that identifies the line of best fit.
Both the process costing and job order costing systems accumulate product costs
throughout the production process and assign those costs to individual units of
production.
After the entry is made to record the overhead applied, if the balance in the overhead
account is a debit, more overhead was actually incurred than was recorded in the Work
in Process account during the period.
Regression is a more precise method of estimating the fixed and variable components of
a mixed cost than the high-low method or a scattergraph.
Because an absolute dollar change does not give the whole picture, a percentage change
is often included in a horizontal analysis.
Benchmarking is appropriate only within a company’s industry.
A firm’s ability to pay its obligations as they come due and to meet any unforeseen
needs for cash is referred to as liquidity.
A basic tool for making business decisions is the contribution margin.
The flexible budget variance reflects how efficiently the company operated in
producing a given level of sales.
Both process costing systems and job order costing systems accumulate costs on a job
cost sheet.
The direct labor rate variance is part of the direct labor flexible budget variance that
arises when the actual wage rate differs from the standard wage rate.
The contribution margin income statement allows managers to easily assess the impact
of sales volume on operating income.
Return on investment, residual income, and EVA all have qualitative components.
The price-earnings ratio indicates what multiple of current earnings investors are
willing to pay for a share of stock.
Under a build strategy, a company aims to increase its market share and competitive
position relative to others in the industry, maximizing its short-term earnings and
positive cash flow.
Which of the following does not influence prices?
a. Competition
b. Contribution margin
c. Costs
d. Customers
Brandon, Inc. had a $1,000 increase in accounts payable during the year. Which of the
following would appear on the statement of cash flows prepared using the indirect
method?
a. Do not include the $1,000 in the statement of cash flows, but show it in an
accompanying schedule of non-cash transactions
b. Add $1,000 to net income in order to arrive at net cash provided by operating
activities
c. Deduct $1,000 from net income in order to arrive at net cash provided by operating
activities
d. Deduct $1,000 to arrive at net cash flows from investing activities
Mercantile Corporation has sales of $2,000,000, variable costs of $1,100,000, and fixed
costs of $750,000. Mercantile’s degree of operating leverage is
a. 1.22.
b. 1.47.
c. 1.20.
d. 6.00.
If activity level increases, what happens to the total variable cost?
a.It remains the same.
b.It decreases.
c.It increases.
d.It depends on how much the activity level increases.
The gross margin percentage shows how much of each sales dollar is available after
which of the following income statement components has been covered?
a. Cost of goods sold
b. Contribution margin
c. Operating expenses
d. Net income.
In the manufacturing of swim suits, in addition to the price of fabric, the standard
materials price includes all of the following items except
a. Cost of shipping.
b. Cost of advertising.
c. Volume discount.
d. All of these answer choices are included in the standard price.
When the units produced exceeds the units sold
a. Operating income is higher under absorption costing than under variable costing.
b. Operating income is lower under absorption costing than under variable costing.
c. Operating is the same under absorption costing and variable costing.
d. Cannot be determined with the information given.
Match the following terms to the appropriate statement by placing the letter to the left
of each statement.
a. Balanced Scorecard g. Generally Accepted Accounting Principles
(GAAP)
b. Code of conduct h. Just-in-time inventory
c. Controlling i. Long-term planning
d. Enterprise Resource Planning (ERP) j. Managerial accounting
e. Ethical behavior k. Short-term planning
f. Evaluating l. Supply chain
On the breakeven graph, any level of sales to the right of the breakeven point represents
a. Fixed cost.
b Variable cost.
c. Operating income.
d. Operating loss.
According to the theory of constraints, which of the following is not a step required to
maximize and improve the performance of a value chain?
a. Identify the constraint.
b. Decide how to exploit the constraint.
c. Subordinate and synchronize everything else to the first two decisions.
d. Determine customer demand.
When organizations choose to decentralize their operations, divisions may end up
exchanging goods and services with one another rather than with external suppliers or
customer. Since managers are evaluated based on how well their divisions perform,
they want any transaction with another division to generate positive results.
Required:
Discuss the four ways of determining a transfer price and explain the advantages and
disadvantages of each.
What are three specific capital assets each of the following companies might acquire?
1> Friendly Freddie’s Furniture Store
2> Fishing boat manufacturer
3> Cancer research institute
4> Manufacturer of women’s dresses
5> City Taxi Service
Classify each of the following items as a source or use of cash by placing an X in each
appropriate column. Assume transactions involve cash.
Cost-plus pricing adds an amount to the cost of the product or service to cover the
company’s operating costs and contribute to its profit.
Managerial accounting is designed to assist managers with four general activities:
planning, controlling, evaluating and decision making. Give two examples of each type
of activity for a furniture manufacturer.
Identify potential causes of the direct materials price and quantity variances.