CHAPTER 1
Managerial Accounting in the Information Age
Summary of Questions by Objectives and Bloom’s Taxonomy
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Multiple Choice Questions
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Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-2
TRUE-FALSE STATEMENTS
1. Financial accounting stresses accounting concepts and procedures that are relevant to
preparing reports for internal users of accounting information.
2. The goal of managerial accounting is to provide information for planning, controlling, and
reporting information to shareholders.
3. A thorough understanding of managerial accounting is essential to be an effective manager.
4. A production cost budget provides details of planned production amounts and the cost of
resources needed for production.
5. Budgets can be used to communicate a company’s goals to employees.
6. Only amounts that can be expressed in dollars and cents can be used in preparing budgets.
7. A favorable evaluation of an operation indicates that the manager of that operation is
performing adequately.
8. Performance reports are used for control purposes.
9. Performance reports, like other managerial accounting reports, must follow GAAP.
10. Budgets show comparisons of current period performance to the planned performance.
11. Management by exception requires managers to investigate every difference between actual
and budgeted costs that causes profit to be less than budgeted.
12. Decisions to reward or punish managers are part of the planning and control process.
13. Managerial accounting is directed at internal users of accounting information.
14. Financial accounting must follow generally accepted accounting principles, whereas
managerial accounting stresses information that is useful to managers.
15 Managerial accounting may present more detailed information than financial accounting.
16. Managerial accounting stresses that the information provided should be useful to decision
makers such as creditors and shareholders.
17. Financial accounting is concerned with presenting results of past transactions, while
managerial accounting places considerable emphasis on the future.
18. Variable costs in total increase or decrease in proportion with changes in the level of business
activity.
19. Equipment depreciation is generally a controllable cost for a factory department supervisor.
20. Fixed cost per unit remains the same even though there is a change in the number of units
produced.
21. Variable cost per unit remains constant when the number of units produced changes.
Chapter 1 Managerial Accounting in the Information Age
1-3
22. Sunk costs are never a consideration in incremental analysis.
23. Opportunity costs are the value of benefits forgone when one alternative is selected over
another.
24. Indirect costs are directly traceable to a product, activity, or department.
25. Since a manager can influence noncontrollable costs, they should be considered when
evaluating a manager’s performance.
26. Incremental analysis involves calculating the difference in revenue and difference in costs
between alternatives.
27. The actions of a manager are influenced by the performance measures that are used to
evaluate the manager.
28. Incremental analysis is the appropriate way to approach the solution to all business problems.
29. A good single measure of performance for a sales force would be the ratio of sales to new
customers to total sales.
30. Costs that increase due to a special order are not considered as incremental.
31. Managerial accounting is a key provider of information that impacts the information age.
32. Firm value is created when the value to the customer of receiving products and services
exceeds the cost of these activities,
33. One aspect of the value chain involves information flows between a company and its
customers.
34. Businesses sometimes share sales databases with suppliers so suppliers can respond more
quickly.
35. Enterprise resource planning systems focus on managing a variety of customer interactions.
36. Enterprise resource planning systems (ERP) often support accounting, human resources, and
e-commerce, in addition to production.
37. Supply chain management systems (SCM) allow suppliers some access to a company’s
databases so goods can more profitably be delivered to a company’s customers.
38. Customer Relationship Management Systems (CRM) involve activities between companies
and its suppliers in an effort to enhance production and delivery of goods to customers.
39. A Customer Relationship Management System (CRM) might allow a customer to track his/her
package as it is being shipped across the country.
40. Walmart and Procter & Gamble are two companies that collaborate in the use of Supply Chain
Management (SCM).
41. Managers that are able to recognize all ethical dilemmas have the most profitable businesses.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-4
42. A good code of ethics eliminates potential unethical behavior.
43. The U.S. government has charged the Institute of Management Accountants with primary
responsibility for developing ethics laws that businesses must follow.
44. The Sarbanes-Oxley Act requires that companies provide relevant managerial accounting
information to decision-makers.
45. In most organizations, the controller is the top managerial accountant.
46. The treasurer usually reports to the controller.
47. The controller is responsible for preparing reports for planning and evaluating company
activities.
48. The treasurer has custody of cash and funds invested in marketable securities.
Chapter 1 Managerial Accounting in the Information Age
1-5
MULTIPLE CHOICE
49. Managerial accounting stresses accounting concepts and procedures that are relevant to
preparing reports for
A. investors and banks.
B. internal users of accounting information.
C. shareholders and creditors.
D. the Securities and Exchange Commission (SEC).
50. The goal of managerial accounting is to provide information that managers need for
A. planning, control, and financial reporting.
B. control, evaluation, and financial reporting.
C. planning, control, and decision making.
D. preparing reports for external users.
51. The financial plans prepared by managerial accountants are referred to as
A. budgets.
B. financial statements.
C. treasurer’s reports.
D. controller’s opinions.
52. Which of the following is not a reason that current period performance results may differ from
the company’s budget for that period?
A. The plan may not have been followed properly.
B. The plan may not have been well thought–out.
C. Changing circumstances may have made the plan out of date.
D. All of the above are reasons that actual results may differ from the company’s plan.
53. Which one of the following is true as it relates to the management function of control?
A. It is achieved by evaluating the performance of managers.
B. It is achieved by evaluating the operations for which a manager is responsible.
C. It is necessary only when performance is less than expected.
D. It is achieved by evaluating the performance of managers and the operations for which
they are responsible.
54. Which one of the following is the last step in the planning and control process?
A. Implement a plan.
B. Construct a plan.
C. Make decisions based on the evaluation of the results.
D. Compare actual results to the planned results.
55. Performance reports often compare current performance with
A. a competing company’s performance.
B. shareholders’ expected level of performance.
C. industry standards.
D. performance in a prior period or budgeted performance.
56. When using management by exception, a difference between actual costs and budgeted costs
A. should be investigated if the amount is large.
B. indicates that the planned cost was poorly estimated.
C. indicates that the manager is doing a poor job.
D. should be ignored if it increases profit.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-6
57. Wilson Company’s managers investigate departures from the budget that appear to be
significant. What principle is being followed?
A. Small amounts do not matter
B. Management by exception
C. Incremental analysis
D. You get what you measure
58. Below is a performance report that compares budgeted and actual profit of Atlanta Enterprises
for the month of June:
Budget
Actual
Difference
Sales
$182,000
$180,000
($2,000)
Less:
Cost of ingredients
145,000
141,000
4,000
Salaries
24,000
23,000
1,000
Controllable profit
$ 13,000
$ 16,000
$ 3,000
In evaluating the department in terms of its changes in sales and expenses, what will be most
important to investigate?
A. Sales
B. Cost of ingredients
C. Salaries
D. Debtors
59. Managerial accounting
A. is primarily directed at external users of accounting information.
B. is required by taxing authorities such as the IRS.
C. must follow GAAP.
D. focuses on future performance.
60. The fundamental difference between managerial and financial accounting is that
A. all financial accounting information is audited by Certified Public Accountants whereas
managerial accounting information is audited by the IMA.
B. managerial accounting is concerned principally with budgets, whereas financial
accounting is concerned with a wider range of the organization’s activities.
C. managerial accounting provides information for decision-makers within the
organization, whereas financial accounting provides information for individuals and
institutions external to the organization.
D. financial accounting information follows U.S. Generally Accepted Accounting
Principles, whereas managerial accounting information generally follows rules set forth
by the Institute of Management Accountants.
61. Which of the following is a difference between financial accounting and managerial
accounting?
A. Managerial accounting is primarily concerned with reporting the past, while financial
accounting is more concerned with future decisions that external users may need to
make.
B. Managerial accounting uses monetary and nonmonetary information, whereas financial
accounting reports monetary information.
C. Managerial accounting is primarily concerned with providing information for external
users while financial accounting is concerned with internal users.
D. Financial accounting is rather detailed, while managerial accounting is more
summarized.
Chapter 1 Managerial Accounting in the Information Age
1-7
62. Which one of the following is most likely to make use of Ralston Enterprises’ managerial
accounting information?
A. The IRS
B. An individual contemplating an investment in Ralston Enterprises
C. A company that is one of Ralston’s main suppliers
D. The production manager of Ralston’s plant in Georgia
63. Which of the following costs will change when the level of business activity changes?
A. Total fixed costs
B. Variable cost per unit
C. A company’s total costs
D. Sunk cost
64. Variable cost per unit
A. increases when the number of units produced increases.
B. does not change when the number of units produced increases.
C. decreases when the number of units produced increases.
D. decreases when the number of units produced decreases.
65. Kilwin’s Candies produced and sold 600 boxes of chocolate covered popcorn last month and
had total variable costs of $2,100 that reflected the costs of chocolate and popcorn
(ingredients). Each box of popcorn sells for $12.00. If production and sales are expected to
increase by 10% next month, which of the following statements is true?
A. Total variable costs are expected to be $1,785
B. Variable cost per unit is expected to be $3.50
C. The incremental cost per unit is expected to be $0.35
D. Unit variable costs are expected to be $2.10
66. A company has a cost that is $3.00 per unit at a volume of 9,000 units and $3.00 per unit at a
volume of 11,000 units. What type of cost is this?
A. Fixed
B. Variable
C. Sunk
D. Noncontrollable
67. Which of the following is most likely to be a fixed cost?
A. Cost of wheels for a lawn mower manufacturer
B. Rent on a factory building
C. Cost of labor for cashiers at a retail store
D. Supplies used by the housekeeping staff that cleans hotel rooms
68. Bagel Time produced and sold 2,500 bagels last month and incurred fixed costs totaling
$8,000. If production and sales are expected to decrease by 10% next month, which of the
following statements is true?
A. Total fixed costs will increase.
B. Total fixed costs will decrease.
C. Fixed cost per unit will increase.
D. Fixed cost per unit will decrease.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-8
69. Which of the following statements regarding fixed costs is true?
A. When production increases, fixed cost per unit increases.
B. When production decreases, total fixed costs decrease.
C. When production increases, fixed cost per unit decreases.
D. When production decreases, total fixed costs increase.
70. Costs incurred in the past that are not incremental to present decisions are
A. fixed costs.
B. sunk costs.
C. opportunity costs.
D. variable costs.
71. A sunk cost is a cost
A. expected to be incurred in the future which is not relevant to present decisions.
B. incurred in the current period which changes with changes in production activity.
C. incurred in the current period which remains constant even though activity changes.
D. incurred in the past that is not relevant for future decisions.
72. Sunk costs
A. can be incremental or not incremental, depending on the decision to be made.
B. include all incremental costs to management decisions.
C. are costs that cannot be directly traded to a product, activity, or department.
D. None of these answer choices are correct.
73. Opportunity costs are
A. considered to be fixed costs in the short-term.
B. another term for sunk costs.
C. costs that are controlled by most effective managers.
D. the value of benefits forgone when one decision alternative is selected over another.
74. Which of the following is a benefit given up when one decision alternative is selected over
another?
A. Sunk cost
B. Controllable cost
C. Opportunity cost
D. Incremental cost
75. You own a car and are trying to decide whether to trade it in and buy a new car. Which of the
following costs is an opportunity cost in this situation?
A. The trip to Europe that you will not be able to take if you buy the car
B. The cost of the car you are trading in
C. The cost of toothpaste and soap that you need for the next few months
D. The cost of your meals for the last week
76. A retailer purchased some trendy clothes that have gone out of style and must be marked
down to 60% of the original selling price in order to be sold. Which of the following is a sunk
cost in this situation?
A. The current selling price
B. The original selling price
C. The original purchase price
D. The anticipated profit
Chapter 1 Managerial Accounting in the Information Age
1-9
77. A cost which is directly traceable to a product, activity, or department is a(n)
A. fixed cost.
B. managerial cost.
C. opportunity cost.
D. direct cost.
78. Which of the following statements regarding direct and indirect costs is true?
A. Direct costs are always variable and indirect costs are always fixed.
B. Sunk costs are always direct, and opportunity costs are always fixed.
C. The distinction between a direct and indirect cost depends on the product, activity, or
department to which the cost pertains.
D. If a cost is indirect to a department within a plant, it will also be indirect for the plant as
a whole.
79. Which of the following is a direct cost in relation to the cost of teaching the managerial
accounting course in a college?
A. The cost of the paper that is given as handouts in the class
B. The cost of the electricity to light the classroom
C. The cost of the registration system
D. The cost of the financial aid department of the college
80. Which of the following is likely to be a noncontrollable cost of a department supervisor?
A. Labor in the department
B. Materials used in the department
C. Insurance on the plant
D. Overtime premium pay earned by those working in the department
81. On which of the following costs should a manager not be evaluated?
A. Noncontrollable costs
B. Opportunity costs
C. Fixed costs
D. Variable costs
82. Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be
cooked and sold.
Wings, breading, and
sauce
$4,900
Direct labor (Variable)
3,500
Rent
1,100
Depreciation
900
Other fixed costs
400
Each wing sells for $0.80 each. How much is the budgeted variable cost per unit?
A. $0.35
B. $0.45
C. $0.80
D. None of these answer choices are correct.
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-10
83. Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be
cooked and sold.
Wings, breading, and
sauce
$4,900
Direct labor (Variable)
3,500
Rent
1,100
Depreciation
900
Other fixed costs
400
Each wing sells for $0.80 each. What is the budgeted total variable cost?
A. $8,400
B. $9,500
C. $10,400
D. $10,800
84. Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be
cooked and sold.
Wings, breading, and
sauce
$4,900
Direct labor (Variable)
3,500
Rent
1,100
Depreciation
900
Other fixed costs
400
Each wing sells for $0.80 each. What is the budgeted total fixed cost?
A. $7,300
B. $2,400
C. $8,400
D. $10,800
85. Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be
cooked and sold.
Wings, breading, and
sauce
$4,900
Direct labor (Variable)
3,500
Rent
1,100
Depreciation
900
Other fixed costs
400
Each wing sells for $0.80 each. What is the budgeted fixed cost per unit?
A. $0.35
B. $0.80
C. $0.10
D. $0.17
Chapter 1 Managerial Accounting in the Information Age
1-11
86. Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be
cooked and sold.
Wings, breading, and
sauce
$4,900
Direct labor (Variable)
3,500
Rent
1,100
Depreciation
900
Other fixed costs
400
Each wing sells for $0.80 each. What is Hurricane Wings’ budgeted profit?
A. $8,400
B. $19,200
C. $10,800
D. $13,200
87. Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be
cooked and sold.
Wings, breading, and
sauce
$4,900
Direct labor (Variable)
3,500
Rent
1,100
Depreciation
900
Other fixed costs
400
Each wing sells for $0.80 each. How much will Hurricane Wing’s profit increase if 100 more
wings were sold?
A. $80.00
B. $35.00
C. $45.00
D. None of these answer choices are correct.
88. Dent Lab Car Repair projects variable labor costs of $21,500 in July when 8,600 units are
produced. If production is expected to drop to 8,000 units in August, what is the expected labor
cost in August?
A. $21,500
B. $20,000
C. $23,113
D. $20,900
89. Sweet Time Candies projects its factory rent to be $8,000 in August when 4,000 pounds of
candy are expected to be produced. If rent is a fixed cost, and if production is expected to
increase to 6,000 units in September, what is the expected cost of rent in September?
A. $12,000
B. $8,000
C. $7,000
D. Not enough information is provided to determine the answer.
90. Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials,
$4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. Which
one of the following is the correct cost for Rincon?
A. The fixed cost per unit is $3.75
B. The variable cost per unit is $14.50
C. The fixed cost per unit is $19.50
D. The total cost per unit is $14.50
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-12
91. Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials,
$4,200; labor cost, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. If
production changes to 500 units, which of the following costs will stay the same?
A. Variable cost per unit
B. Fixed cost per unit
C. Total variable cost
D. Total cost per unit
92. Rincon Gifts had the following costs in May when 400 ceramic pots were produced: materials,
$4,200; hourly labor, $1,600; depreciation, $800; rent, $700; and other fixed costs, $500. If the
production level changes to 500 units, how much will the total costs be?
A. $9,750
B. $7,800
C. $9,250
D. $1,950
93. Variable cost per unit is budgeted to be $8.00 and fixed cost per unit is budgeted to be $5.00
in a period when 4,000 units are produced. If production is actually 5,100 units, what is the
expected total cost of the units produced?
A. $52,000
B. $60,800
C. $66,300
D. $40,800
94. In a period when anticipated production is 5,000 units, budgeted variable costs are $75,000
and budgeted fixed costs are $24,000. If 5,600 units are actually produced, what is the
expected total cost?
A. $110,600
B. $84,000
C. $108,000
D. $88,394
95. In a period when anticipated production is 20,000 units, budgeted variable costs are $85,000
and budgeted fixed costs are $45,000. If 15,000 units are actually produced, what is the
expected total cost?
A. $130,000
B. $97,500
C. $108,750
D. $118,750
96. Rom Generators is in the process of preparing a production cost budget for August. Actual
costs in July for the production of 60 generators were:
Materials cost $ 5,200
Labor cost 2,600
Rent 1,200
Depreciation 1,700
Other fixed costs 4,600
Total $15,300
Materials and labor are the only variable costs. If production and sales are budgeted to
increase to 70 generators in August, how much is the expected total cost on the August
budget?
A. $17,850
B. $16,600
C. $9,100
D. $15,300
Chapter 1 Managerial Accounting in the Information Age
1-13
97. Rom Generators is in the process of preparing a production cost budget for August. Actual
costs in July for the production of 60 generators were:
Materials cost $ 5,200
Labor cost 2,600
Rent 1,200
Depreciation 1,700
Other fixed costs 4,600
Total $15,300
Materials and labor are the only variable costs. If production and sales are budgeted to
increase to 70 generators in August, how much is the expected total variable cost on the
August budget?
A. $17,850
B. $16,600
C. $9,100
D. $15,300
98. Rom Generators is in the process of preparing a production cost budget for August. Actual
costs in July for the production of 60 generators were:
Materials cost $ 5,200
Labor cost 2,600
Rent 1,200
Depreciation 1,700
Other fixed costs 4,600
Total $15,300
Materials and labor are the only variable costs. The company has estimated that it can
increase sales to 70 generators in August if it changes the selling price of generators to $450
instead of the current $480 per unit. What is expected to occur to the cost per unit given the
expected changes?
A. It will decline because fixed costs do not increase with increases in volume.
B. It will decline because selling price per unit declines.
C. It will increase because more units will be produced.
D. It will increase because fixed costs do not increase with increases in volume.
99. Barney & Robles plans to produce 50,000 books next year at a total cost of $1,900,000. The
fixed costs total $120,000. Selling price per book is $65.00. Management is considering
lowering the price to $62.00 per unit, and feels that this action will cause sales to climb to
54,000 books. What is the incremental revenue generated if 54,000 units are sold?
A. $44,400
B. $98,000
C. $3,348,000
D. $3,250,000
100. Hanover Binding plans to produce 40,000 books next year at a total cost of $1,640,000 with a
selling price per book of $66.00. The fixed costs total $280,000. Management is considering
lowering the price to $60.00 per book, and feels that this action will cause sales to climb to
50,000 books. What will be the incremental costs incurred if 50,000 books are sold?
A. $340,000
B. $20,000
C. $1,700,000
D. $1,300,000
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
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101. Hanover Binding plans to produce 40,000 books next year at a total cost of $1,640,000 with a
selling price per book of $66.00. The fixed costs total $280,000. Management is considering
lowering the price to $60.00 per book, and feels that this action will cause sales to climb to
50,000 books. What is the amount of incremental profit if 50,000 books are sold?
A. $340,000 profit
B. $20,000 profit
C. $1,700,000 profit
D. $1,300,000 profit
102. Which of the following terms involves calculating the difference in revenue and the difference
in cost between decision alternatives?
A. Budgeting production
B. Incremental analysis
C. Profit planning
D. Systems development
103. Which of the following statements regarding incremental analysis is true? Assume that there
are no opportunity costs and that the capacity exists to complete any of the alternatives.
A. The preferred alternative will have revenues that are greater than the revenues of the
other alternatives.
B. The preferred alternative will have expenses that are greater than the expenses of the
other alternatives.
C. The preferred alternative will have fixed expenses that are less than the fixed expenses
of the other alternatives.
D. The preferred alternative will have profits that are greater than the profits of the other
alternatives.
104. Which one of the following will most likely influence the actions of managers?
A. Sunk costs
B. Performance measures
C. Noncontrollable costs
D. GAAP
105. Which of the following is not a reasonable measure of a plant manager’s performance?
A. Net income
B. Cost of insurance for the plant
C. Number of orders delivered on time
D. Change in market share
106. “You get what you measure!” refers to the relationship between
A. managerial accounting and financial accounting.
B. ethical and unethical behavior.
C. duties of the CEO and duties of the controller.
D. performance measures and actions of managers.
107. If management informs employees that bonuses will depend solely on improving the gross
profit ratio (gross profit/sales), which of the following behaviors would most likely be observed?
A. Sales people would quit trying to sell high volume, low margin core products
B. Overall sales would fall
C. Overall gross profit would fall
D. All of these answer choices are correct
Chapter 1 Managerial Accounting in the Information Age
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108. Which of the following statements regarding performance measures is true?
A. GAAP requires performance measures for all employees.
B. Companies must select from performance measures published by its own industry
when deciding how they want to assess performance.
C. Employees tend to direct their attention to what is measured and may neglect what is
not measured.
D. Companies need to place emphasis on a single performance measure so employees
know what to expect.
109. ProLight plans to sell 1,600 white lights that enhance indoor plant growth next year with total
budgeted sales of $48,000 and estimated profit of $8,000. Variable costs are projected to be
$17.50 per unit. Customer A offers to pay $10,000 to buy 400 lights from ProLight. Total fixed
costs are $12,000 per year. This offer does not affect ProLight’s other planned operations.
How much is the incremental revenue associated with the offer from Customer A?
A. $58,000
B. $10,000
C. $48,000
D. $3,000
110. ProLight plans to sell 1,600 white lights that enhance indoor plant growth next year with total
budgeted sales of $48,000 and estimated profit of $8,000. Variable costs are projected to be
$17.50 per unit. Customer A offers to pay $10,000 to buy 400 lights from ProLight. Total fixed
costs are $12,000 per year. This offer does not affect ProLight’s other planned operations.
What is the incremental cost associated with the offer from Customer A?
A. $58,000
B. $10,000
C. $48,000
D. $7,000
111. ProLight plans to sell 1,600 white lights that enhance indoor plant growth next year with total
budgeted sales of $48,000 and estimated profit of $8,000. Variable costs are projected to be
$17.50 per unit. Customer A offers to pay $10,000 to buy 400 lights from ProLight. Total fixed
costs are $12,000 per year. This offer does not affect ProLight’s other planned operations.
How much is incremental profit associated with the offer from Customer A?
A. $3,000
B. $10,000
C. $48,000
D. $7,000
112. Goody Buy Electronics has received an offer from a customer for $21,600 to purchase 12,000
external hard drives. Good Buy has budgeted sales of 200,000 hard drives totaling $500,000,
with fixed costs of $260,000 and total costs of $420,000. Assuming that Good Buy has the
capacity to produce the additional units and that accepting this order will not affect any other
orders, what effect will accepting the order have on Good Buy’s profit?
A. Incremental profit will increase by $21,600
B. Incremental profit will decrease by $9,600
C. Incremental profit will increase by $12,000
D. Incremental profit will decrease by $3,600
Test Bank to accompany Jiambalvo Managerial Accounting, 6th Edition
1-16
113. Classic Loungers is in the process of preparing a production cost budget for August. Actual
costs in July for 200 chaise lounge chairs were:
Materials cost $ 6,000
Labor cost 8,000
Rent 2,000
Depreciation 4,000
Other fixed costs 5,000
Total $25,000
Each chair was sold for $140 in July. Management estimates that sales will increase to 230
chairs during August if the company lowers the selling price to $130 per chair. Materials and
labor are the only variable costs. How much is the incremental cost of producing an extra 30
chairs?
A. $1,900
B. $2,100
C. $3,750
D. $(200)
114. Classic Loungers is in the process of preparing a production cost budget for August. Actual
costs in July for 200 chaise lounge chairs were:
Materials cost $ 6,000
Labor cost 8,000
Rent 2,000
Depreciation 4,000
Other fixed costs 5,000
Total $25,000
Each chair was sold for $140 in July. Management estimates that sales will increase to 230
chairs during August if the company lowers the selling price to $130 per chair. Materials and
labor are the only variable costs. How much is the incremental revenue associated with the
price reduction?
A. $200
B. $2,100
C. $3,750
D. $1,900
115. Classic Loungers is in the process of preparing a production cost budget for August. Actual
costs in July for 200 chaise lounge chairs were:
Materials cost $ 6,000
Labor cost 8,000
Rent 2,000
Depreciation 4,000
Other fixed costs 5,000
Total $25,000
Each chair was sold for $140 in July. Management estimates that sales will increase to 230
chairs during August if the company lowers the selling price to $130 per chair. Materials and
labor are the only variable costs. Under what situation should the company lower the price of
its chaise lounge chairs?
A. If total revenue exceeds totals costs under the new pricing
B. If incremental revenue exceeds the old revenue
C. If incremental profit is a positive number
D. If incremental costs decrease
Chapter 1 Managerial Accounting in the Information Age
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116. Which of the following is true concerning Enterprise Resource Planning (ERP) systems?
A. They grew out of the material requirements planning systems that preceded them.
B. They will allow customers to track their orders.
C. They are considered sunk costs.
D. All of these answer choices are correct.
117. Which of the following would most likely be a Customer Relationship Management System
component?
A. A system allowing customers to do online banking.
B. A system that prepares a master production schedule.
C. A system that links the company’s suppliers electronically to its databases.
D. A system that manages human resources.
118. Supply Chain Management (SCM) systems
A. computerize inventory control and production planning.
B. organize activities between a company and its suppliers.
C. automate customer service and support.
D. allow customers to track their purchase as it is being produced.
119. Which of the following should be considered when making ethical decisions?
A. What is right?
B. What is standard practice?
C. Is the company’s control system able to detect an irregularity?
D. All of these answer choices are correct.
120. Which of the following is one of the questions you should ask when faced with an ethical
dilemma?
A. Will I get caught?
B. What decisions alternatives are available?
C. Are the actions illegal?
D. How big is the effect on the company’s profit?
121. The Institute of Management Accountants (IMA)
A. is the professional organization of managerial accountants.
B. administers the comprehensive examination which must be passed before a person
can become a CMA.
C. has developed a set of standards of ethical conduct and maintains an ethics hotline.
D. All of these answer choices are correct.
122. The organization which administers the Certificate in Management Accounting program is the
A. GAAP.
B. SCM.
C. CRM.
D. IMA.
123. In most companies, the top management accountant is called the
A. financial analyst.
B. taxation specialist.
C. treasurer.
D. controller.