A just-in-time costing system does not use the Finished Goods Inventory account;
instead, it combines the Finished Goods Inventory account with the Work-in-Process
Inventory account.
Sensitivity analysis allows managers to see how various business strategies will affect
profit levels.
A favorable variance has a debit balance and is a contra revenue.
After comparing budgets with the actual results, the feedback allows managers to
determine what, if any, corrective action should be taken.
The acquisition or construction of a capital asset is known as a capital investment.
To compute the variable overhead cost variance, first compute the difference between
actual cost and standard cost. Then, multiple this difference by standard quantity.
For external reporting purposes, GAAP requires companies to treat period costs as
assets.
The cash receipts journal is a special journal used to record business transactions of all
cash receipts and credit sales.
Unlike the sales journal, entries in the cash receipts journal are posted monthly to the
accounts receivable subsidiary ledger and daily to the general ledger.
When more units are sold than produced, operating income is higher under absorption
costing.
The production budget determines the number of units to be produced during the
period.
Operating leverage predicts the effects that fixed costs have on changes in operating
income when ________.
A) production is discontinued
B) there are no sales returns
C) variable costs change
D) sales volume changes
When the total fixed costs decrease, the breakeven point ________.
A) increases
B) decreases
C) remains the same
D) increases proportionately
Carlson Fashions uses standard costs for its manufacturing division. From the following
data, calculate the fixed overhead volume variance.
A) $16,800 F
B) $46,200 U
C) $46,200 F
D) $16,800 U
Which of the following can increase a company’s return on investment?
A) decrease in operating income
B) decrease in total assets
C) decrease in asset turnover ratio
D) decrease in residual income
Missan, Inc. reports the following information:
There are no beginning inventories. What is the ending balance in Finished Goods
Inventory using absorption costing? (Round any intermediate calculations to the nearest
cent, and your final answer to the nearest dollar.)
A) $13,981
B) $5,781
C) $11,800
D) $17,582
Gross profit is calculated by deducting ________ from sales revenue.
A) total fixed costs
B) cost of goods sold
C) total variable costs
D) selling and administrative costs
Which of the following correctly describes Just-in-Time (JIT) Management?
A) It is a production approach that maintains surplus goods at each stage of
manufacture.
B) It is an inventory purchase approach that seeks purchase discounts on buying large
quantities.
C) It is a cost management approach that focuses on maintaining lean inventory levels.
D) It is an inventory approach that stockpiles raw materials to protect against supply
interruptions.
Which of the following statements is true if the variable cost per unit increases while
the sales price per unit and total fixed costs remain constant?
A) The breakeven point decreases.
B) The contribution margin increases.
C) The breakeven point remains the same.
D) The breakeven point increases.
Diemans Corp. has provided a part of its budget for the second quarter:
The cash balance on April 1 is $14,000. Assume that there will be no financing
transactions or costs during the quarter. Calculate the projected cash balance at the end
of April.
A) $95,800
B) $54,000
C) $37,300
D) $65,300
Kamal Company incurs both fixed and variable production costs. Assuming that
production is within the relevant range, if volume goes up by 20%, then the total costs
would ________.
A) increase by 20%
B) remain the same
C) increase by an amount less than 20%
D) decrease by 20%
A ________ groups cost by behavior; costs are classified as either variable costs or
fixed costs.
A) balance sheet
B) contribution margin income statement
C) traditional income statement
D) absorption costing income statement
A company’s production department was experiencing a high defect rate on the
assembly line, which was slowing down production and causing wastage of valuable
direct materials. The production manager decided to recruit some highly skilled
production workers from another company to bring down the defect rate but was
worried that the higher wages of these workers might negatively affect operating
income. This would produce a(n) ________.
A) unfavorable direct materials cost variance
B) favorable direct labor cost variance
C) favorable direct labor efficiency variance
D) unfavorable direct materials efficiency variance