Archives: Quiz

1) Selling costs can be either direct or indirect costs. 2) The contribution format is widely used for preparing external financial statements. Answer: F 3) A transaction driver provides a measure of the amount of time required to perform an […]

1) Under absorption costing, fixed manufacturing overhead is treated as a product cost. 2) A cost that is relevant in one decision may not be relevant in another decision. Answer: T 3) The contribution margin is the amount remaining from […]

1) The number of units to be produced in a period can be determined by adding the expected sales to the beginning inventory and then deducting the desired ending inventory. 2) Return on investment is superior to residual income as […]

1) One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers. 2) Under variable costing, variable production costs are […]

1) A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes. 2) To increase total asset turnover, management must either increase sales or reduce total stockholders’ equity. Answer: FALSE 3) Inspection Time […]

1) In the absorption approach to cost-plus pricing, the anticipated markup in dollars is NOT equal to the anticipated profit. 2) Paying taxes to governmental bodies is considered a cash outflow in the operating activities section on the statement of […]

1) A direct materials quantity standard generally includes an allowance for waste. 2) The costs assigned to units in inventory are typically lower under variable costing than under absorption costing. Answer: TRUE 3) Suppose a company evaluates divisional performance using […]

1) If a company operates at the break even point for each of its segments, it will lose money overall if common fixed expenses exist. 2) Fixed costs may or may not be sunk costs. Answer: TRUE 3) The budgeted […]

1) If the actual rate per direct labor-hour is less than the standard rate per direct labor-hour, then the journal entry to record the Labor rate variance would be a credit. 2) Direct materials is considered to be a product […]

1) One assumption in CVP analysis is that the number of units produced and sold does not change. 2) Free cash flow will increase if a company increases its accounts payable balance by delaying payments to suppliers. Answer: TRUE 3) […]

1) A direct cost is a cost that cannot be easily traced to the particular cost object under consideration. 2) Opportunity costs are not usually recorded in the accounts of a business. Answer: T 3) If the FIFO cost method […]

1) Under the weighted-average method of process costing, costs from the prior period are averaged with those of the current period in computing unit costs. 2) Under variable costing, product cost does not contain any fixed manufacturing overhead cost. Answer: […]

1) A flexible budget should not be used when making comparisons to actual results such as actual expenses. 2) Directly comparing static budget costs to actual costs only makes sense if the costs are variable. Answer: FALSE 3) In calculating […]

1) Under variable costing, fixed manufacturing overhead cost is not treated as a product cost. 2) In companies that do not have “no lay-off” policies, the total direct labor cost for a budget period is computed by multiplying the total […]

1) When a company has a production constraint, the selling price of any new product should cover both its fully allocated cost–including common fixed costs–and the opportunity cost involved in using the constrained resource. 2) All differences between super-variable costing […]

1) The times interest earned ratio is based on net income because that is the amount of earnings that is available for making interest payments. Interest expense is deducted before taxes are determined; creditors have first claim on the earnings […]

1) Acquiring land by taking out a long-term mortgage will not affect the current ratio. 2) A contribution format income statement for a merchandising company organizes costs into two categoriescost of goods sold and selling and administrative expenses. Answer: F […]

1) If the actual level of activity is 4% less than planned, then the variable costs in the static budget should be decreased by 4% before comparing them to actual costs. 2) The dividend payout ratio is equal to the […]

1) In a traditional format income statement for a merchandising company, the selling and administrative expenses report all period costs that have been expensed as incurred. 2) An increase in the number of shares of common stock outstanding will increase […]

1) All other things the same, an increase in total fixed expenses will increase the break-even point. 2) Process Time is the only non-value-added component of Throughput Time. Answer: FALSE 3) When a company is involved in only one activity […]

1) Under the weighted-average method, the equivalent units used to compute the unit costs of ending inventories relate only to work done during the current period. 2) The simple rate of return in any one year may be less than […]

1) All other things the same, if long-term debt is exchanged for short-term debt, the debt-to-equity ratio will be unchanged. 2) When a company sells used equipment for a loss, the net profit margin percentage is unaffected. Answer: FALSE 3) […]

1) The price elasticity of demand is NOT used to determine the markup over cost when computing the profit-maximizing price. 2) Queue time is considered value-added time. Answer: FALSE 3) Under the direct method of determining the net cash provided […]

1) All other things the same, if the fixed expenses increase in a company then one would expect the margin of safety to increase. 2) As the inventory turnover increases, the average sales period decreases. Answer: TRUE 3) An unfavorable […]

1) When fixed costs are included in the cost of goods sold, the gross margin percentage should increase and decrease with sales volume. 2) The units in beginning work in process inventory plus the units in ending work in process […]

1) In the absence of a constraint, all business segments that are absolutely profitable should be retained. 2) A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis […]

1) Direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system. 2) The step-down method of allocation is simpler and easier to apply than the direct method. Answer: FALSE 3) […]

1) In business, a budget is a method for putting a limit on spending. 2) Insurance and utility expenses are considered operating activities on the statement of cash flows. Answer: TRUE 3) A self-imposed budget is a budget that is […]

1) A cost that differs from one month to another is known as a differential cost. 2) Incremental analysis is generally the most complicated and least direct approach to decision making. Answer: TRUE 3) The acid-test ratio is usually greater […]

1) To encourage salespersons to sell the most profitable products, they should be paid sales commissions based on the profitability index and the amount of constraint time sold rather than on sales revenue. 2) All other things the same, when […]

1) A company whose inventory turnover ratio is much slower than the average for its industry may have too much inventory or the wrong sorts of inventory. 2) Vertical analysis of financial statements is accomplished by preparing common-size statements. Answer: […]

1) The sales budget is usually prepared before the production budget. 2) The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers. Answer: […]

1) The cost categories that appear on a job cost sheet include selling expense, manufacturing expense, and administrative expense. 2) If the actual rate per direct labor-hour exceeds the standard rate per direct labor-hour, then the journal entry to record […]

1) The degree of operating leverage in a company is largest at the break-even point and decreases as sales rise. 2) The manufacturing overhead budget lists all costs of production other than selling and administrative expenses. Answer: FALSE 3) A […]

1) A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments. 2) There is no difference in the unit […]

1) The formula for the average sale period is: Average sale period = Accounts receivable turnover Inventory turnover. 2) The super-variable costing net operating income period can be computed by multiplying the number of units sold by the contribution margin […]

1) The potential benefit that is given up when one alternative is selected over another is called an opportunity cost. 2) Activity-based costing involves a two-stage allocation in which overhead costs are first assigned to departments and then to jobs. […]

1) Purchasing inventory on credit increases the book value per share of a retailer. 2) One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top […]

1) Discounted cash flow techniques do not take into account recovery of initial investment. 2) In traditional costing systems, manufacturing costs that are not caused by products are not assigned to products. Answer: FALSE 3) A vertically integrated company is […]

1) A company has a standard cost system in which fixed and variable manufacturing overhead costs are applied to products on the basis of direct labor-hours. A fixed manufacturing overhead volume variance will NOT necessarily occur in a month in […]

1) Which of the following antipollution policies is least likely to make use of cost-benefit analysis? A.Creating a market for pollution rights B.Charging polluters an emission fee C.Enacting legislation that bans pollution D.Private bargaining 2) The marginal cost-of-funds curve for […]

1) “Time inconsistency” refers to the: A.tendency for policies with high short-run benefits to have high long-run costs. B.fallacy that what is true for the short run must be true for the long run. C.tendency to regularly misjudge in the […]

1) In order to apply the concept of diminishing returns to study time: A.the amount of study time available must be held constant. B.study time must be considered a long-run production process. C.all inputs to the learning process must be […]

1) Refer to the short-run data. The profit-maximizing output for this firm is: A.above 440 units. B.440 units. C.320 units. D.100 units. 2) Which one of the following statements is true? The fertility rates for major industrialized countries in recent […]

1) Which statement about oligopoly is false? A.Oligopolistic firms recognize their interdependence B.Prices in oligopoly are predicted to fluctuate widely and frequently C.A few firms play an important role in the sale of a product D.One firm’s behavior is a […]

1) If the interest rate is 10%, what is the present value of $25,000 received two years from now? A.$20,000 B.$20,661 C.$30,250 D.$30,000 2) The supply of higher education in the United States is: A.highly price elastic. B.highly price inelastic. […]

1) In the inverted-U theory of R&D: A.process innovation and product innovation are inversely related. B.technological change is inversely related to scientific discovery. C.R&D expenditures rise continuously as a percentage of firms’ sales as industry concentration rises. D.R&D expenditures first […]

1) Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, […]

1) Answer the question based on the table below showing the marginal utility schedules for product X and product Y for a hypothetical consumer. The price of product X is $4 and the price of product Y is $2. The […]

1) Farm outputs’ share of U.S. GDP from 1950 to the present: A.Has stayed roughly constant at about 10% B.Has dropped from about 30% to 10% C.Has stayed roughly constant at about 30% D.Has dropped from about 7% to 1% […]