Archives: Quiz

What is the after-tax amount of annual cash operating savings associated with a proposed machine? A) operating savings times the tax rate B) operating savings times (1 minus the tax rate) C) $0 D) operating savings The most recent income […]

BEE Company is considering the replacement of a machine that is presently used in production. Which of the following items are irrelevant to the replacement decision? A) annual operating cost of the old machine (2 years left) B) original cost […]

Dodge Company had the following information: Budgeted factory overhead costs $90,000 Actual factory overhead costs $82,000 Budgeted machine hours 40,000 Actual machine hours 35,500 Assume machine hours are the cost driver of factory overhead costs. The budgeted factory overhead rate […]

In a manufacturing company, product costs used for external reporting include ________. A) direct material costs plus direct labor cost only B) indirect production costs only C) direct material costs plus direct labor cost plus indirect production costs D) direct […]

On January 1, 2014, a parent company purchased 90 percent of the stock in a subsidiary. On January 1, 2010, no goodwill was recorded and the book value of the subsidiary’s assets equals the market value of the subsidiary’s assets. […]

Under the immediate write-off method of disposing of underapplied or overapplied overhead costs, current net income is ________ by underapplied overhead costs and current net income is ________ by overapplied overhead costs. A) increased, decreased B) decreased, increased C) not […]

When developing cost functions, which of the following statements is FALSE? A) The cost function must be believable. B) The cost function should explain past cost behavior. C) Personal observations of costs and activities provide the best evidence of a […]

Increasing capital turnover is one of the advantages of implementing the JIT philosophy. An accounting firm is setting the audit fee for a proposed engagement. The budgeted direct professional labor hours are 100 hours at a rate of $100 per […]

Two common methods for comparing alternative investments are the total project approach and the conversion approach. In a make-or-buy decision, if plant facilities will remain idle when the decision is made to outsource a part used in a product, then […]

Treasury stock is a deduction from total stockholders’ equity. An operating budget is the major part of the master budget that focuses on the balance sheet and supporting schedules. FALSE Learning Outcome: Discuss basic budgeting concepts and identify and prepare […]

Historical data may have a direct bearing on a decision made today. The internal rate of return and the net present value methods usually result in the same investment decisions. TRUE Learning Outcome: Calculate the NPV, internal rate of return, […]

During a period of inflation, the LIFO method reports a larger cost of goods sold amount than FIFO. The elements of a financial budget for a merchandising firm include the capital budget, the cash budget and the budgeted balance sheet. […]

The contribution margin per unit of a given product guides managers when deciding which product to emphasize in a sales mix. Process-costing systems apply costs to like products that are usually mass-produced in continuous fashion through a series of production […]

Value engineering is used primarily during the distribution stage of the value chain. Decreasing cycle time often results in bringing products more quickly to customers. TRUE Learning Outcome: None Accrued interest payable is a long-term liability because it relates to […]

Unexpired costs are expenses. When a company acquires all of the common stock of a subsidiary, the books of the subsidiary are no longer used. FALSE Learning Outcome: None The variable overhead spending variance is the difference between the actual […]

Segments are responsibility centers for which a separate measure of revenues and costs is obtained. In the absence of taxes, depreciation expense on a long-term asset is a relevant cash flow for the NPV model. FALSE Learning Outcome: Calculate the […]

If the segments in a firm buy from the same outside suppliers all the time, they are good candidates for decentralization. Markup is the amount by which cost exceeds price. FALSE Learning Outcome: None When adding or dropping a product […]

Staff managers give advice to line managers and have authority over line managers. In a linear mixed cost function, the slope of the function is the fixed cost per unit of the cost driver. FALSE Learning Outcome: Define and distinguish […]

A management control system is a logical integration of techniques to gather and use data and to evaluate performance. A company will bid near the minimum sales price to establish a presence in new markets or with a new customer. […]

Past costs are irrelevant in equipment replacement decisions. The controller is primarily concerned with a company’s financial matters and the treasurer is concerned with a company’s operating matters. FALSE Learning Outcome: Discuss the legal, ethical and business concepts that affect […]

Managers need to know program costs to make ongoing decisions such as which programs to emphasize or deemphasize and the pricing of programs. Local managers in decentralized organizations tend to duplicate services that may be less expensive if centralized. TRUE […]

Qualitative aspects of information can carry more weight than quantitative aspects in a business decision. One purpose of a post-audit is to provide information for improving future predictions of cash flows. TRUE Learning Outcome: Calculate the NPV, internal rate of […]

The differential approach to investments can be used to compare any number of projects. Period costs include selling and administrative expenses. TRUE Learning Outcome: Describe the basics of managerial accounting and its function within an organization Capital turnover can be […]

When calculating the budgeted overhead rate, the numerator of the fraction is the actual amount of the cost driver. The payback model measures profitability as well as how quickly investment dollars are recouped. FALSE Learning Outcome: Calculate the NPV, internal […]

When a company acquires all of the common stock of a subsidiary, the books of the subsidiary are no longer used. Accounts payable, wages payable and income taxes payable are all considered to be current liabilities. TRUE Learning Outcome: None […]

Goodwill is amortized on the consolidated financial statements. As the terms are used in the budgeting process, it is possible for a company to be efficient at the same time it is ineffective. TRUE Learning Outcome: Discuss standard costing and […]

In job-order costing, the journal entry to record the completion of goods would include a Debit to Cost of Goods Sold. A merchandising company has Raw Materials Inventory. FALSE Learning Outcome: Describe the basics of managerial accounting and its function […]

When an investing company owns less than 50 percent of another company, the companies must prepare consolidated financial statements. Assume a company uses process costing. When factory overhead is applied to the units in production, Finished Goods Inventory is the […]

In job-order costing, the journal entry to record actual factory overhead costs incurred would include a Credit to Factory Department Overhead Control. A flexible budget is different from a variable budget. FALSE Learning Outcome: Prepare a flexible budget and discuss […]

Par value is the value that is printed on the face of the stock certificate. In a linear mixed cost function, the slope of the function is the fixed cost per unit of the cost driver. FALSE Learning Outcome: Define […]

Examples of service departments in a hospital include the housekeeping and laundry departments. Goodwill is amortized on the consolidated financial statements. FALSE Learning Outcome: None Management control systems in nonprofit organizations will never be as highly developed as in profit-seeking […]

Investors need more detailed information about products or services than managers. If a company uses the variable-costing approach, a manager may be tempted to produce unneeded units to increase operating income. FALSE Learning Outcome: None Gross margin is a subtotal […]

Some level of decentralization in an organizational structure creates benefits for most organizations. When using the direct method of preparing the statement of cash flows, depreciation expense is added to net income. FALSE Learning Outcome: None In job-order costing, time […]

A company’s operating cycle can be longer than one year. The effectiveness of any budgeting system depends directly on the attitudes of top management toward the budgeting system. TRUE Learning Outcome: Discuss basic budgeting concepts and identify and prepare the […]

Liabilities are economic resources. A disadvantage of decentralization in organizations is higher overhead costs due to duplication. TRUE Learning Outcome: None The operating budget is a better measure of a company’s long-term performance than the financial budget. TRUE Learning Outcome: […]

Examples of activity centers with indirect costs include receiving, testing and packaging. Process-costing systems apply costs to like products that are usually mass-produced in continuous fashion through a series of production processes. TRUE Learning Outcome: Discuss process costing systems and […]

Opportunity costs apply to resources that a company has committed to purchase. Joint costs are not allocated to a by-product. TRUE Learning Outcome: None The balance sheet shows a company’s financial status at only one point in time. TRUE Learning […]

An example of an operating activity on the statement of cash flows is federal taxes paid. Assume the direct method is used. The allocation of joint costs to joint products should affect the decision to sell or process the joint […]

Preferred stockholders receive cash dividends before common stockholders. Managers evaluated using net book value for plant assets will tend to replace assets sooner than managers evaluated using gross book value. FALSE Learning Outcome: Discuss and calculate various performance measures used […]

When determining a transfer price, outlay cost is often the variable cost for producing the item transferred. The inventory method a company uses does not affect its income statement. FALSE Learning Outcome: None Job-order costing only applies to specific jobs […]

The corporate culture is a larger influence on the ethical climate of an organization than a code of ethics. An operating budget is the major part of the master budget that focuses on the balance sheet and supporting schedules. FALSE […]

When referring to a cost function, plausibility refers to whether you can rely upon the cost function for predicting the future. Two popular methods for allocating service department costs to user departments are the direct method and the step-up method. […]

Which of the following is the best example of opportunity cost? A) a company’s expenditures on a training program for its employees B) the rate of return on a company’s investment C) the amount of money that a company can […]

The sensitivity of the change in quantity consumed of one good to a change in the price of a related good is called A) cross-elasticity. B) substitute elasticity. C) complementary elasticity. D) price elasticity of demand. Answer the following questions […]

Which of the following will not cause a short-run shift in the supply curve? A) a change in the number of sellers B) a change in the cost of resources C) a change in the price of the product D) […]

Which of the following is a Leading Economic Indicator? A) commercial and industrial loans outstanding B) industrial production C) average weekly duration of unemployment D) None of the above The existence of a kinked demand curve under oligopoly conditions may […]

When MR = MC A) marginal profit is maximized. B) total profit is maximized. C) marginal profit is positive. D) total profit is zero. When a firm experiences increasing returns to scale A) its AFC will decrease. B) its AFC […]

Which of the following is most likely a fixed cost? A) expenditures for raw materials B) wages for unskilled labor C) fuel cost D) property taxes The government unit that wants to achieve “revenue enhancement” will find it considerably more […]

A monopoly will usually produce A) where its demand curve is inelastic. B) where its demand curve is elastic. C) where its demand curve is either elastic or inelastic. D) only when its demand curve is perfectly inelastic. If the […]

Which of the following is the best example of two inputs that would exhibit a constant marginal rate of technical substitution? A) trucks and truck drivers B) natural gas and oil C) personal computers and clerical workers D) company-employed computer […]