ACCT 116 Exam 2

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B. 20,600

Marvel Woodcraft makes furniture. Marvel's expected sales are 20,000 bookcases for the quarter. The company begins the quarter with inventory of 3,000 bookcases and wants to have enough finished bookcases on hand at the end of the quarter to provide for 15% of the next quarter's expected sales of 24,000 bookcases. Based on this information, how many bookcases need to be produced during the quarter? A. 3,600 B. 20,600 C. 21,000 D. 4,000 E. 17,600

E. None of these are correct, as all these organizations can use ABC.

Of the following organizations, activity-based costing (ABC) cannot be used by: A. manufacturers. B. financial-services firms. C. book publishers. D. hotels. E. None of these are correct, as all these organizations can use ABC.

E. capital budget

A company's plan for the acquisition of long-lived assets, such as buildings and equipment, is commonly called a: A. pro-forma budget. B. master budget. C. financial budget. D. profit plan. E. capital budget

C. semivariable cost.

A cost that has both a fixed and variable component is known as a: A. step-fixed cost. B. step-variable cost. C. semivariable cost. D. curvilinear cost. E. discretionary cost.

D. The production budget

A manufacturer develops budgets for the direct materials, direct labor, and overhead that will be required in the production process from which of the following? A. The selling and administrative expenses budget. B. The budget for merchandise purchases. C. The sales budget. D. The production budget. E. The cash budget

A. semivariable cost.

A mixed cost is also known as a: A. semivariable cost. B. step-fixed cost. C. variable cost. D. curvilinear cost. E. discretionary cost.

C. often reveal products that were under- or over-costed by traditional costing systems.

Activity-based costing systems: A. use a single, volume-based cost driver. B. assign overhead to products based on the products' relative usage of direct labor. C. often reveal products that were under- or over-costed by traditional costing systems. D. typically use fewer cost drivers than more traditional costing systems. E. have a tendency to distort product costs.

E. All of these choices are correct

An organization's budgets will often be prepared to cover: A. one month. B. one quarter. C. one year. D. periods longer than one year. E. All of these choices are correct

A. increase income

Assuming no change in sales volume, an increase in company's per-unit contribution margin would: A. increase income. B. decrease income. C. have no effect on income. D. increase fixed costs. E. decrease fixed costs

D. semivariable cost.

Brock Morton has a fast-food franchise and must pay a franchise fee of $45,000 plus 4% of gross sales. In terms of cost behavior, the fee is known as a: A. variable cost. B. fixed cost. C. step-fixed cost. D. semivariable cost. E. curvilinear cost.

E. All of the answers are correct

CVP analysis can be used to study the effect of: A. changes in selling prices on a company's profitability. B. changes in variable costs on a company's profitability. C. changes in fixed costs on a company's profitability. D. changes in product sales mix on a company's profitability. E. All of the answers are correct.

E. I, II, and III

Consider the following statements about companies that are involved with international operations: I. Budgeting for these firms is often very involved because of fluctuating values in foreign currencies. II. Multinational firms may encounter hyperinflationary economies. III. Such organizations often face changing laws and political climates that affect business activity. Which of the above statements is (are) true? A. I only. B. III only. C. I and II. D. II and III. E. I, II, and III.

D. I and III.

Consider the following statements regarding traditional costing systems: I. Overhead costs are applied to products on the basis of volume-related measures. II. All manufacturing costs are easily traceable to the goods produced. III. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and III. E. II and III.

B. 3 scarves

Denise sells silk scarves at a hobby fair. Each scarf sells for $25 and has a variable cost of $15. Denise's booth rental for one day is $30. Based on this information, how many scarves must Denise sell to break-even? A. 2 scarves. B. 3 scarves. C. 4 scarves. D. 5 scarves. E. None of these answer choices is correct.

B. $75

Denise sells silk scarves at a hobby fair. Each scarf sells for $25 and has a variable cost of $15. Denise's booth rental for one day is $30. Based on this information, what total revenue amount does Denise need to earn to break-even? A. $85. B. $75. C. $100. D. $50. E. None of these answer choices is correct

D. request normal delivery times.

Generally speaking, companies prefer doing business with customers who: A. order small quantities rather than large quantities. B. often change their orders. C. require special packaging or handling. D. request normal delivery times. E. need specialized engineering design changes.

A. fixed costs amount to $2,000 and variable costs amount to $3,200.

If the Malabar Yacht Club expense includes a rent of $2,000 plus a charge of $40 per member and the club has 80 members,: A. fixed costs amount to $2,000 and variable costs amount to $3,200. B. fixed costs amount to $3,200 and variable costs amount to $2,000. C. all costs are fixed. D. all costs are variable. E. cannot be determined.

B. Choice B

Macon Company has a variable selling cost. If sales volume increases, how will the total variable cost and the variable cost per unit behave? _____________________________________________________________ Total Variable Cost | Variable Cost Per Unit ----------------------------------------- A. Increase | Increase B. Increase | Remain constant C. Increase. | Decrease D. Remain constant | Decrease E. Decrease | Increase ——————————————————————————— A. Choice A B. Choice B C. Choice C D. Choice D E. Choice E

E. multidisciplinary project teams

Successful adoptions of activity-based costing typically occur when companies rely heavily on: A. finance personnel. B. accounting personnel. C. manufacturing personnel. D. office personnel. E. multidisciplinary project teams

D. $32

Thai Two sells hot pots for $40 each. The company incurs monthly fixed costs of $5,000. The contribution-margin ratio is 20%. Based on this information, what is the variable cost per hot pot? A. $38. B. $40. C. $48. D. $32. E. None of these answer choices is correct.

B. contribution margin equals fixed cost

The break-even point is that level of activity where: A. variable cost equals fixed cost. B. contribution margin equals fixed cost. C. total contribution margin equals the sum of variable cost plus fixed cost. D. sales revenue equals total variable cost. E. sales revenue equals fixed cost.

B. budgetary slack.

The difference between the revenue or cost projection that a person provides, and a realistic estimate of the revenue or cost, is called: A. passing the buck. B. budgetary slack. C. false budgeting. D. participative budgeting. E. resource allocation processing

B. participative budgeting

When an organization involves its many employees in the budgeting process in a meaningful way, the organization is said to be using an approach most commonly known as: A. budgetary slack. B. participative budgeting. C. budget padding. D. imposed budgeting. E. employee-based budgeting

A. Raw materials required for production + desired ending inventory of raw material = Total raw material required − expected beginning inventory of raw material = Raw material to be purchased.

The direct-material budget shows the number of units and the cost of material to be purchased and used during a budget period. Which of the following formulas is this schedule based on? A. Raw materials required for production + desired ending inventory of raw material = Total raw material required − expected beginning inventory of raw material = Raw material to be purchased. B. Raw materials required for production − desired ending inventory of raw material = Total raw material required + expected beginning inventory of raw material = Raw material to be purchased. C. Total raw material required + Raw materials required for production = desired ending inventory of raw material = Raw material to be purchased. D. Raw material to be purchased + expected beginning inventory of raw material = Desired ending inventory of raw material × cost per unit = Raw materials required for production. E. Raw material required for production ÷ [(expected beginning inventory of raw material + desired ending inventory of raw material) ÷ 2] = Raw material to be purchased

E. 4, 3, 2, 1

The following tasks are associated with an activity-based costing system: 1— Assignment of cost to products 2— Calculation of pool rates 3— Identification of cost drivers 4— Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 2, 4, 1, 3. C. 3, 4, 2, 1. D. 4, 2, 1, 3. E. 4, 3, 2, 1.

D. facility-level activities

The salaries of a manufacturing plant's management are said to arise from: A. unit-level activities. B. batch-level activities. C. product-sustaining activities. D. facility-level activities. E. direct-cost activities.

A. Variable cost.

What type of cost exhibits the behavior shown below? _________________________________________________________________ Manufacturing Volume (Units) | Cost Per Unit ---------------------------------------------------- 50,000 | $1.95 70,000 | $1.95 ---------------------------------------------------- A. Variable cost. B. Fixed cost. C. Semivariable cost. D. Discretionary fixed cost. E. Step-fixed cost.

E. All of the answers are correct.

When determining customer profitability, activity-based costing can be used to analyze: A. orders processed. B. sales visits. C. special packaging and handling. D. billing and collections. E. All of the answers are correct.

A. a horizontal line.

When graphed, a typical fixed cost appears as: A. a horizontal line. B. a vertical line. C. a u-shaped line. D. a diagonal line that slopes downward to the right. E. a diagonal line that slopes upward to the right.

E. a diagonal line that slopes upward to the right.

When graphed, a typical variable cost appears as: A. a horizontal line. B. a vertical line. C. a u-shaped line. D. a diagonal line that slopes downward to the right. E. a diagonal line that slopes upward to the right.

E. All of the answers are correct.

Which of the following can have a negative impact on a particular sale's profitability? A. Number of required sales contacts (phone calls, visits, etc.). B. Special shipping instructions. C. Accounts receivable collection time. D. Purchase-order changes. E. All of the answers are correct.

A. Variable cost.

Which of the following costs changes in direct proportion to a change in the activity level? A. Variable cost. B. Fixed cost. C. Semivariable cost. D. Step-variable cost. E. Step-fixed cost

B. II only.

Which of the following is (are) example(s) of a mixed cost? I. A building that is used for both manufacturing and sales activities. II. An employee's compensation, which consists of a flat salary plus a commission. III. Depreciation that relates to five different machines. IV. Maintenance cost that must be split between sales and administrative offices. A. I only. B. II only. C. I and III. D. I, III, and IV. E. I, II, III, and IV.

B. Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to products.

Which of the following is the proper sequence of events in an activity-based costing system? A. Identification of cost drivers, identification of cost pools, calculation of pool rates, assignment of cost to products. B. Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to products. C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of pool rates. D. Calculation of pool rates, identification of cost drivers, identification of cost pools, assignment of cost to products. E. None of the answers is correct.

B. The break-even point would decrease.

Which of the following occurs if a company experiences a decrease in its fixed costs? A. Income would decrease. B. The break-even point would decrease. C. The contribution margin would increase. D. The contribution margin would decrease. E. More than one of the answers would occur.

B. The break-even point would increase.

Which of the following occurs if a company experiences an increase in its fixed costs? A. Net income would increase. B. The break-even point would increase. C. The contribution margin would increase. D. The contribution margin would decrease. E. More than one of the answers would occur.

E. The sales forecast is typically completed before the master budget and has significant impact on the master budget

Which of the following statements best describes the relationship between the sales-forecasting process and the master-budgeting process? A. The sales forecast is typically completed after completion of the master budget. B. The sales forecast is typically completed approximately halfway through the master-budget process. C. The sales forecast is typically completed before the master budget and has no impact on the master budget. D. The sales forecast is typically completed before the master budget and has little impact on the master budget. E. The sales forecast is typically completed before the master budget and has significant impact on the master budget.

E. All the answers are assumptions that underlie cost-volume-profit analysis

Which of the following underlying assumptions form(s) the basis for cost-volume-profit analysis? A. Revenues and costs behave in a linear manner. B. Costs can be categorized as variable, fixed, or semivariable. C. Worker efficiency and productivity remain constant. D. In multiproduct organizations, the sales mix remains constant. E. All the answers are assumptions that underlie cost-volume-profit analysis

E. None of the other answers are correct, since all of these items would have some influence

Which of the following would have no effect, either direct or indirect, on an organization's cash budget? A. Sales revenues. B. Outlays for professional labor. C. Advertising expenditures. D. Raw material purchases. E. None of the other answers are correct, since all of these items would have some influence


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