ACCTG 231 - Ch1 McGrawHill

Which of the following is always an irrelevant cost? a) Differential cost b) Sunk cost c) Opportunity cost

b) Sunk cost

Planning involves ________. a) hiring employees b) setting goals and objectives c) analyzing financial statements d) coordinating company activities

b) setting goals and objectives

In the equation, Y = a + bX, X represents ________. a) the total mixed cost b) the level of activity c) the total fixed cost d) the variable cost per unit of activity

b) the level of activity

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) __________ a selling a tour package.

indirect cost

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called ________. a) raw materials b) direct materials c) indirect materials

b) direct materials

Differential costs are always ________. a) irrelevant in making business decisions b) relevant in making business decision c) a sunk cost

b) relevant in making business decisions

Financial or Managerial Accounting? - Emphasizes relevance

Managerial

________ is sometimes called "touch labor." a) direct labor b) indirect labor c) overhead labor

a) direct labor

Property taxes associated with a company's administrative facility are considered ________. a) nonmanufacturing costs b) manufacturing overhead costs c) selling costs

a) nonmanufacturing costs

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated ________. a) total manufacturing overhead cost b) total fixed manufacturing overhead cost c) variable manufacturing overhead cost per unit of the allocation base d) total amount of the allocation base

b) total fixed manufacturing overhead cost

A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.

common cost

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job? a) $5,000 b) $5,200 c) $6,000 d) $6,200

d) $6,200 Total cost associated with the job = Direct material + Direct labor + Manufacturing overhead applied Total cost associated with the job = $4,000 + $1,200 + ($10 × 100 DLHs) = $6,200

Which of the following is common to both prime cost and conversion cost? a) Manufacturing overhead b) Direct materials c) Nonmanufacturing costs d) Direct labor

d) Direct labor

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would b a(n) ________ of the branch.

direct cost

Financial or Managerial Accounting? - Emphasizes financial consequences of past activities

Financial

Financial or Managerial Accounting? - Not required to follow GAAP

Managerial

How should the wages of a sheet metal worker in a fabrication plant be classified? a) Product cost b) Period cost c) Nonmanufacturing cost d) Administrative cost

a) Product cost

Which of the following statements about opportunity costs is not correct? a) An opportunity cost is the potential benefit that is given up when one alternative is selected over another. b) An opportunity cost cannot be changed by any decision made now or in the future. c) Opportunity costs are not usually found in accounting records. d) Opportunity costs are costs that must be explicitly considered in every decision a manager makes.

b) An opportunity cost cannot be changed by any decision made now or in the future.

Manufacturing costs include all of the following categories except ________. a) administrative costs b) direct labor c) direct materials d) manufacturing overhead

a) administrative costs

Davidson Company has sales of $100,000, variable cost of goods sold of $40,000, variable selling expenses of $15,000, variable administrative expenses of $5,000, fixed selling expenses of $7,000, and fixed administrative expenses of $9,000. What is Davidson's contribution margin? a) $84,000 b) $45,000 c) $40,000 d) $8,000

c) $40,000 Contribution margin = Sales revenues − All variable expenses Contribution margin = $100,000 − ($40,000 + $15,000 + $5,000)) = $100,000 − $60,000 = $40,000

All of the following are pillars of managerial accounting except ________. a) controlling b) decision making c) planning d) maximizing profit

d) maximizing profit

Financial or Managerial Accounting? - Emphasizes objectivity

Financial

The direct materials required to manufacture each unit of product are listed on a ________. a) bill of materials b) materials requisition form c) materials ticket d) job order cost sheet

a) bill of materials

Financial or Managerial Accounting? - Emphasizes decisions affecting the future

Managerial

Variable expenses and fixed expenses. Cost of goods sold and fixed expenses. Operating expenses and selling and administrative expenses. Cost of goods sold and selling and administrative expenses. a) $25,000 b) $15,000 c) $10,000 d) $20,000

a) $25,000 Cost of goods sold = Beginning merchandise inventory + Purchases − Ending merchandise inventory Cost of goods sold = $15,000 + $20,000 − $10,000 = $25,000

Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours? a) $2,000 b) $4,000 c) $6,000 d) $10,000

b) $4,000 Predetermined overhead rate = $200,000 ÷ 10,000 DLHs = $20 per DLH For 200 DLHs, the manufacturing overhead that would be applied is = $20 per DLH × 200 DLHs = $4,000

Companies can improve job cost accuracy by using ________. a) a plantwide OH rate b) DLH to apply OH c) multiple POHR d) number of units in the job to apply overhead

c) multiple POHR

Which of the following is true of the contribution approach? a) It is mainly used for external reporting purposes. b) It separates costs into fixed and variable categories. c) It is not useful for merchandising companies. d) It calculates gross margin by deducting cost of goods sold from sales.

b) It separates costs into fixed and variable categories

Which of the following is not a business management perspective that goes beyond the numbers to enable intelligent planning, controlling, and decision making? a) Enterprise risk management perspective b) Lean production perspective c) Corporate social responsibility perspective d) Leading perspective

b) Lean production perspective

When all of a company's job cost sheets are viewed collectively they form what is known as a ________. a) general ledger b) inventory c) job-order costing system d) subsidiary ledger

d) subsidiary ledger

The traditional income statement uses which of the following cost categories? a) Variable expenses and fixed expenses. b) Cost of goods sold and fixed expenses. c) Operating expenses and selling and administrative expenses. d) Cost of goods sold and selling and administrative expenses.

d) Cost of goods sold and selling and administrative expenses

The ________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized. a) materiality concept b) consistency concept c) matching principle d) going concern assumption

c) matching principle

A normal cost system applies overhead to jobs ________. a) POHR x estimated allocation base incurred by the by the job b) POHR x actual amount of allocation base incurred by the job c) using the actual amount of OH caused by each job d) using the normal amount of OH caused by each job

b) POHR x actual amount of allocation base incurred by the job

All of the following are pillars of managerial accounting except ________. a) controlling b) decision making c) planning d) maximizing profit

d) maximizing profit

Items such as indirect materials, indirect labor, maintenance and repairs on production equipment, depreciation, and insurance on manufacturing facilities are included in ________. a) nonmanufacturing costs b) manufacturing overhead costs c) direct costs

b) manufacturing overhead costs

Cyber Devices manufactures PCTV products that enable people to watch television content on their computers. It sells its product to retailers for $50. A tuner component that goes into each of these devices costs $5 to acquire. The total variable cost at an activity level of 1,000 units equals ________. a) $50,000 b) $5 c) $1,000 d) $5,000

d) $5,000

The adjustment for overapplied overhead ________. a) decreases cost of goods sold and decreases net operating income. b) decreases cost of goods sold and increases net operating income. c) increases cost of goods sold and decreases net operating income. d) increases cost of goods sold and increases net operating income.

b) decreases costs of goods sold and increases net operating income

The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate? a) $6 per machine hour b) $8 per machine hour c) $10 per machine hour d) $12.50 per machine hour

c) $10 per machine hour Estimated total overhead cost = $300,000 + ($4 per MH × 50,000 MHs) = $500,000 Predetermined overhead rate = Estimated total overhead cost of $500,000 ÷ 50,000 MHs = $10 per MH

In a small manufacturing facility, one welder is needed for every 200 hours of machine-hours or fewer in a month. The welder is paid a monthly salary of $2,500. If the total monthly requirement is 1,300 machine-hours, the total salaried employee expense is ________. a) $12,500 b) $16,250 c) $17,500 d) $15,000

c) $17,500 The company would need 7 welders (7 × $2,500 = $17,500) to complete the work. The relevant range here is 1,201 to 1,400 machine-hours.

If a firm increases its activity level, ________. a) costs will remain the same b) all costs will rise c) some costs will change, other costs will remain the same

c) some costs will change, other costs will remain the same

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)? a) $52 b) $62 c) $100 d) $124

d) $124 Unit product cost = Total cost associated with the job ÷ Number of units Unit product cost = $6,200 ÷ 50 Units = $124

What is the term used when a company applies less overhead to production than it actually incurs? a) Misapplied b) Overapplied c) Unadjusted d) Underapplied

d) Underapplied

A fixed cost is a cost which ________. a) varies in total with changes in the level of activity b) remains constant per unit with changes in the level of activity c) varies inversely in total with changes in the level of activity d) remains constant in total with changes in the level of activity

d) remains constant in total with changes in the level of activity