Managerial Accounting Exam I

Sniffifles Inc. produces facial tissues. The company's contribution margin ratio is 77%. Fixed expenses are $240,000. To achieve a target profit of $930,000, Sniffles' sales rounded to the nearest dollar must be:

$1,520,000

Lance, Inc. has sales of 9,000 units. The contribution margin per unit is $32 and fixed costs total $120,000. Lance's profit is $ ________.

$168,000

Chrissy's cupcakes has $832,000 in sales and $265,000 in fixed expenses. Given a contribution margin ratio of 72%, Chrissy's profit (loss) is:

$334,040

A company sold 750 units with a contribution margin of $120 per unit. If the company has a break-even point of 450 units, net operating income is:

$36,000

What causes traditional and activity-based costing systems to report different product margins?

-Traditional cost systems allocate all manufacturing overhead costs to products -Traditional cost systems allocate all of the manufacturing overhead costs to products using a volume-related allocation base -The ABC system assigns non manufacturing overhead costs to products on a cause-and-effect basis as appropriate.

The steps for implementing ABC in order:

1. Define activities, activity cost pools, and activity measures. 2. Assign overhead costs to activity cost pools. 3. Calculate activity rates. 4. Assign overhead costs to cost objects. 5. Prepare management reports.

B's Blanket's target profit is $520,000. Each blanket has a contribution margin of $21. Fixed costs are $320,000. How many blankets need to be sold to achieve the target profit?

40,000

A company has the following: Target Profit - $204,000 Fixed Costs - $305,000 Contribution Margin - $40 What is the break-even in unit sales?

7,625

A measure such as direct labor-hours or machine hours used to assign overhead costs to products and services is called a cost driver or a(n) ________.

Allocation base.

Which of the following might be included in a customer relations cost pool?

Cost of sales calls and customer entertainment.

Indirect materials can be easily and inexpensively traced to a specific product.

False

True or false: CVP analysis investigates company personnel polices, business values, and performance measures for a specific company.

False

True or false: The benefits of increased accuracy from ABC always outweighs the costs

False, very costly.

Which of the following information is contained on a time ticket?

Number of jobs worked, nature of indirect tasks worked, and amount of time spent on each job.

Which of these managerial accounting functions are relevant to business majors, such as marketing and human resource management?

Planning, Controlloing, and decision making.

Which of the following statements are true?

Raw materials used in production are transferred to WIP as direct materials and when materials are purchased they are recorded in the raw materials inventory account.

Why is the unit product cost different from the cost that would be incurred if another unit were produced?

The cost to produce another unit is the incremental or magical cost.

True or false: Extrinsic rewards can lead to dysfunctional consequences.

True

Which of the following statements are true?

a direct cost can be easily and conveniently traced to a specific cost object & a regional sales manager's salary would be a direct cost of the regional office in which the sales manager works.

A cost driver is:

a factor that causes overhead costs to occur.

The use of _______ absorption costing can lead to the omission of segment costs because nonmanufacuting costs are not included as costs of a product.

absorption

An event that causes the consumption of manufacturing overhead resources is referred to as a(n) ________.

activity.

Under activity-based costing, overhead includes

all indirect costs.

A type of cognitive bias that comes from attaching credibility to a false piece of information which leads to distorted analysis is referred to as _____ bias.

anchor

Comparing the performance within an organization to that of other similar organizations is called ________.

benchmarking

Management's detailed plans for the future are often expressed formally in a(n)

budget

A series of steps followed to carry out a business task that can span departmental boundaries is a:

business process

A performance report:

can be used to help evaluate and reward employees & helps identify and eliminate sources of unsatisfactory performance.

Using the contribution margin ratio, the impact on net income for a change in sales dollar is:

change in sales dollars x contribution margin ratio.

Underpaid or overspilled manufacturing overhead can be disposed of by:

closing it out to Cost of Goods sold or allocation it among WIP, finished good, and COGS.

Costs that are shared by multiple cost objects in a company are known as ______ costs.

common

One mistake companies make when preparing segmented income statements is arbitrarily assigning ______ fixed costs to segments.

common

A strategy helps a company distinguish itself from:

competitors

To calculate the degree of operating leverage, divide ______ ________ by net operating income.

contribution margin

Contribution margin divided by sales is the formal for:

contribution margin ratio.

Sales revenue minus variable expenses equals _______ _______.

contribution margin.

Another name for an activity measure or allocation base in ABC is _________ _______.

cost driver

Gross margin is calculated by subtracting ______ from ______.

cost of goods sold; sales.

Activities that could be combined into one batch-level activity are the number of:

customer orders and shipped orders.

The most common management reports using ABC data are:

customer profitability and product profitability.

A value chain adds value by focusing on the major functions of a business including:

customer service, manufacturing, and R&D.

Selecting a course of action from available alternatives is part of the ______ process.

decision making

A change in revenues between two alternatives is known as _______ revenue or incremental revenue.

differential

Labor costs that can be easily and conveniently traced to a specific product are _____ costs.

direct labor

A laptop computer manufacturer would consider the computer's processor chip to be a(n) ______ cost.

direct material

Activity-based management focused on:

eliminating waste and reducing defects.

Companies have a corporate social responsibility to serve:

employees, suppliers, customers, and communities.

Companies should provide _________ and human rights advocates with greenhouse gas emissions data, child labor transparency, and recycling and resource conservation data.

environmental

Type of costs that might be included in a cost pool based on order size include:

equipment depreciation and factory supplies.

The formal for a predetermined overhead rate is:

estimated manufacturing overhead cost divided by estimated allocation base.

Without ______ behavior, the economy would operate much less efficiently. Less would be available to consumers, and quality would be lower

ethical

A product profitability report:

excludes costs not caused by specific products.

A benefit of the lean thinking model is:

fewer defects.

In terms of social responsibility, companies should provide customers with:

full disclosure of product-related risks.

An absorption costing income statement calculates:

gross margin by deducting cost of goods sold from sales.

Key differences between variable and absorption costing include:

how costs classifications are defined, how fixed overhead is treated, and whether or not contribution margin is reported.

Motivation that comes from within is known?

intrinsic motivation.

Job-ordering cost:

is a widely used costing method and may be used in almost any type of organization.

Materials requisition forms are used for

making journal entries in accounting records and controlling the flow of materials into production.

The Statement of Ethical Professional Practice describes the ethical responsibilities of _______ accountants.

managerial

Manufacturing costs include:

manufacturing overhead, direct labor, and direct materials.

Indirect materials and indirect labor are classified as:

manufacturing overhead.

The revenue obtained from selling one additional unit of product is called ______ revenue.

marginal

Which of the following statements are true?

mixed costs contain both fixed and variable cost elements and the equation for a straight-line can be used to express the relationship between mixed costs and the level of activity.

Activity-based absorption costing uses _______ costs pools than traditional absorption costing.

more

A measure of how sensitive net operating income is to a given percentage change in sales dollars is known as _________ _________.

operating leverage.

The lean production management approach:

organizes resources around the flow of business processes, tends to result in fewer defects, is sometimes called just-in-time production.

The formal for applying overhead to a specific job is:

predetermined overhead rate x amount of allocation base incurred by job.

Categories of customer value propositions are:

product leadership, customer intimacy, and operational excellence.

The most common reports prepared using ABC data are the product and customer _______ reports.

profitability

Any purchased materials that will go into the finished product are first recorded in _______ ________ inventory account.

raw materials

Company A has sales of $500,000 variable costs of $350,000, and fixed costs of $150,000. Company a has:

reached the break-even point or a contribution margin equal to fixed costs.

Cost assumptions are reasonably valid within the ________ ________ of activity.

relevant range

Non manufacturing costs include:

sales commissions and the CEO's salary.

Which of the following statements are true?

sales commissions are period costs and period costs are expensed in the same period in which they are incurred.

The relative proportions in which a company's products are sold is referred to as ________ _________.

sales mix.

A part or activity of an organization that managers want to gather cost, revenue or profit data about is a(n)

segment.

Companies have a corporate social responsibility to provide _________ with competent management and easy access to complete and accurate financial records.

shareholders

Which of the following is NOT required to be viewed as a credible leader?

strong mentoring skills

Which type of cost is never relevant and should be disregarded when making decisions?

sunk.

Companies should provide __________ with reasonable times to prepare orders and hassle free acceptance of timely and complete deliveries.

suppliers

Differential cost is:

the difference in cost between two alternatives and also known as incremental cost.

An income statement focusing on product and period costs has been prepared using a ________ format, while a(n) ________ format income statement makes a distinction between fixed and variable costs.

traditional, contirbution

A(n) ______ _______ consists of the major business functions that add value to a company's products and services.

value chain

A cost that changes in direct proportion to changes in the activity level is a ________ cost.

variable

Within the relevant range, _____ costs remain constant on a per unit basis.

variable

Variable expenses/Sales is the calculation of the _______ _______ ratio.

variable expense

The contribution margin is equal to sales minus:

variable expenses.

CVP analysis allows companies to easily identify the change in profit due to changes in:

volume, costs, and selling price.

Traditional cost systems allocate all manufacturing costs using ______ allocation base(s).

volume-related