Managerial Accounting Quiz #2

Generally speaking, net operating income under variable and absorption costing will:

be equal only when production and sales are equal.

Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost with respect to the stores?

the cost of corporate advertising aired during the Super Bowl

Hayworth Corporation has just segmented last year's income statement into its ten product lines. The chief executive officer (CEO) is curious as to what effect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole?

the product line's segment margin.

The usual starting point for a master budget is:

the sales forecast or sales budget.

A reason why absorption costing income statements are sometimes difficult to interpret is that:

they shift portions of fixed manufacturing overhead from period to period according to changing levels of inventories.

A cost that would be included in product costs under both absorption costing and variable costing is:

variable manufacturing costs.

Which of the following will usually be found on an income statement prepared using absorption costing? Contribution Margin Gross Margin A) Yes Yes B) Yes No C) No Yes D) No No

Choice C

Which of the following budgets are prepared before the sales budget? Budgeted Income Statement Direct Labor Budget A) Yes Yes B) Yes No C) No Yes D) No No

Choice D

Which of the following is not an advantage of a company preparing a master budget?

Having a tool to penalize managers for not meeting goals.

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

It is calculated based on the sales budget and the desired ending inventory.

Which of the following statements is NOT correct concerning the Cash Budget?

It is not necessary to prepare any other budgets before preparing the Cash Budget.