Managerial Accounting Test 1 Chapter 1

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 ________. -$12,500 -$16,250 -$17,500 -$15,000

$17,500 The company would need 7 welders (7 × $2,500 = $17,500)

Audio Corporation purchased $20,000 of DVDs during the current year. The company had DVD inventory of $15,000 at the beginning of the year. An end of the year audit revealed that the company had DVD inventory of $10,000. The amount that would be reported as cost of goods sold in the income statement for the current year is ________. $25,000 $15,000 $10,000 $20,000

$25,000 Cost of goods sold = Beginning merchandise inventory + Purchases - Ending merchandise inventory

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? -$84,000 -$45,000 -$40,000 -$8,000

$40,000 Contribution margin = Sales revenues − All variable expenses

Manufacturing costs include all of the following categories except ________. -administrative costs -direct labor -direct materials -manufacturing overhead

Administrative Cost

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

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

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

It separates costs into fixed and variable categories.

Depreciation on salespersons' cars. Product Cost or Period Cost

Period Cost

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 ________. -$50,000 -$5 -$1,000 -$5,000

$5,000 Total variable cost = $5 × 1,000 = $5,000.

A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually. -Indirect Cost -Common Cost -Direct Cost

Common Cost

The traditional income statement uses which of the following cost categories? -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.

Cost of goods sold and selling and administrative expenses.

A branch manager's salary would be a(n) _________ of the branch. -Indirect Cost -Common Cost -Direct Cost

Direct Cost

________ is sometimes called "touch labor." -Direct labor -Indirect labor -Overhead labor

Direct Labor

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

Direct Materials

A branch manager's salary would be a(n) _________ of selling a tour package. -Indirect Cost -Common Cost -Direct Cost

Indirect Cost

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

Manufacturing Overhead Costs

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. -materiality concept -consistency concept -matching principle -going concern assumption

Matching Principle

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

Non Manufacturing Costs

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

Product Cost

Rent on equipment used in the factory.

Product Cost

Differential costs are always ________. -irrelevant in making business decisions -relevant in making business decisions -a sunk cost

Relevant in making business decisions

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

Remains constant in total with changes in the level of activity

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

Some costs will change, other costs will remain the same

Which of the following is always an irrelevant cost? -Differential cost -Sunk cost -Opportunity cost

Sunk cost

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

The level of activity