AC 401 Final

materials price variance

(Actual price of input - Budgeted price of input) x Actual quantity of input

Target Profit

(FC + TP) / CM per unit

Target Profit $

(FC+TP) / CM%

ROI

(NI - preferred div) / avg stockholder's equity

B) it is a benchmark against which actual performance can be compared

A budget serves as much as a control tool as a planning tool because ________. A) it helps to make predictions about the future B) it is a benchmark against which actual performance can be compared C) it helps to evaluate customer needs and feedback D) it aids in the coordination and communication among various business functions

C) the setup cost of the new equipment

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost? A) the loss on the disposal of the old equipment B) the depreciation expense on the old equipment C) the setup cost of the new equipment D) the book value of the old equipment

A) is developed at the end of the period

A flexible budget ________. A) is developed at the end of the period B) provides favorable operating results C) is another name for management by exception D) is based on the budgeted level of output

A) future revenue and differs among alternative courses of action

A relevant revenue is revenue that is a(n) ________. A) future revenue and differs among alternative courses of action B) in-hand revenue C) past revenue and differs among alternative courses of action D) earned revenue

batch level costs

Advanced Technology Products produces 10 different fastners. Each time a type of fastener is produced, the equipment must be stopped and items such as filters and drill bits must be changed, oil must be added to the equipment and some parts need lubrication. This work must be done before the products can be produced, the costs related to this activity would be part of which cost pool? Product sustaining costs service sustaining costs output level costs batch level costs

POR X actual activity base

Applied OH =

C) unit costs decrease as productivity increases and the unit-cost function behaves nonlinearly

As a result of learning curve, ________. A) unit costs decrease as productivity increases and the unit-cost function behaves linearly B) unit costs increase as productivity increases and the unit-cost function behaves nonlinearly C) unit costs decrease as productivity increases and the unit-cost function behaves nonlinearly D) unit costs increase as productivity increases and the unit-cost function behaves linearly

B) be linked by feedback to help learning and future planning

Control measures should ________. A) be set by excluding nonfinancial information B) be linked by feedback to help learning and future planning C) be set and not changed until the next budget cycle so as to provide an effective benchmark D) be kept confidential from employees so that competitors don't have an opportunity to gain a competitive advantage

D) manufacturing overhead budget

Costs such as supervision, plant and equipment (production) depreciation, maintenance, supplies, and power. are included in the ________ . A) revenues budget B) capital expenditures budget C) distribution costs budget D) manufacturing overhead budget

C) predatory pricing

Crimpson Corp., a California-based company is selling its products for $21. Its average variable costs is $23 and the average selling price of its competitors is $26. This is an example of ________. A) suicidal pricing B) dumping C) predatory pricing D) collusive pricing

Ending inventory

beginning bal + Purchases (additions) - uses (sold)

A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results

Management accounting ________. A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results B) reports information that has occurred in the past that is verifiable and reliable C) provides information about the company as a whole D) provides information that is generally available only on a quarterly or annual basis

Profit Margin %

Net income/ sales (Rev)

D) economies of scale allowing for lower cost purchases with larger orders

What is a plausible explanation of a cost function has a slope coefficient of $30 for purchases of 1 to 1,000 units and $25 for production of 1,100 - 2,000 units, and $20 for production of 2,001 - 3,000 units A) contribution margins are decreasing B) their is a linear cost function in effect C) the fixed cost per unit has decreased because of efficiencies D) economies of scale allowing for lower cost purchases with larger orders

C) manufacturing labor cost

Which of the following cost is included in cost of goods sold? A) distribution cost B) marketing cost C) manufacturing labor cost D) customer service cost

A) relevant costs

Which of the following costs always differ among future alternatives? A) relevant costs B) historical costs C) variable costs D) fixed costs

A) maintenance department of a luxury resort

Which of the following departments is most likely to be a cost center? A) maintenance department of a luxury resort B) call center of a company that serves customers and cross-sells other products C) research department of a company providing consultancy services D) sales department of a company selling industrial tools

B) arriving at a price that earns a target return on investment

Which of the following explains the cost-plus approach to pricing decisions? A) arriving at a price based on the demand and supply trends in the market B) arriving at a price that earns a target return on investment C) arriving at a price for the product based on the competitive pricing prevalent in the market D) arriving at a price based on the perceived value to a customer given the cost of design and added features

A) Beginning inventory + Purchases - Ending inventory = Costs of goods sold

Which of the following formulas determine cost of goods sold in a merchandising entity? A) Beginning inventory + Purchases - Ending inventory = Costs of goods sold B) Beginning inventory + Purchases + Ending inventory = Cost of goods sold C) Beginning inventory - Purchases + Ending inventory = Cost of goods sold D) Beginning inventory - Ending inventory - Purchases = Cost of goods sold

A) to provide information for cost-control and pricing decisions

Which of the following illustrates a purpose for allocating costs to cost objects? A) to provide information for cost-control and pricing decisions B) to measure capital expenditure C) to provide information to customers D) to determine marginal cost

C) the cost to train factory general managers to use a new activity based management system

Which of the following is NOT a discretionary cost? A) the cost of social networking activities to promote a product B) legal costs C) the cost to train factory general managers to use a new activity based management system D) the cost of total quality management training for executives

C) fixed costs are allocated as if they are variable costs

Which of the following is a problem related to cost analysis? A) extreme observations are adjusted or removed B) inflationary effects are removed C) fixed costs are allocated as if they are variable costs D) a company keeps accounting records on the accrual basis

A) making each manager aware of the plan and allowing each manager to understand the importance of the plan

One of the benefits of a well implemented and executed budget is communication. Which of the following best describes communication within the budgetary cycle? A) making each manager aware of the plan and allowing each manager to understand the importance of the plan B) meshing and balancing of all aspects of production or service C) allocation of scarce resources across all functional areas of the company D) the calculation of deviations from plan

B) The analyst should remove the inflationary effects

Which of the following is a step to overcome problems related to data collection for estimating cost function? A) The analyst should not use accrual accounting. B) The analyst should remove the inflationary effects. C) The analyst should consider fixed costs as variable. D) The analyst should also use extreme values while calculating cost functions.

D) promotions based on performance

Which of the following is an example of an extrinsic reward? A) receiving a high rating on customer service B) verbal appreciation from CEO C) appreciation mail from a customer D) promotions based on performance

C) recognition of job well done

Which of the following is an example of an intrinsic reward? A) bonuses paid to employees B) salaries paid to employees C) recognition of job well done D) promotions based on performance

D) Debit: Manufacturing Overhead Control account Credit: Cash

Payment of the factory rent would require debits and credits to which accounts? A) Debit: Factory Depreciation account Credit: Accumulated Depreciation Control B) Debit: Work-in-Process Control account Credit: Cash C) Debit: Cost of Goods Sold account Credit: Prepaid Rent D) Debit: Manufacturing Overhead Control account Credit: Cash

C) are treated as expenses in the period they are incurred

Period costs ________. A) are also referred to as manufacturing overhead costs B) are treated as expenses in the following period they are incurred C) are treated as expenses in the period they are incurred D) are directly traceable to products

Design, Production, Marketing, Customer Service

Place the four business functions in the order they appear along the value chain:

C) percentage of products started and completed without requiring any rework

Which of the following is an example of nonfinancial performance measure? A) quantity discounts obtained on order of large quantity B) direct manufacturing labor efficiency variance C) percentage of products started and completed without requiring any rework D) direct materials price variance

A) strategizing compliance with GAAP (Generally Accepted Accounting Principles)

Which of the following is not a concern for management accountants in formulating a strategy? A) strategizing compliance with GAAP (Generally Accepted Accounting Principles) B) maintaining adequate fixed assets available to implement the strategy C) identifying the most important warehouse location for the distribution of goods D) substituting products that exist in the marketplace

D) deliberately sets prices very low, sometimes even below costs, to minimize competition

Predatory pricing is a type of price discrimination that ________. A) allows prices to be cut to the level of variable costs B) is used in the food industry for perishable goods C) is required when a company declares bankruptcy so that it can sell its remaining goods quickly D) deliberately sets prices very low, sometimes even below costs, to minimize competition

estimated factory OH cost / Estimated activity base

Predetermined overhead rate (POR)

A) used by businesses to price identical products

Process costing is ________. A) used by businesses to price identical products B) used to enhance employees' job satisfaction C) used by businesses when manufacturing goods above normal capacity D) used by businesses to price unique products or identical products produced in batches

A) by identifying the most important customers

Strategy is formulated ________. A) by identifying the most important customers B) based on the qualified opinion of external auditors C) by forecasting the composition of adequate fixed assets D) by eliminating sunk costs

C) how an organization matches its own capabilities with the opportunities in the marketplace

Strategy specifies ________. A) the demand created for products and services B) incremental changes for improved performance C) how an organization matches its own capabilities with the opportunities in the marketplace D) standard procedures to ensure quality products

C) cost management

The approaches and activities of managers in short-run and long-run planning and control 49) decisions that increase value for customers and lower costs of products and services are known as ________. A) customer value management C) cost management B) value chain management D) enterprise resource planning

B) direct materials inventory, work-in-process inventory, and finished goods inventory accounts

The balance sheet of a manufacturing-sector companies would report ________. A) only finished goods inventory B) direct materials inventory, work-in-process inventory, and finished goods inventory accounts C) direct materials inventory and finished goods inventory accounts only D) only merchandise inventory

A) theoretical capacity

The budgeted fixed manufacturing cost rate is the lowest for ________. A) theoretical capacity B) practical capacity C) master-budget capacity utilization D) normal capacity utilization

B) based on analysis and opinions gathered from various departments

The conference method estimates cost functions ________. A) using quantitative methods that can be very time consuming and costly B) based on analysis and opinions gathered from various departments C) by mathematically analyzing the relationship between inputs and outputs in physical terms D) using time-and-motion studies

operating leverage

contribution margin/operating income

C) competition in product markets

Demand for refinements to the costing system has accelerated due to ________. A) decrease in product diversity B) decrease in indirect costs C) competition in product markets D) increase in direct costs

C) eliminate most short-run costs assigned to that customer

Dropping an unprofitable customer will ________. A) decrease long-run profitability B) eliminate long-run costs assigned to that customer C) eliminate most short-run costs assigned to that customer D) increase the potential to cross-sell other products that are more desirable

D) significant past investment amounts are relevant to decision making

Each of the following are true of relevant information except: A) Not all future revenues and expenses are relevant B) Past costs are helpful when making predictions but not relevant when making decisions C) Different alternatives can be compared by examining differences in expected future revenues and expected total future costs D) significant past investment amounts are relevant to decision making

(actual qty of input used - budgeted qty of input allowed for actual output) X budgeted price of input

Efficiency variance =

Break Even in units

FC/ CM per unit

Break Even in $

FC/ CM%

B) if the supplier is reliable

Factors used to decide whether to outsource a part include ________. A) past design costs used to develop the current composition of the part B) if the supplier is reliable C) the supplier's cost of direct materials D) the original cost of equipment currently used for production of that part

C) how to obtain funds to acquire resources

Financing decisions primarily deal with ________. A) acquiring equipment and buildings B) the use of scarce resources C) how to obtain funds to acquire resources D) preparing financial statements for stockholders

C) indirect costs of another product are misallocated

For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that: A) direct costs of another product are misallocated B) direct labor costs of the product are misallocated C) indirect costs of another product are misallocated D) direct material costs of the product are misallocated

advertising

For an automobile manufacturer, period costs include the cost of ________. A) advertising B) assembly-line equipment C) labor used for assembly D) the dashboard

C) more than one constraining resource

For managers attempting to maximize operating income for a product offering with a great deal of variety, product-mix decisions must usually take into account: A) products that produce a profit above the full costs of the product B) just those products with the greatest contribution margin per constraining resource C) more than one constraining resource D) how to maximize the selling price of all the products

A) shipping (incoming) costs to acquire merchandise

For merchandising companies, inventoriable costs include ________. A) shipping (incoming) costs to acquire merchandise B) selling expenses C) distribution costs D) outgoing freight and handling costs

Gross Margin %

Gross margin / sales (rev)

B) repair costs tend to lag periods of high production

If cost accountants decide to use production of prior periods as a cost driver for repair cost of the current period they understand that A) cost accountants do not need to understand operations B) repair costs tend to lag periods of high production C) there is no correlation between repair costs and levels of production D) there is no cause-and-effect between production and repair costs

the board of directors

If there is an ethical conflict concerning your direct supervisor, you should first contact ________.

D) its resources and capabilities

In designing strategy, a company must match its opportunities in the marketplace with ________. A) the requirements of credit rating agencies B) environmental friendly goals C) branding opportunities D) its resources and capabilities

C) is the factor used to predict the dependent variable

In the estimation of a cost function using quantitative analysis, the independent variable ________. A) is the product of fixed costs and slope coefficient B) is the cost to be predicted C) is the factor used to predict the dependent variable D) is the product of total costs and slope coefficient

B) fixed overhead costs are subtracted to determine gross margin

In the manufacturing sector, ________. A) fixed overhead costs are subtracted to determine contribution margin B) fixed overhead costs are subtracted to determine gross margin C) all operating costs are subtracted to determine contribution margin D) only variable costs are subtracted to determine gross margin

A) Budgeted annual indirect costs divided by actual quantity of cost-allocation base

The formula for the predetermined indirect cost rate is: A) Budgeted annual indirect costs divided by actual quantity of cost-allocation base B) Actual annual indirect costs divided by actual annual quantity of cost-allocation base C) Actual annual indirect costs divided by budgeted annual quantity of cost-allocation base D) Budgeted annual indirect costs divided by budgeted annual quantity of cost-allocation base

A) choosing the appropriate level of capacity

The major challenge when planning fixed overhead is ________. A) choosing the appropriate level of capacity B) calculating total costs C) calculating the cost-allocation rate D) choosing the appropriate planning period

A) the adjusted allocation rate approach

The method that restates all overhead entries in the general ledger and subsidiary ledgers using 32) actual cost rates rather than budgeted cost rates is called ________. A) the adjusted allocation rate approach B) the write-off of cost of goods sold approach C) the weighted-average cost approach D) the proration approach

B) target costing

The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide adequate operating income is referred to as ________. A) cost-plus pricing B) target costing C) full costing D) kaizen costing

A) revenues minus the direct material costs of the goods sold

The theory of constraints (TOC) defines throughput margin as ________. A) revenues minus the direct material costs of the goods sold B) revenues minus the full costs of the goods sold C) operating income minus the direct material costs of the goods sold D) operating income minus the direct labor costs of the goods sold

D) the increased use of activity-based costing

The use of activity-based budgeting is growing because of ________. A) increases in work-in-process inventory B) the increased use of kaizen costing C) increases in direct materials inventory D) the increased use of activity-based costing

B) (Actual price of input - Budgeted price of input) x Actual quantity of input

Which of the following is the correct formula for the materials price variance? A) (Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Budgeted price of input B) (Actual price of input - Budgeted price of input) x Actual quantity of input C) (Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Actual price of input D) (Actual price of input - Budgeted price of input) x Budgeted quantity of input

D) It enables a manager to increase margins and operating income by producing more and building ending inventory.

Which of the following is true of absorption costing? A) It enables a manager to decrease margins and operating income by producing more beginning inventory. B) It enables a manager to decrease margins and operating income by producing more and building ending inventory. C) It enables a manager to increase margins and operating income by producing more beginning inventory. D) It enables a manager to increase margins and operating income by producing more and building ending inventory.

D) There is a clear cause-and-effect relationship between costs and the cost driver in the long run.

Which of the following statements is true of activity-based costing? A) There is no variety of cost drivers and cost pools. B) A single cost driver should be identified for all the activities. C) The system focuses on activities in together and not on individual activities. D) There is a clear cause-and-effect relationship between costs and the cost driver in the long run.

Master budgets express management's operating and financial plans

Which of the following statements is true of budgets? -Master budgets express management's operating and financial plans -Operating budgets are prepared independently of the master budget -the budgeted balance sheet is the first budget prepared as management is very much covered with projected finial position -financial budgets are prepared before the master budget is prepared

C) It affects the willingness of a company to supply a product.

Which of the following statements is true of the cost of producing a product? A) It includes manufacturing costs, but not product design costs for pricing decisions. B) It is not a factor to be taken into account while pricing a product. C) It affects the willingness of a company to supply a product. D) It controls pricing in highly competitive markets.

B) There is a cause-and-effect relationship between the cost driver and the amount of cost.

Which of the following statements is true? A) Fixed costs have cost drivers over the short run. B) There is a cause-and-effect relationship between the cost driver and the amount of cost. C) Over the short run all costs have cost drivers. D) Volume of production is a cost driver of distribution costs.

C) It includes all manufacturing costs that cannot be directly traced to a product or service.

Which of the following statements regarding manufacturing overhead allocation is true? A) The costs can be grouped only as a single indirect-cost pool. B) Allocated amounts are debited to Manufacturing Overhead Control. C) It includes all manufacturing costs that cannot be directly traced to a product or service. D) Total costs are unknown at the end of the accounting period.

B) Absorption costing

________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs. A) Standard costing B) Absorption costing C) Variable costing D) Mixed costing

Design

________ is the detailed planning and engineering and testing of products, services, or processes. A) Research and development B) Production C) Design D) Plan of implementation

Total Quality Management

________aims to improve operations throughout the value chain and to deliver products and services that exceed customer expectations.

flexible budget

actual # of units sold X budgeted price X budgeted input

operating leverage X percent change in sales

estimated change in operating income =

A) when there is a clear violation of the law

f there is an ethical conflict concerning your direct supervisor, when is it appropriate to contact authorities or individuals not employed by the organization? A) when there is a clear violation of the law B) when you face injustice from your supervisor C) when there is a personal conflict D) when your supervisor is about to be promoted

(budgeted indirect cost rate X actual qty of allocation base)

in normal costing how are indirect costs calculated ?

WACC

minimum % we are going to use to discount our cash flows (have to make this minimum in return)

ROI

net income/ ((stockholders equity Beg+ Stockholders equity)/2)

planned operating income

net income/ (1-tax rate)

ROI

net income/ average stockholders equity

actual direct cost of cost driver X budgeted overhead rate

normal overhead cost =

residual income

operating income - (operating assets X WACC)

(actual price of input - budgeted price of input) X actual qty of input

price variance =

Profit Margin

sales (rev) - Expenses

flexible budget amount - static budget amount

sales volume variance =

budgeted contribution margin X (actual units sold - static budget units sold)

sales volume variance for OI =

(actual selling price - budgeted selling price) X actual units sold

selling-price variance =

cost of capital (WACC)

weighted avg cost of debt + weighted avg cost of equity

Gross Margin

Rev - COGS

Gross Profit

Rev- COGS

Contribution Margin

Revenue - VC

B) focus on the upcoming budget period

Rolling budgets help management to ________. A) rigidly administer the budget B) focus on the upcoming budget period C) better review the past calendar year D) deal with a 5-year time frame

C) do not need to follow GAAP but must meet the cost-benefit test.

Rules for measurement and reporting for management accounting ________ A) must follow GAAP. B) must follow GAAP, IRS rules or government standards. C) do not need to follow GAAP but must meet the cost-benefit test. D) state that information must only be useful to management.

B) incremental revenues exceed incremental costs

When there is an excess capacity, it makes sense to accept a one-time-only special order for less than the current selling price if ________. A) the company placing the order is in the same market segment as your current customers B) incremental revenues exceed incremental costs C) additional fixed costs is incurred to accommodate the order D) incremental revenue equals incremental operating income

B) cost driver

When using the high-low method, the two observations used are the high and low observations of the ________. A) direct cost B) cost driver C) fixed cost component D) slope coefficient

C) the productivity component

Which component of strategy measures the reduction in costs attributable to a reduction in the quantity of inputs used in Year 2 relative to the quantity of inputs that would have been used in Year 1 to produce the Year 2 output? A) the price-recovery component B) the cost leadership component C) the productivity component D) the growth component

B) Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is a past cost.

Which of the following is true of depreciation cost? A) Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is an opportunity cost. B) Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is a past cost. C) Depreciation cost on equipment is relevant in decision making because depreciation on equipment that has already been purchased is an opportunity cost. D) Depreciation cost on equipment is irrelevant in decision making because there is no cash transaction.

D) Management accountants provide information to enhance a company's supply chain.

Which of the following statements about a company's supply chain is true? A) A company's supply chain is the same thing as a company's value chain. B) A company's supply chain is always external to a firm. C) A company's supply chain is always internal to a firm. D) Management accountants provide information to enhance a company's supply chain.

B) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

Which of the following statements best define a product differentiation strategy? A) It describes how an organization can increase customer base by differentiating its' product prices from its competitors. B) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. C) It describes how an organization can decrease product prices by differentiating its' raw materials from its competitors. D) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.

A) Responsibility accounting segregates uncontrollable costs from controllable costs

Which of the following statements is true about responsibility accounting statements? A) Responsibility accounting segregates uncontrollable costs from controllable costs. B) Responsibility accounting segregates fixed costs and variable costs. C) Responsibility accounting excludes fixed costs and variable costs. D) Responsibility accounting excludes controllable costs.

C) It presents variable cost as a slope coefficient.

Which of the following statements is true of a linear cost function? A) It presents variable cost as an intercept. B) It presents total cost as an intercept. C) It presents variable cost as a slope coefficient. D) It presents total cost as slope coefficient.