Conceptual Accounting Test 2
Which of the following statements is true with regard to short-term decision-making? Qualitative and quantitative information should be considered. Variable costs should be considered in total. Fixed costs should be considered on a per unit basis
A
True/False: Used properly, budgets can help eliminate goal congruence.
False
The contribution margin income statement is organized by cost behavior.
True
True/False: A company having few competitors would typically use cost-plus pricing to determine its regular sales price.
True
True/False: In a given period, budgeted purchases for a merchandiser are not necessarily the same as budgeted cash payments to suppliers.
True
True/False: Participative budgeting relies on the knowledge of multiple levels of management within a company.
True
True/False: Sensitivity analysis helps management answer "What If?" questions.
True
Which of the following statements is true regarding the indifference point calculation? If sales volume is expected to be higher than the indifferent point, management should choose the cost structure with higher fixed costs. If sales volume is expected to be higher than the indifferent point, management should choose the cost structure with higher variable costs.
A
Which of the following statements best describes the break-even point? The point at which operating income is equal to $0. The point at which variable costs equal fixed costs. The point at which sales revenue equals contribution margin.
A
The total contribution margin tells managers the amount by which sales revenue exceeds variable costs. the amount by which sales revenue exceeds cost of goods sold.
A
Which of the following cost behaviors do not change in total? Variable Fixed Mixed
B
Which of the following questions does the cash collections budget answer? What are the company's expected cash outflows for the period? What are the company's expected cash inflows for the period? What is the company's expected cash balance at the end of the period?
B
Which of the following budgets is the starting point in the budgeting process for manufacturers and merchandisers? The production/purchases budget. The operating expenses budget. The sales budget. The capital expenditures budget.
C
Which of the following is a disadvantage of participative budgeting? Increased accuracy of budget. Increased motivation of management. Increased likelihood of budgetary slack.
C
Which of the following is not a model used to develop a cost behavior formula? Regression Account Analysis Derivative Scatterplot High-Low
C
Which of the following is not an assumption made during CVP analysis? Revenue is linear throughout the relevant range. Costs can be classified according to cost behavior. Inventory levels fluctuate. Sales mix remains constant.
C
Which of the following questions best describes a keep/drop decision? Should we accept a one time, large volume order at a reduced sales price? What should we charge for our product? Should we continue to operate the segment? In what order should we fill demand? Should we continue making the part in house?
C
Who determines a company's sales mix? Management Shareholders Customers
C
Which of the following is not a typical budgeting approach used by companies? Prior period review Zero based Rolling Master
D
Which of the following is considered when deciding whether to accept a special order? Is there sufficient excess capacity? Is the special unit contribution margin positive? Will regular sales be affected in the long run? Are fixed costs affected? All of the above are considered
E
True/False: CVP analysis relies on our knowledge of cost function to express relationships among costs, sales volume, and profit.
False
True/False: Cost behavior relates to the categorization of costs as either product or period costs
False
True/False: For a manufacturer, the direct material purchases budget, the direct labor budget, and the manufacturing overhead budget are prepared before the production budget.
False
True/False: Management should only discuss a course of action if the combined cash budget reveals an expected cash deficit at the end of the period.
False
True/False: The only criteria necessary to make information relevant to the decision making process is that it differs between alternatives.
False
True/False: The unit contribution margin is calculated by subtracting the unit fixed cost from the sales price.
False
True/False: When making an outsourcing decision, management must consider how the in house unit variable costs compare to the price that will be paid to the outside provider/supplier.
True
True/False: The relevant range is defined as the range of activity over which a cost behavior formula is valid.
True
