Managerial Accounting - Mid Term

18. If the contribution margin is $30 per unit and the selling price is $40 per unit, then the contribution margin ratio is:

75%

17. Cost Pool

A collection of costs that are related to the same or similar activity.

17. Activity-base costing

A costs allocation method that focuses on activities performed.

15. A job order production system would be appropriate for a company that produces which one of the following items?

A landscaping design for a new hospital

17. A method of assigning overhead costs to product using a single overhead rate is:

A. Plantwide overhead rate method

17. Value-added activities

Actions which add value to a product

17. From an ABC perspective, what causes costs to be incurred?

Activities

17. Pool rate

An allocation rate used to sign overhead costs to cost objects

17. Improved pricing decisions

An outcome or goal of improved costing calculations using ABC

18. Projecting a target income is important because:

Businesses have an expectation from investors to achieve certain income levels.

15. A company that makes which of the following types of products would best be suited for a job costing system?

CUSTOM jewelry

15. A job order costing system would best fit the needs of a company that makes

CUSTOM machinery

17. Overhead costs:

Cannot be traced to units of product in the same way that direct labor can.

16. Which of the following products is most likely to be produced in a process operation?

Cereal

17. Direct material cost

Components of production costs which are usually transferred in from raw materials.

17. Overhead costs

Contains all other production costs not included in direct labor or direct materials

16. A way for materials to uninterruptedly move through the production process

Continuous Processing

16. The combined costs of direct labor and factory overhead per equivalent unit used by many businesses with process operations is called:

Conversion cost per unit

Which of the following items appear only in a manufacturing company's financial statements?

Cost of goods manufactured

18. An important tool in predicting the volume of activity, the costs to be incurred, the sales to be made, and the profit to be earned is:

Cost-Volume-Profit Analysis.

16. A way for companies to improve business processes by giving greater attention to the end user

Customer Orientation

15. Job order production is also known as

Customized Production

17. Which of the following would not be considered a product cost?

D. Cost Accountant's Salary

17. Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

Departmental overhead rate method and activity based costing.

18. Which of the following costs are most likely to be classified as variable?

Direct Materials

Wesson company sold 10,000 unties of its only product in the first half of the increase by 12% in the second half of the year, which cost will increase?

Direct materials

A fixed cost

Does not change with changes in the volume of activity

16. Which of the following characteristics does not usually apply to process operations?

Each unit of product is separately identifiable

16. A key idea in process costing that refers to the number of units that could have been started and completed given the costs incurred during the period is known as:

Equivalent units of production

17.Activity

Factors the drives costs

15. T/F A business providing professional services, such as website design, would never have a need for job order costing and analysis.

False

15. T/F A company that produces a large number of standardized units would normally use a job order costing system.

False

15. T/F A manufacturing company that uses a cost accounting system normally has only two inventory accounts: Finished Goods Inventory and Work in Process Inventory.

False

15. T/F Cost accounting information is helpful to management for pricing decisions but has no effect on controlling costs.

False

15. T/F Once companies are proficient at completing bids to obtain new business, job order costing becomes obsolete.

False

15. T/F Service firms cannot use job order costing for determining a selling price for their services.

False

16. Equivalent units of production for direct materials and direct labor are always the same.

False

16. In a process costing system costs are only measured upon completion of each job.

False

16. In process costing system, companies typically end each period with only Finished Goods Inventory.

False

17. Compared to the departmental overhead rate method, the plant wide overhead rate method results in more accurate overhead allocations.

False

17. Multiple cost pools are used when allocating overhead rate using the plantwide overhead rate method.

False

18. CVP is an abbreviation for Cost-Variable-Profit.

False

18. Dividing a mixed cost into its separate fixed and variable cost components cannot be done in cost-volume-profit analysis.

False

18. The high-low method of deriving an estimated cost line uses all the data points available.

False

18. The method most likely to produce the most precise line of cost behavior and require the least amount of judgment is the scatter diagram.

False

18. Total fixed costs change in proportion to changes in volume activity.

False

18. Variable costs per unit increase proportionately with increases in volume of activity.

False

An employee overstates his reimbursable expenses in one period in order to receive needed additional cash. Since he intends to help save the company expenses by reducing his future travel costs, the act of overstatement is not considered fraudulent.

False

Both financial and managerial accounting rely on accepted principles that are enforced through an extensive set of rules and guidelines.

False

Direct materials are not easily traced to a product

False

The Work in Process Inventory account is found only in the ledgers of merchandising companies

False

The focus of managerial accounting information is on the organizations as a whole and not individual department or processes

False

Product that have been completed and are ready to be sold by the manufacturer are called

Finished goods inventory

18. A cost that remains unchanged in total despite variations in volume of activity within a relevant range is a:

Fixed Cost

Classifying costs by behavior with changes in volume of activity involves

Identifying fixed costs and variable costs

14. Managerial accounting information:

Involves gathering info. about costs for planning and controlling decisions.

15. The production of activities for a customized production represent a:

Job

15. Large aircraft manufacturers like Boeing normally use:

Job Order Costing

15. Omega Construction manufactures homes to customer specifications. It most likely uses

Job Order Costing

16. A frequently used processing method that keeps inventory levels very low

Just-in-Time Processing

14. Flexibility of practice, when applied to managerial accounting means

Managerial accounting systems differ across companies depending on the nature of the business and the arrangement of its internal operations

15. Features of job order production include all of the following except:

Mass Production (DOES include diversity of products, also called heterogeneity, customization, and separate manufacturing)

18. A cost that includes both fixed and variable cost components is called a:

Mixed Cost

Which of the following is not a direct cost for a scooter manufacturer?

Office Rent

16. Managements concern with production efficiency which can lead to companies entirely reorganizing its production processes

Process Design

16. A system of accounting in which costs are accumulated and then measured per unit at the end of a period by combining costs per equivalent unit from various departments is a:

Process costing system

16. An organizational unit of a factory that has the responsibility for partially manufacturing or producing a product is called a:

Production department

15. Job order costing would be used for all of the following except:

Production of running shoes (It would be used for construction of a custom home, production of a Pixar movie, production of wedding invitations, and conducting an audit)

18. Which of the following costs are most likely to be classified as fixed?

Property Taxes

18. CVP analysis is based on necessary assumptions. Which of the following is not one of these assumptions?

Relevant range includes all possible levels of activity that a company might experience

16. A method of mechanizing production processes with the goal of reducing (or replacing) direct labor costs

Robotics and Automation

15. The final job cost sheet for a manufactured item would most likely include the following cost components, except:

Sales commissions

16. The the of processing used by non-manufacturing companies such as oil change business and tax return preparers

Services Processing

16. A company that applies process costing is most frequently characterized by:

Similar products and high production volume

17. The cost objects of the departmental overhead rate method is:

The cost object of the departmental overhead rate method is:

17. Direct Labor costs

The costs of workers directly involved in production

16. Equivalent units of production are equal to:

The number of units that could have been started and completed given the costs incurred during the period

18. The break-even point is:

The sales level at which total sales equal total costs.

17. Cost Objects

The target of a cost assignment

A direct cost is a cost that is:

Traceable to a single cost object

15. T/F A materials requisition is a source document used for recording materials requested, usually from the raw materials inventory.

True

15. T/F A time ticket is a source document used by an employee to record the number of hours worked on a particular job during the work day.

True

15. T/F An example of Indirect Materials is shop supplies in an auto repair shop.

True

15. T/F In a manufacturing company, the cost of one type of materials purchased may pass through three separate inventory accounts before it is charged to Cost of Goods Sold.

True

15. T/F Job cost sheets are used to track all of the costs assigned to a job, including direct materials, direct labor, overhead, and all selling and administrative costs.

True

15. T/F Predetermined overhead rates are calculated before the start of the accounting period, and are therefore based on estimates.

True

15. T/F The predetermined overhead rate is used to apply estimated overhead cost to jobs.

True

15. T/F When a job involves producing more than one unit of a custom product, it is often called a job lot.

True

16. Conversion cost per equivalent unit is the combined costs of direct labor and factory overhead.

True

16. If a department that uses process costing starts the reporting period with 100,000 physical units that were 20% complete with respect to direct labor, the equivalent units of direct labor in beginning Work in Process are 20,000

True

16. In a process costing system, with the exception of the first department, each department receives output from the prior department as a partially processed product

True

16. In process costing the cost object is the process an in job order costing the cost object is a job

True

16. Process and job order manufacturing operations both combine materials, labor, and overhead items in the process of producing products.

True

16. Process costing systems use separate Work in Process Inventory accounts for each process

True

16. The managers of process operations focus on the series of repetitive processes, or steps, resulting in a noncustomized product or service.

True

17. A cost pool is a collection of costs that are related to the same or similar activity.

True

17. Overhead costs are indirect costs so assuming these costs to products requires an allocation method.

True

17. Product costs consist of direct labor, direct materials, and overhead (indirect) costs.

True

17. The departmental overhead rate method uses a different overhead rate for each production department

True

17. The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

True

17. When using the plant wide overhead rate method, total budgeted overhead costs are combined into one overhead cost pools.

True

18. A break-even point can be calculated either in units or in dollars of sales.

True

18. A visual line fit to points in a scatter diagram may be used to identify the approximate relation between past cost and unit data.

True

18. CVP analysis is a predictive tool for identifying the impact of future cost changes, price changes, and volume of activity changes.

True

18. CVP analysis requires management to classify all costs as either fixed or variable with respect to production or sales volume within the relevant range of operations.

True

18. Curvilinear costs increase as volume of activity increases, but at a non-constant rate.

True

18. Fixed costs per unit decrease proportionately with increases in volume of activity.

True

18. The dollar amount of sales needed to achieve a target income is computed by dividing the sum of fixed costs plus the target pretax income by the contribution margin ratio.

True

18. The process to identify and measure cost behavior usually starts with an analysis of cost data from the past.

True

18. Total variable costs change in proportion to changes in volume activity.

True

Control is the process of monitoring planning decisions and evaluating an organization's activities and employees

True

Costs may be classified by many different cost classifications

True

Just in time manufacturing (JIT) is a system that acquires inventory and produces only when needed

True

Managerial accounting information can be forwarded to the managers of a company quickly since external auditors do not have to review it, and estimates and projections are acceptable.

True

Manufacturers usually have three inventories: raw materials, work in process, and finished goods

True

One of the usual differences between financial and managerial accounting is the timeliness of the information reported.

True

Planning is the process of setting goals and making plans to achieve them

True

Selling and administrative expenses are normally period costs

True

The cost of partially completed products is included in the balance of the Work in Progress Inventory account

True

15. T/F The total costs on job cost sheets for jobs that are not yet completed equals the balance in the Work in Process Inventory account.

True (?)

16. A method of measuring efficiency based on the formula of material output divided by material input

Yield

18. Which one of the following statements is not true?

a. Total fixed costs remain the same regardless of volume within the relevant range. b. Total variable costs decrease as the volume increases. c. Fixed costs per unit increase as the volume decreases. d. Total variable costs change with volume. B is the answer

14. An attitude of constantly seeking ways to improve company operations, including customers services, product quality, product features the production process and employee interactions, is called

customer orientation

Jenny an employee of Toucan Company used company assets for her own personal gain. This is an example of:

fraud

14. Managerial accounting information

involves gathering info about costs for planning and control decisions