Test 1 Conceptual Questions

If at a given volume total costs and fixed costs are known, the variable costs per unit may be computed as follows:

(Total costs − Fixed costs)/Unit volume

What is the difference between a correlation equal to −1 and a correlation equal to +1?

A correlation equal to −1 means two alternatives are moving in opposite directions, whereas a correlation of +1 means they are moving in the same direction.

Which of the following is an advantage of using the scatterplot method over the high-low method to estimate costs?

A cost analyst can review the data visually and eliminate outliers.

Which of the following is NOT an example of a difference between the income statement of a service organization and the income statement of a manufacturing organization?

A service company will never have work in process.

The system that focuses on the management of activities with the objective of improving the value received by the customer and the profit received by providing this value is called.

Activity-based management

Which of the following is an advantage of analyzing big data sets using business analytics?

An improved quality

An accountant certified to possess the minimal professional qualifications for an external auditor is a

CPA

Persons in the United States who provide external auditing services are designated as

Certified Public Accountants.

Which of the following relates to the credibility section of the IMA Code of Conduct?

Communicate information fairly and objectively.

Which of the following are standards of ethical conduct for management accountants?

Competence, confidentiality, integrity, and resolution and credibility

The type of management which broadens the focus of accounting because it is concerned with factors that drive costs, such as cycle time and process productivity is called:.

Cost management

Which of the following items would be associated with both a traditional cost accounting information system and an activity based cost information system?

Direct labor cost is assigned to products using direct tracing.

The costs incurred for the acquisition of short-run activity capacity, usually as the result of yearly planning are called:

Discretionary fixed expenses

Which of the following managerial objectives is served by traditional product costs?

External financial reporting

Which of the following statements is TRUE about fixed and variable costs?

Fixed costs are constant in total and variable costs are constant per unit.

Which of the following assumptions does NOT pertain to cost-profit-volume analysis?

Inventories in a manufacturing entity may go up or down.

Which of the following is true about the hypothesis test of cost parameters?

It indicates whether the parameters are different from zero.

Which of the following is true of a profit-volume graph?

It is a graph of the operating income equation.

Which of the following formulas is used to compute operating income?

Operating income = Sales revenues − Variable expenses − Fixed expenses

Which of the following is a major subsystem of the cost accounting information system?

Operational control information system

Which of the following will be included in traditional product costs?

Production costs

Which of the following is a TRUE statement about sales mix?

Profits may decline with an increase in total dollars of sales if the sales mix shifts to sell more of the lower contribution margin product.

Which of the following decreases the non-value added time of producing a product and in turn increases the quality of the product?

Redesigning products

For financial accounting, the nature of the inputs and the rules and conventions governing processes are defined by the _____.

Securities and Exchange Commission (SEC)

Which of the following certifications require a candidate to pass a qualifying examination in Financial Planning, Performance, and Control and Financial Decision Making?

The Certificate in Management Accounting

Which of the following is true of the assumptions made in a cost-volume-profit analysis?

The analysis assumes a linear revenue function.

Which of the following statements is TRUE in a cost-volume-profit graph?

The slope of the total cost line is dependent on the variable cost per unit.

In resolving an ethical conflict, it is inappropriate to discuss the problem with the immediate supervisor because of a violation of which standard of ethical conduct for management accountants?

This action is not in violation of the code of conduct.

What does a correlation coefficient near +1 mean?

Two variables are moving in the same direction.

What does a correlation coefficient near 0 mean?

Two variables are unrelated.

In the formula Y = F + VX, total variable cost is represented by:

VX.

Which of the following costs would be included as part of direct labor?

a cutter in the production of shelving

The direct costs of operating a college computer center would NOT include

a fair share of college utilities.

When a firm acquires the resources needed to perform an activity, it is obtaining

activity capacity.

The three methods of assigning costs to cost objects are direct tracing, driver tracing, and _____.

allocation

Which cost assignment method would likely assign the cost of heating in a plant that makes beds and dressers when the bed product line is the cost object?

allocation

In a cost-volume-profit graph,

an increase in the unit selling price would shift the break-even point in units to the left.

Direct costs

are those costs that can be easily and accurately traced to a cost object.

The point of zero profit is called the:

break-even point.

Analyzing cost overruns to determine their cause is an example of

control

Inspecting units produced to determine if they meet specifications is an example of

control.

Which of the following job positions is a staff position?

controller

Which of the following positions would most likely be a staff manager?

controller

Which of the following costs is a period cost for a manufacturing company?

controller's salary

The sum of direct labor and factory overhead is referred to as

conversion costs.

Which of the following is an example of a step-fixed cost?

cost of disposable surgical scissors, which are purchased in increments of 100

The cost of units completed during a period is called

cost of goods manufactured.

Which of the following items would NOT appear on an income statement of a service organization?

cost of goods sold

What is a disadvantage of assigning costs evenly over all cost objects?

costs may be distorted by consumption patterns of other cost objects

Continuous improvement is

critical in a dynamic environment. important to finding and maintaining a competitive advantage. an effort to find ways to increase overall efficiency, improve quality, and reduce costs.

Setting the selling price of a company's product is an example of

decision making.

Assuming all other things are the same, if there was an increase in the break-even point, contribution margin per unit must have:

decreased

Which of the following is NOT part of the financial accounting information system?

determining the future cash flows of a proposed flexible manufacturing system

With regard to services, inseparability means that

direct contact must take place for an exchange.

A company has purchased some steel to use in the production of steel railings. If this steel has NOT been put into production, it would be classified as

direct materials inventory.

The most likely method to assign the cost of an assembly-line supervisor when the assembly line is the cost object is the:

direct tracing method

Which cost assignment method would likely assign the cost of maintenance for machines in a department that does cutting when the cutting activity is the cost object?

driver tracing

If physical observation can NOT be used to identify the exact amount of resources consumed by a cost object, the next best approach is

driver tracing.

In an accounting information system, the inputs are usually

economic events.

Any form of commerce that is executed using information and communications technology is called:

electronic commerce

Currently, the activity found LEAST often within the controller's department is

establishing and maintaining a market for the organization's debt and equity securities.

According to the rules and conventions of the Financial Accounting Standards Board (FASB), only production costs should be used in calculating product costs for _____.

external financial reporting

The accounting information subsystem that is primarily concerned with producing outputs for external users is called:

financial accounting information system

Competitive advantage is established by providing

greater customer value for less cost than competitors.

Which of the following items would NOT be considered in cost-volume-profit analysis?

gross profit margin

Assuming all other things are the same, if there was a decrease in the break-even point, selling price per unit must have:

increased

Assuming all other things are the same, if there was an increase in the break-even point variable cost per unit must have:

increased

The learning curve that decreases by a constant percentage each time the cumulative quantity doubles is known as the

incremental unit-time model.

In the formula Y = F + VX, X refers to the

independent variable.

Principles of personal ethical behavior include

integrity. respect for others. fairness.

The cost function derived by the least-squares cost estimation method

is linear.

A demand-pull system that strives to produce a product only when it is needed and only in the quantities demanded by customers is referred to as:

just-in-time manufacturing.

Which of the following accounts would appear on the financial statements of ONLY a manufacturing firm?

materials inventory

Which of the following costs is a variable cost?

materials used in production

Longhorn Enterprises rents a truck for a flat fee plus an additional charge per mile. What type of cost is the rent?

mixed cost

When least squares is used to fit an equation involving two or more independent variables, the method is called _____.

multiple regression

In JIT manufacturing, each operation produces

only what is necessary for the succeeding operations.

A cost management subsystem designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control activities is called the:

operational control information system

Which of the following is a cost management subsystem designed to provide accurate and timely feedback concerning the performance of managers and others relative to their planning and control of activities?

operational control information system

Period costs do NOT include

order-making costs.

An example of a tangible product, rather than a service, would be

paper

Which of the following costs would be considered a direct material?

paper used in the production of books

Accounting reports that provide feedback by comparing planned (budgeted) data with actual data are called:

performance reports.

Selling and administrative costs are classified as

period costs.

Evaluating the performance of a segment of the company is an example of

planning and internal auditing.

Developing a company strategy for responding to anticipated new markets is an example of

planning.

The formulation of a program for the accomplishment of a specific purpose is referred to as

planning.

The setting of objectives and the identification of methods to achieve those objectives is called

planning.

In the method of least squares, the deviation is the difference between the

predicted and actual costs.

Which of the following activities is associated with the cost management information system?

preparing reports for division managers

Which of the following would be considered a line function?

production

Which of the following job positions is a line function?

production supervisor

Which of the following positions would most likely be a line manager?

production supervisor

Intangibility of services means that

products cannot be seen, tasted, heard or felt before the purchase.

The cost management information system is concerned with

providing cost information that is used in planning, control, and decision-making.

Cost behavior analysis focuses on how costs

react to changes in activity level.

Using cost-volume-profit analysis, we can conclude that a 20 percent reduction in variable costs will

reduce the slope of the total cost line by 20 percent.

The range of activity within which a linear cost function is valid is called the

relevant range.

Which of the following costs is NOT a product cost?

rent on an office building

Which of the following activities is NOT associated with the financial accounting information system?

reporting on the cost of quality

In a cost management system, the cost view does NOT include

resources. activities. Correct Answer: driver analysis. products and customers.

When calculating the absorption-costing income for external reporting, all

selling and administrative costs are classified as nonmanufacturing costs.

Which of the following costs would be included as part of direct materials in the production of an automobile?

steel

Which of the following costs is NOT a period cost?

steel used in steel railings

Salaries paid to shift supervisors are an example of a

step-fixed cost.

Staff positions are positions that are:

supportive in nature and have only indirect responsibility for an organization's basic objectives.

The set of interrelated parts that performs one or more processes to accomplish specific objectives is called a(n):

system

In resolving an ethical conflict, which of the following would NEVER be appropriate?

taking the matter to the press where there is no legal requirement

Which of the following duties is usually assigned to the controller?

tax planning

Which of the following is an example of an expense?

the cost of a product delivered to a customer

Which of the following is NOT a use of CVP (Cost-Volume-Profit) analysis?

the identification of price and efficiency variances

Weaknesses of the high-low method include all of the following EXCEPT

the method is relatively complex and difficult to apply.

The high-low method may give unsatisfactory results if

the points are unrepresentative.

A smaller standard error indicates that:

the regression line more closely approximates the data.

Which of the following expenses incurred by a department store is a direct cost for the women's shoe department?

the salespersons' commissions in the women's shoe department

In a cost-volume-profit graph, the slope of the total revenue line represents

the selling price per unit.

In a cost-volume-profit graph, the total revenue line rises with a slope equal to

the selling price.

The precision of driver tracing depends upon

the strength of causal relationships described by the driver.

Which of the following costs incurred by a chair manufacturer would be traced to the product cost through direct tracing?

the woodworker's salary

Which of the following is an example of a loss?

the write-off of an obsolete product

Which of the following emerging trends in cost accounting deals with managers striving to create an environment that will enable workers to manufacture perfect (zero-defect) products?

total quality management

Which of the following assumptions is NOT necessary for cost-volume-profit analysis?

total revenues increase when total costs increase

If production volume increases from 16,000 to 20,000 units,

total variable costs will increase by 25 percent.

Which of the following is the officer responsible for money management and serves chiefly as the custodian of the organization's funds?

treasurer

Which of the following is a trait of a traditional cost management system?

unit-based drivers

Product costs are converted from cost to expense when

units are sold.

Which of the following activities is NOT associated with the cost management information system?

using future expected earnings to estimate the price of a share of common stock

Direct materials are an example of a

variable cost.

All of the following would be considered staff functions EXCEPT the

vice president of marketing.

Cost of goods sold equals cost of goods manufactured

when finished goods inventories remain constant.

Total quality management emphasizes

zero defects. continual improvement. elimination of waste.

Which of the following best describes sustainable development?​

​It is defined as development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

The appropriate range for the coefficient of correlation (r) is

−1 ≤ r ≤ 1.