week 9 accy
At the breakeven point, operating income is equal to ....
0
Which of the following capital budgeting techniques use present value analysis?
The net present value method The internal rate of return method
The higher a firm's contribution margin ratio, the greater its operating:
leverage
When considering the product mix decision and the allocation of scarce production capacity resources, the objective is to maximize contribution margin in terms of the .
scarce resource
The high-low method of analyzing the cost behavior of a mixed cost uses a(n) ......to illustrate cost and volume data relationships.
scattergram
A(n) _____________ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned.
target cost
Cost behavior implies that people accountable for costs would react negatively to increases in the cost.
F
The concept of operating leverage refers to which of the following?
Operating income changes proportionately more than revenues for any given change in activity level.
Relevant costs in short-run decisions are:
future costs that represent differences between decision alternatives
A capital budget provides the organization an overall blueprint to help the organization meet its:
long-term growth and profitability objectives.
When analyzing capital expenditures, the time value of money concept implies:
present value
As the volume of activity changes, a(.....) cost changes in total. Listen to the complete question
variable
The following information exists for ABC Company: Selling price per unit: $30 Variable expenses per unit: $21 Fixed expenses for the period: $60,000 Sales volume in units: 10,000 If selling price is reduced by $2 and sales volume increases by 3,000 units, total contribution margin will increase by $.
1,000 or 1000
ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10 Product engineering has determined that certain production changes could refine the product quality and functionality. These changes would increase material and labor costs by 25 percent per unit. ABC could sell the refined version of its product for $84 per unit. Identify the following relevant costs to process further: Difference in selling price = $...per unit Difference in processing costs = $....per unit Difference in profit/(loss) = $...per unit Difference in profit/(loss) = $....
12 11 1 yes
ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10 Product engineering has determined that certain production changes could refine the product quality and functionality. These changes would increase material and labor costs by 25 percent per unit. ABC could sell the refined version of its product for $84 per unit. Identify the following relevant costs to process further: Difference in selling price = 1 2 , per unit Difference in processing costs = $11 , per unit Difference in profit/(loss) = 1 , per unit Decision to process further = yes
12 11 1 yes
ABC Company is considering an opportunity to produce and sell Product X that currently sells for $20 in the marketplace. If ABC wants to earn a 25 percent profit margin on the sales of Product X, what is the target cost that must be achieved to compete in the market? Target cost = $.
15
The following information exists for ABC Company: Selling price per unit = $60 Variable expenses per unit = $40 If ABC's breakeven point is 5,000 units and it sells 5,750 units in March, its operating income will be $.
15000 or 15,000
ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10. Product engineering has determined that a certain portion of the product conversion could be outsourced. Direct labor and variable overhead would be reduced by 50 percent. Raw material would not be affected and no other alternative use for any idle production capacity is apparent. The outsourcing supplier would charge ABC $15 to provide this product conversion. Identify the following relevant costs to process further: Avoidable cost if outsourced = $ per unit Cost to buy = $ per unit Difference in conversion cost = $ per unit Decision to make or buy = (Make/Buy)
17 15 2 buy
ABC Company produces a product that currently sells for $72 per unit. Current production costs per unit include the following: Direct materials = $20 Direct labor = $24 Variable overhead = $10 Fixed overhead = $10 Total production costs = $64 ABC has received a special pricing offer from a nonprofit organization to buy 3,000 units at $60 per unit. ABC is currently operating at full production capacity. Identify the following relevant costs of this special pricing offer: Current contribution margin at full capacity = $ per unit Contribution margin of special pricing offer = $ per unit Difference in contribution margin = $ per unit Decision to accept special pricing offer = (Yes/No)
18 6 -12 or (12) no
The following information exists for ABC Company: Selling price per unit: $30 Variable expenses per unit: $21 Fixed expenses for the period: $60,000 Sales volume in units: 10,000 If advertising of $15,000 is spent to increase sales volume by 2,000 units, operating income will increase by $
3,000 or 3000
The following information exists for ABC Company: Selling price per unit: $30 Variable expenses per unit: $21 Fixed expenses for the period: $60,000 Sales volume in units: 10,000 Based on the information given above, the operating income of ABC Company will be $
30,000
ABC Company is considering an opportunity to produce and sell Product Z that currently sells for $50 in the marketplace. ABC wants to earn a 20 percent profit margin on the sales of Product Z, and product engineering has estimated production costs for product Z will be $45. Should ABC enter the market to produce Product Z? Target cost = $...... Estimated profit margin for Product Z =....% Decision to produce Product Z =....
40 10 no
ACB Company sells Product X for $20 per unit, but if the product is enhanced, it can be sold for $26 per unit. The enhancement process will cost $80,000 for the 10,000 units that are currently sold. If sales of Product X remain the same, identify the following relevant costs to process further: Difference in selling price = ..... per unit Difference in processing costs = .... per unit Difference in profit/(loss) = $Blank 3Blank 3 2000 , Incorrect Unavailable per unit Based on the relevant costs information identified above, should ACB Company sell Product X as-is or process further? Decision to process further (Yes/No)
6 8 (2) or -2 No
The following information exists for ABC Company: Sales revenue: $300,000 Contribution margin ratio: 30% Fixed expenses for the period: $60,000 Sales volume in units: 10,000 If sales revenue increases by $20,000, operating income will increase by $.
6,000 or 6000
Which of the following statements does not describe a characteristic of management accounting?
Management accounting must conform to GAAP.
Arrange the following items on the contribution margin income statement in the correct order.
Revenue, Variable Expense, Contribution Margin, Fixed Expense, Operating Income
Which of the following items are relevant in a decision to continue or discontinue a segment of an organization?
Segment variable expensesSegment salesSegment contribution marginSegment direct fixed expenses
Managerial accounting provides information for use within an organization.
T
The concept of different costs for different purposes means that costs must be viewed differently depending on the planning, control, or decision-making situation.
T
True or false: Operating leverage should inform management's decisions about whether to incur variable costs or fixed costs in its cost structure.
T
Using the high-low method produces a cost formula for expressing the total of a mixed cost at any level of activity, which is:
Total cost = Fixed cost + (Variable rate x Volume of activity)
When analyzing capital expenditures, the time value of money concept implies:
a dollar received today is worth more than a dollar received five years from today
The relevant range assumption relating to fixed costs refers to:
a firm's range of activity
When the number of units sold is _____.
above the breakeven point, profit equals units sold above the breakeven point multiplied by the contribution margin per unit. below the breakeven point, loss equals each unit unsold below the breakeven point multiplied by the contribution margin per unit.
A cost behavior pattern describes the relationship of total cost to volume of .
activity
A cost behavior pattern describes the relationship of total cost to volume of ....
activity
The principal (advantage/disadvantage) of the net present value method for evaluating proposed capital investments is that it (considers/ignores) the time value of money.
advantage considers
Relevant costs in decision-making:
are future costs that represent differences between decision alternatives.
When a company has different products with different contribution margin ratios, the relationship of total company contribution margin to total company sales revenue is known as the ... contribution margin ratio.
average
Fill in the blanks to complete the sentence. The relevant range assumption is about the level of production ..... and suggests that the level of fixed costs will remain constant only within certain ranges of activity.
capacity
In capital budgeting, the cash receipts and disbursements associated with a capital expenditure over its life is known as
cash flow
When analyzing capital expenditure decisions, the key factor used to equate the value of money over varying lengths of time is:
compound interest
Alpha & Omega Inc. produces laptops and the selling price per laptop is $300. Currently, the company has a separate division that produces the internal hard drive used in the laptop. To produce one such hard drive, it spends $10 in the raw materials, $15 in direct labor, $5 in variable manufacturing overhead, and $10 in fixed manufacturing overhead. If the company decides to purchase the internal hard drive from outside, then it will cost $35 per hard drive. Also, 20 percent of the fixed cost is avoidable if the division is outsourced. Based on the scenario, Alpha & Omega Inc. should _____.
continue to produce the hard drives as the company will save $3 by producing them Reason: Total costs per unit that can be avoided if outsourced = Direct material + Direct labor + Variable overhead + 20% of Fixed overhead = $10 + $15 + $5 + (20% × $10) = $32 Per unit cost of purchasing from outside = $35 The company will save $3 if it continues to produce the internal hard drive.
When considering the decision for solving product mix problems involving multiple products and scarce production resources, the decision should focus on:
contribution margin per unit of scarce resource
In managerial accounting, the term means different things depending on the situation.
cost
A traditional income statement format is organized by function, whereas a contribution margin format income statement is organized by .... ...... pattern.
cost behavior
The term to describe the concept that costs increase or decrease with changes in the volume of activity is known as:
cost behavior
Cost behavior refers to:
costs that are variable or fixed
The management activity that occurs in each phase of the planning and control cycle is:
decision making
Costs that will differ according to the alternative activity being considered are known as .....
differential
When considering two decision alternatives, _____________ costs are those costs that would result from selecting one alternative instead of the other.
differential
When considering the decision to continue or discontinue a segment of the organization, (common/direct) fixed expenses will always be relevant to the decision and (common/direct) fixed expenses will never be relevant to the decision.
direct common
As the volume of activity changes, a(.....) cost remains constant in total.
fixed
As compared to a traditional income statement format, which of the following terms do not appear on the contribution margin format income statement?
idk but not operating income
A company's margin of safety calculation is an indication of how closely the company is operating relative to __________.
its breakeven point
..... accounting provides information to support an organization's planning, control and decision-making needs.
managerial
A relative measure of risk that describes a company's current sales performance in relation to its break-even sales is called the _____.
margin of safety
Beta and Gama Inc. produces a product that currently sells for $250 per unit. Current production costs per unit includes direct materials of $30, direct labor of $25, variable overhead of $15, fixed overhead of $20, and total production costs of $90. Beta and Gama Inc. has received a special pricing offer from a nonprofit organization to buy 1,000 units at $200 per unit. Beta and Gama Inc. is currently operating at its full production capacity. Based on the scenario, Beta and Gama Inc. should _____.
not accept the special order as the company will lose $50,000 if it accepts the special order Reason: Per unit the company will lose = $250 - $200 = $50 per unit For 1,000 units, the company will lose = 1,000 units × $50 per unit = $50,000
An organization's (operating/capital) budget reflects its plans to achieve short-term profitability goals, while the organization's (operating/capital) budget reflects its plans to achieve long-term profitability goals.
operating capital
The following information exists for ABC Company: Selling price per unit = $60 Variable expenses per unit = $45 If ABC's break-even sales revenue is $150,000 and sales revenue for April totals $140,000, then for April, the company's __________.
operating loss will be $2,500
The logical sequence of the activities performed in the management planning and control cycle is: controlling, managing, planning planning, managing, controlling planning, controlling, managing managing, planning, controlling
planning, managing, controlling
After the results of a present value analysis has been obtained for a capital investment opportunity, overriding .... factors should also be considered before a final decision is made.
qualitative
Sometimes when management decisions are reached, the investment project with the highest NPV or IRR is not selected because (qualitative/quantitative) factors override (qualitative/quantitative) analysis.
qualitative quantitative
Future costs that represent differences between decision alternatives and are the key to effective decision making are called .... costs.
relevant
If the selling price and variable expense per unit were to drop $2 and fixed expenses remain the same, the breakeven point would __________.
remain the same
The discount rate used in the present value calculations of a capital budgeting expenditure decision is known as:
the cost of capital
Knowing the behavior pattern of a cost is important to determine the effect on net income of a change in sales volume because as sales volume increases or decreases:
the effect on net income will depend on the behavior pattern of various costs.
A firm calculates the average contribution margin ratio when _____.
the firm sells more than one product
Managerial accounting can best be described as:
the preparation and use of accounting information within the organization.