Acc For Planning & Control Test 1
A company has 10 employees who are paid for a 40 hour work week. For the upcoming week, scheduled production requires 37 hours of work per employee. Which of the following statements is true?
The opportunity cost of the extra 3 hours depends upon the best alternative use of the employee's time.
Which of the following statements are correct?
Variable cost is a close approximation of marginal cost within the relevant range. Variable cost per unit is usually assumed to be constant.
Under federal laws and regulations, the responsibility for overseeing compliance with the company's code of conduct rests with the ______.
audit committee of the board of directors
The practice of imitating successful business practices is known as ______. economic Darwinism marmot-and-bear benchmarking continuous improvement
benchmarking
The process of continuously comparing and measuring an organization's business processes against business leaders to improve performance is known as
benchmarking
Because owners generally want to maximize profits and employees want higher wages and benefits, a(n) ______ ________ ________ exists in most organizations.
conflict of interest
Performance measures, incentive compensation systems, security guards and internal auditors are all part of the firm's
control system
A firm's accountant is often called the
controller
The firm's chief management accountant is the
controller
Direct labor and factory overhead are product costs that are also referred to as
conversion
When a firm bases its price on average total cost and markup, they are using
cost plus pricing
In order to earn the highest effective interest rate, choose the option that compounds interest ______.
daily
A person's job description specifies the _____ ______assigned to that particular individual.
decision rights
Giving a division manager the ability to set product prices is one component of his or her
decision rights assignment
Components of organizational architecture include ______.
decision-right assignment reward system performance evaluation system
When a company has excess capacity, considerations in accepting a special order include ______?
does the Robinson-Patman Act apply do costs change at a higher volume
The marmot-and-bear parable is an extremely important proposition in the social sciences known as
economic darwinism
Using a single accounting system for decision making, performance evaluation and external reporting ______.
eliminates the need to reconcile accounting numbers for the same concept increases the credibility of financial reports
True or false: If employees are guaranteed 40 hours of pay per week, the opportunity cost of paid hours not needed for production is always zero.
false
True or false: If the annual interest rate is 18%, the monthly interest rate is 1.5%
false
True or false: In order to make cash flows equivalent, they must all be converted to beginning-of-year dollars. True false question.
false
True or false: Most of today's modern management accounting techniques developed within the last 20 years. True false question.
false
True or false: When a firm has market power, profit will be maximized when revenue is maximized.
false
From 1925 to 1975, management accounting was heavily influenced by ______.
financial accounting requirements income taxes
Using internal accounting systems for both decision making and control
gives rise to fundamental trade-offs
Motion and time studies ______.
have a goal of determining the optimal work method may result in product redesign suffer from potential bias because employees may under perform during the study period
Resources expended for actions actually undertaken are
historical costs
An internal accounting system ______. includes incentives for managers to maximize firm value supports the tax accounting reporting function contributes more to firm value than it costs provides information to assess product profitability provides performance evaluation and reward
includes incentives for managers to maximize firm value supports the tax accounting reporting function contributes more to firm value than it costs provides information to assess product profitability
Formal records such as payroll documents, intangible data such as memos, and nonfinancial information such as customer satisfaction surveys are all part of an organization's:
information system
Budgets, cost and inventory data and periodic financial reports are included in an organization's _______ _______ system.
internal accounting
Intentional (or accidental) financial misrepresentation by managers should be prevented by a company's
internal control system
Procedures, codes of conduct, and policies that prohibit corruption, bribery and kickbacks are all components of a company's
internal control system
The internal accounting system: includes information intangible data is an important component of a firm's information system provides knowledge for decision making includes inventory cost data
is an important component of a firm's information system provides knowledge for decision making includes inventory cost data
Cost-plus pricing ______.
is based on the average cost of production is a commonly used pricing method
The additional cost incurred to produce an additional unit is the
marginal cost
If a special order increases total revenue and reduces average cost,
marketing and management will want to accept the order the firm's cash flow may or may not increase
Information systems ______.
may be simple or sophisticated may include employee satisfaction surveys provide data for decision making
If revenue increases and average cost per unit decreases, profit ______ be maximized.
may or may not
The internal audit department ______. reports to either the CEO or the board of directors always reports to the CFO must always report to the board of directors because of Sarbanes-Oxley may report to the CFO, CEO, controller or board of directors
may report to the CFO, CEO, controller or board of directors
A company is charged $50 per month plus $2.10 per kilowatt hour for electricity. In this case, electricity is a(n)
mixed; semivariable
Costs that cannot be identified as purely fixed or variable are ______ costs.
mixed; semivariable
When determining which product(s) to produce to maximize profits, fixed costs are ______.
never considered in the analysis
In the last two years, __ percent of the data in the world was generated.
ninety
When making a decision, price takers ______.
only consider fixed costs that have not yet been incurred
Which of the following is NOT a potential alternative to a firm's internal accounting system? activity-based costing lean accounting economic value added opportunity accounting balanced scorecards
opportunity accounting
The firm's control system includes __. performance measures promotions and demotions video surveillance employee satisfaction surveys
performance measures promotions and demotions video surveillance
The most basic control use of accounting is to
prevent fraud and embezzlement
Direct material, direct labor, and factory overhead are the components of ______ costs.
product
Inventoriable costs that are incurred to manufacture a good are _______ costs whereas costs that are expensed as incurred are ______ costs.
product; period
When compared with external reports, internal reports ______. provide a more disaggregated view of the company calculate costs and profits for specific products are provided less frequently than external reports
provide a more disaggregated view of the company calculate costs and profits for specific products
An internal accounting system ______. provides information to detect production inefficiencies creates incentives for management to maximize firm value generally costs more than it contributes to the firm's value supports the financial accounting reporting function
provides information to detect production inefficiencies creates incentives for management to maximize firm value supports the financial accounting reporting function
Accountants are not charged with ______ the firm's accounting system. Multiple choice question.
purchasing
Internal accounting systems ______.
record costs after decisions are made cannot anticipate all future decisions provide data for controlling behavior
Variable cost is a close approximation of marginal cost within the
relevant range
Since 2002, federal regulation increased the CFO's role by requiring
requiring companies to continuously test the effectiveness of internal controls over financial statements
When a firm has market power ______.
some customers will still buy the products even if the firm raises prices perfect substitutes do not exist for their products
A company needs one supervisor for every 40 employees. In this case, supervision is a ______ cost.
step
If a hospital schedules one nurse for each 10 patients, nursing salaries and wages is a(n)
step cost
A company has some materials in inventory that cost $1,500 and have no current use. In determining what to do with the materials, the $1,500 is a(n)
sunk cost
Break-even point for a single product may be computed if ______. Multiple select question.
the company only produces one product the firm has no common fixed costs
If a plant is operating at 70% capacity, the opportunity cost of increasing capacity to 85% is ______.
the higher production cost imposed on units existing capacity
True or false: A cost may be fixed for one decision and variable for another
true
True or false: A single accounting system usually offers enough flexibility for managers to reclassify, recombine, and reorganize the date for multiple purposes.
true
Price takers ______.
use cost information to set production cannot influence the selling price of a product
The slope of the total cost line is the __ cost per unit.
variable
A company has $5,000 of materials in stock that could be used for a special order. If the materials have no other use or value, their opportunity cost is ______.
zero
A company has fixed costs of $250,000 per year. They sell a single product for $25 per unit. Variable costs are $7 per unit. Given a combined state and local tax rate of 40%, how many units must be sold to earn an after-tax profit of $120,000? Multiple choice question.
$25,000
Given an interest rate of 8%, receiving $100 a year from now requires an investment of ____ today
$92.59
The break-even equation is ______.
(P - VC) x Q - FC = 0
Maintaining multiple accounting systems ______. -helps prevent dysfunctional internal decisions -reduces the credibility of the financial reports -decreases external auditing costs -is generally too expensive for most organizations -may lead to confusion when systems report different numbers for the same concept
-helps prevent dysfunctional internal decisions -reduces the credibility of the financial reports -may lead to confusion when systems report different numbers for the same concept
Given an interest rate of 6%, how much would someone be willing to pay to receive $1 a year from now?
.9434
A company is currently producing 50,000 units of product per year. The variable cost per unit is $75 and fixed costs total $800,000. The company uses cost-plus pricing. If the desired markup is 35%, the selling price per unit rounded to the will be ______. Multiple choice question.
122.85
For every case of candy bars with nuts, two cases of plain bars are produced. If total fixed costs are $247,500, how many cases of plain candy bars are required to break-even?
15000, 7500 bundles
An investment earning 8% interest will pay $500 at the end of year 1, $600 at the end of year 2, and $700 at the end of year 3. The present value of the investment using the appropriate table from the end of the chapter is $
1533
In order to save for a child's education, a new parent decides to invest $500 per year for the next 18 years. At an interest rate of 6%, the value of the education fund at the end of year 18 will be $
15453
Given an interest rate of 8%, an investment of $100 will grow to $
216 in 10 years
Given an interest rate of 6%, how much should be paid for a bond that pays $150 per year in perpetuity? Multiple choice question.
2500
Given an interest rate of 9%, to have $5,000 in 6 years, $
2981 must be invested today
A buyer can afford to make payments of $500 per year for 10 years. At an interest rate of 9%, the amount of the loan that can be made today is $
3209
Given the following information calculate the total opportunity cost of a new motorcycle model: Average inventory of materials, work in process and finished motorcycles - $2,500,000 Payments for labor, promotion and administration - $750,000 The market rate of interest for this type of investment is 10%.
3500000
A plant is currently operating at 80% capacity. Given the following information, what is the opportunity cost of increasing capacity to 216 units (90% capacity)?
5.78
An investment earning 7% interest will pay $1,000 at the end of year 1, $2,000 at the end of year 2, and $3,000 at the end of year 3. Calculate the present value of the investment using the appropriate table from the end of the chapter. Multiple choice question.
5129
A company is currently operating at 80% capacity (800 units of production). If production increases by an extra 50 units (to 85% capacity), the average cost of the base production of the 800 units increases from $5.90 to $5.93. The opportunity cost of producing the additional 50 units is
6.41
If a bond pays $500 per year in perpetuity and the interest rate is 8 percent, investors are willing be pay $
6250
Given an interest rate of 6%, how much will $500 grow to in 4 years (rounded to the nearest dollar)? Multiple choice question.
631
Given the following information, the opportunity cost of accepting Job 2 is: Job Offer Salary $ Equivalent of Intangibles 1 $94,000 $3,000 2 $92,000 $7,000 3 $95,000 $1,000
97000
Which of the following statements are true? Accepting a special order may impact the price charged to other customers. Production becomes less efficient as plant utilization increases. A special order should always be accepted if it results in an incremental profit. The Robinson-Patman Act may apply to special orders.
Accepting a special order may impact the price charged to other customers. Production becomes less efficient as plant utilization increases. The Robinson-Patman Act may apply to special orders.
For a typical corporation, controllership and treasury are functions of the
CFO
True or false: The accounting procedures chosen for external reporting to shareholders are dictated by the Internal Revenue Service.
False: The SEC and FASB, not the IRS regulate the financial statements issued to shareholders.
In the United States, financial statements issued to shareholders are regulated by the ______.
Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC)
Which of the following statements are true?
Fixed costs are relevant when determining if a firm should produce. Fixed costs generally do not impact a pricing decision.
Quinn Industries produces three types of travel bags - economy, standard and deluxe. The contribution margins per unit are $7.50 for economy, $9.00 for standard and $11.00 for deluxe. Economy bags require 3/4 hour of machine time, standard bags require 1 hour and deluxe bags require 1 1/4 hours. Which of the following statements are correct?
If machine hours are limited, economy bags should be produced first Standard bags have a higher contribution margin per hour than deluxe bags.
Which of the following statements are correct?
In most cases, unit cost figures refer to product costs only. Both product and period costs have fixed and variable components.
Which of the following statements are true?
It is usually optimal to have some excess capacity. Plants are generally not expected to operate at 100% capacity.
Which of the following are true Many modern management accounting techniques developed with the growth of large organizations. One of the first uses of management accounting information was to help increase operating efficiencies. Management accounting was very important for the small, family-operated firms of the early 1800s.
Many modern management accounting techniques developed with the growth of large organizations. One of the first uses of management accounting information was to help increase operating efficiencies.
Which of the following statements are true? All organizations have either formal or informal objectives. Maximizing profits is equivalent to maximizing firm value. Not all owners care only about maximizing profits. Maximizing self-interest is a common objective of employees.
Maximizing profits is equivalent to maximizing firm value. Not all owners care only about maximizing profits. Maximizing self-interest is a common objective of employees.
Which of the following statements are correct?
Opportunity costs are crucial in decision making. When making decisions, accounting data should be supplemented with other information.
Which of the following statements are correct? The controller must balance providing information to lower-level managers and top executives. Most firms only have a single, corporate controller that manages both corporate and division-level functions. The controller is responsible for both internal and external financial reports. The controllership function involves assisting with decision making and control.
The controller must balance providing information to lower-level managers and top executives. The controller is responsible for both internal and external financial reports. The controllership function involves assisting with decision making and control.
Which of the following statements is true?
The difference between accounting profits and economic profits is the opportunity cost of the investment.
A farmer leased land and equipment for $500,000 and expected to produce 400,000 bushels of wheat. The variable cost of production is $1.50 per bushel. After the land and equipment had been paid for, the farmer discovered the selling price of wheat was $2.25. Which of the following statements are correct?
The farmer will incur an overall net loss of $200,000 The wheat will generate a contribution margin of $300,000
