Accounting for Planning and Control Final Study Guide

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Sparkle Jewelry sells 600 units resulting in $75,000 of sales revenue, $32,000 of variable costs, and $26,000 of fixed costs. Breakeven point in units is ________. (Round to the nearest whole unit.) A. 363 units B. 447 units C. 810 units D. 684 units

A. 363 units

Activity based costing system differs from traditional costing systems in the treatment of: A. indirect costs B. direct labor costs C. direct material costs D. prime costs

A. indirect costs

________ is relevant in a decision to replace equipment. A) Book value of old equipment B) Salvage value C) Warehouse rent costs D) Accumulated depreciation on old equipment

B) Salvage value

Flash City Inc. manufactures small flash drives and is considering raising the price by 75 cents a unit for the coming year. With a 75-cent price increase, demand is expected to fall by 7,000 units. If the price increase is implemented, operating profit is projected to ________. Current Demand (Units): 79,000 Selling Price: $8.50 Incremental Cost Per Unit: $5.80 Projected Demand (Units): 72,000 Selling Price: $9.25 Incremental Cost Per Unit: $5.80 A) decrease by $7,000 B) increase by $35,100 C) increase by $5,250 D) decrease by $5,250

B) increase by $35,100

Sales total $400,000 when variable costs total $300,000 and fixed costs total $80,000. The breakeven point in sales dollars is ________. (Round interim calculations to two decimal places and the final answer to the nearest dollar.. A. $500,000 B. $320,000 C. $1,200,000 D. $400,000

B. $320,000

Which of the following statements is true of activity-based costing? A. Activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services. B. Activity based costing is more suited to companies with high product diversity than companies with single product line. C. The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products. D. In activity-based costing, direct labor-hours is always the best allocation base to allocate all non-manufacturing indirect costs.

B. Activity based costing is more suited to companies with high product diversity than companies with single product line.

Which of the following is not true about the cause-and-effect criterion when estimating a cost function? A. Contractual arrangements may show a direct cause and effect between two variables B. Correlation of variables proves cause-and-effect C. Knowledge of operations can help managers discover cause-and-effect relationships D. Managers must be careful not to equate high correlation between two variables to mean that either variable causes the other

B. Correlation of variables proves cause-and-effect

When managers determine whether it is less expensive to buy products from a vendor or make them in house they are performing ________. A. Value-chain analysis B. Cost-benefit analysis C. Research and development D. Supply-chain analysis

B. Cost-benefit analysis

A variance is: A. the difference between actual fixed cost per unit and standard variable cost per unit B. the difference between an actual result and a budgeted performance C. the difference between actual variable cost per unit and standard fixed cost per unit D. the standard units of inputs for one output

B. the difference between an actual result and a budgeted performance

Given the unit information below, how many units of Product X and Product Y must Alex Corp sell if Total Fixed Costs are $75,000? Product X Selling Price (Per Unit): $12.00 Variable Cost (Per Unit): $4.50 Sales Mix: 2 Product Y Selling Price (Per Unit): $44.50 Variable Cost (Per Unit): $9.50 Sales Mix: 1 A) 842.5 units of Y and 1,685 units of X B) 3,000 units of Y and 1,500 units of X C) 1,500 units of Y and 3,000 units of X D) 1 units of Y and 10,000 units of X

C) 1,500 units of Y and 3,000 units of X

Which of the following is an assumption of linear programming? A) Average variable costs remain constant throughout the year. B) Few sunk costs are relevant in decision making. C) All costs are either variable or fixed for a single cost driver. D) Opportunity costs are irrelevant in decision making.

C) All costs are either variable or fixed for a single cost driver.

With a constraining resource, managers should choose the product with the ________. A) lowest contribution margin per unit of the constraining resource B) highest gross profit C) highest contribution margin per unit of the constraining resource D) highest sales price

C) highest contribution margin per unit of the constraining resource

Which of the following formulas determine cost of goods sold in a manufacturing entity? A. Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold B. Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process inventory = Cost of goods sold C. Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold D. Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold

C. Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold

Which of the following statements refers to management accounting information? A. The audience tends to be stockholders, creditors, and tax authorities. B. The reports are generally delayed and historical. C. There are no regulations governing the reports. D. It primarily measures manager's compensation on reported financial results.

C. There are no regulations governing the reports.

When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base. A. actual; actual B. actual; budgeted C. budgeted; actual D. budgeted; budgeted

C. budgeted; actual

When costs can be traced to a particular cost object in an economically feasible way, the cost is a: A. budgeted cost B. indirect cost C. direct cost D. allocated cost

C. direct cost

For a manufacturing company, direct material costs may be included in ________ A. only the direct materials inventory account B. only in both work-in-process inventory and finished goods inventory C. direct materials inventory, work-in-process inventory, and finished goods inventory accounts D. only in the merchandise inventory account reflecting the inventory on hand

C. direct materials inventory, work-in-process inventory, and finished goods inventory accounts

If management takes a multiple-year view in the decision model and judges success according to the current year's results, a problem will occur in the ________. A) quantitative mode B) decision model C) production evaluation model D) performance evaluation model

D) performance evaluation model

A company budgets 10,000 units of sales based on a projected selling price of $13.00. The actual units sold were 15,000 at a price of $10. What is the flexible budget for sales? A. $100,000 B. $130,000 C. $150,000 D. $195,000

D. $195,000

Manton Manufacturing applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Bear product. Estimates for this order include: Direct materials of $79,000; 680 direct manufacturing labor-hours at $25 per hour; and a 25% markup rate on total manufacturing costs. What would be the manufacturing overhead cost estimates for this special-order total? A. $57,800 B. $59,250 C. $60,550 D. $40,800

D. $40,800

First Class, Inc., expects to sell 28,000 pool cues for $14 each. Direct materials costs are $3, direct manufacturing labor is $5, and manufacturing overhead is $0.82 per pool cue. Given the 2019 inventory levels below, how many pool cues need to be produced in 2019? Beginning Inventory Direct Materials (Units): 26,000 Work-in-process Inventory (Units): 0 Finished Goods Inventory (Units): 1,300 Ending Inventory Direct Materials (Units): 26,000 Work-in-process Inventory (Units): 0 Finished Goods Inventory (Units): 2,800 A. 26,500 cues B. 29,300 cues C. 30,800 cues D. 29,500 cues

D. 29,500 cues

A manufacturer utilizes three separate indirect cost pools. Which of the following is true? A. Each indirect cost pool is a subset of total direct costs B. Each indirect cost pool utilizes the same cost-allocation rate for all costs incurred C. Each indirect cost pool relates to multiple cost centers D. Each indirect cost pool utilizes a separate cost-allocation rate

D. Each indirect cost pool utilizes a separate cost-allocation rate

Which of the following statements is true of productivity factors? A. Partial-productivity focus on a multiple inputs simultaneously. B. Total factor productivity (TFP) focus on a single input. C. Comparable data for total factor productivity measurements are easily available. D. It is the ratio of the quantity of output produced to the costs of all inputs used based on current prices.

D. It is the ratio of the quantity of output produced to the costs of all inputs used based on current prices.

Which of the following is true of variance? A. Managers should interpret a favorable variance as "good news". B. A small variance or zero variance definitively reveals efficient performance. C. Managers' performance must be evaluated solely on single variance. D. Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.

D. Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.

When deciding to lease a new cutting machine or continue using the old machine, which of the costs below would be considered irrelevant to the decision? A) $50,000, cost of the old machine B) $10,000, selling price of the old machine C) $3,000, annual savings in operating costs if the new machine is purchased D) $20,000, cost of the new machine

A) $50,000, cost of the old machine

Which of the following is an irrelevant cost when considering where to drop a customer? A) depreciation B) sales order and delivery processing C) marketing support D) cost of goods sold

A) depreciation

In a make-or-buy decision, which of the following would not be relevant? A) property taxes on the plant that will still be necessary even if the product is outsourced B) the portion of fixed costs that could be eliminated by outsourcing C) a lease that could be discontinued upon accepting the "buy proposal" D) the quality of the product

A) property taxes on the plant that will still be necessary even if the product is outsourced

Based on the theory of constraints, investments equal ________. A) the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings B) the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; sunk costs, full costs, and business function costs C) the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and full costs D) the sum of material costs in direct and indirect materials, work-in-process, and finished goods inventories; R&D costs; and business function costs

A) the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings

X-Industries manufactures 3-D printers. For each unit, $3,400 of direct material is used and there is $2,600 of direct manufacturing labor at $16 per hour. Manufacturing overhead is applied at $20 per direct manufacturing labor hour. Calculate the profit earned on 46 units if each unit sells for $9,500. A. $11,500 B. $3,250 C. $65,320 D. $35,880

A. $11,500

________ is considered while choosing a cost allocation base for activity costs in ABC costing. A. Availability of reliable data and measures B. Marketing strategy and material price level C. Product price level D. Market share of a product

A. Availability of reliable data and measures

Which of the following statements best define a product differentiation strategy? A. It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. B. It describes how an organization can increase customer base by differentiating its' product prices from its competitors. C. It describes how an organization can decrease product prices by differentiating its' raw materials from its competitors. D. It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.

A. It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

Which of the following is true of locked-in costs? A. Locked-in costs are also called designed-in costs. B. Locked-in costs are the same as sunk costs. C. Locked-in costs are incurred costs. D. Locked-in costs are always fixed costs.

A. Locked-in costs are also called designed-in costs.

Which of the following differentiates job costing from process costing? A. Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches. B. Job costing is used by manufacturing industries, and process costing is used by service industries. C. Job costing is used when each unit of output is identical and not produced in batches, and process costing deals with unique products produced on large scale. D. Job costing is used when each unit of output is identical, and process costing deals with unique products.

A. Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

Which of the following is true of target pricing? A. a price is an estimate of customers' perceived value of the product. B. a price is calculated by adding a markup component to the cost base. C. it is used for short-term pricing decisions. D. it is one form of cost-based pricing.

A. a price is an estimate of customers' perceived value of the product.

The flexible budget contains which of the following? A. budgeted amounts for actual output B. actual costs for planned output C. static budget amounts for planned output D. actual costs for actual output

A. budgeted amounts for actual output

A plot of cost driver data and cost data may show all but the following: A. cause-and-effect relationship B. a positive relationship C. a strong relationship D. linear relationship

A. cause-and-effect relationship

Three major influences on pricing decisions are ________. A. competition, costs, and customers B. variable costs, fixed costs, and mixed costs C. competition, demand, and production efficiency D. continuous improvement, customer satisfaction, and supply

A. competition, costs, and customers

A ________ is a grouping of individual indirect cost items. A. cost pool B. job-costing system C. cost assignment D. cost-allocation base

A. cost pool

Which of the following is a period cost? A. costs incurred to provide customer service such as the operation of a 800 phone line to trouble shoot product problems and to answer questions about product warranties B. the cost of direct labor C. the cost of materials used to make a product when those materials are an insignificant part of the finished product D. the amount of depreciation expense recognized because of the use of plant assets such as building and equipment

A. costs incurred to provide customer service such as the operation of a 800 phone line to trouble shoot product problems and to answer questions about product warranties

Predatory pricing is a type of price discrimination that ________. A. deliberately sets prices very low, sometimes even below costs, to minimize competition B. allows prices to be cut to the level of variable costs C. is used in the food industry for perishable goods D. is required when a company declares bankruptcy so that it can sell its remaining goods quickly

A. deliberately sets prices very low, sometimes even below costs, to minimize competition

A company using responsibility accounting system decides to exclude all uncontrollable costs from a manager's performance report. Jenson is the machine supervisor. Which of the following costs will impact Jenson's performance report? A. direct labor cost B. rent and taxes paid on by the company C. cost of materials used in manufacture D. cost of power consumed by the plant

A. direct labor cost

Data collection problems arise when ________ A. fixed and variable costs are not separately identified and both are allocated to products on a per unit basis B. purely inflationary price effects are removed C. data are recorded electronically rather than manually D. accrual-basis costs are used rather than cash-basis costs

A. fixed and variable costs are not separately identified and both are allocated to products on a per unit basis

Benchmarking is a process ________ A. in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes B. in which the underlying processes of an organization is optimized using a systematic approach to achieve more efficient goals C. which is based on calculating the breakeven point and analyzing the consequences of changes in various factors calculating the breakeven point D. in which overhead costs are absorbed into units of output, or 'jobs'

A. in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes

A controllable cost is any cost that can be ________ by a responsibility center manager for a period of time. A. influenced B. excluded C. controlled D. segregated

A. influenced

Life-cycle costing is best described by which of the following? A. it is the process of tacking and accumulating business function costs across the entire value chain B. it is the process of tracking and accumulating costs that are incurred within the manufacturing and distribution links of the value chain C. it is a method of cost planning to reduce manufacturing costs to targeted levels D. it is a costing system that focuses on reducing costs during the manufacturing cycle

A. it is the process of tacking and accumulating business function costs across the entire value chain

It only makes sense to implement an ABC system when: A. its benefits exceed its implementation costs B. production process is labor-intensive C. a single product is produced in bulk D. it traces more costs as direct costs

A. its benefits exceed its implementation costs

An experience curve ________. A. measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases B. only measures the decline in labor-hours per unit as units produced increases C. measures the increase in cost per unit as productivity increases D. is a narrower application of the learning curve

A. measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases

Which of the following represents cross-sectional data? A. personnel costs of a month at 10 different organizations B. number of machine-hours used for the past 10 years C. maintenance cost of machine in a plant for the past 3 years D. indirect manufacturing labor costs for the past 5 years

A. personnel costs of a month at 10 different organizations

The flexible-budget variance for direct cost inputs can be further subdivided into which of the following? A. price variance and an efficiency variance B. static-budget variance and a price variance C. static-budget variance and a sales-volume variance D. sales-volume variance and an efficiency variance

A. price variance and an efficiency variance

Over-costing a particular product may result in: A. pricing the product too high B. pricing the product too low C. understating total product costs D. operating efficiencies

A. pricing the product too high

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________. A. property taxes paid on the land and building (plant) B. labor to shape the leather used to make the soccer ball C. material used to manufacture the soccer studs D. material used to make the soccer balls

A. property taxes paid on the land and building (plant)

Which of the following best defines the term: product life cycle? A. the span of time from initial R&D on a product to when the customer service and support for the product is no longer offered B. the span of time from when the first unit of the product is sold until the last unit of the product is sold C. the time span between when the company begins the initial R&D on a product till the time when the last unit is sold D. the time span between when the company begins the initial R&D on a product till the time when the first unit is sold.

A. the span of time from initial R&D on a product to when the customer service and support for the product is no longer offered

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when: A. there are several homogeneous cost pools B. a single activity accounts for a sizable portion of department costs C. different activities have the same cost-allocation base D. different products use different resources in the same proportion

A. there are several homogeneous cost pools

Quantitative analysis methods estimate cost functions ________ A. using a formal mathematical method to fit cost functions to past data observations B. using the pooling of knowledge from each value chain function C. using the time-and-motion studies D. based on analysis and opinions gathered from various departments

A. using a formal mathematical method to fit cost functions to past data observations

Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified? A. variable cost B. fixed cost C. irrelevant cost D. mixed cost

A. variable cost

Managers are examining a possible replacement of a machine and used the information in the table below to determine whether the company should or should not replace the old machine. In performing an analysis and in attempt to answer the question, "should we replace the old machine", which of the following statements would be true. Book Value of Old Machine: $1,000,000 Current Disposal Value of Old Machine: $50,000 Loss on Disposal of Old Machine: $300,000 Cost of New Machine: $600,000 A) the book value of the old machine is relevant B) the cost of the new machine and the current disposal value of the old machine are relevant C) the book value of the old machine and the current disposal value of the old machine are both relevant D) the book value of the old machine and the current disposal value of the old machine are the only relevant items

B) the cost of the new machine and the current disposal value of the old machine are relevant

Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $19 each and used a budgeted selling price of $19 per unit. What is the static-budget variance of revenues? Actual Units Sold: 48,000 Variable Costs: $167,000 Fixed Costs: $41,000 Budgeted Units Sold: 39,000 Variable Costs: $152,000 Fixed Costs: $50,000 A. $6,000 favorable B. $171,000 favorable C. $9,000 unfavorable D. $171,000 unfavorable

B. $171,000 favorable

Harland Corporation currently produces cardboard boxes in an automated process. Expected production per month is 20,000 units, direct material costs are $2.50 per unit, and manufacturing overhead costs are $15,000 per month. Mfg. overhead is all fixed costs. What are the flexible budget costs for 14,000 and 20,000 units, respectively? A. $50,000 &; $30,000 B. $50,000 & $65,000 C. $14,000 & $30,000 D. $14,000 & $65,000

B. $50,000 & $65,000

Tally Corp. sells software during the recruiting seasons. During the current year, 10,000 software packages were sold resulting in $470,000 of sales revenue, $130,000 of variable costs, and $48,000 of fixed costs. If sales increase by $80,000, operating income will increase by ________. (Round interim calculations to two decimal places and the final answer to the nearest whole dollar.) A. $48,000 B. $57,872 C. $30,588 D. $32,000

B. $57,872

Which of the following is the correct formula for the materials price variance? A. (Actual price of input - Budgeted price of input) x Budgeted quantity of input B. (Actual price of input - Budgeted price of input) x Actual quantity of input C. (Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Budgeted price of input D. (Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Actual price of input

B. (Actual price of input - Budgeted price of input) x Actual quantity of input

Sparkle Jewelry sells 800 units resulting in $85,000 of sales revenue, $32,000 of variable costs, and $26,000 of fixed costs. The number of units that must be sold to achieve $41,000 of operating income is ________. (Round up to the nearest whole unit.. A. 909 units B. 1,012 units C. 393 units D. 619 units

B. 1,012 units

Why is choosing the correct cost driver to estimate indirect manufacturing costs important? A. Identifying the wrong driver can increase the direct costs of the cost object B. Identifying the wrong driver can lead management to incorrect and costly decisions C. Identifying the wrong driver can increase the usage of the correct driver D. Identifying the wrong driver can increase actual overhead costs

B. Identifying the wrong driver can lead management to incorrect and costly decisions

Which of the following is a limitation of using past performance as a basis for judging actual results? A. It increases the incentive for managers to introduce budgetary slack. B. It assumes inefficiencies of previous periods without considering possible efficiencies of the budget period. C. It increases the tendency of senior managers exaggerating changes in future conditions as opposed to changes in current conditions. D. It does not account for productivity increases over the periods.

B. It assumes inefficiencies of previous periods without considering possible efficiencies of the budget period.

Which of the following statements best define strategy? A. It describes how an organization motivates its employees to work for more hours without any increase in their wages. B. It describes how an organization can create value for its customers while differentiating itself from its competitors. C. It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. D. It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control.

B. It describes how an organization can create value for its customers while differentiating itself from its competitors.

Which of the following is true of cost-volume-profit analysis? A. The theory assumes that all costs are variable. B. The theory assumes that units manufactured equal units sold. C. The theory states that total costs remain the same over the relevant range. D. The theory states that total variable costs remain the same over a relevant range.

B. The theory assumes that units manufactured equal units sold.

Which of the following statements is of true engineered costs? A. They include advertising, executive training, and R&D. B. They have a detailed, physically observable, and repetitive relationship with output. C. They arise from periodic (usually annual) decisions regarding the maximum amount to be incurred. D. They have high level of uncertainty.

B. They have a detailed, physically observable, and repetitive relationship with output.

Which of the following statements is true of discretionary costs? A. They include conversion cost, direct material costs. B. They have high level of uncertainty. C. They have measurable cause-and-effect relationship between output and resources used. D. They arise from day-to-day operational decisions.

B. They have high level of uncertainty.

Production is the ________. A. processing orders and shipping products or services to customers B. acquisition, coordination, and assembly of resources to produce a product or deliver a service C. detailed planning and engineering of products, services, or processes D. generation of, and experimentation with, ideas related to new products, services, or processes

B. acquisition, coordination, and assembly of resources to produce a product or deliver a service

The fundamental cost objects of ABC are: A. cost drivers B. activities C. products D. services

B. activities

A company's actual performance should be compared against budgeted amounts for the same accounting period so that: A. to avoid any feedback from the budgets due to past miscues B. adjustments for future conditions can be included C. a rolling budget can be implemented D. inefficiencies of the past year can be included

B. adjustments for future conditions can be included

Which of the tools shown below would be the most effective planning tool? A. fishbone diagram B. budget C. control chart D. performance evaluation report

B. budget

The budgeted indirect-cost rate for each cost pool is computed as ________. A. budgeted annual quantity of cost allocation base divided by budgeted annual indirect costs B. budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base C. actual annual indirect costs divided by budgeted annual quantity of cost allocation base D. budgeted annual indirect costs divided by budgeted actual quantity of cost allocation base

B. budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

The margin of safety is the difference between ________. A. actual operating income and budgeted operating income B. budgeted revenues and breakeven revenues C. budgeted expenses and breakeven expenses D. actual sales margin and budgeted sales margin

B. budgeted revenues and breakeven revenues

A ________ is anything for which a measurement of costs is desired. A. cost-application base B. cost object C. cost-allocation base D. cost pool

B. cost object

At what point are direct material costs per unit "locked in"? A. delivered B. designed C. assembled D. sold

B. designed

Engineered costs ________. A. have a no repetitive relationship with output B. include a high level of certainty C. have no measurable cause-and-effect relationship between output and resources used D. include research and development and human resource costs

B. include a high level of certainty

A master budget: A. is another name given to the financial budget B. is the initial plan of what the company intends to accomplish in the period and evolves from both the operating and financing decisions C. is only prepared for manufacturers as they are the only type of company with material purchases and work-in-process accounts. D. improves companies' market capitalization and evolves from both the investing and financing decisions

B. is the initial plan of what the company intends to accomplish in the period and evolves from both the operating and financing decisions

In a company with low operating leverage, ________. A. contribution margin and operating income are inversely related B. less risk is assumed than in a highly leveraged firm C. there is a higher possibility of net loss than a higher-leveraged firm D. fixed costs are more than the contribution margin

B. less risk is assumed than in a highly leveraged firm

Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________. A. fixed costs increases by $6 per unit B. operating income increases by $6 per unit C. operating income decreases by $6 per unit D. fixed costs decreases by $6 per unit

B. operating income increases by $6 per unit

Franklin Inc. manufactures pipes and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $18 per direct labor-hour. The information for June is displayed in the table below. For June 2018, manufacturing overhead is ________. Direct Materials: $170,000 Direct Labor (4,600 hours @ $10/hour): $46,000 Indirect Labor: $17,000 Plant Facility Rent: $34,000 Depreciation on Plant Machinery and Equipment: $24,500 Sales Commissions: $33,000 Administrative Expenses: $28,000 A. underallocated by $20,700 B. overallocated by $7,300 C. overallocated by $20,700 D. underallocated by $7,300

B. overallocated by $7,300

Which of the following is a manufacturing overhead cost? A. labor cost of plant workers that can be traced accurately and easily to a particular product B. overtime premiums paid to plant workers C. cost of materials that can be traced to individual products in an economically feasible manner D. the use of direct materials in the making of a finished good

B. overtime premiums paid to plant workers

The balance sheet of a manufacturing-sector companies would report ________ A. raw materials inventory and finished goods inventory accounts only B. raw materials inventory, work-in-process inventory, and finished goods inventory accounts C. only merchandise inventory D. only finished goods inventory

B. raw materials inventory, work-in-process inventory, and finished goods inventory accounts

The order to follow when preparing the operating budget is: A. cash expenditures budget, revenues budget, and production budget B. revenues budget, production budget, direct manufacturing labor costs budget, and cost of goods sold C. revenues budget, manufacturing overhead costs budget, and production budget D. revenues costs of goods sold budget, production budget, and cash budget

B. revenues budget, production budget, direct manufacturing labor costs budget, and cost of goods sold

The costs that result from theft of inventory are ________. A. costs of quality B. shrinkage costs C. stock-out costs D. external failure costs

B. shrinkage costs

Which of the following is the best description of efficiency? A. the continuous process of comparing a firm's performance levels against the best levels of performance in competing companies B. the relative amount of inputs used to achieve a given output level C. the difference between an actual input quantity and a budgeted input quantity D. the degree to which a predetermined objective or target is met

B. the relative amount of inputs used to achieve a given output level

When 24,000 units are produced, variable costs are $12.00 per unit. Therefore, when 18,000 units are produced ________. A. variable unit costs will increase to $16.00 per unit B. variable costs will remain at $12.00 per unit C. variable costs will total $288,000 D. variable unit costs will decrease to $9.00 per unit

B. variable costs will remain at $12.00 per unit

A company reported revenues of $377,000, cost of goods sold of $122,000, selling expenses of $12,000, and total operating costs of $72,000. Gross margin for the year is ________. A. $293,000 B. $243,000 C. $255,000 D. $171,000

C. $255,000

Lobster Liquidators will make $550,000 if the fishing season weather is good, $240,000 if the weather is fair, and would actually lose $40,000 if the weather is poor during the season. If the weather service gives a 45% probability of good weather, a 25% probability of fair weather, and a 30% probability of poor weather, what is the expected monetary value for Lobster Liquidators? A. $247,500 B. $250,000 C. $295,500 D. $750,000

C. $295,500

Wonderful Products Manufacturing Corp. provided operating income information for last month the table below. If sales reduce to half of the amount in the next month, what is the projected operating income? Sales: $43,000 Variable Costs: $14,000 Fixed Costs: $11,000 Operating Income: $18,000 A. $18,000 B. $2,000 C. $3,500 D. $9,000

C. $3,500

Given the Cost and Activity information for Extreme Manufacturing Company below, how much of the account inquiry cost will be assigned to Department A? Total Costs Account Inquiry: $320,000 Account Billing: $200,000 Account Verification Accounts: $173,250 Correspondence Letters: $24,000 Total Costs: $717,250 Activity-Cost Driver Totals Account Inquiry (Hours): 16,000 Account Billing (Lines): 4,000,000 Account Verification Accounts (Accounts): 70,000 Correspondence Letters (Letters): 4,000 Activities Consumed by Department A Account Inquiry (Hours): 2,700 Account Billing (Lines): 900,000 Account Verification Accounts (Accounts): 8,000 Correspondence Letters (Letters): 1,400 Activities Consumed by Department B Account Inquiry (Hours): 4,200 Account Billing (Lines): 750,000 Account Verification Accounts (Accounts): 6,000 Correspondence Letters (Letters): 1,800 A. $160,000 B. $84,000 C. $54,000 D. $320,000

C. $54,000

Sparkle Jewelry sells 800 units resulting in $9,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Contribution margin per unit is ________. (Round the final answer to the nearest cent.) A. $5.00 B. $13.75 C. $7.50 D. $11.25

C. $7.50

Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,200, variable costs are $700, and fixed costs are $100,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $20,000, assuming the tax rate is 40%? A. 400 dresses B. 200 dresses C. 267 dresses D. 240 dresses

C. 267 dresses

The cost-plus pricing approach is generally in the form ________. A. Variable cost + Fixed cost + Contribution margin = Prospective selling price B. Cost base + Gross margin = Prospective selling price C. Cost base + Markup component = Prospective selling price D. Prospective selling price - Cost base = Markup component

C. Cost base + Markup component = Prospective selling price

Which of the following statements is true of the internal-business-process perspective of a balanced scorecard? A. Internal-business-process perspective is composed of three subprocesses: operations process; learning-and-growth process; and post sales-service process. B. Internal-business-process perspective is composed of three subprocesses: innovation process; learning-and-growth process; and post sales-service process. C. Internal-business-process improvement targets are often determined after benchmarking against an organization's main competitors standards. D. Internal-business-process perspective evaluates the profitability of the strategy and the creation of shareholder value.

C. Internal-business-process improvement targets are often determined after benchmarking against an organization's main competitors standards.

Which of the following statements is true? A. Managers can lower operating risk by changing variable costs to fixed costs in the long-term. B. Managers can lower operating risk by increasing the selling price and reducing volume. C. Managers can lower operating risk by changing fixed costs to variable costs in the long-term. D. Managers can lower operating risk by reducing the selling price and increasing volume.

C. Managers can lower operating risk by changing fixed costs to variable costs in the long-term.

Which of the following statements is true of productivity? A. Prices of inputs are incorporated in the partial productivity ratio. B. Partial productivity compares the quantity of output produced with the cost of all inputs used. C. Productivity will increase when the partial productivity is high. D. Partial productivity compares the quantity of output produced with the quantity of all inputs used.

C. Productivity will increase when the partial productivity is high.

How does the conference method estimate cost functions? A. by mathematically analyzing the relationship between inputs and outputs in physical terms B. using time-and-motion studies C. based on analysis and opinions gathered from various departments D. using quantitative methods that can be very time consuming and costly

C. based on analysis and opinions gathered from various departments

Among different types of costs associated with inventory, the opportunity cost of the investment tied up in inventory is a(n) _____________. A. ordering cost B. stock-out cost C. carrying cost D. purchasing cost

C. carrying cost

One of the first steps to take when using CVP analysis to help make decisions is ________. A. calculation of the degree of operating leverage for the company B. calculating the break-even point C. identifying the variable and fixed costs D. estimating the volume of sales to make a good profit

C. identifying the variable and fixed costs

In designing strategy, a company must match its opportunities in the marketplace with ________. A. branding opportunities B. the requirements of credit rating agencies C. its resources and capabilities D. environmental friendly goals

C. its resources and capabilities

A cost function is a ________ A. is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs B. process of allocating costs to cost centers or cost objects C. mathematical description of how a cost changes with changes in the level of an activity relating to that cost D. process of calculating present value of projected cash flows

C. mathematical description of how a cost changes with changes in the level of an activity relating to that cost

The major objectives of a budgeting process should include all of the following EXCEPT: A. providing coordination among the subunits B. providing a framework for judging performance and facilitating learning C. providing unyielding commitment to targets as a means to achieve a target profit D. providing communication among the subunits

C. providing unyielding commitment to targets as a means to achieve a target profit

ABC and traditional systems are quite similar in: A. the identification of cost pools B. evaluating performance C. the treatment of direct costs D. the allocation of overheads

C. the treatment of direct costs

Companies must always examine their pricing ________. A. based on the GAAP cost of producing the product and then add a mark-up B. based on the supply of the product C. through the eyes of their customers and then manage costs to produce a profit D. based on the full cost of producing the product and price to make a profit

C. through the eyes of their customers and then manage costs to produce a profit

The following information is available for a company's utility cost for operating its machines over the last four months. Using the high-low method, what is the estimated total fixed cost for utilities? January Machine Hours: 900 Utility Cost: $5,450 February Machine Hours: 1,800 Utility Cost: $6,900 March Machine Hours: 2,400 Utility Cost: $8,100 April Machine Hours: 600 Utility Cost: $3,600 A. $1,500 B. $3,600 C. $6,000 D. $2,100

D. $2,100

Which of the following is true of a budgeting system? A. It leads to operational inefficiency. B. It is easy to measure the exact benefits of a budgeting system. C. It increases agency costs. D. It compels managers to plan ahead.

D. It compels managers to plan ahead.

Which of the following is true of financial accounting information? A. It is primarily used by managers to make internal business decisions. B. It is prepared based on cost-benefit analysis. C. It only measures the cash transactions of a company. D. It focuses on the past-oriented financial performance of a company.

D. It focuses on the past-oriented financial performance of a company.

Which of the following involves a fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance? A. Strategy B. Product designing C. Product differentiation D. Reengineering

D. Reengineering

In the cash budget, the cash excess (surplus. or deficiency (deficit. is calculated using which of the following formulas? A. beginning cash + receipts - disbursements - minimum cash balance + loan proceeds B. total cash needed - cash disbursements C. beginning cash + receipts - disbursements D. beginning cash + receipts- disbursements - minimum cash balance

D. beginning cash + receipts- disbursements - minimum cash balance

It is usually difficult to find good cost driver (cause-and-effect relationship. between ________ and a cost allocation base. A. batch-level costs B. unit-level costs C. product-sustaining costs D. facility-sustaining costs

D. facility-sustaining costs

Work-in-process inventory would normally include ________ A. direct materials in stock and awaiting use in the manufacturing process B. goods fully completed but not yet sold C. goods returned after being sold to be re-worked on further improvements and quality D. goods partially worked on but not yet fully completed

D. goods partially worked on but not yet fully completed

In general, profit potential of an organization decreases with ________. A. lesser competition and weaker potential entrants B. greater competition and weaker potential entrants C. lesser competition and stronger potential entrants D. greater competition and stronger potential entrants

D. greater competition and stronger potential entrants

Kaizen refers to incorporating cost reductions: A. in each successive sales forecast B. in all areas of the organization C. in all customer service centers D. in each successive budgeting period

D. in each successive budgeting period

For a company with diverse products, under-costing overhead of a product will lead to product-cross -subsidization which means that: A. direct labor costs of the product are misallocated B. direct material costs of the product are misallocated C. direct costs of another product are misallocated D. indirect costs of another product are misallocated

D. indirect costs of another product are misallocated

A budget serves as much as a control tool as a planning tool because ________. A. it helps to evaluate customer needs and feedback B. it helps to make predictions about the future C. it aids in the coordination and communication among various business functions D. it is a benchmark against which actual performance can be compared

D. it is a benchmark against which actual performance can be compared

A favorable efficiency variance for direct manufacturing labor indicates which of the following occurred? A. a higher wage rate than planned was paid for direct labor B. more direct manufacturing labor-hours were used during production than planned for actual output C. a lower wage rate than planned was paid for direct labor D. less direct manufacturing labor-hours were used during production than planned for actual output

D. less direct manufacturing labor-hours were used during production than planned for actual output

Among different types of costs associated with inventory, the incoming freight charges of inventories are _____________. A. carrying costs B. stock-out costs C. ordering costs D. purchasing costs

D. purchasing costs

Which of the following is an objective of value engineering? A. to streamline and add non-value added activities B. to understand competitors' product design C. to reduce cost by eliminating all value-added activities D. to reduce the total cost of the product

D. to reduce the total cost of the product

A primary consideration in assigning a cost to a responsibility center is: A. whether the cost is fixed or variable B. whether the cost is direct or indirect C. where in the organizational structure the cost was incurred D. who can best control the change in that cost

D. who can best control the change in that cost


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