Cost Accounting Final (Learning Catalytic's)
A linear cost function can only represent fixed cost behavior. True False
FALSE
In a graphical display of a cost function, the steepness of a line represents the total amount of fixed costs. True False
FALSE
A cost system determines the cost of a cost object by ________. accumulating and then assigning costs accumulating costs assigning and then accumulating costs assigning costs
A
A learning curve is a function ________. that measures the decline in labor-hours per unit due to workers becoming better at a job that increases at a greater rate as workers become more familiar with their tasks where unit costs increase as productivity increases that is linear
A
An actual cost is ________. is the cost incurred is a predicted or forecasted cost is anything for which a cost measurement is desired is the collection of cost data in some organized way by means of an accounting system
A
An inaccurate cost function with a constant that is estimated too high may most likely result in ________. evaluating a weak manager as providing strong performance promoting a product that is actually less profitable than budgeted predicting total costs that are too low replicating processes that are truly cost saving
A
Bennet Company employs 20 individuals. Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month. Which of the following is the total cost function of personnel? y = a + bX y = b y = bX y = a
A
Cost behavior refers to ________. how costs react to a change in the level of activity whether a cost is incurred in a manufacturing, merchandising, or service company classifying costs as either perpetual or period costs whether a particular expense is expensed in the same or the following period
A
Cost tracing is ________. the assignment of direct costs to the chosen cost object a function of cost allocation the process of tracking both direct and indirect costs associated with a cost object the process of determining the actual cost of the cost object
A
Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified? variable cost mixed cost irrelevant cost fixed cost
A
Financial accounting provides a historical perspective, whereas management accounting emphasizes ________. the future past transactions a current perspective reports to shareholders
A
In making product mix and pricing decisions, managers should focus on ________. total costs unit costs variable costs manufacturing costs
A
Product costs used for external reporting generally include ________. manufacturing costs only design costs plus manufacturing costs all costs incurred along the value chain research and development costs along with production costs
A
The account analysis method estimates cost functions ________. by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis using time-and-motion studies at a high cost, which renders it seldom used in a manner that cannot be usefully combined with any other cost estimation methods
A
The ideal database for estimating cost functions contains ________. numerous cost driver observations only the independent variable and not the dependent variable cost driver observations spanning a narrow range a few values of the cost driver that are grouped closely together
A
When 20,000 units are produced, variable costs are $8 per unit. Therefore, when 10,000 units are produced ________. variable costs will remain at $8 per unit variable costs will total $60,000 variable unit costs will increase to $12 per unit variable unit costs will decrease to $3 per unit
A
Which of the following is true of line management? It is directly responsible for achieving the goals of the organization. It is responsible of management accounting functions. It provides advice, support, and assistance to staff management. It only includes the top level management.
A
Which of the following statements is true? There is a cause-and-effect relationship between the cost driver and the amount of cost. Fixed costs have cost drivers over the short run. Over the short run all costs have cost drivers. Volume of production is a cost driver of distribution costs.
A
Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%? 200 dresses 170 dresses 150 dresses 145 dresses
A $1,000N - $400N - $90,000 = $18,000 / (1 - 0.4); $600N - $90,000 = $30,000; N = 200 units
A budget ________. is the qualitative expression of a proposed plan of action by management is an aid to coordinating what needs to be done to execute a plan helps in identifying problems and uncertainties promotes production automation
B
An inaccurate cost function with a slope coefficient that is estimated too low may most likely result in ________. predicting total costs that are too high initiating cost cutting measures when they are unnecessary evaluating a weak manager as having strong performance promoting a product that is actually more profitable than budgeted
B
Comparing budgeted costs to actual costs helps managers to improve ________. coordination control implementation planning
B
Cost assignment ________. includes future and arbitrary costs encompasses allocating indirect costs to a cost object is the same as cost accumulation is the difference between budgeted and actual costs
B
Financial accounting ________. focuses on the future and includes activities such as preparing next year's operating budget must comply with GAAP (generally accepted accounting principles) is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization is prepared for the use of department heads and other employees
B
In designing strategy, a company must match its opportunities in the marketplace with ________. environment friendly goals its resources and capabilities branding opportunities the requirements of credit rating agencies
B
Managers use cost-volume-profit (CVP) analysis to ________. forecast the cost of capital for a given period of time to study the behavior of and relationship among the elements such as total revenues, total costs, and income estimate the risks associated with a given job analyse a firm's profitability and help to decide wealth distribution among its stakeholders
B
Managers use management accounting information to ________. help external users such as investors, banks, regulators, and suppliers communicate, develop, and implement strategies communicate a firm's financial position to investors, banks, regulators, and other outside parties ensure that financial statements are consistent with the SEC rules
B
One of the first steps to take when using CVP analysis to help make decisions is ________. calculating the break-even point identifying the variable and fixed costs calculation of the degree of operating leverage for the company estimating the volume of sales to make a good profit
B
The conference method estimates cost functions ________. using quantitative methods that can be very time consuming and costly based on analysis and opinions gathered from various departments using time-and-motion studies by mathematically analyzing the relationship between inputs and outputs in physical terms
B
The cost to be predicted is referred to as the ________. independent variable dependent variable cost driver regression
B
The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________. cost accumulation cost assignment cost tracing conversion costing
B
The margin of safety is the difference between ________. budgeted expenses and breakeven expenses budgeted revenues and breakeven revenues actual operating income and budgeted operating income actual sales margin and budgeted sales margin
B
Which of the following deals with management accounting? identifying the costs of acquiring the resources of the company developing budgets preparing the income statement preparing the statement of cash flows
B
Which of the following formulas determine cost of goods sold in a merchandising entity? Beginning inventory + Purchases + Ending inventory = Cost of goods sold Beginning inventory + Purchases - Ending inventory = Costs of goods sold Beginning inventory - Purchases + Ending inventory = Cost of goods sold Beginning inventory - Ending inventory - Purchases = Cost of goods sold
B
Which of the following is a nonlinear cost function? increase in revenues with increase in sales in units total fixed cost of $25,000 variable cost of $5 per unit learning curve function
B
Which of the following is true if a slope coefficient in a cost function is decreased from the last year? fixed cost per unit has decreased variable cost per unit has decreased production has decreased contribution margin has decreased
B
A cost function is a ________. process of calculating present value of projected cash flows process of allocating costs to cost centers or cost objects mathematical description of how a cost changes with changes in the level of an activity relating to that cost is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs
C
All individual cost items included in the dependent variable should have ________. a different cost driver an independent relationship with the independent variable an economically plausible relationship with the cost driver a heterogeneous cost pool
C
Budgeted costs are ________. the costs incurred this year the costs incurred last year planned or forecasted costs competitor's costs
C
Cost allocation is ________. the process of tracking both direct and indirect costs associated with a cost object the process of determining the opportunity cost of a cost object chosen the assignment of indirect costs to the chosen cost object made based on material acquisition document
C
Data collection problems arise when ________. data are recorded electronically rather than manually accrual-basis costs are used rather than cash-basis costs fixed and variable costs are not separately identified and both are allocated to products on a per unit basis purely inflationary price effects are removed
C
Financial accounting provides the primary source of information for ________. decision making in the finishing department improving customer service preparing the income statement for shareholders planning next year's operating budget
C
In CVP analysis, focusing on target net income rather than operating income ________. will increase the breakeven point will decrease the breakeven point will not change the breakeven point will help managers construct a better capital policy
C
In the estimation of a cost function using quantitative analysis, the independent variable ________. is the cost to be predicted is the product of fixed costs and slope coefficient is the factor used to predict the dependent variable is the product of total costs and slope coefficient
C
Inventoriable costs are expensed on the income statement ________. when direct materials for the product are purchased after the products are manufactured when the products are sold when the goods move from work-in process to finished goods account
C
Quantitative analysis methods estimate cost functions ________. using the time-and-motion studies based on analysis and opinions gathered from various departments using a formal mathematical method to fit cost functions to past data observations using the pooling of knowledge from each value chain function
C
Which of the following is true if the volume of sales increases (within a relevant range)? fixed cost increases variable cost decreases variable cost increases fixed cost decreases
C
Which of the following is true of cost accounting? It provides financial information about cash-based transactions only. It accounts only the financial information of business transactions, not the nonfinancial information. It provides financial information regarding the cost of acquiring resources. It must be prepared in accordance with GAAP.
C
Which of the following is true of financial accounting information? It is prepared based on cost-benefit analysis. It is primarily used by managers to make internal business decisions. It focuses on the past-oriented financial performance of a company. It only measures the cash transactions of a company.
C
Which of the following is true of staff management? It plans income taxes, sales taxes, and international taxes. It is directly responsible for achieving the goals of the organization. It provides advice, support, and assistance to line management. It controls the main business functions such as production and marketing.
C
Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. The number of units that must be sold to achieve $40,000 of operating income is ________. 677 units 717 units 617 units 650 units
C ($75,000 − $28,000) / 500 = $94. The number of units that must be sold to achieve $40,000 of operating income = ($18,000 + $40,000) / $94 = 617 units
Assume the following cost information for Fernandez Company: Selling price $120 per unit Variable costs $80 per unit Total fixed costs $80,000 Tax rate 40% What minimum volume of sales dollars is required to earn an after-tax net income of $30,000?
C Minimum volume of sales dollars is required = [$80,000 + ($30,000/0.6)] / [($120 - $80) / $120] = $390,000
A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________. average range cost-allocation range cost driver range relevant range
D
All else being equal, a reduction in selling price will ________. increase contribution margin reduce fixed costs increase variable costs reduce operating income
D
Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________. fixed costs increases by $6 per unit operating profits decreases by $6 per unit fixed costs decreases by $6 per unit operating profits increases by $6 per unit
D
Management accounting information typically includes ________. tabulated results of customer satisfaction surveys the cost of producing a product the percentage of units produced that are defective All of these answers are correct.
D
The selling price per unit less the variable cost per unit is the ________. fixed cost per unit gross margin margin of safety contribution margin per unit
D
The value chain is the sequence of business functions in which ________. value is deducted from the products or services of an organization producing and delivering the product or service is of prime importance products and services are evaluated with respect to their value to the supply chain usefulness is added to the products or services of an organization
D
Which of the following differentiates cost accounting and financial accounting? The primary users of cost accounting are the investors, whereas the primary users of financial accounting are the managers. Cost accounting deals with product design, production, and marketing strategies, whereas financial accounting deals mainly with pricing of the products. Cost accounting measures only the financial information related to the costs of acquiring fixed assets in an organization, whereas financial accounting measures financial and nonfinancial information of a company's business transactions. Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties.
D
Which of the following factors affect the direct/indirect classification of a cost? the level of budgeted profit for the next year the estimation of time required to complete the order the ability to execute an order in the most cost-efficient manner the design of the operation
D
With a step fixed-cost function ________. the cost varies with the changes in the activity fixed cost is often approximated with a continuous variable-cost function fixed cost changes proportionally with the level of activity the cost remains the same over wide ranges of the activity in each relevant range
D
Star Jewelry sells 500 units resulting in $75,000 of sales revenue, $28,000 of variable costs, and $18,000 of fixed costs. Breakeven point in units is ________. 196 units 203 units 185 units 192 units
D Contribution margin per unit = ($75,000 − $28,000) / 500 = $94 Breakeven point = $18,000 / $94 = 191.49 units. Hence breakeven is approximately 192 units.
The following information pertains to Alleigh's Mannequins: Manufacturing costs $1,500,000 Units manufactured 30,000 Units sold 29,500 units sold for $85 per unit Beginning inventory 0 units What is the amount of gross margin? $1,475,000 $1,500,000 $2,507,500 $1,032,500
D 29,500 × ($85 - ($1,500,000 / $30,000)) = $1,032,500
An example of a physical cause-and-effect relationship is when additional units of production increase total direct material costs. True False
TRUE
Cost management not only helps reducing costs but also improving customer satisfaction and the quality of a firm's products. True False
TRUE
Management accountants help managers identify what information is relevant and what information is irrelevant that help in decision making. True False
TRUE
Sales mix is the quantities or proportion of various products or services that constitute a company's total unit sales. True False Depends That's a falsehood IDk
TRUE
Sensitivity analysis is a "what-if" technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes. True False Depends IDK
TRUE