Managerial Accounting

A company manufactures steel railings and is looking at the product cast of a railing. The cost of freight-in (transportation costs) on steel used to manufacture the railings would be considered:

Direct Material Cost

Period Costs

Do not become part of the value of inventory for financial or tax reporting. Period costs are expensed as incurred (Product costs become part of the value of inventory)

Which of the following costs would MOST LIKELY be classified as a variable cost? A) Indirect material b) property taxes c) factory maintenance and repairs d) supervisory salaries

A) Indirect material

A company produced customer bottle caps and jar covers for large cometic companies. The company has custom-made molds that are used for the caps and jar covers. Each order requires the setting of molds in molding machines. Two full time mechanics, who's combined total annual salary and benefits are $160,000 per year, are employed setting up and breaking down the molding machines. An operator then stands by the machine and operates the molding machine to produce the order. An order of anywhere from 50,000 50 500,000 units. The cost of setting up the molding machine is an example of:

Batch level activity. The machine is set up prior to each order (or batch). Thus, this is a batch-level activity.

Product costs can be distorted if a unit-based activity driver is used and .... which of the following statements is true: 1. non unit-based overhead costs are a significant proportion of total overhead. 2. there are multiple products with varying usage of resources.

Both of the statements are true. These are some of the necessary conditions for ABC to be helpful.

A company manufactures golf clubs and gold bags. Which of the following costs would be a direct material cost?

Cloth (Fabric) used to make golf bags.

Managers may intentionally build slack into the budget: a) because they are uncertain about the future b) to make their performance appear better c) to acquire the resources they need in the event the organization implements a budget cut d) because all of the above are true

D) All are true

The cost of fire insurance for a manufacturing plant is generally considered to be a:

Manufacturing Overhead Cost

Testing prototypes of a new product is an example of a:

Product level activity

Which are the following are true about transfer pricing? a) All are true b) the transfer price affects the profit measurement for both the selling and buying divisions of the organization because the divisions are buying and selling from and to each other. c) The transfer price charged when one division of an organization sells goods or services to another division does not affect the total profit of the overall organization, assuming the transfer is made. d) The transfer pricing policy can affect incentives of autonomous managers as they decide whether to make the transfer.

a) All are true

Cost-volume profit (CVP) analysis is a key factor in many decisions, including choice of product lines, pricing products, marketing strategy, and use of product facilities. A calculation used in a CVP analysis is the break-even point. Once the break-even point has been reached, operating income will increase by the: a) CM per unit for each additional unit sold b) FC per unit for each additional unit sold c) VC per unit for each additional unit sold

a) CM per unit for each additional unit sold

____ are outcome measures that can be readily quantified and verified. a) Objective measures b) Lag measures c) External measures d) Financial measures

a) Objective measures

An equipment lease that specifies a payment of $5,000 per month plus $8 per machine hour used is an example of a: a) mixed cost b) step cost c) fixed cost d) variable cost

a) mixed cost Fixed costs remain constant in total. Total variable costs vary with each unit of activity (because the per unit variable cost is constant). Step costs change in "chunks" (or "steps"). Mixed costs contain a constant fixed cost along with a portion of the costs that vary based on the level of activity.

In a balanced scorecard, which of the following would be a measure of learning and growth area of performance? a) Retention of existing customers b) % of defective products c) Hours of job related training d) gross margin ratio

c) Hours of job related training Gross margin ratio would be financial performance measure. Retention of existing customers would be a customer measure. % of defective products would be an internal business process measure.

In the cost-volume-profit analysis, income taxes a) are treated as fixed costs b) increase the sales volume required to breakeven c) are treated as a fixed cost d) increase the sales volume required to earn a desired profit

d) increase the sales volume required to earn a desired profit

Assuming all other things are equal, fixed costs must have _____ if there was a decrease in the break-even point.

decreased

If activity-based costing is used, the salary of the plant manager would be classified as a:

facility level activity General items relating to the manufacturing facility are facility-level activities.

Which of the following statements is TRUE about fixed and variable costs? a) Both costs are constant when considered on a total basis. b) Fixed costs are constant in total and variable costs are constant per unit c) Variable costs are constant in total and fixed cost are constant per unit

B) Fixed costs are constant in total and variable costs are constant per unit VC are constant per unit and will increase in total with an increase in activity; FC are constant in total and will decrease per unit with an increase in activity

In the relevant range, which of the following best describe a fixed cost? a) Per unit cost decreases as activity decreases and increases as activity increases b) Total cost remains the same regardless of activity c) Per unit cost remains the same regardless of activity

B) Total cost remains the same regardless of activity

The predetermined overhead rate is usually calculated

at the beginning of the year.

Which of the following statements about activity based costing is NOT true? a) In activity based costing, cost drivers are usually what cause cost to be incurred. b) Activity based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. c) Activity based costing differs from traditional costing systems in that products are not cross subsidized. d) Activity based costing is useful for allocating marketing and distribution costs.

b) Activity based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. Activity based costing is more likely to result in major differences from traditional costing systems if the film manufactures MULTIPLE products rather than ONLY ONE product.

An important qualitative factor to consider regarding a special order is the: a) avoidable fixed costs associated with the special order. b) effect the sale of special-order units will have on the sale of regularly priced units. c) incremental revenue from the special order. d) variable costs associated with the special order.

b) effect the sale of special-order units will have on the sale of regularly priced units.

When analyzing relevant information which items should not be included in the decision? a) The increase in additional fixed costs of manufacturing b) The increase in costs per unit manufactured. c) Depreciation on existing machines d) Future changes in set-up and facility costs.

c) Depreciation on existing machines