Managerial Accounting Exam Prep 4

The revenue that is forgone from an alternative use of an asset, such as cash, is called

Opportunity cost

Incurring actual indirect factory wages in excess of budgeted amounts for actual production results in a:

Controllable variance

Standard costs are divided into which of the following components? a. variance standard and quality standard b. materials standard and labor standard c. standard quality and standard quantity d. standard price and standard quantity

D

When using the product cost method of applying the cost-plus approach to product pricing, which of the following is included in the markup? a. desired profit b. total fixed manufacturing costs, total fixed selling and administrative expenses, and desired profit c. total cost plus desired profit d. total selling and administrative expenses plus desired profit

D

Which of the following is a measure of a manager's performance working in a profit center? a. a balance sheet b. the return on investment and residual income measures c. a budget performance report d. the divisional income statements

D

Which of the following is a present value method of analyzing capital investmetn proposals? a. average rate of return b. cash payback method c. accounting rate of return d. net present value

D

Common allocation bases are

direct labor dollars, direct labor hours, machine hours

Which is not a factory overhead allocation method?

factory costing

Periods in time that experience increasing price levels are known as periods of

inflation

The controllable variance measures

the efficiency of using variable overhead resources

The target costing method assumes that

the selling price is set by the marketplace

Which of the following is a drawback in using a single plantwide rate to apply overhead to product costs?

A single driver is used for all overhead costs and it is unlikely that the driver selected is appropriate for every time.

When multiple production department rates are used to apply overhead to products,

All overhead costs are first directly traced to support and production departments and then support department to production departments.

Which of the following is not a method commonly used in applying the cost-plus approach to product pricing? a. total cost method b. the efficiency of using variable overhead resources c. operating results at more than normal capacity d. control over fixed overhead costs

D

The standard price and quantity of direct materials are separated because

Direct materials prices are controlled by the purchasing department and quantity used is controlled by the production department

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department manager are _________ expenses

Direct operating

The term used to describe expenses that are incurred by a specific department is ______ expenses

Direct operating

What is the main feature of support department cossts?

They are indirect costs

Contractors who sell to government agencies would be most likely to use which cost concepts in pricing their products?

Total cost method

The formula for the return on investment (ROI) is

Operating income / invested assets

Everest Co. uses a single plantwide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments?

a labor-intensive department

In an investment center, the manager has the responsibility for and the authority to make decisions that affect

costs, revenues, and assets invested in the center

A responsibility center in which the departmetn manager is responsible for costs, revenues, and assets for a department is called a(n) ________ center

investment

The ratio of sales to invested assets, which is also a factor in the DuPont formula for determing the return on investment (ROI), is called

investment turnover

An unfavorable staff time variance may be the result of

oversheduling staff, insufficient staff training, difficult room cleaning situations

If the price paid per unit differs from the standard price per unit for direct materials, the variance is a __________ variance

price

If the actual quantity of direct materials used in producing a commodity differs from the standard quantity, the variance is a ______ variance

quantity

To compute operating income, total support department allocations are

subtracted from operating income before support department allocations

Widgeon Co. manufactures three products: Bales, Tales, and Wales. The selling prices are $55, $78, and $32, respectively. The variable costs for each product are $20, $50, and $15, respectively. Each product must go through the same processing in a machine that is limited to 2,000 hours per month. Bales take 5 hours to process; Tales, 7 hours; and Wales 1 hour. ​ The contribution per machine hour for wales is

$17

An unfavorable fixed overhead volume variance can be due to all of the following except: a. sales orders at a low level b. machine breakdowns c. employee inexperience d. in increase in utility costs

D

Pinnacle Corp. budgeted $700,000 of overhead cost for the current year. Actual overhead costs for the year were $650,000. Pinnacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours. Actual machine hours were 80,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinnacle's plantwide factory overhead rate for the current year is

$7 per machine hour

The Swan Company produces its product at a total cost of $43 per unit. Of this amount, $8 per unit is selling and administrative costs. The total variable cost is $30 per unit and the desired profit is $20 per unit. Determine the markup percentage on total cost.

110%

Which of the following is an advantage of the cash payback method? a. easy to use b. takes into consideration the time value of money c. both costs and revenues for the deparmetn or division d. costs, revenues, and assets invested in the center

A

Which of the following statements regarding the cash payback period is true? a. the longer the payback the longer the estimated life of the asset will be b. the longer the payback, the sooner the cash spent on the investment will be recovered c. the shorter the payback, the possibility of obsolence will be less likely. d. all of these choices

A

All of the following qualitative considerations may influence capital investment analysis except the investment proposal's impact on a. manufacturing productivity b. manufacturing sunk cost c. manufacturing flexibility d. market opportunities

B

Which of the following expenses incurred by a department store would be a direct expense of the Sporting Goods Department? a. depreciation expense - office equipment b. commissions earned by Sporting Goods DepRartment sales clerk c. uncontrollable accounts expense d. office salaries

B

In a profit center, the deparmetn manager has responsibility for and the authority to make decisions that affect

Both costs and revenue fro the department or division

All of the following are advantages of decentralization except: a. managers make better decisions when closer to the operations of the company b. expertise in all areas of the business is difficult; decentralization makes it better to delegate certain responsibilities c. each decentralized operation purchases its own assets and pays for operating costs d. decentralization managers can respond quickly to customer needs

C

Support department costs are normally accounted for as which of the following responsibility center classification?

Cost center

Brunette Company is contemplating investing in a new piece of manufacturing machinery. The amount to be invested is $180,000. The present value of the future cash flows generated by the project is $163,000. Should they invest in this project?

No, because the rate of return on the project is less than the desired rate of return used to compute the present value of the future cash flows.

What does not rely on managerial decisions involving accuate product costing?

Product constraints

Airco Company is tempted to consider support department costs to be facility-levle costs that do not need to be applied to products. Which of the following explains what is misguided about this approach?

Product costs may be inaccurate because support department services may be used more heavily by some products

What is not the type of work done in a support department?

Production work on an assembly line that makes a product

The ratio of operating income to sales, which is also a factor in the DuPont formula for determing the return on investment (ROI) is called

Profit margin

A cost that has been incurred in the past, cannot be recouped, and is not relevant to future decisions it termed a

Sunk cost

Which is commonly used to describe the departments within a company that provide a necessary service to produce a product but are not directly involved in production?

Support departments

If the actual direct labor hours spent producing a commodity differ from the standard hours, the variance is termed

TIme

What describes how support department costs are related to production?

They are indirectly related to production

Operating income for Division H is $200,000, and operating income before support department allocations is $975,000. As a result,

Total support department allocations are $755,000

Two managerial accounting tools useful in considering the uncertainty of estimates are

sensitivity analysis and capital rationing