MGMT final
In imperfect competition, if prices have little or no effect on sales volume, demand is ________. A. highly inelastic B. stable C. highly elastic D. uniform
A. highly inelastic
Which of the following statements about long −range plans is FALSE? A. Longinus−range plans guide day −to −day operations. B. A decision made during long −range planning is the acquisition of a plant building. C. Companies coordinate long −range plans with capital budgets. D. Long−range plans provide forecasted financial statements for five to ten year periods.
A. Long −range plans guide day −to −day operations.
A fraternity held a party. The fraternity prepared the following budget for 25 expected attendees: Total Costs $625 Twenty−five people attended the party. The following costs were incurred: Total Costs $760 What is the variance for total costs?
135 U
A cost accounting system called GPK uses ________ cost pools to allocate ________. A. 400 to 2000; indirect manufacturing costs B. 1−10; direct manufacturing costs C. 10−20; indirect manufacturing costs D. 1−20; direct manufacturing costs
A. 400 to 2000; indirect manufacturing costs
________ is the field of accounting that develops information for external parties such as stockholders, suppliers, banks and governmental regulatory bodies. A. Financial accounting B. Internal auditing C. Auditing D. Management accounting
A. Financial accounting
In a manufacturing firm, the computation of Cost of Goods Manufactured does NOT use ________. A. Finished Goods Inventory, ending balance B. indirect production costs C. direct materials used D. direct labor costs
A. Finished Goods Inventory, ending balance
When developing cost functions, which of the following statements is FALSE? A. The cost function does not have to be plausible. B. The cost function should explain past cost behavior. C. Personal observations of costs and activities provide the best evidence of a plausible relationship between a cost and its cost driver. D. The cost function must be believable.
A. The cost function does not have to be plausible.
To support managers' decisions, accountants develop cost management systems that are ________. A. a collection of tools and techniques that identify how decisions affect costs B. also used by external users such as investors and lenders C. composed of at least 400 cost pools D. computer programs with specialized accounting language
A. a collection of tools and techniques that identify how decisions affect costs
On the income statement, the absorption approach separates manufacturing costs from ________. A. all nonmanufacturing costs B. some nonmanufacturing costs C. all fixed costs D. all variable costs
A. all nonmanufacturing costs
The greatest benefit of activity analysis is that it directs management accountants to the ________. A. appropriate cost driver for each cost B. most accurate product cost C. relevant costs for decision making D. most accurate product price
A. appropriate cost driver for each cost
Which of the following costs is NOT relevant to an equipment replacement decision? A. cost of old equipment B. operating cost of old equipment(several years left) C. cost of new equipment D. operating cost of new equipment
A. cost of old equipment
Which of the following is a major factor causing changes in management accounting today? A. increased global competition B. additional value chain functions C. shift to manufacturing−based economy D. small advances in technology
A. increased global competition
When an upholstered chair is the cost object, minor materials, such as tacks and nails, used to manufacture the chair would probably be classified as a(n) ________. A. indirect production cost B. direct production cost C. direct nonproduction cost D. indirect nonproduction cost
A. indirect production cost
Today, in most manufacturing companies, workers oversee automated production processes that produce many different products. With respect to the products manufactured, the labor costs are considered to be ________. A. indirect production costs B. direct labor costs C. direct production costs D. period costs
A. indirect production costs
If a department in a department store is under consideration to be eliminated, unavoidable fixed expenses are ________ to the decision. A. irrelevant. B. incremental C. relevant D. marginal
A. irrelevant.
Historical or past information can have an indirect bearing on a manager's decision because ________. A. it can help predict the future B. the past decision resulted in a bonus for the manager C. the manager wants to repeat the past decisions made some of the time D. the past decision resulted in a favorable outcome
A. it can help predict the future
Managers may be tempted to make decisions that are not in the best interests of the company because ________. A. performance measures in use reward them for decisions that are not in the best interests of the company Your answer is correct. B. the managers are evaluated several times each year C. the managers do not understand the use of decision−making tools D. performance measures in use reward them for decisions that are in the best interests of the company
A. performance measures in use reward them for decisions that are not in the best interests of the company
The Troy Company has the following information available: Total fixed costs $400,000 Expected sales (units) 100,000 Contribution margin per unit $7.50 Tax rate 30% What is the after−tax net income? A. $245,000 B. $400,000 C. $280,000 D. $350,000
A. $245,000
Henricks Company has the following information available: Revenue $500,000 Variable production costs $100,000 Fixed production costs $100,000 Variable selling costs $50,000 Fixed selling costs $50,000 What is the gross margin and net income? A. $300,000; $200,000 B. $200,000; $200,000 C. $400,000: $200,000 D. $250,000; $150,000
A. $300,000; $200,000
Assume the following facts: Sales price $180 per unit Variable cost $100 per unit Total fixed costs $39,600 Targeted net income $52,800 How many units must be sold to achieve the targeted net income? A. 1,155 B. 513 C. 963 D. 629
A. 1,155
Barber Company has budgeted sales of $30,000 with the following budgeted costs: Direct materials $6,300 Direct labor $4,100 Variable factory overhead $3,700 Fixed factory overhead $5,600 Variable selling and administrative costs $2,400 Fixed selling and administrative costs $3,200 What is the average target markup percentage for setting prices as a percentage of total variable costs? A. 82% B. 45% C. 57% D. none of the above
A. 82%
In a graph of a mixed cost function, the y−axis is ________ and the x−axis is ________. A. cost; cost driver activity B. mixed cost; volume in units C. fixed cost; cost driver activity D. fixed cost; variable cost per unit
A. cost; cost driver activity
In general, many more costs are direct costs instead of indirect costs when the cost object is a ________ instead of a(n) ________. A. department; product B. product; activity C. product; department D. product; resource
A. department; product
________ is a name for a system that first accumulates indirect resource costs for each of the activities of an organization and then assigns the cost of each activity to the cost objects that require that activity. A. Activity −based management B. Activity −based costing C. Cost accounting D. Activity −based cost allocation
B. Activity −based costing
What is the sequence of steps in preparing the master budget? A. Output from the financial budget is used to prepare the operating budget. B. Output from the operating budget is used to prepare the financial budget. C. Output from the financial budget is used to prepare the budgeted income statement. D. Output from the financial budget is used to prepare the operating expense budget.
B. Output from the operating budget is used to prepare the financial budget.
Which of the following is NOT a valid step when designing an activity −based cost accounting system? A. Determine the relationships between cost objects, activities, and resources. B. Use a process map to identify areas for operational improvement. C. Collect relevant data concerning costs and cost drivers. D. Determine the key components of the system.
B. Use a process map to identify areas for operational improvement.
What is Six Sigma? A. a process improvement to reduce the time products spend in the production process B. a data−driven approach to eliminate defects in any process C. a process improvement to eliminate waste from the entire enterprise D. a process improvement to reduce the time products spend in activities that do not add value
B. a data−driven approach to eliminate defects in any process
On a cost−volume−profit graph, when the Total Cost line is higher than the Total Revenue line, the difference represents ________. A. net income B. a net loss C. a positive return on the investment D. not enough information is presented
B. a net loss
In order to estimate cost functions using account analysis, users rely on the ________ for information about cost behavior. A. value chain B. accounting system C. performance report D. management audit
B. accounting system
In the short run, when managers set prices for products, the minimum selling price should be equal to ________. A. all manufacturing costs B. all variable costs of producing, selling and distributing the good or service C. all fixed costs of producing, selling and distributing the good or service D. all fixed and variable costs of producing, selling, and distributing the good or service
B. all variable costs of producing, selling and distributing the good or service
The final output of the financial budget is ________. A. budgeted income statement B. budgeted balance sheet C. budgeted statement of stockholders' equity D. budgeted statement of cash flows
B. budgeted balance sheet
The detailed design and engineering of products, services or processes is called the ________ function in the value chain. A. production B. design C. research and development D. engineering
B. design
According to the IMA's Statement of Ethical Professional Practice, the standard of credibility includes ________. A. continually developing the accountant's knowledge and skills B. disclosing all relevant information that could reasonably be expected to influence an intended user's understanding of the reports C. refraining from engaging in any conduct that would prejudice carrying out duties ethically D. mitigating actual conflicts of interest
B. disclosing all relevant information that could reasonably be expected to influence an intended user's understanding of the reports
When evaluating a cost function estimated by least squares regression, it is important to see if the estimated cost function makes economic sense. This is assessed by ________. A. examining the sign of the coefficient of determination B. examining the sign of the variable cost estimate C. examining the sign of the fixed cost estimate D. examining the standard deviation of the cost driver
B. examining the sign of the variable cost estimate
With mixed costs, the ________ element is unchanged over the relevant range and the ________ element varies proportionately with cost−driver activity. A. fixed cost; step cost B. fixed cost; variable cost C. step cost; variable cost D. variable cost; fixed cost
B. fixed cost; variable cost
A company has 10,000 hours of capacity and manufactures two products. Product 1 takes 2 hours per unit. Product 2 takes 3 hours per unit. The contribution margin per unit for Product 1 is $5. The contribution margin per unit for Product 2 is $6. Neither product has enough demand to use all of the plant capacity, but the demand for both products exceeds the plant capacity. Which product or products should be manufactured? A. 0 units of Product 1 and 5,000 units of Product 2 B. make Product 1 first until meet customer demand, then make Product 2 C. 5,000 units of Product 1 and 0 units of Product 2 D. make Product 2 first until meet customer demand, then make Product 1
B. make Product 1 first until meet customer demand, then make Product 2
In considering whether to produce a single product, the associated direct materials and direct labor costs would probably be ________. A. relevant qualitative factors B. relevant quantitative factors C. irrelevant quantitative factors D. irrelevant qualitative factors
B. relevant quantitative factors
When looking at a manufactured product, an example of an inventoriable cost is ________. A. clerical salaries in corporate office B. wages of plant security guard C. insurance expense on vehicles used by sales staff D. depreciation expense on office equipment in corporate office
B. wages of plant security guard
An activity analysis has shown that the number of components added to Product X and Product Y is the cost driver for support costs. Support costs are $20 per component. Product X has 4 components and Product Y has 8 components. What amounts of support costs should be assigned to Product X and Product Y? Product X Product Y A. $20 $20 B. $80 $160 C. $6.67 $13.33 D. $80 $320
B. $80 $160
Benjamin Company has the following information available: Income tax rate 30% Selling price per unit $5.00 Variable cost per unit $3.00 Total fixed costs $90,000.00 If Benjamin Company wants a targeted after−tax net income of $14,000, how many units must be sold? A. 60,000 B. 55,000 C. 52,000 D. 45,000
B. 55,000
What happens when the cost−driver activity level increases within the relevant range? A. Total fixed costs increase. B. Variable costs per unit of cost driver decrease. C. Fixed costs per unit of cost driver decrease. D. Total variable costs decrease.
C. Fixed costs per unit of cost driver decrease
________ costs are costs of manufacturing two or more products that are not separately identifiable as individual products until their split−off point. A. Sunk B. Separable C. Joint D. Incremental
C. Joint
A merchandising firm reports ________ as a current asset on the balance sheet. A. Finished Goods Inventory B. Raw Materials Inventory C. Merchandise Inventory D. Work −in−Process Inventor
C. Merchandise Inventory
Which of the following statements is FALSE? A. A cost may be defined as a sacrifice or giving up of resources for a particular purpose. B. A cost accounting system typically has two processes that include cost accumulation and cost assignment. C. Only manufacturing firms need some form of cost accounting. D. Costs are frequently measured by the monetary units that must be paid for goods and services.
C. Only manufacturing firms need some form of cost accounting.
Which of the following statements is FALSE about information used for decision making? A. Imprecise but relevant information can be useful for decision making. B. Relevant information must be reasonably accurate but not precisely so. C. Relevant information must be totally accurate or it is useless. D. Precise but irrelevant information is worthless for decision making.
C. Relevant information must be totally accurate or it is useless.
In a master budget, the schedule of cash disbursements for operating expenses is used to prepare the ________. A. purchases and cost of goods sold budget B. sales budget C. cash budget D. capital budget
C. cash budget
When developing a price for a new product, the price must cover ________. A. costs in product development and phase−out cycles plus direct production costs B. costs in phase−out and product development cycles only C. costs incurred in all stages of the product life cycle D. costs in mature market and introduction to market cycles only
C. costs incurred in all stages of the product life cycle
Companies may be forced to use engineering analysis or account analysis to estimate cost functions because ________. A. engineering analysis is the least costly method B. the other estimation methods are too difficult to use C. historical data are not available D. historical data are too subjective
C. historical data are not available
Cost drivers are ________. A. different types of cost calculations B. the different functions in the value chain C. measures of activities that require the use of resources and thereby cause costs D. different types of functional areas in the firm
C. measures of activities that require the use of resources and thereby cause costs
A compensation plan where the sales force is paid salary plus commission is a ________. A. step cost B. purely variable cost C. mixed cost D. fixed cost
C. mixed cost
Janitors clean the factory with scrubbing machines and polishing machines. Scrubbing machines scrub the factory floor and polishing machines polish the floor. The cost associated with cleaning the factory is treated as a product cost. What is a good cost driver for the Depreciation Expense associated with the scrubbing and polishing machines? A. number of janitors operating machines B. number of labor hours put in by janitors C. number of machine hours used D. number of kilowatt hours used
C. number of machine hours used
Starbucks experiments with adding ice cream sundaes to its menu at several stores in the state of Washington Financial reports are prepared showing revenues and costs for the new menu item. Based on the reports, management at the corporate office will then decide whether to permanently add or remove the new menu item. The financial reports are an example of ________ information. A. attention directing B. management auditing C. problem-−solving D. scorekeeping
C. problem-−solving
The various stages through which a product passes are called the ________. A. product performance plan B. value chain C. product life cycle D. performance plan
C. product life cycle
An unfavorable variance occurs on a performance report when ________. A. the actual cost is less than the budgeted cost B. the actual revenue is greater than the budgeted revenue C. the actual revenue is less than the budgeted revenue D. the actual profit is greater than the budgeted profit
C. the actual revenue is less than the budgeted revenue
Nancy Company has an idle machine that originally cost $200,000. The book value of the machine is $100,000. The company is considering three alternative uses of the idle machine: Alternative 1: Disposal of machine. Disposal value of machine is $50,000. Alternative 2: Use the idle machine to increase production of Product A. Contribution margin from additional sales of Product A is estimated to be $60,000. Alternative 3: Use the idle machine to increase production of Product B. Contribution margin from additional sales of Product B is estimated to be $70,000. When considering the opportunity cost of the idle machine, what is the net financial benefit from Alternative 3? A. $50,000 B. $70,000 C. $10,000 D. $20,000
C. $10,000
Falls Company has budgeted sales of $120,000 based on 80,000 units. The margin of safety is $1,000. What is the break−even point in dollars? A. $120,000 B. $121,000 C. $119,000 D. $81,000
C. $119,000
Management cannot influence the price of a new product. The market price is $100 per unit. The estimated production cost is $30 per unit. The estimated nonproduction cost is $40 per unit. If the gross profit is 40 percent of the market price, what is the target cost of the new product? A. $70 B. $40 C. $60 D. $30
C. $60
Thompson Company currently produces 10,000 units of a key part at a total cost of $512,000 annually. Annual variable costs are $300,000. Of the annual fixed costs, $140,000 relate specifically to this part. The remaining fixed costs are unavoidable. Another manufacturer has offered to supply the part for $48 per unit. The facilities currently used to manufacture the part could be used to manufacture a new product with an expected contribution margin of $60,000 annually. Alternatively, the facilities could be rented out at $70,000 annually. If Thompson Company makes the part, what is the annual opportunity cost of the facilities? A. $13,000 B. $60,000 C. $70,000 D. $28,000
C. $70,000
Missouri Company has a current production capacity level of 200,000 units per month. At this level of production, variable costs are $0.60 per unit and fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. Gates Company has contacted Missouri Company about purchasing 20,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. If the order is accepted, what is Missouri Company's change in profits? $10,000 decrease B. $10,000 increase C. $8,000 increase D. $8,000 decrease
C. $8,000 increase
Many organizations use a linear relationship with a single cost driver to describe a cost even though the cost may have multiple cost drivers. Why? A. The cost of developing a more complex function is greater than the benefit. B. Cost estimates from the simple function are accurate enough for most decisions. C. This approach is easier and less expensive. D. All of the above
D. All of the above
When choosing between two alternatives, what of the following are relevant costs? A. future variable costs that are the same under two alternatives B. future variable costs that are different under two alternatives C. future fixed costs that are different under two alternatives D. B and C
D. B and C
Why do most nonprofit organizations face substantial difficulties in implementing management control systems? A. The outputs of nonprofit organizations are easy to measure. B. It is difficult to measure the quantity of outputs from nonprofit organizations. C. It is difficult to measure the quality of outputs from nonprofit organizations. D. B and C
D. B and C
A spreadsheet can be used to prepare ________. A. the financial budget B. schedules from the master budget C. the operating budget D. all of the above
D. all of the above
Under the contribution approach to the income statement, the difference between sales and ________ is contribution margin. A. manufacturing costs B. cost of goods sold C. all fixed expenses D. all variable expenses
D. all variable expenses
What is the most common value−chain function outsourced in most businesses? A. production process B. research and development C. product design D. corporate support
D. corporate support
Which of the following is an example of a strategic management decision that uses cost information? A. evaluation of operational cost control program B. determination of Cost of Goods Sold for the income statement C. assessment of process improvement efforts in quality control D. identification of value−chain function to outsource
D. identification of value−chain function to outsource
Arkansas Company has no beginning and ending inventories, and has obtained the following data for its only product: Selling price per unit $65 Direct materials used $150,000 Direct labor $225,000 Variable factory overhead $140,000 Variable selling and administrative expenses $60,000 Fixed factory overhead $370,000 Fixed selling and administrative expenses $30,000 Units produced and sold 20,000 Assume there is excess capacity. There is a special order outstanding for 1,000 units at $40.00 per unit. If Arkansas Company accepts the special order, net income would ________. A. increase by $40,000 B. decrease by $10,000 C. decrease by $28,750 D. increase by $11,250
D. increase by $11,250
Managers apply two criteria to obtain accurate and useful cost functions. These criteria are ________. A. reliability and validity B. validity and plausibility C. plausibility and believability D. plausibility and reliability
D. plausibility and reliability
A car lease payment is computed based solely on the number of miles driven. This is an example of a ________. A. mixed cost B. stair cost C. step cost D. variable cost
D. variable cost
Abbott Company sells desks at $480 per desk. The variable costs are $372 per desk. Total fixed costs for the period are $456,840. The break−even volume in dollars is ________. A. $589,471 B. $1,573,560 C. $456,840 D. $2,030,400
D. $2,030,400
Assume the following facts for two products, Zip and Zap: Zip Zap Sales mix 3 units 1 unit Selling price per unit $21.00 $28.00 Variable costs per unit $14.00 $16.00 If total fixed costs are $132,000, the break−even point in units would be ________. A. 4,000 units of Zip and 12,000 units of Zap B. 8,400 units of Zip and 2,800 units of Zap C. 1,200 units of Zip and 400 units of Zap D. 12,000 units of Zip and 4,000 units of Zap
D. 12,000 units of Zip and 4,000 units of Zap
A value −added cost is the cost of an activity that a company can eliminate without affecting the product's value to the customer.
False
Account analysis is used to identify appropriate cost drivers and their effects on the costs of making a product or providing a service.
False
An effective budget process communicates from the top down, but not from the bottom up.
False
An equipment's book value is the original cost plus accumulated depreciation.
False
Companies can reduce or eliminate committed fixed costs when demand falls during an economic downturn.
False
Companies must assign all nonproduction costs to cost objects for internal management purposes.
False
Conflicts in the decision−making process can arise when superiors evaluate a manager's performance using a model consistent with the decision model used by the manager.
False
Generally Accepted Accounting Principles play an important role in management accounting.
False
In perfect competition, the marginal revenue curve is a vertical line equal to the price per unit at all volumes of sales.
False
Opportunity costs and outlay costs are widely used synonyms.
False
Product design affects a small amount of costs in the value chain.
False
Selling expenses are found in the cost of goods sold.
False
The break−even point is the level of revenue at which revenue equals fixed costs.
False
The break−even point is when enough units are sold that total contribution margin equals total variable costs.
False
The controller is primarily concerned with a company's financial matters and the treasurer is concerned with a company's operating matters.
False
Naperville Corporation has a joint process that produces three products: P, G and A. Each product may be sold at split−off or processed further and then sold. Joint−processing costs for a year amount to $25,000. The production level for each product is 10,000 units. Other data follows: Sales Value Separable Processing Sales Value Product at Splitminus−Off Costs after Splitminus−Off at Completion P $12 $8 $21 G 10 4 17 A 15 6 19 Processing Product P beyond the split−off point will cause profits to ________.
Increase by 10000
Stanley Company has identified the following activities related to indirect production costs: Materials Handling $50,000 12,500 pounds of materials Product 1 Product 2 Number of units produced 4,000 20,000 Direct materials cost $20,000 $25,000 Using an activity−based costing system, what amount of materials handling cost is assigned to Products 1 and 2?
Product 1 Product 2 D. $2,000 $6,000
Determining the relationships among cost objects, activities, and resources is the second step in the design of an ABC system.
True
Discriminatory pricing is the act of charging different prices to different customers for the same product or service.
True
For both merchandising and manufacturing firms, selling and administrative costs are period costs.
True
Future costs are irrelevant if they are the same under all feasible alternatives.
True
Heating and air conditioning costs are examples of common costs to the different departments in a retail store.
True
Inventory turnover is the number of times the average inventory is sold per year.
True
Managers may use different markup rates for different categories of costs.
True
The contribution margin per unit of a given product guides managers when deciding which product to emphasize in a sales mix.
True
The corporate culture is a larger influence on the ethical climate of an organization than a code of ethics.
True
The relevant range is the limit of costminus−driver level within which a specific relationship between costs and the cost driver is valid.
True
When managers make decisions, the accountant is seen as the technical expert on financial analysis.
True
Customers, departments and territories are examples of cost objects.
True