Practice test accounting 212 test 1

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11) Financial accounting information is prepared: 11) ______ A) for the firm as a whole B) for internal parties C) using firm's best estimates D) on forecast information

3) An accountant would use which formula to find the amount of variable costs? 3) _______ A) Total costs - fixed costs B) Fixed costs / total costs C) Fixed costs - variable costs D) Total costs / fixed costs

3) The performance of a cost center is evaluated based upon the: 3) _______ A) amount of cost incurred B) profit for the segment C) sales dollars generated D) return on the assets

4) The income statement that a company makes available for use by external decision makers is the: 4) _______ A) functional income statement B) direct income statement C) contribution income statement D) variable income statement

5) An example of a cost center would be: 5) _______ A) the furniture delivery department of a department store B) the entire department store chain C) an individual store in a department store chain D) the furniture department of a department store

5) If the sales budget is changed, then: 5) _______ A) at the minimum, the purchases, cost of goods sold, and cash budgets will also change B) none of the other budgets will change C) only the cash budget will change D) only the selling and administrative expenses budget will change

5) The firm of Smith, Kirkpatrick, and Associates is considering a new computer system. The computer system will cost $53,000 and generate cost saving of $8,200 per year. What is the payback period? 5) _______ A) 6.46 years B) 1.60 years C) 4.75 years D) 8.00 years

Under absorption costing, fixed manufacturing overhead costs: A. are deferred in inventory when production exceeds sales. B. are always treated as period costs. C. are released from inventory when production exceeds sales. D. are ignored.

14) When the firm lacks past experience concerning a cost's reaction to activity, the method most likely used to separate the components of a mixed cost will be the: 14) ______ A) engineering approach B) high-low method C) regression analysis D) scatter graphing

A I am guessing this is because the other options require data. Engineering approach uses experts who can make predictions with minimal past experience.

19) The budgeting approach where upper management prepares the budget and allows for little negotiation by the rest of the company is called: 19) ______ A) incremental B) imposed C) bottom-up D) zero-based

Most accounting information is: 1) _______ A) qualitative B) quantitative C) irrelevant D) None of these answers is correct.

Which of the following costs, if expressed on a per unit basis, would be expected to decrease as the level of production and sales increases? A. Sales commissions. B. Fixed manufacturing overhead. C. Variable manufacturing overhead. D. Direct materials.

10) A method that is statistically accurate to separate mixed costs is the: 10) ______ A) engineering approach B) regression analysis C) high-low method D) scatter graphing

B keyword: statistical

1) A business expenditure for acquiring expensive assets that will be used for several years is known as a(n): 1) _______ A) strategic investment B) long-term depreciation C) capital investment D) capital budget

10) When deciding if a special order should be accepted, variable costs are: 10) ______ A) past costs B) None of these answers is correct C) relevant costs D) opportunity costs

12) Nonfinancial goals: 12) ______ A) are secondary to financial goals and are generally not communicated B) are quantifiable in the capital budgeting process C) do not mention money but refer to activities that may or may not result in profits D) None of these answers is correct.

12) One cost does not change per unit as business activity changes. This is an example of a: 12) ______ A) fixed cost B) mixed cost C) variable cost D) All costs change on a per unit basis as business activity changes.

19) When there is a forgone benefit when one alternative is selected over another alternative, the benefit is commonly known as a(n): 19) ______ A) irrelevant cost B) outsourcing event C) opportunity cost D) alternative benefit

20) An example of a nonfinancial goal for a firm would be: 20) ______ A) the minimization of costs B) a high investor return C) creating a safe employee work environment D) to maximize profits

5) The key element of a functional income statement is that costs are separated into: 5) _______ A) product and variable costs B) period and fixed costs C) product and period costs D) variable and fixed costs

6) A cost that changes on a per unit basis as the activity level changes is a: 6) _______ A) None of these answers is correct B) behavioral cost C) fixed cost D) variable cost

6) A qualitative factor to consider when deciding whether to buy a new home would be the: 6) _______ A) property taxes for the new home B) purchase price and financing of the new home C) neighborhood reputation where the new home is located D) utility costs of the new home

6) An income statement prepared for a business segment is known as a: 6) _______ A) multiple-step income statement B) single-step income statement C) segment income statement D) None of these answers is correct.

6) One type of income statement that is only used internally within a company is the: 6) _______ A) functional income statement B) absorption income statement C) contribution income statement D) full-costing income statement

6) Which type of organization would use capital budgeting techniques? 6) _______ A) only "for profit" organizations B) only "not-for-profit" organizations C) Answers A and B are correct. D) None of these answers is correct.

7) An order for a manufacturing firm that is outside the scope of the firm's normal business activities is known as a(n): 7) _______ A) relevant order B) opportunity order C) special order D) outsourcing

9) The public at large would use: 9) _______ A) specific information about a product line B) specific information about a division of the company C) general purpose financial statements D) management accounting information

9) When the costs for the period are broken into variable and fixed categories on the income statement, it is known as the: 9) _______ A) full-costing income statement B) functional income statement C) contribution income statement D) absorption income statement

9) When the manager controls both the revenues and the expenses incurred by the segment only, the segment would be classified as a(n): 9) _______ A) investment center B) revenue center C) profit center D) cost center

A self-imposed budget or ________________ budget is a budget that is prepared with the full cooperation of managers at all levels. A. perpetual B. master C. participative D. responsibility

A sunk cost is: A. a cost which may be saved by not adopting an alternative. B. a cost which may be shifted to the future with little or no effect on current operations. C. a cost which cannot be avoided because it has already been incurred. D. a cost which does not entail any dollar outlay but which is relevant to the decision-making process.

Manufacturing Cycle Efficiency (MCE) is computed as:� A.�Throughput Time / Delivery Cycle Time. B.�Process Time / Delivery Cycle Time. C.�Value-Added Time / Throughput Time. D.�Value-Added Time / Delivery-Cycle Time.

Pulo Corporation uses a weighted-average process costing system. The company has two processing departments. Production starts in the Assembly Department and is completed in the Finishing Department. The units completed and transferred out of the Assembly department during April will become the: A. units in April's ending work in process in Finishing. B. units in May's beginning work in process in Finishing. C. units started in production in Finishing for April. D. units started in production in Finishing for May.

Residual income:� A.�is the return on investment (ROI) percentage multiplied by average operating assets. B.�is the net operating income earned above a certain minimum required return on sales. C.�is the net operating income earned above a certain minimum required return on average operating assets. D.�will always be greater than zero.

The ________________________ is the amount remaining from sales revenue after all variable expenses have been deducted. A. cost structure B. gross margin C. contribution margin D. committed fixed cost

Which of the following would be classified as an internal failure cost on a quality cost report? A. Warranty repairs and replacements. B. Supplies used in testing and inspection. C. Debugging software errors. D. Final product testing and inspection.

14. A fixed cost remains constant if expressed on a unit basis. True False

The units in beginning work in process inventory plus the units in ending work in process inventory must equal the units transferred out of the department plus the units started into production. True False

Under variable costing, variable production costs are not treated as product costs. True False

FALSE

A major advantage of the FIFO method is that it allows managers to judge the performance of the current period independently of the performance of the prior period. True False

TRUE

A manufacturing cycle efficiency (MCE) ratio close to 1.00 is desirable because this is the ratio of value-added time to throughput time t/f

TRUE

Sales dollars is generally a poor base to use in allocating service department costs. t/f

TRUE

In a make-or-buy decision, relevant costs include: A. unavoidable fixed costs B. avoidable fixed costs C. fixed factory overhead costs applied to products D. fixed selling and administrative expenses

Barraza Corporation uses a weighted-average process costing system. Barraza has two direct materials. One of these materials is added at the beginning of the production process. The other material is added when processing is 50% complete. When will the equivalent units of production for these two materials be equal? A. when processing on beginning work in process is less than 50% complete at the start of the period. B. when processing on beginning work in process is more than 50% complete at the start of the period. C. when processing on ending work in process is over 50% complete. D. when processing on ending work in process is less than 50% complete.

Costs in an operation costing system are accumulated by: A. department. B. by individual job. C. by both job and departments. D. by neither job nor department.

In a job-order costing system, the use of indirect materials that have been previously purchased is recorded as a credit to: A. Work in Process inventory. B. Manufacturing Overhead. C. Raw Materials inventory. D. Finished Goods inventory.

Joint products are products that are sold to customers as a set or as part of a group of products. True False

1) If a cost is truly variable: 1) _______ A) it changes proportionately as activity changes B) it changes only within its relevant range C) its rate of change is smaller than the rate of change of the activity D) None of these answers is correct.

10) The type of cost that stays the same on a per unit basis as business activity levels change is a: 10) ______ A) variable cost B) mixed cost C) fixed cost D) parallel cost

10) Variable and fixed cost classifications are found on the: 10) ______ A) contribution income statement B) absorption income statement C) functional income statement D) full-costing income statement

11) Costs that are classified by their behavior are found on the: 11) ______ A) contribution income statement B) functional income statement C) full-costing income statement D) absorption income statement

11) Variable costs are costs that __________ in total, but __________ as the business activity level changes. 11) ______ A) change ; remain constant per unit B) remain constant; change per unit C) change; change per unit D) remain constant; remain constant per unit

11) When determining if a special order should be undertaken, fixed production costs are: 11) ______ A) relevant only if affected by the increased production B) all considered relevant costs C) all sunk costs and thus are relevant costs D) not included as relevant costs

11. If a company wants to decrease its total quality cost, it would usually be best to spend more money on: A. prevention. B. internal and external failure. C. prevention and internal failure. D. appraisal and external failure. E. appraisal and internal failure.

12) The budgeting approach that gets its name because the prior year's budgets are used to build the new operating budget is known as: 12) ______ A) incremental budgeting B) zero-based budgeting C) perpetual budgeting D) continuous budgeting

12) When determining whether to accept a special order, if the fixed production costs will be the same whether the special order is completed or not, the fixed costs are: 12) ______ A) irrelevant B) all sunk costs C) relevant D) None of these answers is correct

13) Nonfinancial goals: 13) ______ A) may be difficult, if not impossible, to determine when they have been attained B) are never categorized as organization goals C) can be quantified through the organizational goal process D) are easily determined when they have been attained

13. Which of the following would be classified as an appraisal cost on a quality cost report? A. Re-entering data because of keying errors. B. Quality data gathering, analysis, and reporting. C. Debugging software errors. D. Test and inspection of in-process goods.

14) After all variable costs have been deducted from sales, the amount that is available to go toward covering fixed costs and ultimately, profits, is called: 14) ______ A) contribution margin B) net sales C) gross profit D) gross margin

14) Costs that support multiple business segments and that remain constant even as levels of activity change are called: 14) ______ A) common fixed costs B) common variable costs C) traceable fixed costs D) direct fixed costs

14) For most businesses, the primary financial goal is to: 14) ______ A) earn a profit B) retain quality employees C) become the most competitive organization in their particular area of expertise D) grow exponentially

14. Which of the following would be classified as an appraisal cost on a quality cost report? A. Supervision of testing and inspection activities. B. Systems development. C. Quality engineering. D. Quality training.

15) The budgeting approach where each item must be justified for its inclusion in the budget is the: 15) ______ A) zero-based approach B) imposed approach C) incremental approach D) perpetual approach

16) A method that separates mixed costs into fixed and variable components by plotting historical activity and cost data is: 16) ______ A) scatter graphing B) regression analysis C) the engineering approach D) the high-low method

17) In the basic mathematical regression equation, the "a" represents: 17) ______ A) fixed cost B) total cost C) activity level D) unit variable cost

17) The budgeting approach where the budget is prepared without reference to past budgets or past actual results is known as: 17) ______ A) zero-based B) perpetual C) bottom-up D) top-down

19) A company's strategic plan tends to have objectives that are: 19) ______ A) long range B) concerned with the security of the company C) short-term D) Answers B and C are both correct.

19) In the basic mathematical regression equation, the X represents: 19) ______ A) activity level B) total cost C) unit variable cost D) fixed cost

2) An example of a qualitative factor is: 2) _______ A) customer satisfaction B) increased income C) a relevant cost D) an irrelevant cost

2) Increases and decreases in any business activity: 2) _______ A) will impact some costs and not others B) will impact only fixed costs C) generally have no impact on cost D) will impact all costs

2) The budget which is not closely related to any other budget is the: 2) _______ A) All of the budgets are closely interrelated. B) cash budget C) sales budget D) selling and administrative expenses budget

23. Which of the following would be classified as an external failure cost on a quality cost report? A. Product recalls. B. Quality engineering. C. Quality training. D. Systems development.

5) The method used to separate the components of mixed cost which focuses on the mathematical differences between the two extremes of observations is called: 5) _______ A) the high-low method B) scatter graphing C) regression analysis D) the engineering approach

5) When using a graph to depict cost behavior, a flat horizontal line represents: 5) _______ A) a fixed cost B) the y axis C) the x and y axis D) a variable cost

6) The law office of Russell, Shelton, and Company is considering a new copier. The copier will cost $8,750 and generate cost saving of $3,605 per year. What is the payback period? 6) _______ A) 2.43 years B) 5.15 years C) 8.00 years D) 6.25 years

6) When using a graph to depict cost behavior, an upward sloping line represents: 6) _______ A) a variable cost B) a fixed cost C) the x axis D) the y axis

7) The extent of business activity within which cost behavior assumptions are valid is known as the: 7) _______ A) relevant range B) variable cost index C) fixed cost index D) total cost horizon

8) A cost that decreases per unit as business activity increases is a: 8) _______ A) fixed cost B) behavioral cost C) variable cost D) product cost

8) If a manager only has responsibility for increasing revenues and controlling costs, the center is called a(n): 8) _______ A) profit center B) revenue center C) cost center D) investment center

9) One advantage of perpetual budgeting is that: 9) _______ A) it spreads the workload for budget preparation evenly over the year B) it makes the budgeting process a routine matter C) it adds to an already heavy workload for many managers D) many managers will be satisfied with the status quo

All other things being the same, which of the following would increase the residual income?� A.�Decrease in average operating assets. B.�Decrease in sales. C.�Increase in minimum required return. D.�Decrease in net operating income. �

Departmental overhead rates are generally preferred to plant-wide overhead rates when: A. the activities of the various departments in the plant are not homogeneous. B. the activities of the various departments in the plant are homogeneous. C. most of the overhead costs are fixed. D. all departments in the plant are heavily automated.

Fairmont Inc. uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order that will result in higher than normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as: A. responsibility accounting. B. contribution accounting. C. absorption accounting. D. operational budgeting.

Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true? A. Variable costs would show favorable variances. B. Variable costs would show unfavorable variances. C. Fixed costs would show favorable variances. D. Fixed costs would show unfavorable variances.

The nursing station on the fourth floor of Central Hospital is responsible for the care of orthopedic surgery patients. The costs of prescription drugs administered by the nursing station to patients should be classified as: A. direct patient costs. B. indirect patient costs. C. overhead costs of the nursing station. D. period costs of the hospital.

When sales are constant, but the number of units produced fluctuates, net operating income determined by the absorption costing method will: A. tend to fluctuate in the same direction as fluctuations in the number of units produced. B. tend to remain constant. C. tend to fluctuate in the opposite direction as fluctuations in the number of units produced. D. fluctuate without any relation to the number of units produced.

Which of the following would be classified as a prevention cost on a quality cost report? A. Quality improvement projects. B. Disposal of defective products. C. Depreciation of test equipment. D. Final product testing and inspection.

Which of the following would be classified as an internal failure cost on a quality cost report? A. Re-entering data because of keying errors. B. Final product testing and inspection. C. Supplies used in testing and inspection. D. Depreciation of test equipment.

1) The purpose of the budgeted cash flows statement is to: 1) _______ A) explain what caused the actual change in cash B) explain what is expected to cause the estimated change in cash C) None of these answers is correct. D) estimate the sales revenue for the upcoming accounting period

1) The reaction of costs to changes in levels of business activity is called: 1) _______ A) semi-variable cost tracking B) cost behavior C) managerial decision behavior D) marketing mix

10) A banker would likely find the financial information about a company that he uses to: 10) ______ A) have a future orientation B) be highly summarized C) have few if any rules D) be set on an as-needed time line

10) Activities that are outside of a relevant range: 10) ______ A) None of these answers is correct. B) affect both fixed and variable costs C) have minimal impact on the company or its costs D) affect neither fixed nor variable costs

10) The Spring Hill Community Center is trying to decide whether or not to purchase a jukebox. The following information has been obtained: Initial outlay $10,500 Annual cash inflow $4,000 Estimated useful life 5 years Residual value $ 0 What is the accounting rate of return? 10) ______ A) 40% B) 18% C) 10% D) 20%

10) The evaluation of a profit center is based upon: 10) ______ A) only sales dollars generated B) the profit for the segment C) only the amount of cost incurred D) the return on the assets

11) If a manager is evaluated on his or her ability to control expenses and generate revenue, then the manager is probably responsible for a(n): 11) ______ A) revenue center B) profit center C) investment center D) cost center

11) Managers who are able to incorporate budget preparation into their routine work schedules are probably using the: 11) ______ A) incremental budgeting approach B) perpetual budgeting approach C) imposed budgeting approach D) zero-based budgeting approach

12) An example of a profit center would be: 12) ______ A) a company's personnel department B) a college bookstore C) an assembly department D) the accounting department for a company

12) Instead of plotting mixed cost data manually: 12) ______ A) the high-low method can be used to automatically plot the data B) Excel can be used C) Microsoft DataGraph can be used D) None of these answers is correct.

12) The main difference between a contribution income statement and a functional income statement is that the contribution income statement classifies costs as: 12) ______ A) product and mixed B) fixed and variable C) period and fixed D) product and period

13) A cost that changes in total proportionately with changes in the level of activity is a: 13) ______ A) period cost B) variable cost C) fixed cost D) mixed cost

13) When a cost is incurred that benefits all segments and that cost remains stable at any level of activity, the cost is known as a: 13) ______ A) direct fixed cost B) common fixed cost C) traceable fixed cost D) common variable cost

13) Which of the following would likely be classified as a profit center? 13) ______ A) an in-house computer maintenance department for a merchandiser B) a bakery and deli department in a grocery store C) an accounting department at a hospital D) a personnel department at an insurance company

14) A business segment that is evaluated based on the profit generated relative to the assets employed by the segment is known as a(n): 14) ______ A) revenue center B) investment center C) cost center D) profit center

15) Financial accounting information should have: 15) ______ A) a schedule estimating future revenues and costs of the company B) predictive value C) a forward-looking orientation D) a schedule of income and expenses by product line

15) The manager of an investment center should strive to maximize profit and: 15) ______ A) minimize revenue B) minimize investment C) maximize cost D) maximize investment

16) The formula used to find the contribution margin is: 16) ______ A) sales - cost of goods sold B) sales - variable costs C) sales - fixed costs D) sales - gross profit

17) The amount that a product provides to cover fixed costs and profit is known as the product's: 17) ______ A) gross margin B) contribution margin C) variable costs D) gross profit

18) One method used to separate the components of mixed costs may use a time-and-motion study as part of its approach. This method is known as: 18) ______ A) the high-low method B) the engineering approach C) regression analysis D) scatter graphing

19) When using a graph, the dependent variable is plotted: 19) ______ A) using the index on the x axis B) using the index on the y axis C) in monetary terms only D) using coordinates

2) The income statement that classifies cost by their behavior is called the: 2) _______ A) cash-basis income statement B) contribution income statement C) single-step income statement D) functional income statement

20) The budget approach where the initial budget is prepared by the lower-level managers and employees is the: 20) ______ A) top-down B) bottom-up C) incremental D) imposed

20) Using another firm to make a product or part of a product, rather than making it internally, is an example of: 20) ______ A) special ordering B) outsourcing C) relevant costing D) opportunity costing

29. The term gross margin is used in reports prepared using: A. both absorption costing and variable costing. B. absorption costing but not variable costing. C. variable costing but not absorption costing. D. neither variable costing nor absorption costing.

3) A factor that can be measured by numbers is called a(n): 3) _______ A) irrelevant factor B) quantitative factor C) relevant factor D) qualitative factor

3) A manager who would like information regarding all of the expected cash resources for the period should analyze the: 3) _______ A) budgeted income statement B) budgeted cash flow statement C) budgeted balance sheet D) cash sales budget

3) In cost and management accounting, the term "business activity" means: 3) _______ A) activities which only impact a company's management accounting B) almost anything happening in a business C) activities which only generate revenue for a company D) None of these answers is correct.

3) The income statement which classifies costs into product and period categories is known as the: 3) _______ A) contribution income statement B) functional income statement C) variable income statement D) direct income statement

4) A company invests in a new office building. This is generally known as a: 4) _______ A) strategic planning reality B) capital project C) None of these answers is correct. D) capital budget

4) A typical example of a quantitative factor is: 4) _______ A) customer satisfaction B) the purchase price of a new machine C) employee morale D) product quality

4) An equation used to determine the components of mixed cost is: 4) _______ A) total mixed cost = fixed cost element - variable cost element B) total mixed cost = fixed cost element + variable cost element C) total cost = fixed cost + variable cost D) mixed cost = total cost - variable cost

4) The internal rate of return is also known as the: 4) _______ A) payback period B) time-adjusted rate of return C) accounting rate of return D) Answers A and B are correct.

4) The manager of a cost center is evaluated on: 4) _______ A) the sales dollars generated B) his or her ability to control costs C) the return on the assets D) the profit of the segment

6) A drawback to using the high-low method is that this method is based on: 6) _______ A) mathematical calculations B) only two data points at opposite extremes C) activity D) costs

6) If the sales budget is changed, then: 6) _______ A) only the budgeted statement of cash flows will change B) the budgeted income statement and balance sheet will change C) some of the budget schedules will change, but none of the budgeted financial statements will change D) none of the other budgets or budget schedules will change

7) Another term used for regression analysis is: 7) _______ A) the engineering approach B) the least-squares method C) scatter graphing D) the high-low method

7) The key element of a contribution income statement is that costs are separated into: 7) _______ A) product and period B) fixed and variable C) product and fixed D) variable and period

8) The core purpose of an organization is expressed in its: 8) _______ A) profit B) goals C) operations D) budgets

8) The income statement format that is well-suited for presenting segment information is the: 8) _______ A) multiple-step income statement format B) contribution income statement format C) functional income statement format D) None of these answers is correct.

8) The type of income statement not allowed for external use under GAAP is known as the: 8) _______ A) full-costing income statement B) contribution income statement C) functional income statement D) absorption income statement

8) When the scatter graph method is compared with the high-low method, the fixed and variable costs will be: 8) _______ A) identical B) somewhat different C) extremely different D) None of these answers is correct.

9) A cost that supports a single business segment of a company is called a(n): 9) _______ A) common fixed cost B) direct fixed cost C) indirect variable cost D) indirect fixed cost

9) Activities that are outside of the relevant range: 9) _______ A) only impact variable costs in a business setting B) can still affect costs in a business setting C) only affect fixed costs in a business setting D) do not affect costs in a business setting

9) When the firm has a customer that makes a manufacturing request that is outside the scope of the normal business activity of the firm, it is critical that: 9) _______ A) the firm analyzes its sunk costs involved in completing the order B) the firm treats fixed costs properly C) the firm adheres to its normal pricing policies D) the firm treats variable costs as if they were fixed costs

All of the following costs would be found in a company's accounting records except: A. sunk cost. B. opportunity cost. C. indirect costs. D. direct costs.

Emco Company uses direct labor cost as a basis for computing its predetermined overhead rate. In computing the predetermined overhead rate for last year, the company misclassified a portion of direct labor cost as indirect labor. The effect of this misclassification will be to: A. understate the predetermined overhead rate. B. overstate the predetermined overhead rate. C. have no effect on the predetermined overhead rate. D. cannot be determined from the information given.

For performance evaluation purposes, the variable costs of a service department should be charged to operating departments using:� A.�the actual variable rate and the budgeted level of activity for the period. B.�the budgeted variable rate and the actual level of activity for the period. C.�the budgeted variable rate and the budgeted level of activity for the period. D.�the actual variable rate and the peak-period or long-run average servicing capacity.

Fresh Wreath Corporation manufactures wreaths according to customer specifications and ships them to customers using United Parcel Service (UPS). Which two terms below describe the cost of shipping these wreaths? A. variable cost and product cost B. variable cost and period cost C. fixed cost and product cost D. fixed cost and period cost

An investment project with a project profitability index of less than one should ordinarily be rejected. True False

Charges for service department costs to operating departments should be based on the actual variable costs and the budgeted fixed costs of the service department. t/f

For capital budgeting decisions, the simple rate of return method is superior to the net present value method t/f

For performance evaluation purposes, any variance over budgeted fixed costs in a service department should be charged to the departments that use the service. t/f

If the internal rate of return exceeds the required rate of return for a project, then the net present value of that project is negative. True False

In calculating the payback period where new equipment is replacing old equipment, any salvage value to be received on disposal of the old equipment should be added to the cost of the new equipment t/f

In the payback method, depreciation is deducted from net operating income when computing the annual net cash flow. t/f

Joint costs are relevant in the decision to sell a product at the split-off point or to process the product further. True False

One way to increase the effective utilization of a bottleneck is to put less emphasis on preventing defects and simply discard defective units at final inspection before sending them to customers. True False

Service department costs should not be separated into fixed and variable costs when charging operating departments for their services. t/f

The internal rate of return is computed by finding the discount rate that maximizes the difference between the present value of a project's cash outflows and the present value of its cash inflows. t/f

The present value of a cash flow will never be less than the future dollar amount of the cash flow. . True False

The split-off point in a process that produces joint products is the point in the manufacturing process at which the joint products are sent to separate customers. True False

The term joint cost is used to describe the costs incurred after the split-off point in a process involving joint products. True False

When a company has a production constraint, total contribution margin will be maximized by emphasizing the products with the lowest contribution margin per unit of the constrained resource. True False

When discounted cash flow methods of capital budgeting are used, the working capital required for a project is ordinarily counted as a cash inflow at the beginning of the project and as a cash outflow at the end of the project. True False

when making preference decisions about competing investment proposals, the internal rate of return is superior to the project profitability index. t/f

Eliminating nonproductive processing time is particularly important in work stations that do not contain bottlenecks. True False

f eliminating processing time can potentially cause a bottleneck

A capital budgeting project's incremental net income computation for purposes of determining incremental tax expense does not include immediate cash outflows for initial investments in equipment. . True False

An investment project with a project profitability index of -0.05 has an internal rate of return that is less than the discount rate. t/f

Ideally, the base selected for charging a service department's costs to operating departments should be whatever drives those costs t/f

If a project does not have constant incremental revenues and expenses over its useful life, the simple rate of return will fluctuate from year to year. True False

One criticism of the payback method is that it ignores cash flows that occur after the payback point has been reached. t/f

Preference decisions follow screening decisions and seek to rank investment proposals in order of their desirability t/f

The basic premise of the payback method is that the more quickly the cost of an investment is recovered the more desirable is the investment. True False

The higher the discount rate, the lower the present value of a given future cash flow. . True False

The internal rate of return method assumes that the cash flows generated by the project are immediately reinvested elsewhere at a rate of return that equals the internal rate of return. t/f

The investment in working capital at the start of an investment project can not be deducted from revenues when computing taxable income. . True False

The payback method of making capital budgeting decisions does not give full consideration to the time value of money. t/f

The present value of a given amount increases as the number of years over which it is to be discounted decreases. . True False

The project profitability index is used to compare the net present values of two investments that require different amounts of investment funds. t/f

The release of working capital at the end of an investment project is not a taxable cash inflow. . True False

The required rate of return is the minimum rate of return that an investment project must yield to the acceptable. t/f

The simple rate of return method does not take into account the time value of money. t/f

Unless the organization is tax-exempt, income taxes should be considered when using net present value analysis to make capital budgeting decisions. . True False

Using process costing, it is necessary to consider the stage of completion of the units when assigning conversion cost to partially completed units in the ending work in process inventory. True False

When cash flows are uneven and vary from year to year, the net present value method is easier to use than the internal rate of return method. True False

When using internal rate of return to evaluate investment projects, if the internal rate of return is greater than the required rate of return, the project should be accepted. t/f

In a factory operating at capacity, not every machine and person should be working at the maximum possible rate. True False

t The maximum possible rate is the tipping point. Too risky.

The simple rate of return in any one year may be less than or greater than the internal rate of return of a project. t/f

t giveaway: less than or greater than

The salvage value of new equipment should be considered when using the internal rate of return method to evaluate a project. t/f

t irr involves cash inflows and salvage value is a cash inflow

In preference decision situations, a project with a lower net present value may be preferable to a project with a higher net present value. t/f

t keywords: may be, not is always a lower net present value is less profitable but as long as both values are positive they are profitable.

Defective units should be detected and scrapped or reworked before the bottleneck operation rather than after it. True False

true

George Corporation has no beginning inventory and manufactures a single product. If the number of units produced exceeds the number of units sold, then net operating income under the absorption method for the year will: A. be equal to the net operating income under variable costing. B. be greater than the net operating income under variable costing. C. be equal to the net operating income under variable costing plus total fixed manufacturing costs. D. be equal to the net operating income under variable costing less total fixed manufacturing costs.

Indirect labor is a(n): A. Prime cost. B. Conversion cost. C. Period cost. D. Opportunity cost.

Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is:� A.�Residual income can be computed without having to measure operating assets. B.�Managers are more likely to accept projects that are beneficial to the company. C.�ROI does not take into account both turnover and margin. D.�A minimum rate of return does not have to be specified when the residual income approach is used.

Overapplied manufacturing overhead means that: A. the applied manufacturing overhead cost was less than the actual manufacturing overhead cost. B. the applied manufacturing overhead cost was greater than the actual manufacturing overhead cost. C. the estimated manufacturing overhead cost was less than the actual manufacturing overhead cost. D. the estimated manufacturing overhead cost was less than the applied manufacturing overhead cost.

The budget or schedule that provides necessary input data for the direct labor budget is the: A. raw materials purchases budget. B. production budget. C. schedule of cash collections. D. cash budget.

The cash budget must be prepared before you can complete the: A. production budget. B. budgeted balance sheet. C. raw materials purchases budget. D. schedule of cash disbursements.

The costs of the Accounting Department at Central Hospital would be considered by the Surgery Department to be: A. direct costs. B. indirect costs. C. incremental costs. D. opportunity costs.

The materials purchase budget: A. is the beginning point in the budget process. B. must provide for desired ending inventory as well as for production. C. is accompanied by a schedule of cash collections. D. is completed after the cash budget.

The net present value and internal rate of return methods of capital budgeting are superior to the payback method because they:� A.�are easier to implement. B.�consider the time value of money. C.�require less data. D.�reflect the effects of depreciation and income taxes.

The principal difference between variable costing and absorption costing centers on: A. whether variable manufacturing costs should be included in product costs. B. whether fixed manufacturing costs should be included in product costs. C. whether fixed manufacturing costs and fixed selling and administrative costs should be included in product costs. D. whether selling and administrative costs should be included in product costs.

The variance that is usually most useful in assessing the performance of the purchasing department manager is: A. the materials quantity variance. B. the materials price variance. C. the labor rate variance. D. the labor efficiency variance.

There are two acceptable methods for closing out any balance of underapplied or overapplied manufacturing overhead. One method involves allocation of the balance among several accounts, whereas the other closes any balance directly to: A. Finished Goods inventory. B. Cost of Goods Sold. C. Cost of Goods Manufactured. D. Work in Process inventory.

When production exceeds sales and the company uses the LIFO inventory flow assumption, the net operating income reported under absorption costing generally will be: A. less than net operating income reported under variable costing. B. greater than net operating income reported under variable costing. C. equal to net operating income reported under variable costing. D. higher or lower because no generalization can be made.

When using data from a segmented income statement, the dollar sales for the company to break even overall is equal to: A. (Allocated fixed expenses + Traceable fixed expenses) / Overall CM ratio B. (Traceable fixed expenses + Common fixed expenses) / Overall CM ratio C. (Non-traceable fixed expenses + Common fixed expenses) / Overall CM ratio D. (Traceable fixed expenses) / Overall CM ratio

Which of the following would be classified as an internal failure cost on a quality cost report? A. Supervision of testing and inspection activities. B. Re-entering data because of keying errors. C. Cost of field servicing and handling complaints. D. Depreciation of test equipment.

Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table? A. The amount paid to the individual who stains the table. B. The commission paid to the salesperson who sold the table. C. The cost of glue used in the table. D. The cost of the wood used in the table.

Discretionary fixed costs: A. have a planning horizon that covers many years. B. may be reduced for short periods of time with minimal damage to the long-run goals of the organization. C. cannot be reduced for even short periods of time without making fundamental changes. D. are most effectively controlled through the effective utilization of facilities and organization.

B A discretionary cost is a cost or capital expenditure that can be curtailed or even eliminated in the short term without having an immediate impact on the short-term profitability of a business.

Within the relevant range: A. variable cost per unit decreases as production decreases. B. fixed cost per unit increases as production decreases. C. fixed cost per unit decreases as production decreases. D. variable cost per unit increases as production decreases.

B per unit

1) A part of the company managed by a particular individual is called a(n): 1) _______ A) centralized management B) business partition C) business segment D) expense segment

1) Which of the following should not be used to rank acceptable capital projects? 1) _______ A) Any of these methods can be used to rank acceptable projects. B) internal rate of return C) net present value D) profitability index

10) A traceable fixed cost which only supports a single segment is also known as a(n): 10) ______ A) common variable cost B) indirect fixed cost C) direct fixed cost D) common fixed cost

10) One disadvantage of perpetual budgeting is that: 10) ______ A) it spreads the workload for budget preparation evenly over the year B) the budget always extends 12 months into the future C) it makes the budgeting process a routine (just a few forms to fill out) matter D) There are no disadvantages to the perpetual budgeting technique.

11) A method used to separate a mixed cost using experts or other professionals that are familiar with technical aspects of the activity and associated costs is the: 11) ______ A) regression analysis B) scatter graphing C) engineering approach D) high-low method

11) An example of a nonfinancial goal of an organization is: 11) ______ A) to cut costs by one-third in the next year B) to increase profits next year C) to recruit 30 new highly qualified workers D) None of these answers is correct.

12) A cost which contains elements of both fixed and variable costs is known as a: 12) ______ A) period cost B) total cost C) mixed cost D) product cost

13) The budgeting approach which takes the firm's actual results to build the new budget is called: 13) ______ A) zero-based budgeting B) perpetual budgeting C) incremental budgeting D) imposed budgeting

13) What software program can be used to plot mixed cost data? 13) ______ A) Microsoft DataGraph B) High/Low Simulation C) Excel D) None of these answers is correct.

14) An advantage to using the incremental budgeting approach is that: 14) ______ A) last year's unnecessary costs may be rolled into next year's budget B) it is zero-based C) it is simple D) it is prepared on a perpetual basis

14) The behavior of a variable cost is the opposite of the behavior of a: 14) ______ A) period cost B) mixed cost C) fixed cost D) liquid cost

15) Mathematically, after all variable costs have been subtracted from sales, the remaining amount is called: 15) ______ A) gross margin B) fixed costs C) contribution margin D) gross profit

15) What software program can be used to plot mixed cost data? 15) ______ A) Microsoft PowerPoint B) Microsoft Word C) Microsoft Excel D) None of these answers is correct.

16) "Earning a reasonable return for stockholders" would be considered: 16) ______ A) only a nonfinancial goal B) part of the annual capital budgeting plan C) only a financial goal D) either a financial or nonfinancial goal

16) An alternative to the incremental budgeting approach is the: 16) ______ A) perpetual approach B) imposed approach C) zero-based approach D) continual approach

16) An example of a fixed cost related to delivery activity is: 16) ______ A) rent on a factory building B) the salary of the vice president of sales C) vehicle insurance D) depreciation on a factory building

16) In the basic mathematical regression equation, the Y represents: 16) ______ A) activity level B) unit variable cost C) total cost D) fixed cost

18) In the basic mathematical regression equation, the "b" represents: 18) ______ A) fixed cost B) total cost C) unit variable cost D) activity level

18) The "long-range" budget is also referred to as the: 18) ______ A) capital budget B) extended forecast C) strategic plan D) operating budget

18) The key amount found on the contribution income statement that would be available to cover fixed costs and profits for a business is the: 18) ______ A) sales dollars B) gross margin C) contribution margin D) variable costs

18) Tom's Gear Products decides to buy its clutch part AT53 from a Chinese supplier. Tom's is said to be __________ the clutch part. 18) ______ A) special ordering B) opportunity costing C) outsourcing D) relevant costing

19) After all __________ costs have been covered by the firm's sales, the amount remaining is the called the __________. 19) ______ A) fixed; gross margin B) variable; gross profit C) variable; contribution margin D) cost of goods sold; contribution margin

2) Long-lived expensive assets are commonly known as: 2) _______ A) long-term depreciation B) strategic assets C) capital projects D) capital budgets

2) The equation to determine total costs is: 2) _______ A) total costs = variable cost - fixed cost B) total cost + fixed cost = variable cost C) total costs = fixed cost + variable cost D) total costs = fixed cost - variable cost

2) Which of the following would not be considered a business segment? 2) _______ A) a product line B) a geographic region C) the entire firm D) a business function

20) When working with mixed costs, the total variable costs in the regression equation are represented by: 20) ______ A) a B) Y C) bX D) b

3) The method used to separate mixed costs that uses only two data points (even if more reliable points are available) is called: 3) _______ A) the engineering approach B) scatter graphing C) the high-low method D) regression analysis

33. Managers will often allocate common fixed expenses to business segments because: A. this is required by law. B. not allocating these costs will lead to bad decisions. C. they believe this practice will ensure that the company's common fixed expenses are covered. D. they do not want the sum of the business segment margins to equal the net operating income for the company.

4) An accountant would use which formula to find the amount of fixed costs? 4) _______ A) Total costs - fixed costs B) Total costs / variable costs C) Total costs - variable costs D) Variable costs / total costs

4) Costs that remain the same in total regardless of the level of business activity are called: 4) _______ A) variable costs B) frozen costs C) fixed costs D) sunk costs

43. If the level of activity increases within the relevant range: A. variable cost per unit and total fixed costs also increase. B. fixed cost per unit and total variable cost also increase. C. total cost will increase and fixed cost per unit will decrease. D. variable cost per unit and total cost also increase.

47. When the level of activity decreases, variable costs will: A. increase per unit. B. increase in total. C. decrease in total. D. decrease per unit.

7) Fixed costs are costs that __________ in total, but __________ as the business activity level changes. 7) _______ A) fluctuate; are relatively stable B) change; remain fixed per unit C) remain constant; change per unit D) None of these answers is correct.

7) The offices of Smith and Smith, civil engineers, are considering a new drafting machine. The machine will cost $59,000 and generate cost saving of $8,895 the first 2 years, $10,500 the next two years and then $12,000 the next three. What is the payback period? 7) _______ A) 8.00 years B) 6.25 years C) 5.68 years D) 5.16 years

8) A customer has approached Stacy Sexton Company about manufacturing something outside of Sexton's normal business activities. Sexton would consider the request a(n): 8) _______ A) outsourcing B) sunk cost C) special order D) opportunity cost

8) Accounting information which addresses specific company issues is known as: 8) _______ A) financial accounting information B) information prepared according to GAAP C) management accounting information D) general-purpose information

8) When a cost no longer holds to its cost behavior pattern, the activity may be: 8) _______ A) a fixed cost B) an indeterminable cost C) outside the relevant range D) a mixed cost

All of the following would be classified as product costs except: A. property taxes on production equipment. B. insurance on factory machinery. C. salaries of the marketing staff. D. wages of machine operators.

If a portion of the actual cost incurred by a service department is not charged to operating departments, then at the end of the period, this uncharged cost should be: A.allocated equally between the other departments. B.allocated between the other departments in proportions to budgeted activity. C.treated as a variance of the service department. D.treated as a variance of the other departments.

In a manufacturing company, direct labor costs combined with direct materials costs are known as: A. period costs. B. conversion costs. C. prime costs. D. opportunity costs.

In describing the cost equation, Y = a + bX, "a" is: A. the dependent variable cost. B. the independent variable the level of activity. C. the total fixed cost. D. the variable cost per unit of activity.

Inventoriable costs are also known as: A. variable costs. B. conversion costs. C. product costs. D. fixed costs.

The concept of responsibility accounting means that: A. Budgetary data should be reviewed and approved by the budget committee. B. Budgetary data should be reviewed and approved by all levels of management. C. An employee's performance should be evaluated only on those items under his or her control. D. An employee's performance should be evaluated only by his or her immediate supervisor.

The excess or deficiency of cash available over disbursements on the cash budget is calculated as follows: A. The beginning balance less the expected cash receipts less the expected cash disbursements. B. The cash available less the expected cash receipts plus the expected cash disbursements. C. The beginning balance plus the expected cash receipts less the expected cash disbursements. D. None of the above.

The master budget process usually begins with the: A. production budget. B. operating budget. C. sales budget. D. cash budget.

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget? A. It details the required direct labor hours. B. It details the required raw materials purchases. C. It is calculated based on the sales budget and the desired ending inventory. D. It summarizes the costs of producing units for the budget period.

Which of the following is an example of a cost that is variable with respect to the number of units produced? A. Rent on the administrative office building. B. Rent on the factory building. C. Direct labor cost, where the direct labor workforce is adjusted to the actual production of the period. D. Salaries of top marketing executives.

Which of the following is not a benefit of budgeting? A. It uncovers potential bottlenecks before they occur. B. It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts. C. It ensures that accounting records comply with generally accepted accounting principles. D. It provides benchmarks for evaluating subsequent performance.

Which of the following would be an argument for the use of net book value in the computation of operating assets in return on investment calculations?� A.�It allows the manager to replace old, worn-out equipment with a minimum adverse impact on ROI. B.�It allows ROI to decrease over time as assets get older. C.�It is consistent with how plant and equipment items are reported on the balance sheet. D.�It eliminates both age of equipment and method of depreciation as factors in ROI computations.

Which of the following would be classified as an appraisal cost on a quality cost report? A. Quality circles. B. Downtime caused by quality problems. C. Supplies used in testing and inspection. D. Quality engineering

Which of the following would produce a materials price variance? A. An excess quantity of materials used. B. An excess number of direct labor-hours worked in completing a job. C. Shipping materials to the plant by air freight rather than by truck. D. Breakage of materials in production.

46. Stott Company requires one full-time dock hand for every 500 packages loaded daily. The wages for these dock hands would be: A. variable. B. mixed. C. step-variable. D. curvilinear.

C A step variable cost is a cost that generally varies with the level of activity, but which tends to be incurred at certain discrete points and to involve large changes in amounts when such a point is reached. Conversely, a truly variable cost will vary continually and directly in concert with the level of activity. 1 step equals 500 packages. only variable if wages inc w/ each package

Which of the following would be classified as a prevention cost on a quality cost report? A. Technical support provided to suppliers. B. Rework labor and overhead. C. Net cost of scrap. D. Debugging software errors.

C http://www.accountingdetails.com/quality_costs.htm this website contradicts this question I believe it is D

1) The business segment where the manager is charged with responsibilities limited to controlling expenditures and keeping production output high is a(n): 1) _______ A) profit center B) investment center C) cost center D) revenue center

C its job is to limit costs while not decreasing productivity

9) The mathematical formula method to separate mixed costs that uses all the data points available is called: 9) _______ A) the high-low method B) scatter graphing C) regression analysis D) the engineering approach

C keywords: mathematical formula

1) An income statement that classifies costs as product costs and period costs is a: 1) _______ A) multiple-step income statement B) functional income statement C) single-step income statement D) Answers A and B are correct.

1) Traditionally, financial accounting information has focused primarily on: 1) _______ A) efficiency B) product and service quality C) productivity D) profitability

10) The objectives of a firm that constitute its core beliefs and values are known as the firm's: 10) ______ A) capital budget B) strategic plan C) operating budget D) organization goals

11) A fixed cost that supports more than one business segment is called a(n): 11) ______ A) manufacturing fixed cost B) traceable fixed cost C) direct fixed cost D) indirect fixed cost

11) The Spring Hill Community Center is trying to decide whether or not to purchase a jukebox. The following information has been obtained: Initial outlay $15,600 Annual cash inflow $ 6,000 Estimated useful life 3 years Residual value $ 3,000 What is the accounting rate of return? 11) ______ A) 13.3% B) 40.0% C) 30.0% D) 11.5%

11) The most mathematically complex method used for separating mixed costs is: 11) ______ A) scatter graphing B) engineering approach C) high-low method D) regression analysis

12) A common fixed cost which supports more than one business segment is known as a(n): 12) ______ A) common variable cost B) traceable fixed cost C) direct fixed cost D) indirect fixed cost

12) One criterion of financial accounting information is that it must: 12) ______ A) deal with individual divisions B) contain only future data C) be available as users need it D) be prepared according to GAAP

12. The cost of warranty repairs would be classified as a(n): A. prevention cost. B. appraisal cost. C. internal failure cost. D. external failure cost.

13) One characteristic that is unique to management accounting is that it: 13) ______ A) follows GAAP B) focuses on past information C) deals with the entire firm D) has few rules

13) The engineering approach to cost identification relies heavily on the use of: 13) ______ A) visual graphs B) mathematical equations C) formulas D) technical experts and professionals

13) The main difference between a contribution income statement and a functional income statement is that the functional income statement does not classify costs as: 13) ______ A) product and mixed B) period and fixed C) product and period D) fixed and variable

13) When determining whether a special order should be accepted, costs that are included in the evaluation are: 13) ______ A) all production costs including both fixed and variable B) only fixed production costs C) only variable production costs D) only future costs that would change as production increases for the order

14) A company is deciding whether to close a neighborhood retail store. Which consideration below is not a qualitative factor in such a decision? 14) ______ A) company reputation B) employee morale at the other stores C) customer satisfaction D) profit margin of the store under consideration

14) One characteristic that is unique to financial accounting is that it: 14) ______ A) focuses on the future B) has few rules C) is presented by product line D) is governed by GAAP

15) A business decision may affect many nonfinancial areas. When deciding whether to close a factory, one nonfinancial area which should be considered is: 15) ______ A) outsourcing costs B) reduced production costs C) overall company gross profit D) employee morale at existing facilities

15) For most businesses, the primary nonfinancial goal is to: 15) ______ A) retain quality employees B) promote a nondiscriminatory work environment C) earn a profit D) There is no one primary nonfinancial goal for most businesses.

15) One way to determine if a cost is a common or direct cost of a business segment is to determine: 15) ______ A) if the cost is a capital or revenue expenditure B) if the cost is material or immaterial to the segment C) whether the cost will continue if the company downsizes D) whether the cost will continue if the segment were to disappear

15) The method used to separate the components of a mixed cost that relies on the plotting of data points is known as the: 15) ______ A) engineering approach B) regression analysis C) high-low method D) scatter graphing

15) Which of the following is not an example of a fixed cost? 15) ______ A) factory insurance cost B) depreciation on a factory building C) monthly store rent D) All of these answers are examples of fixed costs.

16) The purchasing of services, products, or components rather than producing them is known as: 16) ______ A) opportunity costing B) relevant costing C) special ordering D) outsourcing

17) An example of a fixed cost related to sales activity is: 17) ______ A) depreciation on production equipment B) rent on a factory building C) vehicle insurance D) the salary of the vice president of sales

17) Decision makers considering whether to make or buy components must pay close attention to __________ because they may or may not be relevant. 17) ______ A) opportunity costs B) variable costs C) both fixed and variable costs D) fixed costs

17) The mixed cost separation method that relies on visually plotting a line through data points is called: 17) ______ A) high-low method B) regression analysis C) engineering approach D) scatter graphing

17) The planning of day-to-day business activities is a key element of : 17) ______ A) organization goals B) the capital budget C) the strategic plan D) the operating budget

18) The budget approach which is based on the assumption that upper management is most knowledgeable about the overall operations of the firm is known as: 18) ______ A) bottom-up B) zero-based C) incremental D) top-down

18) Which of the following is not an example of a variable cost? 18) ______ A) Gasoline for delivery vehicles B) Direct labor C) Direct material D) All of these answers are examples of variable costs.

19) Which of the following is an example of a variable cost related to sales activity? 19) ______ A) monthly retail store rent B) sales salaries C) direct material D) sales commissions

2) A business segment which provides services to the company or its customers, but that does not directly contribute revenues to the company, is called a(n): 2) _______ A) revenue center B) profit center C) investment center D) cost center

2) A method used to separate the components of mixed costs by looking at the two extreme activity levels is called: 2) _______ A) scatter graphing B) the engineering approach C) regression analysis D) the high-low method

2) The percentage return calculated for a proposed capital project is called the: 2) _______ A) payback period B) net present value C) profitability index D) internal rate of return

2) Traditionally, management accounting information has focused primarily on: 2) _______ A) solvency B) liquidity C) profitability D) productivity

20) When using a graph, the independent variable is plotted: 20) ______ A) using coordinates B) using the index on the y axis C) only in terms of units D) using the index on the x axis

20) Which of the following is an example of a variable cost related to delivery activity? 20) ______ A) depreciation on delivery vehicles B) delivery vehicle insurance cost C) factory rent D) gasoline

3) A business segment may be established for a: 3) _______ A) geographic region B) product line C) department D) All of these answers are correct.

3) A significant difference between financial and management accounting information is that: 3) _______ A) no rules apply to financial accounting B) management accounting information must conform with GAAP C) users can define the format of financial accounting information D) financial accounting information must conform with GAAP

3) There are two methods used to evaluate capital projects that fail to consider the time value of money in their calculations. The two methods are: 3) _______ A) net present value and internal rate of return B) internal rate of return and payback period C) accounting rate of return and net present value D) payback period and accounting rate of return

3) When a business makes a significant expenditure for property, plant, and equipment it is called a(n): 3) _______ A) strategic plan B) operating capital investment C) capital budget item D) capital investment

34. When using data from a segmented income statement, the dollar sales for a segment to break even is equal to: A. Common fixed expenses / Unit CM B. Common fixed expenses / Segment CM ratio C. Traceable fixed expenses / Unit CM D. Traceable fixed expenses / Segment CM ratio

4) A change in any one of the budgets will probably: 4) _______ A) None of these answers is correct. B) result in the actual realization of less revenue for the accounting period C) have no material impact on the other budgets for the period D) impact the other budgets by causing a ripple effect

4) Segment reports: 4) _______ A) must include an abundance of information B) must be simple with little detail C) should only be prepared for a company based on its sales by product D) should be prepared based on management's need to know

4) Which one of the following is not a characteristic of management accounting? 4) _______ A) GAAP does not apply to management accounting. B) It is prepared for internal parties. C) Users can define the level of detail of accounting information. D) It is prepared for external users.

5) A company's planning and decision-making process for investing in property, plant, and equipment is known as: 5) _______ A) corporate strategic planning B) None of these answers is correct C) the operating budget D) capital budgeting

5) A cost that does not change as the level of business activity changes is a: 5) _______ A) variable cost B) semi-variable cost C) mixed cost D) fixed cost

5) A quantitative factor in a decision whether to buy a new house or keep the existing residence would be the: 5) _______ A) neighborhood school reputation B) control over location C) family morale during a move D) new house price and financing

5) One characteristic of management accounting information is its: 5) _______ A) limited amount of detailed information for users B) past focus and orientation C) conformity to GAAP D) future focus and orientation

5) Reports that provide information pertaining to a particular part of a company are called: 5) _______ A) residual income B) segment margins C) business segments D) segment reports

6) The management information that a production manager would likely use would: 6) _______ A) follow generally accepted accounting principles B) be set on a specific time line C) be highly summarized D) have a future orientation

6) Which of the following would likely be classified as a cost center? 6) _______ A) a pharmacy in a hospital B) a college bookstore at a university C) a lawn service business D) the accounting department of a hospital

7) A business segment where the manager is charged with managing revenues and expenses, but not the assets of the segment, is known as a(n): 7) _______ A) revenue center B) cost center C) investment center D) profit center

7) Because management accounting information is prepared for use by those working within the company, its users can question: 7) _______ A) the level of detail and validity of the information B) the meaning of the information C) the content of the information D) All of these answers are correct.

7) The budgeting approach where at any given point in time the budget projects for 12 months in the future is called a(n): 7) _______ A) zero-based budget B) imposed budget C) incremental budget D) perpetual budget

7) The process of capital budgeting determines: 7) _______ A) only when expenditures should be made for property, plant, and equipment B) only which expenditures should be made for property, plant, and equipment C) overall organization goals only D) Answers A and B are correct.

8) Alamosa Copier Services Company is considering a new high-speed copy machine. The copier will cost $60,000 and generate cost saving of $8,000 the first 2 years, $12,000 the next two years and then $10,000 the next three years. What is the payback period? 8) _______ A) 5.16 years B) 8.16 years C) 5.68 years D) 6.00 years

8) The budgeting approach where the budget is continually being updated is known as: 8) _______ A) continual budgeting B) a rolling budget C) perpetual budgeting D) All of these answers are correct.

9) Management accounting is used in all of the business planning process and it is especially important to: 9) _______ A) "the who" B) "the how" C) "the what" D) All of these answers are correct.

9) The method for evaluating capital investments which uses an income focus rather than cash flow is the: 9) _______ A) payback period B) internal rate of return C) net present value D) accounting rate of return

9) __________ costs change in total proportionately with changes in the level of business activity. 9) _______ A) Frozen B) Fixed C) Mixed D) Variable

Contribution income statements are used to measure the performance of:� A.�cost centers. B.�both cost centers and profit centers. C.�both cost centers and investment centers. D.�both profit centers and investment centers.

Contribution margin means: A. what remains from total sales after deducting fixed expenses. B. what remains from total sales after deducting cost of goods sold. C. the sum of cost of goods sold and variable expenses. D. what remains from total sales after deducting all variable expenses.

For performance evaluation purposes, any variance between budgeted fixed costs and actual fixed costs in a service department: A. should be allocated both to operating departments and to other service departments on the basis of usage. B. should be allocated to operating departments only on the basis of usage. C .should be allocated to other service departments only on the basis of usage. D. should be retained in the service department itself.

For planning, control, and decision-making purposes: A. fixed costs should be converted to a per unit basis. B. discretionary fixed costs should be eliminated. C. variable costs should be ignored. D. mixed costs should be separated into their variable and fixed components.

The cost of factory machinery purchased last year is: A. an opportunity cost. B. a differential cost. C. a direct materials cost. D. a sunk cost.

Throughput Time consists of:� A.�Process Time. B.�Inspection Time and Move Time. C.�Process Time, Inspection Time, and Move Time. D.�Process Time, Inspection Time, Move Time, and Queue Time.

Which of the following would be classified as a prevention cost on a quality cost report? A. Re-entering data because of keying errors. B. Rework labor and overhead. C. Net cost of scrap. D. Technical support provided to suppliers.

Which of the following would be classified as an external failure cost on a quality cost report? A. Depreciation of test equipment. B. Re-entering data because of keying errors. C. Rework labor and overhead. D. Liability arising from defective products.

An example of a discretionary fixed cost would be: A. taxes on the factory. B. depreciation on manufacturing equipment. C. insurance. D. research and development.

D A discretionary cost is a cost or capital expenditure that can be curtailed or even eliminated in the short term without having an immediate impact on the short-term profitability of a business. Eliminating res and dev only affects future profitability considering its focus is finding out how to inc profit

7) The segment margin represents the business segment's: 7) _______ A) revenues B) expenses C) gains D) income

D segment margin = all sales - all costs net income = revenues - expenses

2) The percentage return calculated for a proposed capital project is called the: 2) _______ A) payback period B) net present value C) profitability index D) internal rate of return

D the only rate of return

2. If direct labor-hours is used as the allocation base in a job-order costing system, but overhead costs are not caused by direct-labor hours, then jobs with high direct labor requirements will tend to be undercosted relative to jobs with low direct labor requirements.� True False

4. In order to equitably allocate costs in a process costing system, dissimilar products are restated in terms of equivalent units by weighting the number of units produced by their market values. True False

Depreciation on office equipment would be included in product costs. True False

In calculating cost per equivalent unit under the weighted-average method, prior period costs are not combined with current period costs. True False

Job cost sheets are used to record the costs of preparing routine accounting reports.� True False

Manufacturing salaries and wages incurred in the factory are period costs. True False

The "costs accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the cost of units transferred out. True False

The "costs to be accounted for" portion of the cost reconciliation report includes the cost of ending work in process inventory and the costs added during the period. True False

The sum of all amounts transferred from the Work in Process account to the Finished Goods account represents the Cost of Goods Sold for the period.� True False

Total variable cost is expected to remain unchanged as activity changes within the relevant range. True False

Under the weighted-average method, the equivalent units used to compute the unit costs of ending inventories relate only to work done during the current period. True False

When the predetermined overhead rate is based on direct labor-hours, the amount of overhead applied to a job is proportional to the estimated amount of direct labor-hours for the job.� True False

The cost categories that appear on a job cost sheet include selling expense, manufacturing expense, and administrative expense.� True False

F categories: direct materials, direct labor, man overhead giveaway: selling and administrative exp are usually one expense.

A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack. True False

FALSE

A common fixed cost is a fixed cost that supports more than one business segment and is traceable in whole or in part to at least one of the business segments. True False

FALSE

A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes. True False

FALSE

A disadvantage of vertical integration is that by pooling demand for parts from a number of companies, a supplier will face diseconomies of scale that result in lower quality and higher cost than if every company makes its own parts. True False

FALSE

A favorable spending variance occurs when the actual cost exceeds the amount of the cost in the static planning budget. True False

FALSE

A fixed cost cannot be a differential cost. True False

FALSE

A flexible budget cannot be used to estimate what costs should have been at a given level of activity. True False

FALSE

A flexible budget report should contain variable costs and mixed costs but not fixed costs. True False

FALSE

A flexible budget should not be used when making comparisons to actual results such as actual expenses. True False

FALSE

A product whose revenues do not cover the sum of its variable costs, its traceable fixed costs, and its allocated share of general corporate administrative expenses should usually be dropped. True False

FALSE

A vertically integrated company is more dependent on its suppliers than a company that is not vertically integrated. True False

FALSE

All other things being the same, a decrease in average operating assets will decrease return on investment (ROI). True False

FALSE

An activity variance is due to the difference between the level of activity used in the flexible budget and the actual level of activity. True False

FALSE

An avoidable cost is a cost that can be completely eliminated irrespective of whether one chooses one alternative or another in a decision. True False

FALSE

An unfavorable activity variance indicates that activity was too high for the amount of sales. True False

FALSE

Assuming the LIFO inventory flow assumption, if production is less than sales for the period, absorption costing net operating income will generally be greater than variable costing net operating income. True False

FALSE

Because absorption costing emphasizes costs by behavior, it works well with cost-volume-profit analysis. True False

FALSE

Budgets are used for planning rather than for control of operations. True False

FALSE

Contribution margin equals revenue minus all fixed costs. True False

FALSE

Direct materials is considered to be a product cost under variable costing but not absorption costing. True False

FALSE

Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled. True False

FALSE

Directly comparing static budget costs to actual costs only makes sense if the costs are variable. True False

FALSE

Discounted cash flow techniques do not take into account recovery of initial investment. True False

FALSE

Fixed costs should be ignored when evaluating how well a manager has controlled costs. True False

FALSE

Future costs that do not differ between the alternatives in a decision are avoidable costs. True False

FALSE

If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should not be considered a common cost. True False

FALSE

If sales volume decreases, and all other factors remain unchanged, the contribution margin ratio will decrease. True False

FALSE

In business, a budget is a method for putting a limit on spending. True False

FALSE

In companies that have "no lay-off" policies, the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate. True False

FALSE

In the cost reconciliation report under the FIFO method, the costs accounted for equals the cost of beginning work in process inventory plus the cost of units transferred out. True False

FALSE

In the cost reconciliation report under the FIFO method, the costs to be accounted for equals the cost of beginning work in process inventory plus the cost of units transferred out. True False

FALSE

In the cost reconciliation report under the FIFO method, the costs to be accounted for equals the cost of ending work in process inventory plus the cost of units transferred out. True False

FALSE

In the manufacturing overhead budget, the non-cash charges (such as depreciation) are added to the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead. True False

FALSE

In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units). True False

FALSE

Indirect materials are charged to specific jobs. True False

FALSE

Manufacturing overhead is overapplied if actual manufacturing overhead costs for a period are greater than the amount of manufacturing overhead cost that was charged to Work in Process. True False

FALSE

Margin equals net operating income divided by sales. True False

FALSE

Move time is considered value-added time t/f

FALSE

Net operating income is income after interest and taxes. True False

FALSE

On a cost-volume-profit graph, the revenue line will be shown below the total expense line for any activity level above the break-even point. True False

FALSE

One of the advantages of allocating common fixed costs to a product is that such allocations more accurately reflect the product's true profitability. True False

FALSE

One way to compute the total contribution margin is to deduct total fixed expenses from net operating income. True False

FALSE

Operating assets include cash, accounts receivable, and inventory but not any depreciable fixed assets. True False

FALSE

Planning involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change. True False

FALSE

Process Time is the only non-value-added component of Throughput Time t/f

FALSE

Process costing is used in those situations where many different products or services are produced each period to customer specifications. True False

FALSE

Queue time is considered value-added time t/f

FALSE

Residual income is the net operating income that an investment center earns above the minimum required return on the investment in fixed assets t/f

FALSE

Return on investment is superior to residual income as a means of measuring performance because it encourages managers to make investment decisions that are more consistent with the interests of the company as a whole. True False

FALSE

The "costs accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the costs added to production during the period. True False

FALSE

The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together. True False

FALSE

The beginning cash balance is not included on the cash budget because the cash budget deals exclusively with cash flows rather than with balance sheet amounts. True False

FALSE

The cash budget is developed from the budgeted income statement. True False

FALSE

The cash budget is typically prepared before the direct materials budget. True False

FALSE

The contribution format is widely used for preparing external financial statements. True False

FALSE

The direct materials budget is typically prepared before the production budget. True False

FALSE

The equivalent units of production will be the same under the weighted-average and the FIFO method if there is no ending work in process inventory. True False

FALSE

The first budget a company prepares in a master budget is the production budget. True False

FALSE

The impact on net operating income of a given dollar change in sales can be computed by multiplying the contribution margin by the dollar change in sales. True False

FALSE

The project profitability index is computed by dividing the present value of the cash inflows of the project by present value of the cash outflows of the project. True False

FALSE

The standard cost per unit is computed by dividing the standard quantity or hours by the standard price or rate. True False

FALSE

The use of a predetermined overhead rate in a job-order cost system makes it possible to compute the total cost of a job before production is begun. True False

FALSE

The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements. True False

FALSE

There is no difference in the unit costs computed under the weighted-average and FIFO methods of process costing if there are no ending work in process inventories. True False

FALSE

Under conventional absorption costing, the fixed costs associated with idle production capacity are not included as part of the product cost. True False

FALSE

When a company is involved in only one activity in the entire value chain, it is vertically integrated. True False

FALSE

When a flexible budget is used in performance evaluation, actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period. True False

FALSE

When a job is completed, the goods are transferred from the production department to the finished goods warehouse and the journal entry would include a debit to Work in Process. True False

FALSE

When preparing a materials purchase budget, desired ending inventory is deducted from total needs of the period to arrive at materials to be purchased. True False

FALSE

When the number of units in work in process and finished goods inventories decrease, absorption costing net operating income will typically be greater than variable costing net operating income. True False

FALSE

When viewed over the long term, cumulative net operating income will be the same for variable and absorption costing if ending inventories exceed beginning inventories. True False

FALSE

A quantity standard indicates how much output should have been produced. True False

FALSE A quantity standard is the amount of materials that should be used in the production of a single unit. ex. The QS to produce one shoe you need .5lbs of rubber, .5lbs of cloth Price standard is the price that should be paid for materials at a given level of activity.

The book value of old equipment is a relevant cost in a decision to replace that equipment. (Ignore taxes.) True False

FALSE A relevant cost would be one that is incurred if you replace the equipment and is avoidable if you do not. Book value of old equipment is not a cost if you replace the old equipment. If you decided to keep the old equipment, i believe the depreciation expense would be a relevant cost.

In a decision to drop a segment, the opportunity cost of the space occupied by the segment is the cost of renting or building similar space nearby. True False

FALSE OC is loss of potential gain, not loss of potential loss

A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be. True False

FALSE PLANNING BUDGET DOESNT EXIST

ROI and residual income are tools used to evaluate managerial performance in profit centers. t/f

FALSE PROFIT IS WHAT IS USED TO EVALUATE PROFIT CENTERS

Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control. True False

FALSE confused me because of a diff q but this assesses the spending variance. I think "variable" is trying to throw you off.

A cost that differs from one month to another is known as a differential cost. True False

FALSE differential cost- the difference between the cost of two alternative decisions, or of a change in output levels. The concept is used when there are multiple possible options to pursue, and a choice must be made to select one option and drop the others.

One assumption in CVP analysis is that the number of units produced and sold does not change. True False

FALSE it is literally a graph that compares varying amounts of units produced and how the varying amount of sales creates a net loss, break even point and net profit. http://www.myaccountingcourse.com/accounting-dictionary/images/cost-volume-profit-analysis-chart-example.png

A revenue variance is unfavorable if the actual revenue is less than the revenue in the static planning budget. True False

FALSE not sure why this is false

If direct labor-hours is used as the allocation base in a job order costing system, but overhead costs are not caused by direct-labor hours, then jobs with high direct labor requirements will tend to be undercosted relative to jobs with low direct labor requirements. True False

FALSE pohr=est. man ovrhd/allocation base estimated man ovrhd= pohr * allocation base high direct labor hours would result in a high estimate for manufacturing overhead and likely to be overcosted.

A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period. True False

FALSE static budget is sus

In a flexible budget performance report, actual costs should be compared to the flexible budget at the original budgeted activity level. True False

FALSE there is no "original budgeted activity level" a flexible budget changes as activity level increases.

Self-imposed budgets are those that are prepared by top management and then assigned to other managers within the organization. True False

FALSE they are prepared with the *full cooperation and participation of managers at all levels*

A disadvantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income. True False

FALSE this is an advantage

Commissions paid to salespersons are a variable selling expense. True False

Committed fixed costs represent organizational investments with a multi-year planning horizon that can't be significantly reduced even for short periods. True False

Costs are accumulated by department in a process costing system. True False

Country Charm Restaurant is open 24 hours a day and always has a fire going in the fireplace in the middle of its dining area. The cost of the firewood for this fire is fixed with respect to the number of meals served at the restaurant. True False

Depreciation expense on existing factory equipment is usually irrelevant in a decision of whether to accept or reject a special offer for a company's product. True False

In a job-order cost system, direct labor is assigned to a job using information from the employee time ticket.� True False

The cost of a completed job in a job-order costing system typically consists of the actual direct materials cost of the job, the actual direct labor cost of the job, and the manufacturing overhead cost applied to the job.� True False

The formula for computing the predetermined overhead rate is: Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total amount of the allocation base� �True False

The present value of an amount to be received in five years is greater than the present value of the same amount to be received in ten years. . True False

Variable costs are costs that vary, in total, in direct proportion to changes in the volume or level of activity. True False

When completed goods are sold, the transaction is recorded as a debit to Cost of Goods Sold and a credit to Finished Goods.� True False

1. Land held for possible plant expansion would not be included as an operating asset when computing return on investment (ROI). True False

TRUE

2. Under absorption costing, fixed manufacturing overhead is treated as a product cost. True False

TRUE

2. When used in return on investment (ROI) calculations, operating assets do not include investments in land held for future use and investments in other companies. True False

TRUE

A cost that is relevant in one decision may not be relevant in another decision. True False

TRUE

A cost that is traceable to a segment through activity-based costing may or may not be an avoidable cost for decision making. True False

TRUE

A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period. True False

TRUE

A job-order cost system would be used to account for the cost of building an oil tanker. True False

TRUE

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm. True False

TRUE

A self-imposed budget can be a very effective control device in an organization. True False

TRUE

A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels. True False

TRUE

All other things the same, an increase in total fixed expenses will increase the break-even point. True False

TRUE

An unfavorable activity variance for a variable cost occurs because the actual level of activity is higher than expected when the static planning budget was prepared. True False

TRUE

An unfavorable spending variance may reflect waste as well as paying too much for inputs. True False

TRUE

Any difference in the equivalent units calculated under the weighted-average and the FIFO methods is due to the units in the beginning work in process inventory. True False

TRUE

Assuming the LIFO inventory flow assumption, if production equals sales for the period, absorption costing and variable costing will produce the same net operating income. True False

TRUE

Both job-order and process costing systems use averaging to compute unit product costs. True False

TRUE

Budgets are used to plan and to control operations. True False

TRUE

Common fixed costs should not be charged to the individual segments when preparing a segmented income statement. True False

TRUE

Controllability has little to do with whether a cost is fixed or variable. True False

TRUE

Fixed costs may or may not be relevant in decisions about whether a product should be dropped. True False

TRUE

Fixed costs may or may not be sunk costs. True False

TRUE

Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes. True False

TRUE

If the FIFO cost method is used in a process costing system, costs in the beginning inventory are kept separate from current period costs. True False

TRUE

If the actual level of activity is 4% less than planned, then the variable costs in the static budget should be decreased by 4% before comparing them to actual costs. True False

TRUE

If the actual manufacturing overhead cost for a period exceeds the manufacturing overhead cost applied, then manufacturing overhead would be considered to be underapplied. True False

TRUE

If the expected level of activity is appreciably above or below the company's present capacity, it may be desirable to adjust fixed costs in the budget. True False

TRUE

In a decision to drop a product, the product should not be charged for factory rent if the space in which the product is produced has no alternative use and the rental payment is unavoidable. True False

TRUE

In computing the cost per equivalent unit, costs in the beginning work in process inventory are kept separate from current period costs when the FIFO method is used. True False

TRUE

In the selling and administrative budget, the non-cash charges (such as depreciation) are deducted from the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. True False

TRUE

In two companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be higher in the company with a higher proportion of fixed expenses in its cost structure. True False

TRUE

Incremental analysis is generally the most complicated and least direct approach to decision making. True False

TRUE

One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur. True False

TRUE

Operation costing is a hybrid system that employs certain aspects of both job-order and process costing. True False

TRUE

Opportunity costs are not usually recorded in the accounts of a business. True False

TRUE

Return on investment (ROI) equals margin multiplied by turnover. True False

TRUE

Reynold Enterprises sells a single product for $25. The variable expense per unit is $15 and the fixed expense per unit is $5 at the current level of sales. The company's net operating income will increase by $10 if one more unit is sold. True False

TRUE

Selling costs can be either direct or indirect costs. True False

TRUE

Suppose a company evaluates divisional performance using both ROI and residual income. The company's minimum required rate of return for the purposes of residual income calculations is 12%. If a division has a residual income of $6,000, then its ROI is greater than 12%. True False

TRUE

The "costs to be accounted for" portion of the cost reconciliation report includes the cost of beginning work in process inventory and the costs added during the period. True False

TRUE

The R2 (i.e., R-squared) is a measure of the goodness-of-fit in least-squares regression. True False

TRUE

The activity variance for revenue is unfavorable if the actual level of activity for the period is less than the planned level of activity. True False

TRUE

The book value of a machine, as shown on the balance sheet, is not relevant in a decision concerning the replacement of that machine by another machine. (Ignore taxes.) True False

TRUE

The equivalent units of production for a department using the FIFO process costing method is equal to the number of units completed plus the equivalent units in the ending inventory less the equivalent units in the beginning inventory. True False

TRUE

The potential benefit that is given up when one alternative is selected over another is called an opportunity cost. True False

TRUE

The sales budget is usually prepared before the production budget. True False

TRUE

Under absorption costing, the profit for a period is affected by a change in the number of units of finished goods in inventory. True False

TRUE

Under variable costing, fixed manufacturing overhead cost is not treated as a product cost. True False

TRUE

Under variable costing, product cost does not contain any fixed manufacturing overhead cost. True False

TRUE

Wait time is considered non-value-added time. t/f

TRUE

When analyzing a mixed cost, you should always plot the data in a scattergraph, but it is particularly important to check the data visually on a scattergraph when the R2 from a least squares regression is low. A quick look at the scattergraph can reveal that there is little relation between the cost and the activity or that the relation is something other than a simple straight line. True False

TRUE

When considering a number of investment projects, the project that has the shortest payback period does not necessarily have the highest net present value. t/f

TRUE

When materials are purchased in a process costing system, a materials account is debited with the cost of the materials. True False

TRUE

When the predetermined overhead rate is based on the level of activity at capacity, underapplied manufacturing overhead may be called the Cost of Unused Capacity and treated as a period expense. True False

TRUE

A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period. True False

TRUE " the revenue should have been for the actual level of activity of the period. " confusing but it is a weird way of referring to flexible budget since flex budget depends on level of activity.

When variable costing is used, and if selling prices exceed variable expenses and if the unit contribution margins, the sales mix, and fixed costs remain the same, profits move in the same direction as sales. True False

TRUE I thought that unit contribution margin and fixed cost remaining the same would mean that the profit would also remain the same. But that is only on a per unit basis.If a unit sells for $2 and unit cm = $2-$.5(VCpu)=1.5 and FCpu equal $1. Profit would be $.5 per unit sold. An increase in sales from $10 to $12: 10-2.5=7.5-5=$2.5 -> 12-3=9-6=$3

Average operating assets is used in the numerator to compute turnover in an ROI analysis. True False

TRUE ROI= margin x turnover ROI = (Net operating income/sales) x (sales/average operating assets) ???

Only future costs that differ between alternatives are relevant in decision making. True False

TRUE a relevant cost is a cost that can be avoided if another decision is chosen. Meaning the cost would be incurred in the future had you chose that alternative. Relevant cost in decision making are always going to be future costs from different alternatives since it is a decision between multiple choices each having its own cost associated with it.

The revenue and spending variances are the differences between the flexible budget and the actual results for the period. True False

TRUE any variance is the difference between the actual measure and the budgeted measure. Does not matter the type of budget.

Under absorption costing, it is possible to defer a portion of the fixed manufacturing overhead costs of the current period to future periods through the inventory account. True False

TRUE apply it to wip inv, finished goods inv, etc

At the break-even point, the total contribution margin and fixed expenses are equal. True False

TRUE at BE point sales = TC TC= F + V -> F = tc -vc CM=sales-vc= tc-vc F=CM

If a company operates at the break even point for each of its segments, it will lose money overall if common fixed expenses exist. True False

TRUE common fixed cost are not allocated to individual segments unless specified

In a special order situation, any fixed cost that could be avoided if the special order were not accepted would be irrelevant. True False

TRUE double negative - treat as double positive to make it clearer

Residual income should not be used to evaluate a profit center. t/f

TRUE evaluate based on how much profit the profit center makes

Net operating income is affected by the number of units produced when absorption costing is used. True False

TRUE fixed manufacturing overhead per unit is included in abs costing. This means that depending on how many units produced, the product cost per unit will change. fmopu= total fix mo/units produced

The costs assigned to units in inventory are typically lower under variable costing than under absorption costing. True False

TRUE variable costing product costs account for: direct materials, direct labor, variable manufacturing overhead absorption: direct materials, direct labor, variable manufacturing overhead PLUS FIXED MANUFACTURING OVERHEAD.

For which situation(s) below would an organization be more likely to use a process costing system of rather than a job-order costing system? A. a paper mill that processes wood pulp into large rolls of paper B. a shop that restores old cars to "showroom" quality C. a framing shop that builds picture frames to order for individual customers D. a masonry company that builds brick walls, bulkheads, and walkways designed by architects

Management is considering a one-time-only special order. There is sufficient idle capacity to fill the order without affecting any normal sales. Which one of the following is NOT relevant in making the decision? A. absorption costing unit product costs B. variable costs C. incremental costs D. differential costs

Two or more products produced from a common input are called: A. common costs. B. joint products. C. joint costs. D. sunk costs.

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost of attending college? A. the cost of the textbooks B. the cost of the cola that Hal will consume during class C. Hal's lost wages at Burger Haven D. the cost of commuting to the Burger Haven job

In computing its predetermined overhead rate, Brady Company included its factory insurance cost twice. This error will result in: A. the ending balance of Finished Goods to be understated. B. the credits to the Manufacturing Overhead account to be understated. C. the Cost of Goods Manufactured to be overstated. D. the Net Operating Income to be overstated.

When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on: A. selling price per unit B. contribution margin per unit C. contribution margin per unit of the constraining resource D. unit sales volume

When the weighted-average method of process costing is used, a department's equivalent units are computed by: A. subtracting the equivalent units in beginning inventory from the equivalent units in ending inventory. B. subtracting the equivalent units in beginning inventory from the equivalent units for work performed during the period. C. adding the units transferred out to the equivalent units in ending inventory. D. subtracting the equivalent units in beginning inventory from the sum of the units transferred out and the equivalent units in ending inventory.

Which of the following companies would be most likely to use a process costing system? A. Ship builder. B. Movie studio. C. Oil refinery. D. Hospital.

Which of the following is not an effective way of dealing with a production constraint (i.e., bottleneck)? A. Reduce the number of defective units produced at the bottleneck. B. Pay overtime to workers assigned to the bottleneck. C. Pay overtime to workers assigned to work stations located after the bottleneck in the production process. D. Subcontract work that would otherwise require use of the bottleneck.

18. Which of the following statements about a process costing system is incorrect? A. In a process costing system, each processing department has a work in process account. B. In a process costing system, equivalent units are separately computed for materials and for conversion costs. C. In a process costing system, overhead can be underapplied or overapplied just as in job-order costing. D. In a process costing system, materials costs are traced to units of products.

Computing the present value of future dollars is known as: A. interpolating. B. compounding. C. annualizing. D. discounting.

On the Schedule of Cost of Goods Manufactured, the final Cost of Goods Manufactured figure represents: A. the amount of cost charged to Work in Process during the period. B. the amount of cost transferred from Finished Goods to Cost of Goods Sold during the period. C. the amount of cost placed into production during the period. D. the amount of cost of goods completed during the current year whether they were started before or during the current year.

Opportunity costs are: A. not used for decision making. B. the same as variable costs. C. the same as historical costs. D. relevant in decision making.

Which of the following companies would be most likely to use a process costing system? A. a shipbuilder B. a furniture manufacturer C. a law firm D. a utility producing natural gas

1) Which of the following is an example of a variable cost related to delivery activity? 1) _______ A) gasoline B) depreciation on delivery vehicles C) delivery vehicle insurance cost D) factory rent

14) What software routine can be used to plot mixed cost data? 14) ______ A) Chart Wizard B) High/Low Chart Mapping C) Expresto Charting D) None of these answers is correct.

13. Rent on a factory building used in the production process would be classified as a product cost and as a fixed cost. True False

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