Quizzes chapter 1-4
The Widget Factory pays $1,000 per month for rent, $10 per item made, and $3 per item stored. What is the fixed cost for the Widget Factory? $10 per item $1,000 per month $3 per item $1,000 plus $13 per item
$1,000 per month
It costs your company $12 per item in manufacturing costs. The rent on the warehouse is $40,000, and the administrative salaries are $52,000. What is the total cost to manufacture 100,000 units? $1,292,000 $1,200,000 $1,240,000 $1,252,000
$1,292,000
An analysis of the manufacturing process shows that $10,000 in raw materials will make 1,000 items. The advertising cost is set at $2,000, and the warehouse rent is $2,500. What is the variable cost per unit of this company based on this information? $10.00 $14.50 $12.50 $12.00
$10.00
Tyler's Tires make 1,000 tires at $72 each. They want to make $25,000 and they need to pay rent of $5,000 during that time period. For how much should Tyler sell each tire? $97 $77 $102 $125
$102 explanation: 1000 x p = 1000 x 72 + 5000 +25000 1000p = 102000 p=102
Alpha Company Ltd is looking to lease a photocopier. The monthly lease for the photocopier is $65 and an additional charge of $0.05 per copy. Calculate the lease cost of the photocopier during the month of July if the expected number of copies is 50,000. $2565 $575 $565 $2500
$2565 Explanation Use the relationship y = a+bx where y = total cost. a = fixed cost = $65 b = variable cost = $0.05 per sheet x = number of units of activity = 50,000 So, y = $2565
Helen wants to sell her product for $100. It costs her $74 to make. How much is Helen's profit? $26 $74 $100 $174
$26 profit = 100 - 74 = 26
If total costs are $100,000, variable costs are $1, and 70,000 units were produced, what is the fixed cost? $30,000 $40,000 $171,000 $170,000
$30,000
Calculate the differential cost based on the following information: Cost to manufacture an item = $1,000 Cost to purchase an item = $1,500 $0 $1,000 $1,500 $500
$500
XYZ Furniture had a very good year financially in 2016. They did $1.6 million in total sales. They paid $475,000 in wages to their manufacturing employees, and they paid $300,000 for the wood and other materials used for production. What was their contribution margin in 2016? $175,000 $825,000 $2.375 million $1.425 million
$825,000 Explanation: The contribution margin shows the profit or loss after variable labor and production costs are subtracted from total sales.
A company sells 5000 units at $25 each. If the variable costs are $35,000, what is the contribution margin ratio? 0.44 0.28 0.50 0.72
0.72 Explanation: total sale = 5000 x 25 = 125000 contribution margin = 125000 - 35000 = 90000 contribution margin ratio = 90000 / 125000 = 0.72
How are fixed costs related to production levels? Fixed costs can change, but not due to changes in production levels. Fixed costs decrease as production levels increase. Fixed costs increase as production levels decrease. Fixed costs increase as production levels increase
Fixed costs can change, but not due to changes in production levels.
Why is it sometimes beneficial to abandon a project with sunk costs? The sunk costs have a better chance of being recovered. Further money will not be spent on the project. It is never beneficial to abandon a project with sunk costs. The sunk costs can be rerouted to new projects
Further money will not be spent on the project.
Which of the following is an example of a sunk cost? Hiring bonus Purchase of a building Prepaid insurance Depreciation
Hiring bonus
Jesse decides to leave his job as a programmer with a salary of $70,000 to form his own startup, and he elects not to take a salary in the company's first year. Why would the $70,000 in lost income not be calculated in his company's financial records? People who form their own startups tend to make half as much as they used to for the first year. He is still in a probationary period and entrepreneurs never pay themselves during the probationary period. His company is not paying him a $70,000 salary yet. His former employer would likely give him a severance package. Print Worksheet
His company is not paying him a $70,000 salary yet.
Big Business Inc. allocates clerical staff hours to shredding papers. What type of cost is this? Implicit Explicit Income Fixed
Implicit
What are the two umbrella categories of expenses? Sales and COGS Mortgage expense and payroll Implicit and explicit costs Accounts receivable and aged accounts
Implicit and explicit costs
For accounting purposes, how are implicit costs recorded? Implicit costs are not recorded for accounting purposes. On the income statement. On the balance sheet. On the master budget.
Implicit costs are not recorded for accounting purposes.
What type of cost would be the result of a bomb threat that shut down the facility for a day? Implicit costs from lost profit Explicit cost from lost profit Implicit cost from goodwill Explicit cost from goodwill
Implicit costs from lost profit
When should sunk costs be considered in decision-making? In special circumstances determined by management Always When the business environment has changed Never
Never
Kat Glue Company Ltd has $1 million. The company decides to invest the money in the construction of a new warehouse instead of keeping it in the bank as a deposit for interest income. Identify the type of cost being illustrated in the above scenario. Variable Period Sunk Opportunity
Opportunity
An implicit cost is a specialized form of which type of cost? Opportunity cost Fixed cost Sunk cost Variable cost
Opportunity cost
An investor is deciding if they should sell their mutual funds that earn 3% to buy stock that may earn a greater return. What kind of cost is the loss of the 3% return? Opportunity cost Sunk cost Total cost Administrative cost
Opportunity cost
You have the option of selling stock that you hold but then you will not get the $2,000 dividends, or you can hold the stock and earn the dividends. If you sell, what type of costs are the loss of the dividend revenue? Opportunity costs Financing costs Sunk costs Alternative costs
Opportunity costs
If you know the variable cost and the fixed cost, what other piece of information will you need to calculate the total cost? Quantity being produced Raw material cost Overhead Manufacturing time
Quantity being produced
All of the following are alternative terms for implicit costs, EXCEPT: Notional costs Rational costs Implied costs Opportunity costs
Rational costs
Which of the following costs would be considered an indirect cost? Direct labor Supplies used in the manufacturing process Raw materials Rent
Rent
Which of the following is an explicit cost? Rent Depreciation Goodwill Employee satisfaction
Rent
Define cost. A financial gain when producing something Money obtained in return for labor or services A periodic payment from government to an employer Sacrificing one resource to obtain another resource
Sacrificing one resource to obtain another resource
Which of the following would be a direct cost? Screws used in manufacturing The CEO's salary Warehouse rent Depreciation
Screws used in manufacturing
How do you find the unit contribution margin? Subtract variable cost per unit from price per unit Divide total revenue by total variable costs Divide per unit variable costs by per unit revenue Subtract total variable costs from total revenue
Subtract variable cost per unit from price per unit
Which of the following are insignificant in investment decisions? Sunk costs Fixed costs Variable costs Administrative costs
Sunk costs
If you spend $1000 to fix the brakes on your 15-year-old car, and then find out that you also need new tires, which will cost another $1000, what would be the most sensible decision to make? Go ahead and get the tires, since you have already spent so much money on the brakes. Keep driving the car until the tires go flat. Get your old brakes put back on the car and then spend the money on new tires. Take the money you would have spent on new tires, and use it as a down payment for a newer car
Take the money you would have spent on new tires, and use it as a down payment for a newer car.
Assume that you have two hours to spend at the mall. You can either visit the bookstore or enjoy a movie at the theater. The opportunity cost of watching a movie is equivalent to which of the following? The time you could have spent visiting the bookstore. The time it takes to walk from the parking lot to the movie theater. The time you spent watching the movie. The cost of the movie ticket.
The time you could have spent visiting the bookstore.
Which of the following would be considered a mixed cost? Direct labor Rent Raw materials Utilities
Utilities
What are the costs that change with output called? Fixed Mixed Variable Even
Variable
When selecting a cost structure, which of the following factors would a company consider that change with the volume of production activity? Competition Risk Fixed Cost Variable costs
Variable costs
What are variable labor expenses? All the money that was made by the company through sales A statement showing how much of sales were spent on variable costs Wages that were paid for sales Wages that were paid for production
Wages that were paid for production
The head of a bottle factory decides to cease running the factory as a 24-hour operation, only keeping it open for eight hours per day. Why is there an implicit cost to this decision? When the factory is closed at night, it is saving money because no one needs to be paid for working the night shift. The equipment will now have more time to rest between shifts, thereby increasing its value. When the machines are not operating, the bottles that could be created during that time become an opportunity cost (lost opportunity) to the company. A factory that is not operating is more likely to be robbed, which costs the company money
When the machines are not operating, the bottles that could be created during that time become an opportunity cost (lost opportunity) to the company.
The formula for total variable cost is _____. total fixed costs / total units produced total quantity of output / total fixed costs total quantity of output X variable cost per unit of output total quantity of output / variable cost per unit
total quantity of output X variable cost per unit of output
Costs that fluctuate proportionally with the fluctuation of output are called _____ costs. fixed variable sunk direct
variable
Mixed cost is a combination of _____. increasing and decreasing costs variable and increasing costs increasing and constant costs variable and fixed costs
variable and fixed costs
It takes Joan 1 hour to make a pizza and 2 hours to make a cake. Joan's opportunity cost of making a pizza is which of the following? ½ pizzas 2 cakes 2 pizzas ½ of a cake
½ of a cake Joan only needs 1 hour to make a pizza, so that equals 1 / 2 a cake.
With the same amount of resources, Country A can produce 25 tons of chicken or 50 tons of wheat. What is Country A's opportunity cost of producing 1 ton of wheat? 25 tons of wheat 2 tons of chicken 25 tons of chicken ½ ton of chicken
½ ton of chicken The opportunity cost equation is 25 tons of chicken = 50 tons of wheat. Reducing the equation, you get 1 ton of chicken = 2 tons of wheat which means that 1 ton of wheat is equal to 1 / 2 ton of chicken.
What is the cost of goods sold under marginal costing given the following information? Beginning inventory = $2,000 Direct materials = $4,000 Direct labor = $5,000 Variable manufacturing overhead = $1,000 Fixed manufacturing overhead = $500 Ending inventory = $1,500 $10,500 $12,000 $8,500 $11,000
$10,500 Cost of goods sold is $10,500: cost of goods sold = opening inventory + direct materials + direct labor + variable manufacturing overhead - ending inventory = $2,000 + $4,000 + $5,000 + $1,000 - $1,500.
Given the following information, what amount would be reported on the balance sheet as inventory? raw materials = $5,000 work-in-process = $6,000 finished goods = $8,000 $6,000 $19,000 $8,000 $5,000 Print Worksheet
$19,000 Inventory is the sum of raw materials, work in process, and finished goods. 5,000 + 6,000 + 8,000 = 19,000
Calculate cost of goods sold given the following information: beginning finished goods = $45,000 cost of goods manufactured = $25,000 ending finished goods = $50,000 $20,000 $45,000 $120,000 $70,000
$20,000 Cost of goods sold (or finished goods available for sale) = beginning finished goods + cost of goods manufactured - ending finished goods = 45,000 + 25,000 - 50,000 = $20,000
Janet sells custom made window blinds. If her raw materials are $15, labor costs are $125, and overhead is 50% of labor, using job-order costing calculate the cost for producing the custom blinds. $202.50 $140.00 $187.50 $265.00
$202.50 (15 + 125 + (125 x 50%))
What is the total cost of a product if the costs are $10,000 for rent, $5,000 for equipment, and $1.00 per each of the 10,000 items produced? $25,000 $10,000 $20,000 $15,000
$25,000
A company has 100,000 items in stock and gets an order for 125,000 items. It costs them $1.00 extra per item that needs to be express shipped to fill the order. What are the shortage costs? $25,000 $125,000 $100,000 0
$25,000 (125000 - 100000) x $1
Calculate the predetermined overhead rate given the following information:estimated manufacturing overhead costs = $300,000; direct labor hours = 100,000. The allocation base is direct labor hours. $2 $1 $4 $3
$3 The predetermined overhead rate is $3 (estimated manufacturing overhead / direct labor hours = $300,000 / 100,000).
A certain product has a total production cost of $10,234 for 3,000 units. What is the cost to make just one unit of this product? $4.21 $3.41 $5.13 $2.50
$3.41 The cost for a single unit of this product is $3.41. It is calculated as follows: $10,234 / 3,000 = $3.41
Determine the amount of the manufacturing overhead adjustment required based on the following information:actual manufacturing overhead = $100,000; applied manufacturing overhead = $60,000. $60,000 underapplied $40,000 overapplied $40,000 underapplied $60,000 overapplied
$40,000 underapplied Since actual manufacturing overhead is greater than what has been applied, manufacturing overhead is underapplied by $40,000 ($100,000 - $60,000).
Calculate the total cost of a product if the fixed costs are $5,000 and the variable costs are $2.00 per each of the 20,000 units produced. $45,000 $30,000 $40,000 $10,000
$45,000
Calculate the cost of goods sold given the following: Finished goods at the beginning of the period = $130,000. Cost of goods manufactured = $470,000. Finished goods at the end of the period = $120,000. $480,000 $220,000 $720,000 $590,000
$480,000 (130000 + 470000 - 120000)
Given the following information, what is the pre-determined overhead allocation using direct labor hours as the driver? Total factory overhead costs = $25,000 Total direct labor hours = 5,000 Total direct labor costs = $10,000 Total materials cost = $15,000 $3 $10 $2 $5
$5 The allocation for pre-determined overhead would be $5 per labor hour ($25,000 / 5,000).
Oodles Foods manufactures noodles. For the month of March, the company bought a total of $5,000 worth raw materials; $4,500 worth of those raw materials was used and the manufacturing process involved $1,000 of direct labor and $500 of overhead. At the end of the month, $5,500 of goods had been completed, out of which $3,000 worth of noodles was sold to consumers. What is the total amount that represents the work-in-process inventory at the end of March? $500 $5,500 $1,500 $2,000
$500 Raw Material worth = $5000 $4500 was used to manufacture the noodles. We also have the direct labor and overhead = $1000 + $500 = $1500. Total amount work-in-progress = $6000 Since $5500 worth is transferred to finished goods, only $500 worth noodles remain in the work-in-process section.
A certain product has department costs of $2.45, $1.23, and $5.23 per unit as analyzed in the process costing method. What is the total product cost? $9.12 $8.91 $10.32 $7.23
$8.91 The total product cost is $8.91 per unit, or $2.45 + $1.23 + $5.23 = $8.91
What is the cost of goods sold under absorption costing given the following information? Beginning inventory = $5,000 Direct materials = $1,000 Direct labor = $2,000 Variable manufacturing overhead = $800 Fixed manufacturing overhead = $1,200 Ending inventory = $200 $10,200 $8,600 $7,800 $9,800
$9,800 Cost of goods sold is $ 9,800: cost of goods sold = beginning inventory + direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead - ending inventory = $5,000 + $1,000 + $2,000 + $800 + $1,200 - $200.
How many basic accounting principles make up GAAP? 10 7 18 4
10
NDB Company has a factory with fixed costs of $500,000 and a production capacity of 150,000 units annually. Its product sells with a 30% contribution margin. The target profit is $300,000. At full production, what does the selling price per unit need to be? 25.71 10.00 17.78 23.81
17.78 (fixed cost + desired profit) = .3x X = total revenue - 2,666,666. 2,666,666/150,000 = 17.78 selling price
What year did the Sarbanes-Oxley Act become law? 2002 2000 2001 2012
2002
Lily Company sells 30,000 units at $20 each, which exactly covers fixed costs of $150,000. What is the percentage contribution margin? 25% 15% 30% 20%
25% 30,000 units @ $20 = $600,000 revenues. CM = 150,000/500,000 = 25%
Karen's Kabinets has 10,000 units still in production at the end of this accounting period. 4,000 of those units are 75% complete and 6,000 units are 40% complete. Using the weighted-average method of equivalent units of production, determine how many equivalent units are represented by these unfinished cabinets. Choose your answer below. 5,400 5,000 2,400 2,000
5,400 (4000 x 75%) + (6000 x 40%)
Which of the following costs would be considered raw materials for a bakery? A loaf of bread A bag of flour A baked cake awaiting decorating An iced cupcake
A bag of flour
How does a company become socially engaged? A company should become involved in multiple aspects of social responsibility right from the start. A company should only become as engaged in social responsibility as that of its top competitors. A company can simply dabble in social responsibility to determine if it wants to be engaged. A company should go all in. Engage with the aspects of social responsibility, review them and determine how the company can support them
A company should go all in. Engage with the aspects of social responsibility, review them and determine how the company can support them.
Which of the following phrases BEST describes social responsibility? A company that works to benefit society during the course of its business dealings. A company that uses charitable donations of funds to promote the welfare of others. A business that advertises its products or services within its local community. A business that refrains from discriminating in its recruitment and promotion practices
A company that works to benefit society during the course of its business dealings.
Which of the following choices is NOT an example of a service? A hair dresser cutting a customer's hair A handmade piece of furniture created by a woodworker An attorney filing paperwork for a customer A mechanic replacing spark plugs in a customer's car
A handmade piece of furniture created by a woodworker
You are auditing a company. A line item on the income statement is titled Finished Goods. What kind of company are you auditing? A manufacturing company A service company Neither a manufacturing company or a service company Unable to tell from this information
A manufacturing company
What is a job order costing system? A method of assigning costs to units based on tax basis of product or service A method of assigning costs to a mass quantity of a product or service A method of assigning costs to a specific unit or product A method of assigning costs to a specific department with the company
A method of assigning costs to a specific unit or product
How is risk related to insurance? A risk is uninsurable if it cannot be quantified. Risk is inversely proportional to insurance cost. All risks are insurable. If a risk cannot be articulated, it becomes insurable
A risk is uninsurable if it cannot be quantified.
Matching is the accounting principle that says which of the following? A sales expense should be recorded in the same accounting period that sales income was made The currency between companies must be the same The organizational management must be the same The company revenue between companies must be the same
A sales expense should be recorded in the same accounting period that sales income was made
Javier is the sole owner of a consulting company that specializes in developing manufacturing processes. What kind of company does Javier own? A service company A manufacturing company Either a service company or a manufacturing company, depending on the contract Neither a service company or a manufacturing company
A service company
Which costing method results in a higher reported net income? Cost of goods sold Marginal costing Absorption costing Incremental costing
Absorption costing
Which costing system must be used for external reporting, according to accounting standards like GAAP? Incremental costing Complete costing Absorption costing Marginal costing
Absorption costing
Which of the following is NOT a financial statement? Balance sheet Income statement Accounting cycle Statement of cash flows Statement of retained earnings
Accounting cycle
Which of the following is NOT a step in the risk management process? Mitigating risks Assessing risks Adding risks Identifying risks
Adding risks
GAAP sets the standards for the creation of what? All answers are correct Income Statement Balance Sheet Statement of Retained Earnings
All answers are correct
What statement(s) do external and internal users of accounting information rely on? Balance Sheet Statement of Retained Earnings All answers are correct. Income Statement Statement of Cash Flows
All answers are correct.
Why is accounting important to business? It lets a business owner know how much money they are making. It lets a business owner know what their assets are worth. It lets a business owner know how much money they are spending. It provides the information that a business needs to file taxes with the IRS All of the answers are correct
All of the answers are correct
Which of the following is a possible way to assemble a strategy? Assemble a growth strategy. All of these answers are correct Use a retrenchment strategy to assemble your strategy. Look at the information from the environmental scan and determine what you should do as a company Look at the business world through environmental scanning, and then figure out how you're going to get there
All of these answers are correct
Which of the following would use external financial statements? All would use them Banker Investors Creditors
All would use them
Which of the following is an example of external users of accounting information? Managers Employees Analysts Directors Owners
Analysts
On which section of the balance sheet is inventory reported? Liabilities Owner's equity Revenue Assets
Assets
What is the formula for the basic accounting equation? Liabilities = Assets + Owner's Equity Assets = Liabilities - Owner's Equity Assets = Liabilities + Owner's Equity Assets = Liabilities x Owner's Equity Owners Equity = Assets + Liabilities
Assets = Liabilities + Owner's Equity
What does ALOE stand for? Accounts, Liabilities and Owner's Equity Assets, Liabilities and Owner's Equity Assets, Liabilities and Owner's Expenses Assets, Ledgers and Owner's Equity Accounts, Ledgers and Owner's Expenses
Assets, Liabilities and Owner's Equity
What are the three parts of a balance sheet? Assets, liabilities, and owner's equity Revenue, debts, and profit Income, expenses, and profit Equity, debts, and loans
Assets, liabilities, and owner's equity
Adam wants to find out the assets and liabilities of a company. Which financial statement should Adam read to find out this information? Income Statement Balance Sheet Statement of Retained Earnings Statement of Profit and Loss Statement of Cash Flows
Balance Sheet
Why do service companies use different account names than manufacturing companies? Because the differentiation helps customers understand products and services better. Because the change in account names identify the accounts as belonging to a service. Because manufacturing companies produce more that contributes to Gross Domestic Product for a country. Because the change in account names identify the accounts according to Generally Accepted Accounting Principles
Because the change in account names identify the accounts as belonging to a service.
Why do you need to identify key deliverables? Because they are essential to environmental scanning to determine which kind of aspects are important to your plan. Because they are important to ensuring the assembly of your strategy, as they are the input you use to design it. Because they are important to understanding whether a project has succeeded or not and are thus crucial to the implementation phase. Because they are essential in the monitor and evaluate segment to ensure that everything is on track
Because they are essential in the monitor and evaluate segment to ensure that everything is on track.
Which of these is NOT a reason that many companies have decided to adopt a socially responsible stance when they conduct their business? Because they wish to receive public recognition Because it's good for public relations Because they desire to cut back on expenditures Because they care about the environment and want to make the world a better place
Because they desire to cut back on expenditures
Which of the following products would be costed using a process costing system? Work completed by accountants Made-to-order furniture Custom-ordered wedding cakes Breakfast cereal
Breakfast cereal
In the monitoring and controls function, which of the following is used to compare anticipated to actual revenues and expenses? Budget Cash Flow Statement Profit and Loss Statement Investment Appraisal
Budget
How can a company be considered socially responsible? By posting on Facebook and Twitter By beautifying its campuses By designing products of cheaper quality By minimizing its carbon footprint
By minimizing its carbon footprint
Harry runs a bakery. Which of the following would NOT represent a raw material for the bakery? Loaf of bread Powdered sugar Dozen eggs Unsalted butter
Loaf of bread
X Corporation pays $25,000 per year to rent a warehouse. What type of cost is this? Carrying cost Ordering cost Cost of goods sold Administrative expense
Carrying cost
Your company loses $10,000 per year of inventory due to theft and spoilage. What type of costs are these? Carrying costs Period costs Ordering costs Total costs
Carrying costs
Shazam Electronics is a major retailer specializing in a large variety of computer chips. All of the chips have to be stored at a specific temperature, which is a significant expense to Shazam's monthly electric bill. Which of the following categories does this expense refer to? Inventory costs Receiving costs Carrying costs Ordering costs
Carrying costs Carrying costs are the costs that are related to keeping inventory in stock. It is expensive to store computer chips. This is a carrying cost.
If a company goes from holding a small amount of inventory to holding a large amount of inventory, what will happen to the carrying costs? Carrying costs will increase Carrying costs will decrease Carrying costs will remain the same It will depend on the ordering costs
Carrying costs will increase
Which company, listed on the New York Stock Exchange would definitely be in breach of the Going Concern Principle? Company C, which shows a net cash outflow in its statement of cash flows. Company B, which has made a net loss this financial year. Company A, which has decided to issue new shares to foreign nationals. Company D, which has run out of cash and is now not able to pay its creditors
Company D, which has run out of cash and is now not able to pay its creditors.
Connie's Company tracks accounts by project and Bob's Business tracks them by process. What kind of businesses do Connie and Bob likely have? Connie has a service and Bob has a manufacturing Connie has a manufacturing and Bob has a service Both have a manufacturing Both have a service
Connie has a service and Bob has a manufacturing
Accountant Henry chooses not to recognize potential revenue until it is actually received. This is an example of which GAAP? Conservatism Periodicity Matching Low-balling
Conservatism
Which of the following is an example of philanthropic responsibility? Fulfilling a consumer' needs Following national and state regulations Treating stockholders ethically Contributing to a charity
Contributing to a charity
The use of business resources to help solve social problems and to achieve social goals is known as _____. Company Economic Responsibility Corporate Responsibility Corporate Social Responsibility Societal Engagement Mutual Company Responsibility
Corporate Social Responsibility
A company, person, or organization that works with the benefit of society as a whole in mind is practicing which of the following principles? Corporate social responsibility Marketing mix Total quality assurance Long term sustainability
Corporate social responsibility
Paul has a small manufacturing company that produces and sells its products to the public from a website. He calculates that the product costs $1.50 in raw materials to produce and he loses about 3% of the product in spoilage and waste. Shipping costs are passed through to the buyers. What other factor does he need to calculate the cost of goods sold? Costs associated with ordering and maintaining the raw materials Costs associated with marketing Costs associated with the company headquarters building He has all of the information that he needs
Costs associated with ordering and maintaining the raw materials
Job-order costing would be most appropriate for which of the following products, and why? Oil refining, since the product is produced in large volume. Cookies, since the raw materials can spoil. Soft drinks, since the product has a long shelf life. Custom-order furniture, since the products are unique
Custom-order furniture, since the products are unique.
The Sarbanes-Oxley Act does NOT protect against conflicts of interest between the company and which of the following? Customers Inside stock traders Stock analysts Investment bankers
Customers
A manager who is reviewing an investment appraisal and a profitability analysis is performing which of the four managerial accounting functions? Planning Decision making Monitoring and controls Accountability
Decision making
Which of the following is an implicit cost? Depreciation on machinery for a capital project Rent for machinery for a capital project Salaries for a capital project Machine-hours for a capital project
Depreciation on machinery for a capital project
Why are accountants not able to constantly change the method used to compute inventory value? There is no impact to change inventory valuation methods, they are different ways to come up with the same result. Different methods of inventory valuation can make net profits appear larger and be misleading. Managers do not like to learn different methods of accounting. Changing from one method to another can confuse auditors
Different methods of inventory valuation can make net profits appear larger and be misleading.
Leno's Tux Boutique is in dire need of additional blue bow ties for the start of wedding season. He has to quickly order more for his inventory. Which of the following would NOT incur a shortage cost for the business? Additional employees to restock the large order of incoming bow ties The wholesale cost to quickly replenish the inventory of bow ties Discounts on other sale items to quickly make space for the bow ties Next-day shipping on 30 dozen bow ties
Discounts on other sale items to quickly make space for the bow ties
Djokovic is the Chief Financial Officer for InfoTech Inc. Murray is the Chief Lending Officer at the Bank where InfoTech has a large bank loan. Which statement is true for both Djokovic and Murray, in connection with the accounting information for InfoTech? Djokovic is an internal user and Murray is an external user. Both are external users. Murray is an internal user and Djokovic is an external user. Both are internal users. Print Worksheet Print Answers
Djokovic is an internal user and Murray is an external user.
Which level of corporate social responsibility focuses on a company's obligation to fulfill consumers' needs with products and services? Philanthropic Legal Economic Societal Political
Economic
Under Sarbanes-Oxley, what is the best explanation of internal controls for purposes? Ensures that all stocks are analyzed by an independent auditor for valuation Ensures that insider trading is punishable by strict fines and jail sentences Ensures that financial reporting is done accurately and complies with the generally accepted accounting principles Ensures that there is no conflict of interests on the board of directors
Ensures that financial reporting is done accurately and complies with the generally accepted accounting principles
An analysis of the economic barriers for your company's products would be part of which step in the strategic management process? Environmental scanning Evaluation Monitoring Implementation
Environmental scanning
What is the first step of the strategic management planning process? Environmental scanning Strategy formation Strategy implementation Strategy evaluation
Environmental scanning
You work in a small company that is currently in the planning process. Which of the following steps will you start with? Strategy implementation Strategy formulation Environmental scanning Environmental implementation
Environmental scanning
What are the main components of the strategic management process? Identify the problem, assemble a team, develop work groups and decide on a course of action. Develop a plan, have a meeting with all of the interested stakeholders, implement the plan and monitor results. Environmental scanning, assemble a strategy, implement the strategy and monitor and evaluate the strategy. Strategically look at the issue and develop an action plan to address it
Environmental scanning, assemble a strategy, implement the strategy and monitor and evaluate the strategy.
Treating competing companies morally is an example of appropriate behavior for the _____ level of corporate social responsibility. Financial Ethical Legal Philanthropic
Ethical
Which of the following is NOT an example of a variable cost? Executive salaries Materials Production labor Fuel
Executive salaries
Which organization issues GAAP? FASB SEC IFRS IASB
FASB
A business that is socially responsible does which of the following? Maintains a focus on the benefit to society Maintains a focus on sustainability Maintains a focus on the bottom line Maintains a focus on profit
Maintains a focus on the benefit to society
Which standard of accounting is primarily used in the United States? GAAP IFRS FDIC UPAC
GAAP
The accountant finds out that the owner is planning on closing the company during the fiscal year. The accountant needs to evaluate the company differently than usual in order to avoid violating which GAAP? Going concern Matching Periodicity Conservatism
Going concern
What type of decision is NOT part of the decision-making function? Cost-volume-profit analysis decisions Costing decisions Investment decisions Historical change decisions
Historical change decisions
Which of the following is NOT one of the steps in the lean production model? Aim for perfection Identify constraints Define value from the customer's perspective Create flow to the customer by eliminating waste
Identify constraints
Which of the following is NOT an example of social responsibility? Promoting telecommuting and installing energy-efficient lighting Selling jewelry where 10% of the proceeds go to support women who are in a domestic abuse situation Providing a free meal to a shelter dog for each bag of dog food purchased Implementing a hiring freeze for a three-month period
Implementing a hiring freeze for a three-month period
The form of accounting that uses financial information to reach company goals is which of the following? Managerial accounting Financial accounting Budget accounting Proactive accounting
Managerial accounting
Which of the following activities incur ordering costs? Purchasing an item and selling it at a discounted price Inspecting merchandise and shipping out orders Processing the purchase order and maintaining inventory Placing an order and receiving merchandise
Placing an order and receiving merchandise
Which financial statement would contain the cost of goods sold? Balance sheet Statement of cash flows Statement of retained earnings Income statement
Income statement
The Sarbanes-Oxley Act did which of the following? Increased the requirements on internal financial control Set standards for privately held companies Created accounting standards All of the above
Increased the requirements on internal financial control
Which of the following is NOT a common base used in calculating the predetermined overhead rate for manufactured goods? Direct labor dollars Direct labor hours Indirect labor hours Number of machine hours
Indirect labor hours
Financial accounting provides which of the following information? Tax return information that is useful to external users All of the vital information that is used by internal users Information for external users, such as investors Decision making information for managers
Information for external users, such as investors
Which of the following management decisions involves risk reduction? Installing fire extinguishers. Purchase of an insurance policy. Safety training for all staff. Setting aside funds to cover a loss
Installing fire extinguishers.
Your company is worried about being destroyed by a hurricane. What type of risk is this? Insurable risk Uninsurable risk Mitigated risk Calculable risk
Insurable risk
Managerial accounting provides information for which target group? Regulatory agencies Internal users All users External users
Internal users
Why are financial statements required to include financial information prepared according to GAAP? It helps ensure that the company is is in compliance with US laws. It allows regulators to have an absolute verification concerning the financial health of the business. It allows the public to ensure that all companies are using uniform guidelines when preparing information. It allows external users absolute assurance of financial health
It allows the public to ensure that all companies are using uniform guidelines when preparing information.
What is the outcome of an investment appraisal? It determines whether actual revenues are equal to estimated revenues. It determines the cost to make a single product. It determines whether stockholders invested in stock. It determines the rate of return on an investment
It determines the rate of return on an investment.
Why is a profit and loss statement important? It shows managers the day-to-day business expenses. It helps managers evaluate the costs for developing new products and procedures. It helps managers determine where to invest the company's profits. It helps managers make revenue generating and cost cutting decisions
It helps managers make revenue generating and cost cutting decisions.
Which of the following is NOT a reason why a company would transfer the balance of the manufacturing overhead account directly to cost of goods sold by the period end? It is a simpler process. To clear out the manufacturing overhead account It is more accurate. It takes less time.
It is more accurate.
How does the theory of constraints differ from the lean production model? It focuses on customers to increase profit instead of seeking to increase throughput. It seeks to increase throughput instead of focusing on customers to increase profit. It involves a one-time fix and is not a continuous improvement process. It is a much quicker process with more substantial results
It seeks to increase throughput instead of focusing on customers to increase profit.
Where would a manager find all the costs associated with a particular job or project, including materials, labor, and overhead costs? Materials requisition form Manufacturing overhead summary Job cost sheet Time ticket
Job cost sheet
Conversion costs include which of the following? Labor and overhead costs Material, labor and overhead costs Material and overhead costs Material and labor costs
Labor and overhead costs
A company that routinely violates employment laws by refusing to hire minority workers would be ignoring the _____ level of corporate social responsibility. Legal Helping Economic Societal Philanthropic
Legal
All of the following are examples of behaviors associated with the philanthropic level of corporate social responsibility, EXCEPT _____. The donation of a portion of company profits to a charitable organization Managers encourage employees to participate in social functions within the community Managers provide employees with performance-based annual bonuses to spend within their community Company management volunteers at a local homeless shelter The use of manufacturing processes that are friendly to the environment
Managers provide employees with performance-based annual bonuses to spend within their community
Which form would contain the materials used for a custom-ordered job? Job cost sheet Manufacturing overhead summary Materials requisition form Time ticket
Materials requisition form
Costs that include both variable and fixed costs are what? Even Functional Scrambled Mixed
Mixed
The boss is creating a budget and requests a report on the number of products manufactured, the number sold, and the time between the two. This is an example of which of the four functions of managerial accounting? Monitoring and control Planning Decision making Accountability
Monitoring and control
Michael, the majority shareholder of a company, decided to produce the company's balance sheet whose cash balance included the cash in his own bank account. Would Michael be allowed to do this by GAAP? No, because of the revenue recognition principle. Yes, because of the going concern principle. No, because of the economic entity assumption. Yes, because of the full disclosure principle.
No, because of the economic entity assumption.
ABAX Company Ltd started and finished the contract in the same accounting time period. Will the company need to record their costs for the contract in the 'service contract in progress' account? Yes, because the contract was started and finished in the same accounting time period. Yes, because service companies must always record costs this way. No, because the contract was started and finished in the same accounting time period. No, because service companies never record costs this way.
No, because the contract was started and finished in the same accounting time period.
John the stock clerk spends 3 hours per week earning minimum wage stocking new raw materials for the manufacturing process. What type of cost is John's salary? Ordering costs Carrying costs Cost of goods sold Administrative overhead
Ordering costs
Which of the following is NOT one of the four managerial accounting functions? Organizing Controlling Planning Monitoring
Organizing
Which of the following represents a finished good? Pulp Lumber Paper Water
Paper
The PCAOB was created under the Sarbanes-Oxley Act. What does the acronym PCAOB stand for? Public Company Accounting Oversight Board Public Corporation Accounting Oversight Board Private Company Accounting Oversight Bureau Private Corporation Accounting Oversight Bureau
Public Company Accounting Oversight Board
Sarbanes-Oxley applies to which of the following types of businesses? Publicly traded companies Private companies All businesses General Partnerships
Publicly traded companies
Select the correct order for the flow of goods. Raw materials - work-in-process - finished goods Work-in-process - raw materials - finished goods Finished goods - raw materials - work-in-process Raw materials - finished goods - work-in-process
Raw materials - work-in-process - finished goods
service company has a parts inventory or supplies account. What would the equivalent account be called for a manufacturing company? Raw materials inventory Work in progress inventory Finished goods Manufacturing overhead
Raw materials inventory
Which of the following is an example of how publicly-traded companies can apply the principle of conservatism with their financial statements? None are correct Recognizing accounts payable immediately on the financial statements. Recognizing a potential gain from a lawsuit immediately. Recognizing the cost of goods sold after the company's inventory has been exhausted.
Recognizing accounts payable immediately on the financial statements.
Which of the following is an example of a fixed cost? Rent Raw material Utilities Overtime paid to hourly employees
Rent
StatsCo finds that there is a 0.01 percent chance of a hurricane hitting the company and causing more than $1 million in damage. This is an example of which of the following? Risk assessment Risk mitigation Risk transfer Risk avoidance
Risk assessment
You decide to place your house on a cliff because the view is beautiful even though you know that heavy rains can erode the foundation. This is a form of which of the following? Risk assumption Risk mitigation Risk assessment Risk management
Risk assumption
Zuk company Ltd. decides to launch a brand new type of bicycle called the Zukbike. The company accepts this risk and is prepared to pay for the losses that may occur. Which type of risk management approach is being used by the company? Risk assumption Ignoring risk Risk avoidance Transferring risk
Risk assumption
Bernie does not own a car because he does not want to get into a car accident. This is an example of which of the following? Risk avoidance Risk assessment Risk mitigation Risk behavior
Risk avoidance
An auto dealership installs canopies over all of the cars on the lot in an effort to prevent sun and hail damage. What type of risk mitigation is this? Risk avoidance Risk reduction Risk assumption Risk transfer
Risk reduction
If a company purchases an insurance policy, which type of risk management approach is it using? Risk avoidance Risk transference Risk assumption Risk reduction
Risk transference
Sarah works for an independent accounting firm and is performing an audit of the MegaCorp company. MegaCorp offers Sarah's firm a multi-million-dollar consulting contract in the midst of the audit. Under the provisions of The Sarbanes Oxley Act, what action can Sarah legally take? Sarah can turn down the consulting contract. Sarah can accept the consulting contract with the promise that she will not let the new business interfere with her independent audit of MegaCorp's finances. Sarah can renegotiate the consulting contract, using her audit of MegaCorp as leverage to get a higher fee for her accounting firm. Sarah can accept the consulting contract on behalf of her accounting firm
Sarah can turn down the consulting contract.
Which of the following would use internal financial statements? Senior management Potential investors Banks Creditors
Senior management
If a service company does not complete a contract at the end of an accounting time period, in which type of account must they carry forward the costs associated with that contract? Work in progress Service contract in progress Cost of completed service contract Finished service contract
Service contract in progress
Which financial statement tells how much money came in and was paid out in a specific time period? Statement of cash flow Income statement Balance sheet Statement of owner's equity
Statement of cash flow
What does the term 'accounting' mean? The act of reporting data The act of writing checks in a check register The act of recording financial data to be used later The act of collecting, organizing, and interpreting financial data The act of filing receipts from transactions Print Worksheet Print Answers
The act of collecting, organizing, and interpreting financial data
Which of the following is NOT an element of inventory costs? The cost to store the item The cost to maintain the item until it is sold The cost to market the item The price paid to buy the item
The cost to market the item -Inventory costs are not only the price that was paid to purchase an item but also the cost of storing and maintaining that item for however long it takes it to sell. It does NOT include marketing costs.
Monica reads in the newspaper that in the year ended December 31, 2015, Two Inc made $1 million profit. Monica wants to confirm for herself that this is really the case. Which financial statement of Profit For Two Inc should Monica read to confirm the newspaper report? The statement of retained earnings. The balance sheet. The income statement. The statement of cash flows.
The income statement.
A company is performing an analysis of its environment. It has detected that one of its greatest threats is the potential rise of inflation by 3%. The other two factors that impact it are that there might be a change in fiscal policy that will decrease the effective tax rate by 15% and that Republicans might lose their majority in Congress, creating a complicated political climate. Identify which of the factors mentioned are economic factors: The Republicans losing their majority in Congress. The increase of inflation by 3% and the change of fiscal policy by decreasing the tax rate by 15%. All of the mentioned factors are economic. The increase of inflation by 3%.
The increase of inflation by 3%.
What is an equivalent unit? The number of completed units in the production process and the estimated percentage completion of work-in-process inventory. Large batches of similar products A situation where total labor costs is equal to total overhead costs. The assumption that all items in a batch process are identical to all other items in the same batch
The number of completed units in the production process and the estimated percentage completion of work-in-process inventory.
What information does the statement of retained earnings provide? The profit that was reinvested in the company The net profit of a company The equity that the investors hold The total revenue the company earned
The profit that was reinvested in the company
How do product costs interrelate as they go from department to department under process costing? They accumulate They remain constant They get smaller as they progress in the process They plateau
They accumulate
Mary wants to know how many hours her assistant worked on a particular project during a certain period. Which document in a job-ordering costing system would allow her to do that? Quotation Manufacturing overhead Time ticket(s) Materials requisition form
Time ticket(s)
Why would the CEO of a company use financial statements? To achieve the goals of the organization To identify investors for the company To find ways of moving money to report the highest returns All of these are true
To achieve the goals of the organization
In managerial accounting, what is the function of planning? To recall historical financial performance To estimate future financial performance To compare historical financial performance to current financial performance To evaluate current financial performance
To estimate future financial performance
What is the purpose of managerial accounting? To gather and report information that adds value to a business. To provide external users financial information in order to make informed decisions. To provide regulatory agencies assurance of financial health. To allow investors to be reasonably assured to a business' operations
To gather and report information that adds value to a business.
Why was Sarbanes-Oxley implemented? To protect the general public To protect investors To protect management To protect auditors
To protect investors
Which of the following is NOT a cost component included in a job-order costing system? Materials Total number of items produced per month Manufacturing overhead Direct labor
Total number of items produced per month
What is the main difference between absorption and marginal costing? Treatment of direct labor costs Treatment of direct materials costs Treatment of fixed manufacturing overhead costs Treatment of variable manufacturing overhead costs
Treatment of fixed manufacturing overhead costs
On December 24, Santa's elves have 12,000 trains that still need painting. How does Santa record these trains? Under a Work In Progress account Under a Service In Progress account Under a Shortage Cost account Under an Owner's Equity account
Under a Work In Progress account
If a CEO files a false certification that all material aspects of the company finances are included with a filed report, what type of criminal penalty may the CEO face? Up to one year in prison and a $500,000 fine Fines up to $1,000,000 but no prison time There are no criminal penalties, just regulatory fines Up to five years in prison and $500,000 fine
Up to five years in prison and $500,000 fine
Costing is when a manager does which of the following? Uses overhead to estimate cost Uses competitor's prices to estimate cost Uses the company's stocks to estimate cost Uses supply and demand to estimate cost
Uses overhead to estimate cost
Predictive accounting focuses on which of the following? Using financial information to forecast future operations External users and their need for accurate information Using tax compliance information Creating flexible budgets
Using financial information to forecast future operations
The Service Contract In Progress account is used for which situation? When the service contract is not complete at the end of the accounting period When the service contract is complete but there is more time in the accounting period When the accounting period differs from the tax period When the accounting period differs from the contract period
When the service contract is not complete at the end of the accounting period
Which of the following are goods that have started the conversion process, but still must undergo additional steps before they can be sold? Raw materials Work in process Finished goods Cost of goods sold
Work in process
Which of the following describes inventory that has started the conversion process, but is not yet complete? Completed inventory Finished goods Raw materials Work-in-process
Work-in-process
Which of the following is the stage of the production process where direct labor and overhead apply? Raw materials Cost of goods sold Finished goods Work-in-process
Work-in-process
_____ represents inventory that has started the conversion process but requires more work before it is ready to be sold to consumers. Cost of goods sold Finished goods Work-in-process Raw materials
Work-in-process
SmogCo, a privately owned company with revenues under $1 million but over $100,000, says that it does not need to follow Sarbanes-Oxley Act. Is it correct? Yes, because it is privately held No, because all companies must follow SOX Yes, because it makes less than $1 million No, because it makes more than $100,000
Yes, because it is privately held
Robert is responsible for making purchases for his company. He is offered and accepts a gift valued at about $100 from one of the company's vendors in his private office. Is this an ethical violation? Why? Yes, it is an ethical violation because it is a gift valued over $75. Yes, it is an ethical violation because it could be perceived as a conflict of interest. No, it is not an ethical violation because no one else knew about the gift. No, it is not an ethical violation because Robert is not obligated to purchase from that vendor
Yes, it is an ethical violation because it could be perceived as a conflict of interest.
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the cost that will not change with the number of units produced? a b x y
a
What is the weighted-average method of equivalent units of production? an accounting procedure used to amortize the cost of unsold goods a method to reconcile goods still in production to accounting paperwork a way to boost the grade of your production facility a method for decreasing time in production
a method to reconcile goods still in production to accounting paperwork
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the cost that will change with the number of units? b x a y
b
In a manufacturing facility, products traveling along two conveyor belts merge onto a single conveyor belt in an area where specialty finishes are applied to them in a controlled environment. Under the theory of constraints, this merge point is known as a _____. value stream defect throughput bottleneck
bottleneck
Why is it important for managerial accountants to maintain a high ethical standard? a company could lose investors due to poor accounting practices poor ethics could result in faulty income tax reporting and create risk for audits business managers make key business decisions based on the information they provide a loss of trust in managerial accounting could cause a company to lose shareholders
business managers make key business decisions based on the information they provide
The IRS has instituted a new tax law and Mary, the company's accountant, does not know about it. She files the company's taxes according to the old law. Mary may be guilty of which category of ethical violations? competence misleading information withholding information conflict of interest
competence
What goods qualify as goods transferred out? goods lost due to mistakes in production goods sold to a preferred client completed goods sent to another department goods whose manufacture is being outsourced
completed goods sent to another department
The _____ refers to the total dollar amount a business paid for the products it sold. cost to sell goods indirect cost of goods inventory items sold cost of goods sold
cost of goods sold
Liz works in a research facility. She frequently makes copies of protocols to send to the various labs throughout her company. The copier is located on the floor below her, so she makes multiple trips downstairs each day. Liz feels that she could be more efficient in her job if the copier was located closer to her work area or if she waited and made the copies once a day. This is an example of which aspect of the lean production model? responding to customer demand creating flow to the customer by eliminating waste defining value from the customer's perspective aiming for perfection
creating flow to the customer by eliminating waste
According to accountants, product flow is the path a product takes _____ when shipped from the business to the customer. when it needs to be moved inside and outside the company. on the assembly line. from idea to a finished product.
from idea to a finished product.
The process costing method is used by businesses that _____ only provide services. produce custom products. manufacture their goods in bulk. provide personalization services
manufacture their goods in bulk.
Marketing and advertising expenses are examples of _____ costs. sunk product period opportunity
period
You are the manager at a toy manufacturing plant. During your end of the month accounting, what report would you use to justify your expenses for production? the cost of inventory report the goods transferred out report the equivalent goods report the cost reconciliation report
the cost reconciliation report
What is conversion? the process of finding the number of equivalent units from those goods still in production the method for determining the percentage units are from being complete subtracting the goods under production from goods that are complete adding the goods under production to the goods already completed Print Worksheet
the process of finding the number of equivalent units from those goods still in production
NDB Company has a factory with fixed costs of $500,000 and a production capacity of 150,000 units annually. Its product sells for $10 with a 30% contribution margin. What is the break-even level expressed in unit sold? 15,000 35,000 50,000 there is no B-E level
there is no B-E level With a contribution margin of $3 per unit, even a maxed-out production only covers $450,000 in fixed costs. Prices need to rise or costs must be reduced.
What is the goal of the theory of constraints? to increase employee satisfaction to improve customer loyalty to reduce waste to maximize profit
to maximize profit
Opportunity costs always need _____. two or more alternative actions a financial investment the use of the stock market a change in capital assets
two or more alternative actions
Which of the following is a category of ethical violation in managerial accounting? tax fraud withholding information embezzlement leaking information
withholding information
In the mixed cost equation of 'y = a + b(x)', which of the letters represents the sum of the fixed and variable costs? y a b x
y
Calculate a company's break-even in units given the following information: fixed costs = $100,000; unit contribution margin = $20; variable cost per unit = $15. 10,000 units 6,667 units 5,000 units 20,000 units
5,000 units The break-even would be 5,000 units (fixed costs / unit contribution margin = $100,000 / $20 = 5,000).
If a company had fixed costs of $100,000, a selling price of $10 per unit and a variable cost of $8 per unit, what is its break-even point in units? 100,000 50,000 10,000 12,500
50,000 The formula for calculating the break-even point per unit is fixed costs / (selling price - variable cost). The break-even point is 50,000 ($100,000 / ($10 - $8)).
Calculate the contribution margin ratio given the following information: sales revenue = $200,000; variable costs = $75,000; fixed costs = $50,000. 25% 37.5% 75% 62.5% Print Worksheet
62.5% ExplanationThe contribution margin ratio is 62.5% ((sales revenue - variable costs / sales revenue) x 100% = (($200,000 - $75,000) / $200,000 x 100%).
What is a contribution margin income statement? A document that shows how much profit a company has made during a specific period of time, once variable and fixed costs have been subtracted from the income A document that shows how much money a company has spent, with no accounting for variable costs A document with an emphasis on fixed costs as a way to determine profit A document that shows how much profit a company has made during a specific period of time, once variable and fixed costs have been added to the income
A document that shows how much profit a company has made during a specific period of time, once variable and fixed costs have been subtracted from the income
What is an income statement? A document that always shows the total amount of sales, minus the variable costs A document that uses sales to track how much your business is spending on costs A document that shows variable costs in detail A document that shows just how much money a company has made during a specific period of time, as well as how much money a company has spent
A document that shows just how much money a company has made during a specific period of time, as well as how much money a company has spent
What kind of business uses a traditional income statement? A smaller business that doesn't have to pay costs off over time Only public corporations A larger business that is more concerned with variable costs A well-run business of any size
A smaller business that doesn't have to pay costs off over time
What is a contribution margin income statement? A statement showing how much of sales were spent on variable costs. All the money that was made by the company through sales Wages that were paid for production Wages that were paid for labor
A statement showing how much of sales were spent on variable costs.
Which of the following is a period cost? Advertising expense Raw materials Manufacturing labor-hours Machine-hours
Advertising expense
What are total sales? All the money that was made by the company through sales Wages that were paid for labor Wages that were paid for production A statement showing how much of sales were spent on variable costs
All the money that was made by the company through sales
When are period costs recorded? Any time during the accounting period. When the product sells. When the manufacturing of the product is completed. When the manufacturing of the product is started.
Any time during the accounting period.
How is variable cost linked to the number of products a company produces? As the number of products increases, the variable costs increase. As the number of products increases, the variable costs remain unchanged. As the number of products increases, the variable costs decrease to a minimum and then remain unchanged. As the number of products decreases, the variable costs increase
As the number of products increases, the variable costs increase.
If someone is considering sunk costs when making a decision, what are they doing? Attempting to justify past choices. Prudently considering all aspects of the project's finances. Attempting to complete the project. Being proactive. Print Worksheet
Attempting to justify past choices.
Why are fixed costs usually not included in the determination of relevant costs? Because fixed costs have already been incurred and relevant costs focus on costs that will be incurred in the future. Because the fixed costs of most companies change too often. Because most companies have few fixed costs. Because fixed costs have not been incurred yet, and relevant costs focus on costs that have already been incurred.
Because fixed costs have already been incurred and relevant costs focus on costs that will be incurred in the future.
Identify the company that has the highest operating leverage. Blyth Company Ltd, with high fixed costs, low variable costs and a high contribution margin ratio. Campus Company Ltd, with low fixed costs, high variable costs and a high contribution margin ratio. Roger Company Ltd, with low fixed costs, low variable costs and a high contribution margin ratio. Rhino Company Ltd, with high fixed costs, high variable costs and a low contribution margin ratio.
Blyth Company Ltd, with high fixed costs, low variable costs and a high contribution margin ratio. Explanation: Operating leverage refers to the extent to which a business has variable and fixed costs. A company with higher fixed costs and lower variable costs has higher operating leverage. A company with higher operating leverage is riskier as it must sell more units in order to break-even.
Pack Company Ltd is a company that is involved in the packing of fruits in cans. Which of the following costs is an example of fixed cost for the business? Building Lease Fruits Cans Packaging
Building Lease
Which of the following would be a mixed cost? Commission Raw materials Rent Car depreciation
Car depreciation
Which of the following is a cost behavior? Change in raw material prices. Change in product selling price. Change in depreciation method. All are cost behaviors.
Change in raw material prices.
ABC Electronics had sales of $175,000 last year. They had $25,000 of variable costs and $12,500 of fixed costs. What is their contribution margin? $162,500 $37,500 $137,500 $150,000 Print Worksheet
Contribution margin = 175000 - 25000 = $150,000
Which kind of income statement would give you the most information about your marketing strategy? Contribution margin income statement An income statement won't have any information on marketing. Any kind of income statement Traditional income statement
Contribution margin income statement
What is the resource exchanged for another resource or advantage called? Cost Raw material Expense Asset
Cost
What do we call a change in total costs due to a change in some business activity? Cost behavior Fixed cost Variable cost Mixed cost
Cost behavior
Assuming there are only two countries, Country A can produce 10 tons of wheat or 20 tons of rice, while Country B can produce 5 tons of wheat or 15 tons of rice. Which country has the highest opportunity cost for producing 1 ton of rice? Country B Country A up to 1/2 ton then it is Country B Country A Both countries are the same
Country A Country A's opportunity cost is 10 tons of wheat = 20 tons of rice or 1 ton of wheat = 2 tons of rice. Country B's opportunity cost is 5 tons of wheat = 15 tons of rice or 1 ton of wheat = 3 tons of rice. To make 1 ton of rice in country A is the same as making 1 / 2 ton of wheat while in country B it's the same as making 1 / 3 ton of wheat. Country A has the higher cost.
Which of the following people has the highest opportunity cost of earning a college degree, if they must give up their present job? Larry, who is a Navy Seal earning $40,000 Curly, who is a salesman earning $60,000 Moe, who is unemployed Sue, who is a chef earning $25,000
Curly, who is a salesman earning $60,000
How are direct costs different from indirect costs? Direct costs are costs borne by the company while indirect costs are not borne by the company. Direct costs have monetary value while indirect costs are costs do not have monetary value. Direct costs are costs that are involved in paying raw materials while indirect costs are costs that are involved in selling the products. Direct costs are those costs that can be tied directly to the production of a product while indirect costs are not directly related to a particular product
Direct costs are those costs that can be tied directly to the production of a product while indirect costs are not directly related to a particular product.
Which of the following costs would be considered a direct cost? Utilities Direct labor Rent Salary of an office manager
Direct labor
What are variable production expenses? Expenses that were paid for production such as raw materials Wages that were paid for labor A statement showing how much of sales were spent on variable costs All the money that was made by the company through sales
Expenses that were paid for production such as raw materials
How do implicit costs and explicit costs differ? Implicit costs only apply to salaries. Implicit costs are dollar amounts that can be easily calculated; explicit costs cannot be calculated as easily. Explicit costs only apply to salaries. Explicit costs are dollar amounts that can be easily calculated; implicit costs cannot be calculated as easily.
Explicit costs are dollar amounts that can be easily calculated; implicit costs cannot be calculated as easily.
Which of the formulas below can be used to calculate the total cost (TC)? FC + VC = TC FC(Q) + VC(Q) = TC FC + VC(Q) = TC (FC + VC)Q = TC
FC + VC(Q) = TC
Which of the following is the cost gain in the production of a product. Electricity used to produce a product. Finished product Labor used to produce a product Raw materials used to produce a product
Finished product
What type of cost is the unchanging base cost that is paid every month when renting a machine? Mixed Constant Variable Fixed
Fixed
Which two cost components does a mixed cost need to have? Fixed and variable Taxable and nontaxable Manufacturing and administrative Internal and external
Fixed and variable
Most overhead costs would be categorized as which of the following? Fixed cost Variable costs Mixed cost Opportunity cost
Fixed cost
Sarah is the accountant for Brown's Business. Under which category would she put the insurance for the delivery trucks owned by Brown's Business? Fixed cost Mixed cost Variable cost Budgeted cost
Fixed cost
Identify a fixed cost and a variable cost that are involved in the operation of an automobile. Fixed cost: gas; variable cost: car payment. Fixed cost: insurance; variable cost: gas Fixed cost: tires for the car; variable cost: gas Fixed cost: car payment; variable cost: insurance
Fixed cost: insurance; variable cost: gas
What type of cost remains constant from month to month? Variable costs Sunk costs Fixed costs Total costs
Fixed costs
Identify the statement that best describes fixed costs. Fixed costs are costs that are not required to run a business. Fixed costs are costs associated with the number of employees a business employs. Fixed costs depend on the profit of the business. Fixed costs are costs that do not usually fluctuate
Fixed costs are costs that do not usually fluctuate.
Which of the following is an indirect cost? Insurance on warehouse inventory Paint to decorate a product Labor to create a product Raw materials
Insurance on warehouse inventory
Which of the following BEST describes a sunk cost? It is money that has been spent, but is recoverable. It is a part of budgeted costs. It is money that has been spent, and is not recoverable. It is based on projected revenue.
It is money that has been spent, and is not recoverable.
Which of the following is a fixed cost? Loan debt Raw materials Depreciation Machine-hours
Loan debt
Which one is NOT an example of product costs? Marketing costs Direct materials Manufacturing overhead Direct labor
Marketing costs
Which of the following are associated with variable costs? Rent, utilities, and executive employee salaries Incurred costs for the previous year Projected costs for the coming year. Materials, labor, and sales commissions
Materials, labor, and sales commissions
Joshua receives a weekly salary for his work as a sales person. He also receives a commission for each sale he makes. What kind of cost is his compensation? Fixed Variable Mixed Opportunity
Mixed
Which of the following would represent a fixed cost? Supplies used in the production process Direct materials Monthly mortgage payment Direct labor
Monthly mortgage payment
Warren bought a jet airplane three years ago with a loan. Fuel costs have stayed the same over the years. If the terms of the loan changes so that the rate increases by 3%, how will this affect the cost behavior analysis? The mixed cost will increase as the fixed cost component increases. The mixed cost will decrease as the fixed cost component increases. The mixed cost will increase as the variable cost component increases. The mixed cost will decrease as the variable cost component decreases.
The mixed cost will increase as the fixed cost component increases.
Assume that land can be used either for producing corn or producing beef. The opportunity cost of converting an acre from producing corn to raising cattle for beef is equal to which of the following? The amount by which corn production decreases. The market value of the extra beef. The amount of beef produced. The profits created by the extra beef production.
The amount by which corn production decreases.
What must be true about profit to use it in the cost-volume-profit model? It must not exceed fixed cost. It must be spent on inventory. It must come in the form of cash. The exact dollar figure of profits must be known
The exact dollar figure of profits must be known.
Josie decided to go to college full-time instead of working. Which of the following is the opportunity cost of going to college for Josie? The income she would have earned by working. The income she will earn in the future for being a college graduate. The cost of college tuition. The final benefit of graduating from college.
The income she would have earned by working.
During the time Mary spent studying macroeconomics, she could have instead either made brownies or played the piano. She thinks to herself that if she wasn't studying, then she would have made brownies. In this case, her opportunity cost of studying is equal to which of the following? The cost of the ingredients needed to make brownies. The value of playing the piano. The amount of time Mary spent studying. The value of making brownies, which is her next best alternative. Print Worksheet
The value of making brownies, which is her next best alternative.
Which of the following best describes opportunity cost? How much better off you are because you made a decision. The value to you of the next best (alternative) action you could have taken. How much you have to pay for the opportunity you choose. The dollar value of the decision you made.
The value to you of the next best (alternative) action you could have taken.
Jill started a business making designer soccer balls. If she made 500 soccer balls this month, sells them for $50 each, and the variable cost of producing one soccer ball is $12.75, what are her total variable costs for this month? $512.75 $25,000 $6,375 $18,625
Total variable cost = 500 x 12.75 = $6,375
In one hour, Sally can complete 4 reports or she can write 8 computer programs. Calculate the opportunity cost for this scenario. Writing one report and forgoing 3 computer programs Writing one report and forgoing 5 computer programs Writing one report and forgoing 4 computer programs Writing one report and forgoing 2 computer programs
Writing one report and forgoing 2 computer programs The opportunity cost here is 4 reports = 8 computer programs which reduces to 1 report = 2 computer programs.