Management Accounting Final

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Ray corp recently computed total product cost of $888, and total period cost of $333k, excluding $33 of sales commissions that were overlooked by the company admin. Based on this info, the income statement should reveal operating expenses of?

$336k (operating expenses is the same as period costs or selling and admin costs)

If the per-unit conversion cost was $1.60 last month and direct materials cost was $120,000, direct labor costs was $40,000 an manufacturing overhead costs was $96,000. How many units did they manufacture during the month

85000

Are factory utilities a component of MO?

YES

what is operating leverage? A) a measure of how a change in sales volume will affect profits B. A measure of how a change in debt will affect profits. C.A measure of how a change in salesprice will affect profits. D.Both "B" and "C" above. E. ll of the above

a

A company budgeted $40,000 production costs in December. Direct material costs represent 30% of the costs. If the company budgeted to purchase $18,000 in raw materials during December, then the budgeted ending raw material inventory levels as at the end of December is: (A)$6,000 higher than beginning inventory. (B)$6,000 lower than beginning inventory (C)$10,000 lower than beginning inventory (D)$22,000 lower than beginning inventory (E)$15,000 higher than beginning inventory

a (3b question 5)

Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was: (A)$1,000 underapplied. (B)$1,000 overapplied. (C)$4,000 underapplied. (D)$4,000 overapplied. (E)$5,000 underapplie

a (work through 3a question 9)

For performance evaluation purposes, the fixed costs of a service department should be charged to operating departments using: I. actual fixed costs and the budgeted level of activity for the period. II. budgeted fixed costs and the peak-period/long-run average servicing capacity. III. actual fixed costs and the peak-period/long-run average servicing capacity only. A. I only B.II only. C.III only. D.I and II only. E.II and III only.

b

The clerical activity associated with preparing purchase orders to buy materials to produce an order for a standard product is an example of a. unit-level activity b. batch level activity c. product level d. org sustaining activity e. customer-level

b

The contribution-margin format of the income statement: A) is used with absorption costing B) highlights the lump sum of fixed manufacturing costs C) distinguishes manufacturing costs from non manufacturing costs D) calculates gross margin E) is used for external reporting purpose

b

The following events took place when Abigail, Bruce, and Callie were preparing budgets for the upcoming period: I.Abigail reduced sales revenue forecast to reflect the expected economic downturn. II.Bruce oversees a team of production direct workers with varying skill levels and wage rates. He used the highest wage rate when preparing the labour budget. III.Callie submitted a higher industrial property tax budget in accordance to the government's plans to increase the industrial property taxes the next year. Which is/are example(s) of budgetary slack? A)I only. (B)II only. (C)III only. (D)I and II. (E) II and III

b

Variances should be investigated: (A)when they are acceptably small. (B)when the same variance keeps recurring. (C even though the cost of investigation exceeds the benefit. (D)only when they are unfavourable (E)only when they are favourable

b

A duration driver is: A. a simple count of the number of times an activity occurs. B. an activity measure that is used for the life of the company. C.a measure of the amount of time required to perform an activity. D. an activity measure that is used for the life of an activity-based costing system. E. the same as transaction driver

c

Relevant costs of a make-or-buy decision include all of the following EXCEPT: (A)Fixed salaries that will not be incurred if the part is outsourced. (B)Current direct material costs of the part. (C)Special machinery purchased a few years ago for the part and has no resale value. (D)Material-handling costs that can be eliminated. (E)Whether the supplier is reliable

c

Which of the following companies would most likely use process costing rather than job costing? (A)McKinsey & Company, Inc., a management consultancy firm (B) KPMG , one of the big four accountancy firms (C)Yeo Hiap Seng Limited, a drink manufacturer. (D)Saatchi & Saatchi, an advertising firm (E)All of the above companies

c

Which of the following products/services cost is most likely to be accounted for using job costing rather than process costing? A. Production of orange juice at Sunkist. B.Manufacturing of potato chips at Lay's C. Provision of tax preparation service for corporate clients at Ernst and Young D.Provision of customer support service at a call center. E. Production of jeans at Levi's

c

Which of the following statements is (are) true regarding Job Costing? I.Direct costs are traced to the jobs and indirect costs are lumped together and allocated to the jobs. II. Companies typically wait for accurate information regarding actual overhead costs before pricing a job. III.Job costing can be used for both manufacturing and service companies. A. I only B. I and II C. I and III D. II and III E. I and II and II

c

IT Pte Ltd provides two types of services: (i) BUILDING computers and (ii) FIXING computers. Under its traditional accounting system, the gross profi treported for BUILDING is $20,000 whereas that for FIXING is $40,000. Good-IT normally uses the total direct labour hours of its technicians and engineers as the allocation base for overheads. Engineers are involved only in FIXING and are paid two times more than technicians. The labour cost of the engineers and technicians are direct costs. A consultant has recommended that Good IT switch to activity based costing (ABC). Which of the following statement(s) is/are true? (A)Under traditional accounting, the cost of engineers is traced to BUILDING. This is unlike ABC where the cost of engineers will not be traced to BUILDING. (B)Organization-sustaining costs must be assigned to BUILDING and FIXING under ABC. (C)Some selling and administrative costs (i.e. period costs) may be assigned to BUILDING and FIXING under ABC on a cause-and-effect basis. (D)A & B above. (E)All of the above

c (False: Stated in the question "Engineers are involved only in FIXING". Hence, "under traditional accounting, the cost of engineers is traced to BUILDING." is false. "This is unlike ABC where the cost of engineers will not be traced to BUILDING." this statement is not false. (B)False: Not all organization-sustaining costs must be assigned to BUILDING and FIXING under ABC. For example, security guards are organization-sustaining costs which ABC may not assign to products. ABC can leave some manufacturing costs unallocate)

Stylo Ltd, a shirt maker, has a cutting operation and a stitching operation for each shirt. At the Cutting Department, it takes 30 minutes to cut the fabric for each shirt. The production workers are paid $60 per hour. There was no beginning work-in-progress. At the end of the period, the Cutting Department had 1,000 completed units and 200 units of work-in-process that were 50% completed. What is the cost per equivalent unit for direct labour at the Cutting Department? (A)$60.00 (B)$45.00 (C)$30.00 (D)$27.50 (E)None of the above

c (One completed shirt = 0.5 hour x $60 = $30)

9. Treetops worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. Nos.401 and 402 were completed by year-end, and no. 401 was sold at a profit of 40% of cost. A review of job no. 403's cost record revealed direct material charges of $20,000 and total manufacturing costs of $25,000. If Treetops applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been: (A)$0. (B)$2,000. (C)$3,000. (D)$3,333. (E)$5,000

c (work through 3a question 9)

2. Trendy Wear Company has exclusive rights to sell the Blueberry Shortcake T-shirts. The company currently pays sales commission of 5% on each shirt sold. If a graph is prepared with the vertical axis representing per-unit cost and the horizontal axis rep resenting units sold, how would a line that depicts sales commissions be draw A) As a straight diagonal line, sloping upward to the right. B) As a straight diagonal line, sloping downward to the right. C) As a vertical line. D) As a horizontal line. E) As a curvilinear line

d

8. Under normal costing, the total production cost of a job is composed of: (A)direct material and direct labor. (B)direct material, direct labor, manufacturing overhead, and outlays for selling costs. (C)direct material, direct labor, manufacturing overhead, and outlays for both selling and administrative costs. (D)direct material, direct labor, and applied manufacturing overhead. (E)direct material, direct labor, and actual manufacturing overhea

d

Comapny has set various goals and management is now taking appropiate action to ensure that the firm achieves these goals. One such action is to reduce outlays for overhead, which have exceeded budgeted amounts. Which of the following function best describes this process? A) Decision making B) Planning C) Coordinating D) Controlling E) Organizin

d

Consider the following activities relating to a product: I.Research and Development II. Advertising III.Packaging products Which of the above activity (or activities) is (are) example(s) of product-level activities? A. I only. B. II only. C. III only. D. I and II. E. II and III

d

For performance evaluation purposes, the variable costs of a service department should be charged to operating departments using: A.actual total variable costs for the period. B.budgeted total variable costs for the period. C.budgeted level of services times budgeted variable rate per service. D.actual level of services consumed times budgeted variable rate per service. E.None of the above

d

In a process costing system using the weighted-average method, data may be manipulated so as to report higher profits by: (A)Understating the quantity of physical units of the beginning work-in-process and units started. (B)Understating the quantity of physical units of the ending work-in-process and completed units. (C)Overstating the degree of completion of beginning of work-in-process. (D)Overstating the degree of completion of ending work -in-process. (E)Overstating the value of manufacturing costs added during the per

d

When considering the appropriateness of costing technique(s) e.g. job- order costing, process costing, activity-based costing, to be adopted for internal decision making purpose, which of the following is the least important or irrelevant factor to a company? A.The techniques should match and fit the underlying operation involved B.The techniques should be simple and cost effective C.The company should have sufficient resources and manpower to run the techniques/system D. The techniques should be IFRS/GAAP compliant E.The techniques should reflect consumption of resources by the cost object

d

a company intends to help other companies fix their laptops. Sales rev will be earned at 100/hr on each computer. Total fixed costs, excluding salaries, is 55k. no variable costs This corp has the choice between (1) hiring permanent IT staff at 55k/month to fix the computers in Singapore or (2) outsource all the work to a co in malaysa costing 40/hr worked on each laptop and an additional 5k/month in fixed transport costs which of the following statements it true for any one month? a. option one has a higher contribution margin ratio b. option 1 has a higher breakeven point c. option 1 will result in the corp having a lower operating leverage d. a and b e. all the above.

d

2. Your CEO has called you into her office and wants to know why you have treated total labour cost (consisting of full-time employees only) as a fixed cost in the annual budget. In her opinion, since employees can be fired with one month's notice, they are a variable cost. What should you say to justify treating total labour costs as fixed with respect to annual sales? (A)The company's total labour cost is a stepped cost with respect to annual sales. (B)You are confident that the company will achieve the budgeted annual sales and this will not exceed the relevant range of total labour cost. (C) The cost of full- time employees is always treated as a fixed cost whereas the cost of part- time employees is always treated a variable cost under all circumstances. (D) A & B above. (E)All of the above .

d Correct: Stepped cost means that total labour cost increases in steps as annual sales increases. Thus, within each step (the relevant range), total labour cost is fixed with respect to annual sales. (B)Correct: If the company will not exceed the relevant range of total labour cost and we need, for example, ten staff within the relevant range, even if we can hire and fire, we will still have ten staff within the relevant range. Hence, ten staff is a fixed cost. (C)Incorrect: There are examples to the contrary. For example, the labour cost of full- time insurance agents is unlikely to be fixed since a large component of their salaries is commission-based

A courier service company uses the Balanced Scorecard to evaluate performance. Which of the following measures will NOT lead to increased customer satisfaction for the company? (A)Reduce the average customer waiting time when calling and scheduling a package pickup. (B) Decrease the number of packages lost or damaged (C)Faster response time to customer problems. (D)\Lower number of customer complaints. (E)Higher employee turnover

e

Assuming that you accidentally overstated the quarter's depreciation expense for office equip by $45k. Which of the following correctly depicts the effect of this error. A) Cost of goods manufactured will be overstated by $45,000. B) Cost of goods sold will be overstated by $45,000. C) Both cost of goods manufactured and cost of goods sold will be overstated by $45,000. D) Cost of goods sold will be overstated by $45,000, and cost of goods manufactured will be understated by $45,000. E) None of these.

e

Public Relations in a manufacturing company is an example of a/(an): A. unit-level activity. B. batch-level activity. C. product-level activity. D. customer-level activity. E. organization-sustaining activity

e

Which of the following positions of a bank is expected to provide and use management acct info? a. financial controller b. marketing director c. head of hr b. head of it e. all of the above

e

when closing over applied manu overhead to cogs, which of the following would be true? A) Work in process will decrease. B) Cost of goods sold will increase. C) Net income will decrease. D) Finished goods will decrease. E) Gross margin will increase

e

Is this statement true: activity-based costing is a costing method that is designed to provide manger with product cost info for external financial reports

false

Is this statement true: all other things equal, the margin of safety $ in a company with high fixed costs and low variable costs will tend to be higher than the margin of safety in a similar company that has low fixed costs and high variable costs

false

Is this statement true: budgets are used mainly for planning rather than control

false

Is this statement true: depreciation is not excluded from the total budgeting s&a expenses to determine the expected cash disbursements

false

Is this statement true: job costing allocates indirect costs equally to each job

false

Is this statement true: job costing calculates the per-determined indirect cost rate by using the budgeting indirect costs divided by the actual cost driver such as actual professional staff hours

false

Is this statement true: job costing can only be used in manu

false

Is this statement true: job costing is commonly used when each unit of output is identical

false

Is this statement true: org-sustaining activities are activities of the org that support specific products

false

Is this statement true: product costs called based on activity-based costing is always higher than the product costs calculated based on traditional costing because activity-based costing also allocates non-manu costs to products

false

Is this statement true: sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing is known

false

Is this statement true: the costs of a particular department should not be split up among activity cost pools in an activity-based costing system

false

Is this statement true: the master budget is made up many separate budgets that are independent from one another

false

Is this statement true: the weighted-average inventory method isolates previous period costs from those costs incurred in teh current period

false

Is this statement true: when a budget is used as a compensation tool, this will result in lowering the amount of budgetary slack/budget padding

false

Relating to variable costing and absorption costing, is this statement true: the product costs for absorption costing differ from that of variable costing in that the product costs for absorption costing includes fixed s&a expenses

false

Is the cost of factory equip a component of MO?

no

is an emphasis on the verifability more than relelance a characteristic of manu accounting info?

no

is determining actual profitability an advantage of budgeting?

no

will increasing the selling price per unit increase a companies breakeven point?

no

Relating to variable costing and absorption costing, contribution margin is always equal to sales minus all variable manu costs

no its false

Relating to variable costing and absorption costing, do the product costs for absorption costing differ from that of variable costing in that the product costs for absorption costing includes variable manu overhead true?

no its false

Relating to variable costing and absorption costing, in teh absence of any fixed costs, contribution margin will always be the same as gross profit true?

no its false

Relating to variable costing and absorption costing, in using absorption costing to cost a product, one must include all fixed costs, manu and non-manu, in the computation of the product costs true

no its false

Is this statement true: in the weighted-average process costing method, the costs of direct materials in beg inv. are not included in the equivalent unit cost calc since direct materials are almost always added at the start of the production process

no, false

An unfavorable price variance for direct materials might indicate that: (A)the purchasing manager purchased in smaller quantities due to a change to just-in-timeinventory methods. (B)a lower price than planned was paid for direct materials (C)more direct material quantity was used in production than planned for actual output (D)the purchasing manager skill fully negotiated a better purchase price (E) the market had an unexpected oversupply of the direct materials

s

Relating to variable costing and absorption costing, is this statement true: under variable costing, contribution margin is after deducting variable cogs and variable s&a from sales rev

treu

Is this statement true: budgets can play both planning and controlling roles for management

true

Is this statement true: budgets generally include both financial and non financial aspects of the plan

true

Is this statement true: examples of industries that would use process costing include the pharmaceutical and soft drinks manu industries

true

Is this statement true: if variable costs per unit increase, then the breakeven point will increase

true

Is this statement true: in a job-costing system, individual jobs use different quantities of production resources

true

Is this statement true: in a process-costing system each unit uses approx the same amount of resources

true

Is this statement true: in process costing cal, conversion costs are usually assumed to be added evenly throughout the production process

true

Is this statement true: research has shown that challenging budgets, rather than budgets that can be easily attained, are energizing and improving performance

true

Is this statement true: the individual units of production manu'ed in a process costing environment are likely to be homogeneous and indistinguishable from one another

true

Is this statement true: the manu overhead budget comprises both variable and fixed manu overhead costs

true

Is this statement true: transferred-in-materials are treated as 100% completed in the current department

true

Is this statement true: unit-level activities are performed each time a unit is produced

true

Is this statement true: when a company has at least some fixed costs, the degree of operating leverage is different at different levels of sales

true

Is this statement true: when administered wisely, budgets promote communication and coordination among the various subunits of the org

true

Is this statement true: when there is no beginning and ending wip, total equivalent units of production is the same as the total physical units of production for the period

true

Referring to overhead allocation, is this statement true: actual overheads may not be known until days or weeks after the end of the period, therefore, using predetermined overhead rates avoid delaying the caluc of unit costs for reporting issues

true

Referring to overhead allocation, is this statement true: many types of overhead costs are fixed, even though output fluctuates during the period; using predetermined overhead rates reduces the fluctuations in overhead rates that results from seasonal factors

true

Referring to overhead allocation, is this statement true: using predetermined overhead rates allows the cost to be estimated in a timely manner for decision makign purposes

true

Referring to prime costs and conversion costs, is this statement true: period costs can be calculated by subtracting product costs from total costs

true

Referring to prime costs and conversion costs, is this statement true: prime costs and conversion costs are product costs

true

Referring to prime costs and conversion costs, is this statement true: the difference between prime cost and conversion cost can be calculated by finding the difference between the cost of direct materials and manu overhead

true

Relating to variable costing and absorption costing, is this statement true: regardless of the sales volume versus production volume, as long as a company has ending inventory, the company's retained profit (cumulative from day 1) will always be higher under absorption costing than under variable costing.

true

Relating to variable costing and absorption costing, is this statement true: variable costing is consistent with the contribution margin format

true

Relating to variable costing and absorption costing, is this statement true: when finished goods inventory decreases during a period, a manu company's absorption costing net operating income

true

Is an emphasis on timeliness more than precision a characteristic of manu accounting info?

yes

Will increasing a companies total fixed costs increase a companies breakeven point?

yes

are indirect materials a component of MO?

yes

are property taxes on the manu plant a component of MO?

yes

is a focus on teh future more than past a characteristic of manu accounting info?

yes

is an improvement of communication and coordination an advantage of budgeting?

yes

is having a flexible format father than having to follow the international acct standards a characteristic of manu accounting info?

yes

is helping allocate resources an advantage of budgeting?

yes

is indirect labor a component of MO?

yes

is motivating employees an advantage of budgeting?

yes

is providing detailed info about parts of a company, not just the company as a whole a characteristic of manu accounting info?

yes

is uncovering potential bottlenecks an advantage of budgeting?

yes

will decreasing contribution margin per unit increase a companies breakeven point?

yes

will increasing variable cost per unit increase a companies breakeven point?

yes


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