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Cost classifications used for decision making include: Variable cost and fixed cost. Direct cost and indirect cost. Product cost and period cost. Relevant and irrelevant cost.

Relevant and irrelevant cost.

A manager of an investment center is most likely to be evaluated using a: variance analysis performance report. properly formatted segmented income statement. financial measure such as residual income. set of financial ratios that focus on profit margins.

financial measure such as residual income.

A spending variance is calculated by comparing the: flexible budget to the actual results planning budget to the flexible budget. planning budget to the actual results. static budget to the actual results.

flexible budget to the actual results

Avoidable costs are always: variable costs. fixed costs. relevant costs. sunk costs.

relevant costs.

Incremental costs are always: variable costs. fixed costs. sunk costs. relevant costs.

relevant costs.

Opportunity costs are always: relevant costs. variable costs. sunk costs. fixed costs.

relevant costs.

Which of the following should be ignored when making decisions? Sunk costs Differential costs Avoidable costs Incremental costs

sunk costs

Which of the following statements is true? A flexible budget is a comparison of actual revenues and costs at the actual level of activity to the actual revenues and costs incurred at the planned level of activity. A flexible budget is a comparison of actual revenues and costs to what they should have been given the planned level of activity. A flexible budget is an estimate of what revenues and costs should have been given the planned level of activity for the period. A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.

A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.

Which of the following statements is true? A planning budget is prepared before the period begins and is valid for only the actual level of activity. A planning budget is prepared after the period ends and is valid for only the planned level of activity. A planning budget is prepared before the period begins and is valid for only the planned level of activity. A planning budget is prepared after the period ends and is valid for only the actual level of activity.

A planning budget is prepared before the period begins and is valid for only the planned level of activity.

Which of the following statements is true? Absorption costing treats variable administrative expense as a product cost. Absorption costing treats sales commissions as a product cost. Absorption costing treats fixed manufacturing overhead as a period cost. Absorption costing treats variable manufacturing overhead as a product cost.

Absorption costing treats variable manufacturing overhead as a product cost.

Which of the following is an example of a product-level activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Advertising products

Which of the following is an example of a unit-level activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Assembling products

Which of the following explains how to prepare a profit graph? Compute the profit at two different sales volumes, plot the points, and then connect them with a straight line. Compute the contribution margin at two different sales volumes, plot the points, and then connect them with a straight line. Compute the total variable expenses at two different sales volumes, plot the points, and then connect them with a straight line. Compute the contribution margin ratio at two different sales volumes, plot the points, and then connect them with a straight line.

Compute the profit at two different sales volumes, plot the points, and then connect them with a straight line.

Which of the following is not one of the three inventory accounts reported on the balance sheet? Cost of goods sold Finished goods Work in process Raw materials

Cost of goods sold

Which of the following measures would most likely appear in the Customer perspective of a company's balanced scorecard? Average training hours per employee Delivery cycle time Customer defection rate Return on assets

Customer defection rate

Which of the following measures would managers hope to see increasing over time? Cost of quality Defect-free units as a percentage of completed units Number of warranty claims Throughput (Manufacturing cycle) time

Defect-free units as a percentage of completed units

Which of the following is an example of a duration driver? Number of machine-setups. Quantity of customer orders received. Direct labor-hours. Dollars spent on advertising.

Direct labor-hours.

The total manufacturing costs added to production within a schedule of cost of goods manufactured is calculated using which of the following equations? Direct materials used in production + Direct labor + Manufacturing overhead applied to work in process Direct materials used in production + Direct labor − Manufacturing overhead applied to work in process Direct materials used in production + Direct labor + Actual manufacturing overhead costs assigned to work in process Direct materials used in production + Direct labor − Actual manufacturing overhead costs assigned to work in process

Direct materials used in production + Direct labor + Manufacturing overhead applied to work in process

In variable costing, a complete definition of unit product cost includes: Direct materials, direct labor, and variable manufacturing overhead. Direct materials, direct labor, variable manufacturing overhead, and variable selling and administrative expenses. Direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead. Direct materials and direct labor.

Direct materials, direct labor, and variable manufacturing overhead.

Which of the following measures would managers hope to see decreasing over time? Employee turnover percentage Average years of tenure per employee Average training hours per employee Percent of workforce promoted within the last three years

Employee turnover percentage

The costs of product recalls and warranty repairs would be classified as what type of quality cost? External failure costs Internal failure costs Appraisal costs Prevention costs

External failure costs

Which of the following statements is false? Conversion costs include manufacturing overhead. Prime costs include direct labor. Conversion costs include direct labor. Prime costs include manufacturing overhead.

Prime costs include manufacturing overhead.

Which of the following statements is false? Finished goods inventory is included in a balance sheet. Finished goods inventory includes direct materials used in production. Finished goods inventory includes actual manufacturing overhead costs assigned to jobs completed during the period. Finished goods inventory includes direct labor costs.

Finished goods inventory includes actual manufacturing overhead costs assigned to jobs completed during the period.

Which of the following statements is true? In variable costing, fixed manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as part of cost of goods sold on the income statement. In variable costing, fixed manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as part of selling and administrative expenses on the income statement. In variable costing, fixed manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as sales revenue on the income statement. In variable costing, fixed manufacturing overhead costs are recorded as period expenses on the income statement as incurred.

In variable costing, fixed manufacturing overhead costs are recorded as period expenses on the income statement as incurred.

Which of the following statements is true with respect to the labor rate variance? It is computed using the standard hours allowed for the actual output. It is computed using the difference between the actual hours worked and the standard hours allowed for the actual output. It is computed using the actual hours worked. It is computed based solely on the standard hourly rate.

It is computed using the actual hours worked.

Which of the following statements is true with respect to the labor efficiency variance? It is computed using the standard hourly rate. It is computed using the difference between the actual and standard hourly rates. It is computed using the actual hourly rate. It is computed based solely on the actual hours worked.

It is computed using the standard hourly rate.

Which of the following statements is false regarding job-order costing? It is used in situations where many different products, each with unique features, are produced each period. It is used for manufacturing companies, but not service companies. It accumulates each job's costs on a job cost sheet. It can be used to calculate a job's unit product cost.

It is used for manufacturing companies, but not service companies.

Which of the following statements is true regarding job-order costing? It is used in situations where many different products, each with unique features, are produced each period. It is used for manufacturing companies, but not service companies. It relies on a predetermined overhead rate to apply direct material cost to units of product. It relies on a predetermined overhead rate to apply direct labor cost to units of product.

It is used in situations where many different products, each with unique features, are produced each period.

Which of the following statements is false with respect to a budgeted income statement? 1. Its net income should equal the net cash flows from the cash budget. 2. Its net income will impact the ending retained earnings balance shown on the balance sheet. 3. Its interest expense flows from the financing section of the cash budget. 4. Its selling and administrative expenses may include depreciation expense.

Its net income should equal the net cash flows from the cash budget.

Which of the following statements is true with respect to a budgeted income statement? Its net income should equal the net cash flows from the cash budget. Its net income will impact the ending retained earnings balance shown on the balance sheet. Its cost of goods sold is derived from the corresponding dollar amount shown in the production budget. Its selling and administrative expenses exclude depreciation expense because it is a product cost.

Its net income will impact the ending retained earnings balance shown on the balance sheet.

A document that records the materials, labor, and manufacturing overhead charged to a specific job is called a: Normal cost sheet. Job cost sheet. Bill of materials. Unit product costing sheet.

Job cost sheet.

Which of the following measures would most likely appear in the balanced scorecard of a company focused on provided an operational excellence customer value proposition? Number of collaborative customer-driven product innovations Number of new products designed Manufacturing cycle efficiency (MCE) Number of patents approved

Manufacturing cycle efficiency (MCE)

Which of the following is not an underlying assumption of cost-volume-profit analysis? Selling price is constant. Variable costs per unit are constant. Net operating income is constant. Total fixed costs are constant within the relevant range.

Net operating income is constant.

Assume that a company in the process of creating a balanced scorecard noted that "our employees are not generating enough ideas to help improve what we do." Which of the following measures would be most appropriate to include in a balanced scorecard in an effort to track improvement with respect to this concern? Absenteeism rate Employee turnover percentage Number of process improvement suggestions per employee Recruiting expenditures per hired employee

Number of process improvement suggestions per employee

The costs of quality training and quality improvement projects would be classified as what type of quality cost? External failure costs Internal failure costs Appraisal costs Prevention costs

Prevention costs

Which of the following financial measures would best be described as a type of profitability ratio? Net operating income Sales from new customers Net cash flow from operating activities Return on equity

Return on equity

Which of the following is an example of a batch-level activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Setting up machines

In a cost-volume-profit (CVP) graph, the intersection of the total sales line and the total expense line represents which of the following? The total fixed expenses The break-even point The total variable expenses The total contribution margin

The break-even point

Which of the following statements is true with respect to a budgeted balance sheet? 1. The accounts receivable balance includes the uncollected credit sales from the most recently completed month plus the expected cash collections from credit sales that were made two months ago. 2. The ending cash balance on the balance sheet equals the net income on the income statement. 3. The accounts payable balance includes the expected cash payments for material purchases that were made during the most recently completed month. 4. The ending cash balance on the balance sheet equals the ending cash balance on the cash budget.

The ending cash balance on the balance sheet equals the ending cash balance on the cash budget.

In a cost-volume-profit (CVP) graph, the vertical distance between the total sales line and the total expense line represents which of the following? The total variable expenses The profit or loss The total fixed expenses The total contribution margin

The profit or loss

Which of the following statements is true? 1. The spending variance for a variable expense will usually equal zero. 2. The spending variance for a variable expense will be favorable if the amount of the expense contained in the flexible budget is greater than the actual amount of the expense. 3. The spending variance for a variable expense will be favorable if the amount of the expense contained in the flexible budget is less than the actual amount of the expense. 4. The spending variance for a variable expense can be favorable or unfavorable depending on whether the actual expense is greater than or less than the planned expense.

The spending variance for a variable expense will be favorable if the amount of the expense contained in the flexible budget is greater than the actual amount of the expense.

Which of the following statements is false? The sum of the segment margins earned by all of a company's business segments will equal the company's overall net operating income. Contribution margin − Traceable fixed expenses = segment margin. Traceable fixed costs can become common fixed costs depending on how the segments are defined. A segment's traceable fixed costs will disappear over time if the segment is eliminated.

The sum of the segment margins earned by all of a company's business segments will equal the company's overall net operating income.

Which of the following is not an advantage of using self-imposed budgets? 1. They recognize individuals at all levels of the organization as members of the team whose views are valued by top management. 2. They generally increase motivation by allowing people to participate in setting their own goals. 3. They are often more accurate than estimates prepared by top managers because front-line workers have more intimate knowledge of day-to-day operations. 4. They are often more accurate than estimates prepared by top managers because front-line workers bring a broad strategic perspective to the budgeting process.

They are often more accurate than estimates prepared by top managers because front-line workers bring a broad strategic perspective to the budgeting process.

Which of the following statements is true with respect to self-imposed budgets? They may enable lower level managers to create too much budgetary slack. They involve people in setting their own goals which, in turn, can lower their motivation levels. They are often less accurate than estimates prepared by top managers who have better knowledge of day-to-day operations. They enable front-line managers to bring a broad strategic perspective to the budgeting process that enhances the accuracy of the estimates.

They may enable lower level managers to create too much budgetary slack.

Which of the following statements is true? 1. Traditional cost systems usually allocate too much nonmanufacturing costs to products whereas activity-based costing systems usually do not allocate enough nonmanufacturing costs to products. 2. Traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems. 3. Traditional cost systems usually undercost high volume products and overcost low volume products when compared to activity-based costing systems. 4. Traditional cost systems may use different allocation bases than activity-based costing systems, but ultimately both approaches result in the same amount of total cost being allocated to each product.

Traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems.

Which of the following is not an underlying assumption of cost-volume-profit analysis? Selling price is constant. Variable cost per unit varies inversely with changes in the level of activity. Correct In multiproduct companies, the mix of products sold remains constant. Total fixed costs are constant within the relevant range.

Variable cost per unit varies inversely with changes in the level of activity.

Which of the following equations can be used to compute a materials quantity variance (where AQ = actual quantity; SQ = standard quantity allowed; AP = actual price; SP = standard price)? [SP ÷ (AQ − SQ)] [AP ÷ (AQ − SQ)] [AP × (AQ − SQ)] [SP × (AQ − SQ)]

[SP × (AQ − SQ)]

Which of the following equations can be used to compute a labor efficiency variance (where AH = actual hours; SH = standard hours allowed; AR = actual rate; SR = standard rate)? [SR × (AH − SH)] [AR × (AH − SH)] [AR ÷ (AH − SH)] [SR ÷ (AH − SH)]

[SR × (AH − SH)]

The cost of goods manufactured includes: applied direct and indirect materials, but not actual direct and indirect materials actual direct and indirect materials, but not applied direct and indirect materials actual manufacturing overhead, but not applied manufacturing overhead applied manufacturing overhead, but not actual manufacturing overhead.

applied manufacturing overhead, but not actual manufacturing overhead.

A planning budget is usually prepared: before the period begins. after the period ends. during the period. after the flexible budget is prepared.

before the period begins.

Which of the following statements is true? a. A batch-level activity cost will decrease as the number of units in the batch increases. b. A batch-level activity cost will increase as the number of units in the batch increases. c. A batch-level activity cost is unaffected by the number of units in the batch. d. Batch-level activity costs are often used in traditional absorption costing systems to allocate batch-level costs.

c. A batch-level activity cost is unaffected by the number of units in the batch.

A revenue variance is calculated by comparing the: planning budget to the actual results. planning budget to the flexible budget. flexible budget to the actual results. static budget to the actual results.

flexible budget to the actual results.

If a company has overapplied overhead, then the journal entry to dispose of it will have what effect on net operating income? It will increase net operating income. It will decrease net operating income. It will decrease cost of goods sold, but it will not affect net operating income. It will increase cost of goods sold, but it will not affect net operating income.

it will increase net operating income.

An activity variance is calculated by comparing the: planning budget to the actual results. planning budget to the flexible budget. flexible budget to the actual results. static budget to the actual results.

planning budget to the flexible budget

The cost of goods manufactured is: the amount transferred from Raw Materials to Work in Process. the amount transferred from Raw Materials to Finished Goods. the amount transferred from Finished Goods to Cost of Goods Sold. the amount transferred from Work in Process to Finished Goods.

the amount transferred from Work in Process to Finished Goods.

Which of the following statements is true with respect to a budgeted balance sheet? 1. The accounts receivable balance includes the uncollected credit sales from the most recently completed month plus the expected cash collections from credit sales that were made two months ago. 2. The ending cash balance on the balance sheet equals the net income on the income statement. 3. The accounts payable balance includes the expected cash payments for material purchases that were made during the most recently completed month. 4. The ending cash balance on the balance sheet equals the ending cash balance on the cash budget.

the ending cash balance on the balance sheet equals the ending cash balance on the cash budget.

The range of acceptable transfer prices is defined as: the range of transfer prices within which the profits of both divisions participating in the transfer would increase. the range of transfer prices within which the profits of both divisions participating in the transfer would decrease. the range of transfer prices within which the profits of the selling division would increase and the buying division would decrease. the range of transfer prices within which the profits of the selling division would decrease and the buying division would increase.

the range of transfer prices within which the profits of both divisions participating in the transfer would increase.


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