Accounting Final

All else being equal, this is true about a firm with high operating leverage relative to a firm with low operating leverage: A) A higher percentage of the high operating leverage firm's costs are fixed B) The debt payments limit the high operating leverage firm's opportunities to turn a big profit C) The high operating leverage firm has more debt D) The high operating leverage firm is exposed to less risk

A) A higher percentage of the high operating leverage firm's costs are fixed

Operating leverage is best described as: A) A measure of the extent to which an organization's costs are fixed B) A measure of the extent to which an organization's contribution margin is sensitive to levels of debt C) A measure of the extent to which an organization's operations are financed by debt D) A measure of the extent to which an organization's profits contribute to reductions in debt

A) A measure of the extent to which an organization's costs are fixed

The purpose of the statement of cost of goods manufactured is to: A) Calculate the cost of goods transferred from Work in Process to finished goods inventory. B) Calculate cost of goods sold. C) Calculate net income. D) Both A and B

A) Calculate the cost of goods transferred from Work in Process to finished goods inventory

Which of the following tasks does not pertain to job-costing? A) Computing equivalent units B) Computing predetermined overhead rates C) Computing cost of goods sold D) Computing ending work-in-process inventory

A) Computing equivalent units

The portion of each dollar that can be used to cover fixed costs and provide a profit is known as: A) Contribution margin ratio B) Gross margin percent C) Margin of safety Operating leverage

A) Contribution Margin Ratio

Operating leverage is computed as: A) Contribution margin divided by income before taxes B) Fixed costs divided by income before taxes C) Income before taxes divided by total debt D) Operating income divided by total debt

A) Contribution margin divided by income before taxes

Standard costs: A) Indicate what it should cost to produce one unit of a product under efficient operating conditions B) Should be used in planning and controlling all costs C) Should be developed from average historical costs D) Are determined by regulators

A) Indicate what it should cost to produce one unit of a product under efficient operating conditions

Which term describes the difference between the actual price of inputs and the standard price of inputs? A) Price variance B) Standard cost variance C) Inflation index adjustment D) Materials price index

A) Price Variance

By using time and motion studies, it is possible to determine how long it takes to perform an activity. This information is often used to formulate: A) Standard labor time allowances for labor hours B) Standard labor prices C) Standard allowances for materials D) Standard material prices

A) Standard labor time allowances for labor hours

A unit contribution margin measures: A) The difference between price and variable cost per unit B) The difference between sales and cost of goods sold on a unit basis C) The difference between unit sales and total costs per unit D) The percentage difference between sales and cost of goods sold

A) The difference between price and variable cost per unit

The objective of standard cost variance analysis is: A) To identify standard cost variances and to explain the reasons for their occurrences B) To explore the reason or reasons for variation in sales prices of products offered in the company's main line of business C) To identify the standard deviation in budgeted numbers over a period of time D) To purge cost data of the effects of inflation

A) To identify standard cost variances and to explain the reasons for their occurrences

Which of the following views of product costs is consistent with financial reporting requirements? A) Product costs are all costs incurred in the process of manufacturing products, including materials, labor and factory overhead. B) Product costs are only labor and materials costs that are incurred in the process of manufacturing products. C) Product costs are all costs directly incurred in the manufacturing and selling of the product. D) Product costs include all costs incurred throughout the value chain.

A)Product costs are all costs incurred in the process of manufacturing products, including materials, labor and factory overhead

Parts used in manufacturing digital cameras would best be classified as what type of cost? A) Variable cost B) Fixed cost C) Mixed cost D) Step cost

A)Variable Cost

The difference between the actual variable overhead cost and the standard variable overhead cost for the actual volume of the overhead activity base is known as the: A) Variable overhead spending variance B) Variable overhead efficiency variance C) Fixed overhead budget variance D) Fixed overhead volume variance]\54 m,./

A)Variable overhead spending variance

A flexible budget variance for a manufacturing cost is computed as the difference between: A) Flexible budget costs and static budget costs B) Actual costs and flexible budget costs C) Departmental costs and cost center costs D) Flexible budget costs and original budget costs

B) Actual costs and flexible budget costs

Budgets based on the actual level of output, rather than the output originally budgeted at one level of expected output, are called: A) Activity budgets B) Flexible budgets C) Operating budgets D) Static budgets

B) Flexible Budgets

In a contribution income statement: A) All fixed costs are grouped together and subtracted from gross profit. B) Net income plus fixed expenses equal the contribution margin. C) The contribution margin is computed as the difference between sales revenue and fixed costs. D) The gross margin is computed as the difference between sales revenue and mixed costs.

B) Net income plus fixed expenses equal the contribution margin

The range of operations that falls within the normal capacity of the current level of fixed costs is referred to as the: A) Linear average B) Relevant range C) Marginal range D) Operating range

B) Relevant Range

The best way to reduce operating leverage is to: A) Substitute direct materials for direct labor B) Substitute direct labor for automated equipment C) Substitute equity for debt D) Substitute in-house direct labor with outsourced labor

B) Substitute direct labor for automated equipment

In an effort to achieve short-run profit maximization, limited resources should first be allocated to the product with: A) The highest contribution margin per unit B) The highest contribution per unit of constraining factor C) The highest selling price per unit of constraining factor D) The lowest cost per unit of constraining factor

B) The highest contribution per unit of constraining factor

Which of the following statements concerning zero-based budgeting is true? A) Zero-based budgeting specifies that every line item must be rounded to the nearest thousand dollar increment. B) Zero-based budgeting specifies that every expenditure must be justified. C) Zero-based budgeting is a variation of the incremental approach. D) Zero-based budgeting is mainly used to assess research and development departments and similar departments where the relationship between inputs and outputs is weakest.

B) Zero-based budgeting specifies that every expenditure must be justified

Which of the following items is not typically considered in the development of the cash budget? A) Selling expenses B) Depreciation Expense C) Administrative expenses D) Purchases

B)Depreciation Expense

Over the short term, which type of costs is unaffected by activity level changes? A) Variable costs B) Fixed costs C) Mixed costs D) Step costs

B)Fixed Costs

The break-even point in sales dollars may be computed as: A) Fixed costs divided by contribution margin per unit B) Fixed costs divided by the contribution margin ratio C) Fixed costs divided by the difference in unit price and unit variable costs D) Total contribution margin divided by the unit contribution margin per unit

B)Fixed costs divided by the contribution margin ratio

When using responsibility accounting, non-controllable costs should be excluded from which reports? A) Discretionary cost reports B) Performance reports C) Financial statements D) Tax filings

B)Performance Reports

Fixed Costs do not respond to: A) Capital expenditures made by the company B) Short-term changes in the amount of activity C) Changes in committed expenditures D) Discretionary investments in the company

B)Short-term changes in the amount of activity

How is depreciation on the manufacturing building and equipment classified in financial reporting? A) As an irrelevant cost because it has already been incurred B) As a current expense C) As part of the cost of the products produced D) As a period cost

C) As part of the cost of the products produced

Which of the following about the manager of a profit center is true? A) Does not control revenues B) Does not control expenses C) Does not control investments D) Only controls revenues

C) Does not control investments

Which of the following statements most accurately describes financial accounting's view of period costs? A) Period costs are all costs incurred in the current financial reporting period. B) Period costs are all direct costs incurred in the current financial reporting period. C) Period costs are all non-manufacturing expenses incurred in the current financial reporting period. D) Period costs are a component of fully absorbed costs.

C) Period costs are all non-manufacturing expenses incurred in the current financial reporting period

Structuring performance reports and addressing them to individuals as group members of an organization in a manner that emphasizes factors that can be controlled by them is accomplished by using which of the following? A) Absorption costing B) Value chain analysis C) Responsibility accounting D) Relational concepts

C) Responsibility Accounting

Which of the following statements concerning the cash disbursements amount in the cash budget is true in a manufacturing setting, but not true a merchandise setting? A) The cash disbursements amount is no longer based off of the purchasing budget. B) The cash disbursements amount includes planned disbursements for ending inventory. C) The cash disbursements amount includes planned disbursements for conversion costs. D) The cash disbursements does not need to equal changes in finished goods inventory.

C) The cash disbursements amount includes planned disbursements for conversion costs

Which of the following descriptions best defines the materials quantity variance? A) The difference between the static budget cost of materials used and the actual cost of materials B) The difference between the actual cost of materials and the flexible budget cost of materials C) The difference between the standard cost of actual materials used and the flexible budget cost for Materials D) The variation in number of units produced and available capacity

C) The difference between the standard cost of actual materials used and the flexible budget cost for Materials

In the following equation for total cost, Y = a + bX, the slope of the total cost line is an approximation of which of the following? A) Total Cost B) Fixed Cost C) Variable Cost D) Volume

C) Variable Cost

When is the cost of manufacturing equipment recognized as an expense? A) When equipment depreciation is recorded B) When inventory processing is completed and finished goods are recorded C) When finished goods inventory is sold D) None of the above

C) When finished goods inventory is sold

Which of the following is not an example of a responsibility center? A) A cost center B) A revenue center C) An activity center D) An investment center

C)An activity center

As volume increases, which of the following statements is not correct? A) Variable cost per unit will remain the same. B) Total fixed will remain the same. C) Average total cost per unit will increase. D) Total variable costs will increase.

C)Average total cost per unit will increase.

When management directs attention only to those activities not proceeding according to plan, they are engaging in :A)Activity-based management B) Organization-based management C) Management by exception D) Just-in-time management

C)Management by Exception

Electricity used to heat, light, and cool a manufacturing facility would best be classified as what type of cost? A) Variable cost B) Fixed cost C) Mixed cost D) Step cost

C)Mixed Cost

Generally, the first of the following budgets to be prepared is the: A) Cash budget B) Operations budget C) Sales budget D) Purchases budget

C)Sales Budget

Sales mix refers to: A) The portion of unit variable costs that are consumed by each product B) The absolute portion of total variable costs consumed by each product C) The relative portion of unit or dollar sales that are derived from each product D) None of the above

C)The relative portion of unit or dollar sales that are derived from each product

At its current level of sales, a company has a degree of operating leverage of 6. This means that a 10% increase in sales would result in a: A) 6% Increase in before-tax profit B) 10% Increase in before-tax profit C) 60% Increase in contribution margin D) 60% Increase in before-tax profit

D) 60% increase in before-tax profit

The approach toward management that considers the absence of significant differences between planned and actual results as an indication that everything is proceeding as planned is known as: A) The control principal B) The Peter principal C) Budget constraints D) Management by exception

D) Management by Exception

Which of the following budgets is directly affected by changes in planned conversion costs (i. e., direct labor and manufacturing overhead costs)? A) The sales budget B) The cash receipts budget C) The general and administrative budget The manufacturing cost budget

D) The manufacturing cost budget

In cost estimation: A) Care must be taken to make sure that data used in developing cost estimates are based on currently employed technology B) Changes in technology and prices make cost estimation difficult C) Identifying appropriate cost drivers is sometimes difficult D) All of the above

D)All of the above

Which of the following factors is an advantage of preparing operating budgets? A) Improved communications B) Improved basis of performance evaluation C) Improved planning D) All of the above

D)All of the above

Which of the following is an assumption used in cost-volume-profit analysis? A) All costs are classified as fixed or variable B) The total cost function is linear C) The total revenue function is linear D) All of the above

D)All of the above

Which of the following statements regarding sales mix is true? A) A shift in the sales mix can have a significant impact on the bottom line. B) One of the limiting assumptions of the basic cost-volume-profit model is that the analysis is for a single product or the sales mix is constant. C) Sales mix analysis is important in multiple-product or service organizations. All of the above are true

D)All of the above are true

Generally, the budgeting process concludes with the preparation of the: A) Cash budget B) Production budget C) Selling expense budget D) Budgeted financial statements

D)Budgeted Financial Statements

Other things being equal, the higher the degree of operating leverage, the _________ profit opportunity with increased sales and __________ risk of loss with a decrease in sales. A) Lower; higher B) Higher; lower C) Lower; lower D) Higher; higher

D)Higher;higher

When developing a cost model for a firm or segment of a firm, the cost model is only applicable within the __________ range of capacity of fixed costs. A) Operating B) Average C) Marginal D) Relevant

D)Relevant

Who of the following individuals is most likely responsible for an unfavorable materials price variance? A) The production supervisor B) The supervisor of the accounting department C) The personnel director D) The purchasing agent

D)The purchasing agent

variable, fixed, mixed, or step? Fire insurance on factory building

Fixed

variable, fixed, mixed, or step? Property taxes

Fixed

variable, fixed, mixed, or step? Annual salary for the vice president of manufacturing

Fxied

variable, fixed, mixed, or step? Electric power in a factory

Mixed

variable, fixed, mixed, or step? Water consumed by the plant, which is based on a flat fee plus actual consumption

Mixed

variable, fixed, mixed, or step? Salaries of quality inspectors when each inspector can evaluate a maximum of 500 units per day

Step

variable, fixed, mixed, or step? Keyboards purchased from a subcontract supplier in a computer assembly plant

Variable

variable, fixed, mixed, or step? Overhead costs in the factory for incidental components such as small screws and rivets.

Variable

variable, fixed, mixed, or step? Raw materials used in production

Variable

variable, fixed, mixed, or step? Wages of machine operator who is paid based on number of units produced on the machine

Variable