Accounting Test 2 T/F
A contribution approach income statement can usually be easily prepared from the info contained in a corporation's published income statement
False
A transaction driver provides a measure of the amount of time required to perform an activity
False
Absorption costing treats fixed manufacturing overhead as a period cost, rather than as a product cost
False
Activity based management seeks to eliminate waste by allocation costs to products that waste resources
False
Activity rates in activity based costing are computed by dividing costs from the second-stage allocations by the activity measure for each activity cost pool
False
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
All other things the same, an increase in variable expense per unit will reduce the break even point.
False
All other things the same, if the fixed expenses increase in a company then one would expect the margin of safety to increase.
False
An activity based costing system is generally easier to set up and run than a traditional cost system.
False
Assuming the LIFO inventory flow assumption, if production is less than sales for the period, absorption costing NOI will generally be greater than variable costing NOI
False
At the break-even point, variable expenses and fixed expenses are equal
False
Batch level activities are performed each time a unit is produced
False
Direct materials is considered to be a product cost under variable costing but not absorption costing
False
In 2 companies making the same product and with the same total sales and total expenses, the contribution margin ratio will be higher in the company with a higher proportion of fixed expenses in its cost structure.
False
In Activity based costing, non manufacturing costs are not assigned to products
False
In activity based costing, as in traditional costing systems, non-manufacturing costs are not assigned to products
False
In traditional costing, some manufacturing costs may be excluded from product costs.
False
On a CVP graph for a profitable company, the line representing total expenses is steeper than the line representing total revenue
False
On a CVP graph, the revenue line will be shown below the total expense line for any activity level above the break even point
False
The first-stage allocation in activity based costing is the process by which overhead costs are assigned to products before they are assigned to customers
False
The impact on net operating income of a given dollar change in sales can be computed by multiplying the contribution margin by the dollar change in sales
False
Under conventional absorption costing, the fixed costs associated with idle production capacity are not included as part of the product cost
False
Under variable costing, the unit product cost contains some fixed manufacturing overhead cost.
False
When sales exceeds production for a period, absorption costing net income will generally be greater than variable costing net income
False
1st stage allocation in activity based costing is the process by which overhead costs are assigned to activity cost pools
True
A duration driver provides a measure of the amount of time required to perform an activity
True
ABC company sells a single product for $25. The variable expense per unit is $15 and the fixed expense per unit is $5 at the current level of sales. The company's net operating income will increase by $10 if one more unit is sold.
True
Absorption costing treats all manufacturing costs as product costs
True
Activity based costing involves a two stage allocation in which overhead costs are first assigned to departments and then to jobs
True
Activity based costing uses a number of activity cost pools, each of which may have a different allocation base
True
All other things the same, a decrease in variable expense per unit will reduce the break-even point.
True
All other things the same, a reduction in the variable expense per unit will decrease the break even-point.
True
All other things the same, an increase in total fixed expenses will increase the break-even point?
True
At the break-even point, the total contribution margin and fixed expenses are equal.
True
Direct labor is always considered to be a product cost under variable costing
True
Duration drivers ordinarily require more effort to record than transaction drivers.
True
In ABC, organization-sustaining costs should not be included in product costs for internal management reports that are used for decision making. However, companies frequently include org costs in product costs to satisfy external reporting requirements
True
In activity based costing, some manufacturing costs can be excluded from product costs.
True
In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost
True
NOI is affected by the number of units produced when absorption costing is used
True
Product level activities relate to specific products and typically must be carried out regardless of how many batches are run or units of product are manufactured
True
The contribution margin ratio measures the effect on the total contribution margin of a given change in total sales
True
The cost assigned to units in inventory are typically lower under variable costing than under absorption costing
True
The degree of operating leverage is greatest at sales levels near the break-even point and decreases as sales rise
True
The profit in cost-volume profit equations is the same as the net operating income on a contribution income statement
True
Under absorption costing, fixed MOH is treated as a product cost.
True
Under absorption costing, it is possible to defer a portion of the fixed MOH costs of the current period to future periods through the inventory account
True
Under absorption costing, the profit for a period is affected by a change in the number of units of finished goods inventory
True
Under variable costing, fixed MOH is not treated as a product cost
True
Under variable costing, product costs consist of direct materials, direct labor, and variable manufacturing overhead.
True
When the number of units in work in process and finished goods inventories increase, absorption costing net income will typically be greater than variable costing net income
True
In general, duration drivers are more accurate measure of the consumption of resources than transaction drivers
true
