ACCT 2102 RA/HW
Max Machining incurs the following utilities costs at different levels of production: 0 units: $120 500 units: $2,620 1,000 units: $5,120 How would utility costs be properly classified? A. Mixed B. Curvilinear C. Variable D. Stepped E. Fixed
A. Mixed
Using a company-wide overhead rate rather than Activity-Based Costing might lead to which of the following problems? A. Overpricing products B. Over-application of overhead to services C. Discontinuing unprofitable operations D. Continuing profitable operations E. All of the above
A. Overpricing products
Which of the following is not a proficiency indicated by the CMA designation? A. Tax preparation B. Decision support C. Financial planning D. Professional ethics
A. Tax preparation
Which of the following are factors to consider when deciding whether to accept a special order? A. Whether there is sufficient excess production capacity B. The fixed costs that will be allocated to the units produced C. The projected salvage value of current production equipment D. Last year's budgeted level of production E. All of the above
A. Whether there is sufficient excess production capacity
In a process costing system, costs are generally accumulated by: A. Product line B. Department C. Unit D. Job order
B. Department
Total costs for a company are usually composed of which of the following? A. Fixed and Mixed Costs B. Fixed and Variable Costs C. Mixed and Variable Costs D. None of the above
B. Fixed and Variable Costs
Which of the following statements is true regarding process costing? A. All costs must be assigned to individual jobs or production runs. B. All products must follow the same path through production to reach the Finished Goods Inventory. C. All products in a particular batch are homogenous. D. A company must use the weighted average cost-flow assumption in tracking the ending balance in each Work in Process Inventory account. E. All of these statements are true.
C. All products in a particular batch are homogenous.
A job order costing system does which of the following? A. Is used to determine period costs in a service company B. Is used to determine unit costs when products are manufactured in a continuous flow process C. Allocates manufacturing costs to individual jobs to determine unit costs D. Both A and B E. None of the above
C. Allocates manufacturing costs to individual jobs to determine unit costs
Which of the following correctly illustrates how to calculate contribution margin? A. Sales - Variable Costs - Operating Costs B. Sales - Fixed Costs - Variable Costs C. Sales - Variable Costs D. Variable Costs / Sales E. None of the above
C. Sales - Variable Costs
How does Fezzari generally market its products to its customers? A. As a wholesaler supplying large mass merchandisers B. Manufacturing and selling bike components to other bike manufacturers C. Selling directly to customers through web-based orders D. As a wholesaler supplying local bike shops
C. Selling directly to customers through web-based orders
What type of firm is EBC? A. Manufacturing firm B. Merchandising firm C. Service firm D. Two of the above E. None of the above
C. Service firm
Which of the following would be a reason to reject a special order? A. The incremental revenues exceed the incremental costs B. The absorption-costing per-unit cost is greater than the price being offered C. The order exceeds the company's excess production capacity D. Qualitative factors that would cause the selling price of the product to increase in the future E. All of the above F. None of the above
C. The order exceeds the company's excess production capacity
Which of the following entries correctly reflects the entry for recording the wages of all factory workers? A. Direct Labor Expense Indirect Labor Expense Wages Payable B. Wage Expense Work in Process Inventory C. Work in Process Inventory Manufacturing Overhead Wages Payable D. Work in Process Inventory Wages Expense Cash
C. Work in Process Inventory Manufacturing Overhead Wages Payable
Which equation properly represents the Margin of Safety ratio? A. Break-even Sales / Actual Sales B. (1 - Actual Sales) / Break-even Sales C. (1 - Break-even Sales) / Break-even Sales D. (Actual sales - Break-even Sales) / Actual Sales E. None of the above
D. (Actual sales - Break-even Sales) / Actual Sales
Accumulating cost information on a per-unit basis is useful for making management decisions in companies such as: A. Manufacturers B. Hospitals C. Insurance companies D. A, B, and C E. None of the above
D. A, B, and C
The equation to find contribution margin under absorption costing is: A. Gross Profit + Fixed Costs B. Sales - Variable Costs - Fixed Costs C. Sales - Fixed Costs D. Absorption costing does not calculate Contribution Margin E. Sales - Variable Costs
D. Absorption costing does not calculate Contribution Margin
If all possible levels of production are considered, which of the following statements is/are true? A. All costs are essentially Fixed. B. All costs are essentially Mixed. C. Not all costs are relevant. D. All costs can change. E. All of the above
D. All costs can change.
Which of the following are not included in the Work in Process Inventory? A. Direct Materials that have been put into production B. Direct Labor incurred in production C. Manufacturing Overhead allocated to units of production D. All of the above are included in Work in Process Inventory
D. All of the above are included in Work in Process Inventory
Which of the following best describes the weighted average cost flow assumption? A. Direct materials are added evenly throughout the process B. Equivalent units of production for conversion costs do not match the physical flow of units C. Inventory cost layers are kept separate based on the period of production D. Cost per equivalent unit is calculated by combining costs from both the current and previous periods E. None of the above
D. Cost per equivalent unit is calculated by combining costs from both the current and previous periods
Which of the following best describes the concept of "sunk costs"? A. Costs that will be incurred regardless of what decision is made B. Costs that are the same between competing alternatives C. Costs that are relevant to the decision process D. Costs that have already been incurred and cannot be avoided E. None of the above
D. Costs that have already been incurred and cannot be avoided
Service firms generally include which of the following as product or job costs: A. Service firms do not track job costs B. Supervisor salaries C. Utilities D. Direct labor wages
D. Direct labor wages
What is the original metric that determines the levels of all budgets? A. Planned production levels B. Approved capital expenditures C. Yearly cash flows D. Forecasted sales levels E. None of these
D. Forecasted sales levels
Which of following costs would be considered variable? A. Heating Bill B. Employee Salaries C. Rent Expense D. Materials Purchases E. All of the above
D. Materials Purchases
Which of the following statements is true regarding current manufacturing companies? A. Production processes are simpler than before. B. Most companies produce only a limited variation of products in one facility. C. Materials and wages constitute the largest portions of the per-unit costs. D. None of the above.
D. None of the above.
Caleb Construction (CC) incurs supervisor salaries expense in the construction of homes. If CC manufactures 100 homes in a year, fixed supervisor salaries will be $400,000. With the current construction supervisors, CC's productive capacity is 150 homes in a year. However, if CC is contracted to build more than 150 homes per year, it will need to hire additional supervisors, which are hired as full-time rather than temporary employees. CC's productive capacity would then become 200 homes per year, and salaries expense would increase to $470,000.How would CC's salaries expense be properly classified? A. Curvilinear B. Variable C. Fixed D. Stepped E. Mixed
D. Stepped
What is the general break-even formula? A. Total Sales = Variable Costs - Fixed Costs B. Fixed Costs = Variable Sales - Total Sales C. Fixed Costs = Variable Costs + Total Costs D. Total Sales = Variable Costs + Fixed Costs E. None of the above
D. Total Sales = Variable Costs + Fixed Costs
Which of the following would be considered a direct cost for a unit of production? A. Depreciation on production facilities B. Salary paid to factory general supervisor C. Indirect materials used in the production process D. Wages paid to assembly line workers E. None of the above
D. Wages paid to assembly line workers
Which of the following steps are part of the Activity-Based Costing model? A. Identify key activities that drive overhead costs B. Assign overhead costs to activity cost pools C. Allocate costs to products or units based on driver usage D. Allocate costs evenly to products or units E. A, B, and C
E. A, B, and C
If a company has sufficient excess capacity, which of the following costs are relevant to the decision to make or buy a new product? A. Direct materials B. Variable overhead C. Fixed overhead D. Costs of buying from the outside vendor E. A, B, and D only
E. A, B, and D only
Which of the following entries correctly reflects the accumulation of Manufacturing Overhead? A. Manufacturing Overhead Cash B. Indirect Labor Manufacturing Overhead C. Manufacturing Overhead Accumulated Depreciation—Factory Equipment D. Manufacturing Overhead Materials Inventory E. A, C, and D
E. A, C, and D
Which of the following activities would incur costs that could be tracked and allocated using Activity-Based Costing? A. Machine set-ups B. Customer billing process C. Payroll preparation D. Equipment maintenance and routine cleaning E. All of the above
E. All of the above
Which of the following are advantages of budgeting? A. It helps management to get out of just doing things the same way and notice what can be improved. B. It helps a company achieve their long-range goals. C. It can be used for performance evaluation. D. It unifies the efforts of various departments in pursuit of company objectives. E. All of the above
E. All of the above
Which of the following is not a role that can be filled by someone with an accounting degree? A. Treasurer B. Internal auditor C. Budget analyst D. Chief Financial Officer E. All of the above are roles that are filled by accountants.
E. All of the above are roles that are filled by accountants.
Which of the following is/are included in the journal entry(ies) to record manufacturing overhead costs? A. DEBIT to Manufacturing Overhead B. DEBIT to Work in Process Inventory C. CREDIT to Wages Payable D. CREDIT to Cash E. All of the above except B.
E. All of the above except B.
Which of the following will not affect Net Income under absorption costing? A. A change in the levels of inventory from the beginning to the end of the period B. Production levels not being the same as Sales C. A change in the fixed overhead application rate D. An increase in the amount of fixed costs incurred by the company E. All of the above will affect Net Income
E. All of the above will affect Net Income
Which of the following types of production would most likely use job-order costing? A. Farming B. Construction of custom homes C. Manufacturing of heavy-duty machinery D. Electrical power generation E. Both B and C
E. Both B and C
Which of the following costs would be applied to manufactured inventory under variable costing? A. Salary of factory manager B. Rental payments on administrative offices C. Commissions to sales persons D. Rental payments on factory E. Cost of raw materials
E. Cost of raw materials
What is the source of input for the Production Budget? A. Cash budget B. Direct materials budget C. Direct labor budget D. Manufacturing overhead budget E. None of the above
E. None of the above
Which of the following factors would lead a company to buy a component rather than make it? A. Greater control over production quality B. Employee concerns about outsourcing C. Excess productive capacity D. An unpredictable supplier of the component E. None of the above
E. None of the above
"Break-even" is the point at which total sales equals total fixed costs. True False
False
A decline in gross profit percentage can be caused by selling fewer units to customers. True False
False
A service firm is one that takes materials and converts them into a sellable product. True False
False
A variable cost is one that varies both in total (with respect to the amount of items produced) and per unit. True False
False
Activity-Based Costing assumes that most overhead costs can be easily allocated based on one or two drivers. True False
False
All products must go through the exact same departments and processes in order for a company to use process costing. True False
False
Because the cost of Indirect Materials is included in Manufacturing Overhead, these materials are not included in Materials Inventory. True False
False
Contribution margin is the amount left over after all fixed costs have been covered. True False
False
Cost accounting concepts and procedures are only useful in product manufacturing entities. True False
False
Cost of goods manufactured = Ending Work in Process + Beginning Work in Process - Total Manufacturing Costs. True False
False
In order to be considered a merchandising firm, a company must have a physical "brick-and-mortar" store location. True False
False
In process costing, all product costs are accumulated in a single Work in Process account until the goods have passed through all production departments; the costs are then transferred to Finished Goods. True False
False
Managerial accounting is primarily concerned with providing information to external users, while financial accounting is used for internal decision making. True False
False
Overhead is always allocated on the basis of direct labor hours, so it is relatively simple and accurate to apply these costs to the products. True False
False
Period costs are assumed to provide benefit to the company in the period in which the product is sold. True False
False
Relevant costs are only those that are the same when comparing competing alternatives. True False
False
The amount of direct materials purchased is usually equal to the amount of direct materials used in production that period. True False
False
The flexible budget variance is equal to the difference between actual costs incurred and budgeted costs. True False
False
When goods are sold, the costs associated with those goods are transferred from Work in Process to Cost of Goods Sold. True False
False
Process costing is ideal for business situations that involve the production of a relatively standardized product, using a continuous-flow operation. True False
True
Standard costing can be used for both job order and process costing systems. True False
True
Sunk costs are those costs that have already been incurred and cannot be recovered. True False
True
The journal entry to record indirect labor includes a debt to Manufacturing Overhead. True False
True
The least-squares regression method generally is considered the most accurate method for approximating a linear cost relationship. True False
True
The total costs for a company are composed of both fixed and variable costs. True False
True
Under Activity-Based Costing, it is important for there to be a high correlation between the change in the level of costs and the change in the use of the driver on which those costs are allocated. True False
True
Under absorption costing, a change in the level of production will affect the amount of fixed costs reported on the income statement for the period. True False
True
Under absorption costing, managers may have an incentive to manipulate earnings through production levels. True False
True
Under standard costing, the inventory account balance may not actually reflect the true costs incurred to acquire the inventory. True False
True
Under variable costing, a company expenses all fixed overhead costs in the same period that it incurs them. True False
True
Variable net income differs from absorption net income because under absorption costing some fixed costs are retained in inventory rather than being expensed. True False
True
While fixed costs remain constant over the relevant range, most fixed costs can change in the long run, and are often best described by a step cost pattern, given a sufficiently long horizon. True False
True
Managers use product costing information in determining budgets and setting prices for products. True False
True
Of the various types of firms, accounting for the operations of a manufacturing firm is typically the most complex. True False
True
On a cost-volume graph, costs are represented on the x-axis, and volume is represented on the y-axis.Variable costs are theoretically equal to $0 when volume is 0. True False
True
Fixed costs are those which do not respond to changes in volume. True False
True
If a company would have to incur additional fixed costs to produce a special order, then those costs are considered relevant. True False
True
Activity-Based Costing is best explained by which of the following statements? A. Accumulating and allocating overhead costs based on a variety of activity drivers. B. More accurately tracking materials and labor costs for each product. C. Ordering all costs alphabetically for easier cataloging in a database. D. Calculating costs sequentially by the order that they affect the production proces
A. Accumulating and allocating overhead costs based on a variety of activity drivers.
When a budget is updated at every incremental budget period, the process is called: A. Continuous budgeting B. Participative budgeting C. Capital budgeting D. Zero-based budgeting E. None of the above
A. Continuous budgeting
Which of the following utilizes multiple automated machines and manufacturing cells to produce a product from start to finish? A. Flexible-manufacturing system automation B. Full-production automation C. Robotics-controlled automated manufacturing D. Stand-alone automation
A. Flexible-manufacturing system automation
Which method of cost data analysis involves approximating a linear cost relationship based on the extremes of production volume? A. High-low method B. Scattergraph method C. Least-squares regression method D. All of the above E. None of the above
A. High-low method
Revenues, Expenses, and Cost of Goods Sold are closed to which of the following accounts A. Income Summary B. Retained Earnings C. Other Income D. Dividends E. None of the Above
A. Income Summary
What is the correct order of the flow of product costs through the inventory system? A. Materials Inventory, Work in Process, Finished Goods, Cost of Goods Sold B. Cost of Goods Sold, Work in Process, Materials Inventory, Finished Goods C. Work in Process, Finished Goods, Materials Inventory, Cost of Goods Sold D. Materials Inventory, Work in Process, Cost of Goods Sold, Finished Goods
A. Materials Inventory, Work in Process, Finished Goods, Cost of Goods Sold
A budget used to plan for the acquisition of long-term assets is called a: A. Participative budget B. Capital Expenditures budget C. Continuous budget D. Zero-based budget E. None of the above
B. Capital Expenditures budget
Just-in-time (JIT) inventory systems are designed to reduce which of the following: A. Possibility of delayed shipments B. Costs of carrying inventory C. Threat of lost sales due to unexpected demand D. All of the above
B. Costs of carrying inventory
In a labor-intensive manufacturing company, overhead costs are usually assumed to be closely related to the level of direct labor hours. True False
True
Which of the following is a drawback to absorption costing as opposed to variable costing? A. Management cannot accurately price products because non-manufacturing overhead is not applied to inventory B. Managers can manipulate earnings by simply producing more than is sold in a period C. Fixed overhead is simply expensed as a period cost without being properly considered as a cost of inventory D. Absorption costing is not allowed for GAAP purposes E. There is no drawback: absorption costing is always preferable to variable costing
B. Managers can manipulate earnings by simply producing more than is sold in a period
Future benefits foregone when one option is chosen over another are called: A. Decision Costs B. Opportunity Costs C. Relevant Costs D. Sunk Costs E. None of the above
B. Opportunity Costs
Which of the following budgets flows directly into the Budgeted Income Statement? A. Capital expenditures budget B. Selling and administrative budget C. Budgeted balance sheet D. Production budget E. All of the above flow directly into the Budgeted Income Statement
B. Selling and administrative budget
Which of the following correctly represents how to calculate absorption net income assuming no change in the fixed overhead rate? A. Variable net income - (Change in Inventory units x Fixed Overhead Rate) B. Variable net income + (Change in Inventory units x Fixed Overhead Rate) C. Variable net income - (Change in Inventory units x Variable Overhead Rate) D. Variable net income + (Change in Inventory units x Variable Overhead Rate) E. None of the above
B. Variable net income + (Change in Inventory units x Fixed Overhead Rate)
Cost of Goods Sold can be calculated in the following manner: A. Ending Finished Goods - Beginning Finished Goods - Manufacturing Overhead B. Beginning Work in Process + Cost of Goods Manufactured - Ending Work in Process C. Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods D. Ending Materials Inventory + Ending Work in Process + Ending Finished Goods
C. Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods
Which of the following statements is true regarding CVP analysis? A. CVP is only useful in a manufacturing context B. CVP cannot be used in service industries C. CVP can be used with multiple products only if the product ratio is fixed and based on a weighted average unit contribution margin D. CVP is useful in all types of business and with any number of products and product mixes E. None of the above
C. CVP can be used with multiple products only if the product ratio is fixed and based on a weighted average unit contribution margin
Which of the following would not be considered product costs? A. Parts used in the production of an automobile B. Electricity bill for a manufacturing facility C. Cleaning supplies for an administration building D. Salary of a factory supervisor E. Wages paid to assembly line workers
C. Cleaning supplies for an administration building
Which of the following is not a way to calculate Absorption Net Income? A. Gross Profit - Non-Manufacturing Costs B. Variable Net Income + (Change in Inventory units x Fixed Overhead Rate) C. Contribution Margin - Selling and Administrative Expenses D. All of the above equal Absorption Net Income E. None of the above equal Absorption Net Income
C. Contribution Margin - Selling and Administrative Expenses
If production increases within a given range, fixed costs per unit will: A. Increase B. Stay constant C. Decrease D. Vary depending on the source of the fixed costs E. None of the above
C. Decrease
Which of the following is an example of a fixed cost? A. Utility expense for electricity usage B. Hourly Wages C. Depreciation of manufacturing equipment D. Indirect Supplies purchases E. None of the above
C. Depreciation of manufacturing equipment
If direct materials are added at the beginning of a process, the equivalent units completed of direct materials will be: A. Equal to equivalent units completed of conversion costs B. Equal to physical units completed C. Equal to the units of direct materials worked on during the period D. None of the above
C. Equal to the units of direct materials worked on during the period
Which method of cost data analysis is generally considered the most accurate? A. High-low method B. Scattergraph method C. Least-squares regression method D. All of the above E. None of the above
C. Least-squares regression method
Activity-Based Costing is based on a deep understanding of the activities that a company engages in while pursuing economic objectives. True False
True
Assuming there are no negative qualitative factors, if incremental revenues exceed incremental costs, then a special order should generally be accepted. True False
True
Contribution margin ratio = Contribution Margin / Sales True False
True
Direct materials and conversion costs are usually tracked separately when determining equivalent units of production. True False
True
Equivalent Units must be calculated as part of the process in properly determining the per-unit costs of direct materials and conversion costs for the period. True False
True
Finished Goods inventory includes all items that have been completed but have not yet been sold to customers. True False
True