Cost Accounting Exam #2

Bennet Company employs 20 individuals. Eighteen employees are paid $18 per hour and the rest are salaried employees paid $3,000 a month. Which of the following is the total cost function of personnel?A) y = a + bX B) y = b C) y = bX D) y = a

A

Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified? A) variable cost B) mixed cost C) irrelevant cost D) fixed cost

A

Which of the following statements is true of a linear cost function? A) It presents variable cost as a slope coefficient. B) It presents total cost as an intercept. C) It presents variable cost as an intercept. D) It presents total cost as slope coefficient.

A

A decision model involves a(n) ________. A) informal method of making a choice at the lower level management using sensitivity analysis B) formal method of making a choice that often involves both quantitative and qualitative analyses C) informal method of making a choice which is discussed in detailed in the financial reports D) formal method of making a choice at the lower level management using advanced management techniques such as balance scorecard

B

For February, the cost components of a picture frame include $0.30 for the glass, $0.75 for the wooden frame, and $0.80 for assembly. The assembly desk and tools cost $500. Two hundred fifty frames are expected to be produced in the coming year. What cost function best represents these costs? A) y = 1.85 + 500X B) y = 500 + 1.85X C) y = 3.85 + 600X D) y = 1.05 + 500X

B

Which of the following best describes how fixed cost are treated in a variable cost​ method? A.They are part of the product cost B.They are excluded from inventory cost and are treated as period costs C.They are classified as nonmanufacturing costs D.They are allocated to the product cost using a​ denominator-level capacity choice

B

Which of the following is true of variable costing? A) It expenses administrative costs as cost of goods sold. B) It treats direct manufacturing costs as a product cost. C) It includes fixed manufacturing overhead as an inventoriable cost. D) It is required for external reporting to shareholders.

B) It treats direct manufacturing costs as a product cost.

_______ is an organization's ability to offer products or services that are perceived by its customers as being superior and unique relative to those of its competitors. A) Strategy B) Product differentiation C) Cost leadership D) The balanced scorecard

B) Product differentiation

The master budget is: A) a flexible budget B) a static budget C) developed at the end of the period D) based on the actual level of output

B) a static budget

A favorable variance indicates that: A) budgeted costs are less than actual costs B) actual revenues exceed budgeted revenues C) the actual amount decreased operating income relative to the budgeted amount D) All of these answers are correct.

B) actual revenues exceed budgeted revenues

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________. A) increase the planned variable overhead budgets B) add value for the customer using the products or services C) increase the linearity between total costs and volume of production D) identify the product advertising requirements

B) add value for the customer using the products or services

Management by exception is the practice of concentrating on: A) the master budget B) areas not operating as anticipated C) favorable variances D) unfavorable variances

B) areas not operating as anticipated

The formal process of choosing between alternatives is known as a(n) ________. A) relevant model B) decision model C) alternative model D) prediction model

B) decision model

Which of the following costs is inventoried when using variable costing? A) rent on factory building B) electricity consumed in manufacturing process C) sales commission paid on each sale D) advertising costs incurred for the product

B) electricity consumed in manufacturing process

In general, profit potential of an organization decreases with ________. A) lesser competition and stronger potential entrants B) greater competition and stronger potential entrants C) lesser competition and weaker potential entrants D) greater competition and weaker potential entrants

B) greater competition and stronger potential entrants

An organization that is using the product differentiation approach would ________. A) focus on tight cost control B) use innovative research and development C) provide products that are similar to competitors D) offer products at a lower cost than competitors

B) use innovative research and development

A cost function is: A) process of calculating present value of projected cash flows B) process of allocating costs to cost centers or cost objects C) mathematical description of how a cost changes with changes in the level of an activity relating to that cost D) is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs

C

A variance is ____. A) the difference between actual fixed cost per unit and standard variable cost per unit B) the standard units of inputs for one output C) the difference between an actual result and a budgeted performance D) the difference between actual variable cost per unit and standard fixed cost per unit.

C

________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs. A) Variable costing B) Mixed costing C) Absorption costing D) Standard costing

C) Absorption costing

_______ refers to an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. A) Marketing strategy B) Product differentiation C) Cost leadership D) Competitor differentiation

C) Cost leadership

Place the following steps from the five-step decision process in order: A = Obtain information including historical costs B = Evaluate performance to provide feedback C = Make decisions choosing among alternatives D = Make predictions about the future E = Identify the problem and uncertainties A) A, E, D, B, C B) E, A, D, B, C C) E, A, D, C, B D) D, C, B, A, E

C) E, A, D, C, B

Which of the following is true of absorption costing? A) It expenses marketing costs as cost of goods sold. B) It treats direct manufacturing costs as a period cost. C) It includes fixed manufacturing overhead as an inventoriable cost. D) It treats indirect manufacturing costs as a period cost.

C) It includes fixed manufacturing overhead as an inventoriable cost

An organization that is using the cost leadership approach would ________. A) incur costs for innovative R&D B) provide products at a higher cost than competitors C) focus on productivity through efficiency improvements D) bring products to market rapidly

C) focus on productivity through efficiency improvements

An unfavorable variance indicates that: A) actual costs are less than budgeted costs B) actual revenues exceed budgeted revenues C) the actual amount decreased operating income relative to the budgeted amount D) All of these answers are correct.

C) the actual amount decreased operating income relative to the budgeted amount

Which of the following costs is inventoried when using absorption costing? A) variable selling costs B) fixed administrative costs C) variable manufacturing costs D) fixed selling costs

C) variable manufacturing costs

Feedback regarding previous actions may affect ________. A) future predictions B) implementation of the decision C) the decision model D) All of these answers are correct.

D) All of these answers are correct.

Which of the following statements best define a product differentiation strategy? A) It describes how an organization can increase customer base by differentiating its' product prices from its competitors. B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. C) It describes how an organization can decrease product prices by differentiating its' raw materials from its competitors. D) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

D) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors.

Effective planning of fixed overhead costs includes ________. A) planning day-to- day operational decisions B) eliminating value-added costs C) determining which products are to be produced D) choosing the appropriate level of capacity

D) choosing the appropriate level of capacity

Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of ________. A) eliminating activities that do not add value B) increasing the linearity between total costs and volume of production C) choosing the appropriate level of investment D) identifying essential value-adding activities

c) choosing the appropriate level of investment.

Effective planning of variable overhead costs includes ________. A) choosing the appropriate level of investment B) eliminating value-added costs C) redesigning products to use fewer resources D) reorganizing management structure

c) redesigning products to use fewer resources.

Which of the following statements is true of variable overhead costs?A) All the decisions determining the level of variable overhead costs are made at the start of a budget period. B) Planning of variable overhead costs includes choosing the appropriate level of capacity. C) Activities which add value are of least relevance while planning variable overhead costs. D) The level of variable overhead costs incurred in a period is mainly determined by day-to- day operating decisions.

d) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.

Which of the following statements best define strategy? A) It describes how an organization can create value for its customers while differentiating itself from its competitors. B) It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. C) It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. D) It describes how an organization motivates its employees to work for more hours without any increase in their wages.

A) It describes how an organization can create value for its customers while differentiating itself from its competitors.

Fixed overhead costs include ________. A) the cost of sales commissions B) property taxes paid on plant facilities C) energy costs D) indirect materials

b) property taxes paid on plant facilities.