Cost Aye

11.2 Direct materials are $600, direct labor is $150, variable overhead costs are $450, and fixed overhead costs are $300. The cost of one unit is ________.

$1500

11.6 When deciding to lease a new cutting machine or continue using the old machine, the irrelevant cost is ________.

$50,000, cost of the old machine

7.2 A flexible-budget variance is $600 favorable for unit-related costs. This indicates that costs were ________.

$600 less than standard for the achieved level of activity

2.2 Which of the following statements is true of direct costs?

A direct cost of one cost object can be an indirect cost of another cost object.

5.1 Which of the following statements is true of a peanut-butter costing system?

A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.

3.5 ________ is the process of varying key estimates to identify those estimates that are the most critical to a decision.

A sensitivity analysis

7.6 Which of the following is true of variance?

A variance within an acceptable range is considered to be an "in-control occurrence" and calls for no investigation or action by managers.

5.6 Which of the following statements is true of ABC systems?

ABC system employs multiple activity-cost drivers.

5.8 Which of the following statements is true of ABC systems?

ABC systems are used by managers for strategic decisions rather than for inventory valuation in merchandising companies.

5.7 Which of the following statements is true of costing systems?

ABC systems classify some indirect costs as direct costs helping to improve processes

5.3 Which of the following statements is true of ABC systems?

ABC systems provide valuable information to managers beyond accurate product costs.

9.1 ________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.

Absorption costing

9.1 ________ method includes fixed manufacturing overhead costs as inventoriable costs.

Absorption costing

9.2 Which of the following statements is true of absorption costing?

Absorption costing allocates fixed manufacturing overhead to actual units produced during the period.

9.2 At the end of the accounting period, Armstrong Corporation reports operating income of $30,000. Which of the following statements is true, if Armstrong's inventory levels decrease during the accounting period?

Absorption costing will report less operating income than variable costing.

5.3 Which of the following statements is true of activity-based costing?

Activity based costing is more suited to companies with high product diversity than companies with single product line.

5.3 Which of the following statements is true of activity-based costing?

Activity-based costing classifies some of the indirect costs as direct costs.

4.5 Which of the following statements about actual costing is true?

Actual costing uses actual indirect-cost rates calculated annually.

11.1 Feedback regarding previous actions may affect ________.

All of these answers are correct

1 Management accounting information typically includes ________.

All of these answers are correct.

5.1 Aqua Company produces two products-Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta's cost is shared between design and setup costs, while Alpha's major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua?

Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs.

2.5 Which of the following companies is part of the merchandising sector of our economy?

Arrow Electronics

5.5 ________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Availability of reliable data and measures

2.2 Which of the following statements is true?

Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.

2.6 Which of the following formulas determine cost of goods sold in a merchandising entity?

Beginning inventory + Purchases - Ending inventory = Costs of goods sold

6.1 Which of the following is true of a budget?

Budgets help managers to revise their plans and strategies.

1.4 Place the five steps in the decision-making process in the correct order: A = Obtain information B = Make decisions by choosing among alternatives C = Identify the problem and uncertainties D = Implement the decision, evaluate performance, and learn E = Make predictions about the future

C A E B D

4.4 Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate

CADB

5.5 Put the following ABC implementation steps in order ________. A Compute the allocation rates. B Compute the total cost of the products. C Identify the products that are the cost objects. D Select the cost allocation bases.

CDAB

1.6 Long-term financing is an integral part of the ________ function in an organization.

CFO's

9.7 Which of the following is true of capacity costs?

Capacity costs are difficult to estimate

5.2 Collin Inc. produces hospital equipment and the setup requirements vary from product to product. Collin produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid?

Collin has failed to use the correct cost driver as the cost-allocation base for setup costs.

1.7 Which of the following differentiates confidentiality and credibility under the Standards of Ethical Conduct?

Confidentiality deals with refraining from the usage of critical information for unethical or illegal advantage, while credibility ensures disclosing the relevant information that would help the intended user's understanding.

3.1 Which of the following is the mathematical expression of contribution margin ratio?

Contribution margin ratio = Contribution margin percentage × Revenues (in dollars)

1.6 ________ includes providing financial information for reports to managers and shareholders, and overseeing the overall operations of the accounting system.

Controllership

17.1 Which of the following statements best describes conversion costs?

Conversion costs are all manufacturing costs other than direct materials costs

1 Which of the following differentiates cost accounting and financial accounting?

Cost accounting measures information related to the costs of acquiring or using resources in an organization, whereas financial accounting measures a financial position of a company to investors, banks, and external parties.

4.1 ________ is the process of distributing indirect costs to products.

Cost allocation

4.6 Which account is debited if materials costing $100,000 are sold?

Cost of Goods Sold account

2.6 Which of the following formulas determine cost of goods sold in a manufacturing entity?

Cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold

1.2 Which of the following statements about customer value is true?

Creating value for customers is an important part of planning and implementing strategy.

1.3 ________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors.

Customer relationship management

1.3 ________ is an after-sale support provided to customers.

Customer service

6.2 Budgets should ________.

be flexible

6.2 Managers who feel that top management does not believe in the budget are most likely to ________.

be inactive participants in the budgeting process

1.4 Control measures should ________.

be linked by feedback to help future planning

7.7 The process by which a company's products or services are measured relative to the best possible levels of performance is known as ________.

benchmarking

1.7 If there is an ethical conflict concerning your direct supervisor, you may contact ________.

board of directors

2.5 For a manufacturing company, direct labor costs may be included in ________.

both work-in-process inventory and finished goods inventory

2.5 For a manufacturing company, indirect manufacturing costs may be included in ________.

both work-in-process inventory and finished goods inventory

1.4 The most important planning tool is a ________.

budget

7.2 The flexible budget contains ________.

budgeted amounts for actual output

4.4 The budgeted indirect-cost rate for each cost pool is computed as ________.

budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

6.1 Which of the following is a financial budget?

budgeted balance sheet

6.3 The operating budget process generally concludes with the preparation of the ________.

budgeted income statement

4.7 One reason indirect costs may be overapplied is because ________.

budgeted indirect costs exceed actual indirect costs

4.6 During an accounting period, job costs are computed on an ongoing basis by the use of ________.

budgeted indirect-cost rates

4.8 In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use ________.

budgeted rates for some direct costs and indirect costs

3.5 The margin of safety is the difference between ________.

budgeted revenues and breakeven revenues

6.3 Total finished units to be produced is based on the ________.

budgeted sales units

7.2 Which of the following elements are used in calculating revenue in a flexible budget?

budgeted selling price and actual quantity of output

4.8 The budgeted direct-labor cost rate includes ________.

budgeted total direct-labor costs in the numerator

6.3 Budgeted production equals ________.

budgeted unit sales + targeted ending finished goods inventory - beginning finished goods inventory

4.5 When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.

budgeted; actual

11.3 Which of the following minimizes the risks of outsourcing?

building close partnerships with the supplier

17.2 In a process-costing system average unit costs are calculated ________.

by dividing total costs in a given accounting period by total units produced in that period

1.2 Strategy is formulated ________.

by identifying the most important customers

6.4 Sensitivity analysis helps managers evaluate risks ________.

by showing the effects of changes to the original data or an underlying assumption

1.3 Management accounting information helps managers calculate a target cost for a product ________.

by subtracting from the target price the operating income per unit of product that the company wants to earn

1.3 ________ aims to improve operations throughout the value chain and to deliver products and services that exceed customer expectations.

Total Quality Management

3.1 Which of the following is an assumption of CVP analysis?

Total costs can be divided into a fixed component and a component that is variable with respect to the level of output.

2.4 XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?

Total manufacturing costs will increase and unit manufacturing costs will decrease.

9.3 Which of the following is a reason for companies to use absorption costing for internal accounting?

It can help prevent managers from taking actions that make their performance measure look good but that hurt the income they report to shareholders.

9.2 Which of the following statements is true of contribution-margin format of the income statement?

It highlights the lump sum of fixed manufacturing costs.

4.6 Which of the following statements regarding manufacturing overhead allocation is true?

It includes all manufacturing costs that cannot be directly traced to a product or service.

9.1 Which of the following is true of absorption costing?

It includes fixed manufacturing overhead as an inventoriable cost.

1.3 ________ is a philosophy in which management improves operations throughout the value chain to deliver products and services that exceed customer expectations.

Total quality management

3.1 Which of the following is true of CVP analysis?

Total revenues and total costs are linear in relation to output units.

1.6 ________ includes banking and short- and long-term financing, investments, and cash management.

Treasury management

4.6 Which of the following is true of plant utility costs?

It increases the Manufacturing Overhead Control account.

6.3 Which of the following best describes a rolling budget?

It is a budget that is always available for a specified future time period.

6.5 Which of the following is true of responsibility accounting?

It is a system that measures the plans, budgets, actions, and actual results of a responsibility center.

6.3 Which one of the following is a benefit of activity-based budgeting?

It provides detailed information that improves decision making.

1 Which of the following is true of cost accounting?

It provides financial information regarding the cost of acquiring resources.

6.3 Which of the following is a benefit of keeping inventory levels low?

It reduces shrinkage costs.

9.3 Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

It reduces the incentives for undesirable buildup of inventories.

5.2 Which of the following is true of refinement of a costing system?

It reduces the use of broad averages for assigning the cost of resources to cost objects.

9.6 Which of the following is true of theoretical capacity?

It results in the lowest cost estimate of the four capacity options when used for product costing.

9.1 Which of the following is true of variable costing?

It treats direct manufacturing costs as a product cost.

4.6 Which of the following is true of the Work-in-Process Control account?

Its balance is the sum of amounts from all in-process individual job-cost records.

5.4 ________ is an example of an output unit-level cost in the cost hierarchy.

Machine depreciation

1.7 Which item is an indication of competence under the Standards of Ethical Conduct?

Maintain an appropriate level of professional expertise by continually developing knowledge and skills.

1.3 Which of the following statements about a company's supply chain is true?

Management accountants provide information to enhance a company's supply chain.

2.5 ________ sector companies purchase materials and components and convert them into finished goods.

Manufacturing

4.6 Actual (rather than allocated) manufacturing overhead costs are first recorded in the ________.

Manufacturing Overhead Control account

4.6 Payment of the factory rent increases the ________.

Manufacturing Overhead Control account

4.6 Manufacturing overhead costs incurred for the month are: Utilities $30,000 Depreciation on equipment $25,000 Repairs $20,000 Which account is debited assuming utilities and repairs were on account?

Manufacturing Overhead Control, 75,000

1.3 Which of the following differentiates marketing from customer service?

Marketing is the process of promoting and selling products or services to customers or prospective customers, whereas customer service is the process of providing after-sales service to customers.

6.1 Which of the following statements is true of budgets?

Master budgets express management's operating and financial plans.

9.5 ________ is the level of capacity utilization that managers expect for the current budget period, which is typically one year.

Master-budget capacity utilization

4.6 Which account is credited if direct materials of $20,000 and indirect materials of $3,000 are sent to the manufacturing plant floor?

Materials Control for $23,000

3.3 Which of the following statements about net income (NI) is true?

NI = operating income less income taxes.

3.3 Which of the following is true of net income?

Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes.

2.5 Which of the following companies is part of the manufacturing sector of our economy?

Nike

4.7 The ________ approach carries the underallocated or overallocated amounts to overhead accounts in the following year.

None of these answers are correct.

9.5 ________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

Normal capacity utilization

5.4 ________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

Unit-level costs

9.1 ________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded.

Variable costing

9.1 ________ is a method of inventory costing in which only variable manufacturing costs are included as inventoriable costs.

Variable costing

9.2 ________ are subtracted from sales to calculate gross margin.

Variable manufacturing costs

4.6 Which account would be credited if the following labor wages were incurred in a furniture manufacturing company? Assembly workers $20,000 Janitors $10,000

Wages Payable Control, 30,000

3.1 Which of the following is true about the assumptions underlying basic CVP analysis?

Only selling price, variable cost per unit, and total fixed costs are known and constant.

5.6 Which of the following is a sign that an ABC system may be useful for an organization?

Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services.

11.2 Which of the following is true of relevant information?

Past costs are not relevant.

9.5 ________ provides the lowest estimate of denominator-level capacity in case demand of the product is not a limiting factor.

Practical capacity

9.5 ________ reduces theoretical capacity for unavoidable operating interruptions.

Practical capacity

2.2 Which one of the following items is a direct cost?

Printing costs incurred for payroll check processing; payroll check processing is the cost object.

4.2 Which of the following differentiates job costing from process costing?

Process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches.

5.7 A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.

can be used to eliminate nonvalue-added activities

3.1 The contribution margin income statement ________.

can be used to predict future profits at different levels of activity

6.4 ERP systems store vast quantities of information about the materials, machines and equipment, labor, power, maintenance, and setups needed to manufacture different products. This helps simplify the budgeting process as ERP systems ________.

can quickly calculate the manufacturing and nonmanufacturing costs based on a given sales quantity.

9.6 Using master-budget capacity to set selling prices ________.

can result in a downward demand spiral

6.A The ________ is required to prepare the cash budget of an organization.

capital expenditures budget

6.3 The ________ is a component of financial budgets.

cash budget

9.2 Given a constant contribution margin per unit and constant fixed costs, the period-to-period change in operating income under variable costing is driven solely by ________.

changes in the quantity of units actually sold

9.3 Switching production to products that absorb the highest amount of fixed manufacturing costs is also called ________.

cherry picking

1.2 Which of the following statements concerning an organization's strategy is true?

Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.

1.3 ________ describes the flow of goods, services, and information from the purchase of materials to the delivery of products to consumers, regardless of whether those activities occur in the same organization or with other organizations.

Supply chain

5.6 Which of the following is a sign that a "smoothing out" costing system exists?

The company loses bids they believe were priced competitively.

1 Managers use management accounting information to ________.

communicate, develop, and implement strategies

1.7 The Standards of Ethical Conduct for management accountants include concepts related to ________.

competence, confidentiality, integrity, and credibility

5.2 Demand for refinements to the costing system has accelerated due to ________.

competition in product markets

7.3 An unfavorable sales-volume variance could result from ________.

competitors taking market share

2.3 If each motorcycle requires a belt that costs $20 and 2,000 motorcycles are produced for the month, the total cost for belts is ________.

considered to be a direct variable cost

11.8 Top management faces a persistent challenge to make sure that the performance evaluation model of lower level managers is ________.

consistent with the decision model

6.6 Kaizen budgeting involves ________.

continual small cost reductions

6.6 The Japanese use the term kaizen when referring to________.

continuous improvement

3.1 The selling price per unit less the variable cost per unit is the ________.

contribution margin per unit

3.1 As per CVP, operating income calculations use ________.

contribution margins and fixed costs

2.1 Comparing budgeted costs to actual costs helps managers to improve ________.

control

1.6 The ________ is primarily responsible for management accounting and financial accounting.

controller

1.3 The ________ function supports the six functions of value-chain analysis.

controlling

17.1 An example of a business which would have no beginning or ending inventory but which could use process costing to compute unit costs would be a ________.

corporation whose sole business activity is processing the customer deposits of several banks

2.2 The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________.

cost assignment

4.1 Which of the following includes both traced direct costs and allocated indirect costs?

cost assignments

6.5 A maintenance manager of a theatre is most likely to be responsible for a(n) ________.

cost center

1 The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are known as ________.

cost management

2.2 The determination of a cost as either direct or indirect depends upon the ________.

cost object chosen

6.3 High inventory levels increase the ________.

cost of carrying inventory, the costs of quality, and shrinkage costs

4.1 A ________ is a grouping of individual indirect cost items.

cost pool

4.1 Assigning direct costs to a cost object is called ________.

cost tracing

4.1 A ________ links an indirect cost to a cost object.

cost-allocation base

1.5 The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes ________.

cost-benefit approach

2.7 For external reporting ________.

costs are classified as either inventoriable or period costs

2.5 Inventoriable costs are costs of a product that are ________.

costs of a product that are considered assets in a company's balance sheet when the costs are incurred and that are expensed as cost of goods sold only when the product is sold

11.2 Sunk costs are ________.

costs that are unavoidable and cannot be changed no matter what action is taken

6.2 Participation of employees in the budgeting process helps ________.

create greater commitment towards the budget

1.3 New-product development time is the time taken by companies to ________.

create new products and bring them to market

1 The primary user of financial accounting information is a ________.

current shareholder

11.3 Relevant costs in a make-or-buy decision of a part include ________.

currently used manufacturing capacity that has alternative uses

11.2 An example of a qualitative factor for the decision-making process is ________

customer satisfaction

1.3 Customer relationship management initiatives use technology to coordinate all ________.

customer-facing activities

11.1 The formal process of choosing between alternatives is known as a(n) ________.

decision model

3.4 Which of the following forms a part of decision making in CVP analysis?

decision to advertise

9.3 Critics of absorption costing suggest evaluating management on its ability to ________.

decrease fixed costs

9.3 Ways to "produce for inventory" that result in increasing operating income include ________.

deferring maintenance to accelerate production

11.6 Which of the following is an irrelevant cost?

depreciation

2.7 Which of the following is included in product cost for pricing and product-mix decisions?

design costs

2.7 Product costs used for government contracts generally include ________.

design costs and production costs

6.3 Activity-based budgeting makes it easier to ________.

determine how to reduce costs

11.2 When deciding to accept a one-time-only special order from a wholesaler, management should ________.

determine whether excess capacity is available

6.3 In which order are the following developed? First to last: A = Production budget B = Direct materials costs budget C = Budgeted income statement D = Revenues budget

DABC

17.7 Which of the following entries is used to record the standard costs of direct materials assigned to units worked on and total direct materials variances?

Debit Work in Process (at standard costs) Credit Direct Materials Variances Direct Materials Control

17.3 When a Bakery transfers goods from the Mixing Department to the Baking Department, the accounting entry is ________.

Debit Work in Process — Baking Department Credit Work in Process — Mixing Department

17.4 Which of the following entries is correct to record depreciation expense of Assembly Department?

Debit Work in Process—Assembly Credit Accumulated Depreciation

17.3 Which of the following entries is used to record direct materials purchased and used in production during a month in the Assembly department, before transferring the goods to Testing department?

Debit Work in Process—Assembly Credit Accounts Payable Control

11.6 Which of the following is true of depreciation cost?

Depreciation cost on equipment is irrelevant in decision making because depreciation on equipment that has already been purchased is a past cost.

1.3 ________ is the detailed planning and engineering and testing of products, services, or processes.

Design

1.3 Place the four business functions in the order they appear along the value chain: Customer service Design Marketing Production

Design, Production, Marketing, Customer Service

4.5 Which of the following statements about normal costing is true?

Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.

9.2 ________ is subtracted from sales while calculating contribution margin.

Direct labor in factory

1.7 Which item is an indication of credibility under the Standards of Ethical Conduct?

Disclose delays or deficiencies in information, timeliness, processing, or internal controls in conformance with organization policy and/or applicable law.

9.6 ________ is the continuing reduction in the demand for a company's products that occurs when competitor prices are not met.

Downward demand spiral

11.1 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

E, A, D, C, B

2.5 Which of the following companies is part of the service sector of our economy?

Ernst & Young

17.3 Which of the following statements is true of conversion costs?

Estimating the degree of completion is usually easier for direct material costs than for conversion costs.

6.7 Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets?

Evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility.

17.4 A major advantage of using the FIFO process-costing method is that ________.

FIFO provides managers with information about changes in the costs per unit from one period to the next

5.4 ________ costs support the organization as a whole.

Facility-sustaining

17.6 Which of the following companies is likely to use a hybrid-costing system?

Fast run, which sells a limited range of televisions, which go through similar manufacturing process

6.3 ________ include a budgeted statement of cash flows and a budgeted balance sheet.

Financial budgets

4.6 When a job is complete ________.

Finished Goods Control is debited

1.7 Which of the following actions should a management accountant take first in confronting a potential ethical conflict concerning your direct supervisor?

Follow the organization's procedures concerning resolution of such a conflict.

1.5 Which of the following statements about the cost-benefit approach is true?

In a cost-benefit analysis, both costs and benefits are not easy to measure.

17.4 Which of the following statements is true of process costing?

In a period of falling prices, weighted-average process-costing method will increase tax payments as compared to FIFO process-costing method.

17.1 Which of the following statements is true?

In a process-costing system, each unit uses approximately the same amount of resources

17.1 Which of the following statements is true of conversion costs?

In process costing, they are usually considered to be added evenly throughout the production process.

2.2 Which of the following statements about the direct/indirect cost classification is true?

Indirect costs are always allocated

2.2 Which of the following is true of indirect costs?

Indirect costs cannot be traced to a particular cost object in an economically feasible way.

2.5 ________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object.

Indirect manufacturing costs

7.4 Which of the following is an advantage of using actual input data from past periods to develop a budget?

Information is available at a low cost.

2.7 Which of the following statements is true?

Inventoriable costs are assigned to inventories under GAAP.

17.4 Which of the following is an assumption under FIFO process-costing method?

It assumes that the ending work in process consists of only the lower-cost current-period units.

17.4 Which of the following is true of weighted-average process-costing?

It calculates the cost per equivalent unit of all work done to date, regardless of the accounting period in which it was done.

7.2 Which of the following is true of flexible budget?

It calculates total variable cost by multiplying actual units by budgeted variable cost per unit.

9.3 Which of the following steps can a management take to reduce the undesirable effects of absorption costing?

It can encourage using nonfinancial measures such as units in ending inventory compared to units in sales.

11.7 Which of the following is true in a decision to keep or replace existing equipment?

The disposal value of the old equipment is relevant.

2.5 The income statement of a manufacturing firm reports ________.

The income statement of a service-sector firm reports ________.

1.4 Which of the following statements is true of performance reports?

The performance report shows actual performance as compared to the budget.

6.3 ________ is the usual starting point for budgeting.

The revenues budget

7.1 Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.

The static-budget variance for operating income is $3 million unfavorable.

3.1 Which of the following is true of cost-volume-profit analysis?

The theory assumes that units manufactured equal units sold.

5.2 Which of the following is a reason that has accelerated the demand for refinements to the costing system?

The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.

9.5 ________ is the level of capacity based on producing at full efficiency all the time.

Theoretical capacity

1 Which of the following statements refers to management accounting information?

There are no regulations governing the reports

2.3 Which of the following statements is true?

There is a cause-and-effect relationship between the cost driver and the amount of cost.

17.5 Which of the following best describes transferred-in costs in process costing?

These costs are incurred in previous departments that are carried forward to subsequent departments.

6.1 Which of the following is true of master budgets?

They aid in coordinating what needs to be done to implement a plan.

7.4 Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

They are not based on realized benchmarks.

11.2 Which of the following is true of historical costs?

They are useful for making future predictions

6.2 Which of the following is true of budgets when they are administered thoughtfully?

They promote coordination within the subunits of a company.

6.2 Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process?

To benefit from their experience with the day-to-day aspects of running the business.

6.7 Which of the following statements is true in the case of budgeting for multinational companies?

While budgeting for multinational companies, managers must be aware that budgets will not be used for evaluating performance.

4.6 When direct materials are requisitioned the ________ account is increased.

Work-in-Process Control

4.6 Which of the following general ledger accounts will have a subsidiary ledger account?

Work-in-Process Control account

4.8 In the service sector ________.

a budgeted direct-labor cost rate may be used to apply direct labor to jobs

17.6 Which of the following companies is most likely to use an operation-costing system?

a company that makes suits for which the basic design is same, but depending on specifications, each batch of suits varies somewhat from other batches

4.1 In a costing system, ________.

a cost-allocation base can be either financial or nonfinancial

7.5 Which of the following can be a reason for a favorable price variance for direct materials?

a decrease in the price of materials due to an oversupply of materials

4.4 A job-cost record uses information from ________.

a labor-time card to record an employee's wage rate and hours spent on a particular job

11.3 Which of the following is an example of outsourcing?

a petrochemical company assigning a vendor to make software for its supply chain management

11.3 Which of the following is an example of insourcing?

a pharmaceutical company's research team developing a new patent using current resources

17.5 Transferred-in costs are treated as if they are ________.

a separate direct material added at the beginning of the process

1 An Enterprise Resource Planning System can best be described as ________.

a single database that collects data and feeds it into applications that support each of the company's business activities, such as purchases, production, distribution, and sales

9.1 In ________, fixed manufacturing costs are included as inventoriable costs.

absorption costing

9.1 Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles) for external financial reporting?

absorption costing

9.3 Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

absorption costing

9.4 Assume a manufacturing company that has started production in the current year. Which of the following would result in the highest profit being reported if the company has 1,000 units of ending inventory?

absorption costing

9.4 Which of the following inventory costing methods shown below is most likely to cause undesirable incentives for managers to build up finished goods inventory?

absorption costing

9.2 The gross-margin format is used for ________.

absorption costing income statement

9.2 When comparing the operating incomes between absorption costing and variable costing, and ending finished inventory exceeds beginning finished inventory, it may be assumed that ________.

absorption costing operating income exceeds variable costing operating income

2.1 A cost system determines the cost of a cost object by ________.

accumulating and then assigning costs

1.3 Production is the ________.

acquisition, coordination, and assembly of resources to produce a product or deliver a service

6.3 Which of the following statements is true about activity-based budgeting?

activity-based budgeting provides more detailed information than cost-based budgeting

4.4 Costs that are subject to short-run fluctuations for given jobs are ________.

actual costs

7.1 A favorable variance indicates that ________.

actual revenues exceed budgeted revenues

7.2 Which of the following information is needed to prepare a flexible budget?

actual units sold

4.7 The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.

adjusted allocation-rate

6.2 A company's actual performance should be compared against budgeted amounts for the same accounting period so that ________.

adjustments for future conditions can be included

2.3 Which of the following is a fixed cost for an automobile manufacturing plant?

administrative salaries

2.5 For an automobile manufacturer, period costs include the cost of ________.

advertising

4.2 Job-costing is likely to be used by________.

advertising agencies

7.6 A purchasing manager's performance is best evaluated using the ________.

affect the manager's action has on total costs for the entire company

11.2 Full costs of a product are the sum of ________.

all variable and fixed costs in all the business functions of the value chain

4.6 Which of the following items is debited to the Work-in-Process account?

allocated manufacturing overhead

4.6 For externally reported inventory costs, the Work-in-Process Control account is increased (debited) by ________.

allocated plant utility costs

4.2 Process costing ________.

allocates all product costs, including materials, and labor

11.3 When evaluating a make-or-buy decision, which of the following needs to be considered?

alternative uses of the production capacity

7.5 Favorable direct manufacturing labor efficiency variances are ________.

always credits

7.5 Unfavorable direct material price variances are ________.

always debits

11.4 In product-mix decisions, managers should ________.

always focus on maximizing total contribution margin

2.3 Fixed costs depend on the ________.

amount of resources acquired

7.4 A price variance reflects the difference between ________.

an actual input price and a budgeted input price

7.4 An efficiency variance reflects the difference between ________.

an actual input quantity and a budgeted input quantity

4.2 Which of the following companies will use a process costing system?

an oil refining company

9.6 The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.

an unattainable level of capacity

3.1 A revenue driver is defined as ________.

any factor that affects revenues

11.2 When making decisions ________.

appropriate weight must be given to both quantitative and qualitative factors

2.3 At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually ________.

are considered a fixed cost

3.6 Fixed costs ________.

are considered variable costs over the long run

4.1 Direct costs ________.

are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner

2.5 Inventoriable costs ________.

are expensed in the accounting period in which the products are sold

11.2 Sunk costs ________.

are ignored when evaluating alternatives

9.1 Under absorption costing, fixed manufacturing costs ________.

are inventoriable costs

11.2 Sunk costs ________.

are irrelevant for decision making

6.4 Financial planning models ________.

are mathematical representations of the relationships affecting the budget process

5.6 Smaller cost distortions occur when the traditional systems' single indirect-cost rate and the activity-cost-driver rates ________.

are similar in proportion to each other

2.5 Period costs ________.

are treated as expenses in the period they are incurred

7.6 Nonfinancial performance measures ________.

are usually used in combination with financial measures for control purposes

7.1 Management by exception is a practice whereby managers focus more closely on ________.

areas that are not operating as anticipated

17.3 The purpose of the equivalent-unit computation is to ________.

assist the business in determining the cost assigned to ending inventory and work-in-process inventory

4.5 The budgeted indirect-cost rate is calculated ________.

at the beginning of the year

7.1 A master budget is ________.

developed for a period for a planned output

1 Which of the following deals with management accounting?

developing budgets

11.7 Book value is defined as the ________.

difference between the original cost of an asset and the accumulated depreciation

11.3 The cost to produce Part A was $20 per unit in 2013 and in 2014 it has increased to $22 per unit. In 2014, Supplier ABC has offered to supply Part A for $18 per unit. For the make-or-buy decision ________.

differential costs are $4 per unit

4.4 A job-cost sheet details the ________.

direct labor costs incurred

2.5 In the cost classification system used by manufacturing firms, assembly workers' wages would be included in ________.

direct manufacturing costs

2.6 Conversion costs include ________.

direct manufacturing labor and manufacturing overhead costs

2.5 Wages paid to machine operators on an assembly line are classified as a ________.

direct manufacturing labor cost

4.6 Which of the following increases (are debited to) the Work-in-Process Control account?

direct manufacturing labor costs

7.6 Which of the following is an example of financial performance measure?

direct manufacturing labor efficiency variance

2.6 Prime costs include ________.

direct materials and direct manufacturing labor costs

4.6 The Materials Control account is increased when ________.

direct materials are purchased

2.5 Total manufacturing costs is comprised of ________.

direct materials costs, direct manufacturing labor costs, and manufacturing overhead costs

2.5 Direct materials inventory would normally include ________.

direct materials in stock and awaiting use in the manufacturing process

2.5 For a manufacturing company, direct material costs may be included in ________.

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

2.5 Manufacturing-sector companies report ________.

direct materials inventory, work-in-process inventory, and finished goods inventory accounts

2.6 Total manufacturing costs equal ________.

direct materials plus conversion costs

1.7 Which of the following issues is addressed by the Sarbanes-Oxley legislation?

disclosure practices of public corporations

1.3 Processing orders and shipping products or providing services to customers is known as ________.

distribution

1.6 Line management includes ________.

distribution managers

4.3 The actual indirect-cost rate is calculated by ________.

dividing actual total indirect costs by the actual total quantity of the cost-allocation base

3.3 The planned operating income is calculated by ________.

dividing net income by 1 − tax rate

2.4 A unit cost is computed by ________.

dividing total cost by the number of units produced

7.6 The degree to which a predetermined objective or target is met is known as ________.

effectiveness

9.1 Which of the following costs is inventoried when using variable costing?

electricity consumed in manufacturing process

2.3 Which one of the following is a variable cost for an insurance company?

electricity expenses

6.6 Kaizen budgeting is driven by ________.

employees

1.5 Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?

employing a cost-benefit approach

2.1 Cost assignment ________.

encompasses allocating indirect costs to a cost object

17.4 In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs ________.

entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

17.4 If there was no beginning work in process and no ending work in process under the weighted-average process costing method, the number of equivalent units for direct materials, if direct materials were added at the start of the process, would be ________.

equal to the units completed during the period

5.3 Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.

establish a cause-and-effect relationship with the activities performed

6.3 Which of the following information is required by a company's manager while preparing a manufacturing overhead costs budget?

estimated expense for maintenance of factory building

6.3 Which of the following is required to arrive at the budgeted units to be produced in a year?

estimated finished goods inventory required at the end of the year

11.1 When using the five-step decision process, which one of the following steps should be done last?

evaluation and feedback

11.3 Which of the following would be a consideration in a make-or-buy decision?

excess capacity

1.5 In a cost-benefit approach, managers should spend resources if the ________.

expected benefits to the company exceed the expected costs

11.2 Relevant costs are ________.

expected future costs

11.2 The best way to avoid misidentification of relevant costs is to focus on ________.

expected future costs that differ among the alternatives

1 Financial accounting is concerned primarily with ________.

external reporting to investors, creditors, and government authorities

5.4 For a company which produce its products in batches, the CEO's salary is a(n) ________ cost.

facility-sustaining

5.4 It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.

facility-sustaining costs

5.4 Top management compensation cost is an example of ________ in the cost hierarchy.

facility-sustaining costs

6.3 The number of units in the sales budget and the production budget may differ because of a change in ________.

finished goods inventory levels

2.3 Which of the following is true if the production volume decreases?

fixed cost per unit increases

9.7 Product-sustaining costs in activity-based costing are similar to ________.

fixed costs

7.2 In a flexible budget ________.

fixed costs are kept at the same level of static budget

3.2 The breakeven point revenues is calculated by dividing ________.

fixed costs by contribution margin percentage

3.2 Breakeven point in units is ________.

fixed costs divided by contribution margin per unit

11.2 Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

fixed manufacturing costs

9.1 The only difference between variable and absorption costing is the expensing of ________.

fixed manufacturing costs

9.2 The difference between operating incomes under variable costing and absorption costing centers on how to account for ________.

fixed manufacturing costs

9.4 Advocates of throughput costing maintain that ________.

fixed manufacturing costs are related to the capacity to produce rather than to the actual production of specific units

9.7 There is no output-level variance for variable costing, when ________.

fixed manufacturing overhead is not allocated to work in process

3.9 In the manufacturing sector, ________.

fixed overhead costs are subtracted to determine gross margin

11.3 Which of the following is a relevant cost to be included in a make-or-buy decision?

fixed salaries that will not be incurred if the part is outsourced

6.2 It helps managers gather information for improving future performance.

focus on the upcoming budget period

6.3 Activity-based budgeting ________.

focuses on activities necessary to produce and sell products and services

17.6 Managers find operation costing useful in cost management because it ________.

focuses on control of physical processes of a given production system

1 Management accounting ________.

focuses on estimating future revenues, costs, and other measures to forecast activities and their results

6.5 Responsibility accounting ________.

focuses on who should be asked about the information

4.1 Product costing information will include ________.

for cost management

4.1 Job costing information is used ________.

for internal financial reporting

6.5 A manager of a revenue center is responsible ________.

for only the revenues of his center

11.1 A decision model involves a(n) ________.

formal method of making a choice that often involves both quantitative and qualitative analyses

6.1 Budgets are used to ________.

formulate company strategies

2.7 Debated items that some companies include as direct manufacturing labor include ________.

fringe benefits

2.5 Which of the following is a direct manufacturing cost?

fringe benefits paid to machine operators

11.6 When deciding whether to discontinue a segment of a business, relevant costs include ________.

future administrative costs that can be eliminated

6.2 A limitation of using past performance as a basis for judging actual results is that ________.

future conditions can be different from the past

11.2 A relevant cost is a cost that is a(n) ________.

future cost

11.2 A relevant revenue is revenue that is a(n) ________.

future revenue

2.5 Finished goods inventory would normally include ________.

goods fully completed but not yet sold

2.5 Work-in-process inventory would normally include ________.

goods partially worked on but not yet fully completed

5.3 Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into ________.

greater overhead costs for each product line

3.8 Multiple cost drivers ________.

have no unique breakeven point

4.6 The ending balance in the Work-in-Process Control account represents the costs of all jobs that ________.

have not been completed

11.4 Product mix decisions ________.

help determine how to maximize operating profits

1.5 Technical consideration ________.

help managers make wise economic decisions by providing them with the desired information

1.4 Linking rewards to performance ________.

helps to motivate managers

4.3 An example of a denominator reason for calculating annual indirect-cost rates includes ________.

higher levels of output demanded during the fall months

11.4 With a constraining resource, managers should choose the product with the ________.

highest contribution margin per unit of the constraining resource

5.3 ABC systems ________.

highlight the different levels of activities

5.3 ABC systems create ________.

homogenous activity-related cost pools

1.2 Strategy specifies ________.

how an organization matches its own capabilities with the opportunities in the marketplace

2.3 Cost behavior refers to ________.

how costs react to a change in the level of activity

6.1 Financing decisions primarily deal with ________.

how to obtain funds to acquire resources

4.4 Problems with costing occur when ________.

icorrect job numbers are recorded on source documents

5.7 ABC systems help managers to ________.

identify new designs to reduce costs

5.2 Refining a cost system includes ________.

identifying the activities involved in a process

3.1 One of the first steps to take when using CVP analysis to help make decisions is ________.

identifying the variable and fixed costs

4.7 A company would use multiple cost-allocation bases ________.

if managers believed the benefits exceeded the additional costs of that costing system

11.2 Factors used to decide whether to outsource a part include ________.

if the supplier is reliable

6.2 Demanding but achievable targets tend to ________.

improve performance of employees when they are closer to the target

6.6 Kaizen refers to incorporating cost reductions ________.

in each successive budgeting period

7.7 Benchmarking is a process ________.

in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes

11.2 Qualitative factors ________.

include customer satisfaction

2.5 Period costs ________.

include the cost of selling, delivering, and after-sales support for customers

2.5 A plant manufactures several different products. The wages of the plant supervisor can be classified as a(n) ________.

inventoriable cost

2.5 Costs that are initially recorded as assets and expensed when goods sold are called ________.

inventoriable costs

2.7 Product costs for financial statements may refer to ________.

inventoriable costs for external reporting purposes

6.5 A regional manager of a restaurant chain in charge of finding additional locations for expansion is most likely responsible for a(n) ________.

investment center

6.5 Silas has been recently promoted to head his department. He is responsible for maximizing the profits of the department and to ensure that the earnings are ploughed back into the business. Silas is most likely to head a (n) ________.

investment center

4.1 The cost allocation base ________.

is a systematic way to link an indirect cost or group of indirect costs to cost objects

1.4 A budget ________.

is an aid to coordinating what needs to be done to execute a plan

4.6 In a normal costing system, the Manufacturing Overhead Control account ________.

is debited with actual overhead costs

7.2 A flexible budget ________.

is developed at the end of the period

17.4 Under the weighted-average method, the stage of completion of beginning work in process ________.

is irrelevant in determining the equivalent-unit calculation

2.1 An actual cost is ________.

is the cost incurred

6.1 A master budget ________.

is the initial plan of what the company intends to accomplish in the period and evolves from both the operating and financing decisions

1.4 Management accounting is considered most likely to be successful when it ________.

is timely

5.6 Recognizing ABC information is not always perfect because ________.

it balances the need for better information against the costs of creating a complex system

1.4 A budget serves as much as a control tool as a planning tool because ________.

it is a benchmark against which actual performance can be compared

5.6 It only makes sense to implement an ABC system when ________.

its benefits exceed its implementation costs

1.2 In designing strategy, a company must match its opportunities in the marketplace with ________.

its resources and capabilities

6.6 Tom Magic Company manufactures various kinds of toys for different age groups. The company's flagship product is Rx. The company currently requires 8.50 labor hours to manufacture per unit of Rx. The company believes that because of numerous small improvements in the process, it will require 0.10 labor-hours less and hence will only 8.40 labor-hours in the next quarter. It will require 8.35 and 8.25 labor-hours in third and fourth quarter. The company has adopted ________.

kaizen budgeting

4.4 The basic source document for direct manufacturing labor is the ________.

labor-time record

11.3 Which of following is a firm's risk of outsourcing the production of a part?

leakage of intellectual property

7.5 A favorable efficiency variance for direct manufacturing labor indicates that ________.

less direct manufacturing labor-hours were used during production than planned for actual output

3.6 In a company with low operating leverage, ________.

less risk is assumed than in a highly leveraged firm

11.4 Which of the following methods is used to determine the most profitable production schedule and the most profitable product mix?

linear programming

5.1 Overcosting a particular product may result in ________.

loss of market share

9.6 The higher the denominator level, the ________.

lower the amount of fixed manufacturing costs allocated to each unit produced

6.2 Which of the following is referred to as the bottom-up aspect of the budgeting process?

lower-level managers providing inputs to the budgeting process based on their specialized knowledge

5.5 Which of the following cost and cost allocation base have a strong cause and effect relationship?

machine depreciation and output units

6.5 A company using responsibility accounting system decides to exclude all uncontrollable costs from a manager's performance report. Jenson is the machine supervisor. Which of the following costs will impact Jenson's performance report?

machine maintenance cost

6.5 Which of the following departments is most likely to be a cost center?

maintenance department of a luxury resort

1.6 Staff management includes ________.

management accountants

3.8 To apply CVP analysis in not-for profit organization ________.

managers need to focus on measuring their output, which is different from the tangible units sold by manufacturing and merchandising companies

1.6 Which of the following is a responsibility of the CFO?

managing short-term and long-term financing

2.7 Under GAAP, only ________ can be assigned to inventories in the financial statements.

manufacturing costs

2.7 Product costs used for external reporting generally include ________.

manufacturing costs only

2.5 Which of the following cost is included in cost of goods sold?

manufacturing labor cost

6.3 Costs such as supervision, depreciation, maintenance, supplies, and power. are included in the ________.

manufacturing overhead budget

2.5 For a manufacturing-sector company, the cost of factory depreciation is classified as a ________.

manufacturing overhead cost

2.5 Which of the following is an inventoriable cost?

manufacturing overhead cost

4.4 In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job

manufacturing overhead costs

11.2 Which of the following costs is NOT considered to calculate the minimum acceptable price of a one-time-only special order?

marketing costs

9.6 The marketing manager's performance evaluation is most fair when based on a denominator level using ________.

master-budget capacity utilization

6.3 When direct material and direct labor is the limiting factor, revenue budgets are usually based on ________.

maximum units that can be manufactured

2.2 Indirect manufacturing costs ________.

may include both variable and fixed costs

5.1 Product-cost cross-subsidization ________.

means that if a company undercosts one of its products, it will overcost at least one of its other products

1 Cost accounting ________.

measures the costs of acquiring or using resources in an organization

5.1 For a company with diverse products, undercosting overhead of a product will lead to ________.

misallocating indirect costs of another product

2.2 A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.

monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver

2.3 Which of the following is a fixed cost?

monthly rent payment

9.2 If the unit level of inventory increases during an accounting period, then ________.

more operating income will be reported under absorption costing than variable costing

6.2 Challenging budgets tend to ________.

motivate improved performance as employees work more intensely to avoid failure

1 Financial accounting ________.

must comply with GAAP (generally accepted accounting principles)

11.6 Zephyr Energies, Inc. is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is discontinued?

net income will decrease by the amount of the contribution margin of the product line being discontinued

2.5 Service-sector companies report ________.

no inventory accounts

9.7 It is most difficult to estimate ________ because of the need to predict demand for the next few years

normal capacity utilization

9.5 Which of the following measures capacity levels in terms of demand for the output of the plant?

normal capacity utilization and master-budget capacity utilization

4.5 The difference between actual costing and normal costing is ________.

normal costing uses budgeted indirect-costs

9.3 Under variable costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

not affecting the manager's bonus

11.2 Unit cost data can most mislead decisions by ________.

not computing unit costs at the same output level

3.8 Which of the following is an output measure for a hospital?

number of days spent by a patient in a hospital

2.3 The most likely cost driver of distribution costs is the ________.

number of miles driven

5.5 A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. Of the following, the most appropriate cost driver for assigning materials handling costs to the various products is ________.

number of parts used

3.5 To apply CVP analysis in the hotel industry, which of the following is the most important measure of output?

number of room-nights occupied

6.3 Which of the following is most likely to be a cost driver for the variable portion of marketing costs?

number of units units sold

11.1 When using the five-step decision process, which one of the following steps should be done first?

obtain information

9.4 Advocates of throughput costing argue that ________.

only direct material costs are included as inventoriable costs

2.7 Under GAAP, for the purposes of calculating inventory costs, product costs include ________.

only inventoriable costs

2.5 Target reports ________.

only merchandise inventory

5.4 Unit-level cost drivers are most appropriate as an overhead assignment base when ________.

only one product is manufactured

9.6 Customers expect to pay a price that includes ________.

only the cost of actual capacity used

3.9 In the merchandising sector ________.

only variable costs are subtracted to determine gross margin

3.2 At breakeven point, ________.

operating income is equal to zero

3.4 Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________.

operating profits increases by $6 per unit

6.1 Which of the following is generally expressed through a short-run budget?

operational plans

1.6 Which of the following is a function of a controller?

operations administration

2.8 Which of the following influences the make or buy decision to the company?

opportunity cost

11.3 Schmidt Sewing Company incorporates the services of Deb's Sewing. Schmidt purchases pre-cut dresses from Deb's. This is primarily known as ________.

outsourcing

2.7 Which of the following is a manufacturing overhead cost?

overtime premiums paid to plant workers

5.1 Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called ________.

peanut-butter costing

7.6 Which of the following is an example of nonfinancial performance measure?

percentage of products started and completed without requiring any rework

11.7 If management takes a multiple-year view in the decision model and judges success according to the current year's results, a problem will occur in the ________.

performance evaluation model

1.4 A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________.

performance report

9.1 Variable costing regards fixed manufacturing overhead as a(n) ________.

period cost

2.5 Costs expensed on the income statement in the accounting period incurred are called ________.

period costs

6.A Financial analysts use the projected cash flow statement to ________.

plan for short-term cash investments

2.1 Budgeted costs are ________.

planned or forecasted costs

2.5 For manufacturing firms, inventoriable costs include ________.

plant supervisor salaries

11.3 Which of the following would be considered in a make-or-buy decision?

potential rental income from space occupied by the production area

9.6 The Internal Revenue Service requires the use of ________ for calculating fixed manufacturing costs per unit.

practical capacity

9.6 Using ________ as the denominator level also gives the manager a more accurate idea of the resources needed and used to produce a unit by excluding the cost of unused capacity.

practical capacity

9.7 Which of the following capacity levels do proponents of activity-based costing recommend to be used as the denominator level to calculate activity cost rates?

practical capacity

9.6 Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

practical capacity for pricing decisions

6.A The cash budget is a schedule of expected cash receipts and disbursements that ________.

predicts the effect on the cash position at given levels of operations

1 Financial accounting provides the primary source of information for ________.

preparing the income statement for shareholders

7.4 The flexible-budget variance for direct cost inputs can be further subdivided into a ________.

price variance and an efficiency variance

5.7 Activity-based costing information can be used for ________.

pricing decisions

17.1 Costing systems that are used for the costing of like or similar units of products in mass production are called ________.

process-costing systems

5.7 Lavender Company is a logistics company and has recently implemented ABC system. Using activity-based information, it decides to reduce the bulkiness of the packages delivered, thereby reducing costs. This suggests that ABC system helps managers in ________ decisions.

process-improvement

7.6 Cost reductions can be the result of ________.

producing products faster and more efficiently

11.4 Determining which products should be produced when the plant is operating at full capacity is referred to as a(n) ________.

product-mix decision

5.7 It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.

product-pricing errors are minimal

9.2 An favorable production-volume variance occurs when ________.

production exceeds the denominator level

7.3 If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.

production manager

1.4 Which of the following is an example of an extrinsic reward?

promotions based on performance

4.4 If indirect-cost rates are calculated monthly, distortions might occur because of ________.

property tax payments made in July and December

7.7 When benchmarking, management accountants are most valuable when they ________.

provide insight into why costs or revenues differ across companies

2.5 Service-sector companies ________.

provide intangible products

2.5 Merchandising-sectors ________.

purchase and then sell tangible products without changing their basic form

11.3 For make-or-buy decisions, a supplier's ability to maintain secrecy of intellectual property is considered a(n) ________.

qualitative factor

11.2 Employee morale at Dos Santos, Inc., is very high. This type of information is an example of ________.

qualitative factors

1.3 Which of the following is an area that customers want to see improved levels of performance?

quality of the product

7.3 The sales-volume variance is sometimes due to ________.

quality problems leading to customer dissatisfaction

11.2 Roberto owns a small body shop. His major costs include labor, parts, and rent. In the decision-making process, these costs are considered to be ________.

quantitative factors

4.4 For a given job the direct costs associated with the job are ________.

raw materials

1.4 Which of the following is an example of an intrinsic reward?

recognition of job well done

4.2 Job costing ________.

records the flow of costs for each product or service

3.4 All else being equal, a reduction in selling price will ________.

reduce operating income

3.4 All else being equal, an increase in advertising expenditures will ________.

reduce operating income

9.5 Practical capacity is the denominator-level concept that ________.

reduces theoretical capacity for unavoidable operating interruptions

11.2 In evaluating different alternatives, it is useful to concentrate on ________.

relevant costs

11.2 Which of the following costs always differ among future alternatives?

relevant costs

2.3 A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

relevant range

6.6 A stretch budget is a budget that ________.

represents a challenging, but achievable level of performance

9.6 Budgeted fixed manufacturing costs of a product using practical capacity ________.

represents the cost per unit of supplying capacity

2.7 Product cost for reimbursement under government contracts includes ________.

research and development costs

2.7 Which of the following is common for reporting product cost under financial reporting and product cost for reimbursement under government contracts?

research and development costs

6.5 The regional sales office manager of a national firm is most likely responsible for a(n) ________.

revenue center

6.3 The order to follow when preparing the operating budget is ________.

revenues budget, production budget, and direct manufacturing labor costs budget

3.2 The breakeven point is the activity level where ________.

revenues equal the sum of variable and fixed costs

9.4 Throughput contribution equals ________.

revenues minus all direct material cost of goods sold

11.5 The theory of constraints (TOC) defines throughput margin as ________.

revenues minus the direct material costs of the goods sold

3.1 Contribution margin equals ________.

revenues minus variable costs

2.2 A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________.

salary paid to plant supervisor

6.3 Which of the following is a component of operating budgets?

sales budget

9.1 Which of the following costs will be treated as period costs under absorption costing?

sales commission paid on sale of product

2.5 Which of the following is a period cost?

sales promotion expenses

3.9 Gross margin is ________.

sales revenue less cost of goods sold

6.A The cash flow statement includes ________.

sales revenues of the organization

6.2 A budget is an end product of negotiations among senior and subordinate mangers because ________.

senior managers want stiffer targets and subordinates want relatively easy targets

3.5 Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If a change is made in one parameter of CVP analysis, it is an example of ________.

sensitivity analysis

6.4 Financial planning software packages assist management with ________.

sensitivity analysis in their planning and budgeting activities

11.2 Which of the following is an appropriate step when identifying relevant costs to make a business decision?

separating total costs into variable and fixed components

2.5 Yahoo, an Internet search firm, would be classified as a(n) ________.

service-sector company

6.1 A master budget forces managers to examine the business as they plan, so they can ________.

set expectations against which actual results can be compared

6.3 Activity-based-costing analysis makes no distinction between ________.

short-run variable costs and short-run fixed costs

4.3 Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates?

shorter the period, the greater is the influence of seasonal patterns on the amount of costs

4.4 Managers and accountants collect most of the cost information that goes into their systems through ________.

source documents

7.4 Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.

standard input allowed for one output unit by standard price per input unit

1 Which of the following groups would be least likely to receive detailed management accounting reports?

stockholders

1 A data warehouse or infobarn ________.

stores information used by different managers for multiple purposes

1.2 Which of the following is not a concern for management accountants in formulating a strategy?

strategizing compliance with GAAP (Generally Accepted Accounting Principles)

9.2 One possible means of determining the difference between operating incomes for absorption costing and variable costing is by ________.

subtracting fixed manufacturing overhead in beginning inventory from fixed manufacturing overhead in ending inventory

9.4 Throughput costing is also called ________.

super-variable costing

1.4 A well-conceived plan allows managers the ability to ________.

take advantage of unforeseen opportunities

5.4 Facility-sustaining costs are the costs of activities ________.

that managers cannot trace to individual products or services but that support the organization as a whole

7.5 An unfavorable price variance for direct materials might indicate ________.

that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods

7.1 An unfavorable variance indicates that ________.

the actual units sold are less than the budgeted units

4.7 The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called ________.

the adjusted allocation rate approach

2.2 Cost tracing is ________.

the assignment of direct costs to the chosen cost object

2.2 Cost allocation is ________.

the assignment of indirect costs to the chosen cost object

6.1 Operating decisions primarily deal with ________.

the best use of scarce resources

2.2 Cost accumulation is ________.

the collection of cost data in some organized way by means of an accounting system

6.5 Which of the following departments is most likely to be a profit center?

the consulting department of a law firm

11.3 Opportunity costs is defined as ________.

the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use

1 The primary user of management accounting information is a(n) ________.

the controller

6.3 Activity-based budgeting would separately estimate ________.

the cost of a setup activity

7.6 Effectiveness is ________.

the degree to which a predetermined objective or target is met

2.2 Which of the following factors affect the direct/indirect classification of a cost?

the design of the operation

7.1 A variance is ________.

the difference between an actual result and a budgeted performance

17.3 In a process-costing system, the calculation of equivalent units is used for calculating ________.

the dollar amount of the cost of goods sold for the accounting period

17.4 The weighted-average process-costing method calculates the equivalent units by ________.

the equivalent units completed during the current period plus the equivalent units in ending

6.3 The revenues budget identifies ________.

the expected level of sales for the company

1 Financial accounting provides a historical perspective, whereas management accounting emphasizes ________.

the future

6.3 The use of activity-based budgeting is growing because of ________.

the increased use of activity-based costing

17.4 A disadvantage of the weighted-average method compared to the FIFO process-costing method is that ________.

the information it provides about changes in unit prices from one period to the next is less useful than the information provided by FIFO

11.3 The opportunity cost of holding significant inventory includes ________.

the interest forgone on an alternative investment

6.3 Best products, an Atlanta based company, is in the midst of its budgeting process. It has already prepared its direct materials usage budget and is now in the process of preparing its direct material purchase budget. In addition to the details gathered to prepare the direct materials usage budget, Best also must know ________.

the level of direct material inventory to be maintained

1.3 Marketing is the ________.

the manner by which companies promote and sell their products or services to customers or perspective customers

11.7 Managers tend to favor the alternative that makes their performance look best. Therefore, they tend to focus on ________.

the measures used in the performance evaluation model

6.3 Which of the following is a factor while choosing the period of a budget?

the motive for creating the budget

2.3 Which of the following is a cost driver for a company's human resource costs?

the number of job applications processed

4.3 An example of a numerator reason for calculating annual indirect-cost rates includes ________.

the number of units produced

4.7 The spreading of underallocated or overallocated overhead among ending work-in-process, finished goods, and cost of goods sold is called ________.

the proration approach

9.6 Which of the following approaches spreads underallocated or overallocated overhead among ending balances in Work-in-Process Control, Finished Goods Control, and Cost of Goods Sold?

the proration approach

7.6 Which of the following is a reason for a favorable material price variance?

the purchasing manager bargaining effectively with suppliers

7.6 Efficiency is ________.

the relative amount of inputs used to achieve a given output level

6.3 The budgeting process is most strongly influenced by ________.

the sales forecast

11.7 A company decided to replace an old machine with a new machine. Which of the following is considered a relevant cost?

the setup cost of the new equipment

1.3 Customer response time involves ________.

the speed at which an organization responds to customer requests

11.2 Business function costs are ________.

the sum of all variable and fixed costs in a particular business function of the value chain

11.5 Based on the theory of constraints, investments equal ________.

the sum of material costs in direct materials, work-in-process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings

3.2 The breakeven point decreases if ________.

the total fixed costs decrease

5.7 ABC and traditional systems are quite similar in ________.

the treatment of direct costs

17.4 An assumption of the FIFO process-costing method is that ________.

the units in beginning inventory are assumed to be completed first

17.1 Process costing should be used to assign costs to products when ________.

the units produced are similar

1.3 R&D, production, and customer service are business functions that are all included as part of ________.

the value chain

9.6 Operating income reported on the end-of-period financial statements is changed when ________ is used to handle the production-volume variance at the end of the accounting period.

the write-off variances to cost of goods sold approach

9.5 The budgeted fixed manufacturing cost rate is the lowest for ________.

theoretical capacity

5.8 Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when ________.

there are several homogeneous cost pools

5.3 A single indirect-cost rate distort product costs because ________.

there is an assumption that all support activities affect all products

3.2 If unit outputs exceed the breakeven point ________.

there will be a profit

2.5 R&D costs are treated as period costs because ________.

these costs may increase revenues in the future period

9.4 If 1,000 units are produced and only 700 units are sold, ________ results in the greatest amount of expense reported on the income statement.

throughput costing

9.4 If 800 units are produced and 1,200 units are sold, the costing method which will result in the greatest operating income is ________.

throughput costing

9.4 Which of the following inventory costing methods results in the least amount of costs being inventoried?

throughput costing

4.7 The adjusted allocation approach yields the benefits of ________.

timeliness and convenience of normal costing

5.7 One reason for assigning selling and distribution costs to products for analytical purposes is ________.

to ensure that all costs are considered

6.5 Which of the following is the fundamental purpose of responsibility accounting?

to gather information that will enable future improvement

9.3 Many companies have switched from absorption costing to variable costing for internal reporting ________.

to reduce the undesirable incentive to build up inventories

3.1 Managers use cost-volume-profit (CVP) analysis to ________.

to study the behavior of and relationship among the elements such as total revenues, total costs, and income

7.6 Variance analysis should be used ________.

to understand why variances arise and to improve future performance

2.4 In making product mix and pricing decisions, managers should focus on ________.

total costs

6.4 When performing a sensitivity analysis, if the selling price per unit is increased, then the ________.

total costs for sales commissions and other nonmanufacturing variable costs will increase

5.5 Management accountants use the cost hierarchy to first calculate the ________.

total costs of each product and then they compute per-unit costs

7.2 Which of the following items will be same for a flexible budget and a master budget?

total fixed costs

2.3 Within the relevant range, if there is a change in the level of the cost driver, then ________.

total fixed costs will remain the same and total variable costs will change

7.5 These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity. The best label for the formula [(AP)(AQ) - (BP)(BQ)] is the ________.

total flexible-budget variance

11.3 If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the ________.

total variable cost of producing the product

1.6 Which of the following reports to the CFO?

treasurer

4.7 When the allocated amount of indirect costs are less than the actual amount, indirect costs have been ________.

underallocated

5.4 With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.

undercosted

7.5 A favorable price variance for direct manufacturing labor might indicate that ________.

underskilled employees are being hired

7.6 If manufacturing machines are breaking down more than expected, this will contribute to a(n) ________.

unfavorable direct manufacturing labor efficiency variance

6.6 To reduce budgetary slack management may ________.

use external benchmark performance measures

4.2 Process costing is ________.

used by businesses to price identical products

4.2 Job costing is ________.

used by businesses to price unique products for different jobs

1.3 The value chain is the sequence of business functions in which ________.

usefulness is added to the products or services of an organization

7.2 An unfavorable flexible-budget variance for variable costs may be the result of ________.

using more input quantities than were budgeted

4.3 Actual costing is a costing system that traces direct costs to a cost object by ________.

using the actual direct cost rates times the actual quantities of the direct-cost inputs

4.1 Each indirect-cost pool of a manufacturing firm ________.

utilizes a separate cost-allocation rate

5.5 ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

variable

2.3 Which of the following is true if the volume of sales increases?

variable cost increases

9.2 The contribution-margin format is used for ________.

variable costing income statement

9.2 In general, if inventory increases during an accounting period, ________.

variable costing will report less operating income than absorption costing

11.2 Which of the following costs is relevant in a decision-making process?

variable costs

3.2 Assume only the specified parameters change in a CVP analysis. The contribution margin percentage increases when ________.

variable costs per unit decrease

2.4 When 20,000 units are produced, variable costs are $8 per unit. Therefore, when 10,000 units are produced ________.

variable costs will remain at $8 per unit

9.1 Which of the following costs is inventoried when using absorption costing?

variable manufacturing costs

11.2 Which of the following is an example of sunk costs?

wages to security staffs

17.5 In a process-costing system when goods move from department to department, the accounting for such transfers is relatively simple under ________.

weighted-average costing

3.6 When a greater proportion of costs are fixed costs, then ________.

when demand is low the risk of loss is high

2.5 Inventoriable costs are expensed on the income statement ________.

when the products are sold

1.7 If there is an ethical conflict concerning your direct supervisor, when is it appropriate to contact authorities or individuals not employed by the organization?

when there is a clear violation of the law

7.6 Variances should be investigated ________.

when there is a small variance for critical items such as product defects

17.4 On occasion, the FIFO and the weighted-average methods of process costing will result in the same dollar amount of costs being transferred to the next department. Which of the following scenarios would have that result?

when there is no beginning inventory

2.2 Classifying a cost as either direct or indirect depends upon ________.

whether the cost can be easily traced with the cost object

1.7 Ethical challenges for management accountants include ________.

whether to accept gifts from suppliers, knowing it is an effort to indirectly influence decisions

6.5 A primary consideration in assigning a cost to a responsibility center is ________.

who can best control the change in that cost

11.2 For decision making, a listing of the relevant costs ________.

will help the decision maker concentrate on the pertinent data

2.3 Outside the relevant range, variable costs, such as direct material costs ________.

will not change proportionately with changes in production volumes

3.3 In CVP analysis, focusing on target net income rather than operating income ________.

will not change the breakeven point

5.3 Activity-based costing is most likely to yield benefits for companies ________.

with complex product design processes

17.4 A distinct feature of the FIFO process-costing method is that the ________.

work done on beginning inventory before the current period is kept separate from the work done during the current period in the calculation of equivalent units

7.5 A favorable efficiency variance for direct materials might indicate that ________.

work is scheduled efficiently

7.5 An unfavorable efficiency variance for direct manufacturing labor might indicate that ________.

work is scheduled inefficiently

4.7 The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________.

write-off to cost of goods sold approach

5.8 Which of the following is a disadvantage of an activity-based costing system?

It needs activity-cost rates to be updated regularly.

1.6 Which of the following is true of staff management?

It provides advice, support, and assistance to line management.

1.3 Which of the following is true of sustainability?

It helps the development and implementation of strategies to achieve long-term financial, social, and environmental goals.

9.6 Which of the following is true of master-budget capacity utilization?

It hides the amount of unused capacity.

1.4 Which of the following is true of planning?

It makes predictions about the future.

7.6 Which of the following statements is true about analyzing a single variance?

It can lead to different other variances.

1 Which of the following is true of management accounting information?

It co-ordinates product design, production, and marketing decisions.

1.5 Which of the following is true of a budgeting system?

It compels managers to plan ahead.

7.6 A company has a policy "investigate all variances exceeding $3,000 or 15% of the budgeted cost, whichever is lower." There is a variance of $2,000 in repair and maintenance costs of $12,000. What does the company do in the given situation?

It deserves more attention as it is more than 15% of total repair cost

9.2 Which of the following statements is true of gross-margin format of the income statement?

It distinguishes between manufacturing and nonmanufacturing costs.

6.2 Which of the following is a limitation of using past performance as a basis for judging actual results?

It does consider inefficiencies of previous periods.

9.3 Which of the following is true of absorption costing?

It enables a manager to increase margins and operating income by producing more ending inventory.

1 Which of the following is true of financial accounting information?

It focuses on the past-oriented financial performance of a company.

1.4 Which of the following is true of planning in decision making?

It helps an organization to select goals and strategies.

6.2 Which of the following is a benefit of budgeting?

It helps managers gather information for improving future performance.

7.7 Which of the following statements is true of benchmarking?

It is difficult to ensure that the benchmark numbers are comparable due to the existence of differences across companies.

1.6 Which of the following is true of line management?

It is directly responsible for achieving the goals of the organization.

9.7 Which of the following is true of unused capacity?

It is intended for future use.

11.7 What role does a trade-in allowance on old equipment play in a decision to retain or replace equipment?

It is relevant since it reduces the cost of the new equipment.

11.3 Which of the following is true of an opportunity cost?

It is the income foregone by not using a resource in an alternative way.

9.5 Which of the following best describes practical capacity?

It is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time and shutdowns for holidays

17.1 Which of the following companies is most likely to use process costing?

Red Paste Inc., a company manufacturing and selling toothpaste on a large scale

1.7 Which item is an indication of integrity under the Standards of Ethical Conduct?

Refrain from engaging in any conduct that would prejudice carrying out duties ethically.

1.3 ________ is the generation of, and experimentation with, ideas related to new products, services, or processes.

Research and development

6.5 Which of the following statements is true about responsibility accounting statements?

Responsibility accounting segregates uncontrollable costs from controllable costs.

2.5 ________ are the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object.

Sales taxes paid to acquire materials

11.7 ________ is relevant in a decision to replace equipment.

Salvage value

6.3 The sales forecast should be primarily based on ________.

input from sales managers and sales representatives

11.3 Smiley Face Company manufactures signs from direct materials to the finished product. This is considered ________.

insourcing

5.1 An accelerated need for refined cost systems is due to ________.

intense competition

2.5 For merchandising companies, inventoriable costs include ________.

incoming freight costs

9.3 To discourage producing for inventory, management can ________.

incorporate a carrying charge for inventory in the internal accounting system

2.3 Variable costs ________.

increase in total when the actual level of activity increases

3.6 If a company would like to increase its degree of operating leverage it should ________.

increase its fixed costs relative to its variable costs

11.6 Discontinuing unprofitable products will ________.

increase profitability if the resources no longer required by the discontinued product can be eliminated

2.4 When 20,000 units are produced, fixed costs are $16 per unit. Therefore, when 16,000 units are produced, fixed costs will ________.

increase to $20 per unit

11.4 Capacity constraints include ________.

increased need of display space for a retailer

9.6 The effect of spreading fixed manufacturing costs over a shrinking master-budget capacity utilization amount results in ________.

increased unit costs

4.4 An increase in direct labor cost per unit ________.

increases the variable cost

9.3 Under absorption costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

increasing the manager's bonus

3.2 Which of the following will increase a company's breakeven point?

increasing variable cost per unit

11.3 For make-or-buy decisions, relevant costs include ________.

incremental costs plus opportunity costs

11.2 One-time-only special orders should only be accepted if ________.

incremental revenues exceed incremental costs

11.2 When there is an excess capacity, it makes sense to accept a one-time-only special order for less than the current selling price if ________.

incremental revenues exceed incremental costs

5.8 Service companies, in particular, find great value from ABC because a vast majority of their cost structure is composed of ________ costs.

indirect

5.3 Activity based costing system differs from traditional costing systems in the treatment of ________.

indirect costs

4.6 The advantage of using normal costing instead of actual costing is ________.

indirect costs are assigned to a job on a timely basis

2.5 Manufacturing overhead costs are also referred to as ________.

indirect manufacturing costs

2.5 Manufacturing overhead costs in an automobile manufacturing plant most likely include ________.

indirect material costs such as lubricants

5.8 The unique feature of an ABC system is the emphasis on ________.

individual activities

4.4 A job that shows low profitability may be the result of ________.

inefficient direct manufacturing labor

6.5 A controllable cost is any cost that can be ________ by a responsibility center manager for a period of time.

influenced