ACC255 final dr.k

Which one of the following describes the break-even point? A.It is the point where total sales equals total variable costs plus total fixed costs. B.It is the point where the contribution margin equals zero. C.It is the point where total variable costs equal total fixed costs. D.It is the point where total sales equals total fixed costs

It is the point where total sales equals total variable costs plus total fixed costs.

One key difference appears when comparing the income statements of a manufacturing company to a merchandising company. What is that difference?

Manufacturing companies use cost of goods manufactured and merchandising companies use cost of goods purchased.

Which of the following are considered to be management's three broad functions?

Planning, directing, and controlling

Under just-in-time processing A.raw materials are received just in time for use in production. B.subassembly parts are completed just in time for use in assembling finished goods. C.finished goods are completed just in time to be sold. D.all of these.

all the above

A process cost system would be used for all of the following except the A.manufacture of cereal. B.refining of petroleum. C.printing of wedding invitations. D.production of automobiles.

printing wedding invitations

Cost accounting involves each of the following except the A.measuring of product costs. B.recording of product costs. C.reporting of product costs. D.processing of product costs.

processing of product costs

A cost of goods manufactured schedule shows beginning and ending inventories for

raw materials and work in process only

what is typically considered a cash inflow?

sale of old equipment

Product costs include each of the following except A.direct labor. B.direct materials. C.manufacturing overhead. D.selling and administrative expenses.

selling and administrative

Which of the following is an overhead activity cost pool for a manufacturer? A.Direct labor B.Setting up machines C.Direct materials D.All of these are considered overhead activity cost pools for a manufacturer.

setting up machines

Job cost sheets constitute the subsidiary ledger for

work in process inventory

The cost applicable to units that have been started into production but not completed is shown as

work in process inventory

When the company assigns factory labor costs to jobs, the direct labor cost is debited to

work in process inventory

Companies assign manufacturing overhead to work in process on an estimated basis through the use of a(n)

predetermined overhead rate

Which statement describes a fixed cost? A.It varies in total at every level of activity. B.When activity declines, its cost per unit increases. C.The unit cost varies directly to the activity level. D.The unit costs stay the same at every activity level.

.When activity declines, its cost per unit increases.

A manufacturer may report three inventories in its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods. Indicate in what sequence these inventories generally appear on a balance sheet.

3,2,1

Variable costs are costs that A.vary in total directly and proportionately with changes in the activity level. B.remain the same per unit at every activity level. C.neither of these D.both of these. q

D

Assigning manufacturing costs to work in process results in credits to all of the following except

finished goods inventory

Which group of costs consists of only product costs? A.Direct labor, direct materials, and selling expenses B.Indirect labor, factory building depreciation, administrative expenses C.Factory maintenance, sales commissions, salaries paid to sales clerks D.Direct labor, indirect labor, factory utilities

Direct labor, indirect labor, factory utilities

Which of the following answer choices lists the three manufacturing costs?

Direct materials, direct labor, and manufacturing overhead

Planning is the process of keeping the company's activities on track. T/F

FALSE

The cost of the beginning work in process plus the total manufacturing costs for the current period is the cost of goods manufactured. t/f

FALSE

On a CVP income statement A.Sales - Cost of goods sold = Contribution margin. B.Sales - Variable costs - Fixed costs = Contribution margin. C.Sales - Variable costs = Contribution margin. D.Sales - Fixed costs = Contribution margin.

Sales - Variable costs = Contribution margin.

Manufacturing overhead consists of costs that are indirectly associated with the manufacture of the finished product. t/f

TRUE

When a completed job is sold an entry is made crediting

finished goods inventory

unfavorable direct material variances can be caused by inexperienced workers T/F

True

Which of the following costs are classified as a period cost?

Wages paid to a cost accountant department supervisor.

Which of the following statements is false concerning the use of ABC in service industries? A.In most service industries, a large portion of overhead costs are company-wide costs. B.When using ABC for service industries, special methods must be used to identify cost pools and cost drivers due to the unique nature of the services offered. C.The notion regarding eliminating as many non-value-added activities as possible applies equally to manufacturers and service providers. D.All of the statements are true concerning the use of ABC in service industries.

When using ABC for service industries, special methods must be used to identify cost pools and cost drivers due to the unique nature of the services offered.

Direct materials are a Product Cost? Manufacturing Overhead? Period Cost?

Yes, no, no

the difference between a standard and budget is

a budget expresses a total amount while a standard expresses a unit amount

Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?

activity based costing

Manufacturing overhead is underapplied if

actual overhead is greater than applied

The predetermined overhead rate may be based on any of the following bases except A.Direct labor costs. B.Direct labor hours. C.Machine hours. D.Any of the options may be used.

any option

Which of the following is the proper classification of activities according to activity level for a computer manufacturing company? A.Assembly: Product; Maintenance: Unit B.Assembly: Batch; Maintenance: Product C.Assembly: Product; Maintenance: Facility D.Assembly: Unit; Maintenance: Facility

assembly: unit; maintenance facility

When a job is completed in a job order cost accounting system, the cost of the job is transferred to

finished goods inventory

How are equipment setups classified? A.Unit-level activity B.Batch-level activity C.Product-level activity D.Facility-level activity

batch-level activity

Which of the following is a limitation of activity-based costing? A.Activity-based costing can be expensive to use. B.Activity-based costing systems can only be used by firms with a state-of-the-art technology. C.Activity-based costing can be used only if approved by the Institute of Management Accountants. D.Activity-based costing can only be used by firms involved in manufacturing.

can be expensive to use

Which one of the following activities for a window cleaning service is a value-added activity? A.Giving a potential customer an estimate of cost to clean windows in a three bedroom home. B.Verifying credit card information upon receiving payment from a customer. C.Cleaning plate glass windows for a customer. D.Repairing window cleaning equipment.

cleaning plate glass windows for a customer

At the break-even point A.sales equal total variable costs. B.contribution margin equals total variable costs. C.contribution margin equals total fixed costs. D.sales equal total fixed costs.

contribution margin equals total fixed costs.

The process of keeping the company's activities on track is

controlling

the cash payback formula is

cost of capital investment/ net annual cash inflow

If the amount of underapplied overhead is immaterial, companies will debit underapplied overhead to

cost of goods sold

Usually, under- or overapplied overhead is considered to be an adjustment to

cost of goods sold

The principal difference between a merchandising and a manufacturing income statement is the

cost of goods sold section

Activity-based costing is most appropriate to use when labor costs are a(n) ___________ proportion of total product costs and the manufacturing process is __________. A.large, uncomplicated. B.decreasing, complex. C.increasing, complex. D.small, uncomplicated.

decreasing complex

Which of the following costs would a computer manufacturer include in manufacturing overhead?

depreciation on equipment testing

On average, studies have shown that the smallest component of total manufacturing cost is A.direct materials. B.direct labor. C.manufacturing overhead. D.factory overhead.

direct labor

When is it appropriate to use direct labor as a basis for assigning overhead costs to products? A.When there is a low correlation between direct labor and changes in overhead costs. B.When direct labor constitutes a significant part of total product costs. C.When the manufacturing process is highly automated. D.When the manufacturing process is complex.

direct labor constitutes as a significant part of total product automated

Manufacturing overhead includes all of the following except A.depreciation. B.direct materials. C.indirect labor. D.maintenance.

direct material

Which of the following would not be an overhead activity cost pool? A.Shipping B.Direct materials C.Packaging D.Inspecting and testing

direct materials

The primary objective of just-in-time processing is to A.accumulate overhead in activity cost pools. B.eliminate or reduce all manufacturing inventories. C.identify relevant activity cost drivers. D.identify value-added activities.

eliminate or reduce all manufacturing inventories.

When incurred, factory labor costs are debited to

factory labor

A process cost system is used when a company manufactures a large volume of unique products. t/f

false

At the break-even point, contribution margin equals total variable costs. t/f

false

Companies generally list manufacturing inventories in the order of completion—raw materials, work in process, and finished goods. t/f

false

Each entry to Work in Process Inventory must be accompanied by a corresponding posting to one or more job cost sheets. t/f

false

Labor costs are debited to Work in Process Inventory when they are incurred. t/f

false

Manufacturers compute cost of goods sold by adding the beginning finished goods inventory to the cost of goods purchased and subtracting the ending finished goods inventory. t/f

false

Product design is a unit-level activity. t/f

false

The cost of goods manufactured schedule shows actual overhead costs rather than applied manufacturing overhead. t/f

false

The format of a CVP income statement is Sales - Cost of goods sold - Operating expenses = Net Income. t/f

false

If a traditional costing system allocates too much overhead to one product, the firm is likely to experience which of the following problems? A.An increase in the number of defective products produced B.The firm may lose market share to competitors C.The firm may be underpricing the product D.The product is in danger of becoming obsolete

firms may lose market share to competitors

CVP analysis considers the interrelationships among all of the following components except A.volume/level of activity. B.variable cost per unit. C.unit selling prices. D.fixed costs per unit.

fixed costs per unit.

Which of the following is not one of the four steps involved in calculating unit costs under activity-based costing? A.Assign manufacturing overhead costs for each cost pool to products, using the overhead rates. B.Identify the cost driver that has a minor correlation to the costs accumulated in the activity cost pool. C.Identify and classify the major activities involved in the manufacture of specific products, and allocate manufacturing overhead costs to the appropriate cost pools. D.Compute the overhead rate per cost driver.

identify the cost driver that has a minor correlation to the costs accumulated in the activity pool

As the complexity of a product's manufacturing operation increases, the number of activities and cost drivers used in an activity-based cost system will likely A.increase. B.stay about same. C.decrease. D.vary randomly.

increase

Examples of recent trends in the economic environment of U.S. businesses are

increasing deregulation, increasing global competition, and a shift toward providing services rather than goods.

Contribution margin A.is revenue remaining after deducting variable costs. B.may be expressed as contribution margin per unit. C.is selling price less cost of goods sold. D.is revenue remaining after deducting variable costs and may be expressed as contribution margin per unit.

is revenue remaining after deducting variable costs and may be expressed as contribution margin per unit.

A company is more likely to use a job costing system if

it manufactures products with unique characteristics.

Many companies have significantly lowered inventory levels and costs using

just in time inventory

What is the primary barrier to using activity-based costing in a service company? A.A large number of cost pools. B.A large portion of overhead costs are company-wide costs. C.A shortage of potential cost drivers. D.A limited number of arbitrary allocation decisions.

large portion of overhead costs are companywide costs

In recent years, as production has become more automated, there has been a significant trend toward use of _______________as the activity base in assigning overhead.

machine hours

What overhead allocation basis is used by many companies with automated manufacturing processes to reduce product cost distortions?

machine hours

Work in Process Inventory is debited for all of the following except

manufacturing overhead incurred

Costs that change in total but not proportionately with changes in the activity level are A.fixed costs. B.mixed costs. C.semifixed costs. D.variable costs.

mixed costs

What is the primary benefit of activity-based costing? A.The cost of implementation B.Arbitrary allocations of overhead costs C.More cost pools D.More accurate product costing

more accurate product costing

In a manufacturing company, the cost of factory labor consists of all of the following except A.Employer payroll taxes. B.Fringe benefits incurred by the employer. C.Net earnings of factory workers. D.Gross earnings of factory workers.

net earnings of factory workers

When comparing a traditional income statement to a CVP income statement A.net income will always be greater on the traditional statement. B.net income will always be less on the traditional statement. C.net income will always by identical on both. D.net income will be greater or less depending on the sales volume.

net income will always by identical on both.

An activity that adds costs to the product but does not increase its market value is a A.value-added activity. B.cost driver. C.cost-benefit activity. D.non-value-added activity.

non-value added activity

All of the following are control accounts except A.Finished Goods Inventory. B.Raw Materials Inventory. C.Work in Process Inventory. D.all of the options are control accounts.

none of the above

at the end of the period, the company determines that the actual amount of manufacturing overhead for the period is greater than the amount of overhead applied to the Work in Process account. this means

overhead has been underapplied

For which of the following activities will direct labor hours and direct labor cost be an appropriate cost driver? A.Drilling oil wells B.Equipment setups C.Engineering changes D.Painting

painting

The flow of costs in job order costing

parallels the physical flow of materials as they are converted into finished goods.

Contribution margin is A.the amount of revenue remaining after deducting fixed costs. B.the amount available to cover fixed costs and contribute to income for the company. C.sales less fixed costs. D.unit selling price less unit fixed costs.

the amount available to cover fixed costs and contribute to income for the company.

Cost-volume-profit analysis includes all of the following assumptions except A.the behavior of costs is curvilinear throughout the relevant range. B.costs can be classified accurately as either variable or fixed. C.changes in activity are the only factors that affect costs. D.all units produced are sold.

the behavior of costs is curvilinear throughout the relevant range

capital budgeting

the process of planning and managing a firm's long-term investments

The relevant range is A.the range of activity in which variable costs will be curvilinear. B.the range of activity in which fixed costs will be curvilinear. C.the range over which the company expects to operate during a year. D.usually from zero to 100% of operating capacity.

the range over which the company expects to operate during a year

if actual costs are less than standard costs

the variance is favorable

A cost driver is a factor or activity that has a direct cause-effect relationship with the resources consumed. t/f

true

Activity-based costing is used in service industries as well as manufacturing. t/f

true

Activity-based management leads to the identification of value-added and non-value-added activities. t/f

true

Cost-volume-profit analysis assumes that changes in activity are the only factors that affect costs. t/f

true

Margin of safety is the difference between actual sales and sales at the break-even point.

true

Margin of safety measures how far sales can drop before a company will be operating at a loss. t/f

true

Target net income is an income objective for individual product lines set by management. t/f

true

The formula for computing the break-even point in sales dollars for a company with multiple products or multiple divisions is fixed costs divided by weighted average contribution margin ratio. t/f

true

The range over which a company expects to operate during a year is called the relevant range of the activity index. t/f

true

Two benefits of ABC are that it leads to better management decisions and increases the accuracy of overhead cost allocations. t/f

true

What should management do if there are variances determined for the month

use management by exception to determine which variances to investigate

An example of a mixed cost is A.direct materials. B.supervisory salaries. C.utility costs. D.property taxes.

utility cost