Accounting Final Multiple Choice

Which of the following is not a benefit of budgeting? A) It reduces the need for tracking actual cost activity. B) It sets benchmarks for evaluation performance. C) It uncovers potential bottlenecks. D) It formalizes a manager's planning efforts.

A) It reduces the need for tracking actual cost activity.

Which of the following is an element of prime cost? Direct materials Indirect materials A) Yes No B) Yes Yes C) No Yes D) No No

A) Yes No

The labor efficiency variance is unfavorable, then: A) actual hours exceeded standard hours allowed for the actual output. B) standard hours allowed for the actual output exceeded actual hours. C) the standard rate exceeded the actual rate. D) the actual rate exceeded the standard rate.

A) actual hours exceeded standard hours allowed for the actual output.

An unfavorable material quantity variance indicates that: A) actual usage of material exceeds the standard material allowed for output. B) standard material allowed for output exceeds the actual usage of material. C) actual material price exceeds standard price. D) standard material price exceeds actual price.

A) actual usage of material exceeds the standard material allowed for output.

Budgeted production needs are determined by: A) adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total. B) adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total. C) adding budgeted sales in units to the desired ending inventory in units. D) deducting the beginning inventory in units from budgeted sales in units.

A) adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.

Factory overhead is an example of a: A) mixed cost. B) fixed cost. C) variable cost. D) irrelevant cost.

A) mixed cost

All other things equal, if a division's traceable fixed expenses decrease: A) the division's segment margin will increase. B) the overall company net operating income will decrease. C) the division's contribution margin will increase. D) the division's sales volume will increase.

A) the division's segment margin will increase.

Which of the following costs would be included both as part of prime cost and as part of conversion cost? A) Direct materials. B) Direct labor. C) Manufacturing overhead. D) None of these.

B) Direct Labor

. On January 1, Lake Corporation increased its management salaries. All other costs and revenues were unchanged. How did this increase affect Lake's break-even point and margin of safety? Break-even point Margin of safety A) Increase Increase B) Increase Decrease C) Decrease Decrease D) Decrease Increase

B) Increase Decrease

Which of the following costs could contain both variable and a fixed cost element with respect to the total output of the company? A) Sales commissions. B) Manufacturing overhead. C) Direct material. D) Administrative salaries.

B) Manufacturing Overhead

Residual income is a better measure for performance evaluation of an investment center manager than return on investment because: A) the problems associated with measuring the asset base are eliminated. B) desirable investment decisions will not be rejected by divisions that already have a high ROI. C) only the gross book value of assets needs to be calculated. D) returns do not increase as assets are depreciated.

B) desirable investment decisions will not be rejected by divisions that already have a high ROI.

Segmented income statements are most meaningful to managers when they are prepared: A) on an absorption cost basis. B) on a cost behavior (contribution) basis. C) on a cash basis. D) in a single-step format.

B) on a cost behavior (contribution) basis.

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variable will be: A) favorable. B) unfavorable. C) either favorable or unfavorable. D) zero.

B) unfavorable

The salary paid to the maintenance supervisor in a manufacturing plant is an example of: Product Cost Manufacturing Overhead A) No Yes B) Yes No C) Yes Yes D) No No

C Yes Yes

Which of the following statements is correct in describing manufacturing overhead costs? A) Manufacturing overhead when combined with direct material cost forms conversion cost. B) Manufacturing overhead consists of all manufacturing cost except for prime cost. C) Manufacturing overhead is a period cost. D) Manufacturing overhead when combined with direct labor cost forms prime cost.

C) Manufacturing overhead is a period cost.

Inventoriable costs are also known as: A) variable costs. B) conversion costs. C) product costs. D) fixed costs.

C) Product costs

The purchasing agent of the Clampett Company ordered materials of lower quality in an effort to economize on price and in response to the demands of the production manager due to a mistake in production scheduling. The materials were shipped by airfreight at a rate higher than ordinarily charged for shipment by truck, resulting in an unfavorable materials price variance. The lower quality material proved to be unsuitable on the production line and resulted in excessive waste. In this situation, who should be held responsible for the materials price and quantity variances? Materials Price Variance Materials Quantity Variance A) Purchasing Agent Purchasing Agent B) Production Manager Production Manager C) Production Manager Purchasing Agent D) Purchasing Agent Production Manager

C) Production Manager Purchasing Agent

When volume or level of activity decreases, variable costs will: A) increase per unit. B) increase in total. C) decrease in total. D) decrease per unit.

C) decrease in total.

A disadvantage of the high-low method of cost analysis is that: A) it cannot be used when there are a very large number of observations. B) it is too time consuming to apply. C) it uses two extreme data points, which may not be representative of normal conditions. D) it relies totally on the judgment of the person performing the cost analysis.

C) it uses two extreme data points, which may not be representative of normal conditions.

If sales volume increases and all other factors remain constant, then the: A) contribution margin ratio will increase. B) break-even point will decrease. C) margin of safety will increase. D) net operating income will decrease.

C) margin of safety will increase

In describing the cost equation, Y = a + bX, "a" is: A) the dependent variable, cost. B) the independent variable, the level of activity. C) the total fixed costs. D) the variable cost per unit of activity.

C) the total fixed costs

If the level of activity increases within the relevant range: A) variable cost per unit and total fixed costs also increase. B) fixed cost per unit and total variable cost also increase. C) total cost will increase and fixed cost per unit will decrease. D) variable cost per unit and total cost also increase.

C) total cost will increase and fixed cost per unit will decrease.

Wages paid to the factory supply shop foreman are considered an example of Direct Labor Period Cost A) Yes Yes B) Yes No C) No Yes D) No No

D No No

Return on investment (ROI) would experience the greatest decrease under which of the following situations? Turnover Margin A) Increase Increase B) Increase Decrease C) Decrease Increase D) Decrease Decrease

D) Decrease Decrease

When the level of activity increases within the relevant range, how does each of the following change? Average cost/unit - Total variable/unit - Fixed cost/unit A) Increases Increases Increases B) Increases No change Increases C) Decreases No change Decreases D) Decreases Increases Decreases

D) Decreases Increases Decreases

Garth Company sells a single product. If the selling price per unit and the variable expense per unit both increase by 10% and fixed expenses do not change, then: Contribution Contribution Break-even margin per unit margin ratio in Units A) Increases Increases Decreases B) No change No change No change C) No change Increases No change D) Increases No change Decreases

D) Increases No change Decreases

Which department should usually be held responsible for an unfavorable materials price variance? A) Production. B) Materials Handling. C) Engineering. D) Purchasing.

D) Purchasing.

An example of a direct labor cost is wages paid to a: Factory machine operator Supervisor in a factory A) No No B) No Yes C) Yes Yes D) Yes No

D) Yes No

A company that is seeking to increase ROI should attempt to decrease: A) sales. B) turnover. C) margin. D) average operating assets.

D) average operating assets.

Contribution income statements are used to measure the performance of: A) cost centers. B) both cost centers and profit centers. C) both cost centers and investment centers. D) both profit centers and investment centers.

D) both profit centers and investment centers.