Managerial Accounting Final

(T/F) All other things the same, in periods of increasing sales, net operating income will tend to increase more rapidly in a company with high fixed costs and low variable costs than in a company with high variable costs and low fixed costs.

True

(T/F) At the break-even point, the total contribution margin and fixed expenses are equal.

True

(T/F) Purchase of poor quality materials may cause a favorable materials price variance and an unfavorable labor efficiency variance.

True

(T/F) Reynold Enterprises sells a single product for $25. The variable expense per unit is $15 and the fixed expense per unit is $5 at the current level of sales. The company's net operating income will increase by $10 if one more unit is sold.

True

(T/F) The costs attached to products that have not been sold are included in ending inventory on the balance sheet.

True

(T/F) The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies.

True

(T/F) The margin of safety is the amount by which sales can decrease before losses are incurred by the company.

True

(T/F) Waste on the production line will result in an unfavorable materials quantity variance.

True

All other things the same, a reduction in the variable expense per unit will decrease the break-even point.

True

In a job-order costing system, indirect labor cost is usually recorded as a debit to

Manufacturing Overhead.

Which of the following would produce a labor rate variance?

Use of persons with high hourly wage rates in tasks that call for low hourly wage rates.

The variance that is usually most useful in assessing the performance of the purchasing department manager is:

the materials price variance.

Which of the following is NOT a correct definition of the break-even point?

the point where total profit equals total fixed expenses.

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is unfavorable, the variable overhead efficiency variance will be

unfavorable.

Contribution margin is the amount remaining after:

variable expenses have been deducted from sales revenue.

Within the relevant range, variable costs can be expected to:

vary in total in direct proportion to changes in the activity level.

As the level of activity increases, how will a mixed cost in total and per unit behave? In Total Per Unit A)Increase Decrease B)Increase Increase C)Increase No effect D)Decrease Increase E)Decrease No effect

Choice A

The cost of electricity for running production equipment is classified as: Conversion cost Period cost A)Yes No B)Yes Yes C)No Yes D)No No

Choice A

Which of the following approaches to preparing an income statement includes a calculation of the gross margin? Traditional Approach- Contribution Approach A)Yes Yes B)Yes No C)No Yes D)No No

Choice B

The costs of direct materials are classified as: Conversion cost Manufacturing cost Prime cost A)Yes Yes Yes B)No No No C)Yes Yes No D)No Yes Yes

Choice D

Hal currently works as the fry guy at Burger Haven but is thinking of quitting his job to attend college full time next semester. Which of the following would be considered an opportunity cost of attending college?

Hal's lost wages at Burger Haven

In a sell or process further decision, which of the following costs is relevant? I. A variable production cost incurred after split-off. II. A fixed production cost incurred prior to split-off.

Only I

Consider the following statements: I. A division's net operating income, after deducting both traceable and allocated common fixed costs, is negative .II. The division's avoidable fixed costs exceed its contribution margin. III. The division's traceable fixed costs plus its allocated common corporate costs exceed its contribution margin. Which of the above statements is a valid reason for eliminating the division?

Only II

Which of the following is an example of a period cost in a company that makes clothing?

Answer: Advertising cost for a new line of clothing. Choices: Monthly depreciation on production equipment. Advertising cost for a new line of clothing. Fabric used to produce men's pants. Factory supervisor's salary.

Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle?

Answer: Direct Cost - No; Fixed Cost - Yes Choices Direct Cost - No; Fixed Cost - No Direct Cost - Yes; Fixed Cost - Yes Direct Cost - Yes; Fixed Cost - No Direct Cost - No; Fixed Cost - Yes

Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

Answer: The amount paid to the individual who stains a chair. Choices: The amount paid to the individual who stains a chair. Correct The cost of the glue in a chair. The factory utilities of the department in which production takes place. The workman's compensation insurance of the supervisor who oversees production

All of the following are examples of product costs except

Answer: depreciation on the company's retail outlets. Choices: Rental costs of factory equipment. insurance on the factory equipment. salary of the plant manager. depreciation on the company's retail outlets.

(T/F) When a flexible budget is used in performance evaluation, actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period.

False

(T/F) A cost that can be avoided by choosing one alternative over another is not relevant for decision purposes.

False

(T/F) A job cost sheet is used to record how much a customer pays for the job once the job is completed.

False

(T/F) A major advantage of the high-low method of cost estimation is that it omits all data from the analysis other than the lowest and highest costs.

False

(T/F) A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period.

False

(T/F) All other things the same, if the fixed expenses increase in a company then one would expect the margin of safety to increase.

False

(T/F) Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.

False

(T/F) Future costs that do not differ between the alternatives in a decision are avoidable costs.

False

(T/F) If sales volume decreases, and all other factors remain unchanged, the contribution margin ratio will decrease.

False

(T/F) In a job-order costing system, costs are traced to individual units of product. The sum total of such traced costs is called the unit product cost.

False

(T/F) In absorption costing, nonmanufacturing costs are assigned to units of product.

False

(T/F) Job cost sheets contain entries for actual direct material, actual direct labor, and actual manufacturing overhead cost incurred in completing a job.

False

(T/F) One way to compute the total contribution margin is to deduct total fixed expenses from net operating income.

False

(T/F) The amount of overhead applied to a particular job equals the actual amount of overhead caused by the job.

False

(T/F) The formula for computing the predetermined overhead rate is:Predetermined overhead rate = Estimated total amount of the allocation base ÷ Estimated total manufacturing overhead cost

False

(T/F) The highest and lowest costs are always used to analyze a mixed cost under the high-low method.

False

Garth Corporation 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: Option Contribution margin per unit Contribution margin ratio Break-even in units A Increases Increases Decreases B No change No change No change C No change Increases No change D Increases No change Decreases

Option D

In a job-order costing system that is based on machine-hours, which of the following formulas is correct?

Predetermined overhead rate = Estimated manufacturing overhead ÷ Estimated machine-hours

The break-even in units sold will decrease if there is an increase in

Selling Price

Which of the following would produce a materials price variance?

Shipping materials to the plant by air freight rather than by truck.

(T/F) A bill of materials is a document that lists the type and quantity of each type of direct material needed to complete a unit of product.

True

(T/F) A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period.

True

(T/F) A materials price variance is unfavorable if the actual price exceeds the standard price.

True

(T/F) A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period.

True

(T/F) Actual overhead costs are not assigned to jobs in a job costing system.

True

(T/F) All other things the same, an increase in total fixed expenses will increase the break-even point.

True

An example of a committed fixed cost is:

a long-term equipment lease.

Management is considering a one-time-only special order. There is sufficient idle capacity to fill the order without affecting any normal sales. Which one of the following is NOT relevant in making the decision?

absorption costing unit product costs

In a make-or-buy decision, relevant costs include:

avoidable fixed cost

When a multi-product factory operates at full capacity, decisions must be made about which products to emphasize. In making such decisions, products should be ranked based on:

contribution margin per unit of the constraining resource

Two or more products produced from a common input are called:

joint products.

If sales volume increases and all other factors remain constant, then the:

margin of safety will increase.

Opportunity costs are:

relevant in decision making.