WorksheetsManagement Accounting Quiz 1-113
Total questions: 224
Worksheet time: 2hrs 52mins
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.
E D A B C
C D B E A
A E B D C
C A E B D
Which of the following groups would be least likely to receive detailed management accounting reports?
sales managers
Stockholders
distribution managers
production supervisors
Place the four business functions in the order they appear along the value chain: CUSTOMER SERVICE, DESIGN, MARKETING, and PRODUCTION.
Customer Service, Design, Production, Marketing
Design, Production, Marketing, Customer Service
Design, Customer Service, Production, Marketing
Customer Service, Marketing, Production, Design
________ is the detailed planning and engineering and testing of products, services, or processes.
Plan of implementation
Research and development
Design
Production
________ is an after-sale support provided to customers.
Customer service
Marketing
Distribution
Production
The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes ________.
balanced scorecard
different costs for different purposes
cost-benefit approach
behavioral and technical considerations
Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?
employing a six sigma approach
employing a cost-benefit approach
employing a regression approach
employing a supply chain approach
The primary user of financial accounting information is a ________.
factory shift supervisor
department manager
current shareholder
distribution manager
Which of the following is true of a budgeting system?
It is easy to measure the exact benefits of a budgeting system.
It increases agency costs.
It leads to operational inefficiency.
It compels managers to plan ahead.
Which of the following is true of cost accounting?
It provides financial information about cash-based transactions only
It accounts only the financial information of business transactions, not the nonfinancial information.
It provides financial information regarding the cost of acquiring resources.
It must be prepared in accordance with GAAP.
________ includes providing financial information for reports to managers and shareholders, and overseeing the overall operations of the accounting system.
Controllership
Strategic planning
Risk management
Treasury management
Which of the following is true of management accounting information?
It is prepared for shareholders
It focuses on documenting past business actions of a firm.
It helps you be happy
It co-ordinates product design, production, and marketing decisions.
Which of the following is true of planning in decision making?
It helps in evaluating performance.
It improves the quality of products.
It helps in the analysis of actual performance.
It helps an organization to select goals and strategies.
R&D, production, and customer service are business functions that are all included as part of ________.
the value chain
customer relationship management
benchmarking
the supply chain
Strategy is formulated ________.
by identifying the most important customers
based on the qualified opinion of external auditors
by eliminating sunk costs
by forecasting the composition of adequate fixed assets
Financial accounting provides a historical perspective, whereas management accounting emphasizes ________.
reports to shareholders
a current perspective
the future
past transactions
Financial accounting provides the primary source of information for ________.
improving customer service
decision making in the finishing department
preparing the income statement for shareholders
planning next year's operating budget
The value chain is the sequence of business functions in which ________.
value is deducted from the products or services of an organization
usefulness is added to the products or services of an organization
producing and delivering the product or service is of prime importance
products and services are evaluated with respect to their value to the supply chain
Which of the following statements refers to management accounting information?
The reports are generally delayed and historical.
There are no regulations governing the reports.
It primarily measures manager's compensation on reported financial results
The audience tends to be stockholders, creditors, and tax authorities.
A budget ________.
helps in identifying problems and uncertainties
is an aid to coordinating what needs to be done to execute a plan
is the qualitative expression of a proposed plan of action by management
promotes production automation
Management accounting ________.
reports information that has occurred in the past that is verifiable and reliable
provides information that is generally available only on a quarterly or annual basis
provides information about the company as a whole
focuses on estimating future revenues, costs, and other measures to forecast activities and their results
The most important planning tool is a ________.
Budget
fishbone diagram
control chart
performance evaluation report
Which of the following statements about a company's supply chain is true?
A company's supply chain is the same thing as a company's value chain.
Management accountants provide information to enhance a company's supply chain.
A company's supply chain is always external to a firm.
A company's supply chain is always internal to a firm.
Which of the following is true of planning?
It evaluates customer feedback.
It makes predictions about the future.
It improves the quality of products.
It assumes the functional hierarchy of any business is linear.
Which of the following is true of financial accounting information?
It is primarily used by managers to make internal business decisions.
It focuses on the past-oriented financial performance of a company.
It is prepared based on cost-benefit analysis.
It only measures the cash transactions of a company.
Management accounting is considered most likely to be successful when it ________.
helps investors improve their decisions
helps creditors evaluate the company's performance
is timely
is relevant and reported annually
Staff management includes ________.
distribution managers
management accountants
manufacturing managers
purchasing managers
Managers use management accounting information to ________.
help external users such as investors, banks, regulators, and suppliers
communicate a firm's financial position to investors, banks, regulators, and other outside parties
communicate, develop, and implement strategies
ensure that financial statements are consistent with the SEC rules
Marketing is the ________.
acquisition, coordination, and assembly of resources to produce a product or deliver a service
generation of, and experimentation with, ideas related to new products, services, or processes
the manner by which companies promote and sell their products or services to customers or perspective customers
detailed planning and engineering of products, services, or processes
Line management includes ________.
management-accounting managers
distribution managers
human-resource managers
information-technology managers
________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors.
Customer relationship management
Continuous quality improvement
Supply-chain analysis
Value-chain analysis
Which of the following is true of line management?
It only includes the top level management.
It is directly responsible for achieving the goals of the organization.
It provides advice, support, and assistance to staff management.
It is responsible of management accounting functions.
Financial accounting ________.
focuses on the future and includes activities such as preparing next year's operating budget
is prepared for the use of department heads and other employees
is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources
The primary user of management accounting information is a(n) ________.
bondholder
a shareholder evaluating a stock investment
external regulator
the controller
________ is the generation of, and experimentation with, ideas related to new products, services, or processes.
Research and development
Marketing
Production
Design of products, services, or processes
Which of the following statements concerning an organization's strategy is true?
Cost accountants formulate strategy in an organization since they have more inputs about costs.
A good strategy will always overcome poor implementation.
Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.
Businesses usually follow one of two broad strategies: offering a quality product at a high price, or offering a unique product or service priced lower than the competition.
________ includes banking and short- and long-term financing, investments, and cash management.
Controllership
Risk management
Strategic planning
Treasury management
Which of the following is an area that customers want to see improved levels of performance?
lower marginal costs
profit margins
quality of the product
higher sales margin
The ________ function supports the six functions of value-chain analysis.
Controlling
Administration
Planning
Direction
Which of the following differentiates cost accounting and financial accounting?
Cost accounting deals with product design, production, and marketing strategies, whereas financial accounting deals mainly with pricing of the products.
Cost accounting measures only the financial information related to the costs of acquiring fixed assets in an organization, whereas financial accounting measures financial and nonfinancial information of a company's business transactions.
The primary users of cost accounting are the investors, whereas the primary users of financial accounting are the managers.
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.
Which of the following is a responsibility of the CFO?
managing short-term and long-term financing
investing in new equipment
preparing financial statements
conducting internal audit
________ is a philosophy in which management improves operations throughout the value chain to deliver products and services that exceed customer expectations.
Customer focus
Customer relationship management
Cost-benefit approach
Total quality management
A data warehouse or infobarn ________.
gathers only nonfinancial information
is reserved for exclusive use by the CFO
stores information used by different managers for multiple purposes
is primarily used for financial reporting purposes
Production is the ________.
detailed planning and engineering of products, services, or processes
acquisition, coordination, and assembly of resources to produce a product or deliver a service
processing orders and shipping products or services to customers
generation of, and experimentation with, ideas related to new products, services, or processes
Processing orders and shipping products or providing services to customers is known as ________.
Distribution
marketing
supply chain
after-sales services
Customer relationship management initiatives use technology to coordinate all ________.
advertising and marketing techniques to attract customers
quality control management activities
customer-facing activities
research activities
________ 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
Quality control
Customer relationship management
Production process
Which of the following statements about customer value is true?
Customer value is shown in a corporation's balance sheet.
Customer value is lost with increase in costs of the product.
Creating value for customers is an important part of planning and implementing strategy.
Customer value is the only focus that helps managers to formulate strategies.
________ are the acquisition costs of all materials that eventually become part of the cost object and can be traced to the cost object.
Plant depreciation incurred
Sales taxes paid to acquire materials
Wages paid to assembly-line workers
Property taxes on plant
Variable costs ________.
increase in total when the actual level of activity increases
are always indirect costs
include most personnel costs and depreciation on machinery
are never considered a part of prime cost
Which one of the following is a variable cost for an insurance company?
electricity expenses
CEO's salary
property taxes
rent of the building
Total manufacturing costs equal ________.
direct materials plus prime costs
direct manufacturing labor costs plus sunk costs
direct manufacturing labor costs plus conversion costs
direct materials plus conversion costs
________ sector companies purchase materials and components and convert them into finished goods.
Professional
Service
Manufacturing
Merchandising
Which one of the following items is a direct cost?
The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object
Utility costs of the administrative offices; the accounting department is the cost object.
Printing costs incurred for payroll check processing; payroll check processing is the cost object.
Customer-service costs of a multiproduct firm; Product A is the cost object.
Which of the following is true of indirect costs?
Indirect costs cannot be traced to a particular cost object in an economically feasible way.
Indirect costs always vary in direct proportion to the level of production.
Indirect costs are always considered sunk costs.
All indirect costs are included in cost of goods sold.
An actual cost is ________.
is the cost incurred
is the collection of cost data in some organized way by means of an accounting system
is a predicted or forecasted cost
is anything for which a cost measurement is desired
For a manufacturing company, indirect manufacturing costs may be included in ________.
merchandise inventory only
direct materials inventory only
both work-in-process inventory and finished goods inventory
direct materials inventory, work-in-process inventory, and finished goods inventory accounts
The most likely cost driver of distribution costs is the ________.
number of products manufactured
number of parts within the product
number of production hours
number of miles driven
Which of the following is an inventoriable cost?
marketing costs
distribution costs
manufacturing overhead cost
customer service costs
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 an indirect variable cost
considered to be a direct fixed cost
considered to be an indirect fixed cost
considered to be a direct variable cost
Under GAAP, for the purposes of calculating inventory costs, product costs include ________.
only research and development costs
design costs
only inventoriable costs
all costs incurred along the value chain
Finished goods inventory would normally include ________.
goods returned after being sold to be re-worked on further improvements and quality
direct materials in stock and awaiting use in the manufacturing process
goods partially worked on but not yet fully completed
goods fully completed but not yet sold
Merchandising-sectors ________.
purchase and then sell tangible products without changing their basic form
purchase and then sell tangible products by changing their basic form
purchase materials and components and convert them into finished goods
provide intangible products
Budgeted costs are ________.
planned or forecasted costs
competitor's costs
the costs incurred last year
Budgeted costs are ________.
planned or forecasted costs
competitor's costs
the costs incurred last year
the costs incurred this year
The most likely cost driver of direct labor costs is the ________.
number of miles driven
number of production hours
number of machine hours
number of machine setups for the product
At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually ________.
depend on the scheduling of floor workers
depend on the scheduling of production runs
are considered a variable cost
are considered a fixed cost
Wages paid to machine operators on an assembly line are classified as a ________.
direct material cost
period cost
manufacturing overhead cost
direct manufacturing labor cost
Which of the following statements is true?
Inventoriable costs are assigned to inventories under GAAP.
Manufacturing costs are a special case of period costs.
Intangible costs refer to a particular cost of a product.
Product costs and design costs are interchangeable terms.
Cost allocation is ________.
the assignment of indirect costs to the chosen cost object
the process of determining the opportunity cost of a cost object chosen
the process of tracking both direct and indirect costs associated with a cost object
made based on material acquisition document
Under GAAP, only ________ can be assigned to inventories in the financial statements.
period costs
cost of goods sold
manufacturing costs
historical costs
Service-sector companies report ________.
work-in-process inventory, and finished goods inventory accounts
no inventory accounts
direct materials inventory, work-in-process inventory, and finished goods inventory accounts
only finished goods inventory
Work-in-process inventory would normally include ________.
goods fully completed but not yet sold
goods partially worked on but not yet fully completed
goods returned after being sold to be re-worked on further improvements and quality
direct materials in stock and awaiting use in the manufacturing process
Period costs ________.
should be treated as an indirect cost rather than as a direct manufacturing cost
seldom influence financial success or failure
include the cost of selling, delivering, and after-sales support for customers
include only fixed costs
In making product mix and pricing decisions, managers should focus on ________.
manufacturing costs
unit costs
total costs
variable costs
Which of the following is a manufacturing overhead cost?
overtime premiums paid to plant workers
labor cost that can be traced to individual products
cost of conversion of direct materials to finished goods
cost of materials that can be traced to individual products
Which of the following is true if the production volume decreases?
average cost per unit decreases
fixed cost per unit increases
variable cost per unit decreases
variable cost per unit increases
Which of the following is a direct manufacturing cost?
plant rent
fringe benefits paid to machine operators
plant maintenance
property taxes on plant
Product costs for financial statements may refer to ________.
exchange cost incurred during transportation
only the costs incurred along the supply chain
inventoriable costs for external reporting purposes
opportunity costs incurred for the decisions forgone
Which of the following is true if the volume of sales increases?
variable cost increases
fixed cost decreases
variable cost decreases
fixed cost increases
Fixed costs depend on the ________.
volume of production
amount of resources acquired
amount of resources used
total number of units sold
Direct materials inventory would normally include ________.
goods fully completed but not yet sold
direct materials in stock and awaiting use in the manufacturing process
goods partially worked on but not yet fully completed
products in their original form intended to be sold without changing their basic form
Cost assignment ________.
is the difference between budgeted and actual costs
encompasses allocating indirect costs to a cost object
includes future and arbitrary costs
is the same as cost accumulation
Product costs used for government contracts generally include ________.
production costs, distribution costs, marketing costs, and customer service costs
design costs and production costs
all the costs for pricing and product-mix decisions
marketing costs, and customer service costs
A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.
salaries of the clerical staff that work in the company administrative offices
overheads incurred in producing both golf and soccer equipment
beverages provided daily in the plant break room
monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver
Which of the following cost is included in cost of goods sold?
distribution cost
customer service cost
marketing cost
manufacturing labor cost
Inventoriable costs ________.
are expensed in the accounting period in which the products are sold
are expensed in the accounting period in which the products are manufactured
include administrative and marketing costs
are also referred to as nonmanufacturing costs
Cost tracing is ________.
the assignment of direct costs to the chosen cost object
the process of tracking both direct and indirect costs associated with a cost object
a function of cost allocation
the process of determining the actual cost of the cost object
Which of the following is a cost driver for a company's human resource costs?
the number of units sold
the square footage of the office space used by the human resource department
the number of employees in the company
the number of job applications processed
Comparing budgeted costs to actual costs helps managers to improve ________.
Implementation
Planning
Control
Coordination
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
material used to make the soccer balls
labor to shape the leather used to make the soccer ball
material used to manufacture the soccer studs
Which of the following formulas determine cost of goods sold in a merchandising entity?
Beginning inventory + Purchases + Ending inventory = Cost of goods sold
Beginning inventory - Purchases + Ending inventory = Cost of goods sold
Beginning inventory - Ending inventory - Purchases = Cost of goods sold
Beginning inventory + Purchases - Ending inventory = Costs of goods sold
A plant manufactures several different products. The wages of the plant supervisor can be classified as a(n) ________.
direct cost
period cost
inventoriable cost
variable cost
Total manufacturing costs is comprised of ________.
indirect materials costs, indirect manufacturing labor costs, and manufacturing overhead costs
prime costs and period costs
direct materials costs and period costs
direct materials costs, direct manufacturing labor costs, and manufacturing overhead costs
Cost behavior refers to ________.
whether a particular expense is expensed in the same or the following period
whether a cost is incurred in a manufacturing, merchandising, or service company
classifying costs as either perpetual or period costs
how costs react to a change in the level of activity
A unit cost is computed by ________.
dividing total cost by the number of units produced
dividing fixed cost by the number of units produced
multiplying total cost by the number of units produced
dividing variable cost by the number of units produced
Which of the following companies is part of the manufacturing sector of economy?
Ernst & Young
NAZIK
PWC
Halyk Finance
Costs that are initially recorded as assets and expensed when goods sold are called ________.
irrelevant costs
period costs
inventoriable costs
research an
For manufacturing firms, inventoriable costs include ________.
distribution costs
plant supervisor salaries
research and development costs
costs of dealing with customers after the sale
R&D costs are treated as period costs because ________.
these costs are expensed when the goods are sold
these costs may increase revenues in the current period
these costs may increase revenues in the future period
these costs may decrease revenues in the current period
For an automobile manufacturer, period costs include the cost of ________.
advertising
the dashboard
labor used for assembly
assembly-line equipment
A cost system determines the cost of a cost object by ________.
assigning costs
accumulating and then assigning costs
accumulating costs
assigning and then accumulating costs
Which of the following is included in product cost for pricing and product-mix decisions?
opportunity costs
design costs
cost of capital
sunk costs
For a manufacturing company, direct labor costs may be included in ________.
merchandise inventory only
direct materials inventory only
both work-in-process inventory and finished goods inventory
direct materials inventory, work-in-process inventory, and finished goods inventory accounts
Period costs ________.
are treated as expenses in the following period they are incurred
are also referred to as manufacturing overhead costs
are directly traceable to products
are treated as expenses in the period they are incurred
The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________.
cost tracing
conversion costing
cost accumulation
cost assignment
The income statement of a service-sector firm reports ________.
period costs only
both period and inventoriable costs
inventoriable costs only
direct labor costs
Cost accumulation is ________.
anything for which a cost measurement is desired
the collection of cost data in some organized way by means of an accounting system
anything for which a profit measurement is desired
the collection of profit data in some organized way by means of an accounting system
The determination of a cost as either direct or indirect depends upon the ________.
inventory valuation
cost object chosen
tax system chosen
accounting standards
Manufacturing-sector companies report ________.
direct materials inventory and finished goods inventory accounts only
direct materials inventory, work-in-process inventory, and finished goods inventory accounts
only finished goods inventory
only merchandise inventory
Which of the following is a fixed cost?
monthly rent payment
travel expenses
direct material costs
electricity expenses
Service-sector companies ________.
purchase and then sell tangible products without changing their basic form
purchase and then sell tangible products by changing their basic form
provide intangible products
purchase materials and components and convert them into finished goods
Which of the following statements is true of direct costs?
A direct cost of one cost object is a true sense of the budgeted costs.
All variable costs are direct costs.
All fixed costs are direct costs.
A direct cost of one cost object can be an indirect cost of another cost object.
For a manufacturing company, direct material costs may be included in ________.
direct materials inventory, work-in-process inventory, and finished goods inventory accounts
direct materials inventory only
both work-in-process inventory and finished goods inventory
merchandise inventory only
________ are all manufacturing costs that are related to the cost object but cannot be traced to that cost object.
Marketing costs incurred
Custom duties paid for the materials
Indirect manufacturing costs
Variable manufacturing costs
Which of the following statements is true?
A direct cost of one cost object will always be a direct cost of another cost object.
Because of a cost-benefit tradeoff, some direct costs may be treated as indirect costs.
All fixed costs are indirect costs.
All direct costs are variable costs.
The income statement of a manufacturing firm reports ________.
cost of goods sold
only manufacturing overhead costs
sales promotion costs only
inventoriable costs only
Which of the following is a fixed cost for an automobile manufacturing plant?
sales commissions
electricity used by assembly-line machines
tires
administrative salaries
Which of the following companies is part of the service sector of our economy?
Magnum
PwC
Technodom
Rahat
Indirect manufacturing costs ________.
can be traced to the product that created the costs
can be easily identified with the cost object
generally include the cost of material and the cost of labor
may include both variable and fixed costs
Product costs used for external reporting generally include ________.
research and development costs along with production costs
all costs incurred along the value chain
design costs plus manufacturing costs
manufacturing costs only
For merchandising companies, inventoriable costs include ________.
incoming freight costs
distribution costs
outgoing freight costs
sales costs
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
Beginning work-in-process inventory + Cost of goods manufactured + Ending work-in-process inventory = Cost of goods sold
Beginning work-in-process inventory + Cost of goods manufactured - Ending work-in-process inventory = Cost of goods sold
Cost of goods manufactured - Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold
Which of the following is a period cost?
direct material cost
indirect manufacturing costs like plant insurance
sales promotion expenses
direct labor cost
Classifying a cost as either direct or indirect depends upon ________.
whether a cost is fixed or variable
whether the cost can be easily traced with the cost object
the behavior of the cost in response to volume changes
whether the cost is expensed in the period in which it is incurred
Which of the following factors affect the direct/indirect classification of a cost?
the estimation of time required to complete the order
the ability to execute an order in the most cost-efficient manner
the design of the operation
the level of budgeted profit for the next year
Conversion costs include ________.
direct manufacturing labor and manufacturing overhead costs
direct materials and direct manufacturing labor costs
only direct materials
direct materials and manufacturing overhead costs
Manufacturing overhead costs are also referred to as ________.
direct manufacturing costs
prime costs
indirect manufacturing costs
direct material
For external reporting ________.
costs are classified as either inventoriable or period costs
there are no prescribed rules since no one is exactly sure how investors and creditors will use these numbers
Inventoriable costs are expensed on the income statement ________.
when direct materials for the product are purchased
after the products are manufactured
when the goods move from work-in-process to finished goods account
when the products are sold
The planned operating income is calculated by ________.
dividing net income by tax rate
dividing net income by 1 − tax rate
multiplying net income by 1 − tax rate
multiplying net income by tax rate
Which of the following is the mathematical expression of contribution margin ratio?
Contribution margin ratio = Contribution margin percentage × Revenues (in dollars)
Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars)
Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars)
Contribution margin ratio = Contribution margin percentage × Operating leverage
Which of the following is true of CVP analysis?
Costs may be separated into separate inventoriable and period components with respect to the level of output.
Proportion of different products will vary according to demand and supply when multiple products are sold.
Unit selling price, unit variable costs, and unit fixed costs are known and remain constant.
Total revenues and total costs are linear in relation to output units.
Contribution margin equals ________.
revenues minus fixed costs
revenues minus product costs
revenues minus variable costs
revenues minus period costs
If a company would like to increase its degree of operating leverage it should ________.
increase its variable costs relative to its fixed costs
increase its sales relative to its variable costs
increase its sales relative to its fixed costs
increase its fixed costs relative to its variable costs
At breakeven point, ________.
breakeven revenues equal fixed costs divided by the variable cost per unit
contribution margin minus fixed costs is equal to profits earned
operating income is equal to zero
revenues equal fixed costs minus variable costs
Assume only the specified parameters change in a CVP analysis. The contribution margin percentage increases when ________.
total fixed costs increase
total variable costs increase
total revenues increase
total fixed costs decrease
Managers use cost-volume-profit (CVP) analysis to ________.
forecast the cost of capital for a given period of time
estimate the risks associated with a given job
analyse a firm's profitability and help to decide wealth distribution among its stakeholders
study the behavior of and relationship among the elements such as total revenues, total costs, and income
The selling price per unit less the variable cost per unit is the ________.
margin of safety
contribution margin per unit
gross margin
fixed cost per unit
The contribution margin income statement ________.
reports gross margin
categorizes costs as either direct or indirect
can be used to predict future profits at different levels of activity
is allowed for external reporting to shareholders
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
operating profits decreases by $6 per unit
fixed costs decreases by $6 per unit
fixed costs increases by $6 per unit
In CVP analysis, focusing on target net income rather than operating income ________.
will help managers construct a better capital policy
will increase the breakeven point
will not change the breakeven point
will decrease the breakeven point
Which of the following will increase a company's breakeven point?
increasing the selling price per unit
increasing variable cost per unit
reducing its total fixed costs
increasing contribution margin per unit
Which of the following is an assumption of CVP analysis?
The unit-selling price is variable as it is subject to demand and supply
Total costs can be divided into inventoriable and period costs with respect to the level of output
Total costs can be divided into a fixed component and a component that is variable with respect to the level of output
When graphed, total costs curve upward
All else being equal, a reduction in selling price will ________.
increase contribution margin
reduce fixed costs
reduce operating income
increase variable costs
Fixed costs ________.
are considered variable costs over the long run
provide less operating leverage
reduce the risk of loss
are graphed as a steeply sloped line
In a company with low operating leverage, ________.
fixed costs are more than the contribution margin
contribution margin and operating income are inversely related
less risk is assumed than in a highly leveraged firm
there is a higher possibility of net loss than a higher-leveraged firm
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.
Only selling price and variable cost per unit are known and constant.
Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant.
Selling price varies with demand and supply of the product.
Which of the following forms a part of decision making in CVP analysis?
selection of inventory method for financial reporting purposes
decision to form a capital policy
decision to advertise
decision to improve the efficiency of the work force
A revenue driver is defined as ________.
any factor that affects revenues
any factor that affects costs and revenues
the only factor that can influence a change in selling price
the only factor that can influence a change in demand
To apply CVP analysis in the hotel industry, which of the following is the most important measure of output ________.
number of employees
number of room-nights occupied
number of visitors
number of dishes on the menu
One of the first steps to take when using CVP analysis to help make decisions is ________.
identifying the variable and fixed cost
calculating the break-even point
estimating the volume of sales to make a good profit
calculation of the degree of operating leverage for the company
All else being equal, an increase in advertising expenditures will ________.
increase variable costs
reduce operating income
increase selling price
reduce contribution margin
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 ________.
multiple cost drivers
incremental budgeting
sensitivity analysis
variance analysis
Which of the following is true of net income?
Net income is operating income minus nonoperating revenues minus nonoperating costs minus sales taxes.
Net income is operating income plus operating revenues minus operating costs minus income taxes.
Net income is operating income plus nonoperating revenues minus nonoperating costs minus income taxes.
Net income is operating income minus operating revenues minus operating costs minus income taxes.
The margin of safety is the difference between ________.
budgeted revenues and breakeven revenues
actual sales margin and budgeted sales margin
actual operating income and budgeted operating income
budgeted expenses and breakeven expenses
Gross margin is ________.
sales revenue less variable costs
contribution margin less variable costs
sales revenue less cost of goods sold
contribution margin less fixed costs
When a greater proportion of costs are fixed costs, then ________.
a small increase in sales results in a small decrease in operating income
when demand is low the risk of loss is high
a decrease in sales reduces the cost per unit
a decrease in sales reduces the total fixed cost per unit
In the manufacturing sector, ________.
fixed overhead costs are subtracted to determine contribution margin
all operating costs are subtracted to determine contribution margin
only variable costs are subtracted to determine gross margin
fixed overhead costs are subtracted to determine gross margin
In the merchandising sector ________.
only variable costs are subtracted to determine gross margin
fixed overhead costs are subtracted to determine contribution margin
all operating costs are subtracted to determine contribution margin
fixed overhead costs are subtracted to determine gross margin
The breakeven point revenues is calculated by dividing ________.
total revenues by fixed costs
fixed costs by total revenues
fixed costs by contribution margin percentage
contribution margin percentage by fixed costs
The breakeven point decreases if ________.
the variable cost per unit increases
the total fixed costs decrease
the contribution margin per unit decreases
the selling price per unit decreases
If unit outputs exceed the breakeven point ________.
there will be a profit
there will be an increase in fixed costs
total sales revenue will exceed variable costs
total sales revenue will exceed fixed costs
The breakeven point is the activity level where ________.
revenues equal the sum of variable and fixed costs
revenues equal variable costs
revenues equal fixed costs
contribution margin equals total costs
Breakeven point in units is ________.
total costs divided by profit margin per unit
contribution margin per unit divided by total cost per unit
the sum of fixed and variable costs divided by contribution margin per unit
fixed costs divided by contribution margin per unit
Multiple cost drivers ________.
can utilize the simple CVP formula
have only one revenue driver
are the result of multiple products
have no unique breakeven point
In multiproduct situations, when sales mix shifts toward the product with the lowest contribution margin then ________.
total revenues will increase
operating income will decrease
interest cost will decrease
total contribution margin will increase
The only factor that can influence a change in demand is ________.
contribution margins and fixed costs
income tax expense and net income
net income and dividends
nonoperating revenues and nonoperating expenses
Which of the following is true of cost-volume-profit analysis?
The theory states that total variable costs remain the same over a relevant range
The theory assumes that all costs are variable
The theory assumes that units manufactured equal units sold
The theory states that total costs remain the same over the relevant range
For a given job, the direct costs associated with the job are ________.
sunk costs
actual overhead
raw materials
fixed costs
An increase in direct labor cost per unit ________.
increases profits
increases the fixed cost
increases the variable cost
increases overhead costs
The budgeted indirect-cost rate is calculated ________.
at the end of the year
at the beginning of the year
at the end of each quarter
during the year
The spreading of underallocated or overallocated overhead among ending work-in-process, finished goods, and cost of goods sold is called ________.
the proration approach
the write-off of cost of goods sold approach
the weighted-average cost approach
the adjusted allocation rate approach
Job costing is ________.
used to calculate equivalent units
used by businesses to price identical products
used by businesses to price unique products for different jobs
used to calculate the percentage of work completed
Assigning direct costs to a cost object is called ________.
cost pooling
cost tracing
cost absorption
cost allocation
cost assignment
The actual indirect-cost rate is calculated by ________.
multiplying actual total indirect costs by the actual total quantity of the cost-allocation base
multiplying the actual total quantity of the cost allocation base by actual total indirect costs
dividing the actual total quantity of the cost allocation base by actual total indirect costs
dividing actual total indirect costs by the actual total quantity of the cost-allocation base
A job that shows low profitability may be the result of ________.
overpricing the job
insurance claim of the damaged goods
excessive usage of direct materials
inefficient direct manufacturing labor
Which of the following statements about actual costing is true?
Corrective actions can be implemented sooner under actual costing.
Manufacturing costs of a job are available earlier under actual costing.
Actual costing uses actual indirect-cost rates calculated annually.
Actual costing uses budgeted indirect-cost rates calculated annually.
When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.
actual; actual
actual; budgeted
budgeted; actual
budgeted; budgeted
Product costing information will include ________.
for efficient human resource management
to increase profits
to increase sales and image of the company
to increase sales and image of the company
In a costing system, ________.
a cost-allocation base can be either financial or nonfinancial
cost tracing allocates indirect costs
cost allocation assigns direct costs
a cost object should be a product and not a department or a geographic territory
The difference between actual costing and normal costing is ________.
normal costing uses actual quantities of direct-costs
normal costing uses budgeted indirect-costs
actual costing uses actual quantities of cost-allocation bases
actual costing uses actual quantities of direct-costs
The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.
write-off to cost of goods sold approach
weighted-average cost approach
proration approach
proration approach
The adjusted allocation approach yields the benefits of ________.
the proration approach
timeliness and convenience of normal costing
allocating budgeted manufacturing overhead costs at the end of the year
write-off to the cost of goods sold approach
The Materials Control account is increased when ________.
materials are converted to finished goods
materials are written off as obsolete
indirect materials are sold
direct materials are purchased
materials are requisitioned for production
The cost allocation base ________.
are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way
is a grouping of individual indirect cost items
is anything for which a measurement of costs is desired
is a systematic way to link an indirect cost or group of indirect costs to cost objects
Costs that are subject to short-run fluctuations for given jobs are ________.
budgeted direct costs
actual costs
budgeted indirect costs
normal costs
When the allocated amount of indirect costs are less than the actual amount, indirect costs have been ________.
within budget
overallocated
underallocated
perfectly allocated
Job-costing is likely to be used by ________.
beverage production companies
advertising agencies
oil refining companies
postal service companies
Job costing information is used ________.
to determine tax rates
to enhance public relations
to calculate the percentage of completion
to set government policy
for internal financial reporting
Which of the following includes both traced direct costs and allocated indirect costs?
cost allocations
cost assignments
cost pools
cost tracing
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
the write-off of cost of goods sold approach
the weighted-average cost approach
the proration approach
Job costing _______.
cannot be used by the service industry
is used when each unit of output is identical
records the flow of costs for each product or service
allocates an equal amount of cost to each unit made during a time period
The basic source document for direct manufacturing labor is the _______.
labor-time record
materials-requisition record
labor-requisition record
job-cost record
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
longer the period, the greater is the influence of seasonal patterns on the amount of costs
shorter the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs
longer the period, the smaller is the influence of seasonal patterns on the amount of opportunity costs
Which of the following companies will use a process costing system?
a manufacturer of ships
a custom watch manufacturer
an oil refining company
an advertising firm
In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the _______ allocated to a job.
manufacturing overhead costs
total costs
direct labor
direct materials
A _______ is a grouping of individual indirect cost items.
cost allocations
cost pools
cost tracing
cost assignments
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
ACDB
DCAB
BACD
The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________.
adjusted write-off approach
adjusted allocation-rate approach
proration approach
write-off to cost of goods sold approach
A ________ links an indirect cost to a cost object.
cost tracing
cost assignment
cost-allocation base
cost pool
Actual costing is a costing system that traces direct costs to a cost object by ________.
using the budgeted direct cost rates times the actual quantities of the direct-cost inputs
using the actual direct cost rates times the actual quantities of the direct-cost inputs
using the actual direct cost rates times the budgeted quantities of the direct-cost inputs
using the budgeted direct cost rates times the budgeted quantities of direct-cost inputs
Management accountants use the cost hierarchy to first calculate the ________.
labor costs of each product and then they compute material costs
overhead costs of each product and then they compute prime costs
total costs of each product and then they compute per-unit costs
factory costs of each product and then they compute labor costs
It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.
product-sustaining costs
facility-sustaining costs
batch-level costs
unit-level costs
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
direct labor hours
machine hours
total production volume
Activity-based costing information can be used for ________.
Pricing decisions
Weather forecasting
Space exploration
Cooking recipes
Which of the following statements is true of ABC systems?
ABC system will always result in higher product costs.
ABC system is least suited for service companies.
ABC system is simpler compared to traditional systems.
ABC system is best suited for manufacturing companies.
Which of the following is true of refinement of a costing system?
A homogeneous cost pool will use multiple cost drivers to allocate costs.
It reduces the use of broad averages for assigning the cost of resources to cost objects.
While refining a costing system, companies should identify as many indirect costs as is economically feasible.
It is likely to yield the most decision-making benefits when direct costs are a high percentage of total costs.
It only makes sense to implement an ABC system when ________.
A single product is produced in bulk.
It traces more costs as direct costs.
The company has unlimited resources.
Production process is labor-intensive.
Its benefits exceed its implementation costs.
Activity-based costing system differs from traditional costing systems in the treatment of ________.
Indirect costs
Direct material costs
Prime costs
Direct labor costs
Which of the following statements is true of ABC systems?
ABC systems assume all costs are variable costs.
Which of the following statements is true of ABC systems?
ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs.
ABC systems are time-driven cost systems.
________ costs support the organization as a whole.
Batch-level
Unit-level
Facility-sustaining
Product-sustaining
Which of the following statements is true of activity-based costing?
Activity-based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services.
Activity-based costing is more suited to companies with high product diversity than companies with a single product line.
In activity-based costing, direct labor-hours is always the best allocation base to allocate all non-manufacturing indirect costs.
The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products.
Overcosting a particular product may result in ________.
Pricing the product too low
Understating total product costs
Operating efficiencies
Loss of market share
Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.
Establish a cause-and-effect relationship with the activities performed
Never consider interactions between different departments in assigning support costs
Use a broad average to allocate all overhead costs
Use a single cost pool for all overhead costs, thereby enabling simplicity
For a company which produces its products in batches, the CEO's salary is a(n) ________ cost.
Output unit-level
Facility-sustaining
Product-sustaining
Output unit-level
ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.
Committed
Fixed
nondiscretionary
Variable
Which of the following statements is true of activity-based costing?
Activity-based costing classifies some of the indirect costs as direct costs.
Activity-based costing ignores the allocation of marketing and distribution costs.
Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.
________ is considered while choosing a cost allocation base for activity costs in ABC costing.
Marketing strategy and material price level
Market share of a product
Product price level
Availability of reliable data and measures
Refining a cost system includes ________.
classifying as many costs as indirect costs as is feasible
seeking a lesser level of detail
identifying the activities involved in a process
creating as many cost pools as possible
Demand for refinements to the costing system has accelerated due to ________.
competition in product markets
decrease in indirect costs
decrease in product diversity
increase in direct costs
Product-cost cross-subsidization ________.
means that if a company undercosts more than one of its products, it will overcost more than one of its other products
exists only when one overcosted product results in all other products being overcosted
means that if a company undercosts one of its products, it will overcost at least one of its other products
exists when one overcosted product results in more than one other product being overcosted
________ 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.
Facility-sustaining costs
Product-sustaining costs
Unit-level costs
Batch-level costs
Service companies, in particular, find great value from ABC because a vast majority of their cost structure is composed of ________ costs.
Indirect
Prime
factory
Committed