Acct Test 3 Multiple Choice/ NO MATH - Flashcards

question

Managerial accounting applies to each of the following types of businesses except a. service firms. b. merchandising firms. c. manufacturing firms. d. Managerial accounting applies to all types of firms.

answer

Managerial accounting applies to all types of firms.

question

Managerial accounting information is generally prepared for a. stockholders. b. creditors. c. managers. d. regulatory agencies.

answer

managers.

question

Managerial accounting information a. pertains to the entity as a whole and is highly aggregated. b. pertains to subunits of the entity and may be very detailed. c. is prepared only once a year. d. is constrained by the requirements of generally accepted accounting principles.

answer

pertains to subunits of the entity and may be very detailed.

question

The major reporting standard for presenting managerial accounting information is a. relevance. b. generally accepted accounting principles. c. the cost principle. d. the current tax law.

answer

relevance.

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Managerial accounting is also called a. management accounting. b. controlling. c. analytical accounting. d. inside reporting.

answer

management accounting.

question

Which of the following is not an internal user? a. Creditor b. Department manager c. Controller d. Treasurer

answer

Creditor

question

Managerial accounting does not encompass a. calculating product cost. b. calculating earnings per share. c. determining cost behavior. d. profit planning.

answer

calculating earnings per share.

question

Managerial accounting is applicable to a. service entities. b. manufacturing entities. c. not-for-profit entities. d. all of these.

answer

all of these

question

Management accountants would not a. assist in budget planning. b. prepare reports primarily for external users. c. determine cost behavior. d. be concerned with the impact of cost and volume on profits

answer

prepare reports primarily for external users.

question

Internal reports must be communicated a. daily. b. monthly. c. annually. d. as needed.

answer

as needed.

question

Financial statements for external users can be described as a. user-specific. b. general-purpose. c. special-purpose. d. managerial reports

answer

general-purpose

question

Managerial accounting reports can be described as a. general-purpose. b. macro-reports. c. special-purpose. d. classified financial statements.

answer

special-purpose

question

The reporting standard for external financial reports is a. industry-specific. b. company-specific. c. generally accepted accounting principles. d. department-specific

answer

generally accepted accounting principles.

question

Which of the following statements about internal reports is not true? a. The content of internal reports may extend beyond the double-entry accounting system. b. Internal reports may show all amounts at market values. c. Internal reports may discuss prospective events. d. Most internal reports are summarized rather than detailed.

answer

Most internal reports are summarized rather than detailed.

question

In an analogous sense, external user is to internal user as generally accepted accounting principles are to a. timely. b. special-purpose. c. relevance to decision. d. SEC.

answer

relevance to decision.

question

Internal reports are generally a. aggregated. b. detailed. c. regulated. d. unreliable.

answer

detailed.

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A distinguishing feature of managerial accounting is a. external users. b. general-purpose reports. c. very detailed reports. d. quarterly and annual reports

answer

very detailed reports

question

What activities and responsibilities are not associated with management's functions? a. Planning b. Accountability c. Controlling d. Directing

answer

Accountability

question

Planning is a function that involves a. hiring the right people for a particular job. b. coordinating the accounting information system. c. setting goals and objectives for an entity. d. analyzing financial statements

answer

setting goals and objectives for an entity.

question

The managerial function of controlling a. is performed only by the controller of a company. b. is only applicable when the company sustains a loss. c. is concerned mainly with operating a manufacturing segment. d. includes performance evaluation by management.

answer

includes performance evaluation by management.

question

Which of the following is not a management function? a. Constraining b. Planning c. Controlling d. Directing

answer

Constraining

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A manager that is establishing objectives is performing which management function? a. Controlling b. Directing c. Planning d. Constraining

answer

Planning

question

The management function that requires managers to look ahead and establish objectives is a. controlling. b. directing. c. planning. d. constraining

answer

planning

question

In determining whether planned goals are being met, a manager is performing the function of a. planning. b. follow-up. c. directing. d. controlling.

answer

controlling

question

Which of the following is not a separate management function? a. Planning b. Directing c. Decision-making d. Controlling

answer

Decision-making

question

Directing includes a. providing a framework for management to have criteria to terminate employees when needed. b. running a department under quality control standards universally accepted. c. coordinating a company's diverse activities and human resources to produce a smooth-running operation. d. developing a complex performance ranking system to give certain high performers good raises.

answer

coordinating a company's diverse activities and human resources to produce a smooth-running operation.

question

Both direct materials and indirect materials are a. raw materials. b. manufacturing overhead. c. merchandise inventory. d. sold directly to customers by a manufacturing company.

answer

raw materials.

question

The work of factory employees that can be physically and directly associated with converting raw materials into finished goods is a. manufacturing overhead. b. indirect materials. c. indirect labor. d. direct labor.

answer

direct labor

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Which one of the following would not be classified as manufacturing overhead? a. Indirect labor b. Direct materials c. Insurance on factory building d. Indirect materials

answer

Direct materials

question

Manufacturing costs include a. direct materials and direct labor only. b. direct materials and manufacturing overhead only. c. direct labor and manufacturing overhead only. d. direct materials, direct labor, and manufacturing overhead.

answer

direct materials, direct labor, and manufacturing overhead.

question

Which one of the following is not a direct material? a. A tire used for a lawn mower b. Plastic used in the covered case for a home PC c. Steel used in the manufacturing of steel-radial tires d. Lubricant for a ball-bearing joint for a large crane

answer

Lubricant for a ball-bearing joint for a large crane

question

Which one of the following is not a cost element in manufacturing a product? a. Manufacturing overhead b. Direct materials c. Office salaries d. Direct labor

answer

Office salaries

question

A manufacturing process requires small amounts of glue. The glue used in the production process is classified as a(n) a. period cost. b. indirect material. c. direct material. d. miscellaneous expense.

answer

indirect material.

question

The wages of a timekeeper in the factory would be classified as a. a period cost. b. direct labor. c. indirect labor. d. compliance costs.

answer

indirect labor.

question

Which one of the following is not considered as material costs? a. Partially completed motor engines for a motorcycle plant b. Bolts used in manufacturing the compressor of an engine c. Rivets for the wings of a new commercial jet aircraft d. Lumber used to build tables

answer

Partially completed motor engines for a motorcycle plant

question

Which of the following is not a manufacturing cost category? a. Cost of goods sold b. Direct materials c. Direct labor d. Manufacturing overhead

answer

Cost of goods sold

question

As current technology changes manufacturing processes, it is likely that direct a. labor will increase. b. labor will decrease. c. materials will increase. d. materials will decrease.

answer

labor will decrease.

question

For the work of factory employees to be considered as direct labor, the work must be conveniently and

answer

periodically associated with raw materials conversion.

question

Which of the following is not classified as direct labor? a. Bottlers of beer in a brewery b. Copy machine operators at a copy shop c. Wages of supervisors d. Bakers in a bakery

answer

Wages of supervisors

question

Cotter pins and lubricants used irregularly in a production process are classified as a. miscellaneous expense. b. direct materials. c. indirect materials. d. nonmaterial materials

answer

indirect materials.

question

Which of the following is not another name for the term manufacturing overhead? a. Factory overhead b. Pervasive costs c. Burden d. Indirect manufacturing costs

answer

Pervasive costs

question

Because of automation, which component of product cost is declining? a. Direct labor b. Direct materials c. Manufacturing overhead d. Advertising

answer

Direct labor

question

The product cost that is most difficult to associate with a product is a. direct materials. b. direct labor. c. manufacturing overhead. d. advertising.

answer

manufacturing overhead.

question

Manufacturing costs that cannot be classified as either direct materials or direct labor are known as a. period costs. b. nonmanufacturing costs. c. selling and administrative expenses. d. manufacturing overhead

answer

manufacturing overhead.

question

Which one of the following is an example of a period cost? a. A change in benefits for the union workers who work in the New York plant of a Fortune 1000 manufacturer b. Workers' compensation insurance on factory workers' wages allocated to the factory c. A box cost associated with computers d. A manager's salary for work that is done in the corporate head office

answer

A manager's salary for work that is done in the corporate head office

question

Which one of the following costs would not be inventoriable? a. Period costs b. Factory insurance costs c. Indirect materials d. Indirect labor costs

answer

Period costs

question

Direct materials and direct labor of a company total $8,000,000. If manufacturing overhead is $4,000,000, what is direct labor cost? a. $4,000,000 b. $8,000,000 c. $0 d. Cannot be determined from the information provided

answer

Cannot be determined from the information provided

question

Which of the following are period costs? a. Raw materials b. Direct materials and direct labor c. Direct labor and manufacturing overhead d. Selling expenses

answer

Selling expenses

question

Sales commissions are classified as a. overhead costs b. period costs. c. product costs. d. indirect labor.

answer

period costs.

question

Product costs consist of a. direct materials and direct labor only. b. direct materials, direct labor, and manufacturing overhead. c. selling and administrative expenses. d. period costs.

answer

direct materials, direct labor, and manufacturing overhead.

question

Which one of the following represents a period cost? a. The VP of Sales' salary and benefits b. Overhead allocated to the manufacturing operations c. Labor costs associated with quality control d. Fringe benefits associated with factory workers

answer

The VP of Sales' salary and benefits

question

Product costs are also called a. direct costs. b. overhead costs. c. inventoriable costs. d. capitalizable costs.

answer

inventoriable costs.

question

For inventoriable costs to become expenses under the matching principle, a. the product must be finished and in stock. b. the product must be expensed based on its percentage-of-completion. c. the product to which they attach must be sold. d. all accounts payable must be settled.

answer

the product to which they attach must be sold.

question

As inventoriable costs expire, they become a. selling expenses. b. gross profit. c. cost of goods sold. d. sales revenue.

answer

cost of goods sold.

question

A manufacturing company calculates cost of goods sold as follows: a. Beginning FG inventory + cost of goods purchased - ending FG inventory. b. Ending FG inventory - cost of goods manufactured + beginning FG inventory. c. Beginning FG inventory - cost of goods manufactured - ending FG inventory. d. Beginning FG inventory + cost of goods manufactured - ending FG inventory.

answer

Beginning FG inventory + cost of goods manufactured - ending FG inventory.

question

A manufacturing company reports cost of goods manufactured as a(n) a. current asset on the balance sheet. b. administrative expense on the income statement. c. component in the calculation of cost of goods sold on the income statement. d. component of the raw materials inventory on the balance sheet.

answer

component in the calculation of cost of goods sold on the income statement.

question

The subtotal, "Cost of goods manufactured" appears on a. a merchandising company's income statement. b. a manufacturing company's income statement. c. both a manufacturing and a merchandising company's income statement. d. neither a merchandising nor a manufacturing company's income statement

answer

a manufacturing company's income statement

question

Cost of goods manufactured in a manufacturing company is analogous to a. ending inventory in a merchandising company. b. beginning inventory in a merchandising company. c. cost of goods available for sale in a merchandising company. d. cost of goods purchased in a merchandising company.

answer

cost of goods purchased in a merchandising company.

question

Cost of goods sold a. only appears on merchandising companies' income statements. b. only appears on manufacturing companies' income statements. c. appears on both manufacturing and merchandising companies' income statements. d. is calculated exactly the same for merchandising and manufacturing companies.

answer

appears on both manufacturing and merchandising companies' income statements.

question

Cost of goods manufactured is calculated as follows: a. Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP. b. Direct materials used + direct labor + manufacturing overhead - beginning WIP + ending WIP. c. Beginning WIP + direct materials used + direct labor + manufacturing overhead - ending WIP. d. Direct materials used + direct labor + manufacturing overhead - ending WIP - beginning WIP.

answer

Beginning WIP + direct materials used + direct labor + manufacturing overhead - ending WIP.

question

If the amount of "Cost of goods manufactured" during a period exceeds the amount of "Total manufacturing costs" for the period, then a. ending work in process inventory is greater than or equal to the amount of the beginning work in process inventory. b. ending work in process is greater than the amount of the beginning work in process inventory. c. ending work in process is equal to the cost of goods manufactured. d. ending work in process is less than the amount of the beginning work in process inventory.

answer

ending work in process is less than the amount of the beginning work in process inventory.

question

On the costs of goods manufactured schedule, depreciation on factory equipment a. is not listed because it is included with Depreciation Expense on the income statement. b. appears in the manufacturing overhead section. c. is not listed because it is not a product cost. d. is not an inventoriable cost.

answer

appears in the manufacturing overhead section.

question

On the costs of goods manufactured schedule, the item raw materials inventory (ending) appears as a(n) a. addition to raw materials purchases. b. addition to raw materials available for use. c. subtraction from raw materials available for use. d. subtraction from raw materials purchases

answer

subtraction from raw materials available for use.

question

What is work in process inventory generally described as? a. Costs applicable to units that have been started in production but are only partially completed b. Costs associated with the end stage of manufacturing that are almost always complete and ready for customers c. Costs strictly associated with direct labor d. Beginning stage production costs associated with labor costs dealing with bringing in raw materials from the shipping docks

answer

Costs applicable to units that have been started in production but are only partially completed

question

Which one of the following does not appear on the balance sheet of a manufacturing company? a. Finished goods inventory b. Work in process inventory c. Cost of goods manufactured d. Raw materials inventory

answer

Cost of goods manufactured

question

The equivalent of finished goods inventory for a merchandising firm is referred to as a. purchases. b. cost of goods purchased. c. merchandise inventory. d. raw materials inventory.

answer

merchandise inventory.

question

How have many companies significantly lowered inventory levels and costs? a. They use activity-based costing. b. They utilize a balanced scorecard system. c. They have a just-in-time method. d. They focus on total quality management

answer

They have a just-in-time method.

question

What term describes all business processes associated with providing a product or service? a. The manufacturing chain b. The product chain c. The supply chain d. The value chain

answer

The value chain

question

Which one of the following managerial accounting approaches attempts to allocate manufacturing overhead in a more meaningful fashion? a. Balanced scorecard b. Just-in-time inventory c. Activity-based costing d. Total quality management

answer

Activity-based costing

question

What is "balanced" in the balanced scorecard approach? a. The number of products produced b. The emphasis on financial and non-financial performance measurements c. The amount of costs allocated to products d. The number of defects found on each product

answer

The emphasis on financial and non-financial performance measurements

question

Which one of the following characteristics would likely be associated with a just-in-time inventory method? a. Ending inventory of work in process that would allow several production runs b. A backlog of inventory orders not yet shipped c. Minimal finished goods inventory on hand d. An understanding with customers that they may come to the showroom and select from inventory on hand

answer

Minimal finished goods inventory on hand

question

Many companies now focus on reducing defects in finished products with the goal of zero defects. This is called a. Activity-based costing. b. Balanced scorecard. c. Value chain. d. Total quality management

answer

Value chain.

question

Financial and managerial accounting are similar in that both a. have the same primary users. b. produce general-purpose reports. c. have reports that are prepared quarterly and annually. d. deal with the economic events of an enterprise

answer

deal with the economic events of an enterprise.

question

The function that pertains to keeping the activities of the enterprise on track is a. planning. b. directing. c. controlling. d. accounting.

answer

controlling.

question

Property taxes on a manufacturing plant are an element of a Product Cost Period Cost a. Yes No b. Yes Yes c. No Yes d. No No

answer

Yes No

question

For a manufacturing company, which of the following is an example of a period cost rather than a product cost? a. Depreciation on factory equipment b. Wages of salespersons c. Wages of machine operators d. Insurance on factory equipment

answer

Wages of salespersons

question

For a manufacturing firm, cost of goods available for sale is computed by adding the beginning finished goods inventory to a. cost of goods purchased. b. cost of goods manufactured. c. net purchases. d. total manufacturing costs.

answer

cost of goods manufactured.

question

If the cost of goods manufactured is less than the cost of goods sold, which of the following is correct? a. Finished Goods Inventory has increased. b. Work in Process Inventory has increased. c. Finished Goods Inventory has decreased. d. Work in Process Inventory has decreased.

answer

Finished Goods Inventory has decreased

question

The principal difference between a merchandising and a manufacturing income statement is the a. cost of goods sold section. b. extraordinary item section. c. operating expense section. d. revenue section.

answer

cost of goods sold section.

question

If the total manufacturing costs are greater than the cost of goods manufactured, which of the following is correct? a. Work in Process Inventory has increased. b. Finished Goods Inventory has increased. c. Work in Process Inventory has decreased. d. Finished Goods Inventory has decreased.

answer

Work in Process Inventory has increased.

question

The sum of the direct materials costs, direct labor costs, and manufacturing overhead incurred is the a. cost of goods manufactured. b. total manufacturing overhead. c. total manufacturing costs. d. total cost of work in process.

answer

total manufacturing costs.

question

The inventory accounts that show the cost of completed goods on hand and the costs applicable to production that is only partially completed are, respectively a. Work in Process Inventory and Raw Materials Inventory. b. Finished Goods Inventory and Raw Materials Inventory. c. Finished Goods Inventory and Work in Process Inventory. d. Raw Materials Inventory and Work in Process Inventory

answer

Finished Goods Inventory and Work in Process Inventory.

question

Chapter 18

answer

Chapter 18

question

For an activity base to be useful in cost behavior analysis, a. the activity should always be stated in dollars. b. there should be a correlation between changes in the level of activity and changes in costs. c. the activity should always be stated in terms of units. d. the activity level should be constant over a period of time.

answer

there should be a correlation between changes in the level of activity and changes in costs.

question

A variable cost is a cost that a. varies per unit at every level of activity. b. occurs at various times during the year. c. varies in total in proportion to changes in the level of activity. d. may or may not be incurred, depending on management's discretion

answer

varies in total in proportion to changes in the level of activity.

question

A cost which remains constant per unit at various levels of activity is a a. variable cost. b. fixed cost. c. mixed cost. d. manufacturing cost.

answer

variable cost

question

Two costs at Bradshaw Company appear below for specific months of operation. Month Amount Units Produced Delivery costs September $40,000 40,000 October 55,000 60,000 Utilities September $ 84,000 40,000 October 126,000 60,000 Which type of costs are these? a. Delivery costs and utilities are both variable. b. Delivery costs and utilities are both mixed. c. Utilities are mixed and delivery costs are variable. d. Delivery costs are mixed and utilities are variable.

answer

Delivery costs are mixed and utilities are variable.

question

An increase in the level of activity will have the following effects on unit costs for variable and fixed costs: Unit Variable Cost Unit Fixed Cost a. Increases Decreases b. Remains constant Remains constant c. Decreases Remains constant d. Remains constant Decreases

answer

Remains constant Decreases

question

A fixed cost is a cost which a. varies in total with changes in the level of activity. b. remains constant per unit with changes in the level of activity. c. varies inversely in total with changes in the level of activity. d. remains constant in total with changes in the level of activity.

answer

remains constant in total with changes in the level of activity.

question

Fixed costs normally will not include a. property taxes. b. direct labor. c. supervisory salaries. d. depreciation on buildings and equipment.

answer

direct labor.

question

The increased use of automation and less use of the work force in companies has caused a trend towards an increase in a. both variable and fixed costs. b. fixed costs and a decrease in variable costs. c. variable costs and a decrease in fixed costs. d. variable costs and no change in fixed costs.

answer

fixed costs and a decrease in variable costs.

question

Cost behavior analysis is a study of how a firm's costs a. relate to competitors' costs. b. relate to general price level changes. c. respond to changes in the level of business activity. d. respond to changes in the gross national product

answer

respond to changes in the level of business activity.

question

Cost behavior analysis applies to a. retailers. b. wholesalers. c. manufacturers. d. all entities.

answer

all entities

question

If a firm increases its activity level, a. costs should remain the same. b. most costs will rise. c. no costs will remain the same. d. some costs will change, others will remain the same

answer

some costs will change, others will remain the same.

question

An activity index might be referred to as a cost a. driver. b. multiplier. c. element. d. correlation.

answer

driver

question

Cost activity indexes might help classify costs as a. temporary. b. permanent. c. variable. d. transient

answer

variable

question

Which of the following is not a cost classification? a. Mixed b. Multiple c. Variable d. Fixed

answer

Multiple

question

If the activity level increases 10%, total variable costs will a. remain the same. b. increase by more than 10%. c. decrease by less than 10%. d. increase 10%.

answer

increase 10%.

question

Which of the following costs are variable? Cost 10,000 Units 30,000 Units 1. $100,000 $300,000 2. 40,000 240,000 3. 90,000 90,000 4. 50,000 150,000 a. 1 and 2 b. 1 and 4 c. only 1 d. only 2

answer

1 and 4

question

Changes in activity have a(n) _________ effect on fixed costs per unit. a. positive b. negative c. inverse d. neutral

answer

inverse

question

Which of the following is not a fixed cost? a. Direct materials b. Depreciation c. Lease charge d. Property taxes

answer

Direct materials

question

Why is identification of a relevant range important? a. It is required under GAAP. b. Cost behavior outside of the relevant range is not linear, which distorts CVP analysis. c. It directly impacts the number of units of product a customer buys. d. It is a cost that is incurred by a company that must be accounted for.

answer

Cost behavior outside of the relevant range is not linear, which distorts CVP analysis.

question

The relevant range of activity refers to the a. geographical areas where the company plans to operate. b. activity level where all costs are curvilinear. c. levels of activity over which the company expects to operate. d. level of activity where all costs are constant

answer

levels of activity over which the company expects to operate.

question

Which of the following is not a plausible explanation of why variable costs often behave in a curvilinear fashion? a. Labor specialization b. Overtime wages c. Total variable costs are constant within the relevant range d. Availability of quantity discounts

answer

Total variable costs are constant within the relevant range

question

Firms operating at 100% capacity a. are common. b. are the exception rather than the rule. c. have no fixed costs. d. have no variable costs

answer

are the exception rather than the rule.

question

Which of the following would be the least controllable fixed costs? a. Property taxes b. Rent c. Research and development d. Management training programs

answer

Property taxes

question

Which one of the following is a name for the range over which a company expects to operate? a. Mixed range b. Fixed range c. Variable range d. Relevant range

answer

Relevant range

question

If graphed, fixed costs that behave in a curvilinear fashion resemble a(n) a. S-curve. b. inverted S-curve. c. straight line. d. stair-step pattern

answer

stair-step pattern.

question

The graph of variable costs that behave in a curvilinear fashion will a. approximate a straight line within the relevant range. b. be sharply kinked on both sides of the relevant range. c. be downward sloping. d. be a stair-step pattern

answer

approximate a straight line within the relevant range.

question

A mixed cost contains a. a variable element and a fixed element. b. both selling and administrative costs. c. both retailing and manufacturing costs. d. both operating and nonoperating costs.

answer

a variable element and a fixed element.

question

Which of the following is not true about the graph of a mixed cost? a. It is possible to determine the amount of the fixed cost from the graph. b. There is a total cost line on the graph. c. The fixed cost portion of the graph is the same amount at all levels of activity. d. The variable cost portion of the graph is rectangular in shape.

answer

The variable cost portion of the graph is rectangular in shape.

question

Which of the following is not a mixed cost? a. Car rental fee b. Electricity c. Depreciation d. Telephone Expense

answer

Depreciation

question

In using the high-low method, the fixed cost a. is determined by subtracting the total cost at the high level of activity from the total cost at the low activity level. b. is determined by adding the total variable cost to the total cost at the low activity level. c. is determined before the total variable cost. d. may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

answer

may be determined by subtracting the total variable cost from either the total cost at the low or high activity level.

question

If Qualls Quality Airline cuts its domestic fares by 30%, a. its fixed costs will decrease. b. profit will increase by 30%. c. a profit can only be earned by decreasing the number of flights. d. a profit can be earned either by increasing the number of passengers or by decreasing variable costs.

answer

a profit can be earned either by increasing the number of passengers or by decreasing variable costs.

question

In applying the high-low method, which months are relevant? Month Miles Total Cost January 80,000 $144,000 February 50,000 120,000 March 70,000 141,000 April 90,000 195,000 a. January and February b. January and April c. February and April d. February and March

answer

February and April

question

For analysis purposes, the high-low method usually produces a (n) a. reasonable estimate. b. precise estimate. c. overstated estimate. d. understated estimate.

answer

reasonable estimate.

question

The high-low method is criticized because it a. is not a graphical method. b. is a mathematical method. c. ignores much of the available data by concentrating on only the extreme points. d. doesn't provide reasonable estimates.

answer

ignores much of the available data by concentrating on only the extreme points.

question

The high-low method is often employed in analyzing a. fixed costs. b. mixed costs. c. variable costs. d. conversion costs.

answer

mixed costs.

question

In CVP analysis, the term "cost" a. includes only manufacturing costs. b. means cost of goods sold. c. includes manufacturing costs plus selling and administrative expenses. d. excludes all fixed manufacturing costs.

answer

includes manufacturing costs plus selling and administrative expenses.

question

Which one of the following is not an assumption of CVP analysis? a. All units produced are sold. b. All costs are variable costs. c. Sales mix remains constant. d. The behavior of costs and revenues are linear within the relevant range

answer

All costs are variable costs.

question

CVP analysis does not consider a. level of activity. b. fixed cost per unit. c. variable cost per unit. d. sales mix

answer

fixed cost per unit.

question

Which of the following is not an underlying assumption of CVP analysis? a. Changes in activity are the only factors that affect costs. b. Cost classifications are reasonably accurate. c. Beginning inventory is larger than ending inventory. d. Sales mix is constant.

answer

Beginning inventory is larger than ending inventory.

question

CVP analysis is not important in a. calculating depreciation expense. b. setting selling prices. c. determining the product mix. d. utilizing production facilities

answer

calculating depreciation expense.

question

To which function of management is CVP analysis most applicable? a. Planning b. Motivating c. Directing d. Controlling

answer

Planning

question

Contribution margin a. is always the same as gross profit margin. b. excludes variable selling costs from its calculation. c. is calculated by subtracting total manufacturing costs per unit from sales revenue per unit. d. equals sales revenue minus variable costs.

answer

equals sales revenue minus variable costs

question

Which of the following would not be an acceptable way to express contribution margin? a. Sales minus variable costs b. Sales minus unit costs c. Unit selling price minus unit variable costs d. Contribution margin per unit divided by unit selling price

answer

Sales minus unit costs

question

Which is the true statement? a. In a CVP income statement, costs and expenses are classified only by function. b. The CVP income statement is prepared for both internal and external use. c. The CVP income statement shows contribution margin instead of gross profit. d. In a traditional income statement, costs and expenses are classified as either variable or fixed.

answer

The CVP income statement shows contribution margin instead of gross profit

question

The equation which reflects a CVP income statement is a. Sales = Cost of goods sold + Operating expenses + Net income. b. Sales + Fixed costs = Variable costs + Net income. c. Sales - Variable costs + Fixed costs = Net income. d. Sales - Variable costs - Fixed costs = Net income.

answer

Sales - Variable costs - Fixed costs = Net income.

question

The CVP income statement a. is distributed internally and externally. b. classifies costs by functions. c. discloses contribution margin in the body of the statement. d. will reflect a different net income than the traditional income statement

answer

discloses contribution margin in the body of the statement.

question

The break-even point is where a. total sales equal total variable costs. b. contribution margin equals total fixed costs. c. total variable costs equal total fixed costs. d. total sales equal total fixed costs.

answer

contribution margin equals total fixed costs.

question

The break-even point cannot be determined by a. computing it from a mathematical equation. b. computing it using contribution margin. c. reading the prior year's financial statements. d. deriving it from a CVP graph.

answer

reading the prior year's financial statements.

question

Select the correct statement concerning the cost-volume-profit graph at right: a. The point identified by "B" is the break-even point. b. Line F is the variable cost line. c. At point B, profits equal total costs. d. Line E is the total cost line.

answer

Line E is the total cost line

question

Nelson Manufacturing has the following data: Variable costs are 60% of the unit selling price. The contribution margin ratio is 40%. The contribution margin per unit is $500. The fixed costs are $300,000. Which of the following does not express the break-even point? a. $300,000 + .60X = X b. $300,000 + .40X = X c. $300,000 ÷ $500 = X d. $300,000 ÷ .40 = X

answer

$300,000 + .40X = X

question

A CVP graph does not include a a. variable cost line. b. fixed cost line. c. sales line. d. total cost line.

answer

variable cost line

question

The amount by which actual or expected sales exceeds break-even sales is referred to as a. contribution margin. b. unanticipated profit. c. margin of safety. d. target net income

answer

margin of safety.

question

In evaluating the margin of safety, the a. break-even point is not relevant. b. higher the margin of safety ratio, the greater the margin of safety. c. higher the dollar amount, the lower the margin of safety. d. higher the margin of safety ratio, the lower the fixed costs.

answer

higher the margin of safety ratio, the greater the margin of safety.

question

Within the relevant range, the variable cost per unit a. differs at each activity level. b. remains constant at each activity level. c. increases as production increases. d. decreases as production increases.

answer

remains constant at each activity level.

question

An example of a mixed cost is a. direct materials. b. supervisory salaries. c. utility costs. d. property taxes.

answer

utility costs.

question

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.

answer

the behavior of costs is curvilinear throughout the relevant range.

question

The contribution margin ratio increases when a. fixed costs increase. b. fixed costs decrease. c. variable costs as a percentage of sales decrease. d. variable costs as a percentage of sales increase.

answer

variable costs as a percentage of sales decrease.

question

Contribution margin is a. the amount of revenue remaining after deducting fixed costs. b. 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.

answer

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

question

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

answer

contribution margin equals total fixed costs.

question

Required sales in dollars to meet a target net income is computed by dividing a. fixed costs plus target net income by contribution margin per unit. b. variable costs plus target net income by contribution margin per unit. c. fixed costs plus target net income by contribution margin ratio. d. total costs plus target net income by contribution margin ratio.

answer

fixed costs plus target net income by contribution margin ratio.

question

Ch. 21

answer

Ch. 21

question

Why are budgets useful in the planning process? a. They provide management with information about the company's past performance. b. They help communicate goals and provide a basis for evaluation. c. They guarantee the company will be profitable if it meets its objectives. d. They enable the budget committee to earn their paycheck

answer

They help communicate goals and provide a basis for evaluation.

question

A budget a. is a substitute for management. b. is an aid to management. c. can operate or enforce itself. d. is the responsibility of the accounting department.

answer

is an aid to management.

question

Accounting generally has the responsibility for a. setting company goals. b. expressing the budget in financial terms. c. enforcing the budget. d. administration of the budget

answer

expressing the budget in financial terms.

question

Which one of the following is not a benefit of budgeting? a. It facilitates the coordination of activities. b. It provides definite objectives for evaluating performance. c. It provides assurance that the company will achieve its objectives. d. It requires all levels of management to plan ahead on a recurring basis

answer

It provides assurance that the company will achieve its objectives.

question

Budgeting is usually most closely associated with which management function? a. Planning b. Directing c. Motivating d. Controlling

answer

Planning

question

Which of the following items does not follow from the adoption of a budget? a. Promote efficiency b. Deterrent to waste c. Basis for performance evaluation d. Guarantee of accomplishing the profit objective

answer

Guarantee of accomplishing the profit objective

question

Which is true of budgets? a. They are voted on and approved by stockholders. b. They are used in the planning, but not in the control, process. c. There is a standard form and structure for budgets. d. They are used in performance evaluation.

answer

They are used in performance evaluation.

question

A common starting point in the budgeting process is a. expected future net income. b. past performance. c. to motivate the sales force. d. a clean slate, with no expectations.

answer

past performance.

question

If budgets are to be effective, all of the following must be present except a. acceptance at all levels of management. b. research and analysis in setting realistic goals. c. stockholders' approval of the budget. d. sound organizational structure

answer

stockholders' approval of the budget.

question

If budgets are to be effective, there must be a. a history of successful operations. b. independent verification of budget goals. c. an organizational structure with clearly defined lines of authority and responsibility. d. excess plant capacity

answer

an organizational structure with clearly defined lines of authority and responsibility.

question

It is important that budgets be accepted by a. division managers. b. department heads. c. supervisors. d. All of these.

answer

All of these.

question

Which of the following statements about budget acceptance in an organization is true? a. The most widely accepted budget by the organization is the one prepared by top management. b. The most widely accepted budget by the organization is the one prepared by the department heads. c. Budgets are hardly ever accepted by anyone except top management. d. Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.

answer

Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.

question

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable? a. Department managers should be held accountable for all variances from budgets for their departments. b. Department managers should only be held accountable for controllable variances for their departments. c. Department managers should be credited for favorable variances even if they are beyond their control. d. Department managers' performances should not be evaluated based on actual results to budgeted results.

answer

Department managers should only be held accountable for controllable variances for their departments.

question

An unrealistic budget is more likely to result when it a. has been developed in a top down fashion. b. has been developed in a bottom up fashion. c. has been developed by all levels of management. d. is developed with performance appraisal usages in mind.

answer

has been developed in a top down fashion.

question

A budget is most likely to be effective if a. it is used to assess blame when things do not occur according to plans. b. it is not used to evaluate a manager's performance. c. employees and managers at the lower levels do not get involved in the budgeting process. d. it has top management support

answer

it has top management support.

question

In many companies, responsibility for coordinating the preparation of the budget is assigned to a. the company's independent certified public accountants. b. the company's internal auditors. c. the company's board of directors. d. a budget committee

answer

a budget committee.

question

A budget period should be a. monthly. b. for a year or more. c. long-term. d. long enough to provide an obtainable goal under normal business conditions.

answer

long enough to provide an obtainable goal under normal business conditions.

question

If a company has adopted continuous budgeting, the budget will show plans for a. every day. b. a full year ahead. c. the current year and the next year. d. at least five years.

answer

a full year ahead.

question

The most common budget period is a. one month. b. three months. c. six months. d. one year.

answer

one year.

question

Budget development for the coming year usually starts a. a year in advance. b. the first month of the year to be budgeted. c. several months before the end of the current year. d. the last month of the previous year

answer

several months before the end of the current year.

question

The budget committee would not normally include the a. research director. b. treasurer. c. sales manager. d. external auditor.

answer

external auditor.

question

The budget committee in a company is often headed by the a. president. b. controller. c. treasurer. d. budget director

answer

budget director.

question

Long-range planning a. generally presents more detailed information than an annual budget. b. generally encompasses a longer period of time than an annual budget. c. is usually more accurate than an annual budget. d. is prepared on a quarterly basis if the budget is prepared on a quarterly basis.

answer

generally encompasses a longer period of time than an annual budget.

question

Long-range planning usually encompasses a period of at least a. six months. b. 1 year. c. 5 years. d. 10 years.

answer

5 years.

question

Which of the following is not a proper match-up? a. Long range planning Strategies b. Budgeting Short-term goals c. Long-range planning 5 years d. Budgeting Long-term goals

answer

Budgeting Long-term goals

question

Which is the last step in developing the master budget? a. Preparing the budgeted balance sheet b. Preparing the cost of goods manufactured budget c. Preparing the budgeted income statement d. Preparing the cash budget

answer

Preparing the budgeted balance sheet

question

The total direct labor hours required in preparing a direct labor budget are calculated using the a. sales forecast. b. production budget. c. direct materials budget. d. sales budget.

answer

production budget.

question

The direct materials and direct labor budgets provide information for preparing the a. sales budget. b. production budget. c. manufacturing overhead budget. d. cash budget.

answer

cash budget.

question

A sales forecast a. shows a forecast for the firm only. b. shows a forecast for the industry only. c. shows forecasts for the industry and for the firm. d. plays a minor role in the development of the master budget

answer

shows forecasts for the industry and for the firm

question

Which of the following is not an operating budget? a. Direct labor budget b. Sales budget c. Production budget d. Cash budget

answer

Cash budget

question

Which of the following is not a financial budget? a. Capital expenditure budget b. Cash budget c. Manufacturing overhead budget d. Budgeted balance sheet

answer

Manufacturing overhead budget

question

Which of the following is done to improve the reliability of the sales forecast? a. Employ financial planning models b. Lengthen the planning horizon to more than a year c. Rely solely on outside consultants d. Use the sales forecasts from the previous year

answer

Employ financial planning models

question

The financial budgets include the a. cash budget and the selling and administrative expense budget. b. cash budget and the budgeted balance sheet. c. budgeted balance sheet and the budgeted income statement. d. cash budget and the production budget

answer

cash budget and the budgeted balance sheet.

question

The culmination of preparing operating budgets is the a. budgeted balance sheet. b. production budget. c. cash budget. d. budgeted income statement.

answer

budgeted income statement.

question

An overly optimistic sales budget may result in a. increases in selling prices late in the year. b. insufficient inventories. c. increased sales during the year. d. excessive inventories.

answer

excessive inventories.

question

In a production budget, total required production units are the budgeted sales units plus a. beginning finished goods units. b. desired ending finished goods units. c. desired ending finished goods units plus beginning finished goods units. d. desired ending finished goods units minus beginning finished goods units.

answer

desired ending finished goods units minus beginning finished goods units.

question

The direct materials budget details 1. the quantity of direct materials to be purchased. 2. the cost of direct materials to be purchased. a. 1 b. 2 c. both 1 and 2 d. neither 1 nor 2

answer

both 1 and 2

question

The production budget shows that expected unit sales are 48,000. The total required units are 54,000. What are the required production units? a. 6,000 b. 9,000 c. 12,000 d. Cannot be determined from the data provided

answer

Cannot be determined from the data provided.

question

Which of the following expenses would not appear on a selling and administrative expense budget? a. Sales commissions b. Depreciation c. Property taxes d. Indirect labor

answer

Indirect labor

question

Which of the following would not appear as a fixed expense on a selling and administrative expense budget? a. Freight-out b. Office salaries c. Property taxes d. Depreciation

answer

Freight-out

question

A master budget consists of a. an interrelated long-term plan and operating budgets. b. financial budgets and a long-term plan. c. interrelated financial budgets and operating budgets. d. all the accounting journals and ledgers used by a company.

answer

interrelated financial budgets and operating budgets

question

The starting point in preparing a master budget is the preparation of the a. production budget. b. sales budget. c. purchasing budget. d. personnel budget.

answer

sales budget.

question

Which one of the following is not needed in preparing a production budget? a. Budgeted unit sales b. Budgeted raw materials c. Beginning finished goods units d. Ending finished goods units

answer

Budgeted raw materials

question

Of the following items, which one is not obtained from an individual operating budget? a. Selling and administrative expenses b. Accounts receivable c. Cost of goods sold d. Sales

answer

Accounts receivable

question

Which of the following statements about a budgeted income statement is not true? a. The budgeted income statement is prepared after the financial budgets are prepared. b. The budgeted income statement is prepared on the accrual basis of accounting. c. The budgeted income statement can be prepared in a multiple-step format. d. The budgeted income statement is prepared using the individual operating budgets

answer

The budgeted income statement is prepared after the financial budgets are prepared.

question

The single most important output in preparing financial budgets is the a. sales forecast. b. determination of the unit cost of the product. c. cash budget. d. budgeted income statement

answer

cash budget

question

Which of the following does not appear as a separate section on the cash budget? a. Cash receipts b. Cash disbursements c. Capital expenditures d. Financing

answer

Capital expenditures

question

The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than a. the prior years. b. management's minimum required balance. c. the amount needed to avoid a service charge at the bank. d. the industry average

answer

management's minimum required balance.

question

Beginning cash balance plus total receipts a. equals ending cash balance. b. must equal total disbursements. c. equals total available cash. d. is the excess of available cash over disbursements.

answer

equals total available cash.

question

The projection of financial position at the end of the budget period is found on the a. budgeted income statement. b. cash budget. c. budgeted balance sheet. d. sales budget.

answer

budgeted balance sheet.

question

What is the proper preparation sequencing of the following budgets? 1. Budgeted Balance Sheet 2. Sales Budget 3. Selling and Administrative Budget 4. Budgeted Income Statement a. 1, 2, 3, 4 b. 2, 3, 1, 4 c. 2, 3, 4, 1 d. 2, 4, 1, 3

answer

2, 3, 4, 1

question

The cash budget reflects a. all revenues and all expenses for a period. b. expected cash receipts and cash disbursements from all sources. c. all the items that appear on a budgeted income statement. d. all the items that appear on a budgeted balance sheet

answer

expected cash receipts and cash disbursements from all sources.

question

Hyde Corp.'s cash budget showed total available cash less cash disbursements. What does this amount equal? a. Ending cash balance b. Total cash receipts c. The excess of available cash over cash disbursements d. The amount of financing required

answer

The excess of available cash over cash disbursements

question

Which one of the following sections would not appear on a cash budget? a. Cash receipts b. Financing c. Investing d. Cash disbursements

answer

Investing

question

Which one of the following items would never appear on a cash budget? a. Office salaries expense b. Interest expense c. Depreciation expense d. Travel expense

answer

Depreciation expense

question

Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? a. Direct labor budget b. Cash budget c. Sales budget d. Budgeted income statement

answer

Direct labor budget

question

The formula for determining budgeted merchandise purchases is budgeted a. production + desired ending inventory - beginning inventory. b. sales + beginning inventory - desired ending inventory. c. cost of goods sold + desired ending inventory - beginning inventory. d. cost of goods sold + beginning inventory - desired ending inventory.

answer

cost of goods sold + desired ending inventory - beginning inventory.

question

Which one of the following is a problem resulting from a service company being overstaffed? a. Labor costs will be disproportionately low. b. Profits will be higher because of the additional salaries. c. Staff turnover may increase. d. Revenue may be lost.

answer

Staff turnover may increase.

question

The master budget for a service enterprise a. will have the same types of budgets as a merchandiser. b. may include a sales budget for sales revenue. c. will not include a budgeted income statement. d. includes a service revenue budget based on expected client billings.

answer

includes a service revenue budget based on expected client billings.

question

Budgeting in not-for-profit organizations a. is not important because they are not profit-oriented. b. usually starts with budgeting expenditures, rather than receipts. c. is necessary only if some product is produced and sold. d. consists entirely of budgeted contributions

answer

usually starts with budgeting expenditures, rather than receipts.

question

For a merchandiser, the starting point in the development of the master budget is the a. cash budget. b. sales budget. c. selling and administrative expenses budget. d. budgeted income statement.

answer

sales budget.

question

Instead of a production budget, a merchandiser will prepare a a. pseudo-production budget. b. merchandise purchases budget. c. master time sheet. d. sales forecast

answer

merchandise purchases budget.

question

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare? a. Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget. b. Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget. c. Pineapple Company will prepare a production budget, and Orange Co. will prepare a merchandise purchases budget. d. Both companies will prepare the same types of budgets

answer

Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget.

question

An appropriate activity index for a college or university for budgeting faculty positions would be the a. faculty hours worked. b. number of administrators. c. credit hours taught by a department. d. number of days in the school term.

answer

credit hours taught by a department.

question

A critical factor in budgeting for a service firm is to a. hire professional staff to perform the budgeting work. b. coordinate professional staff needs with anticipated services. c. classify all personnel as either variable or fixed. d. budget expenditures before anticipated receipts

answer

coordinate professional staff needs with anticipated services.

question

The primary benefits of budgeting include all of the following except it a. requires only top management to plan ahead and formalize their future goals. b. provides definite objectives for evaluating performance. c. creates an early warning system for potential problems. d. motivates personnel throughout the organization

answer

requires only top management to plan ahead and formalize their future goals.

question

The responsibility for expressing management's budgeting goals in financial terms is performed by the a. accounting department. b. top management. c. lower level of management. d. budget committee

answer

accounting department.

question

Coordinating the preparation of the budget is the responsibility of the a. treasurer. b. president. c. chief accountant. d. budget committee

answer

budget committee

question

For better management acceptance, the flow of input data for budgeting should begin with the a. accounting department. b. top management. c. lower levels of management. d. budget committee.

answer

lower levels of management.

question

In the direct materials budget, the quantity of direct materials to be purchased is computed by adding direct materials required for production to a. desired ending direct materials. b. beginning direct materials. c. desired ending direct materials less beginning direct materials. d. beginning direct materials less desired ending direct materials.

answer

desired ending direct materials less beginning direct materials.

question

The important end-product of the operating budgets is the a. budgeted income statement. b. cash budget. c. production budget. d. budgeted balance sheet

answer

budgeted income statement.

question

The budget that is often considered to be the most important financial budget is the a. cash budget. b. capital expenditure budget. c. budgeted income statement. d. budgeted balance sheet.

answer

cash budget.

question

A purchases budget is used instead of a production budget by a. merchandising companies. b. service enterprises. c. not-for-profit organizations. d. manufacturing companies

answer

merchandising companies.

question

Which of the following statements is incorrect? a. A continuous twelve-month budget results from dropping the month just ended and adding a future month. b. The production budget is derived from the direct materials and direct labor budgets. c. The cash budget shows anticipated cash flows. d. In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses

answer

The production budget is derived from the direct materials and direct labor budgets.

question

The important end-product of the operating budgets is the a. budgeted income statement. b. cash budget. c. production budget. d. budgeted balance sheet

answer

budgeted income statement.

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