Acct 2020 final – Flashcards

For a merchandising company, the costs of shipping inventory to the retail outlet is associated with which element of the value chain? A) Design B) Distribution C) Production and Purchases D) Customer Service

All of the following are part of a company's value chain except A) design. B) distribution. C) administration. D) marketing.

Which of the following activities is not included in the value chain? A) Reporting B) Design C) Production D) Customer service

All of the following activities are included in the value chain except A) customer service. B) design. C) safety. D) production.

Which of the following would not be included in the value chain? A) Website development costs B) Costs to deliver product to retail outlets C) Costs of print advertisements D) All of these costs would be included as part of the value chain.

The value chain is used by A) service, manufacturing and merchandising businesses. B) only service and manufacturing businesses. C) only service and merchandising businesses. D) only manufacturing and merchandising businesses

Collectively, all costs such as distribution, marketing, and design are part of A) downstream activities. B) fixed costs. C) the value chain. D) manufacturing costs.

All of the following relate to part of the value chain for a clothing company except A) cost of advertising the new products. B) administrative costs. C) cost of shipping to retailers. D) salaries of clothing designers.

Which part of the value chain would depreciation on a factory be classified as? A) Design B) Distribution C) Research and development D) Production

Testing ways to increase the strength of your product would be classified as which part of the value chain? A) Design B) Distribution C) Production D) Research and development

The costs associated with reengineering machinery and its location within the factory to increase efficiency would be considered which part of the value chain? A) Customer service B) Marketing C) Research and development D) Design

The costs incurred to get merchandise to a company's retail store would be considered to be what part of the value chain? A) Marketing B) Customer service C) Production or purchases D) Research and development

Which of the following is not an example of an indirect cost incurred in manufacturing automobiles? A) Plant supervisor salary B) Machinery depreciation in the factory C) Plant utilities D) Cost of the automobile engines

A factory janitor's wages would be classified as ________ when determining the cost of a manufactured product. A) an indirect cost B) a direct cost C) a period cost D) none of the above

A salesperson's salary would be classified as ________ when determining the cost of a manufactured product. A) a direct cost B) a period cost C) an indirect cost D) none of the above

The cost of lighting the factory would be classified as ________ when determining the cost of a manufactured product. A) an indirect cost B) a direct cost C) a period cost D) none of the above

Which of the following would not be considered a direct material for a mattress? A) Fabric B) Lumber C) Glue D) Steel

All of the following would be considered a direct material for a kitchen cabinet except A) wood. B) stain. C) sand paper. D) hinges.

An example of direct labor would be which of the following? A) Salary of a production manager B) Salary of the vice-president of operations C) Wages of factory security D) Wages of assembly line personnel

Which statement describes direct materials in a manufacturing setting? A) Direct materials are used to determine total manufacturing overhead. B) Direct materials are used to determine total inventoriable product costs. C) Direct materials cannot be separately and conveniently traced. D) Direct materials do not become part of the finished product.

Which of the following is an example of indirect labor in a manufacturing plant? A) Chief operating officer B) Machine operators C) Salespersons D) Plant managers

Which of the following would not be considered a product cost for a manufacturer? A) Direct labor B) Direct materials C) Manufacturing overhead D) Freight out

Period costs are A) always recorded as an expense. B) always considered part of the inventory. C) expensed only when the inventory is sold. D) none of the above.

All of the following are period costs except A) distribution expenses. B) direct labor expenses. C) marketing expenses. D) research and development expenses.

Inventoriable product costs for a product are described by which of the following? A) Inventoriable product costs are narrower in scope than total costs. B) Inventoriable product costs include all costs of the value chain. C) Inventoriable product costs consist of direct materials, direct labor and manufacturing overhead. D) Both A and C are correct.

Inventoriable product costs for a manufactured product include A) the costs of direct materials, direct labor and manufacturing overhead. B) marketing and research and development costs. C) the costs of direct materials and direct labor only. D) none of the above.

Inventoriable product costs are best described by which of the following statements? A) They are expensed on the income statement when incurred. B) They include marketing and distribution costs. C) They are used for external reporting purposes. D) Both A and C are correct.

Where would period costs be found on the financial statements? A) Under current assets on the balance sheet B) Under current liabilities on the balance sheet C) As operating expenses on the income statement in the period incurred D) As operating expenses on the income statement for a previous period

How do variable costs per unit behave? A) They decrease as production increases. B) They increase as production decreases. C) They decrease as production decreases. D) They remain the same throughout production levels within the relevant range.

Which of the following is an example of a fixed cost for a manufacturer? A) Income Taxes B) Machine Repair Expense C) Fire Insurance on buildings D) Delivery Fuel Expense

An example of a fixed cost for a manufacturer would be which of the following? A) Sales commissions B) Salary of plant manager C) Direct materials D) Delivery costs

A(n) ________ cost is one whose total amount changes in direct proportion to a change in volume. A) fixed B) irrelevant C) variable D) mixed

How do fixed costs per unit behave? A) They remain the same throughout production levels within the relevant range. B) They decrease as production decreases. C) They increase as production decreases. D) They increase as production increases.

Which of the following describes the way in which total fixed costs behave? A) They will decrease as production increases. B) They will decrease as production decreases. C) They will remain the same throughout production levels within the relevant range. D) They will increase as production decreases.

Variable costs A) are fixed per unit and vary in total as production levels change. B) are fixed in total as production levels change. C) decrease per unit as production volume increases. D) vary per unit of output as production levels change

If manufacturing overhead has been underallocated during the period, then which of the following is true? A) The jobs produced during the period have been overcosted. B) The jobs produced during the period have been costed correctly. C) The jobs produced during the period have been undercosted. D) None of the above

If manufacturing overhead has been overallocated during the period, and most of the jobs produced have been sold, then A) cost of goods sold should be increased. B) cost of goods sold should be decreased. C) finished goods inventory should be increased. D) work in process inventory should be decreased.

If manufacturing overhead has been underallocated during the period, and most of the jobs produced have been sold, then A) cost of goods sold should be increased. B) cost of goods sold should be decreased. C) finished goods inventory should be increased. D) work in process inventory should be decreased

When a company has established separate manufacturing overhead rates for each department, it is using: A) departmental overhead rates. B) cost distortion. C) a plantwide overhead rate. D) none of the above.

When calculating the total amount of manufacturing overhead to allocate to a particular job, the company would multiply each departmental overhead rate by ________ and then ________ together the allocated amounts from each department. A) the actual amount of the departmental allocation based used by the job; multiply B) the actual amount of the plantwide allocation based used by the job; add C) the actual amount of the departmental allocation based used by the job; add D) the actual amount of the plantwide allocation based used by the job; multiply

When calculating a departmental overhead rate, what should the numerator be? A) Total estimated amount of the departmental allocation base B) Total estimated departmental overhead cost pool C) Total estimated amount of manufacturing overhead for the factory D) Actual quantity of the departmental allocation base used by the job

What will the use of departmental overhead rates generally result in? A) The use of a separate cost allocation base for each department in the factory B) The use of a single cost allocation base C) The use of a single overhead cost pool for the factory D) The use of separate cost allocation base for each activity in the factory

The first step in developing an ABC system is A) calculate an activity cost allocation rate for each activity. B) allocate the costs to the cost object using the activity cost allocation rates. C) select an allocation base for each activity. D) identify the primary activities and estimate a total cost pool for each.

Four basic steps are used in an ABC system. List the proper order of these steps, which are currently scrambled below: a. Identify the primary activities and estimate a total cost pool for each. b. Allocate the costs to the cost object using the activity cost allocation rates. c. Select an allocation base for each activity. d. Calculate an activity cost allocation rate for each activity. A) c, a, b, d B) a, c, d, b C) b, a, c, d D) a, d, c, b

All of the following describe an ABC system except A) ABC systems may only be used by service companies. B) ABC systems can create more accurate product costs. C) ABC systems are more complex and costly than traditional costing systems. D) ABC systems are used in both manufacturing and nonmanufacturing companies

All of the following are considered to be part of the cost hierarchy often used to implement ABC, with the exception of A) production-level activity. B) batch-level activity. C) product-level activity. D) unit-level activity.

In ABC, how is the activity allocation rate computed? A) The total estimated activity allocation base is divided by the total estimated activity cost pool. B) The total estimated activity cost pool is divided by the total estimated activity allocation base. C) The total estimated activity allocation base is multiplied by the total estimated activity cost pool. D) You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

With respect to total variable costs, which of the following statements is true? A) They will remain the same as production levels change within the relevant range. B) They will decrease as production decreases within the relevant range. C) They will decrease as production increases within the relevant range. D) They will increase as production decreases within the relevant range.

With respect to total fixed costs, which of the following statements is true? A) They will remain the same as production levels change within the relevant range. B) They will increase as production decreases within the relevant range. C) They will decrease as production increases within the relevant range. D) They will decrease as production decreases within the relevant range.

Within the relevant range, which of the following statements is true with respect to fixed costs per unit? A) They will increase as production increases. B) They will decrease as production decreases. C) They will remain the same as production levels change. D) They will increase as production decreases.

Renting a scooter and paying $30 per day plus $.20 per mile driven is an example of what type of cost? A) Mixed cost B) Fixed cost C) Conversion cost D) Variable cost

On a traditional income statement, all manufacturing-related costs, whether fixed or variable, are listed A) above the gross profit line. B) above the contribution margin line. C) below the operating income line. D) above the sales line.

On a contribution margin income statement, sales revenue less variable expenses equals A) operating expenses. B) gross profit. C) operating income. D) contribution margin.

The contribution margin is equal to A) sales minus cost of goods sold. B) sales minus operating expenses. C) sales minus fixed expenses. D) sales minus variable expenses.

A basic tenet of variable costing is that fixed manufacturing overhead costs be currently expensed. What is the rationale behind this? A) Fixed manufacturing overhead costs are generally immaterial in amount. B) Fixed manufacturing overhead costs occur regardless of level of production. C) Allocation of fixed manufacturing costs are arbitrary at best. D) Fixed manufacturing costs change as production changes.

All variable costs are listed ________ on a contribution margin income statement. A) above the gross profit line B) above the contribution margin line C) below the contribution margin line D) below the gross profit line

If the variable cost per unit increases while the sale price per unit and total fixed costs remain constant, which of the following statements is true? A) Breakeven point in units remains the same. B) Breakeven point in units decreases. C) Breakeven point in units increases. D) Contribution margin ratio increases.

What will be the effect on the contribution margin ratio if the selling price per unit decreases and variable cost per unit remains the same? A) It will decrease. B) It will increase. C) It will remain the same. D) It is impossible to determine with the given information.

If total fixed costs decrease while the selling price per unit and variable costs per unit remain constant, which of the following statements is true? A) Contribution margin increases. B) Contribution margin decreases. C) Breakeven point in units increases. D) Breakeven point in units decreases.

The higher the operating leverage factor, the A) lesser the impact of volume on operating income. B) greater the impact of volume on operating income. C) more likely operating income is to stay constant. D) none of the above.

By multiplying the operating leverage factor by the anticipated percentage change in volume, one can find A) the anticipated change in operating income. B) the anticipated change in contribution margin. C) the anticipated change in fixed expenses. D) the anticipated change in sales revenue.

To find a firm's operating leverage factor at a given level of sales, you A) divide the contribution margin by fixed expenses. B) divide the contribution margin by operating income. C) divide variable expenses by fixed expenses. D) divide relatively operating income by contribution margin.

All else being equal, a company with a low operating leverage will have A) relatively high fixed costs. B) relatively high contribution margin ratio. C) relatively high risk. D) relatively high variable costs.

All else being equal, a company with a high operating leverage will have A) relatively low fixed costs. B) relatively high variable costs. C) relatively high contribution margin ratio. D) relatively low risk.

A company's margin of safety can be stated A) in units. B) in dollars. C) as a percentage of sales. D) any of the above.

A company's margin of safety is computed as A) actual sales—expected sales. B) expected sales—actual sales. C) expected sales—sales at breakeven. D) sales at breakeven—expected sales.

Which of the following is irrelevant when making a decision? A) Fixed overhead costs that differ among alternatives B) The cost of an asset that the company is considering replacing C) The cost of further processing a product that could be sold as is D) The expected increase in contribution margin of one product line as a result of a decision to discontinue a separate unprofitable product line

Fixed costs that do not differ between two alternatives are A) irrelevant to the decision. B) considered opportunity costs. C) relevant to the decision. D) important only if they represent a material dollar amount.

Fixed costs that may be avoided in the future are referred to as A) relevant costs. B) opportunity costs. C) replacement costs. D) sunk costs.

The format of the income statement most useful in decision-making is which of the following? A) Absorption costing format B) Traditional format C) Contribution margin format D) Single-step format

Which of the following best describes "target costing"? A) An approach to pricing that begins with revenue at market price and subtracts desired profit to arrive at target total cost B) A factor that restricts production or sales of a product C) All costs incurred along the value chain in connection with the product or service D) An approach to pricing that begins with the product's total cost and adds desired profit

Which of the following describes the products and services of companies that are price-setters? A) They tend to be unique. B) They are priced by managers using a target-costing emphasis. C) They tend to have a lot of competitors. D) They tend to be commodities.

Common fixed costs that are allocated between departments are generally A) direct fixed costs of the department. B) relevant to the decision of whether to discontinue the department. C) irrelevant to the decision of whether to discontinue the department. D) direct fixed costs of other departments.

All of the following are considerations for discontinuing a product or product line, except A) whether the product has a positive or negative contribution margin. B) not having any free capacity. C) if discontinuing the product or product line will affect sales of remaining products. D) determining if direct fixed costs could be avoided if the product or product line is

Which of the following could be a constraint for selling a product? A) Store hours B) Available labor hours for employees C) Shelf space D) All of the above could be constraints

In a(n) ________ center, managers are accountable for both revenues and costs. A) cost B) profit C) equity D) investment

Which term below best fits "a part, segment, or subunit of a company whose manager is accountable for specified activities"? A) Operating budget B) Master budget C) Sensitivity analysis D) Responsibility center

The human resources department for Kohl's Department Stores would most likely be classified as a(n) A) cost center. B) investment center. C) profit center. D) revenue center.

Which of the following is a disadvantage of decentralization? A) Unit managers may not understand the big picture of the company. B) Management does not have time to concentrate on long-term strategic planning. C) Unit managers have decreased motivation and retention. D) Managers receive training and experience to allow advancement in the organization

The reservations department for a car rental chain is likely to be classified as a(n) A) cost center. B) investment center. C) profit center. D) revenue center

A potential disadvantage of decentralization is which of the following? A) Benchmarking B) Provides training C) Provides feedback D) Duplication of costs

The manager of the accounting department at Adidas would be in charge of a(n) A) investment center. B) cost center. C) profit center. D) revenue center.

The performance report for a ________ would typically include revenues and costs. A) cost center B) sales center C) profit center D) revenue center

Favorable sales volume variance for revenues is caused by which of the following? A) Actual net income for the subunit is greater than budgeted net income. B) Actual sales in dollars are greater than the master budget sales in dollars. C) The flexible budget sales in dollars are greater than the static budget sales in dollars. D) Actual sales in dollars are less than the static budget sales in dollars.

Which of the following causes the difference between amounts in the static budget and the flexible budget for a revenue center? A) The cost of sales B) The number of units sold differs from planned sales levels C) The selling price per unit D) Both the selling price and the number of units sold

Which of the following financial performance measures can be used to compare potential projects of different sizes? A) ROI B) Residual income C) Sales revenue D) Operating income

Using ________ may cause a manager to reject a project that would be profitable for the company as a whole. A) operating income B) residual income C) ROI D) EVA

With regard to a static budget instead of a flexible budget, which of the following is true? A) A static budget is adjusted for changes in the level of sales activity. B) A static budget is a budget that stays the same from one period to the next. C) A static budget is prepared for only one level of sales activity. D) A static budget is also known as a fixed budget.

The ________ is best for managers to use in order to plan revenues and expenses at different sales volumes. A) flexible budget B) capital budget C) static budget D) master budget

The ________ is a budget based on multiple levels of projected sales or production. A) standard budget B) flexible budget C) static budget D) fixed budget

With regard to flexible budgets, which of the following statements is true? A) They are prepared for one level of sales volume. B) Managers use them to help plan for uncertainties. C) They are prepared by the accounting department on an annual basis. D) They are designed to estimate revenues only.

The four perspectives of the balanced scorecard include all of the following except A) financial. B) customer. C) cost. D) learning and growth.

The ________ approach recognizes that both financial and operational performance measures should be considered when evaluating company performance. A) financial and operational B) total C) complete D) balanced scorecard

The ________ perspective from the balanced scorecard helps managers answer the question, "How do we look to shareholders?" A) financial B) internal business C) customer D) learning and growth

Which of the following situations may lead to a favorable direct materials price variance? A) The purchasing manager was able to negotiate a lower purchase price for raw materials. B) A vendor shipped a greater quantity of raw materials than ordered. C) The purchasing manager paid a premium price for a higher quality of raw materials. D) Raw materials waste was substantially reduced in the factory.

Which variance is directly impacted if a worker drops the raw material during production and the raw material must be discarded? A) Direct materials quantity variance B) Direct materials price variance C) Direct labor rate variance D) Direct labor efficiency variance

A company uses sugar in producing its product. If the price of sugar doubles, which variance is directly impacted? A) Direct materials quantity variance B) Direct materials price variance C) Direct labor rate variance D) Direct labor efficiency variance

A company's purchasing department negotiates all of the purchasing contracts for raw materials. Which variance is most useful in assessing the performance of the purchasing department? A) Direct materials quantity variance B) Direct materials price variance C) Direct labor rate variance D) Direct labor efficiency variance

The direct materials price variance is calculated as A) the difference in Actual Quantities (AQ) multiplied by the Actual Price (AP) of the input. B) the Actual Quantity (AQP) of direct materials divided by the Actual Quantity (AQ). C) the difference in prices of the Actual Quantity Purchased (AQP) and the Actual Price (AP) multiplied by the Actual Quantity Purchased (AQP) and the Standard Price (SP) of the input purchased. D) the direct materials Actual Quantity Purchased (AQ) divided by the per unit price.

A favorable direct materials quantity variance indicates which of the following? A) The actual cost of direct materials was less than the standard cost of direct materials. B) The Standard Quantity (SQ) of direct materials for actual output was less than the Actual Quantity (AQ) of direct materials used. C) The Actual Quantity (AQ) of direct materials used was less than the standard quantity for actual output. D) The Actual Quantity (AQ) of direct materials used was greater than the standard quantity for budgeted output.

The ________ capital budgeting methods are based on cash flows, profitability, and the time value of money. A) payback and accounting rate of return B) payback and net present value C) net present value and internal rate of return D) accounting rate of return and internal rate of return

The ________ is generally considered to be the most superior method for making capital budgeting decisions. A) accounting rate of return method B) net present value method C) payback method D) incremental method

The ________ capital budgeting model considers both profitability and the time value of money. A) payback B) net present value C) accounting rate of return D) Both a and c are correct

The ________ capital budgeting method uses accrual accounting income. A) accounting rate of return B) payback C) net present value D) internal rate of return

A manager wants to know which investment decision will affect the bottom line of the financial statements according to Generally Accepted Accounting Principles. Which capital budgeting method would he choose? A) Payback method B) Accounting rate of return method C) Net present value method D) Profitability index

A company is evaluating a variety of different capital investment opportunities. Due to limited funds, the company can only choose one project. What would be the best capital budgeting method for this company to use to select a project? A) Payback method B) Accounting rate of return method C) Profitability index D) Net present value method