question

managerial accounting, as compared to financial accounting

answer

uses frequent and prompt control reports

question

the scattergram allows cost-volume relationships to be visually scanned for outlier observations that should be

answer

ignored in the calculation of the cost formula of a mixed cost

question

knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes

answer

the effect on net income will depend on the behavior pattern of various costs

question

the concept of operating leverage refers to which of the following

answer

operating income changes proportionately more than revenues for any given change in activity level

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managerial accounting can best be described as

answer

the preparation and use of accounting information within the organization

question

as the level of activity decreases

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fixed cost remains constant in total

question

as the total volume of activity changes

answer

the total of variable costs changes

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___ costs between two alternative projects are those that would result from selecting one alternative instead of the other

answer

differential

question

relevant costs in decision-making

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are future costs that represent differences between decision alternatives

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performance analysis in the planning and control cycle relates to the act of

answer

controlling

question

each of a company's two product lines has a different contribution margin ratio. if the company's total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio, which of the following is true

answer

the average contribution margin ratio will increase the break-even point will decrease operating income will increase

question

a management decision that would have a long term influence on the operating leverage of a firm would be

answer

substituting robots for hourly paid production workers

question

ABU co. has several products, each with a different contribution margin ratio. if the same number of units were sold in july as in june, but the sales mix changed

answer

total contribution margin in july would be different from that in june

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the term relevant range refers to

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the range of activity where cost relationships are valid

question

which of the following is another term for mixed costs

answer

semivariable costs

question

a example of a cost likely to have a mixed behavior pattern is

answer

electricity cost for the manufacturing plant

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a(n) ___ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned

answer

target cost

question

opportunity costs are

answer

foregone benefits

question

to which function of management is CVP analysis most applicable

answer

planning

question

the contribution margin format income statement is organized by

answer

cost behavior classifications

question

managerial accounting, as opposed to financial accounting, is primarily concerned with

answer

present and future planning and control

question

an income statement organized by cost behavior does not include

answer

gross profit

question

which of the following is the correct calculation for the contribution margin ratio

answer

contribution margin divided by sales revenue

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the contribution margin format income statement

answer

uses a behavior pattern classification for costs rather than functional cost classification approach

question

simplifying assumptions made when using cost behavior pattern data include

answer

relevant range and linearity

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when a cost formula is used to describe a mixed(semi-variable) cost behavior pattern, total costs are expected to increase and per unti costs are expected to

answer

decrease as the level of activity increases

question

in a make or buy decision, which of the following costs would be considered relevant

answer

avoidable costs

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opportunity costs are

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foregone benefits

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when the high0low method of estimating a cost behavior pattern is used

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cost and volume must be reviewed for outliers

question

when the firms activity requires it to operate at a level above the upper boudary of the relevant range, fixed expenses are likely to

answer

increase

question

the relevant range concept refers to

answer

a firms range of activity

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expressing fixed costs on a per unit basis of activity is misleading because

answer

fixed cost per unit decrease as activity increases

question

which of the following terms do not appear on the contribution margin format income statement

answer

gross profit

question

which of the following statements does NOT describe a characteristic of management accounting

answer

management accounting must conform to GAAP

question

a sunk cost is a cost that

answer

has been incurred and cannot be eliminated is never relevant in decision-making is never a differential cost

question

an example of a cost that is likely to have a variable behavior pattern is

answer

production labor wages

question

cost behavior refers to

answer

costs that are variable or fixed

question

which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization

answer

unavoidable costs

question

in order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is replaced by

answer

activity-based costing

question

cost of goods manufactured can be computed as

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beginning balance of work in process+raw materials used+direct labor costs incurred+manufacturing overhead costs applied-ending balance of work in process

question

which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accoutning period

answer

raw materials

question

in the T account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account

answer

cost of goods manufactured is debited to finished goods inventory

question

the use of activity based costing information to support the decision making process is known as

answer

activity based management

question

which of the following is NOT an inventory account for a manufacturing company

answer

cost of goods sold

question

product costs are inventoried and treated as assets

answer

the period in which the products they relate to are sold

question

the term cost means

answer

the wage paid to a worker the price paid for a raw material the price charged by an entity for its services

question

common costs pertain to costs that

answer

are not directly traceable to a cost object

question

standards are most appropriately used to

answer

support the planning and control processes of the firm

question

which of the following will cause income determined with absorption costing to be higher than income determined with direct costing

answer

units produced are greater than units sold

question

an example of a cost likely to have an indirect relationship with products being manufactured is

answer

electricity costs for packaging equipment

question

the primary difference between absorption costing and direct costing is the treatment of

answer

fixed manufacturing overhead

question

a predetermined overhead rate is used to

answer

assign indirect costs to cost objects

question

direct costs pertain to costs that

answer

are traceable to a cost object

question

direct costing may be used for

answer

internal reporting purposes

question

the operating budget depends on key information developed in the

answer

sales forecast

question

the overhead component of product cost is

answer

an estimated amount based on labor hours, machine hours, or some other activity

question

an organizations value chain refers to

answer

the sequence of functions and related activities that add value for the customer

question

the predetermined overhead application rate based on direct labor hours is computed as

answer

estimated total overhead costs divided by estimated direct labor hours

question

which of the following is a true statement regarding absorption and/or direct costing

answer

absorption costing includes fixed overhead in product costs whereas direct costing does not

question

cost accounting is a subset of

answer

managerial accounting

question

the budgeting process that most likely creates an attitude supportive of achieving organization goals is

answer

participative approach

question

an example of a cost that is likely to have a direct relationship with products being manufactured is

answer

production labor costs

question

an example of product cost is

answer

production line maintenance

question

cost accounting is primarily concerned with

answer

accumulation and determination of product or service cost generally accepted accounting principles income measurement and inventory valuation

question

an excess of cost of goods manufactured over cost of goods sold for a period represents

answer

an increased in finished goods inventory

question

the three sections of a statement of cost of goods manufactured include

answer

raw material, direct labor, manufacturing overhead

question

the sequence of activities that add value to the organization are

answer

the value chain

question

the operating expense budget is based on the

answer

sales budget

question

a budget that has been prepared only once prior to the budget period is called

answer

single-period budget

question

for performance reports to be most effective for management by exception, they should

answer

be issued as soon after the activity or period covered as possible

question

a set of integrated financial and operating performance measures that communicate an organizations priorities associated with achieving strategic goals is know as a

answer

balanced scorecard

question

the term transfer price refers to

answer

the price at which a product or service is sold by one segment to another related segment

question

the total variance for any particular cost component is referred to as the

answer

budget variance

question

the part of the variable overhead budget variance due to the difference between actual variable overhead cost and the standard cost allowed for the actual inputs used is called the

answer

variable overhead spending variance

question

if the net of all variances is immaterial relative to the total production costs incurred during the period, the net variance is

answer

treated as an adjustment to cost of goods sold

question

a favorable materials quantity variance would occur if

answer

actual pounds of materials used were less than the standard pounds allowed

question

how is performance evaluated for an investment center

answer

actual segment margin compared to budgeted segment margin

question

how is performance evaluated at a profit center

answer

comparison of actual and budgeted return on investment based on segment margin and asset controlled by the segment

question

the best reason for flexing a budget is to

answer

permit a more accurate determination of variances

question

a variance is the difference between actual costs and

answer

expected costs

question

the principal objective of a performance report is to

answer

highlight activities that need management attention

question

the difference between standard and actual cost per unit of input is measured by

answer

the variable overhead spending variance the direct labor rate variance the raw materials price variance

question

a performance report for direct labor shows a variance between the budget and actual amounts. this difference is a

answer

budget variance

question

is a technique used to filter cost information contained in performance reports to each manager within the organization at an appropriate level of detail or summarization

answer

responsibility reporting

question

the purchasing agent of an organization acquired some raw materials at a bargain price, even though she knew that their quality was lower than that of the materials customarily used. this action resulted in a favorable raw materials purchase price variance that might very well have been more than offset by

answer

an unfavorable raw materials usage variance

question

if the net variance of a business using standard costing is significant relevant to total production cost, the net variance should be

answer

cost of goods sold allocated between WIP ad FG inventor

question

the term noncontrollable cost

answer

implies that there is really nothing the manager can do to influence the amount of cost

question

the part of the variable overhead budget variance due to the difference between actual hours required and standard hours allowed for work done is called the

answer

variable overhead efficiency variance

question

when an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization

answer

only direct revenues and direct expenses should be assigned to segments

question

if the actual level of activity is different from the budgeted level, a ___ budget is prepared for the actual level of activity

answer

flexible

question

when analyzing end of period production cost variances, which of the following product cost components will not need flexing

answer

fixed manufacturing overhead

question

how is performance evaluated for a cost center

answer

actual costs incurred compared to budgeted costs

question

the preferred format for a segmented income statement emphasizes

answer

direct and common fixed costs

question

most entities satisfy the accounting criteria for recognizing an expense when

answer

a cost is incurred in the revenue generating process

question

the term earned in revenue recognition refers to which of the following

answer

the entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits

question

the concept of matching revenue and expense refers to the fact that

answer

all costs incurred in the process of earning revenues during a period are recorded as expenses in that period

question

which of the following is an accurate statement regarding a statement of cash flows

answer

all material operating, investing, and financing activities are included

question

the major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities sections

answer

the operating activities section only

question

revenue may be recognized

answer

if a company trades inventory at its usual selling price for newspaper advertising

question

under most circumstances, in order to recognize revenue

answer

the revenue must be realized or realizable, and earned

question

the first caption in most income statements in annual reports is

answer

net sales

question

which of the following accounts/captions are not ever included in the calculation for gross profit

answer

general and selling expenses

question

when the periodic inventory system is used

answer

cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and net purchases

question

in the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would

answer

be subtracted from net income because this means that revenues were more than cash collected

question

in the statement of cash flows, depreciation and amortization expense is added back to net income because

answer

these expenses do not affect cash, but were subtracted in the determination of net income

question

recognition of revenue in accrual accounting requires

answer

that the revenue be realized or realizable, and earned

question

most entities satisfy the accounting criteria for recognizing revenue when

answer

a product is delivered or a service is provided

question

gains differ from revenues because gains

answer

are not a result of the entity's ongoing, central operations

question

the term realization in revenue recognition refers to which of the following

answer

the product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash

question

income from operations is

answer

sometimes used in the ROI calculation

question

the gross profit ratio is useful to the manager for each of the following purposes except that

answer

it can be used to estimate the amount of operating expenses for a period

question

which of the following Is NOT usually considered a measure of an entity's liquidity

answer

cash ratio

question

which of the following accounts is part of working capital

answer

merchandise inventory

question

another term for return on investment is

answer

return on assets

question

book value per share of common stock of manufacturing company

answer

is not a very useful measure most of the time

question

management's use of resources can be best evaluated by focusing on measures of

answer

activity

question

the price/earnings ratio

answer

is a measure of the relative expensiveness of a firms common stock

question

another term for price/earnings ratio is

answer

earnings multiple

question

asset turnover calculation

answer

should be evaluated by observing the turnover trend over a period of time

question

an entity's current ratio will be influenced by

answer

the inventory cost flow assumption used

question

the inventory turnover calculation

answer

is an alternative way of expressing the number of days' sales in inventory

question

which of the following is a universally accepted measure of profitability

answer

return on investment

question

financial leverage

answer

arises because most borrowed funds have a fixed interest rate

question

a common size income statement

answer

expresses items as a percentage of revenues

question

when a firm has financial leverage

answer

risk is greater than if there wasn't any leverage

question

a higher P/E ratio means that

answer

the stock is relatively expensive

question

an advantage of the dupont model for calculating ROI is that

answer

it focuses on asset utilization as well as net income

question

the comparison of activity measures of different companies is complicated by the fact that

answer

different inventory cost flow assumptions may be used

question

the dividend payout ratio describes

answer

the proportion of earnings paid as dividends

question

which of the following is(are) an example of a measure of leverage

answer

debt/equity ratio

question

the common size income statement

answer

expresses items as a percentage of revenues

question

financial statement ratios support informed judgements and decisions most effectively

answer

when the trend of the entity data is compared to the trend of industry data

question

when a cost formula is used to describe mixed cost behavior pattern, total costs are expected

answer

to remain constant as the level of activity increases

question

a cost is considered relevant if

answer

it makes a difference

question

which of the following costs are included in the "for cost accounting purposes" classification

answer

product cost and period cost

question

which of the following describes the correct sequence of flow of costs for a manufacturing firm

answer

raw materials, work in process, finished goods, cost of goods sold

question

the key difference between controllable cost and a noncontrollable cost is

answer

the short term ability to influence the cost by the manager

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