Final - Exams 1,2,3 Flashcards by Jacob Grant

In a CVP income statement, a selling expense is generally..

partly a variable cost and partly a fixed cost.

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A company with a higher contribution margin ratio is

more sensitive to changes in sales revenue

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Cost-volume-profit analysis is the study of the effects of

changes in costs and volume on a company’s profit.

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Contribution margin is the amount of revenue remaining after deducting

variable costs.

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How The degree of operating leverage

is computed by dividing total contribution margin by net income.

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What is the contribution margin ratio

contribution margin divided by sales.

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How do you find the Margin of safety in dollars?

Expected sales less break-even sales.

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True or false
When a company’s sales revenue is decreasing, high operating leverage is good because it means that profits will decrease at a slower pace than revenues decrease.

TRUE

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The CVP income statement classifies costs AS WHAT?

as variable or fixed and computes contribution margin.

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Changes in activity have a(n) _________ effect on fixed costs per unit.

inverse

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If Qualls Quality Airline cuts its domestic fares by 30%

Answers:
its fixed costs will decrease.
profit will increase by 30%.
a profit can only be earned by decreasing the number of flights.
a profit can be earned either by increasing the number of passengers or by decreasing variable costs.

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

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Which one of the following is not an assumption of CVP analysis?

Answers:
All units produced are sold.

All costs are variable costs.

Sales mix remains constant.

The behavior of costs and revenues are linear within the relevant range.

All costs are variable costs.

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A cost which remains constant per unit at various levels of activity is a

Variable Cost

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A CVP graph does not include a..

Variable Cost Line

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The break-even point is where

contribution margin equals total fixed costs.

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Which of the following is not a mixed cost?

Answers:	
Car rental fee
Electricity
 Depreciation
Telephone Expense

Depreciation

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Which of the following is not true about the graph of a mixed cost?

Answers:

It is possible to determine the amount of the fixed cost from the graph.
There is a total cost line on the graph.
The fixed cost portion of the graph is the same amount at all levels of activity.
Correct The variable cost portion of the graph is rectangular in shape.

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

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If the activity level increases 10%, total variable costs will

Increase by 10%

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A mixed cost contains

a variable element and a fixed element.

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Within the relevant range, the variable cost per unit

Answers:	
differs at each activity level.
remains constant at each activity level.
increases as production increases.
decreases as production increases.

remains constant at each activity level.

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CVP analysis does not consider

Answers:	
level of activity.
fixed cost per unit.
variable cost per unit.
sales mix.

Fixed Cost Per Unit

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Activity-based costing is used by
Selected Answer:

Answers:	
accounting firms.
law firms.
consulting firms.
 all of the above.

All of the above

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Companies that switch to ABC often find they have

Answers:
been overpricing some products.
possibly losing market share to competitors.
been sacrificing profitability by underpricing some products.
all of the above.

All of The Above

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Which of the following is not a benefit of activity-based costing?

Answers:	
More accurate product costing
Enhanced control over overhead costs
Better management decisions
Less costly to use

Less costly to use

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Which of the following is a limitation of activity-based costing? ``` Answers: More cost pools Less control over overhead costs Poorer management decisions Some arbitrary allocations continue ```

Some arbitrary allocations continue

The presence of any of the following factors would suggest a switch to ABC except when Answers: product lines differ greatly in volume. overhead costs constitute a major portion of total costs. the manufacturing process has changed significantly. production managers are using data provided by the existing system

production managers are using data provided by the existing system

Which would be an appropriate cost driver for the ordering and receiving activity cost pool? ``` Answers: Machine setups Purchase orders Machine hours Inspections ```

Purchase orders

Each of the following is a limitation of activity-based costing except that ``` Answers: it can be expensive to use. it is more complex than traditional costing. more cost pools are used. some arbitrary allocations continue. ```

more cost pools are used

An activity that has a direct cause-effect relationship with the resources consumed is a(n) ``` Answers: cost driver. overhead rate. cost pool. product activity. ```

Cost Driver

Which of the following is a unit-level activity? ``` Answers: Painting Purchase ordering Inspection Material handling ```

Painting

Which of the following is a value-added activity? ``` Answers: Inventory storage Machining Building Maintenance Bookkeeping ```

Machining

Which of the following is a non-value-added activity? ``` Answers: Inventory control Machining Assembly Painting ```

Inventory control

The last step in activity-based costing is to Answers: - assign overhead costs to products, using overhead rates determined for each cost pool. - compute the activity-based overhead rate per cost driver. - identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. - identify the cost driver that has a strong correlation to the activity cost pool.

assign overhead costs to products, using overhead rates determined for each cost pool.

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

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

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 Answers: - Work in Process Inventory and Raw Materials Inventory. - Finished Goods Inventory and Raw Materials Inventory. - Finished Goods Inventory and Work in Process Inventory. - Raw Materials Inventory and Work in Process Inventory.

Correct Finished Goods Inventory and Work in Process Inventory.

The major reporting standard for presenting managerial accounting information is ``` Answers: relevance. generally accepted accounting principles. the cost principle. the current tax law. ```

Correct relevance.

Which one of the following does not appear on the balance sheet of a manufacturing company? ``` Answers: Finished goods inventory Work in process inventory Cost of goods manufactured Raw materials inventory ```

Cost of goods manufactured

Which of the following is not a management function? ``` Answers: Constraining Planning Controlling Directing ```

Correct Constraining

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

Correct prepare reports primarily for external users.

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

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

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

Correct setting goals and objectives for an entity.

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

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

Cost of goods manufactured is calculated as follows: Selected Answer: Answers: - Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP. - Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP. - Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP. - Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP.

Correct Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP.

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

Correct indirect material.

Which of the following is not used in assigning manufacturing costs to work in process inventory? ``` Answers: Actual manufacturing overhead Time tickets Materials requisitions Predetermined overhead rate ```

Correct Actual manufacturing overhead

Which one of the following best describes a job cost sheet? Answers: - It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job. - It is used to track manufacturing overhead costs to specific jobs. - It is used by management to understand how direct costs affect profitability. - It is a daily form that management uses for tracking worker productivity on which employee raises are based.

Correct It is a form used to record the costs chargeable to a specific job and to determine the total and unit costs of the completed job.

When a job is completed and all costs have been accumulated on a job cost sheet, the journal entry that should be made is.

Finished Goods Inventory | ----Work In Process Inventory

The predetermined overhead rate is based on the relationship between Answers: - estimated annual costs and actual activity. - estimated annual costs and expected annual activity. - actual monthly costs and actual annual activity. - estimated monthly costs and actual monthly activity.

Correct estimated annual costs and expected annual activity.

Which of the following is one of the components of cost accounting? ``` Answers: It involves measuring product costs. It involves the determination of company profits. It requires GAAP to be applied. It requires cost minimizing principles. ```

Correct It involves measuring product costs.

A major purpose of cost accounting is to Answers: classify all costs as operating or nonoperating. measure, record, and report period costs. provide information to stockholders for investment decisions. measure, record, and report product costs.

Correct measure, record, and report product costs.

Cost of raw materials is debited to Raw Materials Inventory when the ``` Answers: materials are ordered. materials are received. materials are put into production. bill for the materials is paid. ```

Correct materials are received.

Which of the following is not viewed as part of accumulating manufacturing costs in a job order cost system? ``` Answers: Cost of goods sold is recognized Raw materials are purchased Factory labor is incurred Manufacturing overhead is incurred ```

Correct Cost of goods sold is recognized

Process costing is used when Answers: the production process is continuous. production is aimed at filling a specific customer order. dissimilar products are involved. costs are to be assigned to specific jobs.

Correct the production process is continuous.

Overapplied manufacturing overhead exists when overhead assigned to work in process is Answers: - -more than overhead incurred and there is a debit balance in Manufacturing Overhead at the end of a period. - -less than overhead incurred and there is a debit balance in Manufacturing Overhead at the end of a period. - more than overhead incurred and there is a credit balance in Manufacturing Overhead at the end of a period. - less than overhead incurred and there is a credit balance in Manufacturing Overhead at the end of a period.

Correct more than overhead incurred and there is a credit balance in Manufacturing Overhead at the end of a period.

A production cost report Answers: - is prepared for each product. - is prepared from a job cost sheet. - will show quantity and cost data for a production department. - will not identify a specific department if more than one department is involved in the production process.

will show quantity and cost data for a production department.

A process cost system would be used for all of the following products except ``` Answers: chemicals. computer chips. motion pictures. soft drinks. ```

Correct motion pictures.

In process cost accounting, manufacturing costs are summarized on a ``` Answers: job order cost sheet. process order cost sheet. production cost report. manufacturing cost sheet. ```

Correct production cost report.

Which of these best reflects a distinguishing factor between a job order cost system and a process cost system? Answers: - The detail at which costs are calculated. - The time period each covers. - The number of work in process accounts. - The manufacturing cost elements included.

Correct The number of work in process accounts.

In the Camria Company, materials are entered at the beginning of the process. If there is no beginning work in process, but there is an ending work in process inventory, the number of equivalent units as to materials costs will be Answers: - the same as the units started. - the same as the units completed. - less than the units started. - less than the units completed.

Correct the same as the units started.

In a process cost system, product costs are summarized: Answers: - on job cost sheets. - on production cost reports. - after each unit is produced. - when the products are sold.

Correct on production cost reports.

Equivalent units are calculated by Answers: - multiplying the percentage of work done by the -equivalent units of output. - dividing physical units by the percentage of work done. - multiplying the percentage of work done by the physical units. - dividing equivalent units by the percentage of work done.

Correct multiplying the percentage of work done by the physical units.

A primary driver of overhead costs in continuous manufacturing operations is: ``` Answers: direct labor dollars. direct labor hours. machine hours. machine maintenance dollars. ```

Correct machine hours.

In a process cost system, unit costs are determined using a Answers: numerator of costs of each job. denominator of units produced during the period. denominator of units produced for the job. denominator of units produced for the day.

Correct denominator of units produced during the period.

In a production cost report, which one of the following sections is not shown under Costs? ``` Answers: Unit costs. Costs to be accounted for. Costs during the period. Units accounted for. ```

Units accounted for.

A flexible budget Answers: - is prepared when management cannot agree on objectives for the company. - projects budget data for various levels of activity. - is only useful in controlling fixed costs. - cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.

Correct projects budget data for various levels of activity.

Controllable margin is defined as Answers: sales minus variable costs. sales minus contribution margin. contribution margin less controllable fixed costs. contribution margin less noncontrollable fixed costs.

Correct contribution margin less controllable fixed costs.

In developing a flexible budget within a relevant range of activity, Answers: only fixed costs are included. it is necessary to relate variable cost data to the activity index chosen. it is necessary to prepare a budget at 1,000 unit increments. variable and fixed costs are combined and are reported as a total cost.

Correct it is necessary to relate variable cost data to the activity index chosen.

The purpose of the departmental overhead cost report is to ``` Answers: control indirect labor costs. control selling expense. determine the efficient use of materials. control overhead costs. ```

control overhead costs.

Which of the following would not be considered an aspect of budgetary control? Answers: - -It assists in the determination of differences between actual and planned results. - -It provides feedback value needed by management to see whether actual operations are on course. - -It assists management in controlling operations. - -It provides a guarantee for favorable results.

Correct It provides a guarantee for favorable results.

A cost center revenues. Answers: only incurs costs and does not directly generate revenues. incurs costs and generates revenues. is a responsibility center of a company which incurs losses. is a responsibility center which generates profits and evaluates the investment cost of earning the profit.

Correct only incurs costs and does not directly generate revenues.

In the formula for ROI, idle plant assets are Answers: included in the calculation of controllable margin. included in the calculation of operating assets. excluded in the calculation of operating assets. excluded from total assets.

Correct excluded in the calculation of operating assets.

Performance reports for cost centers compare actual Answers: total costs with static budget data. total costs with flexible budget data. controllable costs with static budget data. controllable costs with flexible budget data.

Correct controllable costs with flexible budget data.

A responsibility report should Answers: be prepared in accordance with generally accepted accounting principles. show only those costs that a manager can control. only show variable costs. only be prepared at the highest level of managerial responsibility.

Correct show only those costs that a manager can control.

Opportunity cost must be considered in decisions involving Answers: - budgeting. - financial accounting. - CVP analysis. - resources that have alternative uses.

Correct resources that have alternative uses.

The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is ``` Answers: subtracted from the "Make" costs. added to the "Make" costs. added to the "Buy" costs. none of these. ```

Correct added to the "Make" costs.

The cash disposal value of old equipment is considered to be a (an) Answers: - irrelevant cost. - avoidable cost. - sunk cost. - relevant cost.

Correct relevant cost.

If a plant is operating at full capacity and receives a one-time opportunity to accept an order at a special price below its usual price, then Answers: - only variable costs are relevant. - fixed costs are not relevant. - the order will likely be accepted. - the order will likely be rejected.

Correct the order will likely be rejected.

Which of the following is true if a company can accept a special order without affecting its regular sales and is within plant capacity? Answers: - Net income will not be affected. - income will increase if the special sales price per unit -exceeds the unit variable costs. - Net income will decrease. - Additional fixed costs will probably be incurred.

Correct Net income will increase if the special sales price per unit exceeds the unit variable costs.

If an unprofitable segment is eliminated Answers: - it is impossible for net income to decrease. - fixed expenses allocated to the eliminated segment will be eliminated. - variable expenses of the eliminated segment will be eliminated. - it is impossible for net income to increase.

Correct variable expenses of the eliminated segment will be eliminated.

The source of data to serve as inputs in incremental analysis is generated by ``` Answers: market analysts. engineers. accountants. all of these. ```

Correct all of these.

Which of the following is a true statement about cost behaviors in incremental analysis? 1) fixed costs will not change between alternatives 2) fixed cost may change between alternatives 3) Variable cost will always change between alternatives

Incremental analysis would not be appropriate for Answers: - a make or buy decision. - an allocation of limited resource decision. - elimination of an unprofitable segment. - analysis of manufacturing variances.

Correct analysis of manufacturing variances.

In incremental analysis, Selected Answer: Answers: - costs are not relevant if they change between alternatives. - all costs are relevant if they change between alternatives. - only fixed costs are relevant. - only variable costs are relevant.

Correct all costs are relevant if they change between alternatives.

Incremental analysis is synonymous with Answers: - difficult analysis. - differential analysis. - gross profit analysis. - derivative analysis.

Correct differential analysis.

If a company must expand capacity to accept a special order, it is likely that there will be Answers: - an increase in unit variable costs. - no increase in fixed costs. - an increase in variable and fixed costs per unit. - an increase in fixed costs.

Correct an increase in fixed costs.

The starting point in preparing a master budget is the preparation of the ``` Answers: production budget. sales budget. purchasing budget. personnel budget. ```

Correct sales budget.

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

Correct coordinate professional staff needs with anticipated services.

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

It provides assurance that the company will achieve its objectives.

For a merchandiser, the starting point in the development of the master budget is the Answers: - cash budget. - sales budget. - selling and administrative expenses budget. - budgeted income statement.

Correct sales budget.

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entitites will prepare? Answers: - -Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget. - -Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget. - -Pineapple Company will prepare a production budget, and Orange Co. will prepare a merchandise purchases budget. - -Both companies will prepare the same types of budgets.

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

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 ``` Answers: 1,2,3,4 2,3,1,4 2,3,4,1 2,4,1,3 ```

Correct 2,3,4,1

Of the following items, which one is not obtained from an individual operating budget? ``` Answers: Selling and administrative expenses Accounts receivable Cost of goods sold Sales ```

Correct Accounts receivable

A purchases budget is used instead of a production budget by ``` Answers: merchandising companies. service enterprises. not-for-profit organizations. manufacturing companies. ```

Correct merchandising companies.

Which of the following is not an operating budget? Selected Answer: Answers: - -Direct labor budget - -Sales budget - -Production budget - -Cash budget

Correct Cash budget

The important end-product of the operating budgets is the Answers: - -budgeted income statement. - -cash budget. - -production budget. - -budgeted balance sheet.

Correct budgeted income statement.

Hyde Corp.'s cash budget showed total available cash less cash disbursements what does this amount equal? Answers: - Ending cash balance - Total cash receipts - The excess of available cash over cash disbursements - The amount of financing required

Correct The excess of available cash over cash disbursements

Which of the following does not appear as a separate section on the cash budget? Answers: - -Cash receipts - -Cash disbursements - -Capital expenditures - -Financing

Correct Capital expenditures

Final - Exams 1,2,3 Flashcards

(97 cards)