STRACOMA FINALS Flashcards
(115 cards)
1
Q
Which of the following cost(s) are inventoried when using variable costing? A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) Both A and B are correct
A
A) direct manufacturing costs
2
Q
Which of the following cost(s) are inventoried when using absorption costing? A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) Both A and C are correct
A
D) Both A and C are correct
direct manufacturing cost
fixed manufacturing costs
3
Q
is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded
A
variable costing
4
Q
Absorption costing is required for all of the following except: A) generally accepted accounting principles B) determining a competitive selling price C) external reporting to shareholders D) income tax reporting
A
B) determining a competitive selling price
5
Q
The only difference between variable and absorption costing is the expensing of: A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) Both A and C are correct.
A
C) fixed manufacturing costs
6
Q
Absorption costing: A) expenses marketing costs as cost of goods sold B) treats direct manufacturing costs as a period cost C) includes fixed manufacturing overhead as an inventoriable cost D) is required for internal reports to managers
A
C) includes fixed manufacturing overhead as an inventoriable cost
7
Q
Variable costing: A) expenses administrative costs as cost of goods sold B) treats direct manufacturing costs as a product cost C) includes fixed manufacturing overhead as an inventoriable cost D) is required for external reporting to shareholders
A
B) treats direct manufacturing costs as a product cost
8
Q
method(s) expense(s) variable marketing costs in the period incurred. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct
A
D) All of these answers are correct
9
Q
method(s) include(s) fixed manufacturing overhead costs as inventoriable costs. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct
A
B) Absorption costing
10
Q
method(s) expense(s) direct material costs as cost of goods sold. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct
A
D) All of these answers are correct
11
Q
method(s) is required for tax reporting purposes. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct
A
B) Absorption costing
12
Q
Variable costing regards fixed manufacturing overhead as a(n): A) administrative cost B) inventoriable cost C) period cost D) product cost
A
C) period cost
13
Q
A ___ is any part or activity of an organization about which manager seeks costs, revenue or profit data.
A
segment
14
Q
In the preparation of an income statement for a particular segment, ____ are deducted from sales to yield the contribution margin for the segment.
A
variable expenses
15
Q
is the sequence of activities within the firm that begins with research and development, followed by design, manufacturing, marketing/distribution and customer service.
A
Cost life cycle
16
Q
is the sequence of phases in the product’s or service’s life in the market from the introduction of the product or service to growth in sales and finally maturity, decline and withdrawal from the market.
A
Sales life cycle
17
Q
is used throughout the cost life cycle to minimize overall cost.
reduction of cost
A
Life-Cycle Costing
18
Q
is used for managing costs primarily in the design activity
cost control
A
Target Costing
19
Q
is a method for managing manufacturing costs.
A
Theory of Constraints
20
Q
is a management technique used to identify and monitor the costs of product or service throughout its life cycle. It provides a long-term perspective of product costs and product or service profitability.
A
Life-Cycle Costing
21
Q
R & D
Design
A
Upstream Activities
22
Q
The most critical in life cycle costing
A
Design
23
Q
Marketing and Distribution
Customer Service
A
Downstream Activities
24
Q
Industries with high downstream costs include
A
pharmacratic, performer
, cosmetics and toiletries
25
prototyping, testing, concurrent engineering and quality development
Design
26
The critical success factors at the design stage include:
1. Reduced time-to-market.
2 Reduced expected service costs.
3 Improved ease-of-manufacture.
4. Process planning and design.
27
The speed of product development and the speed of delivery and efforts to reduce time-to-market are critical for a business firm to sustain its competitiveness.
Reduced time-to-market
28
By careful simple design and the use of interchangeable or modular
components can reduce expected service costs.
Reduced expected service costs
29
This is a method in which product designers work independently from marketing and manufacturing to develop a design from specific plans and specifications.
Basic engineering
30
This is a method in which functional models of the product are developed and tested by engineers and trial customers.
Prototyping
31
This is a design method in which an existing product is scaled up or down to fit the specifications of the desired new product.
Templating
32
or simultaneous engineering, is an important new approach in which product design is integrated with manufacturing and marketing throughout the product's life cycle.
Concurrent engineering
33
The ____ is the sequence of phases in the product's or service's life in the market from the introduction of the product or service to growth in sales and finally, maturity, decline and withdrawal from the market. Sales are at first small, then peak in the maturity phase and decline thereafter
sales life cycle
34
there is little competition, and sales rise slowly as customers become aware of the new product or service.
Product Introduction
35
Costs are relatively high because of high R&D expenditures and capital costs for setting up production facilities and marketing efforts. Process are relatively high because of product differentiation and the high costs at this phase.
Product Introduction
36
Product variety is limited.
Product Introduction
37
Sales begin to grow rapidly and product variety increases. The product continues to enjoy the benefits of differentiation.
Growth
38
There is increasing competition and prices begin to soften.
Growth
39
Sales continue to increase but at a decreasing rate, there is a reduction in the number of competitors and of product variety.
Maturity
40
Prices soften further, and differentiation is no longer important. Competition is based on cost, given competitive quality and functionality.
Maturity
41
Sales begin to decline, as do the number of competitors. Prices stabilize.
Decline
42
Emphasis on differentiation returns. Survivors are able to differentiate their product, control costs, and deliver quality and excellent service.
Decline
43
Control of costs and an effective distribution network are key to continued survival.
Decline
44
In the ___, the focus of management is on design, differentiation, and marketing.
first phase or Product Introduction
45
The focus shifts to new product development and pricing strategy as competition develops
Second phase or Growth
46
In the ____ management's attention turns to cost control, quality and service as the market continues to become more competitive.
third and fourth phases
maturity and decline
47
Thus, the firm's strategy for the product or service changes over the sales life cycle, from ____ in the early phases to ____ in the final phases.
differentiation
cost leadership
48
is a technique in which the firm determines the desired cost for the product or service, given a competitive market price so the firm can earn a desired profit.
Target Costing
49
How to Reduce Costs to a Target Cost Level
1. Integrate new manufacturing technology using advanced cost management techniques such as activity-based costing and seeking higher productivity through improved organization and labor relations.
2. Redesign the product or service. This approach is more common than the first one because it recognizes that design decisions account for mush of the product life cycle costs.
50
are computer-based databases that include comprehensive information about the firm's drivers. Cost drivers include, for example, the size of the product, the materials used in its manufacture, and the number of features.
Cost tables
51
is a method of identifying similarities in the parts of products a firm manufactures, so the same parts can be used in two or more products, thereby reducing costs.
Group technology
52
is the process of studying and evaluating two or more available alternatives leading to a final choice.
Decision making
53
can be defined as a cost that is applicable to a particular decision in the sense that it will have a bearing on which alternative the manager selects.
relevant cost
54
are expected future costs which differ between the decision alternatives. These are costs that will be increased or decreased as a result of a decision.
Relevant costs
55
can be defined as a cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another in a decision-making situation. ALL costs are considered ___, except:
1. Sunk costs
2. Future costs that do not differ between the alternatives at hand.
Avoidable cost
56
are the profits lost by the diversion of an input factor from one use to another. They are the net economic benefit given up when an alternative is rejected. They are relevant when a company is considering eliminating one activity and using plant facilities advantageously in another activity.
Opportunity Costs
57
involve either an intermediate or near-future cash outlay; they are usually relevant to decisions. Frequently, variable costs fall into this classification.
Out-of-pocket costs
58
is irrelevant in decision only if it relates to a sunk cost.
Depreciation
59
are important in decision making because management should determine whether a proposed project would, at the minimum return is initial cash outlay.
Out-of-pocket costs
60
is used to describe those manufacturing costs that are incurring is producing the joint products up to the split-off point.
Joint product costs
61
is that point in the manufacturing process at which the joint product can be recognized as separate products.
split-off point
62
are irrelevant in decisions regarding what to do with a product from the split off point forward because they have already been incurred and therefore are ___.
Joint product costs
sunk cost
63
Costs incurred after the split-off point for the benefit of only one particular product are called _____. They are relevant costs in the sell-or-process-further decision.
separable costs
64
A responsibility center in which a manger has only the authority to control cost is referred to as a
Cost center
65
Which of the following is more characteristic of a decentralized than a centralized business structure?
a. The firm's environment is stable.
b. There is little confidence in lower-level management to make decisions.
c. The firm grows very quickly.
d. The firm is relatively small
C
66
Costs of decentralization include all of the following except
a. more elaborate accounting control systems.
b. potential costs of poor decisions.
c. additional training costs.
d. slow response time to changes in local conditions
D
67
Performance evaluation measures in an organization
a. affect the motivation of subunit managers to transact with one another.
b. always promote goal congruence.
c. are less motivating to managers than overall organizational goals.
d. must be the same for all managers to eliminate suboptimization
A
68
A management decision may be beneficial for a given profit center, but not for the entire company. From the overall company viewpoint, this decision would lead to
a. goal congruence
b. centralization
c. suboptimization
d. maximization
C
69
To avoid waste and maximize efficiency when transferring products among divisions in a competitive economy, a large diversified corporation should base transfer prices on
a. variable cost
b. market price.
c. full cost.
d. production cost
B
70
The presence of idle capacity in the selling division may increase
a. the incremental costs of production in the selling division.
b. the market price for the good.
c. the price that a buying division is willing to pay on an internal transfer.
d. a negotiated transfer price
A
71
Top management can preserve the autonomy of division managers and encourage an optimal level of internal transactions by
a. selecting performance evaluation measures that are consistent with the achievement of overall corporate goals.
b. selecting division managers who are most concerned about their individual performance.
c. prescribing transfer prices between segments.
d. setting up all organizational units as revenue centers
A
72
A company's return on investment is the:
a. margin divided by turnover.
b. margin multiplied by turnover.
c. turnover divided by average operating assets.
d. turnover multiplied by average operating assets
B
73
Responsibility accounting is a system whose attributes include
a. Culpability, liability and accountability
b. Responsibility, liability and culpability
c. Performance evaluation, accountability, and responsibility
d. Liability, accountability, and performance evaluation
C
74
What term identifies an accounting system in which the operations of the
business are broken down into reportable segments and the control functions
of a foreperson, sales managers or supervisor is emphasized?
a. Responsibility accounting
b. Operations-research accounting
c. Control accounting
d. Budgetary accounting
A
75
Segmented income statements are most meaningful to managers when they
are prepared
a. In a multi-step format
b. On an absorption cost basis
c.
On a cost behavior basis
d. On a cash basis
C
76
When used for performance evaluation, periodic internal reports based on a responsibility accounting system should not
a. Distinguish between controllable and noncontrollable costs
b. Include allocated fixed overhead
c. Be related to the organization chart
d. Include variances between actual and budgeted controllable costs
B
77
In a company with decentralized approach to responsibility accounting, upper-level managers typically
a. Make key decisions only
b. Implement key decisions only
c. Both make and implement key decisions
d. Review the outcomes of key decisions only
C
78
Advantages of decentralization include all of the following except
a. Divisional management is able to react to changing market conditions
more rapidly than top management
b. Divisional management is a source of personnel for promotion to top
management positions
c. Decentralization can motivate divisional managers
d. Decentralization permits divisional management to concentrate on
company-wide problems and long-range planning
D
79
A good example of a common cost which normally could not be assigned to products on a segmented income statement except on an arbitrary basis would be:
a. Product advertising outlays
b. Salary of a corporation president
c. Direct materials
d. The product manager’s salary
A
80
All other things being equal, if a division’s traceable fixed expenses increase:
a. The division’s contribution margin ratio will decrease
b. The division’s segment margin ratio will remain the same
c. The division’s segment margin will decrease
d. The overall company profit will remain the same
B
81
There are costs that are charged directly to the segments in the report, choose the exception.
a. Insurance and maintenance of the division building
b. Salary of the division manager
c. Common fixed expenses not traceable
d. Direct fixed costs
C
82
Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?
a. Depreciation expense--office equipment
b. Insurance on inventory of sporting goods
c. Uncollectible accounts expense
d. Office salaries
B
83
For higher levels of management, responsibility accounting reports:
a. are more detailed than for lower levels of management
b. are more summarized than for lower levels of management
c. contain about the same level of detail as reports for lower levels of
management
d. are rarely provided or reviewed
B
84
Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department
manager are termed:
a. miscellaneous administrative expenses
b. direct expenses
c. indirect expenses
d. operating expenses
B
85
The investment turnover is the:
a. ratio of income from operations to sales
b. ratio of income from operations to invested assets
c. ratio of assets to liabilities
d. ratio of sales to invested assets
D
86
cost that would be included in product costs under both absorptioncosting and variable costing would be:
a. supervisory salaries.
b. equipment depreciation.
c. variable manufacturing costs.
d. variable selling expenses
C
87
An allocated portion of fixed manufacturing overhead is included in product costs under: Absorption Costing and Variable Costing
AC - YES
VC - NO
88
Which of the following are considered to be product costs undervariable costing?
I. Variable manufacturing overhead. II. Fixed manufacturing overhead.
III. Selling and administrative expenses
I
89
What factor is the cause of the difference between net income as computed under absorption costing and net income as computed undervariable costing?
a. Absorption costing considers all manufacturing costs in the determination of net income, whereas variable costing considers only prime costs.
b. Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories, and variable costing considers all fixed manufacturing costs as period costs.
c. Absorption costing includes all variable manufacturing costs in product costs, but variable costing considers variablemanufacturing costs to be period costs.
d. Absorption costing includes all fixed manufacturing costs inproduct costs, but variable costing expenses all fixedmanufacturing costs.
B
90
Under variable costing, costs which are treated as period costsinclude:
a. only fixed manufacturing costs.
b. both variable and fixed manufacturing costs.
c. all fixed costs.
d. only fixed selling and administrative costs
C
91
Which of the following statements is true for a firm that uses variable costing?
a. The unit product cost changes as a result of changes in the number of units manufactured.
b. Both variable selling costs and variable production costs are included in the unit product cost.
c. Net income moves in the same direction as sales.
d. Net income is greatest in periods when production is highest
C
92
The term "gross margin" for a manufacturing company refers to theexcess of sales over
a. cost of goods sold, excluding fixed manufacturing overhead.
b. all variable costs, including variable selling andadministrative expenses.
c. cost of goods sold, including fixed manufacturing overhead.
d. variable costs, excluding variable selling and administrativeexpenses
C
93
Ney income determined using full absorption costing can be reconciled to net income determined using variable costing by computing the difference between:
a. Fixed manufacturing overhead costs deferred in or released from inventories.
b. Inventoried discretionary costs in the beginning and endinginventories.
c. Gross margin (absorption costing method) and contributionmargin (variable costing method).
d. Sales as recorded under the variable costing method and sales asrecorded under the absorption costing method
A
94
Net income reported under absorption costing will exceed net incomereported under variable costing for a given period if:
a. production equals sales for that period.
b. production exceeds sales for that period.
c. sales exceed production for that period.
d. the variable manufacturing overhead exceeds the fixedmanufacturing overhead
B
95
What will be the difference in net income between variable costing andabsorption costing if the number of units in work in process and finished goods inventories increase?
a. There will be no difference in net income.
b. Net income computed using variable costing will be higher.
c. The difference in net income cannot be determined from the information given.
d. Net income computed using variable costing will be lower
D
96
The costing method that can be used most easily with break-evenanalysis and other cost-volume-profit techniques is:
a. variable costing.
b. absorption costing.
c. process costing.
d. job-order costing
A
97
The impact on net operating income of short-run changes in sales for a
segment can be most clearly predicted by analyzing:
a. the contribution margin ratio
98
The biggest challenge in making a decentralized organization function
effectively is:
a. earning maximum profits through fair practices.
b. minimizing losses.
c. taking advantage of the specialized knowledge and skills of highly
talented managers.
d. obtaining goal congruence among division managers.
e. developing an adequate budgetary control system
D
99
Spiedino Company sells its products to both residential and commercial
customers in eight sales territories. In which of the following ways could
Spiedino be segmented?
a. by product and then further segmented by type of customer.
b. by type of customer and then further segmented by sales territory.
c. by sales territory and then further segmented by product line.
d. all of the above.
D
100
A national retail company has segmented its income statement by
sales territories. If each sales territory statement is further segmented by
individual stores, which of the following will most likely occur?
a. some common fixed expenses in the sales territory segmented
statement will become traceable fixed expenses in the individual store
segmented statement.
b. some traceable fixed expenses in the sales territory segmented
statement will become common fixed expenses in the individual store
segmented statement.
c. the sum total of the individual stores' segment margins in each sales
territory will be equal to the segment margin for the sales territory.
d. both A and C above
B
101
Hayworth Company has just segmented last year's income statements
into its ten product lines. The chief executive officer (CEO) is curious as to
what effect dropping one of the product lines at the beginning of last year
would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating
income of the company as a whole?
a. the product line's sales dollars.
b. the product line's contribution margin.
c. the product line's segment margin.
d. the product line's segment margin minus an allocated portion of
common fixed expenses
C
102
Which of the following statements is correct concerning return on
investment calculations?
a. Margin equals stockholders' equity divided by sales.
b. Return on investment equals margin divided by turnover.
c. Turnover equals return on investment divided by margin.
d. Sales equals turnover divided by margin.
C
103
All other things equal, which of the following would increase a
division's residual income?
a. Increase in expenses.
b. Decrease in average operating assets.
c. Increase in minimum required return.
d. Decrease in net operating income.
B
104
A company's sales margin:
a. must, by definition, be greater than the firm's net sales.
b. has basically the same meaning as the term "contribution margin."
c. is computed by dividing sales revenue into income.
d. is computed by dividing income into sales revenue.
e. shows the sales dollars generated from each dollar of income
C
105
.An emphasis on obtaining goal congruence is consistent with a broad
managerial approach called
A. management by crisis
B. management by objectives
C. management through goal congruence
D. just-in-time philosophy
B
106
All of the following are inventoried under absorption costing except:
A. direct labor.
B. raw materials used in production.
C. utilities cost consumed in manufacturing.
D. sales commissions.
E. machine lubricant used in production.
D
107
Which of the following conditions would cause absorption-costing net income to be lower
than variable-costing net income?
A. Units sold exceeded units produced.
B. Units sold equaled units produced.
C. Units sold were less than units produced.
D. Sales prices decreased.
E. Selling expenses increased
A
108
Which of the following methods defines product cost as the unit-level cost incurred each time
a unit is manufactured?
A. Throughput costing.
B. Indirect costing.
C. Process costing.
D. Absorption costing.
E. Back-flush costing.
A
109
The opportunity cost of making a component part in a factory withno excess capacity is the:
a. variable manufacturing cost of the component.
b. fixed manufacturing cost of the component.
c. cost of the production given up in order to manufacture the component.
d. net benefit foregone from the best alternative use of the capacity required
D
110
A joint product is:
a. any product which consists of several parts.
b. any product produced by a firm with more than one product line.
c. any product involved in a make or buy decision.
d. one of several products produced from a common input
D
111
Which of the following is not an effective way of dealing with a production constraint (i.e., bottleneck)?
a. Reduce the number of defective units produced at the bottleneck.
b. Pay overtime to workers assigned to the bottleneck.
c. Pay overtime to workers assigned to work stations located after the bottleneck in the production process.
d. Subcontract work that would otherwise required use of the bottleneck
C
112
A plant operating at capacity would suggest that:
a. every machine and person in the plant is working at the maximum possible rate.
b. only some specific machines or processes are operating at the maximum rate possible.
c. fixed costs will need to change to accommodate increased demand.
d. managers should produce those products with the highest contribution margin in order to deal with the constrained resource
B
113
Consider a decision facing a firm of either accepting or
rejecting a special offer for one of its products. A cost that is not relevant is:
a. direct materials.
b. variable overhead.
c. fixed overhead that will be avoided if the special offer is accepted.
d. common fixed overhead that will continue if the special offer is not accepted.
D
114
Costs which are always relevant in decision making are those costs which are:
a. variable.
b. avoidable.
c. sunk.
d. fixed
b
115
To maximize total contribution margin, a firm faced with a production constraint should:
a. promote those products having the highest unit contribution margins.
b. promote those products having the highest contribution margin ratios.
c. promote those products having the highest contribution marginper unit of constrained resource.
d. promote those products have the highest contribution margins and contribution margin ratios
C
