Managers Use Management Accounting Information

1)Managers use management accounting information to do all of the following except c) perform.

2)Managers make cost management decisions to increase the value of products and services they provide to customers and to achieve organizational goals. Which of the following is not an example of an effective cost management decision? d) Information and the accounting systems themselves.

3)Management accounting: a) focuses on measuring, analyzing, and reporting financial and nonfinancial information to help managers estimate future revenue, costs, and other measures to forecast activities and formulate strategies to increase the competitive advantage of the organization.

4)Financial accounting: b) financial statements must comply with Generally Accepted Accounting Principles (GAAP).

5)An Enterprise Resource Planning (ERP) system is b) a single database that collects data and feeds it into applications that support each of the company's business activities, such as purchasing, production, distribution, and sales.

6)Users of management accounting information include e) managers of the organization.

7)Financial accounting managers are more concerned about b) past-oriented reports.

8)B) Management Accounting measures, analyzes and reports financial information and nonfinancial information that helps managers make decisions to fulfill the goals of an organization.

9)Strategic cost management describes cost management that: d) specifically focus on strategic issues.

10)Which of the following is not one of the six primary business functions that managerial accountants use to create value for their customers? e) Profit focus versus customer service.

11)Which of the following statements concerning an organization's strategy is not true? c) A good strategy will always overcome poor implementation.

12)Management accountants work closely with other managers to develop strategies. Which of the following is not a source of competitive advantage they share to develop those strategies? e) Share only time to attend luncheons and meetings, but never discuss interdepartmental information.

13)Some managerial accountants at companies choose to focus on a product differentiation strategy. Which of the following is not a characteristic of this strategy? c) Offer lower-priced products or services.

14)The managers at Apple are successful because they offer consumers unique and different products. Which strategy do they use to attract and retain customers? b) A product differentiation strategy.

15)The managers at Vanguard follow a cost leadership strategy. Which of the following is a characteristic of their strategy? c) Provide consumers quality products or services at low prices by effective cost management.

16)A ________ is used to specify how a managerial accountant at an organization matches the capabilities with opportunities in the marketplace to accomplish their objectives. It also helps managers gain a competitive advantage at their company. d) strategy.

17)Which of the following is not a way for a company to improve customer response time? b) Decrease in response time to consumer requests.

18)Trader Joe's is known for delivering unique products to consumers at reasonable prices. Which of the following is not one of the strategies they use to attract and retain consumers? d) Maximize cost to attract and retain consumers with brand items.

19)Which of the following is not a key success factor that managerial accountants use to promote sustainability in their organizations? e) Relevance.

20)Sustainability: c) is the development and implementation of strategies to achieve long-term financial, social, and environmental performance.

21)Which of the following is not a way that a manager at a manufacturing firm can improve the performance level in the organization? c) A focus only on budgeting to improve all performance levels in the organization.

22)When managers generate and experiment with ideas related to new products, services or processes. this is: a) research and development.

23)Processing orders and shipping products or services to customers is: c) distribution.

24)To lower costs and increase efficiency at Nike, the decision makers moved its operations to China and Mexico. This is known as: a) outsourcing.

25)The ________ ________ contains six primary business functions in modern organizations. a) value chain.

26)The time it takes for companies to develop new products and services and bring them to market is: b) new-product development time.

27)The ________ ________ is an administration function that includes the human resource management function of training front-line workers. c) production function.

28)The ________ function is the function of analyzing, reporting, and accounting for those resources spent in different marketing channels; while the ________ function includes the human resource management function of training front-line workers. b) marketing; production.

29)Included in the ________ ________ is the function of analyzing, reporting, and accounting for resources spent in different marketing channels. a) marketing function.

30)The strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors is: b) customer relationship management.

31)Which of the following is not true about a managerial accountant that links rewards to performance? a) Not used to motivate managers.

32)How do managers calculate a target cost for the selling price of a product? d) Subtract the operating income per unit of target product.

33)A budget: d) is a benchmark against which actual performance can be prepared.

34)Planning: e) comprises taking actions that implement the planning decisions, deciding how to evaluate performance, and providing feedback and learning to help future decision making.

35) Which of the following is not true about the five-step decision making process? e) Managers cannot evaluate performances or learn.

36) A recent Performance Report from Baker's Chocolate Factory revealed the budgeted amount of chocolate crisps was 1,000; and, they actually sold 900 chocolate crisps. Compute the difference. Was the difference favorable or unfavorable? b) 100; unfavorable.

37)A recent Performance Report from Baker's Chocolate Factory revealed that there were budgeted revenues in October, 2012, of $2,000,000; and, the actual revenues were $2,110,000. Is the difference favorable or unfavorable? c) $110,000 favorable.

38) The comparison of ________ performance to ________ performance, this is known as the control or postdecision role of information. b) actual; budgeted.

39)________ can lead to changes in goals, strategies, and the ways decision alternatives are identified, and the range of information collected when making predictions, and can lead to changes in managers. a) learning.

40)________ comprises the actions that implement the planning decisions, deciding how to evaluate performance, and providing feedback and learning to help future decision making. b) control.

41) Which of the following is not a true statement about a manager that utilizes the cost-benefit approach? d) Senior managers are unable to compare the expected benefits to the expected costs associated with a project.

42) A manager at Best Buy had a television advertising expense in 2013. The company is required to report the expense to external shareholders. According to GAAP, when is the manager at Best Buy required to show the expense? b) 2013.

43)When workers underperform, behavioral considerations suggest: c) managers discuss with workers ways to improve performance actions.

44) A manager can install a budgeting system to replace the old accounting system and to develop formal planning methods. Which of the following is not a correct statement or benefit of implementing the new budgeting system to trace costs? e) Time spent on implementing budgeting process is always easy to quantify.

45) The cost-benefit approach helps managers make certain economic decisions about purchasing new software, or the decision to keep an old software package. In making such decisions, senior managers keep ________ and ________ considerations in mind. a) technical; behavioral.

46) ________ have a behavioral affect by motivating and rewarding employees for achieving organizational goals. d) budgets.

47) ________ is primarily a human activity that should focus on encouraging individuals to do their jobs better. b) management.

48) Line management: b) is directly responsible for achieving the goals of the organization.

49) Which of the following is true about the modern concept of controllership? d) The controller affects the entire company.

50) Organization charts: d) show formal reporting relationships.

51) The term used to describe the concept that includes providing financial information for reports to managers and shareholders, and oversight to the overall operations of the accounting system is: c) controllership.

52)The term used to describe the oversight in banking and short- and long-term financing, investments, and cash management is: d) treasury.

53) The ________ is the financial executive primarily responsible for management accounting and financial accounting. b) controller.

54) Which of the following is not an ethical behavior of Practitioner's of Management Accounting and Financial Managers? d) Permits the executives to accept bribes to award supply contracts to foreign firms.

55)The act that requires CEOs and CFOs to certify that their financial statements fairly represent the results of operations is the: e) Sarbanes Oxley Act.

56)Which of the following is an example of an accountant that does not adhere to special ethical obligation? d) Failure to provide a process for employees to report violations of illegal acts.

57)Which of the following is not a standard of ethical professional practice as outlined by the Institute of Management Accountants? e) Illegal acts.

58)The Sarbanes-Oxley Act authorizes the Public Company Accounting Oversight Board to: c) oversee, review, and investigate the work of the auditors.

1)The cost incurred is: a) actual costs.

2)A ________ is usually measured as the amount of money that must be paid to acquire goods and services. b) cost.

3)Which of the following explains why managers compare the budgeted costs to actual costs? d) Managers evaluate how well they did to control costs and learn how to do better in the future.

4) The cost object is: c) a predicted, or forecasted, cost.

5)Budgeted costs include: c) the planned or forecasted costs.

6)Cost accumulation: b) is a collection of cost data in an organized way by means of a cost object.

7)The two main ways managers use cost information are when they ________ decisions; and, ________ decisions. a) make; implement.

8)A/an ________ cost is the cost incurred; and they are distinguished from a ________ cost; which is a predicted, forecasted, or future cost. b) actual; budgeted.

9)The predicted, or forecasted costs, are: b) budgeted costs.

10)A BMW X6 sports activity coupe is an example of the ________ cost object at BMW. a) product.

11)The general term used to identify the tracing and allocation of accumulated costs to a cost object is: b) cost assignment.

12)Cost tracing: a) describes the assignment of direct costs to a particular cost object.

13)Which of the following is correct about indirect costs of a cost object? c) can be traced to a cost object in an economically feasible way.

14)The broader definition of a cost object is: a) the higher proportion of costs that are direct costs and the managers are more confident in the accuracy of the cost amounts.

15)Which of the following is not a challenge to managers that allocate costs? e) Assign accurate product costs.

16)Which of the following statements about the direct or indirect cost classification is not true? a) Indirect costs are always traced.

17)We define cost tracing as: a) the assignment of direct costs to a chosen cost object.

18)We define cost allocation as: c) the assignment of indirect costs to the chosen cost object.

19)The costing systems that managers use to identify the cost of each activity such as testing, design, or set-up are called: d) activity-based costing systems.

20) Financial accountants realize that a mixed cost is: b) a cost with fixed and variable elements.

21) An example of a mixed cost is: c) Monthly electric bill.

22) Fixed and variable costs: b) are defined as variable or fixed for a specific activity for a given time period.

23) Which of the following is not a true statement about variable costs? c) Total cost never changes in proportion to any changes in related levels of volume or activity.

24) A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the: d) relevant range.

25) If each motorcycle requires a fan belt that costs $20 and 2,000 motorcycles are produced in the month, the total cost for the fan belts is: b) considered to be a direct variable cost.

26) The manager at the Carburetor Factory buys a custom carburetor at $50.00 each for each of its custom vehicles. Compute the total fixed cost per custom carburetor if 1, 500, and 1,000 custom carburetors are produced. a) $25,000; $50,000.

27) Compute the fixed supervision cost per custom carburetor for 5,000, 10,000, and 15,000 carburetors produced. b) $250; $166.66.

28) A manager at an airline must purchase individual annual licenses and pay registration costs for each airplane in the fleet of airplanes they operate at the airport. What type of cost is/are the registration and license costs for the miles flown each year for each individual airplane? c) Fixed cost for the miles flown by each individual plane.

29) Which of the following is not true about unit costs? b) Decision makers think in terms of unit costs rather than total costs.

30) Managers compute the unit cost by: b) dividing total cost by the number of units.

31) Unit costs are found in: c) all areas of the value chain.

32) When 40,000 units are produced, fixed costs are $16 per unit. Therefore, when 80,000 units are produced, fixed costs will: c) decrease to $8 per unit.

33) When 5,000 units are produced, variable costs are $6 per unit. Therefore, when 20,000 units are produced: a) variable costs will total $120,000.

34) Accounting systems report: c) both total-cost amounts and average-cost per unit amounts.

35) As a general rule, managers first calculate total costs, and then compute which of the following costs when they need to make decisions? b) unit cost.

36) Acme Candle Company reported the following information:

Manufacturing costs                                     $1,500,000

Units Manufactured                                          300,000

Units sold (60,000 units sold at $25 per unit) $1,500,000

Beginning inventory                                         0 units

Compute the average manufacturing cost per unit. E) ($1,500,000 / 300,000) = $5 per unit

39) Which of the following is not a characteristic of the type of inventory used in manufacturing-type sector companies? e) products already manufactured and sold.

40) Which of the following is not a commonly used classification or characteristic of manufacturing costs? e) COGS.

41) Inventoriable costs are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold when the product is sold. Period costs are all costs in the income statement other than cost of goods sold. Period costs are treated as expenses of the accounting period in which they are incurred because they are expected to benefit future periods.

42) Which of the following is normally included in direct materials inventory? a) Direct materials in stock and awaiting use in the manufacturing process.

43) In finished goods inventory: c) goods are fully completed but not yet sold.

44) The term that refers to the cost of goods brought to completion, whether they were started before or during the accounting period is: e) cost of goods manufactured.

45) The cost of goods sold is the cost of finished goods inventory sold to customers: d) during the current accounting period.

46) When are inventoried unit costs expensed? c) not expensed until the units are sold.

47) The Material Handler company reported the following information:

Beginning inventory of direct materials, January 1, 2012            $15,000

      Purchases of direct materials in 2012                                     70,000

      Ending inventory of direct materials, December 31, 2012         7,000

Compute the Total Cost of Direct Materials used in 2012. C)$78,000=(15,000+70,000-7,000)

48) Compute the Total Manufacturing Costs incurred from the data provided by Wize Manufacturing.

Direct materials used in 2012                            $60,000

Direct manufacturing labor in 2012                      10,000

Manufacturing overhead costs in 2012                 18,500

  1. B) [($60,000 + $10,000 + $18,500)] = $88,500 total manufacturing costs

49) Ice Manufacturing reported the following information:

 Beginning work-in-process inventory

     $60,000

 Ending work-in-process inventory

       58,000

 Beginning finished goods inventory

     160,000

 Ending finished goods inventory

     180,000

 Cost of goods manufactured

  1,200,000

Compute the cost of goods sold.  B) [$160,000 + $1,200,000 - $180,000] = $1,180,000.

49) Wize Manufacturing reported the following information:

Finished goods inventory                                   $40,000

Cost of goods manufactured                               105,000

Ending inventory of finished goods                      15,000

Compute the cost of goods sold. C) [40,000 + 105,000 - 15,000] = $130,000

50) Managers compute the cost of goods sold in a manufacturing entity as: d) cost of goods manufactured + Beginning finished goods inventory - Ending finished goods inventory = Cost of goods sold.

51) Wagner Company reported the following information about revenues and the cost of goods sold:

Revenues                               $250,000

Cost of Goods Sold                   $75,000

Compute the gross margin. D) [($250,000 - $75,000) = $175,000

52) Isaac Manufacturing reported the following information for the previous month:

Sales                            $75,000

Variable Costs                 5,000

Fixed Costs                    11,000

Operating Income           59,000

Compute the projected operating income if sales doubled in the next month. D) [($75,000 × 2) - ($5,000 × 2) - 11,000] = $129,000.

53) Which of the following is not a prominent labor component of overhead? a) Direct programming labor that cannot be traced to individual products.

54) The wage rate paid to workers (for both direct labor and indirect labor) in excess of their straight time wage rate is: d) overtime premium.

55) Mrs. Jones earns $25.00 per hour for straight time worked in the office; and, she earns $40.00 per hour when she works overtime. In week one of the new pay period, she reported that she worked 48 hours, which included 8 hours of overtime. Compute Mrs. Jones's total compensation: D) $1,320.

56)Ms. Taylor works at an assembly plant that produces footballs. She earns $18.00 an hour for straight-time and $36 per hour when she works overtime. She reported that she worked 46 hours during the previous reporting period, which included 6 hours of overtime.Compute the total compensation for the week; the amount of compensation that was reported as direct manufacturing labor; the amount of compensation that is reported as a manufacturing overhead cost. C) Total Compensation: Direct Labor [(46 hours × $18) + Overtime premium (6 hrs × $18)] = $936

Direct Manufacturing Labor [(46 hours × $18)] = $828

Manufacturing overhead costs = Overtime premium [(6 hrs × $18)] = $108.

57) Mr. Foxhound works at a manufacturing plant that makes balloons for holiday parades. He earns $30 per hour for straight-time and $50 per hour for overtime. One week he worked 46 hours, which included 6 hours of overtime, and 4 hours of idle time caused by a shortage of materials to make the balloons. Compute Mr. Foxhound's total compensation for the week; the amount of compensation reported as direct manufacturing labor; and the amount of compensation that would be reported as manufacturing overhead. C) $1,500; $1,260; $240.

58) For the purpose of calculating inventory, product costs include only: d) inventoriable (manufacturing) costs.

59) Pricing and product-mix decisions include: c) all costs incurred along the value chain.

60) In government contracts, product costs include: b) design costs plus manufacturing costs.

61) The sum of the costs assigned to a product for a specific purpose are: c) product costs.

62) Under Generally Accepted Accounting Principles (GAAP), only ________ costs can be assigned to inventories in the financial statements. e) manufacturing.

63)Which of the following is not true about payroll fringe costs? e) Tax authorities argue that the costs are part of overhead.

64) ________ ________ is the wage rate paid to workers for both direct labor and indirect labor in excess of their straight-time wage rates. c) overtime premium.

65)A sunk cost: d) is a cost that occurred in the past.

66) A key aspect of making decisions is: a) analyzing relevant information.

67) Managers compare actual results to planned performance: a) at the end of the reporting period.

68) Managers must know how revenues and costs vary with changes in: e) output levels.

69) Whatever the purpose, the ________ ________ trace direct costs and allocates indirect costs to products. c) costing systems.

70)Which of the following methods is not used to reduce the undesirable affects of absorption costing? d) Include only financial variables in the measures used to evaluate performance.

71) Under the variable costing method: a) fixed manufacturing costs are not inventoried.

72) Which of the following is not a characteristic of absorption costing? e) It is not the required inventory method for external reporting in most countries.

73) A production system under which products are manufactured only when needed is: e) just-in-time production.

74)The difference between total revenues and total variable costs is the ________ ________. e) contribution margin.

75) In ________ ________, the operating income depends only on the level of sales and it is invariant to the quantity produced. c) variable costing.

1) The term(s) used to describe the behavior and relationship among elements as changes occur in units sold, selling price, variable cost per unit, or fixed costs of product is: e) cost volume profit analysis.

2) The difference between total revenues and total variable costs is: d) contribution margin.

3)The tool useful for calculating contribution margin and operating income is: d) contribution margin per unit.

4) Managers use contribution margin analysis as a quick and handy way to evaluate the effect of changes in ________ on operating income. e) revenues.

5) In the equation method, revenues in each column are calculated as: d) revenues = Selling price (SP) × Quantity of units sold (Q).

6) Which of the following is not an assumption of cost-volume-profit (CVP) analysis? e) The total costs are never separated into components in this analysis.

7) Just as a cost driver is any factor that affects costs, a ________ ________ is a variable, such as volume, that casually affects revenues. d) revenue driver.

8) The Bluebird Factory reported $1,000,000 in total revenues and $60,000 total variable costs during the previous year. Compute the contribution margin. C) [($1,000,000 - $60,000)] = $940,000.

9) A shelter sells products and it contributes proceeds to needy people in the community. The selling price of a product is $80.00 and the manager at the shelter reported that the variable cost per unit is $25.00. Compute the contribution margin per unit. D) [($80 - $25)] = $55 contribution margin per unit.

10) A company reported a contribution margin per unit of $75 and it reported that the managers sold a total of 40 units. Compute the contribution margin. C) [($75 × 40)] = $3,000.

11) A manager at the Film Shoppe at the mall reported that the company had a contribution margin of $3,000 and total variable costs were $25.00. Compute the operating income. C) [($3,000 - $25)] = $2,750 total operating income.

12) A manager at the Food Pantry reported contribution margin of $3,000 and revenues at the store were $8,500. Compute the contribution margin percentage. A) [($3,000 / $8,500)] = .3529% or 35.29% contribution margin percentage.

13)The manager at Mary's Floral Service reported the sale of 600 units of a single product that resulted in $75,000 of sales revenue, $15,000 in variable costs, and $8,000 of fixed costs. Compute the contribution margin percentage. C) ($75,000 - $15,000) = $60,000 / $75,000] = 80%.

14) The term that is used to identify the quantity of output sold at which total revenues equal total costs and that quantity of output sold that results in $0 operating income is: b) breakeven point.

15) The store has fixed costs of $25,000 and a contribution margin per unit of $90 per unit. Compute the breakeven quantity in units. C) [($25,000 / $90)] = 277.77 units.

16) The Clock Store's manager reported that there were 25 breakeven quantities in units and a selling price of $10 per unit. The manager needs to determine the breakeven revenues. Compute the breakeven revenues. E) [(25 × $10)] = $250.

17) The store has a contribution margin per unit of $90 and the products sells for $225. The manager needs to know the contribution margin percentage. Compute the contribution margin percentage. B) [($90 / $225)] = .40% or 40%.

18) The manager at the store needs to determine the breakeven revenues associated with the new and dynamic power blender. The fixed costs associated with the blender are $3,000 and the contribution margin is 50%. Compute the breakeven revenue. C) [($3,000 / 50%)] = $6,000.

19) Sunny Pastures reported the following information:

Fixed costs                                             $3,000

Target Operating Income                          5,000

Contribution margin per unit                          90

Compute the quantity of units required to be sold to have an operating income of $5,000. D) [($3,000 + $5,000) / $90] = 88.88 units.

20) The Vitamin Store reported the following information:

Fixed Costs                                            $3,000

Operating income                                     1,800

Contribution margin per unit                         .50

Compute the revenues needed to earn operating income of $1,800. D) [($3,000 + $1,800) / .50] = $9,600.

21) Managers use ________ ________ ________ to understand how profits change with sales volume. e) profit volume analysis.

22) Which of the following is true about net income? b) Income targets are expressed in terms of net income.

23) The term that represents operating income plus nonoperating revenues minus nonoperating costs minus income taxes is: a) net income.

24) Which of the following is not true about the manager's strategic plans the effect of income taxes in CVP analysis?  c) Income targets are NOT expressed in terms of net income.

25) The Freezer Company has operating income of $200,000 and $30,000 of income taxes. Compute the Freezer Company's net income after taxes. C) [($200,000 - $30,000)] = $170,000.

26) If the Resort Operating Center plans a targeted operating income of $210,000 and the tax rate is 30%, what is the organization's target net income? E) [($210,000 - ($210,000 × .30) = $147,000.

27) Cal's Baseball Clothing Corporation sells material to manufacturers to sew the uniforms. How many units of the material must the store sell to earn a net income of $1,000, what is the target operating income, based on an income tax rate of 40%? B) [($1,000 - (.40 × $1,000)] = $600.

28) ________ ________ is operating income plus nonoperating revenues minus nonoperating costs minus income taxes. a) Net income.

29) When the operating income at the breakeven point (BEP) is ________, no income taxes are paid. a) zero.

30) Which of the following is not correct about CVP analysis? e) Managers are unable to make strategic decisions about selling prices and operating income.

31) Which of the following is not true when managers determine target prices? e) Ignore the changes in the contribution margin.

32) Regarding CVP analysis, experienced managers evaluate decisions based on ________ rather than mechanically working through the contribution income statement. d) differences.

33) CVP analysis helps managers make product decisions by ________ the expected profitability of these choices. b) evaluating.

34) The manager at the Yarn Shoppe needs to determine the price she could sell 50 units of wool yarn and continue to earn an operating income of $1,250. Review the following information.

Target operating income                         $1,400

Fixed costs                                              1,900

Targeted contribution margin                 $3,300

Variable cost per unit                                    25

Compute the target price of 50 units to earn the operating income of $1,250. E) [($3,300 / 50) = $66) + $25) = $91.

35) ________ ________ is a "what-if" technique that managers use to examine how an outcome will change if the original predicted data are not achieved or if an underlying assumption changes. e) Sensitivity analysis.

36) Managers understand that the margin of safety is the difference between: b) budgeted revenues and breakeven revenues.

37) To determine the margin of safety, managers compute: e) budgeted revenues - breakeven revenues.

38) ________ ________ help managers to conduct CVP-based sensitivity analyses and to examine the effect and interaction of changes in selling price, variable cost per unit, fixed costs, and target operating income. e) Electronic spreadsheets.

39) ________ ________ is a simple approach to recognizing uncertainty. e) Sensitivity analysis.

40) Sensitivity analysis broadens the managers' perspectives to possible outcomes that might occur ________ the company commits to funding a project. c) before.

41) A comprehensive approach to recognizing uncertainty is to compute expected values using __. e) probability distributions.

42) Sammy's Motorcycle Shoppe reported the following information:

Target operating income                            $1,300

Fixed costs                                    2,200

Variable costs per unit                       100

Compute the number of units required to be sold at $200 to earn a target income of $1,200. D) [($2,200 + $1,300) / (200-100)] = 35 units

43) Dr. Hill reported breakeven revenues of $7,000 and budgeted revenues of $5,000.  Compute the margin of safety. B) [($7,000 - $5,000)] = $2,000 = margin of safety

44) The Magazine Store reported budgeted sales of 35 units, and 15 budgeted breakeven sales in units to achieve their goal. Compute the margin of safety in units for the Magazine Store. C) [(35-15)] = 20 units.

45) The Tree Shoppe reported the following information:

Budgeted revenues                               $10,000

Breakeven revenues                                 4,000

Budgeted sales (in units)                               35

Breakeven sales (in units)                             15

Compute the margin of safety percentage at the Tree Shoppe. E) Step 1: Compute the margin of safety: [($10,000 - $4,000)] = $6,000

Step 2: Compute the margin of safety in units: [(35-15)] = 20 units

Step 3: Compute the margin of safety percentage: [($6,000 / $10,000) = 60%.

46) Sally's Optimist Club promotes optimism to the youth in Virginia. If the club has a degree of operating leverage of 3.0 and the sales increase by 25%, then: e) profit will increase by 75%.

47) The Frame Shoppe reported the following information:

Contribution margin per unit                        $90

Contribution margin                               $3,500

Operating income                                   $1,500

Compute the degree of operating leverage at the Frame Shoppe. A) [($3,500 / $1,500)] = 2.33 Degree of Operating Leverage.

48) Which of the following is not a characteristic of CVP-based sensitivity analysis? a) Disregards the various fixed-cost structures.

49) Which of the following is not a reason why U.S. companies move their manufacturing operations to other countries? c) To increase costs and increase operating leverage.

50) For any given total quantity of units sold, as the sales mix shifts toward units with lower contribution margins, operating income will be: a) lower.

51) When there is a shift in the sales mix to lower-contribution-margin products, the breakeven quantity: b) increases.

52) The computation used to calculate the breakeven point (BEP) in bundles is: b) fixed costs / contribution margin in bundles.

53) Acme Chimney Service reported the following information:

Fixed costs                                             $4,000

Variable costs                                             100

Contribution margin per bundle                    250

Compute the breakeven point in bundles. B) [($4,000 / $250)] = 16 breakeven point in bundles.

54) In the airline industry, an example of output is: a) passenger miles.

55) In the hotel/motel industry, an example of a measure of output is: b) room-nights occupied.

56) An example of an output at a hospital is: c) patient days.

57) An example of an output at a university is: d) student credit hours.

58) Managers compute gross margin as: b) sales revenue less cost of goods sold.

59) Managers confuse gross margin and contribution margin in merchandising companies because: a) cost of goods sold equals the variable cost of goods purchased.

60) The gross margin percentage is: d) gross margin divided by revenues.

61) The term used to show how much a company can charge for its products over and above the cost of acquiring or producing them is: b) gross margin.

62)A ________ ________ describes the likelihood or the probability, that each of the mutually exclusive and collectively exhaustive set of events will occur. e) probability distribution.

63) When the outcomes are measured in monetary terms, expected value is often called: d) expected monetary value.

1) Anything for which a measurement of costs is desired is a: a) cost object.

2) The iMac computer, or the service cost of repairing an iMac computer, are examples of: a) cost object.

3) Costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way is: e) indirect cost of cost object.

4) The specific term for assigning direct costs is: b) cost tracing.

5) The assignment of indirect costs is: a) cost allocation.

6)Cost pools: e) are groups of individual indirect cost items.

7) The ideal cost-allocation base is: a) the cost driver of indirect costs.

8) The Pine Tree Service provides tree services to consumers in the community. The manager reported that the indirect costs were $800,000 to run the log-cutting machine for 15,000 hours. Compute the cost allocation rate. A) [($800,000 / 15,000 hours)] = $53.33 per machine-hour

9) The manager at Printing Solutions Company reported that a machine used 1,000 machine-hours. The cost allocation rate is $75 per machine-hour. How should the manager allocate this cost? e) E) [($75 × 1,000)] = $75,000

10) The ideal part of a manager's long-term strategic plan is to have revenues exceed: a) total costs.

11) A criterion for allocating some costs is the cost object's ________ ________ ________ costs allocated to it. b) ability to bear.

12) Most managers believe that the ideal cost-allocation base is the ________ ________ of the indirect costs, since there is a cause-and-effect relationship between the cost allocation base and the indirect costs. b) cost driver.

13) A systematic way that managers link an indirect cost or group of indirect costs to cost objects is known as: e) cost-allocation base.

14) Which of the following is not a concern to a manager that utilizes the process-costing system? c) The cost object is known as a unit or multiple units of a distinct product.

15) In job-costing systems, the cost-object is a unit or multiple units of a distinct product or service called a: a) job.

16) Managers use job costing to cost multiple identical units of ________ products. d) distinct.

17) Per-unit cost is the ________ unit cost. e) average.

18) Managers that decide on whether or not to bid on a project or how much to bid on a project is an example of which step in the five-step decision-making process? a) Step 1: Identify the problems with uncertainties.

19) Managers that study drawings and engineering specifications provided by a company to make decisions about technical details is an example of which step in the five-step decision-making process? b) Step 2: Obtain information.

20) Managers that compare the predicted cost amounts against actual costs to evaluate how well they did on a specific job is an example of which step in the five-step decision-making process? e) Step 5: Implement the decision, evaluate performance, and learn.

21) The two underlying reasons that managers use longer time periods, such as a year, to calculate indirect-cost rates are: e) numerator reason; denominator reason.

22)The system that managers do not use too much in organizations today because managers cannot compute costs in a timely manner is: b) actual costing system.

23) The system that calculates the actual costs of jobs is: b) actual costing system.

24) Westinghouse Company has an opportunity to bid on a new job. The manufacturing cost estimate to bid on the job is $25,000, which yields a markup of 50% over the manufacturing cost. How much should they bid on this project? C) [($25,000 × .50 = $12,500) + $25,000] = $37,500

25)In 2012, Alan's Seafood Supply Manufacturing uses machine-hours as the only overhead cost-allocation base. The accountant reported the following information:

                                                                     Estimated              Actual

Manufacturing overhead costs                          $225,000          $250,000

Machine-hours                                                    50,000             55,000

Using job costing, compute the 2012 actual indirect cost rate. D) [($250,000 / 55,000)] = $4.54 per machine hour.

26) The Operations Manager at Mary's Pastry Shoppe requested a machine shop to build a special pastry machine to add extra jellies and sprinkles on their pastries. Mary estimated that the actual annual indirect-costs to make pastries in the new machine are $6,000 and the actual annual quantity of the cost-allocation base is 2,000. Compute the actual indirect-cost rate. C) [($6,000 / 2,000) = $3.

27) The meredith company reported the following information. compute the variable indirect cot rate per direct professional labor-hour. B) [($50,000 / 3,400)] = $14.70, [($10,000 / 900)] = $11.11.

28) Compute the fixed indirect cost rate per direct professional-labor hour. B) [($70,000 / 3,400) = $20.58, [($70,000 / $900)] = $77.77.

29)Compute the total allocation rate per direct professional Labor-Hour. B) [($120,000 / 3,400)] = $35.29, [($80,000 / 900)] = $88.88.

30) The Frame Shoppe reported that fixed costs remain constant at $450,000 per month. During high-output months variable costs are $315,000, and during the low-output months variable costs are $60,000. What are the high and low indirect-cost rates if budgeted professional labor-hours are 15,000 for high-output months and 1,857 for low-output months? Compute the budgeted indirect cost rate for the high-output month and the low-output month.

  1. A) [($450,000 / 15,000)] = $30 [($450,000 / 2,500)] = $180

[($315,000 / 15,000)] = 21          [($60,000 / 1,857)] =  21

High Month:              51           Low Month:          $201

31) Which of the following describes how managers compute the actual indirect-cost rate? B) Divide actual total indirect costs in the pool by the actual total quantity of the cost-allocation base.

32) The original record that supports journal entries in an accounting system is the: d) source documents.

33) The source document that managers use for direct manufacturing labor, which contains information about the amount of labor time used for a specific job in a specific department is a: c) labor0time sheet.

34) Managers order materials with a basic source document called a ________ ________ ________, which contains information about the cost of direct materials used on a specific job and in a specific department. E) materials-requisition record.

35) Managers use the job-cost record (job-cost sheet) to: e) record and accumulate all costs assigned to a specific job.

36) Rachel's Yarn Supply Manufacturing uses machine-hours as the only overhead cost allocation base. In 2012, the accountant reported the following information:

                                                         Estimated              Actual

Manufacturing overhead costs             $250,000          $275,000

Machine-hours                                       35,000              60,000

Using job costing, compute the 2012 budgeted manufacturing overhead rate. A) [($250,000 / 35,000)] = $7.14.

37) In 2012, Jim's Renovation Services used machine-hours as the only overhead cost-allocation base. According to his accountant, the following information was reported:

                                                         Budgeted             Actual

Manufacturing overhead costs              $350,000          $390,000

Machine-hours                                        75,000             50,000

Under the actual-costing system, what was the 2012 budgeted manufacturing rate. B) [($350,000 / 75,000)] = $4.66 per machine hour

38)Casio Company manufactures stereos. For each unit, $3,500 of direct material is used and there is $2,500 of direct manufacturing labor at $25 per hour. Manufacturing overhead is applied at $40 per direct manufacturing labor hour. Compute the cost of each unit. E) [($3,500 + $2,000) + (2,500 / 25) × 40)] = $9,500

39) When do managers compute the budgeted indirect-cost rate? c) annually.

40) A difference between costing a job with normal costing and actual costing is that normal costing uses which of the following cost rates? d) budgeted indirect-cost rates.

41) Which of the following explains how managers compute the actual manufacturing overhead rate? b) Divide actual annual manufacturing overhead costs by the actual annual quantity of the cost-allocation base.

42) Which of the following is not a benefit of the normal-costing system? b) Manufacturing costs of jobs are reported later

43) The Chandelier Shoppe's actual manufacturing overhead costs are $3,000,000. Overhead allocated on the basis of direct labor hours. The direct labor hours were 55,000 for the period. What is the manufacturing overhead rate? C) [($3,000,000 / 55,000)] = $54.54

44) Tia's Tea Manufacturing manufactures organic tea and applies manufacturing overhead costs to production at a budgeted indirect-cost rate of $8.00 per direct labor hour. The following data was obtained from the accountant's records for December 2012:

Direct materials                                                          $100,000

Direct labor (2,000 hours @ $8 per hour)                       $16,000

Indirect labor                                                                 $5,000

Plant facility rent                                                          $25,000

Depreciation on plant machinery and equipment              $8,000

Sales and commissions paid                                          $10,000

Administrative expenses                                                 $6,000

Compute the actual amount of manufacturing overhead cost occurred in December 2012. B) [($5,000 + $25,000 + $8,000)] = $38,000

45) Christian's Consulting Service employs 10 full-time consultants and 5 assistants. The direct and indirect costs are applied on a consultant labor-hour basis that includes both the consultants and assistant hours. The following information was reported by the accountant in 2012.

                                                      Budget              Actual

Indirect costs                                $200,000          $250,000

Annual Salary of each consultant   $100,000          $150,000

Annual salary of each assistant        $45,000            $55,000

Total professional labor hours          40,000  dlh      55,000  dlh

Compute the actual direct-cost rate and the actual indirect-cost rate per professional labor-hour. D) [($150,000 × 10) + ($55,000 × 5) / $55,000] = $32.27 actual direct-cost rate

$250,000 / $55,000 = $4.54 actual indirect-cost rate

46)The following data was reported by the manager at Cost Less Manufacturing:

                                                                          Actual

Total manufacturing overhead costs:             $2,200,000

Total direct manufacturing labor-hours                32,000

Compute the actual manufacturing overhead rate for the single manufacturing overhead cost pool. C) [($2,200,000 / 32,000)] = $68.75 per direct manufacturing labor-hour

47) The following data was reported by the manager at Cost Less Manufacturing:

Actual manufacturing overhead rate        $68.75

Direct manufacturing labor hours                   88

Compute the actual allocated manufacturing overhead costs. A) [($68.75 × 88)] = $6,050

48)Under normal costing, managers compute the amount of manufacturing overhead costs allocated to individual jobs based on the budgeted rate multiplied by the actual quantity used of the allocation base. This is known as: c) manufacturing overhead allocated.

49) Actual overhead costs incurred throughout the month are ________ to the Manufacturing Overhead Control account. a) added.

50) When individual jobs are completed, work-in-process inventory becomes: d) finished goods inventory.

51) Telephone Sales Company incurred labor wages to the Telephone Managers of $30,000 and $10,000 to the Sales Managers. Which of the following illustrates the appropriate journal entry to show this expense?

  1. B) Work-in-Process Control $30,000

     Manufacturing Overhead Control            $10,000

     Wages Payable Control                                                  $40,000

52) Which approach is known for spreading the underallocated overhead or overallocated overhead among ending work-in-process inventory, finished goods inventory, and cost of goods sold? a) Proration.

53) The approach that restates all overhead entries in the general ledger and job-cost records to represent actual cost rates rather than budgeted cost rates is known as: e) adjusted-allocation rate.

54) Which of the following is not a component of manufacturing overhead control? e) Record of manufacturing overhead allocated.

55) The record of the actual costs in all the individual overhead categories is known as: c) manufacturing overhead control.

56) Managers try to use a variation of ________ costs; and, they use budgeted rates to assign ________ costs. a) normal; direct.

57) Managers compute the budgeted indirect cost rate as: e) budgeted total cost in indirect cost pool / budgeted total direct-labor hours.

58) Managers compute the budgeted direct-labor cost rate as: d) budgeted total direct-labor costs / budgeted total direct-labor hours.

59) The ________ costs are traced to jobs using budgeted rates at the end of the year; and, will not equal ________ direct costs because actual rate and budgeted rates are developed at different times with different data. c) direct; actual

60) In actual costing, the ________ rates are calculated at the start of the fiscal year; and, the normal costing uses ________-cost rates for all direct costs and budgeted rates only for indirect costs. e) budgeted, actual.

61) Virginia Consultants employs 10 full-time management consultants. The budgeted annual compensation per employee is $75,000. The average time charged per client is 250 hours per year. The professional consultant labor costs are included in a single direct-cost category and they are allocated to jobs on a per-hour basis. The other costs associated with the consultant firm are included in a single indirect-cost pool, allocated according to professional labor hours. The budgeted indirect costs for the year are $500,000, and the firm expects to have 50 new clients in the next year. What is the budgeted direct-labor cost rate per hour? E) Total Direct Labor Cost = $75,000 × 10 = $750,000 Total Hours = 250 × 50 = 12,500 hours Direct labor cost rate per hour = $750,000 / 12,500 hours = $60 hours.

62) The step-down method is also the: e) sequential allocation method.

63) The service department is also professionally known as the: a) support department.

64) Material-handling labor costs are included as part of the ________ labor costs of each department. b) indirect.

65) Managers compute the plant administration cost-allocation rate as: e) total plant administration costs / total supervision salaries.

66) Which of the following is not an advantage of the direct method? d) It ignores information about reciprocal services provided among support departments.

67) Under the ________ ________ once a support department's costs have been allocated, no subsequent support-department costs are allocated back to it. e) step-down method.

1) There are distinct, identifiable units of a product or service in the: a) job-costing system.

2) Masses of identical or similar units of a product or service are in: c) process-costing system.

3) In a ________-costing system, individual jobs use different quantities of production resources. a) job.

4) ________ costs are all manufacturing costs other than direct material costs, including manufacturing labor, energy, and plant depreciation. d) conversion.

5) ________ -costing systems separate costs into cost categories according to when costs are introduced into the process. e) process.

6) Costs added evenly during production are: e) conversion costs.

7)A company that implements process costing with zero beginning and zero ending work-in-process inventory has: b) all units are started and fully completed within the accounting period.

8)In process costing with no beginning or ending work-in-process inventory, physical units, whether complete or incomplete, refer to the number of: c) output units.

9) John's Assembly Service provided the following data for the assembly department for January 2013:

                       Physical Units for January 2013

 

Work-in-process, beginning inventory (January 1)           0 units

Started during January                                                600 units

Completed and transferred out during January              600 units

Work in process, ending inventory (January 31)              0 units

                         Total Costs for January 2013

 

Direct material costs added during January                    $36,000

Conversion costs added during January                           24,000

Total assembly department costs added during January  $60,000

Compute the direct material cost per unit; the conversion cost per unit; and, the total department cost per unit. A) Direct material cost-per unit: ($36,000 / 600 units) = $60

Conversion cost per unit ($24,000 / 600 units) = $40.00

Department cost per unit ($60 + $40) = $100

10) Terry's Service Corporation reported the following data:

                       Physical Units for January 2013

 

Work-in-process, beginning inventory (January 1)           0 units

Started during January                                                300 units

Completed and transferred out during January              300 units

Work in process, ending inventory (January 31)               0 units

                         Total Costs for January 2013

 

Direct material costs added during January                    $40,000

Conversion costs added during January                           20,000

Total assembly department costs added during January   $60,000

Compute the direct material cost per unit; the conversion cost per unit; and, the total department cost per unit.  A) Direct material cost-per unit: ($40,000 / 300 units) = $133.33

Conversion cost per unit ($20,000 / 300 units) = $66.66

Department cost per unit ($133.33 + $66.66) = $199.99

11) Which of the following is the formula to compute the assembly cost per unit? D) Direct material cost per unit / conversion cost per unit

12) What is the first step of process costing? a) Summarize the flow of physical units of output.

13) What is the second step of process costing? b) Compute output in terms of equivalent units.

14) The common metric that managerial accountants use to compare work completed in each category and to obtain the measure of work completed is: b) equivalent unit.

15) Which of the following is not correct about equivalent units? E) Fails to convert the quantity of input into the amount of completed output units.

16) Managerial accountants calculate product costs on a: c) production cost worksheet.

17) T-account entries posted in process-costing systems: C) are similar to the T-account entries made in job-costing systems for direct materials and conversion costs.

18) The manager at Greenies Floral Shoppe estimated that the 50 units in ending inventory were 60% complete for conversion costs. All conversion costs represented in the 60% were used to make fully completed units. Compute the number of units completed at the end of the month. C) [(.60 × 50)] = 30 completed units of output

19) Crystal Clean Manufacturing reported the following information:

Direct material costs                             $24,000

Conversion costs                                      9,000

Compute the total cost of ending work-in-process inventory. D) [($24,000 + $9,000)] = $33,000.

20) The accountant at Magnificent Magic Company reported $180,000 total direct-material cost and 60,000 total direct-material equivalent units. Compute the direct-material cost per equivalent unit. C) $180,000 / 60,000 = $3.00 per equivalent unit

21) The process-costing method that assumes the earliest equivalent units in work in process are completed first is: e) fifo

22) Equivalent-unit and cost-per-equivalent-unit calculations under the weighted-average process-costing method ________ unit costs in beginning inventory with units and costs of work done in the current period. b) merges

23) The weighted-average process-costing method: a) calculates equivalent cost-per-unit of all work completed to date.

24) Managerial accountants realize that a distinct feature of the first-in, first-out (FIFO) process-costing method is that: B) it keeps separate work completed on beginning inventory before the current period from work completed in the current period.

25) The manager at Marilyn's Sewing Service reported $75,000 total conversion cost and 41,500 total conversion cost in equivalent units. Compute the conversion cost per equivalent unit. D) [($75,000 / 41,500)] = $1.80

26) The accounting manager at Sarah's Pet Toy Manufacturing uses the weighted-average method costing system. The accountant reported 85,000 units in beginning work in process and 32,000 equivalent units of work done in the current period. Compute the equivalent units completed and transferred out in the current period. D) [(85,000 + 32,000)] = 117,000

27) The accountant at John's Cycle Manufacturing Company uses the weighted-average costing method. The accountant reported that there were 400 equivalent units of work completed to date, and reported the following cost:

Summary of Total Costs

Beginning work in progress (direct materials, $15,000 + conversion costs $6,000)

$21,000

Costs added during March (direct materials, $12,000 + conversion costs $18,000

$30,000

Total costs to account for in March

$51,000

Compute the conversion cost-per-unit using the weighted-average costing method. D) Total conversion costs [(beginning work in process, $6,000 + work completed in current period, $18,000)] = $24,000 / 400 (equivalent units of work completed to date) = $60.00 weighed-average cost per equivalent unit

28) The Studio Furniture Company manufactures leather recliners. In February, the firm's Assembly Division started production of 50,000 leather recliners. During the month, the firm completed 55,000 chairs, and transferred them to the Finishing Department. The firm ended the month with 10,000 chairs in ending inventory. There were 15,000 chairs in beginning inventory. All direct materials costs are added at the beginning of the production cycle and conversion costs are added uniformly throughout the production process. The FIFO method of process costing is used by the accounting manager. The Operations Manager reported that the beginning work in process was 30% complete as to conversion costs, while ending work-in process was 80% completed as to conversion costs.

Beginning Inventory

            Direct materials                        $24,000

            Conversion costs                      $35,000

Manufacturing costs added during the accounting period

            Direct materials                        $168,000

            Conversion costs                      $278,000

Using the FIFO method, determine how many units that were started in February were completed during February? E) [(50,000 - 10,000]) = 40,000 units

29) The system that blends characteristics from both job-costing and process-costing systems is a: b) hybrid-costing system.

30) Which of the following is not true about operation-costing systems? e) Managers assume that operation unit costs are different regardless of the work order.

31) The hybrid-costing system that applies to batches of similar, but not identical products is the: d) operation-costing system.

32) In regard to budgeted-conversion costs, if some units have not been completed, managerial accountants compute the conversion-cost rate by: d) dividing budgeted conversion costs by the equivalent units of conversion costs.

33) The basic point in operation costing is that managers assume operation unit costs are the same regardless of the work order, but direct material costs: b) vary across orders when the materials used for each work order vary.

34) In T-account entries, costs can be added throughout the fiscal year in the Conversion Costs ________ account; and, the Conversion Control ________ account. d) control, allocated.

35) In a ________-________ ________, any over allocation or under allocation of conversion costs is disposed of in the same way as over allocated or under allocated manufacturing overhead. a) job-costing system.

36) Marcy's Manicure Shop has budgeted conversion costs in Operation 1 of solar nails in 2013 of $100,000; and, 30,000 budgeted product units in 2013. Compute the Operation 1 budgeted conversion-cost for 2013. D) [(100,000 / 30,000)] = $3.33 budgeted conversion costs

37) The juncture in a joint-production process when two or more products become separately identifiable is known as: C) the split off point.

38) The costs of a production process that yields multiple products simultaneously are: B) joint costs.

39) All costs incurred beyond the split off point that are assignable to each specific product identified at the split off point are: E) separable costs

40) A ________ cost is a cost of operating a facility, department, activity, or similar cost object that two or more users share. d) common

41) The method that determines the weights for cost allocation by considering each user of the cost as a separate entity is: d) stand-alone cost-allocation.

42) The method that ranks the individual users of a costs object in the order of users most responsible for the common cost and uses the ranking to allocate costs among users is: e) incremental cost-allocation.

43) The costs incurred beyond the split off point that are assignable to each of the specific products identified at the split off point is known as: c) separable cost.

44) ________-cost allocation is arbitrary, and mangers generally have a lot less discretion in choosing a method, unlike the choice of the weighted-average or FIFO method in process costing. b) joint.

45) The managerial accountant at the Williamsburg Outlet Shoppe reported the following stand-alone costs:

Stand-alone costs                         $130,000,000

Stand-alone costs                             70,000,000

Use the two stand-alone costs to allocate the common cost of $140,000,000 in millions for the Williamsburg Outlet Shoppe using the stand-alone cost-allocation method. D) [($130,000,000 / $130,000,000 + $70,000,000) = [($130,000,000 / $200,000,000)] = .65

[(.65 × $140,000,000)] = $91 million

1) The costing system that broadly averages or spreads the cost of resources uniformly to cost objects when individual products or services use those resources in nonuniform ways is ________. e) peanut-butter costing.

2)Peanut-butter costing ________. b) spreads the cost of resources uniformly to cost objects.

3) Broad averaging lead to ________. e) inaccurate product costs.

4) A product consumes a high level of resources per unit but is reported to have a low cost per unit is known as ________. b) product under costing.

5) Simple costing systems that allocate indirect costs are most likely to use which of the following steps first? a) Identify the products that are the chosen cost objects.

6) Managers can use steps as a tool in simple costing systems when they have a single indirect cost pool because it helps them to allocate indirect costs using a single indirect-cost rate. Which of the following is not one of the steps to guide them in this process? e) Application of the Five-Step Decision Making Platform.

7) As product diversity and direct costs increase, it is usually best to switch away from a ________ cost system and move to a ________ cost system. E) broad; activity-based

8) To compute the rate per unit of each cost-allocation base, managers ________. D) divide

9)A group of coworkers went to lunch at the mall. Listed below is the total cost of each individual meal.

Matthew

Hank

Shawn

Rachel

Marla

Jim

Entrée Cost

$12

$21

$16

$15

$61

$14

Dessert

0

8

5

5

17

3

Drinks

3

13

7

5

31

7

Total

$15

$42

$28

$25

$109

$24

Compute the average cost per dinner. When the costs are averaged across all six dinners, is Marla overcosted or undercosted? B) Explanation: [($15 + $42 + $28 + $25 + $109 + $24) = $241 / 6] = $42.16

Marla is undercosted because the cost of her meal was $109, based on the average dinner cost of $40.16.

10) The Heartmore Organization uses a single cost allocation base. The management accountants group all budgeted indirect costs of $4,000,000 into a single overhead cost pool. They also reported a budget of 40,000 direct manufacturing labor-hours during the same period. What is the rate per direct manufacturing labor-hour? C) [($4,000,000 / 40,000)] = $100 per direct manufacturing labor-hour

11) Zell Company produces a special hammer for carpenters. The budgeted total cost in the indirect-cost pool is $75,000. The budgeted total quantity of cost allocation base is 30,000. What is the budgeted indirect cost rate? D) [$75,000 / 30,000] = $25.00 per direct manufacturing labor-hour

12) The Monroe Company manufactures a special saddle. The budgeted indirect total cost associated with the production of the saddle is $100,000. The budgeted number of saddles is 55,000. What is the budgeted indirect cost allocation rate? D) [($100,000 / 55,000)] = $1.82 budgeted indirect-cost allocation rate

13) The Lighting Factory produces two types of light fixtures to sell to consumers. Product A illuminates high-density lighting and Product B illuminates low-density lighting. The manager at the Lighting Factory reported the following information:

Product #1: High-density light

      Operating income                         $200,000

      Revenues                                   $3,650,000

Product #2: Low-density light

      Operating income                         $225,000

      Revenues                                   $3,500,000

Compute the profit margin percentage for each product. A) Product A: [($200,000 / $3,650,000)] = 5.47%

Product B: [($225,000 / $3,500,000)] = 6.42%

14) The costing system that reduces the use of broad averages for assigning the cost of resources to cost objects is the ________. E) refined-costing system.

15) The growing demand for customized products, which has led managers to ________ the variety of products and services their companies offer. D) increase

16) Which of the following is not a reason why managers see an accelerated need for refinement? C) Decreases in indirect costs

17) Mug King reported the following information:

Small mugs

Large mugs

Total

1

Quantity of mugs

50,000

25,000

2

Number of mugs produced per batch

240

75

3

Number of batches

?

?

4

Setup time per batch

3 hours

5 hours

5

Total setup-hours

?

?

?

Compute the number of batches for small and large mugs, the total setup-hours, and the total setup-hours for both mugs. A)

Small mugs

Large mugs

Total

1

Quantity of mugs

50,000

25,000

2

Number of mugs produced per batch

240

75

3

Number of batches

208.33

333.33

4

Setup time per batch

3 hours

5 hours

5

Total setup-hours

624.99

1,666.65

2,291.64

Number of batches small mugs [(50,000 / 240)] = 208.33

Number of batches large mugs [(25,000 / 75)] = 333.33

Total setup-hours small mugs [(208.33 × 3)] = 624.99

Total setup-hours large mugs [(333.33 × 50] = 1,666.65

18) The costing system that refines a costing system by identifying individual activities as the fundamental cost object is ________. D) activity-based costing system

19) Determining costs of activity pools requires assigning costs accumulated in various account classifications to each of the activity cost pools. This is referred to as ________. a) first-stage allocation

20) We define second-stage allocation as ________. a) the allocation of costs of activity cost pools to products.

21) Beaver's Molding Corporation produces a quantity of 50,000 molds for contractors. The workers produce 220 molds per batch. Compute the total number of batches produced. D) [(50,000 / 220)] = 227.27 batches produced.

22) Manufacturing Mates produces special-order tiles for organizations. The company reported that they produced 250 batches of tile and the setup time per batch was 2 hours. Compute the total setup hours. C) [(250 × 2)] = 500 total setup hours

23) Which of the following is not a level in the cost hierarchy? B) Input-level unit costs.

24) Which of the following are costs of activities performed on each individual unit of a product or service? C) Output unit-level costs.

25) The costs of activities related to a group of units of a product or service rather than each individual unit of product or service are ________. a) batch-level costs.

26) Which of the following are costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced? d) product-sustaining costs.

27) The costs of activities that cannot be traced to individual products or services but that support the organization as a whole are ________. E) facility-sustaining costs.

28) In indirect cost pools, administrative costs are ________. E) facility-sustaining costs

29) In indirect cost pools, design costs are ________. C) product-sustaining costs

30) In indirect cost pools, shipment setup costs are ________. B) batch-level costs

31) In indirect cost pools, machine operations costs are ________. C) output unit-level costs

32) In indirect cost pools, distribution costs are ________. C) output unit-level costs

33)In the cause-and-effect relationship between allocation base and activity cost, the distribution costs ________ with cubic feet of packages delivered. B) increase

34) In the cause-and-effect relationship between allocation base and activity cost in indirect costing systems, the indirect costs of operating modeling machines ________ with molding machine-hours.

  1. b) increase.

35) The Chesapeake Organization reported $400,000 of indirect-cost pool in design activity. The manager reported a cost-allocation base of 110 parts per square feet. Compute the amount of design activity per part-square foot. C) [($400,000 / 110)] = $3,636.36 per part-square foot

36) The manager at the Atlantic Organization reported $225,000 in Administration Activity. The manager reported that the cost-allocation base was 32,000 in direct manufacturing-labor hours. Compute the direct manufacturing labor-hours. B) [($225,000 / 32,000)] = $7.03 per direct manufacturing labor.

37) The manager at the Petersburg Organization reported $380,000 in distribution activity. The cost-allocation base is 52,000 cubic feet of material delivered to the New Jersey plant. Compute the amount per cubic foot of product delivered. A) [($380,000 / 52,000)] = $7.30 per cubic foot delivered

38) The Ready Corporation reported the following information:

Compute the budgeted indirect cost rate for each activity. E) ¾=5 4375;58.5;400;9.

39) Which of the following is not a sign of when an activity-based costing system would likely provide the manager with the most benefits? E) Operations staff that agrees with all of the reported costs of manufacturing and marketing products and services

40) Which of the following is not true about the benefits and costs of activity-based costing systems? B) It requires few calculations to determine costs of products and services.

41) When incorrect cost-allocation bases are used ________. B) activity-cost information can be misleading

42) Which of the following is not a behavioral issue that managers consider when they implement activity-based costing systems? E) Seeking only large long-run success as proof that the ABC implementation is yielding results.

43) The main costs and limitations of activity-based systems are ________. a) measurements necessary to implement it.

44) The method of management decision making that uses activity-based costing information to improve customer satisfaction and profitability is ________. E) activity-based management

45) Which of the following is not a decision that managerial accountants seek when they use activity-based management? E) Decisions about human resource department policies and procedures

46) Which of the following is not a reason that manufacturing, and distribution personnel would implement activity-based costing systems? E) Reduce work while disregarding customer service and the perceived value

47) Operating personnel manage costs by ________. a) controlling physical cost drivers

1) Which of the following is not true about pricing decisions? E) Customers never have an influence on demand and supply.

2) Which of the following is not true about competitors? E) It is not necessary for managers to learn about their competitors' technologies.

3) Which of the following is not true about international competition? E) Different countries' currencies have no impact on pricing decisions.

4) Which of the following is true about costs? C) As companies increase supply, the cost of producing the product initially declines but eventually increases

5) The strategic decision designed to build long-run relationships with customers based on stable and predictable prices is ________. E) long-run pricing

6) To set long-run prices, managers calculate the ________ -cost of producing and selling a product. A) full

7) The cost-based approach is also called: A) cost-plus

8) Companies operating in competitive markets use the: C) market-based approach

9) Accounting managers that start pricing decisions by asking "Given what our customers want and how our competitors will react to what we do, what price should we charge" is most likely to use: C) market-based approach

10)The managerial accountant at the Wright Company reported the following information:

Compute the Total quantity of cost driver of direct materials and direct manufacturing labor (DML). A) Total Quantity of Cost Driver for Direct Materials [#3 × #4] =: [(1 × 175,000)] = 175,000

Total Quantity of Cost Driver for Direct Manufacturing Labor [#3 × #4] =: [(3.4 × 175,000)] =595,000

11) The Wright Company reported a 7% defect rate of bolts and there are 140,000 units of bolts. Compute the number of defects in units at the Wright Company. C) [(.07% × 140,000)] = 9,800 defective units

12) The Trust Manufacturing Company reported $50,000,000 in direct manufacturing costs for 140,000 units of product. Compute the manufacturing cost per unit. A) [($50,000,000 / 140,000)] = $357.14 manufacturing cost per unit

13) The estimated price for a product or service that customers are willing to pay is: a) target price

14) Market-based pricing starts with: a) target price

15) To earn the target, return on capital, the Moore Company needs to earn 12% operating income per unit on the total units they need to sell. The managerial accountant reported that the target price is $750 per unit. Compute the target operating income per unit and the target cost per unit. B) Target operating income per unit: [(12% × $750)] = $90     Target cost per unit: [($750 - $90)] = $660 per unit

16) The Coffee Distribution Company charges $1,200 to distribute coffee to customers. The managers at the company expect competitors to reduce prices to $1,025. The managers at the Coffee Distribution Company decide to remain competitive and reduce the cost of their coffee by 20%. Compute the new cost the Coffee Distribution Company will charge based on the 20% price reduction. As a result of the cost reduction, should the managerial accountants at the Coffee Distribution forecast an increase or a decrease in annual sales per unit? C) [($1,200 × 20%)] = $240     [($1,200 - $240)] = $960

The managers at the Coffee Distribution Company should forecast an increase in annual sales.

17) A systematic evaluation of all aspects of the value chain, with the objective of reducing costs and achieving a quality level that satisfies customers is ________. C) value engineering.

18) The cost that, if eliminated, would reduce actual or perceived value or utility customers experience from using the product or service is ________. a) value-added cost

19) Costs that have not yet been incurred but will be incurred in the future based on decisions that have already been made are: B) locked-in costs.

20) In reference to locked-in cost curves and the cost-incurrence curves, the top curve plots: B) cumulative locked-in costs.

21) Target annual operating income divided by invested capital is ________. E) target rate of return on investment

22)Amarillo Manufacturing uses a 13% markup on the full unit cost of Product X to compute the selling price. The full unit cost of Product X is $850. Compute the markup component and the prospective selling price. B) Markup component: [(.13 × $850)] = $110.50 Prospective selling price: [($850 + $110.50)] = $960.50

23) The Board Manufacturing Company reported investment capital of $80,000,000 and a 16% (pretax) target rate of return on the investment of 150,000 units of Product Y. Compute the targeted annual operating income and the target operating income per unit of Product Y. D) Targeted annual operating income: [(.16 × $80,000,000)] = $12,800,000 Targeted operating income per unit of Product Y: [($12,800,000 / 150,000)] = $85.33

24) The Walter Foundation invested $3,500,000 in a plant to remanufacture refrigerators. The target operating income from the plant is $250,000 annually. The company plans actual sales of 800 refrigerators at $1,100.00 each. Compute the target rate of return on the investment at the Walter Foundation. B) [($250,000 / $3,500,000)] = 7.14%

25) The Kensington Corporation invested $2,500,000 in an operation to make wooden planks. The target operating income desired at the plant is $245,000 annually. The company plans actual sales of 700 planks at $500 each. The managerial accountant reported a target rate of return on the investment of 15%. Compute the markup percentage as a percentage of the full cost for the Kensington Corporation C) $245,000 / [(700 × $500) - $245,000] = 2.33%

26) Mark Manufacturing had a product design that resulted in a $740 full cost of Product B. Assuming a markup of 10%, what is the prospective price of Product B? C) [$740 + (.10 × $740)] = $814

27) The Heritage Foundation reported the following information:

Cost Base

Estimated Cost per Unit

Markup Percentage

Markup Component

Prospective Selling Price

(1)

(2)

(3)

(4)

Variable manufacturing cost

$425.00

60%

?

?

Variable cost of the product

$550

45%

?

?

Manufacturing cost

$520

50%

?

?

Full cost of the product

$710

10%

?

?

Compute the markup component and the prospective selling price for each cost base at the Heritage Foundation. A)

Markup component:

Variable manufacturing cost: [($425 × .60)] = $255

Variable cost of the product: [($550 × .45)] = $247.50

Manufacturing cost: [($520 × .50)] = $260

Full cost of the product: [($710 × .10)] = $71

Prospective selling price:

Variable manufacturing cost: [($425 + $255)] = $680

Variable cost of the product: [($550 + $247.50)] = $797.50

Manufacturing Cost: [($520 + $260)] = $780

Full cost of the product: [($710 + $71)] = $781

28) The reporting and assessment of revenues earned from customers and the costs incurred to earn those revenues is: E) customer-profitability analysis

29) The reduction in selling price below list selling price to encourage customers to purchase more quantities is: a) price discount

30) Which category of indirect costs in the customer-cost hierarchy are product handling costs of each computer sold? a) Customer output unit-level costs

31) Which category of indirect costs in the customer-cost hierarchy are costs incurred to process orders or to make deliveries? B) Customer batch-level costs

32) Which category of indirect costs in the customer-cost hierarchy are costs of visits to customers or costs of displays at customer sites? C) Customer-sustaining costs

33) Which category of indirect costs in the customer-cost hierarchy is the cost of the salary of a manager in a wholesale distribution channel? D) Distribution-channel costs

34) Sales-order costs are:

35) The Premier Sales Company reported $6,250,000 on the sales order activity in 2012. The activity included negotiating, finalizing, issuing, and collecting on 5,500 sales orders. Compute the cost per sales order. What type of costs are sales-order costs? C) [($6,250,000 / 5,500)] = $1,136.37 per sales order

36) ________ spans the time from initial R&D on a product to when customer service and support is no longer offered for that product a) Product life cycle

37) ________ tracks and accumulates business function costs across the entire value chain from a product's initial R&D to its final customer service and support D) Life-cycle costing

38) The costs that provide useful information for strategically evaluating pricing decisions are: E) budgeted life-cycle costs

39) ________ focus on total costs incurred by a customer to acquire, use, maintain, and dispose of a product or service. C) Customer life-cycle costs

40) Stripe Engineering reported the following budgeted life-cycle revenues to report alternative selling-price/sales-quantity combinations:

Compute the life-cycle revenues for A, B, and C. B) Product A: [($200 × 4,500)] = $900,000

Product B: [($350 × 3,800)] = $1,330,000

Product C: [($500 × 2,400)] = $1,200,000

41) The costs that influence prices a company can charge for its products is: C) customer life-cycle costs.

42) The practice of charging different customers different prices for the same product or service is: C) price discrimination.

43) Insensitivity of demand to price changes is called: B) demand inelasticity

44) The practice of charging a higher price for the same product or service when demand approaches the physical limit of the capacity to produce that product or service is: D) peak-load pricing

45) “Price discrimination is permissible if differences in prices can be justified by differences in costs" is a key feature of: a) price-discrimination laws

46) The Sherman Act, the Clayton Act, the Federal Trade Commission Act, and the Robinson-Patman Act are: E) U.S. antitrust laws.

47) Under U.S. laws, ________ occurs when a non-U.S. company sells a product in the United States at a price below the market value in the country where it is produced. D) dumping.

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