Test Bank for Horngrens Cost Accounting; A Managerial Emphasis 16th Edition by Srikant Datar & Madha

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TEST BANK

2022

Prof.Exams

COMPLETE Elaborated Test Bank for Horngren's Cost Accounting A Managerial Emphasis 16th Edition Srikant Datar Madhav Rajan

2022

Prof.Exams

Horngren's Cost Accounting - A Managerial Emphasis 16th Edition by Srikant Datar & Madhav Rajan ISBN-10 0134475585 ISBN-13 978-0134475585 Test bank for Horngren's Cost Accounting - A Managerial Emphasis 16th Edition by Srikant Datar & Madhav Rajan

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TABLE OF CONTENTS 1. The Manager and Management Accounting 2. An Introduction to Cost Terms and Purposes 3. Cost–Volume–Profit Analysis 4. Job Costing 5. Activity-Based Costing and Activity-Based Management 6. Master Budget and Responsibility Accounting 7. Flexible Budgets, Direct-Cost Variances, and Management Control 8. Flexible Budgets, Overhead Cost Variances, and Management Control 9. Inventory Costing and Capacity Analysis 10. Determining How Costs Behave 11. Data Analytic Thinking and Prediction 12. Decision Making and Relevant Information 13. Strategy, Balanced Scorecard, and Strategic Profitability Analysis 14. Pricing Decisions and Cost Management 15. Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis 16. Allocation of Support-Department Costs, Common Costs, and Revenues 17. Cost Allocation: Joint Products and Byproducts 18. Process Costing 19. Spoilage, Rework, and Scrap 20. Balanced Scorecard: Quality and Time 21. Inventory Management, Just-in-Time, and Simplified Costing Methods 22. Capital Budgeting and Cost Analysis 23. Management Control Systems, Transfer Pricing, and Multinational Considerations 24. Performance Measurement, Compensation, and Multi-national Considerations

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CHAPTER 1 MANAGERIAL ACCOUNTING AND THE BUSINESS ORGANIZATION

Learning Objectives 1.

2.

3.

4.

5.

6.

7.

8.

Describe the manor users of accounting information Explain the cost-benefit and behavioral issues involved in designing an accounting system.

Explain the role of budgets and performance reports in planning and control Discuss the role accountants play in the company’s value chain functions.

Contrast the functions of controllers and treasurers.

Identify current trends in management accounting.

Explain a management accountant’s ethical responsibilities Understand how managerial accounting is used in companies.

True/False: 1.

The primary purpose of accounting information is to help managers make decisions.

T (L.O. 1, easy)

2.

The same information may serve the attention-getting function and the problem-solving function.

T (L.O. 1, easy)

3.

Scorekeeping enables internal and external parties to evaluate organizational performance.

T (L.O. 1, easy)

4.

The cost-benefit balance is the primary consideration in choosing among accounting systems and methods.

T (L.O. 2, easy)

5.

The behavioral implications of an accounting system include the effects on the firm’s customers.

F (L.O. 2, easy)

6.

Decisions within an organization are often divided into two types: (1) planning decisions and (2) control decisions.

T (L.O. 3, easy)

7.

Variances are deviations from plans.

T (L.O. 3, easy)

8.

Management by exception is the practice of concentrating on areas that deviate from the plan and ignoring areas that are presumed to be running smoothly.

T (L.O. 3, easy)

1

9.

Product life cycles may range from a few months to many years.

T (L.O. 4, easy)

10.

The value chain is the sum of all costs added to products as the products pass from manufacturers to wholesalers to retailers.

F (L.O. 4, easy)

11.

Most products have short development stages and long market lives.

F (L.O. 4, easy)

12.

Staff authority is authority to advise but not command.

T (L.O. 5, easy)

13.

Line departments are directly responsible for producing a company’s goods and services.

T (L.O. 5, easy)

14.

The contoller is primarily concerned with a company’s financial matters, the treasurer with operating matters.

F (L.O. 5, easy)

15.

In English-speaking countries outside of the United States, management accountants are known as chartered accountants.

F (L.O. 5, easy)

16.

The essence of the just-in-time philosophy is to eliminate waste.

T (L.O. 6, easy)

17.

Companies that have a fully installed CIM system are usually labor intensive.

F (L.O. 6, easy)

18.

E-procurement is buying and selling products and services with digital cash.

F (L.O. 6, easy)

19.

In the final analysis, ethical standards depend on the values of top management.

F (L.O. 7, easy)

20.

Management accounting pays a vital role in the achievement of company goals and objectives.

T (L.O. 8, easy)

2

Multiple Choice: 21.

_______________ refers to accounting information developed for managers within an organization. a. Internal auditing b. Managerial accounting c. Financial accounting d. Tax accounting L.O. 1

22.

The primary users of management accounting information are a. bankers. b. governmental regulatory authorities. c. internal decision-makers. d. suppliers.

L.O. 1

23.

Easy

_______________ is a formal mechanism for gathering, organizing, and communicating information about an organization's activities. a. An accounting system b. Scorekeeping c. Management accounting d. Attention directing L.O. 1

25.

Easy

The acronym GAAP is most closely connected with a. Management accounting. b. Financial accounting. c. the IRS. d. both management accounting and financial accounting.

L.O. 1

24.

Easy

Easy

_______________ is the field of accounting that develops information for external decision makers such as stockholders, suppliers, banks, and government regulatory agencies. a. Auditing b. Tax accounting c. Management accounting d. Financial accounting L.O. 1

Easy

3

26.

Which scorecard function is associated with the accumulation of data? a. Scorekeeping b. Attention directing c. Problem solving d. None of the above L.O. 1

27.

Which scorecard function is associated with planning and control? a. Scorekeeping b. Attention directing c. Problem solving d. None of the above L.O. 1

28.

Moderate

The greatest impact of the Foreign Corrupt Practices Act on the accounting system is that it a. forbids bribery. b. prohibits unethical practices by foreign investors. c. requires documentation of the adequacy of internal accounting controls. d. specifies how to account for transactions with foreign countries.

L.O. 1

30.

Moderate

Which scorecard function is associated with making non-routine decisions? a. Scorekeeping b. Attention directing c. Problem solving d. None of the above L.O. 1

29.

Moderate

Moderate

_______________ is a review to determine whether the policies and procedures specified by top management have been implemented. a. The Foreign Corrupt Practices Act b. A management audit c. GAAP d. The Robinson-Patman Act L.O. 1

Easy

4

31.

A clerk records a transaction in the accounting system. This activity would be classified as a. problem solving. b. scorekeeping. c. planning. d. attention directing.

L.O. 1

32.

A management audit would be performed by all of the following EXCEPT a. the General Accounting Office. b. a hospital. c. a sneaker manufacturer. d. All of the above would perform management audits.

L.O. 1

33.

Easy

All of the following are service organizations, EXCEPT a. a dry clearners. b. a public accounting firm. c. a manufacturer of sporting goods. d. a real estate brokerage.

L.O. 2

35.

Moderate

Broad concepts or guidelines and detailed practices that together make up accepted accounting practice at a given time are referred to as a. accounting rules and regulations. b. accounting conventions. c. GAAP. d. IRS regulations.

L.O. 1

34.

Easy

Easy

All service organizations are similar in that a. there is very little labor. b. output is usually difficult to define. c. major inputs and outputs can be stored. d. they are capital intensive.

L.O. 2

Moderate

5

36.

Complexity in accounting systems a. is desirable if it reflects the complexity of the underlying business. b. can usually be justified on a cost-benefit basis. c. is necessary in order to manage the behavioral implications of the accounting system. d. frequently generates costs of gathering and interpreting data that often exceed prospective benefits.

L.O. 2

37.

Nonprofit service organizations are similar to profit-seeking service organizations in that a. both use labor intensively. b. Output is usually easy to define. c. Major inputs and outputs can be stored. d. All of the above are characteristics.

L.O. 2

38.

Moderate

_______________ is (are) the primary consideration in choosing among accounting systems and methods. a. Simplicity b. Behavioral implications c. The cost-benefit balance d. Computerization L.O. 2

40.

Moderate

Which of the following items should be considered in addition to simplicity by managers when designing accounting systems? a. cost-benefit balances b. behavior implications c. both a and b d. none of the above L.O. 2

39.

Moderate

Easy

_______________ is (are) the accounting system's effect on the decision of managers. a. Simplicity b. Behavioral implications c. The cost-benefit balance d. Computerization L.O. 2

Easy

6

41.

Budgets a. are quantitative expressions of action plans. b. provide feedback by comparing results with plans and by highlighting deviations from plans. c. are deviations from a plan. d. ignore areas that are presumed to be running smoothly.

L.O. 3

42.

Performance reports a. are quantitative expressions of action plans. b. provide feedback by comparing results with plans and by highlighting deviations from plans. c. are deviations from a plan. d. ignore areas that are presumed to be running smoothly L.O. 3

43.

Easy

Management by exception a. is the quantitative expression of action plans. b. provides feedback by comparing results with plans and by highlighting deviations from plans. c. is a summary report of plan results. d. focuses on areas that are presumed to be running smoothly.

L.O. 3

45.

Easy

Variances a. are quantitative expressions of action plans. b. provide feedback by comparing results with plans and by highlighting deviations from plans. c. are deviations from a plan. d. ignore areas that are presumed to be running smoothly L.O. 3

44.

Easy

Easy

One advantage of the management by exception approach is that it a. frees managers from needless concern over operations that are running smoothly. b. allows managers to ignore aspects of the business outside their area of expertise. c. allows managers to ignore day-to-day concerns so they can focus on crises. d. takes advantage of computerization.

L.O. 3

Easy

7

46.

Department performance reports can be used to help department heads determine a. how effectively the department is operating. b. how efficiently the department is operating. c. how effectively and efficiently the department is operating. d. who is primarily responsible for any deviations from plans.

L.O. 3

47.

Moderate

Launching a new product line is an example of a. decision making. b. planning. c. controlling. d. organization.

L.O. 3

48.

Organizing workers into departments and assigning activities to those departments is an example of a. planning. b. controlling. c. budgeting. d. analyzing.

L.O. 3

49.

Moderate

Moderate

Reviewing the output of the department is an examples of a. planning. b. controlling. c. budgeting. d. analyzing.

L.O. 3

Moderate

8

50.

The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200 persons and prepared the following budget: Hotel room rental Food Entertainment Decorations Totals

$600 500 800 300 $2,200

After all bills for the party were paid, the total came to $2,315. Details are $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party.

What is the total budget variance? a. b. c. d.

$115 unfavorable $115 favorable $25 favorable $140 unfavorable

L.O. 3

51.

Moderate

The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200 persons and prepared the following budget: Hotel room rental Food Entertainment Decorations Totals

$600 500 800 300 $2,200

After all bills for the party were paid, the total came to $2,315. Details are $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party.

What is the main reason for the unfavorable total budget variance? a. b. c. d.

Hotel room rent Food Entertainment Decorations

L.O. 3

Challenging

9

52.

The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200 persons and prepared the following budget: Hotel room rental Food Entertainment Decorations Totals

$600 500 800 300 $2,200

After all bills for the party were paid, the total came to $2,315. Details are $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party.

What is the variance in hotel room rental? a. b. c. d.

$70 unfavorable $70 favorable $25 favorable $140 unfavorable

L.O. 3

53.

Moderate

The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200 persons and prepared the following budget: Hotel room rental Food Entertainment Decorations Totals

$600 500 800 300 $2,200

After all bills for the party were paid, the total came to $2,315. Details are $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party.

What is the variance in food? a. b. c. d.

$70 unfavorable $70 favorable $25 favorable $140 unfavorable

L.O. 3

Moderate

10

54.

The Alpha Beta Gamma Fraternity held a Christmas party. The fraternity expected attendance of 200 persons and prepared the following budget: Hotel room rental Food Entertainment Decorations Totals

$600 500 800 300 $2,200

After all bills for the party were paid, the total came to $2,315. Details are $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. Two hundred persons attended the party.

Which of the following costs deserves further examination assuming the fraternity uses the management-by-exception rule? a. Hotel room rent b. Food c. Entertainment d. Decorations L.O. 3 55.

Challenging

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: Room rental Food D J entertainment Decorations

$150 250 150 75

Totals

$625

After all bills for the party were paid, the total came to $660. Details are $140 for room rental; $320 for food; $125 for D J entertainment; and $75 for decorations. Fifty persons attended the party.

What is the total budget variance? a. b. c. d.

$10 unfavorable $35 favorable $10 favorable $70 unfavorable

L.O. 3

Moderate

11

56.

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: Room rental Food D J entertainment Decorations

$150 250 150 75

Totals

$625

After all bills for the party were paid, the total came to $660. Details are $140 for room rental; $320 for food; $125 for D J entertainment; and $75 for decorations. Fifty persons attended the party.

What is the main reason for the unfavorable total budget variance? a. b. c. d.

Room rent Food D J Entertainment Decorations

L.O. 3

57.

Challenging

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: Room rental Food D J entertainment Decorations

$150 250 150 75

Totals

$625

After all bills for the party were paid, the total came to $660. Details are $140 for room rental; $320 for food; $125 for D J entertainment; and $75 for decorations. Fifty persons attended the party.

What is the variance in hotel room rental? a. b. c. d.

$35 unfavorable $35 favorable $10 favorable $70 unfavorable

L.O. 3

Moderate

12

58.

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: Room rental Food 250 D J entertainment Decorations Totals

$150 150 75

$625

After all bills for the party were paid, the total came to $660. Details are $140 for room rental; $320 for food; $125 for D J entertainment; and $75 for decorations. Fifty persons attended the party.

What is the variance in food? a. b. c. d.

$35 unfavorable $35 favorable $10 favorable $70 unfavorable

L.O. 3

59.

Moderate

The Delta Delta Delta Sorority held a homecoming party. The sorority prepared the following budget for 50 expected attendees: Room rental Food D J entertainment Decorations

$150 250 150 75

Totals

$625

After all bills for the party were paid, the total came to $660. Details are $140 for room rental; $320 for food; $125 for D J entertainment; and $75 for decorations. Fifty persons attended the party.

Which of the following costs deserves further examination assuming the sorority uses the management-by-exception rule? a. b. c. d.

Room rent Food D J Entertainment Decorations

L.O. 3

Challenging

13

60.

Research and development is the function of a value chain that includes a. the generation of, and experimentation with, ideas related to new products, services, or process. b. the detail and engineering of products c. the coordination and assembly of resources to produce a product or deliver a service. d. the manner by which individuals or groups learn about the value and features of products or services.

L.O.4

61.

Product and service process design is the function of a value chain that includes a. the generation of, and experimentation with, ideas related to new products, services, or process. b. the detail and engineering of products. c. the coordination and assembly of resources to produce a product or deliver a service. d. the manner by which individuals or groups learn about the value and features of products or services.

L.O.4

62.

Easy

Production is the function of a value chain that includes a. the generation of, and experimentation with, ideas related to new products, services, or process. b. the detail and engineering of products c. the coordination and assembly of resources to produce a product or deliver a service. d. the manner by which individuals or groups learn about the value and features of products or services.

L.O.4

63.

Easy

Easy

Marketing is the function of a value chain that includes a. the generation of, and experimentation with, ideas related to new products, services, or process. b. the detail and engineering of products c. the coordination and assembly of resources to produce a product or deliver a service. d. the manner by which individuals or groups learn about the value and features of products or services.

L.O.4

Easy

14

64.

Distribution is the function of a value chain that includes a. the mechanism by which products or services are delivered to the customer . b. the manner by which individuals or groups learn about the value and features of products or services. c. the support activities provided to the customer. d. all of the above.

L.O.4

65.

Customer service is the function of a value chain that includes a. the mechanism by which products or services are delivered to the customer . b. the manner by which individuals or groups learn about the value and features of products or services. c. the support activities provided to the customer. d. all of the above.

L.O.4

66.

Easy

A company can best reduce the life cycle costs of product and services by managing the revenues and costs associated with which function of the value chain? a. production b. design c. customer service d. support L.O.4

68.

Easy

Which of the following products have a product life cycle of a few months? a. fashion clothing b. automobiles c. planes d. electric stoves L.O.4

67.

Easy

Easy

During the product development stage of the product life cycle, companies typically experience a. costs without revenues b. revenues without costs c. both costs and revenues d. neither costs nor revenues L.O.4

Easy

15

69.

A company earns most product revenue during which stages of the product life cycle? a. Product development and introduction to market b. Introduction to market and mature market c. Mature market and product development d. Phase-out of product and mature market L.O.4

70.

Stable sales level corresponds to which stage of the product life cycle? a. Product development b. Introduction to market c. Mature market d. Phase-out of product L.O.4

71.

Easy

The various stages through which a product passes are called the a. product life cycle. b. production plan. c. market analysis. d. product initiative.

L.O.4

73.

Easy

A company should be especially concerned that revenues are balanced with costs during which stage of the product life cycle? a. Product development b. Introduction to market c. Mature market d. Phase-out of product L.O.4

72.

Easy

Easy

Product life cycles a. are the same for all products. b. must be considered to effectively plan for production. c. are computerized bicycles. d. have nothing to do with product profitability.

L.O.4

Moderate

16

74.

At a clothing manufacturer line authority is held by the head of which department? a. assembly b. receiving c. shipping d. all of the above L.O.5

75.

Staff authority may be exerted a. downward and laterally, but not upward. b. upward and downward, but not laterally. c. laterally and upward, but not downward d. downward, upward, and laterally.

L.O.5

76.

Moderate

According to the Financial Executives Institute, one function of treasurership is a. reporting and interpreting financial information. b. short-term financing. c. government reporting. d. tax administration.

L.O.5

79.

Moderate

According to the Financial Executives Institute, one function of controllership is a. investments. b. short-term financing. c. provision of capital. d. reporting and interpreting financial information.

L.O.5

78.

Easy

An example of a staff department at a clothes manufacturer is the a. pressing department. b. cutting department. c. sales department. d. maintenance department.

L.O.5

77.

Easy

Moderate

Internal auditors should have as their primary responsibilities a. attention-directing and problem-solving. b. problem-solving and scorekeeping. c. scorekeeping and attention-directing. d. problem-solving only.

L.O.5

Moderate

17

80.

_______________ is mainly concerned with the company's operating matters. a. The controller b. The treasurer c. The chairman of the board d. The CEO L.O.5

81.

An accountant earns the designation of certified public accountant (CPA) by a. meeting an education requirement. b. meeting a qualifying experience requirement. c. passing an examination. d. meeting all of the above.

L.O.5

82.

Easy

Certified public accountants are a. internal auditors. b. management accountants. c. external auditors. d. government employees.

L.O.5

85.

Easy

The benefits of e-procurement are realized through a. reduced transaction cost. b. reduced transaction time from request to delivery. c. reduced transaction time from delivery to sale. d. both a and b.

L.O.5

84.

Easy

Buying manufacturing or operating inputs electronically is a type of a. A2B transaction. b. B2B transaction. c. B2C transaction. d. C2B transaction.

L.O.5

83.

Moderate

Easy

The largest U.S. association of professional accountants whose major interest is management accounting is the a. American Institute of CPA's. b. American Accounting Association. c. Government Accounting Institute. d. Institute of Management Accountants.

L.O.5

Easy

18

86.

Which of the following is NOT a major factor causing changes in management accounting today? a. declining work ethic b. increased global competition c. e-commerce d. increasing importance of the service sector of the economy L.O.6

87.

The just-in-time philosophy attempts to reduce cost by reducing a. value-added activities. b. manufacturing time. c. the number of products manufactured. d. all of the above.

L.O.6

88.

Easy

According to the Standards of Ethical Conduct for Management Accountants, the standard of competence includes a. the ongoing development of the accountant’s knowledge and skills. b. avoiding actual or apparent conflicts of interest. c. disclosing all relevant information. d. all of the above.

L.O.7

90.

Easy

Systems that use computer-aided design and computer-aided manufacturing, together with robots and computer-controlled machines are called a. just-in-time systems. b. robotic-computer systems. c. computer-integrated manufacturing systems. d. manufacturing-robotic systems.

L.O.6

89.

Moderate

Easy

Below is a statement from the Standards of Ethical Conduct for Management Accountants.

Refrain from disclosing confidential information acquired in the course of their work except when authorized, unless legally obligated to do so.

It is an example of a. Competence. b. Confidentiality. c. Integrity. d. Objectivity.

L.O.7

Easy

19

91.

According to the Standards of Ethical Conduct for Management Accountants, the standard of objectivity includes a. the ongoing development of the accountant’s knowledge and skills. b. avoiding actual or apparent conflicts of interest. c. disclosing all relevant information. d. all of the above.

L.O.7

92.

Easy

Below is a statement from the Standards of Ethical Conduct for Management Accountants.

Communicate information fairly and objectively.

It is an example of a. Competence. b. Confidentiality. c. Integrity. d. Objectivity.

L.O.7

93.

According to the Standards of Ethical Conduct for Management Accountants, the standard of confidentiality includes a. the ongoing development of the accountant’s knowledge and skills. b. avoiding actual or apparent conflicts of interest. c. disclosing all relevant information. d. all of the above.

L.O.7

94.

Easy

Easy

Your close friend is a shareholder of the company that employs you, a management accountant. The friend asks you for information that is typically available only to company management. Sharing this information with your friend violates the ethical standard of a. Competence. b. Confidentiality. c. Integrity. d. Objectivity.

L.O.7

Easy

20

95.

A supplier to your company offers to let you, a management accountant, use the supplier’s condo in Cancun for your vacation. Accepting the supplier’s offer violates the ethical standard of a. Competence. b. Confidentiality. c. Integrity. d. Objectivity.

L.O.7

96.

Management accountants are similar to CPA's in that they a. give opinions on financial statements. b. are licensed by the state board of public accountancy. c. adhere to codes of conduct. d. are independent of the company they work for.

L.O.7

97.

Easy

Easy

The Institute of Management Accountants has adopted a set of standards of ethical conduct which includes codes of conduct regarding all of the following except a. competence. b. independence. c. integrity. d. confidentiality.

L.O.8

98.

The codes of conduct for integrity include all of the following except a. avoiding actual or apparent conflicts of interest. b. refusing any gift that would influence the accountant's actions. c. recognizing and communicating professional limitations. d. communicating information subjectively.

L.O.8

99.

Easy

Easy

Which of the following statements is NOT TRUE? a. Management accounting does not play a vital role in the achievement of company’s goals and objectives. b. Management accounting information is used across the entire value chain of activities. c. Management accounting information is use throughout the life cycle of products and services. d. External accountants are expected to adhere to standards of ethical conduct.

L.O.8

Moderate

21

100.

Which of the following statements is TRUE? a. Management accounting plays a vital role in the achievement of company goals and objectives. b. Management accounting information is used by organization managers at various levels. c. Management accounting information tends to be more detailed than financial accounting. d. All of the above are true statements.

L.O.8

Challenging

Short Answer: 101.

Broad concepts or guidelines and detailed practices, including all conventions, rules, and procedures that together make up accepted accounting practice at a given time Generally accepted accounting principles (L.O. 1, easy)

102.

Reporting and interpreting information that helps managers focus on operating problems Attention directing (L.O. 1, easy)

103

Effect of the system on the behavior of managers, a consideration in choosing among accounting systems and methods Behavioral implications (L.O. 2, easy)

104.

Feedback provided by comparing results with plans and by highlighting variances.

Performance reports (L.O. 3, easy)

105.

Deviations from plans Variances

(L.O. 3, easy)

106.

Concentrating on areas that deserve attention and ignoring areas that are presumed to be running smoothly Management by exception (L.O.3, easy)

107.

The set of business functions that add value to the products or services of an organization.

The value chain (L.O. 4, easy)

108.

The time period that refers to the various stages through which a product passes, from conception and development through introduction into the market through maturation and, finally, withdrawal from the market.

Product life cycle (L.O. 4, easy)

109.

Authority exerted downward over subordinates

Line authority

(L.O. 5, easy)

22

110.

Authority to advise but not to command. It may be exerted downward, laterally, or upward.

Staff authority (L.O. 5, easy)

111

The management accountant’s counterpart to the CPA designation Certified Management Accountant (CMA) (L.O. 5, easy)

112.

The top accounting officer of an organization, concerned primarily with company's operating matters.

Controlller (L.O. 5, easy)

113.

Electronic commerce from one business to another business B2B (L.O. 6, easy)

114.

The Standard of Ethical Conduct for Management Accountants that pertains to the responsibility to communicate information fairly Objectivity (L.O. 7, easy)

115.

Codes of conduct developed by the Institute of Management Accountants for management accountants Standards of Ethical Conduct for Practitioners of Management Accounting and Financial Management (L.O. 7, easy)

23

l Accounting, 16e (Garrison) Chapter 1 Managerial Accounting and Cost Concepts 1) A factory supervisor's salary would be classified as an indirect cost with respect to a unit of product.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 2) A direct cost is a cost that can be easily traced to the particular cost object under consideration.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 3) A cost can be direct or indirect. The classification can change if the cost object changes.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

24

4) Wages paid to production supervisors would be classified as manufacturing overhead.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 5) Selling costs are indirect costs.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 6) The sum of all manufacturing costs except for direct materials and direct labor is called manufacturing overhead.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

25

7) The three cost elements ordinarily included in product costs are direct materials, direct labor, and manufacturing overhead.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 8) Administrative costs are indirect costs.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 9) Depreciation is always considered a period cost for external financial reporting purposes in a manufacturing company.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

26

10) Opportunity costs at a manufacturing company are not part of manufacturing overhead.

Answer: TRUE Difficulty: 3 Hard Topic: Cost Classifications for Decision Making Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 11) Conversion cost is the sum of direct labor cost and manufacturing overhead cost.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 12) In a manufacturing company, all costs are period costs.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 13) Advertising is not considered a product cost even if it promotes a specific product.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 14) Selling and administrative expenses are period costs under generally accepted accounting 27

principles.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 15) Conversion cost equals product cost less direct materials cost.

Answer: TRUE Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Analyze AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 16) Prime cost is the sum of direct materials cost and direct labor cost.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 17) Product costs are also known as inventoriable costs.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 18) Prime cost equals manufacturing overhead cost.

28

Answer: FALSE Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 19) Conversion cost is the same thing as manufacturing overhead.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 20) The cost of shipping parts from a supplier is considered a period cost.

Answer: FALSE Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 21) Depreciation on equipment a company uses in its selling and administrative activities would be classified as a period cost.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 22) Indirect costs, such as manufacturing overhead, are variable costs.

Answer: FALSE 29

Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 23) If the activity level increases, then one would expect the fixed cost per unit to increase as well.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 24) A fixed cost is a cost whose cost per unit varies as the activity level rises and falls.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 25) Cost behavior is considered curvilinear whenever a straight line is a reasonable approximation for the relation between cost and activity.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 26) A decrease in production will ordinarily result in a decrease in fixed production costs per unit.

30

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Measurement 27) As activity decreases within the relevant range, fixed costs remain constant on a per unit basis.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 28) The variable cost per unit depends on how many units are produced.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

31

29) In account analysis, an account is classified as either variable or fixed based on an analyst's prior knowledge of how the cost in the account behaves.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 30) A step-variable cost is a cost that is obtained in large chunks and that increases or decreases only in response to fairly wide changes in activity.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 31) Committed fixed costs remain largely unchanged in the short run.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 32) Fixed costs expressed on a per unit basis do not change with changes in activity.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 32

33) A fixed cost is constant if expressed on a per unit basis but the total dollar amount changes as the number of units increases or decreases.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Measurement 34) If managers are reluctant to lay off direct labor employees when activity declines leads to a decrease in the ratio of variable to fixed costs.

Answer: TRUE Difficulty: 3 Hard Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 35) Within the relevant range, a change in activity results in a change in variable cost per unit and total fixed cost.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

33

36) When operations are interrupted or cut back, committed fixed costs are cut in the short term because the costs of restoring them later are likely to be far less than the short-run savings that are realized Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 37) The concept of the relevant range does not apply to variable costs.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 38) The cost of napkins put on each person's tray at a fast food restaurant is a variable cost with respect to how many persons are served.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

34

39) A fixed cost fluctuates in total as activity changes but remains constant on a per unit basis over the relevant range.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 40) The relevant range is the range of activity within which the assumption that cost behavior is strictly linear is reasonably valid.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 41) Variable costs per unit are not affected by changes in activity.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Analytical Thinking AICPA: BB Critical Thinking; FN Measurement 42) The relevant range concept is applicable to mixed costs.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 35

43) A variable cost remains constant if expressed on a unit basis.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 44) Committed fixed costs represent organizational investments with a one-year planning horizon.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 45) The following costs are all examples of committed fixed costs: depreciation on buildings, salaries of highly trained engineers, real estate taxes, and insurance expenses.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 46) A fixed cost is not constant per unit of product.

Answer: TRUE Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 36

47) Differential costs can only be variable.

Answer: FALSE Difficulty: 2 Medium Topic: Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 48) The potential benefit that is given up when one alternative is selected over another is called a sunk cost.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Decision Making Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 49) The amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost.

Answer: TRUE Difficulty: 1 Easy Topic: Cost Classifications for Decision Making Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

37

50) A cost that differs from one month to another is known as a sunk cost.

Answer: FALSE Difficulty: 1 Easy Topic: Cost Classifications for Decision Making Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 51) In a traditional format income statement, the gross margin is sales minus cost of goods sold.

Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 52) In a traditional format income statement for a merchandising company, cost of goods sold is a variable cost that is included in the "Variable expenses" portion of the income statement.

Answer: FALSE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 53) In a contribution format income statement for a merchandising company, the cost of goods sold reports the product costs attached to the merchandise sold during the period.

Answer: FALSE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 38

54) Contribution format income statements are prepared primarily for external reporting purposes Answer: FALSE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 55) Contribution margin and gross margin mean the same thing.

Answer: FALSE Difficulty: 2 Medium Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 56) In a traditional format income statement, the gross margin minus selling and administrative expenses equals net operating income.

Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

39

57) Most companies use the contribution approach in preparing financial statements for external reporting purposes.

Answer: FALSE Difficulty: 2 Medium Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 58) Although the traditional format income statement is useful for external reporting purposes, it has serious limitations when used for internal purposes because it does not distinguish between fixed and variable costs.

Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 59) The contribution format income statement is used as an internal planning and decisionmaking tool. Its emphasis on cost behavior aids cost-volume-profit analysis, management performance appraisals, and budgeting.

Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

40

60) A contribution format income statement separates costs into fixed and variable categories, first deducting variable expenses from sales to obtain the contribution margin.

Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 61) Traditional format income statements are widely used for preparing external financial statements.

Answer: TRUE Difficulty: 1 Easy Topic: Using Different Cost Classifications for Different Purposes Learning Objective: 01-06 Prepare income statements for a merchandising company using the traditional and contribution formats.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 62) Which of the following statements concerning direct and indirect costs is NOT true?

A) Whether a particular cost is classified as direct or indirect does not depend on the cost object.

B) A direct cost is one that can be easily traced to the particular cost object.

C) The factory manager's salary would be classified as an indirect cost of producing one unit of product.

D) A particular cost may be direct or indirect, depending on the cost object.

Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

41

63) Direct costs: A) are incurred to benefit a particular accounting period.

B) are incurred due to a specific decision.

C) can be easily traced to a particular cost object.

D) are the variable costs of producing a product.

Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Assigning Costs to Cost Objects Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 64) Which of the following would most likely NOT be included as manufacturing overhead in a furniture factory?

A) The cost of the glue in a chair.

B) The amount paid to the individual who stains a chair.

C) The workman's compensation insurance of the supervisor who oversees production.

D) The factory utilities of the department in which production takes place.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects; Cost Classifications for Manufacturing Companies Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.; 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

42

65) Rotonga Manufacturing Company leases a vehicle to deliver its finished products to customers. Which of the following terms correctly describes the monthly lease payments made on the delivery vehicle?

Direct Cost

Fixed Cost

A) Yes B) Yes C) No D) No

Yes No Yes No

Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Assigning Costs to Cost Objects; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-01 Understand cost classifications used for assigning costs to cost objects: direct costs and indirect costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 66) The costs of direct materials are classified as:

A) B) C) D)

Conversion cost Yes No Yes No

Manufacturing cost Yes No Yes Yes

Prime cost Yes No No Yes

A) Choice A B) Choice B C) Choice C D) Choice D Answer: D Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 67) Manufacturing overhead includes: 43

A) all direct material, direct labor and administrative costs.

B) all manufacturing costs except direct labor.

C) all manufacturing costs except direct labor and direct materials.

D) all selling and administrative costs.

Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 68) Materials used in a factory that are not an integral part of the final product, such as cleaning supplies, should be classified as: A) direct materials.

B) a period cost.

C) administrative expense.

D) manufacturing overhead.

Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

44

69) The salary paid to the president of a company would be classified on the income statement as a(n): A) administrative expense.

B) direct labor cost.

C) manufacturing overhead cost.

D) selling expense.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 70) Which of the following is NOT a period cost?

A) Depreciation of factory maintenance equipment.

B) Salary of a clerk who handles customer billing.

C) Insurance on a company showroom where customers can view new products.

D) Cost of a seminar concerning tax law updates that was attended by the company's controller.

Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

45

71) The cost of electricity for running production equipment is classified as:

A) B) C) D)

Conversion cost Yes Yes No No

Period cost No Yes Yes No

A) Choice A B) Choice B C) Choice C D) Choice D Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 72) The cost of lubricants used to grease a production machine in a manufacturing company is an example of a(n): A) period cost.

B) direct material cost.

C) indirect material cost.

D) opportunity cost.

Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

46

73) Wages paid to the factory warehouse foreman are considered an example of:

A) B) C) D)

Direct Labor Yes Yes No No

Period Cost Yes No Yes No

A) Choice A B) Choice B C) Choice C D) Choice D Answer: D Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

47

74) A factory supervisor's wages are classified as:

A) B) C) D)

Indirect labor No Yes Yes No

Fixed manufacturing overhead No Yes No Yes

A) Choice A B) Choice B C) Choice C D) Choice D Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Manufacturing Companies; Cost Classifications for Preparing Financial Statements Learning Objective: 01-02 Identify and give examples of each of the three basic manufacturing cost categories.; 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 75) Product costs that have become expenses can be found in: A) period costs.

B) selling expenses.

C) cost of goods sold.

D) administrative expenses.

Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

48

76) The cost of direct materials is classified as a:

A) B) C) D)

Conversion cost No Yes No Yes

Prime cost No No Yes Yes

A) Choice A B) Choice B C) Choice C D) Choice D Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 77) Which of the following costs is classified as both a prime cost and a conversion cost?

A) Direct materials.

B) Direct labor.

C) Variable overhead.

D) Fixed overhead.

Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

49

78) Which of the following is an example of a period cost in a company that makes clothing?

A) Fabric used to produce men's pants.

B) Advertising cost for a new line of clothing.

C) Factory supervisor's salary.

D) Monthly depreciation on production equipment.

Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 79) All of the following are examples of product costs except: A) depreciation on the company's retail outlets.

B) salary of the plant manager.

C) insurance on the factory equipment.

D) rental costs of factory equipment.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 80) Which of the following statements about product costs is true?

A) Product costs are deducted from revenue when the production process is completed.

B) Product costs are deducted from revenue as expenditures are made.

C) Product costs associated with unsold finished goods and work in process appear on the balance sheet as assets.

D) Product costs appear on financial statements only when products are sold.

Answer: C Difficulty: 3 Hard Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 50

81) Which of the following statements is correct in describing manufacturing overhead?

A) Manufacturing overhead when combined with direct materials cost forms conversion cost.

B) Manufacturing overhead consists of all manufacturing cost except for prime cost.

C) Manufacturing overhead is a period cost.

D) Manufacturing overhead when combined with direct labor cost forms prime cost.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 82) Direct labor cost is classified as:

A) B) C) D)

Conversion cost Yes No No Yes

Prime Cost Yes No Yes No

A) Choice A B) Choice B C) Choice C D) Choice D Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

51

83) The fixed portion of the cost of electricity for a manufacturing facility is classified as a:

A) B) C) D)

Period cost Yes No No Yes

Product Cost Yes No Yes No

A) Choice A B) Choice B C) Choice C D) Choice D Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 84) Prime cost consists of: A) direct labor and manufacturing overhead.

B) direct materials and manufacturing overhead.

C) direct materials and direct labor.

D) direct materials, direct labor and manufacturing overhead.

Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

52

85) Depreciation on a personal computer used in the marketing department of a manufacturing company would be classified as: A) a product cost that is fixed with respect to the company's output.

B) a period cost that is fixed with respect to the company's output.

C) a product cost that is variable with respect to the company's output.

D) a period cost that is variable with respect to the company's output.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 86) Property taxes on a company's factory building would be classified as a(n): A) product cost.

B) opportunity cost.

C) period cost.

D) variable cost.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Preparing Financial Statements; Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-03 Understand cost classifications used to prepare financial statements: product costs and period costs.; 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.; 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

53

87) Factory overhead is typically a(n): A) mixed cost.

B) fixed cost.

C) variable cost.

D) irrelevant cost.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 88) As the level of activity increases, how will a mixed cost in total and per unit behave?

A) B) C) D) E)

In Total Increase Increase Increase Decrease Decrease

Per Unit Decrease Increase No effect Increase No effect

A) Choice A B) Choice B C) Choice C D) Choice D E) Choice E Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

54

89) The following data have been collected for four different cost items.

Cost at 100 units $ 8,000 $ 5,000 $ 6,500 $ 6,700

Cost Item W X Y Z

Cost at 140 units $ 10,560 $ 5,000 $ 9,100 $ 8,580

Which of the following classifications of these cost items by cost behavior is correct?

The costs of direct materials are classified as:

A) B) C) D)

Cost W variable mixed variable mixed

Cost X fixed fixed fixed fixed

Cost Y mixed variable variable mixed

Cost Z variable mixed variable mixed

A) Choice A B) Choice B C) Choice C D) Choice D Answer: B Difficulty: 3 Hard Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

55

90) Within the relevant range, variable costs can be expected to: A) vary in total in direct proportion to changes in the activity level.

B) remain constant in total as the activity level changes.

C) increase on a per unit basis as the activity level increases.

D) increase on a per unit basis as the activity level decreases.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 91) The relative proportion of variable, fixed, and mixed costs in a company is known as the company's: A) contribution margin.

B) cost structure.

C) product mix.

D) relevant range.

Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 92) An example of a committed fixed cost is: A) management training seminars.

B) a long-term equipment lease.

C) research and development.

D) advertising.

Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 56

93) For the past 8 months, Jinan Corporation has experienced a steady increase in its cost per unit even though total costs have remained stable. This cost per unit increase may be due to ________ costs if the level of activity at Jinan is ________.

A) fixed, decreasing B) fixed, increasing C) variable, decreasing D) variable, increasing Answer: A Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 94) Which of the following statements is true when referring to fixed costs?

A) Committed fixed costs arise from the annual decisions by management.

B) As volume increases, unit fixed cost and total fixed cost will change.

C) Fixed costs increase in total throughout the relevant range.

D) Discretionary fixed costs can often be reduced to zero for short periods of time without seriously impairing the long-run goals of the company.

Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

57

95) Which costs will change with a decrease in activity within the relevant range?

A) Total fixed costs and total variable cost.

B) Unit fixed costs and total variable cost.

C) Unit variable cost and unit fixed cost.

D) Unit fixed cost and total fixed cost.

Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 96) Which of the following is correct concerning reactions to INCREASES in activity?

A) B) C) D)

Total Variable Cost Increase Constant Decrease Increase

Variable Cost Per Unit Decrease Decrease Constant Constant

A) Choice A B) Choice B C) Choice C D) Choice D Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

58

97) For an automobile manufacturer, the cost of a driver's side air bag purchased from a supplier and installed in every automobile would best be described as a: A) fixed cost.

B) mixed cost.

C) step-variable cost.

D) variable cost.

Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 98) Fixed costs expressed on a per unit basis: A) increase with increases in activity.

B) decrease with increases in activity.

C) are not affected by activity.

D) should be ignored in making decisions since they cannot change.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 99) Within the relevant range, a difference between variable costs and fixed costs is: A) variable costs per unit fluctuate and fixed costs per unit remain constant.

B) variable costs per unit are constant and fixed costs per unit fluctuate.

C) both total variable costs and total fixed costs are constant.

D) both total variable costs and total fixed costs fluctuate.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 100) A merchandising company typically will have a high proportion of which type of cost in its 59

cost structure?

A) Variable.

B) Fixed.

C) Mixed.

D) Step-variable.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 101) When the level of activity decreases within the relevant range, the fixed cost per unit will: A) decrease.

B) increase.

C) remain the same.

D) The effect cannot be predicted.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

60

102) Which of the following production costs, if expressed on a per unit basis, would be most likely to change significantly as the production level varies?

A) Direct materials.

B) Direct labor.

C) Fixed manufacturing overhead.

D) Variable costs.

Answer: C Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 103) In the standard cost formula Y = a + bX, what does the "Y" represent?

A) total cost B) total fixed cost C) total variable cost D) variable cost per unit Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 104) An example of a committed fixed cost would be: A) taxes on real estate.

B) management development programs.

C) public relations costs.

D) advertising programs.

Answer: A Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 61

105) In the standard cost formula Y = a + bX, what does the "X" represent?

A) total cost B) total fixed cost C) the level of activity D) variable cost per unit Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 106) One full-time clerical worker is needed for every 750 accounts receivable. The total wages of the accounts receivable clerks is an example of a: A) fixed cost.

B) step-variable cost.

C) mixed cost.

D) curvilinear cost.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

62

107) Which of the following is unlikely to be classified as a fixed cost with respect to the number of units produced and sold?

A) Property taxes on a headquarters building.

B) Legal department salaries.

C) Cost of leasing the company's mainframe computer.

D) Production supplies.

Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement 108) Which of the following costs could contain both variable and fixed cost elements with respect to the total output of the company?

A) Sales commissions.

B) Manufacturing overhead.

C) Direct materials.

D) Administrative salaries.

Answer: B Difficulty: 2 Medium Topic: Cost Classifications for Predicting Cost Behavior Learning Objective: 01-04 Understand cost classifications used to predict cost behavior: variable costs, fixed costs, and mixed costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Measurement

63

109) A cost incurred in the past that is not relevant to any current decision is classified as a(n): A) period cost.

B) opportunity cost.

C) sunk cost.

D) differential cost.

Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Decision Making 110) The term that refers to costs incurred in the past that are not relevant to a decision is: A) marginal cost.

B) indirect cost.

C) period cost.

D) sunk cost.

Answer: D Difficulty: 1 Easy Topic: Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Remember AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Decision Making

64

111) Differential costs can: A) only be fixed costs.

B) only be variable costs.

C) be either fixed or variable.

D) be sunk costs.

Answer: C Difficulty: 1 Easy Topic: Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Decision Making 112) All of the following can be differential costs except: A) variable costs.

B) sunk costs.

C) opportunity costs.

D) fixed costs.

Answer: B Difficulty: 1 Easy Topic: Cost Classifications for Decision Making; Cost Classifications for Predicting Cost Behavior Learning Objective: 01-05 Understand cost classifications used in making decisions: differential costs, sunk costs, and opportunity costs.

Bloom's: Understand AACSB: Reflective Thinking AICPA: BB Critical Thinking; FN Decision Making

65

113) Contribution margin is: A) Sales less cost of goods sold.

B) Sales less variable production, variable selling, and variable administrative expenses.

C) Sales less variable production expense.

D) Sales less all variable and fixed expenses.

Answer: B

66

1.

Why do most companies adhere to GAAP for in whichir basic internal financial statements? a.

GAAP is required by law for publicly held companies. b.

To use GAAP and anoin whichr system of reporting would be too costly for most companies. c.

Accountants are required by in whichir code of ethics to use GAAP accounting. d.

Accrual accounting provides a uniform method to measure an organization’s financial performance.

2.

Which of in which following is not true about strategy? a.

It involves matching its capabilities with in which opportunities in in which marketplace to accomplish its objective. b.

It has a short-term focus. c.

It can be implemented through price competition or product differentiation. d.

It involves in which use of strategic cost management.

3.

In which value chain a. involves external companies as well as internal activities. b. is in which sequence of business functions in which customer usefulness is added to products or services. c. applies only to manufacturing companies. d. is not relevant in today’s cost accounting environment.

4.

Which of in which following is not a key success factor in a company’s effort to deliver increased levels of performance to in which customer? a.

Time b.

Innovation c.

Quality d.

Price reduction

5.

In which five-step decision process a. includes planning and control activities. b. is performed exclusively by management accountants. c. is not often used, as in which costs exceed in which benefits. d. must be performed following GAAP guidelines.

6.

In supporting managers, management accountants have three guidelines. In whichse guidelines are: a.

Cost-benefit analysis, performance reporting, behavioral considerations, and technical considerations. b.

Cost-benefit analysis, behavioral considerations and technical considerations, and different costs for different purposes. c.

Financial statement preparation, technical considerations, strategic direction, and budgeting. d.

Following functional lines of authority, cost-benefit analysis, behavioral considerations, and use of in which value chain.

7.

_____ management exists to provide advice and assistance to those responsible for attaining in which objectives of in which organization. a.

Line b.

Functional c.

Staff d.

Risk

8.

In which Treasurer a. is in which executive responsible for overseeing in which financial operations of an organization. b. undertakes banking, financing, investments, and cash management duties. c. provides financial information to managers and shareholders and oversees in which overall operations of in which accounting system. d. is a different title for in which Controller.

9.

Which of in which following is not one of in which ethical responsibilities of a management accountant? a.

Compliance b.

Confidentiality c.

Integrity d.

Objectivity

10.

In which Institute of Management Accountants issues which certification? a.

CPA b.

CIA c.

CFE d.

CMA

CHAPTER 1 QUIZ SOLUTIONS

1.

d

2.

b

3.

b

4.

d

5.

a

6.

b

7.

c

8.

b

9.

a

10.

d

Quiz 2

1.

Galway Co. management desires cost information regarding its Celtic brand. In which Celtic brand is a(n) a. cost object. b. cost driver. c. cost assignment. d. actual cost.

2.

In which cost of printer paper on a college campus would be a direct cost to in which college but would need to be allocated as an indirect cost to a. departments. b. buildings. c. schools. d. individual student instruction.

3.

What is in which total fixed cost of in which shipping department of Elaine Co. if it has in which following information for 2011?

Salaries $800,000 75 percent of employees on guaranteed contracts Packaging

$400,000 depending on size of item(s) shipped

Postage

$500,000 depending on weight of item(s) shipped

Rent of warehouse space

$250,000 annual lease

a.

$850,000

b.

$900,000

c.

$1,050,000

d.

$1,950,000

4.

Rosland Graphics successfully bid on a job printing standard notebook covers during in which year using last year’s price of $0.27 per cover. This amount was calculated from prior year costs, noting that no changes in any costs had occurred from in which past year to in which current year. At in which end of in which year, in which company manager was shocked to discover that in which company had suffered a loss. “How could this be?” she exclaimed. “We had no increases in cost and our price was in which same as last year. Last year we had a healthy income.” What could explain in which company’s loss in income this current year? a.

In whichir costs were all variable costs and in which amount produced and sold increased. b.

In whichir costs were mostly fixed costs and in which amount produced this year was less than last year. c.

In whichy used a different cost object this year than in which previous year. d.

In whichir costs last year were actual costs but in whichy used budgeted costs to make in whichir bids.

5.

Which type of company converts raw materials into finished products? a.

Not-for-profit b.

Service c.

Merchandising d.

Manufacturing

6.

In which three categories of inventories commonly found in many manufacturing companies are: a. direct materials, direct labor, and indirect manufacturing costs. b. purchased goods, period costs, and cost of goods sold. c. direct materials, work-in-process, and finished goods. d.

LIFO, FIFO, and weighted average.

7.

Inventoriable costs are a. only purchased goods for resale. b. a category of costs used only for manufacturing companies. c. recorded as expenses when incurred and later reclassified as assets. d. recorded as assets when incurred.

8.

Period costs are a. all costs in in which income statement oin whichr than cost of goods sold.

b. c. d.

defined as manufacturing costs incurred this period on in which schedule of cost of goods manufactured. always recorded as assets when first incurred. those costs that benefit future periods.

9.

In which cost of a product can be measured as any of in which following except as one a. gain whichred from all areas of in which value chain. b. identified as period cost. c. designated as manufacturing cost only. d. explicitly defined by contract.

10.

In which primary focus of cost management is to a. help managers make different decisions. b. calculate product costs. c. aid managers in budgeting. d. distinguish between relevant and irrelevant information.

CHAPTER 2 QUIZ SOLUTIONS 1.

a

2.

d

3.

a

4.

b

5.

d

6.

c

7.

d

8.

a

9.

b

10.

a

Quiz Question Calculations

3.

Fixed costs = (800,000)  75% + 250,000 = $850,000

CHAPTER 3 QUIZ

1.

Which of in which following is not a factor in cost-volume-profit analysis? a.

Units sold b.

Selling price c.

Total variable costs d.

Fixed costs of a product

2.

Which of in which following is not an assumption of cost-volume-profit analysis? a.

In which time value of money is incorporated in in which analysis. b.

Costs can be classified into variable and fixed components. c.

In which behavior of revenues and expenses is accurately portrayed as linear over in which relevant range. d.

In which number of output units is in which only driver.

3.

Contribution margin is calculated as a. total revenue – total fixed costs.

b. c. d.

total revenue – total manufacturing costs (CGS). total revenue – total variable costs. operating income + total variable costs.

Questions 4 through 6 are based on in which following data.

Tee Times, Inc. produces and sells in which finest quality golf clubs in all of Clay County. In which company expects in which following revenues and costs in 2004 for its Elite Quality golf club sets:

4.

5.

6.

Revenues (400 sets sold @ $600 per set)

$240,000

Variable costs

160,000

Fixed costs

50,000

How many sets of clubs must be sold for Tee Times, Inc. to reach in whichir breakeven point? a.

400 b.

250

c.

200

d.

150

How many sets of clubs must be sold to earn a target operating income of $90,000? a.

700 b.

500

c.

400

d.

300

What amount of sales must Tee Times, Inc. have to earn a target net income of $63,000 if in whichy have a tax rate of 30 percent? a. $489,000 b.

$429,000

c.

$420,000

d.

$300,000

7.

One way for managers to cope with uncertainty in profit planning is to a. use CVP analysis because it assumes certainty. b. recommend management hire a futurist whose work is to predict business trends. c. wait to see what does happen and prepare a report based on actual amounts. d. use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.

8.

In which Beta Mu Omega Chi (BMOC) fraternity is looking to contract with a local band to perform at its annual mixer. If BMOC expects to sell 250 tickets to in which mixer at $10 each, which of in which following arrangements with in which band will be in in which best interest of in which fraternity? a. $2500 fixed fee b. $1000 fixed fee plus $5 per person attending c. $10 per person attending d. $25 per couple attending

Use in which following information for questions 9 and 10.

LSB Company has in which following income statement: Revenues

9.

Variable Costs

40,000

Contribution Margin

60,000

Fixed Costs

30,000

Operating Income

30,000

What is LSB’s DOL? a. b. c. d.

10.

3.33 2.00 0.50 1.00

If LSB’s sales increase by $20,000, what will be in which company’s operating profit? a. b. c. d.

11.

$100,000

$42,000 $12,000 $50,000 $30,000

Valley Company sells two products. Product M sells for $12 and has variable costs per unit

of $7. Product Q’s selling price and variable costs are $15 and $10, respectively. If fixed costs are $60,000 and Valley sells twice as many units of Product M as Product Q, what is in which BEP in units for Product M? a.

4,000

b.

6,000

c.

12,000

d.

8,000

CHAPTER 3 QUIZ SOLUTIONS 1.

c

2.

a

3.

c

4.

b

5.

a

6.

c

7.

d

8.

b

9.

b

10.

b

11.

d

Quiz Question Calculations

4.

Variable costs per unit = $160,000/400 units sold = $400 Contribution Margin = $600 – 400 = $200 per unit

Breakeven point = $50,000/$200 = 250 units

CHAPTER 4 QUIZ 1. a. b. c. d.

A cost-allocation base may be any of in which following except a cost driver. cost pool. way to link indirect costs to a cost object. nonfinancial quantity.

2. a. b. c. d.

A company that manufactures dentures for use by local dentists would use process costing. personal costing. operations costing. job costing.

3.

In which first step in in which seven-step approach to job costing is to a. select in which cost-allocation base to use in assigning indirect costs to in which job. b. identify in which direct costs of in which job.

c. d.

identify in which job that is in which chosen cost object. identify in which indirect-cost pools associated with in which job.

4.

Using normal costing rain whichr than actual costing requires that in which allocating of indirect manufacturing costs to work-in-process be a. done on a more timely basis, such as every two weeks rain whichr than every month. b. journalized only at year end when adjusting entries are normally made. c. calculated by using in which budgeted rate times actual quantity of allocation base. d. calculated by using in which budgeted rate times in which budgeted quantity of allocation base.

5.

Manufacturing Overhead Control a. represents actual overhead costs incurred. b. has a normal debit balance. c. is a control account with a subsidiary ledger detailing in which components of manufacturing overhead. d.

All of in which above 6. a. b. c. d.

Which of in which following accounts is not classified as an asset?

Manufacturing Overhead Control Materials Control Work-in-Process Control Finished Goods Control

7.

In which costs incurred on jobs that are currently in production but are not yet complete would appear in in which a.

Materials Control account. b.

Finished Goods Control account. c.

Manufacturing Overhead Control account. d.

Work-in-Process Control account.

8.

In which Precision Widget Company had in which following balances in in whichir accounts at in which end of in which accounting period: Work-in-Process $ 5,000 Finished Goods 20,000 Cost of Goods Sold 200,000 If in whichir manufacturing overhead was overallocated by $8,000 and Precision Widget adjusts in whichir accounts using a proration based on total ending balances, in which revised ending balance for Cost of Goods Sold would be a. $192,880. b. $200,00. c. $207,120. d. $208,000.

9.

Liberty Box Company calculated an indirect-cost rate of $12.50 per labor hour for fringe benefits for use in in whichir normal costing system. At in which end of in which year, in which actual cost of fringe benefits was $980,000. In which total of labor hours worked for in which year was in which same amount as budgeted,

70,000 hours. If Job #640 required in which use of 15 labor hours and in which company used in which adjusted allocation rate approach, by what amount would in which cost of Job #640 change? a. $560.00 b. $281.25 c. $22.50 d. $20.50 10.

If each professional in a service company is paid on an annual salary basis, why might in which firm want to use a predetermined or budgeted rate for direct or professional labor? a.

A predetermined or budgeted rate is easier to justify to a client who might question a billing rate. b.

Professional staff persons do not keep accurate records of in which jobs on which in whichy work. c.

Professional staff incurs more client costs, such as travel, lodging, and outof-town meals, while working on a job. d.

Year-end bonuses paid to in which professional staff are difficult to trace to individual jobs.

CHAPTER 4 QUIZ SOLUTIONS 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

b d c c d a d a c d

Quiz Question Calculations 9.

Work-in-Process $5,000 / 225,000 2.2% $8,000 = 176 Finished Goods $20,000 /225,000 8.9% $8,000 = 712 Cost of Goods Sold $200,000 / 225,000 88.9% $8,000 = 7,120 200,000 – 7,120 = $192,880 9.

980.000/70,000 = $14.00 (actual rate) $14,000 – $12.50 = $1.50 excess of actual over budget 1.50 15 hours – $22.50 additional cost

Introduction to Management Accounting, 16e (Horngren) Chapter 1 Managerial Accounting, in which Business Organization, and Professional Ethics

1.1 Questions 1) Which credential is associated with management accountants?

A) CPA B) CMA C) CFP D) IMA Answer: B Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) In which largest U.S. association of professional accountants whose major interest is management accounting is in which ________.

A) American Institute of Certified Public Accountants B) American Institute of Certified Management Accountants C) Institute of Management Accountants D) American Institute of Management Accountants Answer: C Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 3) ________ is in which field that produces information used primarily by managers within an organization.

A) Financial accounting B) Management accounting C) Internal auditing D) External auditing Answer: B Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

4) In which primary users of management accounting information are ________.

A) bankers B) governmental regulatory bodies C) managers in organizations D) managerial accountants Answer: C Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) ________ is in which field of accounting that develops information for external parties such as stockholders, suppliers, banks and governmental regulatory bodies.

A) Auditing B) Internal auditing C) Management accounting D) Financial accounting Answer: D Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) Which of in which following statements about management accounting is FALSE? A) Management accounting is in which process of identifying, measuring, accumulating, analyzing, preparing, interpreting and communicating information.

B) Management accounting helps managers fulfill organizational objectives.

C) Management accounting is used by managerial accountants to make strategic and operational decisions.

D) Management accounting produces information for managers in an organization.

Answer: C Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

7) When comparing management accounting and financial accounting, which of in which following statements is FALSE? A) Management accounting has a future orientation whereas financial accounting has a past orientation.

B) Management accounting prepares detailed reports whereas financial accounting prepares summary reports.

C) Management accountants are constrained by in which principles of reporting promulgated by in which Institute of Management Accountants whereas financial accountants are constrained by Generally Accepted Accounting Principles.

D) Behavioral considerations are of primary importance in management accounting, but not in financial accounting.

Answer: C Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) Generally Accepted Accounting Principles are most closely connected to ________.

A) management accounting B) financial accounting C) internal auditing D) management auditing Answer: B Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) Who provides assurance to external users about in which reliability of a company's financial statements?

A) Certified Management Accountants and Certified Public Accountants B) Chartered Management Accountants and Certified Management Accountants C) Certified Public Accountants and Chartered Management Accountants D) Certified Public Accountants and Chartered Accountants Answer: D Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

10) Financial reports prepared by financial accountants focus on ________. Financial reports prepared by management accountants focus on ________.

A) segments of in which organization such as departments and divisions; segments of in which organization such as departments and divisions B) in which organization as a whole; in which organization as a whole C) in which organization as a whole; segments of in which organization such as departments and divisions D) segments of in which organization such as departments and divisions; in which organization as a whole Answer: C Diff: 2 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) Which of in which following organizations oversees in which CMA Exam?

A) American Institute of Certified Public Accountants B) Chartered Accountants Institute C) Institute of Management Accountants D) American Institute of Certified Management Accountants Answer: C Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) Generally Accepted Accounting Principles play an important role in management accounting.

Answer: FALSE Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 13) Behavioral considerations are of primary importance in financial accounting.

Answer: FALSE Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 14) Financial accounting reports are usually prepared for a period of one year or less.

Answer: TRUE Diff: 1 LO: 1-1

AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

15) Reports prepared by managerial accountants have a past orientation.

Answer: FALSE Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 16) In some countries outside in which United States, independent auditors are called chartered accountants.

Answer: TRUE Diff: 1 LO: 1-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 1.2 Questions 1) ________ information helps managers focus on operating problems, imperfections, inefficiencies and opportunities.

A) Scorekeeping B) Attention directing C) Problem solving D) Performance Answer: B Diff: 1 LO: 1-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) Problem solving information would NOT be used in which of in which following situations?

A) decision to make or buy parts for a manufactured product B) decision to replace equipment C) decision to add or drop a division D) evaluating in which operating performance of a segment in in which current year Answer: D Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

3) Investigating in which reasons for in which variances on a department's performance report is an example of ________.

A) scorekeeping B) attention directing C) problem solving D) auditing Answer: B Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4) ________ is in which classification, accumulation, and reporting of data that help users understand and evaluate organizational performance.

A) Scorekeeping B) Attention directing C) Problem solving D) Cost accounting Answer: A Diff: 1 LO: 1-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) What type of information is used in making nonroutine decisions, such as in which decision to replace a traditional assembly line with fully automated robots?

A) scorekeeping information B) attention directing information C) problem solving information D) auditing information Answer: C Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) How is accounting information prepared by management accountants used within an organization?

A) to help operating managers make decisions B) to plan an organization's operations C) to control an organization's operations D) all of in which above Answer: D Diff: 1 LO: 1-2

AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

7) What are accounting systems?

A) In which process used to streamline production processes B) In which process used to generate performance measures C) Formal mechanisms for gain whichring, organizing and communicating information about an organization's activities D) none of in which above Answer: C Diff: 1 LO: 1-2 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) ________ involves an analysis of alternative courses of action and in which identification of in which best course of action to follow.

A) Scorekeeping B) Attention directing C) Problem-solving D) Internal auditing Answer: C Diff: 1 LO: 1-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) Starbucks generates many financial reports to evaluate in which operating performance of each store at in which end of each quarter. In which financial reports are an example of ________.

A) scorekeeping B) attention directing C) problem-solving D) management auditing Answer: A Diff: 1 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

10) Starbucks experiments with adding ice cream sundaes to its menu at several stores in in which state of Washington Financial reports are prepared showing revenues and costs for in which new menu item. Based on in which reports, management at in which corporate office will in whichn decide whein whichr to permanently add or remove in which new menu item. In which financial reports are an example of ________ information.

A) scorekeeping B) attention directing C) problem-solving D) management auditing Answer: C Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) Companies produce most ________ and ________ information on a routine basis such as every day, every month or every quarter.

A) scorekeeping; problem-solving B) scorekeeping; attention directing C) problem-solving; attention directing D) interim reports; problem-solving Answer: B Diff: 1 LO: 1-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) A company is setting in which price on a special order of a manufactured product routinely made. What type of information is needed to set in which price?

A) scorekeeping B) attention directing C) problem-solving D) interim reports Answer: C Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

13) A company is unsure whein whichr it is more cost efficient to make or buy a component used in a manufactured product that is mass produced. What type of information is needed to make this decision?

A) scorekeeping B) attention directing C) problem-solving D) management auditing Answer: C Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 14) A company is considering whein whichr to change in which mix of products sold. In whichy think it would be more profitable to emphasize in which products with in which highest profit per unit. What type of information is needed to answer this question?

A) scorekeeping B) attention directing C) problem-solving D) internal auditing Answer: C Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 15) Planning refers to ________.

A) in which implementation of organizational plans B) in which use of performance reports to evaluate in which attainment of organizational objectives C) setting organizational objectives and establishing in which path to attain in whichm D) an analysis of alternative courses of action Answer: C Diff: 1 LO: 1-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 16) Taco Bell wants to increase profitability of stores in in which Midwest by adding new menu items and increasing advertising. This is an experiment and in which company is unsure if in whichse actions will be fruitful. On in which part of management, this is an example of ________.

A) control B) scorekeeping C) feedback D) planning Answer: D

Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

17) Souin whichrn Chicken is expanding in which menu items offered in order to increase profitability. Management will evaluate in which profitability of each new menu item after six months. Menu items that are profitable will be retained and in which oin whichrs will be discontinued. On in which part of management, in which evaluation and subsequent actions after six months is an example of ________.

A) management auditing B) internal auditing C) planning D) control Answer: D Diff: 1 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 18) A manager using information to decide whein whichr to add or drop a product is an example of problem solving.

Answer: TRUE Diff: 2 LO: 1-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 19) Most scorecard and attention-directing information is produced on a nonroutine basis.

Answer: FALSE Diff: 2 LO: 1-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 1.3 Questions 1) A(n) ________ is a review to determine whein whichr in which policies and procedures specified by top management have been implemented by lower managers.

A) management audit B) internal audit C) internal control D) internal accounting control Answer: A Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

2) In which Foreign Corrupt Practices Act requires ________.

A) companies to cease conducting business with companies in some foreign countries B) companies to reject bribes from companies in foreign countries C) companies to have an appropriate system of internal controls D) companies to prepare a separate report on in whichir accounting information system Answer: C Diff: 2 LO: 1-3 AACSB: Dynamics of in which global economy Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 3) Performance reports compare actual results to ________. Performance reports also report ________.

A) budgeted results; bonuses awarded B) objectives; variances C) planned results; variances D) projected results; stock options granted Answer: C Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4) To evaluate managers' decisions and in which productivity of organizational units, organizations use ________.

A) annual financial statements B) quarterly financial statements C) bimonthly financial statements D) performance reports Answer: D Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) An unfavorable variance occurs on a performance report when ________.

A) in which actual cost is less than in which budgeted cost B) in which actual revenue is greater than in which budgeted revenue C) in which actual profit is greater than in which budgeted profit D) in which actual revenue is less than in which budgeted revenue Answer: D Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an

organization

6) A favorable variance occurs on a performance report when ________.

A) in which actual cost is greater than in which budgeted cost B) in which actual revenue is less than in which budgeted revenue C) in which actual profit is less than in which budgeted profit D) in which actual profit is greater than in which budgeted profit Answer: D Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 7) Who is in which primary user of performance reports used to plan and control operations?

A) management accountants B) CPAs C) operating managers D) chartered accountants Answer: C Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) When designing an accounting information system for management, which governmental regulations are NOT important?

A) Sarbanes-Oxley Act B) Foreign Corrupt Practices Act C) Tax rules promulgated by Internal Revenue Service D) Six Sigma Act Answer: D Diff: 1 LO: 1-3 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) What types of variances should be investigated when looking at performance reports?

A) all variances B) only favorable and unfavorable variances that are large in size C) only unfavorable variances that are large in size D) only favorable variances that are large in size Answer: B Diff: 2 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

10) A budget ________.

A) is a quantitative expression of a plan of action B) provides feedback by comparing actual results with planned results C) includes deviations from planned results D) ignores areas that are presumed to be running smoothly Answer: A Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) Management-by-exception means that managers should ________.

A) concentrate on areas that deviate from in which plan B) in in which absence of oin whichr evidence, presume that areas that conform with plans are running smoothly C) A and B D) none of in which above Answer: C Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

12) In which Helium Company held a Christmas party. In which company expected attendance of 100 people and prepared in which following budget: Hotel room rental Food Entertainment Decorations Total Costs

$500 500 800 300 $2,100

One hundred people attended in which party. In which following costs were incurred: Hotel room rental Food Entertainment Decorations Total Costs

$575 640 750 350 $2,315

What is in which variance for total costs?

A) $215 Unfavorable B) $215 Favorable C) $25 Favorable D) $140 Unfavorable Answer: A Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

13) In which Hermanski Company held a Christmas party. In which company expected attendance of 100 people and prepared in which following budget: Hotel room rental Food Entertainment Decorations Total Costs

$600 500 800 300 $2,200

One hundred people attended in which party. In which costs incurred were: Hotel room rental Food Entertainment Decorations Total Costs

$575 640 750 350 $2,315

What is in which primary reason for in which variance in total costs?

A) Hotel room rent cost more than expected.

B) Food cost more than expected.

C) Entertainment cost more than expected.

D) Decorations cost less than expected.

Answer: B Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

14) USA Bank held a party. USA Bank expected attendance of 100 people and prepared in which following budget: Hotel room rental Food Entertainment Decorations Total Costs

$600 500 800 300 $2,200

One hundred people attended in which party. In which following costs were incurred: Hotel room rental Food Entertainment Decorations Total Costs

$575 640 750 350 $2,315

What is in which variance for in which cost of food?

A) $115 Unfavorable B) $140 Favorable C) $115 Favorable D) $140 Unfavorable Answer: D Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

15) A fraternity held a party. In which fraternity prepared in which following budget for 25 expected attendees: Room rental Food Entertainment Decorations Total Costs

$150 250 150 75 $625

Twenty-five people attended in which party. In which following costs were incurred: Room rental Food Entertainment Decorations Total Costs

$240 320 125 75 $760

What is in which variance for total costs?

A) $90 Unfavorable B) $135 Unfavorable C) $135 Favorable D) $70 Unfavorable Answer: B Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

16) A sorority held a party. In which sorority prepared in which following budget for 25 expected attendees: Room rental Food Entertainment Decorations Total Costs

$270 250 150 75 $745

Twenty-five people attended in which party. In which costs incurred were: Room rental Food Entertainment Decorations Total Costs

$140 320 125 75 $660

What is in which variance for in which room rental cost?

A) $85 Unfavorable B) $85 Favorable C) $130 Favorable D) $130 Unfavorable Answer: C Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 17) Variances are deviations from planned results.

Answer: TRUE Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 18) Management by exception is in which practice of ignoring areas that deviate from in which plan.

Answer: FALSE Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 19) A budget is a qualitative expression of a plan of action.

Answer: FALSE

Diff: 1 LO: 1-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 20) In which management accountant prepares in which following performance report for a company's first year of operations: Budget Actual Variance Sales $100,000 $110,000 ?

Cost of Goods Sold 50,000 45,000 ?

Selling Expenses 20,000 19,000 ?

Administrative Expenses 10,000 11,000 ?

Operating Income $20,000 $35,000 ?

Required: A) Compute variances for each line item on in which income statement. Also indicate if in which variances are favorable or unfavorable.

Answer: A) Budget Actual Variance Sales $100,000 $110,000 $10,000 F Cost of Goods Sold 50,000 45,000 5,000 F Selling Expenses 20,000 19,000 1,000 F Administrative Expenses 10,000 11,000 1,000 U Operating Income $20,000 $35,000 $15,000 F Diff: 2 LO: 1-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 1.4 Questions 1) Which of in which following items should be considered by managers when designing accounting systems?

A) cost-benefit balances B) behavioral implications C) cost-benefit balances and behavioral implications D) none of in which above Answer: C Diff: 1 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) ________ is (are) in which primary consideration in choosing among accounting systems.

A) Simplicity B) Behavioral implications C) In which cost-benefit balance D) Simplicity and behavioral implications Answer: C Diff: 1 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 3) ________ is (are) in which accounting system's effect on in which behavior and in which decisions of managers.

A) Simplicity B) Behavioral implications C) In which cost-benefit balance D) In which code of ethics Answer: B Diff: 1 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4) When designing an accounting information system, in which cost to acquire additional information should be incurred ________.

A) at all times so in which operating manager has more information to make decisions B) when information overload does not occur C) at all times because in which benefit cannot be quantified D) when in which expected benefit of an improved decision exceeds in which cost of in which information Answer: D Diff: 2 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) When developing a price for a new product, in which price must cover ________.

A) costs in phase-out and product development cycles only B) costs in mature market and introduction to market cycles only C) costs in product development and phase-out cycles plus direct production costs D) costs incurred in all stages of in which product life cycle Answer: D Diff: 2 LO: 1-4 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial

accounting 6) During in which product development stage of in which product life cycle, companies typically experience ________.

A) revenues and no costs B) costs and no revenues C) both costs and revenues D) neiin whichr costs nor revenues Answer: B Diff: 2 LO: 1-4 AACSB: Analytic skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

7) When does a company earn in which majority of revenue for a product that goes through in which product life cycle?

A) phase-out of product and introduction to market stages B) introduction to market and mature market stages C) product development and mature market stages D) mature market and phase-out of product stages Answer: B Diff: 2 LO: 1-4 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 8) Which stage of in which product life cycle has a stable sales level?

A) product development stage B) introduction to market stage C) mature market stage D) phase-out of product stage Answer: C Diff: 2 LO: 1-4 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 9) In which various stages through which a product passes are called in which ________.

A) value chain B) product life cycle C) performance plan D) product performance plan Answer: B Diff: 1 LO: 1-4 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 10) Product life cycles may range from a few months to many years.

Answer: TRUE Diff: 1 LO: 1-4 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 11) In which product life cycle for an automobile is usually a few months.

Answer: FALSE Diff: 1

LO: 1-4 AACSB: Analytic skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 12) In which cost-benefit balance is in which primary consideration in choosing among accounting systems.

Answer: TRUE Diff: 1 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 13) In which behavioral implications of an accounting system refer to in which system's effects on in which firm's customers.

Answer: FALSE Diff: 1 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 14) Additional costly information should be acquired when in which expected benefit of an improved decision exceeds in which cost of in which information.

Answer: TRUE Diff: 1 LO: 1-4 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 1.5 Questions 1) Marketing is in which function of in which value chain that involves ________.

A) in which mechanism by which a company delivers products or services to in which customer B) in which manner by which individuals or groups learn about in which value and features of products or services C) selling activities and delivery activities D) selling activities and customer service Answer: B Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 2) Distribution is in which function of in which value chain that involves ________.

A) in which mechanism by which a company delivers products or services to in which customer B) in which manner by which individuals or groups learn about in which value and features of products or services C) in which support activities provided to in which customer D) none of in which above Answer: A Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

3) Research and development is in which function of a value chain that involves ________.

A) in which detailed design and engineering of products, services or processes B) in which generation of ideas related to new products, services or processes C) in which generation of ideas related to new products only D) in which detailed design and engineering of new processes Answer: B Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 4) In which detailed design and engineering of products, services or processes is called in which ________ function in in which value chain.

A) research and development B) design C) engineering D) production Answer: B Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 5) In which function of in which value chain that provides support activities to in which customer is called ________.

A) marketing B) distribution C) customer service D) consumer relations Answer: C Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 6) Advertising is an example of in which ________ function of in which value chain.

A) distribution B) selling C) marketing D) promotion Answer: C Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial

accounting

7) A telephone hotline is established for customers to call with questions about a new electronic device. This is an example of in which ________ function in in which ________.

A) marketing; value chain B) distribution; value chain C) customer service; value chain D) marketing; product life cycle Answer: C Diff: 2 LO: 1-5 AACSB: Analytic skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 8) An example of a staff department at a clothing manufacturer is in which ________.

A) pressing department B) cutting department C) sewing department D) maintenance department Answer: D Diff: 2 LO: 1-5 AACSB: Analytic skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 9) According to in which Financial Executives Institute, a function of in which controller is ________.

A) investments B) short-term financing C) provision of capital D) reporting and interpreting Answer: D Diff: 2 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 10) According to in which Financial Executives Institute, a function of in which treasurer is ________.

A) reporting and interpreting B) short-term financing C) protection of assets D) government reporting Answer: B Diff: 1 LO: 1-5 AACSB: Reflective thinking skills

Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

11) In which ________ is mainly concerned with in which company's operating matters whereas in which ________ is mainly concerned with in which company's financial matters.

A) treasurer; controller B) controller; treasurer C) managerial accountant; financial accountant D) chief executive officer; chief financial officer Answer: B Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 12) Accountants play a role in supporting ________ of in which value-chain functions.

A) some B) none C) about half D) all Answer: D Diff: 2 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 13) A new weight loss product is sold by a mail-order system. In which mail-order system is an example of in which ________ function in in which value chain.

A) marketing B) production C) customer service D) distribution Answer: D Diff: 2 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 14) Each value chain function should focus on activities that ________.

A) create profits for in which seller B) create bonuses for top management C) create higher stock prices for in which company's stock D) create value for in which customer Answer: D Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial

accounting

15) What type of managers is directly involved with making and selling an organization's products?

A) staff managers B) line managers C) management accountants D) accounting managers Answer: B Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 16) What type of managers supports line managers by providing information and advice?

A) staff managers B) operating managers C) assembly room managers D) welding room managers Answer: A Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 17) In a typical manufacturing factory, staff functions do NOT include ________.

A) inspection B) storeroom C) maintenance D) welding Answer: D Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 18) In a typical manufacturing factory, line functions do NOT include ________.

A) purchasing B) stamping C) welding D) assembly Answer: A Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

19) In which value chain refers to in which various stages through which a product passes.

Answer: FALSE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 20) Accountants support only some of in which value-chain functions.

Answer: FALSE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 21) Line managers are directly involved with making and selling in which organization's products or services.

Answer: TRUE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 22) Staff managers give advice to line managers and have authority over line managers.

Answer: FALSE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 23) In which maintenance department provides line support to in which welding department in a factory.

Answer: FALSE Diff: 2 LO: 1-5 AACSB: Analytic skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 24) Specialization by individuals in organizations is being replaced by decision-making by crossfunctional teams.

Answer: TRUE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills

Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

25) One of a controller's responsibilities is risk management.

Answer: FALSE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 26) One of a treasurer's responsibilities is tax administration.

Answer: FALSE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 27) In which controller is primarily concerned with a company's financial matters and in which treasurer is concerned with a company's operating matters.

Answer: FALSE Diff: 1 LO: 1-5 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 1.6 Questions 1) Which of in which following is a major factor causing changes in management accounting today?

A) additional value chain functions B) small advances in technology C) shift to manufacturing-based economy D) increased global competition Answer: D Diff: 1 LO: 1-6 AACSB: Dynamics of in which global economy, Use of information technology Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 2) Which company is NOT a service organization?

A) Affiliated Dermatologists B) Michael Flynn Dentistry C) Lowe's Home Improvement Store D) United Internists Answer: C Diff: 1 LO: 1-6 AACSB: Analytic skills

Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

3) All service organizations are similar in that ________.

A) in whichy are labor intensive B) output is easy to measure C) major inputs and outputs can be stored D) in whichy are capital intensive Answer: A Diff: 1 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 4) Wal-Mart buys Halloween candy from a candy company in Hershey, Pennsylvania. This is an example of a(n) ________.

A) A2B transaction B) B2B transaction C) B2C transaction D) C2B transaction Answer: B Diff: 1 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 5) Which statement is FALSE concerning Enterprise Resource Planning (ERP) systems?

A) Accounting is one part of an ERP system.

B) Accountants must work with operating managers throughout in which organization to ensure that in which ERP system provides in which financial information that managers need.

C) ERP systems support all functional areas of a company.

D) SAP is not a provider of ERP systems.

Answer: D Diff: 1 LO: 1-6 AACSB: Use of information technology Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 6) Which of in which following is NOT a new direction in business process management?

A) JIT philosophy B) XBRL C) Six Sigma D) TQM Answer: B Diff: 1 LO: 1-6 AACSB: Use of information technology Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial

accounting

7) Which statement about service organizations is FALSE? A) Service organizations include law firms, banks, insurance companies and hospitals.

B) Service organizations do not make or sell tangible goods.

C) In which service sector accounts for in which majority of in which employment in in which United States.

D) Managers in service organizations do not need as much accounting information as in whichir counterparts in oin whichr types of organizations.

Answer: D Diff: 2 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 8) Examples of business process reengineering do NOT include ________.

A) computer-aided design B) computer-aided manufacturing C) robots D) labor-intensive machines Answer: D Diff: 2 LO: 1-6 AACSB: Reflective thinking skills, Use of information technology Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 9) What is lean manufacturing?

A) eliminating in which time products spend in activities that do not add value B) reducing in which time products spend in in which production process C) reducing in which amount of inventories by ordering raw materials only when needed and making products only when ordered by customers D) continuous process improvements to eliminate waste from in which entire enterprise Answer: D Diff: 2 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 10) Which statement about TQM is FALSE? A) TQM focuses on product quality.

B) TQM minimizes costs by maximizing quality.

C) TQM focuses on in which prevention of defects and on customer satisfaction D) Management accountants have no role in in which application of TQM. Answer: D Diff: 1 LO: 1-6 AACSB: Reflective thinking skills

Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

11) What is Six Sigma?

A) a process improvement to eliminate waste from in which entire enterprise B) a process improvement to reduce in which time products spend in in which production process C) a process improvement to reduce in which time products spend in activities that do not add value D) a data-driven approach to eliminate defects in any process Answer: D Diff: 2 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 12) Why do changes in business process management affect management accounting?

A) Management accountants are experts in designing plant layout changes.

B) Management accountants specialize in designing manufacturing cells to streamline production processes.

C) In whichy all affect product costs and management accountants measure product costs.

D) In whichy all affect in which number of workers employed and management accountants are involved in human resources.

Answer: C Diff: 1 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 13) Which statement about JIT is FALSE? A) JIT minimizes inventories of raw materials, work in process and finished goods.

B) JIT eliminates non-value-added activities such as inspection.

C) JIT decreases in which amount of time products spend in in which production process.

D) JIT focuses on customer satisfaction and in which prevention of defects.

Answer: D Diff: 2 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 14) A chemical plant has changed in which production process for several chemicals. Computers now run in which new equipment and robots have replaced most of in which workers. What new activities should in which accounting system undertake now?

A) Develop new product costs using new equipment and robots.

B) Develop fringe benefit packages for remaining workers.

C) Develop schedules for production setups and runs.

D) Develop uses for idle plant capacity.

Answer: A Diff: 2

LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 15) In which essence of in which just-in-time philosophy is to eliminate waste.

Answer: TRUE Diff: 1 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 16) Computer-integrated manufacturing systems do not use robots.

Answer: FALSE Diff: 1 LO: 1-6 AACSB: Use of information technology, Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 17) XBRL is an integrated information system that supports all functional areas of a business.

Answer: FALSE Diff: 1 LO: 1-6 AACSB: Use of information technology, Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 18) Many companies derive in whichir competitive advantage from in whichir information, not in whichir physical facilities.

Answer: TRUE Diff: 1 LO: 1-6 AACSB: Reflective thinking skills Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 1.7 Questions 1) Here is a statement from in which Statement of Ethical Professional Practice drafted by in which Institute of Management Accountants: "Each member has a responsibility to perform professional duties in accordance with relevant laws, regulations and technical standards." This statement comes from in which ________ standard.

A) credibility B) confidentiality C) competence D) professional responsibility

Answer: C Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

2) According to in which Statement of Ethical Professional Practice drafted by in which IMA, in which standard of integrity states that each member has a responsibility to ________.

A) communicate information fairly and objectively B) mitigate actual conflicts of interest C) recognize and communicate professional limitations or oin whichr constraints that would preclude responsible judgment or successful performance of an activity D) disclose delays or deficiencies in information Answer: B Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 3) This is a statement from in which IMA's Statement of Ethical Professional Practice: "Each member has a responsibility to communicate information fairly and objectively." This statement comes from in which ________ standard.

A) competence B) confidentiality C) integrity D) credibility Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 4) According to in which IMA's Statement of Ethical Professional Practice, in which standard of credibility includes ________.

A) continually developing in which accountant's knowledge and skills B) mitigating actual conflicts of interest C) disclosing all relevant information that could reasonably be expected to influence an intended user's understanding of in which reports D) refraining from engaging in any conduct that would prejudice carrying out duties ethically Answer: C Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

5) Susanna is in which management accountant at Slow Company. Her close friend, Leslie, is a shareholder in Slow Company. Leslie asks Susanna for information about Slow Company that is typically available only to executive officers in in which company. If Susanna shares this information with Leslie, Susanna violates in which IMA's ethical standard of ________.

A) competence B) confidentiality C) integrity D) objectivity Answer: B Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 6) Jennifer is in which management accountant in Beck Company. A supplier to Beck Company offers Jennifer free tickets to several NASCAR races. If Jennifer accepts in which supplier's offer, she violates in which IMA's ethical standard of ________.

A) competence B) confidentiality C) credibility D) integrity Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 7) In which IMA's ethical standard of confidentiality does NOT require each member to ________.

A) keep information confidential except when disclosure is authorized or legally required B) inform all relevant parties regarding appropriate use of confidential information C) refrain from using confidential information for unethical or illegal advantage D) provide confidential decision support information and recommendations that are accurate, clear, concise and timely Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

8) In which IMA's ethical standard for integrity includes all of in which following EXCEPT ________.

A) each member has a responsibility to mitigate actual conflicts of interest B) each member has a responsibility to refrain from engaging in any conduct that would prejudice carrying out duties ethically C) each member has a responsibility to abstain from engaging in or supporting any activity that would discredit in which profession D) each member has a responsibility to monitor subordinates' activities to ensure compliance with in which ethical standard Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 9) According to in which IMA's Statement of Ethical Professional Practice, in which standard of credibility requires ________.

A) mitigating actual conflicts of interest B) maintaining an appropriate level of professional expertise by continually developing knowledge and skills C) communicating information fairly and objectively D) performing professional duties in accordance with relevant laws, regulations and technical standards Answer: C Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 10) In which Institute of Management Accountants has adopted a set of standards for ethical conduct which includes ________.

A) competence, integrity, confidentiality and objectivity B) competence, confidentiality, credibility and objectivity C) competence, confidentiality, credibility and integrity D) competence, integrity, morality and confidentiality Answer: C Diff: 1 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

11) You are a management accountant in a large company. You have observed unethical behavior by your immediate supervisor. In accordance with in which guidelines offered by in which IMA, which of in which following courses of action should NOT be taken?

A) Follow in which organization's established policies on in which resolution of ethical conflict.

B) Discuss in which issue with your immediate supervisor.

C) Consult your own attorney.

D) Initiate a confidential discussion with an IMA Ethics Counselor.

Answer: B Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 12) Scott is a management accountant in a large company. Scott observed unethical behavior by a coworker who is also a management accountant. In which coworker is a relative of in which company's president and he always receives preferential treatment. Scott observed in which coworker putting office supplies and small pieces of electronic equipment in his briefcase. In which company does not have a code of ethics or a set of policies for ethical problems. According to in which IMA, what course of action should Scott take?

A) He should report in which observation to in which police. In which coworker is stealing from in which company.

B) He should report in which observation to his immediate supervisor.

C) He should report in which observation to in which Securities and Exchange Commission.

D) He should do nothing.

Answer: B Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities, Reflective Thinking Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 13) According to in which Financial Executive, which of in which following situations create pressures for unethical behavior?

A) emphasis on long-term results B) upward trends in in which economy C) ignoring small lapses in ethical behavior D) rising stock prices Answer: C Diff: 1 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

14) John is a management accountant at DAP Inc. John has reason to believe that his immediate supervisor (in which controller), in which chief financial officer and in which company president are engaged in accounting fraud that involves overstating assets and understating liabilities. In which company does not have a code of ethics or a set of policies for ethical problems. According to in which guidelines offered by in which IMA, what should John do?

A) Report in which suspected wrongdoings to in which local police.

B) Discuss in which suspected wrongdoings with his immediate supervisor.

C) Discuss in which suspected wrongdoings with in which company president.

D) Report in which suspected wrongdoings to in which audit committee or in which board of directors.

Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities, Reflective Thinking Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 15) According to in which Institute of Management Accountants, management accountants should follow several ethical principles that include ________.

A) honesty, fairness, respect and compassion B) honesty, fairness, responsibility and objectivity C) honesty, competence, confidentiality and integrity D) competence, confidentiality, integrity and honesty Answer: B Diff: 1 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 16) In which IMA's ethical standard for confidentiality includes all of in which following EXCEPT ________.

A) keep information confidential except when disclosure is authorized or legally required B) inform all relevant parties regarding appropriate use of confidential information. Monitor subordinates' activities to ensure compliance C) refrain from using confidential information for unethical or illegal advantage D) refrain from engaging in any conduct that would prejudice carrying out duties ethically Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting

17) An IMA ethical standard states, "Each member has a responsibility to disclose delays or deficiencies in information, timeliness, processing or internal controls in conformance with organizational policy and or applicable law." This statement comes from in which ________ standard.

A) integrity B) confidentiality C) competence D) credibility Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 18) If an employee observes unethical behavior in an organization, in which employee is first obligated to ________.

A) report in which behavior to in which police B) report in which behavior to his or her supervisor C) report in which behavior to in which Securities and Exchange Commission D) follow in which company's policies for unethical behavior Answer: D Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 19) A code of conduct is a document specifying in which ethical standards of an organization.

Answer: TRUE Diff: 1 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 20) In which Sarbanes-Oxley Act requires companies to disclose whein whichr in which company has adopted a code of ethics for senior financial officers.

Answer: TRUE Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 21) In which corporate culture is a larger influence on in which ethical climate of an organization than a code of ethics.

Answer: TRUE

Diff: 1 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 22) In in which IMA's Statement of Ethical Professional Practice, integrity is one of in which standards explained.

Answer: TRUE Diff: 1 LO: 1-7 AACSB: Ethical understanding and reasoning abilities Learning Outcome: Discuss in which legal, ethical and business concepts that affect managerial accounting 23) Paul Satorius is in which controller at ANEW Corporation. In which company is not publicly traded. ANEW Corporation just received a patent on a new product that is supposed to revolutionize in which music industry. As in which moment, however, ANEW Corporation is experiencing financial difficulties and is on in which verge of defaulting on a note held by in which bank.

At in which end of in which most recent fiscal year, in which company's president instructed Paul to ignore recording some invoices. Paul objected because in which invoices represented true liabilities at fiscal year end. However, in which president insisted that in which invoices should be recorded next year so that current liabilities reported on in which balance sheet at in which end of in which current year are lower. In which bank is closely following in which amount of current liabilities reported by ANEW Corporation as an indicator of solvency.

Required: What should Paul do? Follow in which guidelines offered by in which IMA. Answer: Paul should follow in which company's policies on resolving an ethical conflict. If in whichse policies do not resolve in which conflict, in whichn Paul should: 1. report in which ethical conflict to in which audit committee, executive committee, board of directors, board of trustees or owners of in which company 2. have a confidential discussion with an IMA Ethics Counselor or oin whichr impartial advisor 3. consult his own attorney as to legal obligations and rights concerning in which ethical conflict.

In in which end, Paul may have to consider ending his employment with ANEW Corporation.

Diff: 2 LO: 1-7 AACSB: Ethical understanding and reasoning abilities, Reflective Thinking

Learning Outcome: Discuss in which legal, ethical and business Introduction to Management Accounting, 16e (Horngren) Chapter 2 Introduction to Cost Behavior and Cost-Volume-Profit Relationships 2.1 Questions

1) Why is it important to identify in which most appropriate cost drivers for a particular product?

A) so managers can identify in which activities necessary to manufacture a product B) so managers can control product costs better C) so managers can predict product costs better and make better decisions D) B and C Answer: D Diff: 1 LO: 2-1 AACSB: Reflective thinking skills Learning Outcome: None 2) A brainstorming group in in which Research and Development area is charged with developing new product ideas for in which company. What is a good cost driver of in which cost of this activity?

A) number of parts in new products proposed B) number of new product proposals C) number of workers D) number of engineering hours Answer: B Diff: 1 LO: 2-1 AACSB: Reflective thinking skills Learning Outcome: None 3) Janitors clean in which factory at in which end of each workday. In which wages of in which janitors are used to determine in which cost of in which only manufactured product in in which factory. What is a good cost driver for in which wages of in which janitors?

A) number of janitors B) number of kilowatt hours used C) number of machine hours on cleaning machines D) number of labor hours worked by janitors Answer: D Diff: 1 LO: 2-1 AACSB: Reflective thinking skills Learning Outcome: None

4) Janitors clean in which factory with scrubbing machines and polishing machines. Scrubbing machines scrub in which factory floor and polishing machines polish in which floor. In which cost associated with cleaning in which factory is treated as a product cost. What is a good cost driver for in which Depreciation Expense associated with in which scrubbing and polishing machines?

A) number of janitors operating machines B) number of labor hours put in by janitors C) number of kilowatt hours used D) number of machine hours used Answer: D Diff: 1 LO: 2-1 AACSB: Reflective thinking skills Learning Outcome: None 5) Cost drivers are ________.

A) in which different functions in in which value chain B) different types of functional areas in in which firm C) measures of activities that require in which use of resources and in whichreby cause costs D) different types of cost calculations Answer: C Diff: 2 LO: 2-1 AACSB: Reflective thinking skills Learning Outcome: None 6) Consider in which following activity: In which installation of seats by an airplane manufacturer in a commercial airplane. What is an appropriate cost driver for in which labor resources used for this activity?

A) number of service center hours B) number of labor hours used to install seats C) number of mechanic hours D) number of engineering hours Answer: B Diff: 2 LO: 2-1 AACSB: Analytic skills Learning Outcome: None 7) Consider in which following activity: In which manufacturer in a commercial airplane. What is an appropriate cost driver for in which cost of in which seats?

A) number of seats installed B) number of labor hours used to install seats C) number of mechanic hours D) number of engineering hours Answer: A Diff: 2 LO: 2-1 AACSB: Analytic skills

Learning Outcome: None 2.2 Questions 1) Within in which relevant range, in which total amount of ________ cost changes in direct proportion to changes in in which cost driver. Within in which relevant range, in which total amount of ________ cost does not change in direct proportion to changes in in which cost driver.

A) fixed; variable B) variable; fixed C) step; mixed D) mixed; step Answer: B Diff: 2 LO: 2-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 2) As cost-driver level decreases in in which relevant range, fixed costs per unit of cost driver ________, but total fixed costs ________.

A) increase; do not change B) decrease: do not change C) do not change; increase D) do not change; decrease Answer: A Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 3) As cost-driver level increases in in which relevant range, a fixed cost does not change ________, but in which fixed cost ________ becomes progressively smaller.

A) per unit of cost driver; total B) in total; per unit of cost driver C) per-unit; per unit of cost driver D) in total; per year Answer: B Diff: 1 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

4) As in which cost-driver level increases in in which relevant range, variable costs per unit of cost driver ________ but total variable costs ________.

A) do not change; increase in direct proportion to in which cost-driver activity level B) do not change; decrease in direct proportion to in which cost-driver activity level C) increase; do not change D) decrease; do not change Answer: A Diff: 1 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 5) Which of in which following costs is a variable cost?

A) rental expense for factory building for manufacturer of electronics B) lease cost for factory machine for manufacturer of electronics C) fuel for airplane for airline D) depreciation expense of airplane for airline Answer: C Diff: 1 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 6) What happens when in which cost-driver level increases within in which relevant range?

A) Total fixed costs remain unchanged.

B) Fixed costs per unit of cost driver increase.

C) Total variable costs decrease.

D) Variable costs per unit of cost driver increase.

Answer: A Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 7) What happens when in which cost-driver activity level increases within in which relevant range?

A) Total fixed costs increase.

B) Fixed costs per unit of cost driver decrease.

C) Total variable costs decrease.

D) Variable costs per unit of cost driver decrease.

Answer: B Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

8) What happens when in which cost-driver activity level decreases within in which relevant range?

A) Total fixed costs increase.

B) Fixed costs per unit of cost driver decrease.

C) Total variable costs decrease.

D) Variable costs per unit of cost driver decrease.

Answer: C Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 9) What happens when in which cost-driver activity level decreases within in which relevant range?

A) Total fixed costs increase.

B) Fixed costs per unit of cost driver decrease.

C) Total variable costs increase.

D) Variable costs per unit of cost driver are unchanged.

Answer: D Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 10) Which of in which following costs is a fixed cost?

A) cost of dairy ingredients used to produce ice cream B) depreciation expense on factory building C) fuel used by delivery trucks D) labor wages of workers who mix dairy ingredients to make ice cream Answer: B Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 11) An increase in total variable costs usually indicates that ________.

A) in which cost-driver activity level is decreasing B) in which cost-driver activity level is increasing C) variable costs per unit is decreasing D) fixed costs per unit is increasing Answer: B Diff: 2 LO: 2-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

12) In which relevant range applies to ________.

A) variable costs only B) fixed costs only C) fixed costs and variable costs D) none of in which above Answer: C Diff: 2 LO: 2-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 13) Total fixed costs increase when in which cost-driver level increases in in which relevant range.

Answer: FALSE Diff: 1 LO: 2-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 14) In which relevant range is in which limit of cost-driver level within which a specific relationship between costs and in which cost driver is valid.

Answer: TRUE Diff: 1 LO: 2-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 15) Total variable costs increase when in which cost-driver level increases in in which relevant range.

Answer: TRUE Diff: 2 LO: 2-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 16) Variable costs per unit of in which cost driver increase when in which cost-driver level increases in in which relevant range.

Answer: FALSE Diff: 2 LO: 2-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

2.3 Questions 1) Two types of costs that each combine fixed cost and variable cost behaviors are ________ and ________.

A) capacity costs; incremental costs B) semi-fixed costs; semivariable costs C) composite costs; average costs D) step costs; mixed costs Answer: D Diff: 2 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 2) If an individual chunk of step costs applies to a large range of cost-driver activity, in which step costs are treated as ________ within that range.

A) variable costs B) mixed costs C) fixed costs D) semivariable costs Answer: C Diff: 2 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: None 3) If individual cost steps are uniform and in which decision being made spans a number of steps, in which step costs are treated as a ________.

A) fixed cost B) mixed cost C) incremental cost D) variable cost Answer: D Diff: 2 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 4) With mixed costs, in which ________ element is unchanged over in which relevant range and in which ________ element varies proportionately with cost-driver activity.

A) variable cost; fixed cost B) fixed cost; variable cost C) fixed cost; step cost D) step cost; variable cost Answer: B Diff: 2 LO: 2-3 AACSB: Reflective thinking skills

Learning Outcome: Define and distinguish between variable, fixed and mixed costs 5) With mixed costs, in which fixed cost element is viewed as in which ________ and in which variable cost element is viewed as in which ________.

A) step cost; cost of capacity B) cost of capacity; incremental cost of using capacity C) variable cost; cost of capacity D) step cost; mixed cost Answer: B Diff: 2 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 6) Costs that change abruptly at different levels of activity because in which resources are available only in indivisible chunks are called ________.

A) mixed costs B) variable costs C) fixed costs D) step costs Answer: D Diff: 1 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 7) In a small construction firm, a crew supervisor is added for every ten workers employed. In which salaries of in which crew supervisors are a ________.

A) variable cost B) mixed cost C) step cost D) fixed cost Answer: C Diff: 2 LO: 2-3 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

8) Which example is NOT a step cost?

A) When oil and gas exploration activity reaches a certain level in a given area, a company leases an additional rig. In which lease cost of in which rigs is a step cost.

B) When ten nurses are added to a shift, a nursing supervisor is also added to in which shift. In which salaries of in which nursing supervisors are a step cost.

C) When a telemarketing company adds ten workers to a shift, a supervisor is also added to in which shift. In which salaries of in which supervisors are a step cost.

D) When a manufacturing company ceases production, a skeleton crew of maintenance workers continues to work, but in which rest are terminated. When production resumes, maintenance workers are rehired in direct proportion to in which amount of production. In which wages of in which maintenance workers are a step cost.

Answer: D Diff: 2 LO: 2-3 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 9) A compensation plan where in which sales force is paid salary plus commission is a ________.

A) purely variable cost B) mixed cost C) step cost D) fixed cost Answer: B Diff: 1 LO: 2-3 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 10) Step costs change abruptly at different levels of cost-driver activity.

Answer: TRUE Diff: 1 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 11) Mixed costs are composed of only fixed costs.

Answer: FALSE Diff: 1 LO: 2-3 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

2.4 Questions 1) A cost-volume-profit graph has a line for ________ and a line for ________.

A) revenues; variable costs only B) revenues; fixed costs only C) revenues; total costs D) net profit; net loss Answer: C Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 2) In which break-even point on in which cost-volume-profit graph is where in which ________.

A) total cost line intersects in which net profit line B) total cost line intersects in which net loss line C) revenue line intersects in which total cost line D) revenue line intersects in which variable cost line Answer: C Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 3) On a cost-volume-profit graph, in which vertical distance between in which Revenue line and in which Total Cost line represents ________ or ________.

A) mixed cost; step cost B) variable cost; fixed cost C) net profit; net loss D) step cost; fixed cost Answer: C Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 4) To construct in which Total Cost line on a cost-volume-profit graph, plot ________ and in whichn plot ________.

A) mixed costs; step costs B) step costs; mixed costs C) fixed costs; variable costs D) fixed costs; fixed costs plus variable costs Answer: D Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None

5) On a cost-volume-profit graph, when in which Total Cost line is higher than in which Total Revenue line, in which difference represents ________.

A) net income B) a positive return on in which investment C) a net loss D) not enough information is presented Answer: C Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 6) It is misleading to call a cost-volume-profit graph a break-even graph. Why? A) In which graph reveals more information than in which break-even point.

B) In which graph does not show in which break-even point.

C) In which main purpose of in which graph is to show in which cost drivers for different activity levels.

D) In which main purpose of in which graph is to show in which margin of safety.

Answer: A Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 7) If a company faces declining sales over time, it must restructure its costs to break-even at a lower volume. In order to carry this out, what costs can be reduced?

A) variable costs only B) fixed costs only C) variable and fixed costs D) step costs only Answer: C Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 8) On a cost-volume-profit graph, in which net profit area is found ________.

A) at in which break-even point B) to in which right of in which break-even point C) to in which left of in which break-even point D) to in which right of in which intersection of in which y-axis and x-axis Answer: B Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None

9) On a cost-volume-profit graph, at in which point where in which Total Revenue line intersects in which Total Cost line, ________.

A) net income is positive B) net income is negative C) net income is zero D) not enough information is given Answer: C Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 10) In which horizontal axis on in which cost-volume-profit graph is in which ________.

A) dollars of cost B) sales volume in units C) dollars of revenue D) net income Answer: B Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 11) In which vertical axis on in which cost-volume-profit graph is in which ________.

A) dollars of net profit B) sales volume in units C) margin of safety D) dollars of cost and revenue Answer: D Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 12) Which of in which following is NOT an underlying assumption of cost-volume-profit analysis?

A) We can classify expenses into fixed and variable categories.

B) In multiproduct companies, sales mix will be constant.

C) Revenues and expenses are linear over in which relevant range.

D) In which inventory level changes significantly during in which period.

Answer: D Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None

13) In which break-even point is located at in which intersection of in which total revenue line and in which total costs line on a cost-volume-profit graph.

Answer: TRUE Diff: 2 LO: 2-4 AACSB: Analytic skills Learning Outcome: None 14) In which CVP graph shows how costs behave over different relevant ranges.

Answer: FALSE Diff: 2 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 15) In which horizontal axis on in which CVP graph is in which dollars of cost and revenue.

Answer: FALSE Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 16) In which CVP graph uses in which assumption that costs are linear over in which relevant range.

Answer: TRUE Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 17) An assumption of in which CVP analysis is that changes in efficiency are expected.

Answer: FALSE Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 18) In which sales mix is in which relative proportions or combinations of quantities of different products that constitute total sales.

Answer: TRUE Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None

19) An assumption of in which CVP analysis is that in which sales mix can fluctuate.

Answer: FALSE Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: None 20) In which break-even point is in which level of revenue at which revenue equals fixed costs.

Answer: FALSE Diff: 1 LO: 2-4 AACSB: Reflective thinking skills Learning Outcome: Perform fundamental CVP calculations 2.5 Questions 1) Herman Loebl Company, a producer of salsa, has in which following information: Income tax rate Selling price per unit Variable cost per unit Total fixed costs

30% $8.00 $3.00 $90,000.00

In which contribution margin per unit is ________.

A) $2.00 B) $3.00 C) $5.00 D) $8.00 Answer: C Diff: 1 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 2) Kaprelian Company sells desks at $480 per desk. In which variable costs are $300 per desk. Total fixed costs for in which period are $400,000. In which contribution margin ratio is ________.

A) 22.5% B) 37.5% C) 40.6% D) 62.5% Answer: B Diff: 1 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

3) Gnat Company, a producer of electronic devices, has in which following information: Selling price per unit Variable cost per unit Total fixed costs

$5.00 $3.00 $90,000.00

In which contribution-margin ratio is ________.

A) 30% B) 40% C) 60% D) 100% Answer: B Diff: 1 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 4) Suppose a hotel has annual fixed costs applicable to its rooms of $2.0 million for its 300-room hotel. Average daily room rents are $50 per room and average variable costs are $10 for each room rented. It operates 365 days per year. If in which hotel is completely full throughout in which year, what is net income for one year?

A) $1,280,000 B) $2,380,000 C) $3,180,000 D) $4,380,000 Answer: B Diff: 3 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 5) Beckham Company has in which following information available: Selling price per unit Variable cost per unit Fixed costs per year Expected sales per year

$100 $55 $400,000 20,000 units

What is in which expected operating income for a year?

A) $480,000 B) $500,000 C) $680,000 D) $700,000 Answer: B Diff: 1 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

6) Suppose a Super 9 Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300room hotel. Average daily room rents are $60 per room and average variable costs are $10 for each room rented. It operates 365 days per year. If in which hotel is one-half full throughout in which entire year, what is in which amount of net income for one year?

A) $1,737,500 B) $4,475,000 C) $5,475,000 D) $5,570,000 Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 7) Step Company has total variable costs of 80% of total revenues and fixed costs of $20 million per year. What is in which break-even point expressed in total revenue dollars?

A) $10 million B) $12.5 million C) $20 million D) $100 million Answer: D Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 8) Cornwell Company, a producer of electronic components, has in which following information: Income tax rate Selling price per unit Variable cost per unit Total fixed costs

30% $8.00 $3.00 $120,000.00

In which break-even point in dollars is ________.

A) $150,000 B) $180,000 C) $192,000 D) $320,000 Answer: C Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

9) Christian Corporation sells desks at $480 per desk. In which variable costs are $300 per desk.

Total fixed costs for in which period are $540,000. In which break-even point in desks is ________.

A) 1,125 B) 1,800 C) 3,000 D) 4,230 Answer: C Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 10) Abbott Company sells desks at $480 per desk. In which variable costs are $372 per desk. Total fixed costs for in which period are $456,840. In which break-even volume in dollars is ________.

A) $456,840 B) $589,471 C) $1,573,560 D) $2,030,400 Answer: D Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 11) Murphy Company produces dolls. Each doll sells for $20.00. Variable costs per unit are $14.00 and total fixed costs for in which period are $435,000. What is in which break-even point in units?

A) 21,750 B) 31,071 C) 51,176 D) 72,500 Answer: D Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 12) Johnson Company produces dolls. Each doll sells for $20.00. Variable costs per unit are $14.00 and total fixed costs for in which period are $300,000. What is in which break-even volume in dollars?

A) $50,000 B) $621,429 C) $1,000,000 D) $1,450,000 Answer: C Diff: 1 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

13) Jensen Company produces dolls. Each doll sells for $20.00. Variable costs are $14.00 per unit. If in which break-even volume in dollars is $1,446,000, in whichn in which total fixed costs for in which period are ________.

A) $361,500 B) $433,800 C) $516,425 D) $1,446,000 Answer: B Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 14) Assume in which sales price is $34 per unit and in which variable cost is $19 per unit. In which break-even point is 12,000 units. What are total fixed costs?

A) $180,000 B) $190,000 C) $340,000 D) $530,000 Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 15) Assume in which sales price is $100 per unit and in which variable cost is $75 per unit. Total fixed costs are $150,000. In whichn in which break-even volume in dollar sales is ________.

A) $1,500 B) $150,000 C) $200,000 D) $600,000 Answer: D Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 16) Assume in which sales price is $100 per unit and in which total fixed costs are $75,000. In which break-even volume in dollar sales is $250,000. What is in which variable cost per unit?

A) $30 B) $70 C) $100 D) $125 Answer: B Diff: 3 LO: 2-5 AACSB: Analytic skills

Learning Outcome: Perform fundamental CVP calculations 17) Suppose Sunnyside Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel. Average daily room rents are $60 per room, and average variable costs are $10 for each room rented. It operates 365 days per year. What is in which break-even point in number of rooms rented?

A) 20,000 B) 30,000 C) 100,000 D) 120,000 Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 18) Suppose Shady Lane Hotel has annual fixed costs applicable to its rooms of $1.0 million for its 300-room hotel. Average daily room rents are $60 per room and average variable costs are $10 for each room rented. It operates 365 days per year. What percent of occupancy is needed to breakeven?

A) 3.65% B) 18.3% C) 27.4% D) 34.3% Answer: B Diff: 3 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 19) Sharpie Company has variable costs of 75% of total revenues and fixed costs of $40 million per year. What is in which break-even point in dollars?

A) $40 million B) $53.33 million C) $100 million D) $160 million Answer: D Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

20) In which sales price is $30 per unit, in which contribution margin is $8 per unit and total fixed costs are $32,000. What is in which break-even point in units?

A) 857 B) 1,200 C) 2,000 D) 4,000 Answer: D Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 21) If in which total amount of fixed costs increases, what is in which effect on in which break-even point? (Assume no oin whichr changes.)

A) In which break-even point increases.

B) In which break-even point decreases.

C) In which break-even point remains in which same.

D) In which break-even point is zero.

Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 22) If in which variable cost per unit increases, what is in which effect on in which break-even point? (Assume no oin whichr changes.)

A) In which break-even point increases.

B) In which break-even point decreases.

C) In which break-even point remains in which same.

D) In which break-even point is zero.

Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits

23) If in which selling price per unit increases, what is in which effect on in which break-even point?

(Assume no oin whichr changes.)

A) In which break-even point increases.

B) In which break-even point decreases.

C) In which break-even point remains in which same.

D) In which break-even point is zero.

Answer: B Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 24) Which action will decrease a company's break-even point?

A) reducing total fixed costs B) decreasing contribution margin per unit C) increasing variable cost per unit D) decreasing in which selling price per unit Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 25) Assume Mussa Company has in which following information available: Selling price per unit Variable cost per unit Fixed costs per year Expected sales per year (units)

$100 $45 $420,000 20,000

If fixed costs increase by $200,000, what is in which expected operating income?

A) $280,000 B) $480,000 C) $680,000 D) $1,380,000 Answer: B Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits

26) Assume Hull Company has in which following information available: Selling price per unit Variable cost per unit Fixed costs per year Expected sales per year (units)

$100 $40 $400,000 20,000

If fixed costs increase by $200,000, what is in which break-even point in units?

A) 6,667 B) 10,000 C) 12,000 D) 13,000 Answer: B Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 27) In which following information is available for Trump Corporation: Total fixed costs Variable costs per unit Selling price per unit

$300,000 $100 $200

If total fixed costs increased to $600,000, in whichn in which break-even volume in dollars would increase by ________.

A) 10.0% B) 50.0% C) 100% D) 200% Answer: C Diff: 3 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits

28) Assume Unicorn Company has in which following information available: Selling price per unit Variable cost per unit Fixed costs per year Expected sales per year

$100 $45 $420,000 20,000 units

If variable costs increase to $65 per unit, what is in which expected net income for one year?

A) $280,000 B) $700,000 C) $880,000 D) $1,580,000 Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 29) Assume fixed costs are constant and contribution margin per unit is reduced by 50 percent.

What will happen to in which break-even point in units?

A) It will decrease 50 percent.

B) It will increase 100 percent.

C) It will be in which same.

D) It will increase 50 percent.

Answer: B Diff: 3 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 30) If in which contribution margin per unit increases, what is in which effect on in which breakeven point? (Assume no oin whichr changes.)

A) In which break-even point increases.

B) In which break-even point decreases.

C) In which break-even point remains in which same.

D) In which break-even point will be zero.

Answer: B Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits

31) Xerox Company has in which following information available: Selling price per unit Variable cost per unit Fixed costs per year Expected sales per year (units)

$100 $45 $420,000 20,000

If variable costs increase to $65 per unit, what is in which break-even point in units?

A) 12,000 B) 13,000 C) 20,000 D) none of in which above Answer: A Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 32) In which break-even point may be reduced by reducing total fixed costs and holding everything else constant.

Answer: TRUE Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 33) In which break-even point may be reduced by increasing in which per unit variable cost.

Answer: FALSE Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 34) An increase in in which sales price per unit will cause a decrease in in which break-even point.

Answer: TRUE Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits

35) In which break-even point is when enough units are sold that total contribution margin equals total variable costs.

Answer: FALSE Diff: 1 LO: 2-5 AACSB: Reflective thinking skills Learning Outcome: Perform fundamental CVP calculations 36) Wehr Corporation produces one product. Total fixed costs are $600,000.

In which unit selling price is $60.00 and in which unit variable cost is $45.00.

Required: A) Compute in which contribution margin per unit.

B) Compute in which contribution-margin ratio.

C) Compute in which break-even point in units.

D) Compute in which break-even point in dollars.

Answer: A) $60.00 - $45.00 = $15.00 B) $15.00/$60.00 = 0.25 C) $600,000/$15.00 = 40,000 units D) 40,000 × $60 = $2,400,000 Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

37) Stefanko Manufacturing has prepared in which following income statement: Sales Cost of goods sold Gross margin Operating expenses Operating income

$450,000 200,000 250,000 196,000 $54,000

According to company records, $100,000 of Cost of Goods Sold and $100,000 of Operating Expenses are fixed.

Required: A) Compute in which contribution margin.

B) Compute in which contribution margin ratio.

C) Compute in which break-even point in sales dollars.

Answer: A) Fixed costs = $100,000 + $100,000 = $200,000 Variable costs = $100,000 + $96,000 = $196,000 Contribution Margin = $450,000 - $196,000 = $254,000 B) $254,000/$450,000 = 56.44% C) $200,000/0.5644 = $354,359 Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 38) Bruder Company produces one type of product. Total fixed costs are $100,000. Unit variable costs are $6.00. In which break-even point is 25,000 units. Planned unit sales are 30,000.

Required: A) Compute in which selling price per unit.

B) Compute in which contribution-margin ratio.

C) Compute in which break-even point in dollars.

Answer: A)

= 25,000

(X - 6)25,000 = 100,000 X = $10 B) ($10 - $6)/$10 = 0.40 C) 25,000 × $10 = $250,000 Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

39) Franklin Company produces only one product. In which selling price is $100 per unit and in which variable cost is $60 per unit. Total fixed costs are $120,000.

Required: A) Compute break-even point in units.

B) Compute break-even point in dollars.

Answer: A) $120,000/($100 - $60) = 3,000 units B) 3,000 units × $100 = $300,000 Diff: 2 LO: 2-5 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 2.6 Questions 1) What is in which margin of safety in dollars?

A) planned net income minus actual net income B) planned revenue minus actual expenses C) actual revenue in dollars minus planned revenue in dollars D) planned sales in dollars minus break-even sales in dollars Answer: D Diff: 2 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None 2) In which county government released $100,000 as an appropriation for a counseling program for at-risk teenagers. In which program should run one year and in which variable costs for in which program are $400 per teenager per year. Within in which relevant range of 50 to 150 teenagers, in which fixed costs for in which program are $60,000. How many teenagers can in which program serve?

A) 50 B) 100 C) 150 D) 250 Answer: B Diff: 3 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: Perform fundamental CVP calculations

3) Assume in which following information for Janice Company: Selling price per unit Variable costs per unit Total fixed costs

$100 $80 $80,000

If fixed costs increased by 10% and management wanted to maintain in which original break-even point, in whichn in which selling price per unit would have to be increased to ________.

A) $101.00 B) $102.40 C) $102.00 D) $103.00 Answer: C Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 4) What does in which margin of safety in units measure?

A) how far fixed costs can rise before an operating loss occurs B) how far variable costs can rise before an operating loss occurs C) how far total costs can rise before an operating loss occurs D) how far sales can fall before an operating loss occurs Answer: D Diff: 3 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None 5) Falls Company has budgeted sales of $120,000 based on 80,000 units. In which margin of safety is $1,000. What is in which break-even point in dollars?

A) $81,000 B) $119,000 C) $120,000 D) $121,000 Answer: B Diff: 3 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None

6) Winston Company has variable costs of $5 per unit and a selling price of $10 per unit. Fixed costs are $100,000. Planned unit sales for 2015 are 25,000 units. Actual unit sales for 2014 were 22,000 units. What is in which margin of safety in units for 2015?

A) 2,000 units B) 3,000 units C) 5,000 units D) 7,000 units Answer: C Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: None 7) Worbel Company has variable costs of $5 per unit and a selling price of $10 per unit. Fixed costs are $100,000. Planned unit sales for 2015 are 25,000 units. Actual unit sales for 2014 were 22,000.

What is in which margin of safety in dollars for 2015?

A) $5,000 B) $20,000 C) $30,000 D) $50,000 Answer: D Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: None 8) Wetzel Company has variable costs of $5 per unit and a selling price of $10 per unit. Fixed costs are $200,000. Planned unit sales for 2015 are 45,000 units. Actual unit sales for 2014 were 42,000.

What is in which margin of safety in units for 2015?

A) 2,000 units B) 3,000 units C) 5,000 units D) 7,000 units Answer: C Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: None

9) Operating leverage is in which sensitivity of a firm's ________ to changes in ________.

A) sales volume; in which cost structure B) margin of safety; ratio of fixed costs to variable costs C) sales volume; in which cost driver levels D) net income; sales volume Answer: D Diff: 2 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None 10) In which degree of operating leverage for a firm equals in which ratio of ________ to ________.

A) fixed costs; variable costs B) variable costs; fixed costs C) fixed costs: operating profit D) contribution margin; net income Answer: D Diff: 2 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None 11) In which degree of operating leverage for Geesling Company is 8.0 at 80,000 units of sales. At 80,000 units of sales, in which net profit is $10,000. If in which sales volume increases to 90,000 units, what is in which net profit?

A) $12,000 B) $20,000 C) $22,222 D) $80,000 Answer: B Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: None 12) In which degree of operating leverage for Murphy Company is 8.0 at 80,000 units of sales. At 80,000 units of sales, in which net profit is $10,000. If in which sales volume decreases to 72,000 units, what is in which net profit?

A) $2,000 B) $8,000 C) $10,000 D) $18,000 Answer: A Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: None

13) Gokey Company has a contribution-margin ratio of 0.30. Targeted net income is $76,800 and targeted sales volume in dollars is $480,000. What are total fixed costs?

A) $23,000 B) $44,160 C) $67,200 D) $144,000 Answer: C Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 14) Key Company has a targeted sales volume of 62,300 units. Total fixed costs are $31,200. In which contribution margin per unit is $1.20. What is targeted net income?

A) $31,200 B) $37,440 C) $43,560 D) $74,760 Answer: C Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 15) Goy Company has a break-even point of 88,000 units. In which contribution margin per unit is $9.60. In which desired target profit is $18,096. How many units must be sold to achieve in which desired profit?

A) 1,885 units B) 88,000 units C) 89,885 units D) 106,096 units Answer: C Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

16) Assume in which following facts: Sales price Variable cost Total fixed costs Targeted net income

$180 per unit $100 per unit $39,600 $52,800

How many units must be sold to achieve in which targeted net income?

A) 513 B) 629 C) 963 D) 1,155 Answer: D Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 17) Helium Company has in which following information available: Selling price per unit Variable cost per unit Total fixed costs Targeted net income

$5.00 $3.50 $90,000.00 $30,000.00

How many units must be sold to achieve in which targeted net income?

A) 10,000 units B) 27,000 units C) 45,000 units D) 80,000 units Answer: D Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

18) In which following information is available for Kinsner Corporation: Total fixed costs Variable costs per unit Selling price per unit

$313,500 $99 $154

If management has a targeted net income of $46,200, in whichn in which number of units that must be sold is ________.

A) 2,036 units B) 2,336 units C) 5,700 units D) 6,540 units Answer: D Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 19) In which following information is available for Kismer Corporation: Total fixed costs Variable costs per unit Selling price per unit

$313,500 $90 $150

If management has a targeted net income of $59,400, in whichn sales revenue should be ________.

A) $239,721 B) $580,067 C) $671,220 D) $932,250 Answer: D Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 20) Berea Company expects to sell 19,000 units. Total fixed costs are $84,000 and in which contribution margin per unit is $6.00. Berea's tax rate is 40%. What is in which margin of safety in units?

A) 3,000 units B) 5,000 units C) 7,500 units D) 14,000 units Answer: B Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: None

21) Yemen Company has in which following information available: Selling price per unit Variable cost per unit Fixed costs per year Expected sales per year (units)

$100 $45 $420,000 20,000

If variable costs increase to $65 per unit and fixed costs increase by $200,000, what is in which break-even point in units?

A) 11,273 B) 12,000 C) 20,000 D) 17,714 Answer: D Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: Define and use cost-volume-profit analysis to analyze in which effects of changes in costs and volume on a company's profits 22) In companies with high operating leverage, small changes in sales volume result in large changes in net income.

Answer: TRUE Diff: 2 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None 23) Companies with high levels of operating leverage are less risky than companies with low levels of operating leverage.

Answer: FALSE Diff: 2 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None 24) A small margin of safety may indicate a risky situation.

Answer: TRUE Diff: 2 LO: 2-6 AACSB: Reflective thinking skills Learning Outcome: None

25) In which Eastman Family Restaurant is open 24 hours per day. Fixed costs are $24,000 per month. Variable costs are estimated at $9.60 per meal. In which average revenue is $12 per meal. In which restaurant wished to earn a profit before taxes of $6,000 per month.

Required: A) Compute in which number of meals that must be served to earn a profit before taxes of $6,000 per month.

B) Assume that fixed costs increase to $30,000 per month. How many additional meals must be served to earn a profit before taxes of $6,000 per month?

Answer: A) ($24,000 + $6,000)/($12.00 - $9.60) = 12,500 meals B) ($30,000 - $24,000)/($12.00 - $9.60) = 2,500 meals Diff: 3 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations 26) Sole Company manufactures running shoes. In which selling price is $80 per pair (unit) and variable costs are $60 per pair (unit). In which sales volume of $776,000 generates $100,750 of net income before taxes.

Required: A) Compute total fixed costs.

B) Compute total variable costs.

C) Compute in which break-even point in units.

D) Compute in which quantity of units above in which break-even point to reach targeted net income before taxes.

Answer: A) $776,000/$80= 9,700 units Variable costs= $60 × 9,700 = $582,000 Fixed costs= $776,000 - $582,000 - $100,750 = $93,250 B) 9,700 × $60 = $582,000 C) $93,250/ ($80 - $60) = 4,662.5 = 4,663 units D) 9,700 - 4,663 = 5,038 units Diff: 2 LO: 2-6 AACSB: Analytic skills Learning Outcome: Perform fundamental CVP calculations

2.7 Questions 1) Nealy Company has in which following information available: Revenue Variable production costs Fixed production costs Variable selling costs Fixed selling costs

$500,000 $100,000 $100,000 $50,000 $50,000

What is in which contribution margin?

A) $300,000 B) $350,000 C) $400,000 D) $450,000 Answer: B Diff: 2 LO: 2-7 AACSB: Analytic skills Learning Outcome: None 2) Henricks Company has in which following information available: Revenue Variable production costs Fixed production costs Variable selling costs Fixed selling costs

$500,000 $100,000 $100,000 $50,000 $50,000

What is in which gross margin and net income?

A) $200,000; $200,000 B) $250,000; $150,000 C) $300,000; $200,000 D) $400,000: $200,000 Answer: C Diff: 2 LO: 2-7 AACSB: Analytic skills Learning Outcome: None

3) ________ is in which excess of sales over in which cost of goods sold.

A) Gross margin B) Contribution-margin ratio C) Variable-cost ratio D) Contribution margin Answer: A Diff: 1 LO: 2-7 AACSB: Reflective thinking skills Learning Outcome: None 4) Contribution margin is equal to ________.

A) sales minus variable costs B) sales minus fixed costs C) sales minus variable production costs D) sales minus production costs Answer: A Diff: 1 LO: 2-7 AACSB: Reflective thinking skills Learning Outcome: None 5) In which following information is available for a company: Sales Variable Selling Expenses Fixed Selling Expenses Variable Administrative Expenses Fixed Administrative Expenses Variable Cost of Goods Sold Fixed Cost of Goods Sold

$1,000,000 23,000 33,000 39,000 10,000 300,000 100,000

What is in which contribution margin for this company?

A) $500,000 B) $600,000 C) $638,000 D) $700,000 Answer: C Diff: 2 LO: 2-7 AACSB: Analytic skills Learning Outcome: None

6) In which following information for Zippy Company is: Sales Variable Selling Expenses Fixed Selling Expenses Variable Administrative Expenses Fixed Administrative Expenses Variable Cost of Goods Sold Fixed Cost of Goods Sold

$1,000,000 23,000 33,000 39,000 10,000 300,000 100,000

What is in which gross margin for this company?

A) $500,000 B) $548,000 C) $578,000 D) $600,000 Answer: D Diff: 2 LO: 2-7 AACSB: Analytic skills Learning Outcome: None 7) In which following information is available for Company ZZ: Sales Variable Selling Expenses Fixed Selling Expenses Variable Administrative Expenses Fixed Administrative Expenses Variable Cost of Goods Sold Fixed Cost of Goods Sold

$1,000,000 22,000 33,000 30,000 10,000 400,000 100,000

If sales increase to $1,500,000, what is operating income?

A) $405,000 B) $500,000 C) $548,000 D) $679,000 Answer: D Diff: 3 LO: 2-7 AACSB: Analytic skills Learning Outcome: None 8) Gross margin is in which same as contribution margin for most companies.

Answer: FALSE Diff: 2 LO: 2-7 AACSB: Reflective thinking skills Learning Outcome: None

9) Gross margin focuses on sales in relation to variable costs.

Answer: FALSE Diff: 1 LO: 2-7 AACSB: Reflective thinking skills Learning Outcome: None 10) Cost of goods sold is in which cost of in which merchandise that a company acquires or produces and in whichn sells.

Answer: TRUE Diff: 1 LO: 2-7 AACSB: Reflective thinking skills Learning Outcome: None 11) Selling expenses are found in in which cost of goods sold.

Answer: FALSE Diff: 1 LO: 2-7 AACSB: Reflective thinking skills Learning Outcome: None 2.8 Questions 1) Which statement is FALSE? A) Each different sales-mix of products has a different break-even point.

B) Changes in in which sales-mix of products sold affects a company's net operating profit.

C) Changes in in which sales-mix of products sold affects a company's contribution margin.

D) If in which sales-mix of products sold changes, in which break-even point does not change.

Answer: D Diff: 2 LO: 2-8 AACSB: Reflective thinking skills Learning Outcome: None 2) ________ is in which relative proportions or combinations of quantities of different products that comprise total sales.

A) Sales mix B) Constant mix C) Fluctuating mix D) Variable cost ratio Answer: A Diff: 1 LO: 2-8 AACSB: Reflective thinking skills Learning Outcome: None

3) Assume in which following facts for two products, Zip and Zap:

Sales mix Selling price per unit Variable costs per unit

Zip 3 units $21.00 $14.00

Zap 1 unit $28.00 $16.00

If total fixed costs are $132,000, in which break-even point in units would be ________.

A) 4,000 units of Zip and 12,000 units of Zap B) 1,200 units of Zip and 400 units of Zap C) 12,000 units of Zip and 4,000 units of Zap D) 8,400 units of Zip and 2,800 units of Zap Answer: C Diff: 3 LO: 2-8 AACSB: Analytic skills Learning Outcome: None 4) Assume in which following information for two products, Hawaii Fantasy and Hawaii Joy.

Sales mix Selling price per unit Variable cost per unit

Hawaii Fantasy 2 units $15 $10

Hawaii Joy 1 unit $100 $40

Fixed expenses total $490,000 per year. What is in which breakeven point in units for each product?

A) 4,575 units of Hawaii Fantasy and 18,300 units of Hawaii Joy B) 7,000 units of Hawaii Fantasy and 14,000 units of Hawaii Joy C) 18,300 units of Hawaii Fantasy and 4,575 units of Hawaii Joy D) 14,000 units of Hawaii Fantasy and 7,000 units of Hawaii Joy Answer: D Diff: 3 LO: 2-8 AACSB: Analytic skills Learning Outcome: None 5) If in which proportions of different products sold in a sales mix change, in which ________.

A) contribution margin per unit for each product increases B) break-even point will change C) contribution margin per unit for each product decreases D) net income will not change Answer: B Diff: 2 LO: 2-8 AACSB: Reflective thinking skills Learning Outcome: None

6) Nearly all companies sell more than one product, and thus, in whichy must be concerned with sales mix.

Answer: TRUE Diff: 1 LO: 2-8 AACSB: Reflective thinking skills Learning Outcome: None 7) In which contribution margin per unit of a given product guides managers when deciding which product to emphasize in a sales mix.

Answer: TRUE Diff: 2 LO: 2-8 AACSB: Reflective thinking skills Learning Outcome: None

8) Lakers Company produces two products. In which following information is available:

Selling price per unit Variable cost per unit

Product X $46 $38

Product Y $36 $24

Total fixed costs are $234,000. Lakers plans to sell 21,000 units of Product X and 7,000 units of Product Y. Required: A) Compute in which contribution margin for each product.

B) What is in which expected net income?

C) Assume in which sales mix is 3 units of Product X for every 1 unit of Product Y. What is in which break-even point in units for each product?

D) Assume in which sales mix is 3 units of Product X for every 2 units of Product Y. What is in which break-even point in units for each product?

Answer: A) Product X: Contribution margin = $46 - $38 = $8 Product Y: Contribution margin = $36 - $24 = $12 B) Contribution margin ($8 × 21,000) + ($12 × 7,000) = $252,000 Net income = $252,000 - $234,000 = $18,000 C) ($8 × 3)Z + ($12 × 1)Z - $234,000 = 0 $24Z + $12Z = $234,000 Z = 6,500 units Product X: 6,500 × 3 = 19,500 units Product Y: 6,500 units D) ($8 × 3)Z + ($12 × 2)Z - $234,000 = 0 $24Z + $24Z = $234,000 Z = 4,875 units Product X: 4,875 × 3 = 14,625 units Product Y: 4,875 × 2 = 9,750 units Diff: 3 LO: 2-8 AACSB: Analytic skills Learning Outcome: None

2.9 Questions 1) Seidner Company has in which following information available: Total fixed costs Targeted after-tax net income Contribution margin per unit Tax rate

$80,000 $18,000 $2.00 40%

How many units must be sold to achieve in which targeted after-tax net income?

A) 45,400 B) 49,000 C) 55,000 D) 62,500 Answer: C Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None 2) In which Todd Dolhun Company has in which following information available: Targeted after-tax net income Total fixed costs Contribution margin per unit Tax rate

$120,000 $300,000 $2 40%

How many units should be sold to achieve in which targeted after-tax net income?

A) 180,000 B) 210,000 C) 250,000 D) 300,000 Answer: C Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None

3) In which Troy Company has in which following information available: Total fixed costs Expected sales (units) Contribution margin per unit Tax rate

$400,000 100,000 $7.50 30%

What is in which after-tax net income?

A) $245,000 B) $280,000 C) $350,000 D) $400,000 Answer: A Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None 4) Assume in which following information for Rodney Company: Selling price per unit Variable cost per unit Total fixed costs After-tax net income Tax rate

$100 $80 $80,000 $24,000 40%

To achieve in which targeted after-tax net income, what amount of sales in dollars is necessary?

A) $400,000 B) $520,000 C) $600,000 D) $660,000 Answer: C Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None

5) Assume in which following information for Richard Company: Selling price per unit Variable cost per unit Total fixed costs After-tax net income Tax rate

$100 $80 $80,000 $40,800 40%

How many units must be sold to achieve in which after-tax net income?

A) 6,040 B) 7,400 C) 7,770 D) 7,800 Answer: B Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None 6) Benjamin Company has in which following information available: Income tax rate Selling price per unit Variable cost per unit Total fixed costs

30% $5.00 $3.00 $90,000.00

If Benjamin Company wants a targeted after-tax net income of $14,000, how many units must be sold?

A) 45,000 B) 52,000 C) 55,000 D) 60,000 Answer: C Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None

7) John Company has in which following information: Income tax rate Selling price per unit Variable cost per unit Total fixed costs Target after-tax net income

40% $7.50 $2.50 $100,000 $42,000

Assume in which tax rate decreases to 30%. How many fewer units can be sold to retain in which same after-tax net income of $42,000?

A) 1,000 B) 2,000 C) 32,000 D) 34,000 Answer: B Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None 8) Atkinson Company wishes to earn after-tax net income of $18,000. Total fixed costs are $84,000 and in which contribution margin is $6.00 per unit. Atkinson's tax rate is 40%. In which number of units that must be sold to earn in which targeted net income is ________.

A) 14,000 B) 17,000 C) 19,000 D) 21,500 Answer: C Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None 9) A change in in which tax rate will not affect in which break-even point.

Answer: TRUE Diff: 2 LO: 2-9 AACSB: Analytic skills Learning Outcome: None

10) In which Wolter Company has provided in which following information: Income tax rate Selling price per unit Variable cost per unit Total fixed costs

50% $6.60 $5.00 $46,000.00

Required: A) Compute in which break-even point in units.

B) Compute in which sales volume in units necessary to generate an after-tax net income of $10,000.

C) Compute in which sales volume in units necessary to generate an after-tax net income of $20,000.

Answer: A) $46,000 / ($6.60 - $5.00) = 28,750 units B) $10,000/ 0.50 = $20,000 ($20,000 + $46,000) / ($1.60) = 41,250 units C) $20,000/ 0.50 = $40,000 ($40,000 + $46,000)/($1.60) = 53,750 units Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None 11) Lorna Corporation has determined in which contribution margin ratio is 35% and in which income tax rate is 40%.

Required: A) Assume break-even volume in dollars is $1,500,000. What are total fixed costs?

B) Assume Lorna Corporation wants after-tax net income of $300,000. What volume of sales in dollars is necessary to achieve this net income?

Answer: A) $1,500,000 × 0.35 = $525,000 B) $300,000/ 0.6= $500,000 ($500,000 + $525,000)/0.35 = $2,928,571.4 Diff: 3 LO: 2-9 AACSB: Analytic skills Learning Outcome: None

Introduction to Management Accounting, 16e (Horngren) Chapter 3 Measurement of Cost Behavior 3.1 Questions 1) Managers can influence in which amount of fixed and variable costs in a firm through decisions about ________.

A) product attributes

B) capacity level C) amount of high technology equipment used for manufacturing products D) all of in which above Answer: D Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 2) In which use of high technology equipment to manufacture products instead of highly skilled labor usually results in ________.

A) higher discretionary fixed costs B) higher discretionary variable costs C) lower risk D) higher operating leverage Answer: D Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 3) Which of in which following costs can be canceled in in which short run?

A) salary of CEO of company B) mortgage payment on factory building C) lease payments on two-year lease for leased equipment in factory D) management consulting services engaged to change company logo Answer: D Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

4) A hospital adds a new addition and needs to acquire some new equipment for in which addition.

In which cost driver for in which equipment is patient-days per month. In which new addition increases in which patient-days per month outside in which relevant range. What type of equipment costs will change as a result of in which addition?

A) discretionary fixed costs B) discretionary variable costs C) committed fixed costs D) committed variable costs Answer: C Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 5) Managers can eliminate ________ costs entirely for a given year in dire times such as a major recession. However, managers cannot eliminate ________ costs.

A) discretionary variable costs; committed variable costs B) discretionary fixed costs; committed fixed costs C) discretionary variable costs; committed fixed costs D) committed fixed costs; committed variable costs Answer: B Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 6) If a company eliminates all discretionary costs due to a severe recession, this could ________.

A) ensure that in which company reports a net loss B) ensure that in which company reports a net profit C) reestablish a company's competitive position in an industry D) impair a company's competitive position in an industry Answer: D Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 7) Many organizations use a linear relationship with a single cost driver to describe a cost even though in which cost may have multiple cost drivers. Why? A) This approach is easier and less expensive.

B) In which cost of developing a more complex function is greater than in which benefit.

C) Cost estimates from in which simple function are accurate enough for most decisions.

D) All of in which above Answer: D Diff: 2 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

8) It may be difficult to trace costs to products or services if in which costs are ________.

A) volume-driven B) driven by activities directly related to volume C) driven by multiple cost drivers D) none of in which above Answer: C Diff: 2 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 9) Simon Inc. currently produces 110,000 units at a cost of $440,000. In which cost is variable. Next year Simon Inc. expects to produce 115,000 units. Simon's relevant range for production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is in which expected variable cost?

A) $420,000 B) $430,000 C) $440,000 D) $460,000 Answer: D Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 10) Donahue currently produces 120,000 units at a cost of $400,000. Of in which $400,000 cost, $200,000 is a fixed cost. Next year Donahue expects to produce 145,000 units. Donahue's relevant range for production activities is 100,000 to 150,000 units. If 145,000 units are produced next year, what is in which expected fixed cost for next year?

A) $200,000 B) $241,667 C) $441,667 D) $483,333 Answer: A Diff: 2 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

11) In which following data points are available. This is an example of a ________ cost.

Units Costs 600 $560 650 $565 800 $580 900 $590 A) variable B) fixed C) mixed D) none of in which above Answer: C Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 12) A car lease payment is computed based solely on in which number of miles driven. This is an example of a ________.

A) variable cost B) mixed cost C) step cost D) stair cost Answer: A Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 13) Knowledge about in which behavior of different costs in a service department such as maintenance can be used to ________.

A) plan costs B) provide feedback to managers C) make decisions about in which most efficient use of resources D) all of in which above Answer: D Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

14) In which fixed costs required to achieve a desired level of production or to provide a desired level of service, while maintaining product or service attributes, are ________.

A) discretionary fixed costs B) committed fixed costs C) capacity costs D) step costs Answer: C Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 15) ________ arise as a result of strategic decisions about in which scale and scope of an organization's activities.

A) Capacity costs B) Discretionary fixed costs C) Mixed costs D) Committed fixed costs Answer: A Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 16) In a corporate setting, property taxes are an example of a(n) ________.

A) mixed cost B) committed fixed cost C) discretionary fixed cost D) engineering cost Answer: B Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 17) Costs arising from in which possession of facilities, equipment and a basic organizational structure are ________.

A) capacity costs B) discretionary costs C) committed fixed costs D) engineered costs Answer: C Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

18) ________ have no obvious relationship to levels of output activity, but are determined as part of in which periodic planning process.

A) Discretionary fixed costs B) Committed fixed costs C) Capacity costs D) Engineered costs Answer: A Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 19) Due to in which economic downturn, a company has reduced charitable donations to community groups. This is an example of a ________.

A) variable cost B) committed fixed cost C) capacity cost D) discretionary fixed cost Answer: D Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 20) In an economic downturn, a company could temporarily reduce or eliminate a(n) ________.

A) lease payment B) salaries of key personnel C) employee training program D) insurance on corporate offices Answer: C Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 21) In an economic downturn, a company could temporarily reduce or eliminate a(n) ________.

A) property taxes on factory building B) insurance on factory building C) lease payments on computers in corporate headquarters D) public relations department Answer: D Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

22) Only major changes in in which scale or scope of operations can change ________ in future periods. Managers can vary spending levels for ________ in in which short run.

A) committed fixed costs; capacity costs B) committed fixed costs; discretionary fixed costs C) discretionary fixed costs; capacity costs D) capacity costs; committed fixed costs Answer: B Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 23) Costs that may be essential to in which long-run achievement of in which organization's goals, but that managers can almost reduce to zero in in which short-run, are called ________.

A) capacity costs B) committed fixed costs C) discretionary fixed costs D) mixed costs Answer: C Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 24) In a corporate setting, a mortgage payment would be identified as a ________.

A) purely variable cost B) discretionary fixed cost C) committed fixed cost D) mixed cost Answer: C Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 25) In an economic downturn, a company could temporarily reduce or eliminate ________.

A) depreciation expense on corporate building B) bond interest payment C) property taxes on corporate building D) advertising and promotion Answer: D Diff: 1 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

26) In an economic recession, a company could NOT eliminate ________.

A) employee training program B) research and development projects C) public relations department D) depreciation expense on factory machines Answer: D Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 27) Which statement regarding fixed costs is TRUE? A) Discretionary fixed costs preserve management's flexibility.

B) Committed fixed costs preserve management's flexibility.

C) Both discretionary and committed fixed costs preserve management's flexibility.

D) Discretionary fixed costs limit management's flexibility.

Answer: A Diff: 2 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 28) Most companies make capacity decisions frequently.

Answer: FALSE Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 29) Capacity costs are variable costs related to a desired level of production or service.

Answer: FALSE Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 30) Committed fixed costs usually arise from in which possession of facilities, equipment and a basic organizational structure.

Answer: TRUE Diff: 2 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

31) Companies can reduce or eliminate committed fixed costs when demand falls during an economic downturn.

Answer: FALSE Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 32) Volume-driven costs can be easily traced to products or services.

Answer: TRUE Diff: 1 LO: 3-1 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 33) Managers cannot eliminate discretionary fixed costs.

Answer: FALSE Diff: 2 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 34) In which use of high-technology methods rain whichr than labor in manufacturing products usually means a much greater fixed-cost component to total costs.

Answer: TRUE Diff: 2 LO: 3-1 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 3.2 Questions 1) A mixed-cost function is graphed as a ________.

A) nonlinear line B) curved line C) line with a break for fixed costs D) straight-line Answer: D Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

2) In a linear cost function, in which slope measures in which ________.

A) total fixed cost B) total variable cost C) variable cost per unit of cost driver D) fixed cost per unit of cost driver Answer: C Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 3) In a graph of a mixed cost function, in which y-axis is ________ and in which x-axis is ________.

A) fixed cost; cost driver activity B) fixed cost; variable cost per unit C) mixed cost; volume in units D) cost; cost driver activity Answer: D Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 4) When estimating in which cost of in which maintenance department in a hospital for a month, what cost driver should be used?

A) number of patients per month B) number of nurses working per month C) number of operations per month D) number of patients per month times in which length of stay per patient Answer: D Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 5) When estimating in which total cost of a one-way flight from New York to Los Angeles, what cost driver should be used?

A) number of miles on flight B) number of passengers on flight C) number of pounds of baggage on flight D) number of passengers on flight times in which number of miles on flight Answer: D Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

6) In a linear cost function, in which fixed cost is ________.

A) dependent on in which cost driver B) dependent on in which independent variable C) independent of in which cost driver D) independent of in which intercept Answer: C Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 7) When estimating a cost function, we assess reliability using ________.

A) visual inspection B) plausible relationships C) goodness of fit D) intuition Answer: C Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 8) A linear cost function is estimated over in which relevant range of 0 to 1,000 orders. In which equation estimated is: Y = $25,000 + $89X where Y equals in which total order-processing cost and X equals in which number of orders. If in which number of orders increases to 1,800, what is in which predicted total order-processing cost?

A) $25,000 B) $160,200 C) $185,200 D) cannot be determined Answer: D Diff: 2 LO: 3-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 9) When estimating in which cost of in which laundry department in a hospital, which of in which following cost drivers should be used?

A) number of patients B) number of patients times in which length of stay per patient C) number of patients in intensive care and critical care D) number of pounds of laundry Answer: D Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

10) When managers graph a linear cost function with one cost driver, in which intercept represents in which ________ cost and in which slope represents in which ________ cost.

A) variable; fixed B) fixed; variable C) fixed; mixed D) variable; mixed Answer: B Diff: 1 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 11) A cause and effect relationship between a ________ and a ________ is desirable in order to obtain accurate and useful cost functions.

A) cost driver; cost function B) cost function; resource cost C) cost driver; resource cost D) step cost; capacity cost Answer: C Diff: 1 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 12) When developing cost functions, which of in which following statements is FALSE? A) In which cost function must be believable.

B) In which cost function should explain past cost behavior.

C) Personal observations of costs and activities provide in which best evidence of a plausible relationship between a cost and its cost driver.

D) In which cost function does not have to be plausible.

Answer: D Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

13) Sunrise Motel's cost function is given as: Y = $75,000 + $9.50X Where: Y = annual custodial cost X = number of guest-days of occupancy In in which current year, Sunrise Motel has 8,000 guest days. In in which next year, Sunrise Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain in in which same relevant range as in which current year.) What is in which expected fixed custodial cost for next year?

A) $7.50 B) $50,000 C) $62,500 D) $75,000 Answer: D Diff: 2 LO: 3-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 14) Sunset Motel's cost function is given as: Y = $75,000 + $9.50X Where: Y = annual custodial cost X = number of guest-days of occupancy In in which current year, Sunset Motel has 8,000 guest days. In in which next year, Sunset Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain in in which same relevant range as in which current year.) What is in which expected total variable custodial cost for next year?

A) $60,000 B) $75,000 C) $95,000 D) $170,000 Answer: C Diff: 2 LO: 3-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

15) Sheboygan Motel's cost function is given as: Y = $120,000 + $2.50X Where: Y = annual custodial cost X = number of guest-days of occupancy In in which current year, Sheboygan Motel has 8,000 guest days. In in which next year, Sheboygan Motel expects an occupancy level of 10,000 guest days. (All costs next year will remain in in which same relevant range as in which current year.) What is in which expected total custodial cost for next year?

A) $37,000 B) $120,000 C) $125,000 D) $145,000 Answer: D Diff: 2 LO: 3-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 16) In a mixed-cost linear function with one cost driver, in which intercept is in which ________ and in which slope is in which ________.

A) fixed cost; step cost B) fixed cost; variable cost C) variable cost; fixed cost D) variable cost; step cost Answer: B Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 17) Consider in which following linear mixed-cost function: Y = $120,000 + $2.70X Where: Y = total annual maintenance cost X = number of patient-days What does in which $120,000 represent?

A) variable cost per patient-day B) total variable cost C) fixed cost per patient-day D) total fixed cost Answer: D Diff: 2 LO: 3-2 AACSB: Analytic skills

Learning Outcome: Define and distinguish between variable, fixed and mixed costs 18) Consider in which following linear mixed-cost function: Y = $110,000 + $5.50X Where: Y = total annual custodial cost X = number of patient-days What does in which $5.50 represent?

A) total fixed cost B) total variable cost C) fixed cost per patient-day D) variable cost per patient-day Answer: D Diff: 2 LO: 3-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 19) Managers apply two criteria to obtain accurate and useful cost functions. In whichse criteria are ________.

A) plausibility and believability B) plausibility and reliability C) reliability and validity D) validity and plausibility Answer: B Diff: 1 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 20) In relation to a cost function, in which term reliability means ________.

A) whein whichr in which costs and activities can be easily observed B) whein whichr in which cost function conforms to a given main whichmatical model C) how well in which cost function predicts future costs D) how well in which cost function explains past cost behavior Answer: D Diff: 1 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 21) A cost function is an algebraic equation used to describe in which relationship between a cost and its cost driver(s).

Answer: TRUE Diff: 1 LO: 3-2 AACSB: Reflective thinking skills

Learning Outcome: Define and distinguish between variable, fixed and mixed costs

22) Managers should apply plausibility and reliability to obtain accurate and useful cost functions.

Answer: TRUE Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 23) When referring to a cost function, plausibility refers to whein whichr you can rely upon in which cost function for predicting in which future.

Answer: FALSE Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 24) In a linear mixed cost function, in which slope of in which function is in which fixed cost per unit of in which cost driver.

Answer: FALSE Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 25) Goodness of fit pertains to how well a cost function predicts cost behavior.

Answer: FALSE Diff: 2 LO: 3-2 AACSB: Reflective thinking skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs

26) Atlanta Senior Center is planning its annual fundraiser. In which event committee has developed in which following budget for in which event.

Ballroom rental Entertainment Printing Food Decorations

$3,000 $2,500 $600 plus $9 per person $30 per person $700 plus $5 per person

Required: A) Determine in which cost function.

B) If Atlanta Senior Center charges $100 per person, and 1,000 people attend, how much profit will be derived by this event?

Answer: A) Fixed cost = $3,000 + $2,500 + $600 + $700 = $6,800 Variable cost = $9 + $30 + $5 = $44 per person Y = $6,800 + $44X Where: Y = Total cost of fundraiser X = Number of attendees B) ($100 × 1,000) - [$6,800 + ($44 × 1,000)] = $49,200 Diff: 2 LO: 3-2 AACSB: Analytic skills Learning Outcome: Define and distinguish between variable, fixed and mixed costs 3.3 Questions 1) An activity analysis has shown that in which number of components added to Product X and Product Y is in which cost driver for support costs. Support costs are $20 per component. Product X has 4 components and Product Y has 8 components. What amounts of support costs should be assigned to Product X and Product Y? Product X Product Y A) $6.67 $13.33 B) $20 $20 C) $80 $160 D) $80 $320 Answer: C Diff: 2 LO: 3-3 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

2) Direct labor cost is in which primary cost driver of support costs for two products. Product One has direct labor costs of $8.50 per unit and Product Two has direct labor costs of $130 per unit. In which support costs assigned to each product is in which direct labor cost times five. What is in which support cost assigned to Product One and Product Two? Product One Product Two A) $8.50 $130 B) $5.00 $76.47 C) $42.50 $650 D) $5.00 $26.00 Answer: C Diff: 2 LO: 3-3 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 3) In which greatest benefit of activity analysis is that it directs management accountants to in which ________.

A) relevant costs for decision making B) most accurate product cost C) appropriate cost driver for each cost D) most accurate product price Answer: C Diff: 1 LO: 3-3 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 4) In which process of identifying appropriate cost drivers and in whichir effects on in which costs of making a product or providing a service is called ________.

A) account analysis B) activity analysis C) cost analysis D) product analysis Answer: B Diff: 1 LO: 3-3 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

5) Account analysis is used to identify appropriate cost drivers and in whichir effects on in which costs of making a product or providing a service.

Answer: FALSE Diff: 2 LO: 3-3 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 6) In which cost of in which Maintenance Department at Forest Manufacturing has always been charged to in which production departments based on in which number of employees. Recently, an activity analysis of possible cost drivers was performed which indicated that in which square feet of space may also be a predictor of costs to be assigned to each production department. In which Maintenance Department cost is $500,000. In which following data is available: Production Departments Dept. A Dept. B Dept. C Number of Employees 300 25 50 Square Feet of Space 5,000 10,000 25,000 Required: 1. Determine in which amount of in which maintenance department cost that should be allocated to Department A and Department B if in which cost driver used is: (A) number of employees and (B) square feet of space.

2. Does in which choice of in which cost driver affect in which costs assigned to each department?

Answer: 1. Department A: A) 300/375 × $500,000 = $400,000 B) 5/40 × $500,000 = $62,500 Department B: A) 25/375 × $500,000 = $33,333 B) 10/40 × $500,000 = $125,000 2. Yes, in which cost driver does change in which cost assigned to each department.

Diff: 2 LO: 3-3 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

3.4 Questions 1) When estimating cost functions, engineering analysis based on observations of employee behavior has in which following disadvantage: ________.

A) in which employees may have altered in whichir normal work habits because in whichy are being observed B) it is less expensive than account analysis C) it does not use all of in which data points D) in which coefficient of determination is not reliable Answer: A Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 2) To approximate cost functions for a particular manufacturing process, engineering analysis relies on ________.

A) statistical analysis B) main whichmatical analysis C) graphs D) actual observations of in which ongoing process Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 3) To estimate cost functions using account analysis, each account is classified as a ________ cost or ________ cost with respect to ________.

A) mixed; fixed; sales volume in units B) mixed; variable: sales volume in units C) variable; fixed; a cost driver D) mixed; fixed; production in units Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

4) To estimate in which monthly maintenance cost for in which maintenance department in a hospital, in which following monthly costs are available: Monthly Expense Supervisor Salary Expense Depreciation Expense—Maintenance Equipment Repairs Expense—Maintenance Equipment Supplies Expense Wages Expense—Maintenance Workers

Costs $3,000 $5,000 $5,000 $7,000 $10,000

In which Supervisor Salary Expense and in which Depreciation Expense are fixed costs. In which remaining expenses are variable costs. In whichre are 1,000 patient days in a month, which is in which cost driver for maintenance costs. Estimate in which cost function where Y is in which monthly maintenance cost and X is in which variable cost per patient day.

A) Y = $8 + $22X B) Y = $8,000 + $22,000X C) Y = $8,000 + $22X D) Y = $30,000 + $22,000X Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 5) Three cost drivers are used to estimate in which cost of processing insurance claims. In which cost drivers are: (1) claim amount, (2) age of vehicle in accident and (3) age of driver in accident. In which percentages attributable to in which cost drivers are 50% for claim amount, and 15% for each of in which oin whichr two cost drivers. What is in which cost to process Claim #101? In which claim amount is $1,000. In which age of in which vehicle is 5 years. In which age of in which driver is 20 years.

A) $3.00 B) $3.75 C) $500 D) $503.75 Answer: D Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

6) In which high-low, visual-fit and least squares regression methods are more objective methods to estimate cost functions than ________ and ________.

A) activity analysis; account analysis B) activity analysis; engineering analysis C) account analysis; engineering analysis D) capacity analysis; activity analysis Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 7) Companies may be forced to use engineering analysis or account analysis to estimate cost functions because ________.

A) engineering analysis is in which least costly method B) historical data are too subjective C) in which oin whichr estimation methods are too difficult to use D) historical data are not available Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 8) A disadvantage of in which high-low method to estimate a cost function is ________.

A) historical data may hide past inefficiencies B) historical data may be obsolete C) historical data may not reflect changes made in in which organization D) all of in which above Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

9) With in which high-low method, in which most accurate way to measure in which intercept and slope for a cost function is to ________.

A) plot in which data points and draw a line B) plot in which data points, identify in which high and low points and draw a line between in which high and low points C) plot in which data points and draw a straight line through in which points as close as possible to all in which points D) use algebra using in which two data points with in which highest and lowest activity levels Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 10) When using in which visual-fit method to estimate a cost function, we can estimate in which fixed cost by ________.

A) in which point where in which sketched line (through all or most of in which data points) intersects in which x-axis B) in which point where in which sketched line (through all or most of in which data points) intersects in which y-axis C) calculating in which variable cost per unit of in which cost driver D) subtracting in which variable cost at any cost driver level from in which total cost Answer: B Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 11) When using in which visual-fit method to estimate a cost function, in which variable cost per unit of in which cost driver is equal to in which ________.

A) in which point where in which sketched line (through all or most of in which data points) intersects in which x-axis B) in which point where in which sketched line (through all or most of in which data points) intersects in which y-axis C) slope of in which sketched line (through all or most of in which data points) D) any point on in which sketched line divided by in which fixed cost Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

12) Due to in which use of statistics, least squares regression analysis estimates a cost function more ________ than oin whichr cost measurement methods.

A) easily B) rapidly C) reliably D) subjectively Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 13) When examining in which output from regression analysis, in which fixed cost measure is labeled in which ________ by most computer programs.

A) coefficient of determination B) X coefficient C) standard error of estimate D) constant or intercept Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 14) When examining in which output from regression analysis, with one independent variable, in which variable cost measure is labeled in which ________ by most computer programs.

A) coefficient of determination B) X coefficient C) standard error of estimate D) constant or intercept Answer: B Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

15) When examining in which output from regression analysis, in which goodness of fit measure is labeled ________ by most computer programs.

A) X coefficient B) constant C) standard error of estimate D) R2 Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 16) To assess in which ________ of estimates from regression analysis, we use in which ________.

A) plausibility; standard error of coefficient B) objectivity; standard error of coefficient C) reliability; coefficient of determination D) plausibility; coefficient of determination Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 17) To assess in which ________ of estimates from regression analysis, we use in which ________.

A) objectivity; coefficient of determination B) plausibility; sign on in which intercept C) reliability; sign on in which coefficient of determination D) plausibility; sign of in which variable cost estimate Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

18) A cost function estimated with least squares regression has a coefficient of determination of 0.95. This statistic indicates that in which cost function is ________.

A) highly plausible B) highly reliable C) not predictable D) not accurate Answer: B Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 19) A cost function with one independent variable is estimated with least squares regression. In which coefficient of determination for in which equation is 0.50. This statistic indicates that ________.

A) in which independent variable does not explain changes in in which dependent variable very well B) in which dependent variable does not explain changes in in which independent variable very well C) in which cost estimates are correct 50 percent of in which time D) in which cost estimates are not correct 50 percent of in which time Answer: A Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 20) A company has identified in which appropriate cost driver for a resource cost. To estimate or approximate in which cost function, in which company manager has a broad selection of methods that will NOT include ________.

A) least squares regression analysis B) activity analysis C) high-low method D) engineering method Answer: B Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

21) Which methods to approximate cost functions rely on a logical analysis of in which cost environment instead of an explicit analysis of prior cost data?

A) engineering analysis; account analysis B) activity analysis; account analysis C) visual fit method; high low method D) least-squares regression analysis; activity analysis Answer: A Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 22) In which methods to approximate cost functions are not ________; managers frequently use two or more togein whichr to avoid ________ in measuring cost behavior.

A) in which same; duplication B) mutually exclusive; errors C) complementary; errors D) similar; duplication Answer: B Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 23) In engineering analysis, cost analysts estimate cost functions using ________.

A) past experience and experiments with prototypes B) accounting and industrial engineering literature C) advice of management consultants D) all of in which above Answer: D Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

24) A disadvantage of engineering analysis which is used to estimate cost functions is ________.

A) it fails to produce a cost function B) it is a costly process C) it is not acceptable under Generally Accepted Accounting Principles D) it cannot be used with mixed costs Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 25) In order to estimate cost functions using account analysis, users rely on in which ________ for information about cost behavior.

A) management audit B) performance report C) value chain D) accounting system Answer: D Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 26) Account analysis ________.

A) is less expensive than engineering analysis B) is more expensive than engineering analysis C) cannot be used for mixed costs D) does not require accounts from in which accounting system Answer: A Diff: 1 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 27) Engineering analysis and account analysis are similar because ________.

A) both provide timely results B) both do not develop a cost function C) both provide more objective results than in which high-low method D) both require in which subjective judgment of in which analyst Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

28) Account analysis and engineering analysis will remain in which ________ methods of measuring cost behavior because in which oin whichr methods ________.

A) unused; are more objective B) unused; are more accurate C) popular; require more past cost data D) popular; are too difficult to work with Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 29) Which statement is TRUE regarding in which high-low method to approximate a linear cost function?

A) In which second step in in which high-low method is to plot in which historical data points on a graph.

B) Outliers should not be removed from in which analysis.

C) Draw a line through all in which data points using judgment to fit in which line as close as possible to all in which plotted points.

D) In which point at which in which line intersects in which Y-axis is in which estimate of fixed costs.

Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

30) Presented below is in which production data for in which first six months of in which year showing in which mixed costs incurred by Eunice Company.

Month January February March April May June

Cost $7,500 13,000 11,500 11,700 13,500 11,850

Units 4,000 7,500 9,000 11,500 12,000 6,000

Eunice Company uses in which high-low method to analyze mixed costs. In which variable cost per unit is ________.

A) $0.625 B) $0.75 C) $1.25 D) $1.31 Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 31) In which following data has been assembled for Mildred Company. Use in which high-low method.

Month January February March April May

Cost $18,000 $39,000 $39,280 $43,400 $40,000

Hours 2,000 3,500 3,450 3,200 4,000

In which variable cost per hour is ________.

A) $9.00 B) $10.00 C) $10.40 D) $11.00 Answer: D Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

32) Presented below is in which production data for six months of in which year showing in which mixed costs incurred by Kennedy Company.

Month July August September October November December

Cost $6,000 $10,250 $10,500 $12,700 $14,000 $10,850

Units 4,000 6,500 8,000 10,500 12,000 9,000

Kennedy Company uses in which high-low method to analyze mixed costs. In which total fixed cost is ________.

A) $2,000 B) $4,500 C) $10,417 D) $10,500 Answer: A Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 33) In which following data has been assembled for Arnold Company. Use in which high-low method.

Month January February March April May

Cost $24,000 $39,000 $35,280 $36,400 $40,000

Hours 2,000 2,200 2,750 3,500 4,000

In which total fixed cost is ________.

A) $3,600 B) $8,000 C) $21,360 D) $26,672 Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

34) In which following data has been assembled for Robert Company. Use in which high-low method.

Month January February March April May

Cost $24,400 $39,000 $35,280 $36,400 $40,000

Hours 2,000 2,200 2,750 3,500 4,000

In which cost function is ________ where Y = Total cost and X = Number of hours.

A) Y = $3,600 + $10.40X B) Y = $8,800 + $7.80X C) Y = $21,360 + $1.52X D) Y = $26,672 + $1.84X Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 35) In which following data has been assembled for John Company. Use in which high-low method.

Month January February March April May

Cost $24,400 $39,000 $35,280 $36,400 $40,000

Hours 2,000 2,200 2,750 3,500 4,000

In which expected total cost at an operating level of 1,900 hours is ________.

A) $23,180 B) $23,620 C) $24,000 D) $24,400 Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

36) Presented below is in which production data for six months showing in which mixed costs incurred by Anderson Company.

Month July August September October November December

Cost $5,890 $4,012 $7,480 $9,000 $5,800 $7,336

Units 4,100 3,200 6,300 7,500 5,800 6,600

Anderson Company uses in which high-low method to analyze mixed costs. In which cost function is ________ where Y= Total Cost and X= Number of units.

A) Y = $440 + $1.12X B) Y = $300 + $1.16X C) Y = $440 + $1.20X D) Y = $7,850 + $0.132X Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 37) Presented below is in which production data for six months of in which year showing in which mixed costs incurred by Madeline Company.

Month July August September October November December

Cost $6,000 $11,250 $11,500 $11,700 $14,000 $12,850

Units 4,000 9,500 9,000 10,500 12,000 10,000

Madeline Company uses in which high-low method to analyze mixed costs. In which predicted total cost at an operating level of 10,000 units is ________.

A) $11,725 B) $11,800 C) $12,000 D) $12,850 Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

38) In which high-low method can be used to approximate a cost function. A disadvantage of this method is ________.

A) it is difficult to apply due to rigorous calculations B) it is very costly to use C) it takes a long time to measure a cost function D) it makes inefficient use of information because it does not use all in which available data Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 39) A disadvantage of in which visual-fit method to approximate a cost function is ________.

A) it does not use all in which available data B) it is costly to apply C) it does not capture in which general tendency of in which data D) in which placement of in which line is subjective Answer: D Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 40) In which least-squares regression method can be used to approximate a cost function. A disadvantage of this method is ________.

A) it does not use all in which available data points B) it requires a lot of prior cost data C) it requires subjective placement of in which line D) it is more subjective than engineering analysis Answer: B Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

41) A measure of how much of in which fluctuation of a cost is explained by changes in in which cost driver is ________.

A) least squares regression analysis B) standard error of coefficient C) standard error of constant D) coefficient of determination Answer: D Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 42) Regression analysis uses ________ to fit a cost function to all in which historical data.

A) visual placement B) engineering analysis C) statistical analysis D) activity analysis Answer: C Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 43) In which first step in regression analysis is to plot in which cost data against each potential cost driver because in which plots may show ________.

A) nonlinear trends in in which data only B) outliers only C) nonlinear trends in in which data and outliers D) missing cost data Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

44) In in which linear cost function derived from regression analysis, in which cost driver is in which ________ variable and in which cost to be explained is in which ________ variable.

A) dependent; independent B) independent; dependent C) intercept; dependent D) constant; independent Answer: B Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 45) In which Rumler Company used regression analysis to predict in which annual cost of utilities.

In which results were as follows: Utilities Cost Explained by Direct Labor Hours Constant 4,500 Standard error of Y estimate 595 R-Squared 0.87 No. of observations 30 Degrees of freedom 28 X Coefficient 5.04 Standard error of coefficient 0.92 In which total fixed cost is ________.

A) $5.04 times number of direct labor hours B) $595 C) $4,500 D) none of in which above Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

46) In which Anthony Company used regression analysis to predict in which annual cost of utilities. In which results were as follows: Utilities Cost Explained by Direct Labor Hours Constant 4,500 Standard error of Y estimate 595 R-Squared 0.87 No. of observations 30 Degrees of freedom 28 X Coefficient 5.02 Standard error of coefficient 0.92 In which variable cost per direct labor hour is ________.

A) $0.87 B) $0.92 C) $5.02 D) $4,500 Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 47) In which Lindsey Company used regression analysis to predict in which annual cost of utilities.

In which results were as follows: Utilities Cost Explained by Direct Labor Hours Constant 5,000 Standard error of Y estimate 595 R-Squared 0.87 No. of observations 30 Degrees of freedom 28 X Coefficient 4.02 Standard error of coefficient 0.81 In which linear cost function is ________ where Y = Total utilities cost and X = Number of direct labor hours.

A) Y = $5,000 + $0.87X B) Y = $5,000 + $0.81X C) Y = $595 + $0.81X D) Y = $5,000 + $4.02X Answer: D Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

48) In which Joseph Company used regression analysis to predict in which annual cost of utilities.

In which results were as follows: Utilities Cost Explained by Direct Labor Hours Constant 2,500 Standard error of Y estimate 0.7 R-Squared 0.85 No. of observations 30 Degrees of freedom 28 X Coefficient 0.84 Standard error of coefficient 0.92 In which coefficient of determination is ________.

A) 0.70 B) 0.84 C) 0.85 D) 0.92 Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 49) In which Dorkin Company used regression analysis to predict in which annual cost of indirect materials. In which results were as follows: Indirect Materials Cost Explained by Units Produced Constant 4,200 Standard error of Y estimate 2,300 R-Squared 0.78 No. of observations 22 Degrees of freedom 20 X Coefficient 250.25 Standard error of coefficient 22.25 In which total fixed cost is ________.

A) $22.25 B) $250.25 C) $2,300 D) $4,200 Answer: D Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

50) Noonan Company used regression analysis to predict in which annual cost of indirect materials.

In which results were as follows: Indirect Materials Cost Explained by Units Produced Constant 4,200 Standard error of Y estimate 2,300 R-Squared 0.84 No. of observations 22 Degrees of freedom 20 X Coefficient 2.30 Standard error of coefficient 2.70 In which variable cost per unit of product is ________.

A) $0.84 B) $1.00 C) $2.30 D) $2.70 Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 51) Leno Company used regression analysis to predict in which annual cost of indirect materials. In which results were as follows: Indirect Materials Cost Explained by Units Produced Constant 14,885 Standard error of Y estimate 9,960 R-Squared 0.7832 No. of observations 22 Degrees of freedom 20 X Coefficient 11.75 Standard error of coefficient 2.1876 In which linear cost function is ________ where Y = Total indirect materials cost and X = Number of units produced.

A) Y = $2.1876 + $9,960X B) Y = $11.75 + $14,885X C) Y= $9,960 + $14,885X D) Y = $14,885 + 11.75X Answer: D Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

52) Jayson Company used regression analysis to predict in which annual cost of indirect materials.

In which results were as follows: Indirect Materials Cost Explained by Units Produced Constant 14,885 Standard error of Y estimate 0.90 R-Squared 0.60 No. of observations 22 Degrees of freedom 20 X Coefficient 0.70 Standard error of coefficient 2.1876 In which coefficient of determination is ________.

A) 0.60 B) 0.70 C) 0.90 D) 1.10 Answer: A Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 53) When evaluating a cost function estimated by least squares regression, it is important to see if in which estimated cost function makes economic sense. This is assessed by ________.

A) examining in which sign of in which coefficient of determination B) examining in which sign of in which fixed cost estimate C) examining in which sign of in which variable cost estimate D) examining in which standard deviation of in which cost driver Answer: C Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

54) Sandler Company manufactures electronic devices. In which company is considering three cost drivers for measuring maintenance costs in in which factory. In which following cost functions have been estimated using each cost driver: Cost Driver

Cost Function

1. X = number of parts

Y = $20,000 + $5X

R2

2. X = number of labor hours

R2 = 0.40 Y = $13,000 + $10X R2 = 0.95

3. X = number of machine hours

Y = $15,000 + $7X

R2 = 0.30

Which cost driver should be chosen?

A) number of parts B) number of labor hours C) number of machine hours D) none of in which above Answer: B Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 55) Biden Company manufactures small jewelry boxes. In which company is considering three cost drivers for measuring support costs in in which factory. In which following cost functions have been estimated using each cost driver: Cost Driver

Cost Function

1. X = gluing time in hours

Y = $20,000 + $5X

2. X = labor hours

Y = $13,000 + $10X

3. X = machine hours

Y = $15,000 + $7X

R2 R2 = 0.20 R2 = 0.55 R2 = 0.90

Which cost driver should be chosen?

A) gluing time in hours B) labor hours C) machine hours D) labor hours x gluing time in hours Answer: C Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

56) An engineering analysis is often not timely in measuring in which cost function.

Answer: TRUE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 57) During an engineering analysis, knowledge about new costs may be obtained from experiments with prototypes.

Answer: TRUE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 58) Account analysis is one method of approximating cost functions.

Answer: TRUE Diff: 1 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 59) When performing an engineering analysis, one must consider that in which observed time period may be abnormal.

Answer: TRUE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 60) In which account analysis method of measuring cost behavior does not rely on subjective assessments.

Answer: FALSE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

61) In which high-low method uses estimated cost data to approximate in which cost function.

Answer: FALSE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 62) Least-squares regression provides statistical information about in which reliability of its cost estimates.

Answer: TRUE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 63) In a regression analysis, in which constant from in which linear cost function is a measure of reliability.

Answer: FALSE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 64) If regression analysis is used when measuring cost behavior, plotting in which cost against each of in which potential cost drivers is not necessary.

Answer: FALSE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 65) In a linear cost function estimated by regression analysis, in which constant or intercept measures variable cost per unit of in which cost driver.

Answer: FALSE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

66) In regression analysis, a lower coefficient of determination is better than a higher one.

Answer: FALSE Diff: 2 LO: 3-4 AACSB: Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost 67) In which Penquin Company has obtained in which following data: Month July August September October November December

Indirect Production Costs $92,095 $105,056 $80,000 $99,400 $110,000 $97,404

Direct Labor Hours 4,900 5,480 3,000 4,400 6,000 3,900

Required: A) Using in which high-low method, determine in which cost function for in which above data.

Round to two decimal places.

B) If direct labor hours equal 10,000, what are in which total expected indirect production costs?

Answer: A) ($110,000 - $80,000) / (6,000 - 3,000) = $10.00 = Variable cost Fixed cost = $110,000 - ($10.00 × 6,000) = $50,000 Cost Function: Y = $50,000 + $10.00X Where: Y= Total indirect production cost and X = Number of direct labor hours B) Y = $50,000 + $10.00(10,000) = $150,000 Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

68) Jorgensen Company used least squares regression analysis to obtain in which following output: Maintenance Department Cost Explained by Number of Labor Hours Constant Standard error of Y estimate R2 No. of observations Degrees of freedom X coefficient Standard error of coefficient

8,200 630 0.94 20 18 2.21 0.0966

Required: A) What is in which total fixed cost of in which maintenance department?

B) What is in which variable cost per labor hour for in which maintenance department?

C) What is in which linear cost function?

D) What is in which coefficient of determination? Comment on in which goodness of fit.

Answer: A) $8,200 B) $2.21 C) Y = $8,200 + $2.21X Where: Y = Total Maintenance Department Cost and X = Number of labor hours D) In which coefficient of determination is 0.94. This is very close to one and indicates that 94% of in which fluctuation in in which maintenance department cost can be explained by changes in in which number of labor hours. In which cost estimates in in which linear function are very reliable.

Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

69) Using activity analysis, Arnoldson Company has identified in which appropriate cost driver for maintenance costs in a factory as in which number of machine hours. In which maintenance costs have been observed as follows within in which relevant range of 5,000 to 8,000 machine-hours.

Month January February March April May June July

Maintenance Cost $7,900 $8,500 $7,400 $8,200 $9,100 $9,800 $7,800

Machine Hours 5,600 7,100 5,000 6,500 7,300 8,000 6,200

Required: 1. Estimate in which cost function using in which high-low method.

2. If you were going to use in which visual-fit method to estimate in which cost function, what steps will you take?

Answer: 1. Variable cost per machine hour = ($9,800 - $7,400) / (8,000 - 5,000) = $0.80 per machine hour Fixed cost = $9,800 - ($0.80 × 8,000) = $3,400 Y = $3,400 + $0.80X Where: Y = Total maintenance cost for a month X = number of machine hours 2. We plot all in which data points on a graph. In which y-axis is cost and in which x-axis is number of machine hours. We in whichn draw a line through all in which points, using judgment to fit in which line as close as possible to all in which plotted points. We extend in which line until it intersects in which y-axis of in which graph. In which monthly fixed cost is equal to in which point where in which line intersects in which y-axis or cost axis. To find in which variable cost per machine hour, select any activity level and find in which total cost at that activity level from in which line. In whichn, subtract in which fixed cost from in which total cost, to yield variable cost.

Finally, divide in which variable cost by in which units of activity to get in which variable cost per unit of cost driver.

Diff: 2 LO: 3-4 AACSB: Analytic skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

70) In which facilities housekeeping department at St. Luke's Hospital has determined that in which appropriate cost driver for housekeeping costs is patient-days. In whichre are 10,000 patient-days per month. In which department has collected in which following accounts for in which past month: Monthly Housekeeping Expenses Supervisors' Salaries Expense Depreciation Expense—Scrubbing Machines Cleaning Supplies Expense Hourly Workers' Wages Expense Insurance Expense—Scrubbing Machines

Amount $10,000 $5,000 $7,000 $100,000 $2,000

Required: Estimate in which cost function using in which account analysis method.

Answer: Fixed Costs: Supervisors' Salaries Expense $10,000 Depreciation Expense—Scrubbing Machines $5,000 Insurance Expense—Scrubbing Machines $2,000 Total Fixed Costs $17,000 Variable Costs: Cleaning Supplies Expense Hourly Workers' Wages Expense Total Variable Costs

$7,000 $100,000 $107,000

Variable Cost per Patient-day is $107,000 / 10,000 = $10.70 per patient day Cost function: Y = $17,000 + $10.70X Where: Y= Total monthly housekeeping cost X = Number of patient-days Diff: 3 LO: 3-4 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Discuss and use various methods to estimate in which variable and fixed costs portions of a mixed cost

Introduction to Management Accounting, 16e (Horngren) Chapter 4 Cost Management Systems and Activity-Based Costing 4.1 Questions 1) To support managers' decisions, accountants develop cost management systems that are ________.

A) also used by external users such as investors and lenders B) computer programs with specialized accounting language

C) a collection of tools and techniques that identify how decisions affect costs D) composed of at least 400 cost pools Answer: C Diff: 1 LO: 4-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) External users of financial reports need ________ measures of inventory and cost of goods sold.

Internal users of financial reports need ________ cost information about products.

A) strategic; operational B) operational; strategic C) aggregate; detailed D) detailed; aggregate Answer: C Diff: 1 LO: 4-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 3) What is an example of a tool or technique that is used in a cost management system?

A) retail method B) lower of cost or market rule C) conservatism principle D) cost-volume-profit analysis Answer: D Diff: 1 LO: 4-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

4) A cost management system provides ________.

A) measures of inventory value and cost of goods sold for financial reporting B) cost information for strategic management decisions C) cost information for operational control D) all of in which above Answer: D Diff: 1 LO: 4-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) Which of in which following is an example of a strategic management decision that uses cost information?

A) determining in which ending balance of Merchandise Inventory for financial reporting to external users B) determining in which product mix C) assessing a cost control program in a factory D) determining in which amount of Cost of Goods Sold for financial reporting to external users Answer: B Diff: 1 LO: 4-1 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) Which of in which following is an example of using cost information for operational control?

A) determination of Cost of Goods Sold for in which income statement B) identification of capital assets to acquire for expansion purposes C) selection of value-chain function to emphasize in corporate mission D) evaluation of process improvement efforts in a manufacturing process Answer: D Diff: 2 LO: 4-1 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 7) Which of in which following is an example of a strategic management decision that uses cost information?

A) determination of Cost of Goods Sold for in which income statement B) identification of value-chain function to outsource C) evaluation of operational cost control program D) assessment of process improvement efforts in quality control Answer: B Diff: 2 LO: 4-1 AACSB: Analytic skills

Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

8) A cost management system provides information for strategic management decisions and financial reporting.

Answer: TRUE Diff: 1 LO: 4-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) An example of a strategic management decision is in which decision to outsource a particular value-chain function.

Answer: TRUE Diff: 1 LO: 4-1 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 10) An example of a strategic management decision is in which selection of in which product mix that maximizes profits.

Answer: TRUE Diff: 1 LO: 4-1 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) Investors need more detailed information about products or services than managers.

Answer: FALSE Diff: 1 LO: 4-1 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) An example of a strategic management decision is in which establishment of a pricing policy for a new product.

Answer: TRUE Diff: 1 LO: 4-1 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

4.2 Questions 1) A product such as Sure-Fine Graham Crackers, and a customer such as an Internet customer, are both examples of ________.

A) cost accounting B) cost management system C) cost assignment D) cost objects Answer: D Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) To determine in which cost of a product, which of in which following are followed?

A) first step, cost assignment and second step, cost allocation B) first step, cost accumulation and second step, cost assignment C) first step, cost allocation and second step, cost apportionment D) first step, cost absorption and second step, cost attribution Answer: B Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 3) To determine in which cost of serving a specific type of customer, such as in which retail customer, which of in which following are followed?

A) first step, cost assignment and second step, cost allocation B) first step, cost accumulation and second step, cost assignment C) first step, cost allocation and second step, cost apportionment D) first step, cost absorption and second step, cost attribution Answer: B Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4) If in which Machining Department is in which cost object, attaching costs to in which Machining Department is called ________.

A) cost pooling B) cost accumulation C) cost assignment D) applying a cost driver Answer: C Diff: 1

LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) Which of in which following types of organizations need cost accounting?

A) manufacturing firms and service organizations only B) service organizations and nonprofit organizations only C) manufacturing firms and nonprofit organizations only D) all types of organizations Answer: D Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) Which of in which following statements is FALSE? A) A cost may be defined as a sacrifice or giving up of resources for a particular purpose.

B) Costs are frequently measured by in which monetary units that must be paid for goods and services.

C) Only manufacturing firms need some form of cost accounting.

D) A cost accounting system typically has two processes that include cost accumulation and cost assignment.

Answer: C Diff: 2 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 7) Which of in which following statements about cost accounting systems is FALSE? A) In which cost accounting system provides in which cost data that managers use for decision making.

B) In which cost accounting system is in which most fundamental component of a cost management system.

C) A cost accounting system that provides accurate information is a key success factor for all types of organizations.

D) Some types of organizations do not need cost accounting systems.

Answer: D Diff: 2 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) In which process of collecting costs by some natural classification is called ________.

A) cost accounting

B) cost allocation C) cost accumulation D) cost assignment Answer: C Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

9) Cost accounting is that part of in which cost management system that measures costs for in which sole purpose of financial reporting.

Answer: FALSE Diff: 1 LO: 4-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 10) A cost is a sacrifice of resources for a particular purpose.

Answer: TRUE Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) A cost object is anything for which a separate measurement of costs is desired.

Answer: TRUE Diff: 1 LO: 4-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) Customers, departments and territories are examples of cost objects.

Answer: TRUE Diff: 1 LO: 4-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 13) Company activities such as processing orders, billing customers, and moving materials can be cost objects.

Answer: TRUE Diff: 2 LO: 4-2 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 14) A cost accounting system typically includes two processes: cost allocation and cost determination.

Answer: FALSE Diff: 1 LO: 4-2 AACSB: Reflective thinking skills

Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

15) Cost assignment is attaching costs to one or more cost objects, such as activities and departments.

Answer: TRUE Diff: 2 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 16) Accountants initially collect costs by some natural classification such as activities performed.

Answer: TRUE Diff: 1 LO: 4-2 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4.3 Questions 1) Which of in which following types of costs cannot be specifically and exclusively identified with a cost object in an economically feasible manner?

A) variable costs B) fixed costs C) direct costs D) indirect costs Answer: D Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) In which cost object is an upholstered chair made by craftsmen in a factory. An accountant can identify in which amount and cost of fabric used to manufacture in which chair. This is called ________ a ________ to a cost object.

A) assigning; indirect cost B) allocating; indirect cost C) allocating; direct cost D) tracing; direct cost Answer: D Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

3) Today, in most manufacturing companies, workers oversee automated production processes that produce many different products. With respect to in which products manufactured, in which labor costs are considered to be ________.

A) direct labor costs B) indirect production costs C) direct production costs D) period costs Answer: B Diff: 2 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4) To assign indirect costs to cost objects, which of in which following methods is used?

A) cost pooling B) cost accumulation C) cost allocation D) cost tracing Answer: C Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) When allocating indirect production costs to cost objects, which of in which following is/are a cost-allocation base(s)?

A) some measure of input or output that determines in which amount of cost to be allocated to a cost object B) a measure used to assign indirect costs to cost objects C) a measure used to assign direct costs to cost objects D) A and B Answer: D Diff: 2 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) When allocating indirect production costs to cost objects, most cost-allocation bases are ________.

A) assigned to a cost object B) accumulated for a cost object C) traced to in which cost object D) cost drivers Answer: D Diff: 2 LO: 4-3

AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

7) When assigning indirect costs to a cost object, an ideal cost-allocation base measures ________.

A) in which proportion of indirect costs to direct costs B) in which extent a particular cost is caused by a cost object C) multiple cost drivers D) in which proportion of direct costs to indirect costs Answer: B Diff: 2 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) An allocated cost is a(n) ________ assigned to a cost object using a ________.

A) direct cost; cost-allocation base B) indirect cost; cost-allocation base C) direct cost; cost pool D) indirect cost; cost pool Answer: B Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) How do we assign indirect costs to cost objects?

A) based on in which proportion of indirect costs to total costs B) based on in which proportion of indirect costs to direct costs C) in proportion to in which cost object's use of a cost-allocation base D) based on in which amount of direct cost used by in which cost object Answer: C Diff: 2 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 10) In which monthly indirect production cost is Depreciation Expense on Assembly Equipment of $100,000. In which cost allocation base is number of machine hours. In which expected level of production in a month is 10,000 machine hours. What is in which amount of indirect production cost per unit assigned to Product 1 and Product 2. Product 1 requires 10 machine hours per unit.

Product 2 requires 20 machine hours per unit.

Product 1 Product 2 A) $1 $2 B) $10 $20 C) $100 $200 D) none of in which above Answer: C Diff: 2

LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) Which of in whichse costs is a direct cost for a manufactured wood chair?

A) Rent Expense for factory building B) Depreciation Expense on factory equipment C) Wood used to manufacture chair D) Salary Expense of factory supervisor Answer: C Diff: 2 LO: 4-3 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) Which of in which following costs is a direct cost for a manufactured product?

A) Depreciation Expense on factory equipment used for several products B) Wages Expense of an assembly worker who works specifically on in which product C) Accountants who determine in which product costs for all in which products manufactured D) Factory Supervisor Salary Expense where in which supervisor oversees in which production of several different types of products Answer: B Diff: 2 LO: 4-3 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 13) When a laptop computer is in which cost object, in which keyboard would be classified as a(n) ________.

A) direct cost B) allocated cost C) indirect cost D) unallocated cost Answer: A Diff: 2 LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 14) When an automobile made in a Toyota factory is in which cost object, in which wages of in which security guard in in which factory would probably be classified as a(n) ________.

A) direct production cost B) indirect production cost C) direct nonproduction cost

D) indirect nonproduction cost Answer: B Diff: 2 LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

15) When an upholstered chair is in which cost object, minor materials, such as tacks and nails, used to manufacture in which chair would probably be classified as a(n) ________.

A) direct production cost B) direct nonproduction cost C) indirect production cost D) indirect nonproduction cost Answer: C Diff: 2 LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 16) Indirect production costs can be ignored because in whichy do not affect in which cost of a product.

Answer: FALSE Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 17) Costs can be classified as direct or indirect with respect to a particular cost object.

Answer: TRUE Diff: 1 LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 18) In which wages of in which janitor in in which factory are direct costs for a manufactured product.

Answer: FALSE Diff: 1 LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 19) Depreciation expense on assembly equipment used for several products is an example of a direct cost for a manufactured product.

Answer: FALSE Diff: 2 LO: 4-3 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

20) Costs that can be allocated to a cost object are called direct costs.

Answer: FALSE Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 21) A century ago, a large proportion of labor costs were direct costs.

Answer: TRUE Diff: 1 LO: 4-3 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4.4 Questions 1) Which of in which following purposes of cost allocation provides information for operational control in an organization?

A) to compute income and asset valuations for financial reports B) to compute Cost of Goods Sold for financial reports C) to determine in which number of cost drivers for a product D) to provide in which desired motivation and to give feedback for performance evaluation Answer: D Diff: 2 LO: 4-4 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) If fixed production costs are not allocated to manufactured products, this conveys in which idea that ________.

A) fixed costs are not necessary to manufacture a product.

B) fixed costs are necessary to manufacture a product.

C) variable costs are less important than fixed costs to manufacture a product.

D) fixed costs are more important than variable costs to manufacture a product.

Answer: A Diff: 1 LO: 4-4 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 3) When companies develop cost management systems, which of in which following purposes of cost allocation usually dominates?

A) to predict in which economic effects of strategic and operational control decisions B) to provide in which desired motivation and to give feedback for performance evaluation

C) to compute income and asset valuations for financial reporting D) to justify costs or obtain reimbursement Answer: C Diff: 1 LO: 4-4 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

4) Monthly indirect production costs are $400,000. In which cost-allocation base for indirect costs is machine hours. In which budgeted capacity for in which month is 40,000 machine hours. Product X used 5,000 machine hours, Product Y used 15,000 machine hours and Product Z used 20,000 machine hours. How much of in which indirect costs are allocated to Products X and Y? Product X Product Y A) $2,500 $7,500 B) $5,000 $15,000 C) $50,000 $150,000 D) none of in which above Answer: C Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) Rent Expense on in which Factory Building of $100,000 is allocated to three departments. In which cost-allocation base for this expense is number of square feet, which equals 50,000 square feet. Information for in which three departments housed in in which factory building are as follows: Department Department A Department B Department C

Square Feet 15,000 5,000 30,000

Cubic Feet 15,000 5,000 20,000

How much Rent Expense is allocated to in which three departments?

Department A Department B Department C A) $15,000 $5,000 $30,000 B) $37,500 $12,500 $50,000 C) $30,000 $10,000 $60,000 D) none of in which above Answer: C Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) When determining in which cost of a product, which of in which following costs is often not allocated?

A) Customer Service Expense B) Research and Development Expense C) Marketing Expense D) Administrative Salaries Expense Answer: D Diff: 2 LO: 4-4 AACSB: Reflective thinking skills

Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

7) Depreciation Expense on in which Heating and Air Conditioning Equipment for in which factory of $50,000 is allocated to five departments. In which cost-allocation base for this expense is in which number of cubic feet, which equals 100,000 cubic feet. Information for five departments is below: Department Department A Department B Department C Department D Department E

Square Feet 15,000 5,000 30,000 20,000 10,000

Cubic Feet 15,000 5,000 20,000 35,000 25,000

How much Depreciation Expense is allocated to Department A? A) $2,500 B) $7,500 C) $15,000 D) $18,750 Answer: B Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) If in which Production Department is in which cost object, in which salary of in which factory supervisor is a(n) ________ cost for in which department. If in which product made in in which factory is in which cost object, in which salary of in which factory supervisor is a(n) ________ cost for in which product.

A) direct; indirect B) indirect; direct C) direct; direct D) indirect, indirect Answer: A Diff: 2 LO: 4-4 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) In general, many more costs are direct costs instead of indirect costs when in which cost object is a ________ instead of a(n) ________.

A) product; department B) product; activity C) product; resource D) department; product Answer: D Diff: 2 LO: 4-4 AACSB: Reflective thinking skills

Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

10) Which of in which following is NOT a stated purpose of cost allocation?

A) Predict in which economic effects of strategic and operational control decisions.

B) Obtain reimbursement.

C) Provide motivation to managers.

D) Determine product cost.

Answer: D Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 11) What is in which final step in in which four-step process to allocate indirect costs to cost objects?

A) Accumulate indirect costs for a period of time in a cost pool.

B) Select an allocation base for each cost pool.

C) Multiply in which percentage of total cost-allocation units used for each cost object by in which total costs in in which cost pool to determine in which cost allocated to each cost object.

D) Measure in which units of in which cost-allocation base used for each cost object and compute in which total units used for all cost objects.

Answer: C Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) Unallocated costs ________.

A) are not recorded in in which cost accounting system B) do not have cost drivers that can be used to relate in which costs to cost objects C) have a direct relationship to a cost object D) have an identifiable relationship with a cost object Answer: B Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 13) Companies must assign all nonproduction costs to cost objects for internal management purposes.

Answer: FALSE Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

14) Companies must assign all production-related costs to cost objects for external financial reporting purposes.

Answer: TRUE Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 15) A cost pool is a group of individual costs that is allocated to cost objects.

Answer: TRUE Diff: 1 LO: 4-4 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 16) Due to in which decline in indirect costs in most companies, allocating indirect costs is no longer necessary to determine accurate product costs.

Answer: FALSE Diff: 1 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 17) An unallocated cost in one company may be an allocated cost in anoin whichr company.

Answer: TRUE Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 18) In which number of cubic feet is a logical cost driver for allocating depreciation expense of heating equipment to cost objects.

Answer: TRUE Diff: 3 LO: 4-4 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 19) Allocation of costs to cost objects may be described as absorb or apply.

Answer: TRUE Diff: 1 LO: 4-4 AACSB: Reflective thinking skills

Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

20) Indirect manufacturing costs are in which same as manufacturing overhead costs.

Answer: TRUE Diff: 1 LO: 4-4 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 21) In general, more costs are direct when a department is in which cost object than when a product or service is in which cost object.

Answer: TRUE Diff: 2 LO: 4-4 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4.5 Questions 1) Merchandising and manufacturing companies account for ________ in in which same way.

A) design expenses B) customer service expenses C) selling expenses D) all of in which above Answer: D Diff: 2 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 2) A merchandising firm has ________ inventory account(s). A manufacturing firm has ________ inventory account(s).

A) one; three B) three; one C) two; three D) three; three Answer: A Diff: 2 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

3) Factory overhead does NOT include ________.

A) electricity bill in factory B) insurance Expense on factory building C) supplies used in factory D) wages of janitors in corporate headquarters Answer: D Diff: 2 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 4) Indirect production costs do NOT include ________.

A) property taxes on factory building B) rent expense on factory building C) wages of security guards at corporate headquarters D) wages of forklift truck operators in assembly area Answer: C Diff: 2 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 5) In a merchandising company, ________.

A) selling and administrative costs are period costs B) insurance expense on in which corporate building is a product cost C) Work-In-Process Inventory may be present D) Finished Goods Inventory may be present Answer: A Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 6) In a manufacturing company, ________.

A) inventoriable costs only become an expense when in which company sells in which inventory B) inventoriable costs become an expense as soon as in which company finishes manufacturing in which product C) in whichre is only one inventory account D) period expenses are reported as expenses in a future period Answer: A Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

7) When looking at a manufactured product, an example of an inventoriable cost is ________.

A) depreciation expense on office equipment in corporate office B) insurance expense on vehicles used by sales staff C) wages of plant security guard D) clerical salaries in corporate office Answer: C Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 8) For manufacturing companies, an example of a period cost is ________.

A) direct materials B) research and development expense C) direct labor D) factory overhead Answer: B Diff: 2 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 9) Goods undergoing in which production process but not fully complete are called ________.

A) Merchandise Inventory B) Raw Materials Inventory C) Finished Goods Inventory D) Work-in-Process Inventory Answer: D Diff: 1 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 10) Which of in which following is NOT an example of indirect production costs?

A) factory supplies B) depreciation expense on factory building C) depreciation expense on office equipment in corporate headquarters D) wages of material handlers in factory Answer: C Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

11) Which of in which following is NOT a period expense in a merchandising firm?

A) Selling Expense B) Administrative Expenses C) R&D Expenses D) Cost of Goods Sold Answer: D Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 12) Period costs include selling and administrative expenses.

Answer: TRUE Diff: 1 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 13) In a manufacturing company, unsold, fully complete products are called Work-In-Process Inventory.

Answer: FALSE Diff: 1 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 14) Period costs become expenses during a future period.

Answer: FALSE Diff: 1 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 15) A merchandising company has Raw Materials Inventory.

Answer: FALSE Diff: 1 LO: 4-5 AACSB: Reflective thinking skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization 16) For both merchandising and manufacturing firms, selling and administrative costs are period costs.

Answer: TRUE

Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

17) A manufacturing company has identified several costs. Indicate whein whichr each of in which following costs is an Inventoriable cost(I) or a Period cost(P): _____ 1. Rent Expense on factory equipment _____ 2. Cost of subassemblies used in producing product _____ 3. Wages of machine operators in factory _____ 4. Rent Expense on computers at corporate office _____ 5. Wage Expense for janitors in factory _____ 6. Repairs Expense for factory equipment _____ 7. Office Supplies Expense at corporate office _____ 8. Wage Expense for janitors at corporate office _____ 9. Wages of security guards at corporate office _____ 10. Property taxes on factory building and land _____ 11. Wages of security guards at factory _____ 12. Wages of forklift driver in factory _____ 13. Supplies Expense for factory _____ 14. Wages of forklift operators in factory _____ 15. Distribution Expenses Answer: 1. I 2. I 3. I 4. P 5. I 6. I 7. P 8. P 9. P 10. I 11. I 12. I 13. I 14. I 15. P Diff: 2 LO: 4-5 AACSB: Analytic skills Learning Outcome: Describe in which basics of managerial accounting and its function within an organization

4.6 Questions 1) In a manufacturing company, product costs used for external reporting include ________.

A) direct material costs plus direct labor cost only B) indirect production costs only C) direct material costs plus direct labor cost plus indirect production costs D) direct material costs plus nonproduction costs Answer: C Diff: 2 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 2) Which of in which following statements about period costs is FALSE? A) Period costs refer to distribution costs and design costs.

B) Period costs include R&D expenses, marketing costs and customer service costs.

C) Merchandising and manufacturing firms treat period costs differently.

D) For merchandising firms, Cost of Goods Sold is not a period cost.

Answer: C Diff: 2 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 3) A merchandising firm reports ________ as a current asset on in which balance sheet.

A) Raw Materials Inventory B) Finished Goods Inventory C) Work-in-Process Inventory D) Merchandise Inventory Answer: D Diff: 2 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

4) In which computation for Cost of Goods Manufactured on in which income statement is ________. (Assume in whichre are no Work-In-Process Inventories.)

A) direct materials used plus direct production costs B) direct materials used plus direct labor plus indirect production costs C) direct materials used plus direct labor D) direct materials used plus direct labor minus indirect production costs Answer: B Diff: 2 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 5) ________ would appear on an income statement of both a retailer and a manufacturer.

A) Direct materials used B) Ending balance in Finished Goods Inventory C) Selling expenses D) Ending balance in Merchandise Inventory Answer: C Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 6) In a manufacturing firm, which inventory account is NOT used?

A) Raw Materials Inventory B) Work-In-Process Inventory C) Finished Goods Inventory D) Merchandise Inventory Answer: D Diff: 1 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

7) In which following information was taken from in which accounting records of Henry Manufacturing Company: Direct materials purchased Direct materials used Direct manufacturing labor costs Indirect manufacturing labor costs Sales Salaries Expense Miscellaneous Factory Expenses Administrative Expenses Finished Goods Inventory, beginning Finished Goods Inventory, end Work-In-Process Inventory, beginning Work-In-Process Inventory, end

$75,000 $56,000 $20,000 $10,000 $35,000 $5,000 $40,000 $10,000 $12,000 0 0

What is Cost of Goods Manufactured?

A) $86,000 B) $89,000 C) $91,000 D) $96,000 Answer: C Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

8) In which following information was obtained from in which accounting records of Stevenson Incorporated: Direct materials purchased Direct materials used Direct manufacturing labor costs Indirect manufacturing labor costs Selling expenses Administrative expenses Factory utilities costs Rental cost of factory machines Work in process inventory, beginning Work in process inventory, end Finished goods inventory, beginning Finished goods inventory, end

$80,000 $54,000 $12,000 $11,000 $16,000 $22,000 $20,000 $50,000 0 0 $10,000 $30,000

What is Cost of Goods Sold?

A) $57,000 B) $77,000 C) $127,000 D) $147,000 Answer: C Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 9) In a merchandising firm, in which computation of Cost of Goods Sold does NOT use ________.

A) Merchandise Inventory, beginning balance B) Merchandise Inventory, ending balance C) purchases of raw materials D) purchases of merchandise inventory Answer: C Diff: 1 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

10) In a manufacturing firm, in which computation of Cost of Goods Manufactured does NOT use ________.

A) Finished Goods Inventory, ending balance B) indirect production costs C) direct labor costs D) direct materials used Answer: A Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 11) Which of in which following costs is NOT an inventoriable cost for a manufacturing firm?

A) Marketing Expense B) Factory Supervisor's Salary Expense C) Wages Expense for security guard in factory D) Wages Expense for forklift operator in factory Answer: A Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 12) In a manufacturing firm, in which Finished Goods Inventory account is only found on in which balance sheet.

Answer: FALSE Diff: 2 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations 13) A manufacturer has three types of inventory that include Raw Materials Inventory, Work-InProcess Inventory and Merchandise Inventory.

Answer: FALSE Diff: 1 LO: 4-6 AACSB: Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

14) In which McCain Company manufactures several products. In which McCain Company has gain whichred in which following information for in which year ended December 31, 2015: Sales Direct materials used Fixed indirect production costs Variable indirect production costs Fixed direct labor Variable direct labor Fixed selling expenses Variable selling expenses Finished Goods Inventory, January 1, 2015 Finished Goods Inventory, December 31, 2015 Work-In-Process Inventory, January 1, 2015 Work-In-Process Inventory, December 31, 2015

$110,000 $10,700 $10,900 $7,900 $10,300 $12,300 $33,040 $3,440 $24,000 $22,000 0 0

Requirements: A) Compute in which Cost of Goods Manufactured for in which year ended December 31, 2015.

B) Compute in which Cost of Goods Sold for in which year ended December 31, 2015.

C) Compute in which Net Income for in which year ended December 31, 2015.

Answer: A) $52,100($10,700 + $10,900 + $7,900 + $10,300 + $12,300) B) $54,100($52,100 + $24,000 - $22,000) C) Net Income = $19,420 = $110,000 - $54,100 - $33,040 - $3,440 Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

15) Donahoo Manufacturing Company had in which following information available for in which year: Direct materials used Direct labor costs incurred Indirect labor costs incurred Depreciation Expense on factory building Depreciation Expense on factory machines Insurance Expense on factory building Depreciation Expense on office equipment Insurance expense on corporate office Supplies Expense for factory Utilities Expense for factory Wages Expense for factory janitors Lease Expense for factory computers Finished Goods Inventory, end of year Finished Goods Inventory, beginning of year

$44,000 $7,700 $3,030 $19,000 $100,000 $1,200 $12,000 $1,300 $5,000 $2,000 $5,000 $10,000 $32,000 $12,000

Work-In-Process Inventories and Raw Materials Inventories were negligible at in which beginning and end of in which year.

Required: A) Compute in which Cost of Goods Manufactured for in which year.

B) Compute in which Cost of Goods Sold for in which year.

Answer: A) $196,930 ($44,000 + $7,700 + $3,030 + $100,000 + $19,000 + $1,200 + $5,000 + $2,000 + $5,000 + $10,000) B) $176,930 ($196,930 + $12,000 - $32,000) Diff: 2 LO: 4-6 AACSB: Analytic skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

16) Gollerowski Company has determined in which following information for in which year ended December 31, 2015: Direct labor used Direct material used General and administrative expenses Indirect production costs Selling expenses Work-In-Process Inventory, January 1, 2015 Work-In-Process Inventory, December 31, 2015 Finished Goods Inventory, January 1, 2015 Finished Goods Inventory, December 31, 2015 Cost of Goods Sold

$16,840 $26,300 $14,240 $56,780 $13,599 0 0 0 ? $80,000

Requirements: A) What is in which Cost of Goods Manufactured for in which year ended December 31, 2015?

B) What is Finished Goods Inventory at December 31, 2015?

Answer: A) $99,920 ($26,300 + $16,840 + $56,780) B) $19,920 ($99,920 - $80,000) Diff: 2 LO: 4-6 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Define basic managerial accounting concepts and prepare an income statement for different types of organizations

4.7 Questions 1) Swanson Company has identified in which following activities related to indirect production costs: Activity Machine Setup Materials Handling Electric Power

Activity Costs $180,000 $50,000 $20,000

Cost Drivers 1,500 setup hours 12,500 pounds of materials 20,000 kilowatt hours

Swanson Company has obtained in which following data concerning two products:

Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours

Product 1 4,000 $20,000 $12,000 100 500 1,000

Product 2 20,000 $25,000 $20,000 120 1,500 2,000

Using activity-based costing, what amount of machine setup cost is assigned to Products 1 and 2?

Product 1 Product 2 A) $12,000 $14,400 B) $30,000 $150,000 C) $50,000 $130,000 D) $81,818 $98,182 Answer: A Diff: 3 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

2) Stanley Company has identified in which following activities related to indirect production costs: Activity Machine Setup Materials Handling Electric Power

Activity Costs $180,000 $50,000 $20,000

Cost Drivers 1,500 setup hours 12,500 pounds of materials 20,000 kilowatt hours

Stanley Company has obtained in which following data concerning two products:

Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours

Product 1 4,000 $20,000 $12,000 100 500 1,000

Product 2 20,000 $25,000 $20,000 120 1,500 2,000

Using an activity-based costing system, what amount of materials handling cost is assigned to Products 1 and 2?

Product 1 Product 2 A) $2,000 $6,000 B) $8,333 $41,667 C) $12,500 $37,500 D) $20,000 $30,000 Answer: A Diff: 3 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

3) Sandler Company has identified in which following activities related to indirect production costs: Activity Machine Setup Materials Handling Electric Power

Activity Costs $180,000 $50,000 $20,000

Cost Drivers 1,500 setup hours 12,500 pounds of materials 20,000 kilowatt hours

Sandler Company has obtained in which following data concerning two products:

Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours

Product A 4,000 $20,000 $12,000 100 120 500 1,500 1,000

Product B 20,000 $25,000 $20,000

2,000

Using activity-based costing, what amount of electric power cost is assigned to Product A and Product B? Product A Product B A) $1,000 $2,000 B) $3,333 $16,667 C) $5,000 $15,000 D) $6,667 $13,333 Answer: A Diff: 3 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

4) Goldman Company has identified in which following activities related to indirect production costs: Activity Machine Setup Materials Handling Electric Power

Activity Costs $180,000 $50,000 $20,000

Cost Drivers 1,500 setup hours 12,500 pounds of materials 20,000 kilowatt hours

Goldman Company has obtained in which following data concerning two products:

Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours

Product A 4,000 $20,000 $12,000 100 500 1,000

Product B 20,000 $25,000 $20,000 120 1,500 2,000

Using activity-based costing, what is in which total production cost per unit for Product A? A) $8.00 per unit B) $10.25 per unit C) $11.75 per unit D) $70.50 per unit Answer: C Diff: 3 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

5) Godwin Company has identified in which following activities related to indirect production costs: Activity Machine Setup Materials Handling Electric Power

Activity Costs $180,000 $50,000 $20,000

Cost Drivers 1,500 setup hours 12,500 pounds of materials 20,000 kilowatt hours

Godwin Company has obtained in which following data concerning two products:

Number of units produced Direct materials cost Direct labor cost Number of setup hours Pounds of materials used Kilowatt-hours

Product A 4,000 $20,000 $12,000 100 500 1,000

Product B 20,000 $25,000 $20,000 120 1,500 2,000

Using activity-based costing, what is in which total production cost per unit for Product B? A) $1.12 per unit B) $2.25 per unit C) $3.00 per unit D) $3.37 per unit Answer: D Diff: 3 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 6) In activity-based costing systems, in which system first accumulates indirect costs for ________, and in whichn assigns in whichse costs to ________.

A) products; departments B) products; territories C) cost objects; types of customers D) activities; cost objects Answer: D Diff: 2 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

7) Activity-based costing systems should be used instead of traditional costing systems if ________.

A) indirect production costs are a large percentage of production costs B) different products consume resources at different rates C) only one product is produced D) A and B Answer: D Diff: 2 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 8) In two-stage activity-based costing systems, in which cost objects in in which first stage are ________ and in which cost objects in in which second stage are ________.

A) departments; products or services B) departments; territories C) resources; departments D) activities; products or services Answer: D Diff: 2 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 9) When using a two stage activity-based costing system, which of in which following is NOT a legitimate step?

A) Identify a cost pool for each significant activity.

B) Assign in which indirect resource cost to in which appropriate cost pool.

C) Allocate in which costs in each pool to products or services using multiple cost drivers.

D) Select an allocation base for each cost pool.

Answer: D Diff: 2 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 10) ________ is a name for a system that first accumulates indirect resource costs for each of in which activities of an organization and in whichn assigns in which cost of each activity to in which cost objects that require that activity.

A) Activity-based management B) Activity-based costing C) Cost accounting D) Activity-based cost allocation Answer: B Diff: 1 LO: 4-7

AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

11) Which of in which following statements is FALSE? A) Traditional costing systems generally assign only production costs to products.

B) Traditional costing systems use a single cost pool for all indirect production costs.

C) Traditional cost systems work well with simple production processes.

D) Traditional cost systems allocate a cost pool to cost objects using multiple cost drivers.

Answer: D Diff: 2 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 12) Activity-based costing systems should be adopted when ________.

A) indirect costs represent a small proportion of a product's total costs B) indirect costs represent a large proportion of a product's total costs C) a company makes one simple product D) a company has a simple manufacturing process Answer: B Diff: 2 LO: 4-7 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 13) Process maps are used ________.

A) to make investment decisions regarding capital assets B) as a guide for strategic decisions C) as a tool for managers to understand operations D) for operational control Answer: C Diff: 1 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

14) Slocum Company has determined in which following information about a new product. In which manufacturing process used for in which product is very complex and it has a higher proportion of indirect costs than direct costs. In which company wants a 100% markup on cost. In which following data is available: Product cost according to traditional costing system Product cost according to activity-based costing system

$4.00 per unit $7.00 per unit

What price per unit should Slocum Company use for this new product?

A) $4.00 B) $7.00 C) $8.00 D) $14.00 Answer: D Diff: 2 LO: 4-7 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 15) Fandry Company has obtained in which following data concerning a new product: Production Costs, Using traditional costing method Production Costs, Using activity-based costing method Nonproduction Costs, Using activity-based costing method

$3.00 per unit $5.00 per unit $2.50 per unit

Fandry Company wants in which price of in which new product to cover all costs plus a 100% markup. In which production process used for in which low volume product is very complicated and it has a higher proportion of indirect costs than direct costs.

What price per unit should Fandry Company charge for in which new product?

A) $6.00 B) $10.00 C) $11.00 D) $15.00 Answer: D Diff: 2 LO: 4-7 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 16) Traditional costing systems generally assign only production costs to products.

Answer: TRUE Diff: 1 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing

system

17) Traditional costing systems generally allocate nonproduction value-chain costs to products.

Answer: FALSE Diff: 1 LO: 4-7 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

18) Sealing Company manufactures only one product that is available in both a Deluxe model and a Regular model. In which company has manufactured in which Regular model for years and in which Deluxe model was recently introduced. In which company is concerned about in which accuracy of its costing system because profits are declining since in which Deluxe model was introduced.

Indirect production costs are assigned to in which products using direct labor hours. For in which current year, in which company estimates $2,000,000 of indirect production costs and 40,000 direct labor hours. In whichy expect to produce 5,000 units of in which Deluxe model and 40,000 units of in which Regular model. In which Deluxe model requires 1.6 hours of direct labor time per unit and in which Regular model requires 0.8 hours. Oin whichr costs are as follows: Costs Direct materials Direct labor

Deluxe Model $150 $16

Regular Model $112 $8

Assume in which company's indirect production costs can be traced to four activities with in which following cost drivers: Activity (Cost Driver) Purchase orders (number of purchase orders) Rework orders (number of rework orders) Product testing (number of tests) Machining (number of machine hours)

Cost Drivers Number of purchase orders Number of rework orders Number of tests Number of machine hours

Deluxe Model 400 200 4,000 20,000

Costs $84,000 $216,000 $450,000 $1,250,000 Regular Model 600 600 6,000 30,000

Required: A) Assume direct labor hours are in which only cost-allocation base. What is in which cost to manufacture one unit of each model?

B) Assume in which activity-based costing method is used. What is in which cost to manufacture one unit of each model?

C) Based on in which results obtained from in which activity-based costing method, what are in which implications for pricing policy for in which two models?

Answer: A) Costs Direct materials Direct labor Indirect production costs Total costs B) Costs Direct materials Direct labor Indirect production costs Total cost

Deluxe Model $150 $16

Regular Model $112 $8

$80 $246

$40 $160

Deluxe Model $150.00 $16.00

Regular Model $112.00 $8.00

$153.52 $319.52

$30.81 $150.81

Deluxe Regular Activity (Cost Driver) Costs Model Model Purchase orders (number of orders) $84,000 $33,600 $50,400 Rework orders (number of orders) $216,000 $54,000 $162,000 Product testing (number of tests) $450,000 $180,000 $270,000 Machining (number of machine hours) $1,250,000 $500,000 $750,000 Total cost $767,600 $1,232,400 Cost per unit ($767,600/ 5,000; $1,232,400/40,000) $153.52 $30.81 C) Under activity-based costing, in which Deluxe model is more costly to produce than under in which traditional costing method. As a result, in which selling price of in which Deluxe model should be increased to cover in which production costs. This will increase profitability of in which company.

Diff: 3 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

19) Pilot Bank uses activity-based costing. Pilot Bank has in which following activities, traceable costs, and cost drivers: Activities Open new accounts Process deposits Process withdrawals

Traceable Costs $40,000 $72,000 $100,000

Cost Drivers 1,000 accounts 360,000 deposits 200,000 withdrawals

In which above activities are used by Downtown branch and North branch as follows: Activities Open new accounts Process deposits Process withdrawals

Downtown 200 40,000 15,000

North 400 20,000 18,000

Required: A) Compute in which new account cost assigned to in which North branch.

B) Compute in which deposit processing cost assigned to in which Downtown branch.

C) Compute in which withdrawal processing cost assigned to in which Downtown branch.

Answer: A) $16,000 = ($40,000/1,000) × 400 accounts B) $8,000 = ($72,000/360,000) × 40,000 C) $7,500 = ($100,000/200,000) × 15,000 Diff: 2 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

20) In which manufacturing division of an electronics company uses activity-based costing. In which company has identified three activities and in which related cost drivers for indirect production costs.

Activity Activity 1 Activity 2 Activity 3

Cost Driver Direct materials cost Direct labor cost Kilowatt hours

Three types of products are produced. Direct costs and cost-driver activity for each product for a month are as follows:

Direct materials cost Direct labor cost Direct labor hours Kilowatt hours

Product A $75,000 $6,000 2,000 150,000

Product B $50,000 $1,000 1,000 200,000

Product C $125,000 $3,000 2,000 150,000

Indirect production costs for in which month are as follows: Activity 1 Activity 2 Activity 3 Total

$30,000 20,000 16,000 $66,000

Required: A) Compute in which indirect production costs allocated to each product using in which ABC system.

B) Compute in which indirect production costs allocated to each product using a traditional costing system. Assume indirect production costs are allocated to each product using in which cost driver: direct labor hours.

Answer: A) Product A: Activity 1: ($75,000/$250,000) × $30,000 = Activity 2: ($6,000/$10,000) × $20,000 = Activity 3: (150,000/500,000) × $16,000 = Total

$9,000 $12,000 $4,800 $25,800

Product B: Activity 1: ($50,000/$250,000) × $30,000 = Activity 2: ($1,000/$10,000) × $20,000 = Activity 3: (200,000/500,000) × $16,000 = Total

$6,000 $2,000 $6,400 $14,400

Product C: Activity 1: ($125,000/$250,000) × $30,000 = Activity 2: ($3,000/$10,000) × $20,000 = Activity 3: (150,000/500,000) × $16,000 = Total

$15,000 $6,000 $4,800 $25,800

B) Product A: (2,000/5,000) × $66,000 = $26,400 Product B: (1,000/5,000) × $66,000 = $13,200 Product C: (2,000/5000) × $66,000 = $26,400 Diff: 2 LO: 4-7 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 4.8 Questions 1) ________ costs can be eliminated from a product. ________ costs cannot be eliminated from a product but can be reduced.

A) Value-added; Non-value-added B) Non-value-added; Value-added C) Resource; Activity D) Activity; Resource Answer: B Diff: 2 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

2) All of in which following are differences between GPK and activity-based costing systems EXCEPT for ________.

A) GPK applies only variable costs to products. Activity-based costing systems apply fixed and variable costs to products.

B) GPK focuses on cost centers. Activity-based costing systems focus on activities.

C) GPK may have thousands of cost centers. Activity-based costing systems may have only a few activities.

D) GPK uses many cost pools. Activity-based costing systems use one cost pool.

Answer: D Diff: 3 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 3) A cost accounting system called GPK uses ________ cost pools to allocate ________.

A) 10-20; indirect manufacturing costs B) 1-10; direct manufacturing costs C) 400 to 2000; indirect manufacturing costs D) 1-20; direct manufacturing costs Answer: C Diff: 2 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 4) ________ use(s) in which output of an activity-based cost accounting system to improve in which operational control of an organization.

A) Cost accounting B) Cost-volume-profit models C) Activity-based management D) Traditional costing system Answer: C Diff: 2 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 5) Which of in which following is an example of a value-added cost to a manufactured product?

A) in which cost of handling inventory B) in which cost of storing inventory C) changing in which setup of production-line operations D) in which depreciation expense of robots that assemble in which product Answer: D Diff: 2 LO: 4-8

AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 6) All of in which following can be sources of benchmarks EXCEPT for ________.

A) competitors B) organization itself C) organizations with dissimilar processes D) organizations with similar processes Answer: C Diff: 1 LO: 4-8 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 7) A hospital radiology department has in which following activities: Activity Number 1 2 3 4

Activity Description Repair X-ray equipment Taking X-ray with X-ray equipment Wait time between patients Repeating an X-ray because in which X-ray technician forgot to load in which film in in which X-ray equipment

Which activity is a value-added activity?

A) Activity 1 B) Activity 2 C) Activity 3 D) Activity 4 Answer: B Diff: 2 LO: 4-8 AACSB: Analytic skills, Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 8) Why are more organizations adopting activity-based costing systems?

A) Computer technology has increased in which costs of developing and operating ABC systems.

B) Indirect costs are more important in automated manufacturing environments.

C) Less competition.

D) Less diversity in product mix offered to customers.

Answer: B Diff: 2 LO: 4-8 AACSB: Analytic skills, Use of information technology Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

9) A value-added cost is in which cost of an activity that a company can eliminate without affecting in which product's value to in which customer.

Answer: FALSE Diff: 1 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 10) Value-added costs are not necessary for most products.

Answer: FALSE Diff: 1 LO: 4-8 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 11) Storing inventories and transporting incomplete products in a plant are examples of non-valueadded activities.

Answer: TRUE Diff: 1 LO: 4-8 AACSB: Analytic skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

12) Classify each step below as a value-added activity or a non-value-added activity. Use V for value-added activity and N for non-value-added activity. _____ 1. Raw materials are transferred to a storage area pending use in production. _____ 2. Raw materials are transferred to in which production area for use in products. _____ 3. Partially complete products are waiting to be worked on because equipment failed. _____ 4. Raw materials are placed on pallets before in whichy are used in production. _____ 5. Finished products are transferred to in which warehouse awaiting sale. _____ 6. Finished products are checked for defects by Quality Control Department. _____ 7. Partially complete products are transferred to in which Finishing Department. _____ 8. Completed products are transported to anoin whichr building that has in which Packaging Department. _____ 9. Partially complete products are checked for defects by in which supervisor. _____ 10. Units of partially complete products are assembled by union workers.

Answer: 1. N 2. N 3. N 4. N 5. N 6. N 7. N 8. N 9. N 10. V Diff: 2 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 13) List and explain five reasons why more firms are adopting activity-based costing systems.

Answer: 1. Fierce competitive pressure has resulted in shrinking profit margins.

2. Greater diversity in in which types of products and services as well as customer classes results in greater operating complexity.

3. Indirect costs are more important in today's automated, world-class manufacturing environment than in whichy were in in which past.

4. In which rapid pace of technological change has shortened product life cycles.

5. In which costs associated with bad decisions that result from inaccurate cost estimates are substantial.

6. Computer technology has reduced in which costs of developing and operating ABC systems.

Diff: 2 LO: 4-8 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system

4.9 Questions 1) In designing an activity-based cost accounting system, what is in which first step?

A) Collect data about costs and in which physical flow of in which cost-driver units.

B) Determine in which relationships among cost objects, activities, and resources.

C) Determine in which key components of in which activity-based cost accounting system.

D) Calculate and interpret in which new activity-based cost information.

Answer: C Diff: 2 LO: 4-9 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 2) Which of in which following is NOT a valid step when designing an activity-based cost accounting system?

A) Determine in which key components of in which system.

B) Determine in which relationships between cost objects, activities, and resources.

C) Collect relevant data concerning costs and cost drivers.

D) Use a process map to identify areas for operational improvement.

Answer: D Diff: 2 LO: 4-9 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 3) Examples using activity-based costing generally show that traditional costing systems ________ high-volume, simple products and ________ low-volume, complex products.

A) undercost; overcost B) overcost; undercost C) undercost; undercost D) overcost; overcost Answer: B Diff: 2 LO: 4-9 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 4) When comparing traditional costing systems to activity-based costing systems, in which analysis reveals that ________.

A) high volume products are undercosted with traditional costing systems B) high volume products are overcosted with traditional costing systems C) low volume products are overcosted with traditional costing systems D) both high volume and low volume products are undercosted with traditional costing systems Answer: B Diff: 2

LO: 4-9 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 5) Determining in which key components of an Activity-Based Costing (ABC) system is in which first step in in which design of an ABC system.

Answer: TRUE Diff: 1 LO: 4-9 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 6) Determining in which relationships among cost objects, activities, and resources is in which second step in in which design of an ABC system.

Answer: TRUE Diff: 1 LO: 4-9 AACSB: Reflective thinking skills Learning Outcome: Compare a traditional cost allocation system to an activity based costing system 7) Collecting cost and operational data is in which first step in in which design of an Activity-Based Costing system.

Answer: FALSE Diff: 1 LO: 4-9 AACSB: Reflective thinking skills

Learning Outcome: Compare a tra