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1.
In incremental analysis, total variable costs will always change under alternative courses of
action, and total fixed costs will always remain constant.
2.In incremental analysis, total fixed costs will always remain constant under alternative courses of
action.
3.
An opportunity cost is the potential benefit obtained by using resources in an alternative course
of action.
4.The basic decision rule in a sell or process further decision is: process further if the incremental
revenue from processing exceeds the incremental processing costs.
5.
From a quantitative standpoint, a segment should be eliminated if its contribution margin is less
than the fixed costs that can be eliminated.
6.
A revenue that differs between alternatives and makes a difference in decision-making is called
a(n)
a. sales revenue.
c. incremental revenue.
b. irrelevant revenue.
d. unavoidable revenue.
Revenues
Variable costs
Fixed costs
Alternative A
$50,000
30,000
10,000
Alternative B
$60,000
30,000
16,000
c. $0
d. $4,000
c. variable costs.
d. avoidable costs.
10.Miley, Inc. has excess capacity. Under what situations should the company accept a special order
for less than the current selling price?
a. Never
b. When additional fixed costs must be incurred to accommodate the order
c. When the company thinks it can use the cheaper materials without the customer's
knowledge
d. When incremental revenues exceed incremental costs
11.
12.
A factory is operating at less than 100% capacity. Potential additional business will not use up
the remainder of the plant capacity. Given the following list of costs, which one should be ignored in
a decision to produce additional units of product?
a. Variable selling expenses
b. Fixed factory overhead
c. Direct labor
d. Contribution margin of additional units
Variable costs
$75
Fixed costs
30
The normal unit sales price per unit is $165.
A special order from a foreign company has been received for 5,000 units at $135 a unit. In order to
fulfill the order, 3,000 units of regular sales would have to be foregone.
The opportunity cost associated with this order is
a. $225,000.
c. $495,000.
b. $270,000.
d. $405,000.
13.In the analysis concerning the acceptance or rejection of a special order, which items are relevant?
a. Variable costs only
c. Variable costs and fixed costs
b. Fixed costs only
d. Variable costs and unavoidable costs
14.What of the following would not be relevant in a make-or-buy decision?
a. Opportunity costs
c. Unavoidable variable costs
b. Avoidable fixed cost
d. Incremental fixed costs
15.
Max Company uses 20,000 units of Part A in producing its products. A supplier offers to make
Part A for $7. Max Company has relevant costs of $8 a unit to manufacture Part A. If there is excess
capacity, the opportunity cost of buying Part A from the supplier is
a. $0.
c. $20,000.
b. $140,000.
d. $160,000.
16.
17.
The point in the production process when joint products are readily identifiable is the
a. separation point.
c. split-off point.
b. common point.
d. break-even point.
18.
What will most likely occur if a company eliminates an unprofitable segment when a portion of
fixed costs are unavoidable?
a. All expenses of the eliminated segment will be eliminated.
b. Net income will decrease.
c. Net income will increase.
d. The company's variable costs will increase.
Chapter 22
20.
21.
22.
23.
24.
25.
In a competitive environment, the company must set a target cost and a target selling price.
The cost-plus pricing approach establishes a cost base and adds a markup to this base to
determine a target selling price.
Sales volume plays a large role in determining per unit costs in the cost-plus pricing approach.
In time-and-material pricing, the material charge is based on the cost of direct materials used
and a material loading charge for related overhead costs.
A negotiated transfer price should be used when an outside market for the goods does not exist.
The absorption-cost approach is consistent with generally accepted accounting principles
because it defines the cost base as the manufacturing cost.
26.
27.
All of the following are correct statements about the target price except it
a. is the price the company believes would place it in the optimal position for its target
audience.
b. is used to determine a product's target cost.
c. is determined after the company has identified its market and does market research.
d. is determined after the company sets its desired profit amount.
28.
29.
30.
Bond Co. is using the target cost approach on a new product. Information gathered so far
reveals:
Expected annual sales
400,000 units
Desired profit per unit
$0.35
Target cost
$168,000
What is the target selling price per unit?
a. $0.42
c. $0.70
b. $0.35
d. $0.77
In cost-plus pricing, the markup consists of
a. manufacturing costs.
b. desired ROI.
c. selling and administrative costs.
d. total cost and desired ROI.
31.
Bellingham Suit Co. has received a shipment of suits that cost $200 each. If the company uses
cost-plus pricing and applies a markup percentage of 60%, what is the sales price per suit?
a. $333
c. $320
b. $280
d. $500
32.
Why does the unit selling price increase when expected volume is lower than budgeted volume?
a. Variable costs and fixed costs have to be spread over fewer units.
b. Fixed costs and desired ROI have to be spread over fewer units.
c. Variable costs and desired ROI have to be spread over fewer units.
d. Fixed costs only have to be spread over fewer units.
33.
In time-and-material pricing, a material loading charge covers all of the following except
a. purchasing costs.
b. related overhead.
c. desired profit margin.
d. All of these are covered.
34.
The labor charge per hour in time-and-material pricing includes all of the following except
a. an allowance for a desired profit.
b. charges for labor loading.
c. selling and administrative costs.
d. overhead costs.
35.
Dudly Drafting Services uses a 45% material loading charge and a labor rate of $20 per hour.
How much will be charged on a job that requires 3.5 hours of work and $40 of materials?
a. $128
c. $110
b. $88
d. $133
36.
All of the following are approaches for determining a transfer price except the
a. cost-based approach.
b. market-based approach.
c. negotiated approach.
d. time-and-material approach.
37.
The transfer price approach that is often considered the best approach because it generally
provides the proper economic incentives is the
a. cost-based approach.
b. market-based approach.
c. negotiated price approach.
d. time-and-material pricing approach.
38.
The transfer price approach that will result in the largest contribution margin to the buying
division is the
a. cost-based approach.
b. market-based approach.
Chapter 23
40.
41.
42.
The budget itself and the administration of the budget are the responsibility of the accounting
department.
43.
The flow of input data for budgeting should be from the highest levels of responsibility to the
lowest.
44.
Budgets can have a positive or negative effect on human behavior depending on the manner in
which the budget is developed and administered.
45.
46.
The master budget reflects management's long-term plans encompassing five years or more.
47.
If a monthly cash budget is prepared properly, there will never be a cash deficiency at the end of
any month.
48.
49.
50.
51.
a.
b.
c.
d.
production budget.
sales budget.
purchasing budget.
personnel budget.
52.
Doe Manufacturing plans to sell 6,000 purple lawn chairs during May, 5,700 in June, and 6,000
during July. The company keeps 15% of the next months sales as ending inventory. How many
units should Doe produce during June?
a. 5,745
c. 6,600
b. 5,655
d. Not enough information to determine.
53.
Lorie Nursery plans to sell 320 potted plants during April and 240 units in May. Lorie Nursery
keeps 15% of the next months sales as ending inventory. How many units should Lorie Nursery
produce during April?
a. 308
c. 332
b. 320
d. 356
54.
Pell Manufacturing is preparing its direct labor budget for May. Projections for the month are that
33,400 units are to be produced and that direct labor time is three hours per unit. If the labor cost
per hour is $12, what is the total budgeted direct labor cost for May?
a. 1,159,200
c. 1,180,800
b. 1,202,400
d. 1,296,000
55.
56.
Which one of the following items would never appear on a cash budget?
a. Office salaries expense
b. Interest expense
c. Depreciation expense
d. Travel expense
57.
Chapter 24
58.
59.
60.
61.
Flexible budgeting relies on the assumption that unit variable costs will remain constant within
the relevant range of activity.
62.
Management by exception means that management will investigate areas where actual results
differ from planned results if the items are material and controllable.
63.
A distinction should be made between controllable and noncontrollable costs when reporting
information under responsibility accounting.
64.
More costs become controllable as one moves down to each lower level of managerial
responsibility.
65.
Top management's reaction to a difference between budgeted and actual sales often depends
on
a.
b.
c.
d.
66.
What is the primary difference between a static budget and a flexible budget?
a. The static budget contains only fixed costs, while the flexible budget contains only
variable costs.
b. The static budget is prepared for a single level of activity, while a flexible budget is
adjusted for different activity levels.
c. The static budget is constructed using input from only upper level management, while a
flexible budget obtains input from all levels of management.
d. The static budget is prepared only for units produced, while a flexible budget reflects the
number of units sold.
67.
68.
Under management by exception, which differences between planned and actual results should
be investigated?
a. Material and noncontrollable
b. Controllable and noncontrollable
c. Material and controllable
d. All differences should be investigated
69.
In the Dichter Co., indirect labor is budgeted for $72,000 and factory supervision is budgeted for
$24,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked,
flexible budget total for these costs is
a. $ 96,000
c. $108,000
b. $105,000
d. $ 99,000
70.
b. the cost has not exceeded the budget amount in the master budget.
c. it is a variable cost, but it is uncontrollable if it is a fixed cost.
d. it changes in magnitude in a flexible budget.
71.
72.
Management by exception
a. is most effective at top levels of management.
b. can be implemented at each level of responsibility within an organization.
c. can only be applied when comparing actual results with the master budget.
d. is the opposite of goal congruence.
73.
74.
Trails and Paths, Inc. had average operating assets of $6,000,000 and sales of $3,000,000 in
2013. If the controllable margin was $600,000, the ROI was
a. 50%
c. 40%
b. 20%
d. 10%
75.
76.
Chapter 25
77.
78.
Actual costs that vary from standard costs always indicate inefficiencies.
79.
In developing a standard cost for direct materials, a price factor and a quantity factor must be
considered.
80.
81.
If actual costs are less than standard costs, the variance is favorable.
82.
The total overhead variance is the difference between actual overhead costs and overhead
costs applied to work done.
83.
84.
85.
Marburg Co. expects direct materials cost of $6 per unit for 100,000 units (a total of $600,000 of
direct materials costs). Marburgs standard direct materials cost and budgeted direct materials cost
is
Standard
Budgeted
a. $6 per unit
$600,000 per year
b. $6 per unit
$6 per unit
c. $600,000 per year
$6 per unit
d. $600,000 per year
$600,000 per year
86.
87.
88.
c. An unfavorable variance results when actual costs are decreasing but standards are not
changed.
d. All of the above are true.
89.
If actual direct materials costs are greater than standard direct materials costs, it means that
a. actual costs were calculated incorrectly.
b. the actual unit price of direct materials was greater than the standard unit price of direct
materials.
c. the actual unit price of raw materials or the actual quantities of raw materials used was
greater than the standard unit price or standard quantities of raw materials expected.
d. the purchasing agent or the production foreman is inefficient.
90.
91.
92.
93.
94.
Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units,
Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's labor price variance is
a. $770 U.
b. $800 U.
c. $1,030 F.
d. $1,930 F.
95.
Dillon has a standard of 2 hours of labor per unit, at $12 per hour. In producing 2,000 units,
Dillon used 3,850 hours of labor at a total cost of $46,970. Dillon's labor quantity variance is
a. $770 U.
c. $770 F.
b. $1,800 F.
d. $1,930 F.
96.
Which is not one of the four most commonly used perspectives on a balanced scorecard?
a. The financial perspective
b. The customer perspective
c. The external process perspective
d. The learning and growth perspective
Chapter 26
98.
Capital budgeting decisions usually involve large investments and often have a significant
impact on a company's future profitability.
99.
The cash payback method is frequently used as a screening tool but it does not take into
consideration the profitability of a project.
100.
The profitability index allows comparison of the relative desirability of projects that require
differing initial investments.
101.
Sensitivity analysis uses a number of outcome estimates to get a sense of the variability among
potential returns.
102.
A post-audit is an evaluation of how well a project's actual performance matches the projections
made when the project was proposed.
103.
A major advantage of the annual rate of return method is that it considers the time value of
money.
104.
105.
106.
107.
Brady Corp. is considering the purchase of a piece of equipment that costs $20,000. Projected
net annual cash flows over the projects life are:
Year Net Annual Cash Flow
1.
$ 3,000
2.
8,000
3.
15,000
4.
9,000
The cash payback period is
b. 2.29 years
c. 2.60 years.
c. 2.40 years.
d. 2.31 years.
108.
109.
110.
111.
112.
A capital budgeting method that takes into consideration the time value of money is the
a. annual rate of return method.
b. return on stockholders' equity method.
c. cash payback technique.
d. internal rate of return method.