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managerial accounting tools for business decision making

Questions and Answers of Managerial Accounting Tools For Business Decision Making

What is meant by CVP analysis?AppendixLO1
Net income computed under absorption costing will be:(a) higher than net income under variable costing in all cases.(b) equal to net income under variable costing in all cases.(c) higher than net
Fixed manufacturing overhead costs are recognized as:(a) period costs under absorption costing.(b) product costs under absorption costs.(c) product costs under variable costing.(d) part of ending
Stevens Company has a degree of operating leverage of 3.5 at a sales level of $1,200,000 and net income of$200,000. If Stevens’ sales fall by 10%, Stevens can be expected to experience a:(a)
A high degree of operating leverage:(a) indicates that a company has a larger percentage of variable costs relative to its fixed costs.(b) is computed by dividing fixed costs by contribution
The degree of operating leverage:(a) can be computed by dividing total contribution margin by net income.(b) provides a measure of the company’s earnings volatility.(c) affects a company’s
When a company has a limited resource, it should apply additional capacity of that resource to providing more units of the product or service that has:(a) the highest contribution margin.(b) the
MEM manufactures two products. Product X has a contribution margin of $26 and requires 4 hours of machine time. Product Y has a contribution margin of $14 and requires 2 hours of machine time.
If the contribution margin per unit is $15 and it takes 3.0 machine hours to produce the unit, the contribution margin per unit of limited resource is:(a) $25. (c) $4.(b) $5. (d) None of the
Net income will be:(a) greater if more higher-contribution margin units are sold than lower-contribution margin units.(b) greater if more lower-contribution margin units are sold than
Sales mix is:(a) important to sales managers but not to ac -countants.(b) easier to analyze on absorption costing income statements.(c) a measure of the relative percentage of a company’s variable
Mackey Corporation has fixed costs of $150,000 and variable costs of $9 per unit. If sales price per unit is$12, what is break-even sales in dollars?(a) $200,000. (c) $480,000.(b) $450,000. (d)
Gabriel Corporation has fixed costs of $180,000 and variable costs of $8.50 per unit. It has a target income of $268,000. How many units must it sell at $12 per unit to achieve its target net
The following information is available for Chap Company.Sales $350,000 Cost of goods sold $120,000 Total fixed expenses $60,000 Total variable expenses $100,000 Which amount would you find on
Which one of the following describes the break-even point?(a) It is the point where total sales equals total variable plus total fixed costs.(b) It is the point where the contribution margin equals
Croc Catchers calculates its contribution margin to be less than zero. Which statement is true?(a) Its fixed costs are less than the variable costs per unit.(b) Its profits are greater than its total
Which one of the following is the format of a CVP income statement?(a) Sales 2 Variable costs 5 Fixed costs 1 Net income.(b) Sales 2 Fixed costs 2 Variable costs 2 Operating expenses 5 Net income.(c)
Understand how operating leverage affects profi tability.AppendixLO1
Determine sales mix when a company has limited resources.AppendixLO1
Explain the term sales mix and its effects on break-even sales.AppendixLO1
Apply basic CVP concepts.AppendixLO1
Recognize the difference between traditional costing and activity-based costing.AppendixLO1
Identify the steps in the development of an activity-based costing system.AppendixLO1
Know how companies identify the activity cost pools used in activitybased costing.AppendixLO1
Know how companies identify and use cost drivers in activity-based costing.AppendixLO1
Understand the benefi ts and limitations of activity-based costing.AppendixLO1
Differentiate between value-added and non–value-added activities.AppendixLO1
Understand the value of using activity levels in activitybased costing.AppendixLO1
Apply activity-based costing to service industries.AppendixLO1
Activity-based costing (ABC):(a) can be used only in a process cost system.(b) focuses on units of production.(c) focuses on activities performed to produce a product.(d) uses only a single basis of
Activity-based costing:(a) is the initial phase of converting to a just-in-time operating environment.(b) can be used only in a job order costing system.(c) is a two-stage overhead cost allocation
Any activity that causes resources to be consumed is called a:(a) just-in-time activity.(b) facility-level activity.(c) cost driver.(d) non–value-added activity.AppendixLO1
The first step in the development of an activity-based costing system is:(a) identify and classify activities and allocate overhead to cost pools.(b) assign overhead costs to products.(c) identify
Which of the following would be the best cost driver for the assembling cost pool?(a) Number of product lines.(b) Number of parts.(c) Number of orders.(d) Amount of square footage.AppendixLO1
The overhead rate for Machine Setups is $100 per setup. Products A and B have 80 and 60 setups, respectively. The overhead assigned to each product is:(a) Product A $8,000, Product B $8,000.(b)
Donna Crawford Co. has identified an activity cost pool to which it has allocated estimated overhead of $1,920,000. It has determined the expected use of cost drivers for that activity to be 160,000
A frequently cited limitation of activity-based costing is:(a) ABC results in more cost pools being used to assign overhead costs to products.(b) certain overhead costs remain to be allocated by
A company should consider using ABC if:(a) overhead costs constitute a small portion of total product costs.(b) it has only a few product lines that require similar degrees of support services.(c)
An activity that adds costs to the product but does not increase its perceived market value is a:(a) value-added activity.(b) cost driver.(c) cost/benefit activity.(d) non–value-added
The following activity is value-added:(a) Storage of raw materials.(b) Moving parts from machine to machine.(c) Shaping a piece of metal on a lathe.(d) All of the above.AppendixLO1
A relevant facility-level cost driver for heating costs is:(a) machine hours. (c) floor space.(b) direct material. (d) direct labor cost.AppendixLO1
Under just-in-time processing:(a) raw materials are received just in time for use in production.(b) subassembly parts are completed just in time for use in assembling finished goods.(c) finished
The primary objective of just-in-time processing is to:(a) accumulate overhead in activity cost pools.(b) eliminate or reduce all manufacturing inventories.(c) identify relevant activity cost
Under what conditions is direct labor a valid basis for allocating overhead?AppendixLO1
What has happened in recent industrial history to reduce the usefulness of direct labor as the primary basis for allocating overhead to products?AppendixLO1
In an automated manufacturing environment, what basis of overhead allocation is frequently more relevant than direct labor hours?AppendixLO1
What is generally true about overhead allocation to high-volume products versus low-volume products under a traditional costing system?AppendixLO1
What are the principal differences between activitybased costing (ABC) and traditional product costing?AppendixLO1
What is the formula for computing activity-based overhead rates?AppendixLO1
What steps are involved in developing an activitybased costing system?AppendixLO1
Explain the preparation and use of a value-added/non–value-added activity flowchart in an ABC system.AppendixLO1
What is an activity cost pool?AppendixLO1
What is a cost driver AppendixLO1
What makes a cost driver accurate and appropriate?AppendixLO1
What is the formula for assigning activity cost pools to products?AppendixLO1
What are the benefits of activity-based costing?AppendixLO1
What are the limitations of activity-based costing?AppendixLO1
Under what conditions is ABC generally the superior overhead costing system?AppendixLO1
What refinement has been made to enhance the efficiency and effectiveness of ABC for use in managing costs?AppendixLO1
Of what benefit is classifying activities as value-added and non–value-added?AppendixLO1
In what ways is the application of ABC to service industries the same as its application to manufacturing companies?AppendixLO1
What is the relevance of the classification of levels of activity to ABC?AppendixLO1
(a) Describe the philosophy and approach of just-intime processing.(b) Identify the major elements of JIT processing.AppendixLO1
Warner Inc. sells a high-speed retrieval system for mining information. It provides the following information for the year.Budgeted Actual Overhead cost $1,000,000 $950,000 Machine hours 50,000
Finney Inc. has conducted an analysis of overhead costs related to one of its product lines using a traditional costing system (volume-based) and an activity-based costing system. Here are its
Storrer Co. identifies the following activities that pertain to manufacturing overhead:materials handling, machine setups, factory machine maintenance, factory supervision, and quality control. For
Mason Company manufactures four products in a single production facility. The company uses activity-based costing. The following activities have been identified through the company’s activity
Mordica Company identifies three activities in its manufacturing process:machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $150,000, $325,000, and
Weisman, Inc. uses activity-based costing as the basis for information to set prices for its six lines of seasonal coats. Compute the activity-based overhead rates using the following budgeted data
Hollins, Inc., a manufacturer of computer chips, employs activity-based costing.The budgeted data for each of the activity cost pools is provided below for the year 2014.Estimated Expected Use of
Rich Novelty Company identified the following activities in its production and support operations. Classify each of these activities as either value-added or non–valueadded.(a) Machine setup. (d)
Mendle and Kiner is an architectural firm that is contemplating the installation of activity-based costing. The following activities are performed daily by staff architects.Classify these activities
Kwik Pix is a large digital processing center that serves 130 outlets in grocery stores, service stations, camera and photo shops, and drug stores in 16 nearby towns.Kwik Pix operates 24 hours a day,
Trammell, Inc. operates 20 injection molding machines in the production of tool boxes of four different sizes, named the Apprentice, the Handyman, the Journeyman, and the Professional. Classify each
Spin Cycle Company uses three activity pools to apply overhead to its products.Each activity has a cost driver used to allocate the overhead costs to the product. The activities and related overhead
Indicate whether the following statements are true or false.(a) The reasoning behind ABC cost allocation is that products consume activities and activities consume resources.(b) Activity-based
Flynn Industries has three activity cost pools and two products. It expects to produce 3,000 units of Product BC113 and 1,500 of Product AD908. Having identified its activity cost pools and the cost
Classify each of the following activities within a tax-preparation business as value-added (VA) or non–value-added (NVA).(a) Advertising.(b) Completing tax returns.(c) Billing clients.(d) Answering
Adamson Company manufactures four lines of garden tools. As a result of an activity analysis, the accounting department has identified eight activity cost pools.Each of the product lines is produced
Wilkins Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing
Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. Both the traditional and the
American Fabrics has budgeted overhead costs of $990,000. It has allocated overhead on a plantwide basis to its two products (wool and cotton) using direct labor hours which are estimated to be
Altex Inc. manufactures two products: car wheels and truck wheels. To determine the amount of overhead to assign to each product line, the controller, Robert Hermann, has developed the following
Shady Lady sells window coverings (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current
Perdon Corporation manufactures safes—large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two
Quik Prints Company is a small printing and copying firm with three high-speed offset printing presses, five copiers (two color and three black-and-white), one collator, one cutting and folding
Major Instrument, Inc. manufactures two products: missile range instruments and space pressure gauges. During April, 50 range instruments and 300 pressure gauges were produced, and overhead costs of
Kragan Clothing Company manufactures its own designed and labeled sports attire and sells its products through catalog sales and retail outlets. While Kragan has for years used activity-based costing
Healthy Products, Inc., uses a traditional product costing system to assign overhead costs uniformly to all products. To meet Food and Drug Administration requirements and to assure its customers of
Having itemized its costs for the first quarter of next year’s budget, Santana Corporation desires to install an activity-based costing system. First, it identified the activity cost pools in which
William Mendel & Sons, Inc. is a small manufacturing company in La Jolla that uses activity-based costing. Mendel & Sons accumulates overhead in the following activity cost pools.1 Hiring personnel.2
FireOut, Inc. manufactures steel cylinders and nozzles for two models of fire extinguishers: (1) a home fire extinguisher and (2) a commercial fire extinguisher. The home model is a high-volume
Schultz Electronics manufactures two large-screen television models: the Royale which sells for $1,600, and a new model, the Majestic, which sells for $1,300. The production cost computed per unit
Thakin Stairs Co. designs and builds factory-made premium wooden stairways for homes. The manufactured stairway components (spindles, risers, hangers, hand rails)permit installation of stairways of
Benton Corporation produces two grades of wine from grapes that it buys from California growers. It produces and sells roughly 3,000,000 liters per year of a low-cost, high-volume product called
Polk and Stoneman is a public accounting firm that offers two primary services, auditing and tax-return preparation. A controversy has developed between the partners of the two service lines as to
Distinguish between variable and fi xed costs.AppendixLO1
Explain the signifi cance of the relevant range.AppendixLO1
Explain the concept of mixed costs.AppendixLO1
List the fi ve components of cost-volume-profi t analysis.AppendixLO1

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