Managerial Accounting Quiz

1. A DECREASE IN VARIABLE COSTS WILL REDUCE THE MARGIN OF SAFETY.

True

False

2. AN ADVANTAGE OF USING ABSORPTION COSTING IS THAT IT PREVENTS MANAGERS FROM INCREASING PRODUCTION SOLELY FOR THE PURPOSE OF INFLATING PROFIT.

True

False

3. A COMPANY MAKES FOUR PRODUCTS. IF IT SELLS EVERYTHING IT PRODUCES AND IS ONLY CONSTRAINED BY FINDING ENOUGH SKILLED LABOR, THEN ITS GOAL SHOULD BE TO MAXIMIZE THE CONTRIBUTION MARGIN PER LABOR-HOUR.

True

False

4. THE MARGIN OF SAFETY CANNOT BE CALCULATED FOR MULTIPLE PRODUCT AND SERVICE ORGANIZATIONS.

True

False

5. THE BREAK-EVEN POINT IS THE NUMBER OF UNITS OR SALES DOLLARS THAT MUST BE SOLD TO ACHIEVE ZERO PROFIT.

True

False

6. WHEN A COMPANY THAT PRODUCES MULTIPLE PRODUCTS FACES A CONSTRAINT IN AREAS SUCH AS LABOR HOURS OR MACHINE HOURS, MANAGERS OFTEN PREFER TO MAXIMIZE THE CONTRIBUTION MARGIN PER UNIT OF CONSTRAINT.

True

False

7. CONTRIBUTION MARGIN PER UNIT IS CALCULATED BY SUBTRACTING VARIABLE COSTS PER UNIT AND FIXED COSTS PER UNIT FROM THE SELLING PRICE PER UNIT.

True

False

8. ALTHOUGH ABSORPTION COSTING MEETS THE REQUIREMENTS OF GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, VARIABLE COSTING IS TYPICALLY MORE USEFUL FOR INTERNAL DECISION MAKING PURPOSES.

True

False

9. IT IS IMPORTANT FOR ALL PROFIT AND NON-PROFIT COMPANIES TO DETERMINE THEIR PROFIT DESIRED AFTER ACCOUNTING FOR INCOME TAXES.

True

False

10. ABSORPTION COSTING TREATS FIXED MANUFACTURING OVERHEAD COSTS AS PRODUCT COSTS.

True

False

11. USING ACTIVITY-BASED COSTING INFORMATION WITH DIFFERENTIAL ANALYSIS CAN LEAD TO BETTER DECISIONS.

True

False

12. A "MAKE-OR-BUY" DECISION MEANS A COMPANY IS DECIDING WHETHER TO BUILD THE PRODUCT OR OUTSOURCE THE PRODUCT.

True

False

13. ALLOCATED FIXED COSTS ARE EASILY TRACEABLE TO INDIVIDUAL PRODUCTS.

True

False

14. THE THEORY OF CONSTRAINTS STARTS WITH SUBORDINATING ALL NONBOTTLENECK RESOURCES TO THE BOTTLENECK.

True

False

15. THERE ARE OFTEN QUALITATIVE ADVANTAGES FOR KEEPING UNPROFITABLE CUSTOMERS.

True

False

16. DIFFERENTIAL REVENUES AND COSTS ARE ALSO CALLED INCREMENTAL REVENUES AND COSTS.

True

False

17. THE DIFFERENTIAL ANALYSIS FORMAT FOR DECIDING WHETHER TO KEEP OR DROP A CUSTOMER IS SIMILAR TO THAT USED FOR MAKING PRODUCT LINE DECISIONS.

True

False

18. AVOIDABLE COSTS ARE AS ALSO CALLED DIFFERENTIAL COSTS.

True

False

19. ALLOCATED FIXED COSTS ARE ELIMINATED WHEN A PRODUCT LINE IS ELIMINATED.

True

False

20. COST-PLUS PRICING IS OFTEN USED BY COMPANIES THAT PRODUCE CUSTOM PRODUCTS WHERE MARKET PRICES ARE NOT EASILY AVAILABLE.

True

False