Managerial accounting Test

1. Cash is _King________________________.

2. Variable costs in total increase or decrease in proportion with changes in the level of business activity.

3. Opportunity costs are

A. considered to be fixed costs in the short-term.

B. another term for sunk costs.

C. costs that are controlled by most effective managers.

D. the value of benefits forgone when one decision alternative is selected over another.

4 Which of the following is one of the questions you should ask when faced with an ethical dilemma?

A. Will I get caught?

B. What decisions alternatives are available?

C. Are the actions illegal?

D. How big is the effect on the companys profit?

5. Process costing systems are generally used by companies that produce large quantities of identical items.

6. Which of the following is an example of a manufacturing overhead cost?

A. Wages paid to security personnel at the corporate office building

B. The cost of electricity used to run the oven in which Dominos bakes it pizzas

C. Cost of shipping product to customers

D. The salary of the president of the company

7. Product costs

A. are also called period costs.

B. are considered an asset until the finished goods are sold.

C. become an expense in the period the costs are incurred.

D. All of these answer choices are correct.

8. Which of the following accounts does not appear on the balance sheet?

1. Raw Materials Inventory
2. Finished Goods Inventory
3. Work in Process Inventory
4. Cost of Goods Manufactured

9. Which of the following lists presents the accounts in the order in which product costs flow?

1. Cost of Goods Sold, Work in Process Inventory, Raw Materials Inventory, Finished Goods Inventory
2. Work in Process Inventory, Finished Goods Inventory, Cost of Goods Sold, Raw Materials Inventory
3. Raw Materials Inventory, Finished Goods Inventory, Work in Process Inventory, Cost of Goods Sold
4. Raw Materials Inventory, Work in Process Inventory, Finished Goods Inventory, Cost of Goods Sold

10. Materials and labor are often grouped together and called conversion costs.

12.. Which of the following describes the differences between job-order and process costing?

A. Job-order costing is used in financial accounting, while process costing is used in managerial accounting.

B. Job-order costing can only be used by manufacturers; only service enterprises use process costing.

C. Job-order costing is voluntary, while process costing is required by GAAP.

D. Job-order costing traces costs to jobs, while process costing traces costs to departments and averages the costs among the units worked on during the period.

13. Labor and overhead are often grouped together and referred to as

A. prime costs.

B. conversion costs.

C. total manufacturing costs.

D. equivalent unit costs.

14. How are equivalent units calculated in a process costing system?

A. By adding the units started to the equivalent units in beginning and ending inventory

B. By adding the units completed to the equivalent units in ending Work in Process

C. By subtracting the equivalent units in beginning inventory from the total units to account for

D. By adding the units started to the equivalent units in ending inventory

15. Variable costs per unit remain the same when the level of activity changes within the relevant range.

16. At the break-even point, total fixed costs equal total contribution margin.

17. When performing cost-volume-profit analysis with multiple products, it is assumed that the sales mix remains constant, even when a different number of total units are expected to be sold.

18. Which of the following will have no effect on the break-even point in units?

A. The selling price increases.

B. The variable cost per unit increases.

C. The number of units sold declines.

D. Total fixed costs increase.

19. If a company increases production levels without increasing its units sold, both its full costing income and cash flows will be larger than if production were at a lower level.

20. The following information relates to Charlin Industries for the year ending December 31, 2017, the companys first year of operations:

Units produced 100,000

Units sold 80,000

Units in ending inventory 20,000

Fixed manufacturing overhead $650,000

How much fixed manufacturing overhead would be expensed in 2017 using variable costing?

A. $520,000

B. $130,000

C. $650,000

D. $0

21. A cost objective is the product, service, or department that will receive the allocated cost.

22. Activity-based management aims at improving the efficiency and effectiveness of business processes.

23. If managers are not charged for centrally administered services, what may managers likely do?

A. Seek outside suppliers

B. Limit their frivolous use of these services

C. Consider the services as free

D. Evaluate and consider lower-cost alternatives for the services

24. Which of the following is a grouping of individual costs whose total is allocated using one allocation base?

A. Cost objective

B. Cost pool

C. Direct cost

D. Cost driver

25. In a make-or-buy decision, direct materials and direct labor are usually incremental costs.

26. The qualitative aspects of a decision must receive the same careful attention as the quantitative aspects.

27. Which of the following is never considered in incremental analysis?

A. Incremental revenue

B. Sunk costs

C. Incremental profit

D. Differential costs

28. The value of benefits foregone by selecting one decision alternative over another is a(n)

A. unavoidable cost.

B. incremental benefit.

C. differential revenue.

D. opportunity cost.

29. When a department or product line is dropped, the common fixed costs that had been allocated to that department

A. are eliminated.

B. become variable costs.

C. are allocated to the remaining departments or product lines.

D. become sunk costs.

30. The theory of constraints seeks to

A. improve throughput in all departments.

B. improve throughput in the department with the binding constraint.

C. create more constraints.

D. sell at the split-off point.

31. The target costing process begins with the design of the product.

32. Which of the following stays constant when the price per unit changes?

A. Demand

B. Contribution margin per unit

C. Total fixed costs

D. Profit

33. Rosetone Retail sells one product with a variable cost of $3.50 per unit. The demand at different prices to be charged is shown below:

Units Demanded Unit Price

10,000 $9

15,000 $8

20,000 $7

25,000 $6

If fixed costs are $42,000, what price should Rosetone charge in order to maximize profits?

A. $9

B. $8

C. $7

D. $6

34. If the required rate of return is greater than the internal rate of return of a potential investment, the company should deem the investment acceptable.

35. The more risky a potential investment is, the lower the companys required rate of return will be.

36. What is the present value factor for a $4,000 cash outflow that is made today?

A. 0.00

B. Some value greater than 1.00

C. 1.00

D. It depends on the rate of return that is required.

37. Since present value analysis is concerned with cash flows, which of the following is not true?

A. Depreciation is always an incremental cash inflow.

B. Revenues are inflows in the period when the cash is received.

C. Expenses are outflows in the period when they are paid.

D. The salvage value of equipment is considered in the analysis.

38. A budget is a formal document that quantifies a companys plans for achieving its goals.

39. The first step in the budget process is preparing the sales forecast.

40. Managers may be tempted to pad the budget to meet performance targets.

41. Which of the following is the comprehensive planning document that incorporates a number of individual budgets?

A. Static budget

B. Master budget

C. Flexible budget

D. Collective budget

42. Which of the following is not a method that can reasonably be used to forecast sales?

A. Trends in the companys sales data

B. Production capacity

C. Estimates from the companys salespersons

D. Mathematical models adjusted by an experienced manager using professional judgment

43. When budgets are used for evaluation, what is the difference between budgeted and actual amounts called?

A. Exceptions

B. Budget variances

C. Performance results

D. Flexible budgets

44. What are standard cost variances?

A. Differences between standard and actual costs

B. Amounts that exceed budgeted amounts

C. Useful industry-developed amounts that can be used by companies to evaluate their performance

D. Differences between budgeted and standard amounts

45. Which of the following variances is most likely the responsibility of the purchasing manager?

A. Material quantity variance

B. Labor efficiency variance

C. Material price variance

D. Overhead volume variance

46. An advantage of decentralization is that subunit managers can respond more quickly to changing circumstances.

47. Goal congruence refers to the match between

A. locations of manufacturing plants and customers.

B. goals based on profits and those based on return on investment.

C. number of units produced and number of units sold.

D. goals of the individual managers and those of the company as a whole.

48. What does ROI measure?

A. The amount of profit generated out of each sales dollar

B. The amount of sales generated out of each dollar of assets invested

C. The amount of profit generated out of each dollar of assets invested

D. The amount of revenue generated out of each sales dollar.

49. Financial leverage relates to a companys use of debt financing to acquire and use productive assets.

50. What does financial leverage measure?

A. How quickly a company generates profit from its assets

B. How quickly a company is turning its net income into cash

C. The overall efficiency with which a company uses assets to generate revenues

D. How effectively the company uses debt financing to acquire economic resources