Questions 1 - 20 Multiple Choice. Circle the letter corresponding to the best answer. 1. The major activities of managerial accounting include all of the following except: (a) providing a basis for controlling costs by comparing actual results with planned objectives. (b) preparing financial statements designed primarily for stockholders and creditors. (c) preparing internal reports for management. (d) determining the behaviour of costs as activity levels change. 2. As activity increases, variable costs will (a) increase in total but not proportionately with the change in activity. (b) decrease in total. (c) increase per unit. (d) remain constant per unit. 3. For what purpose is a predetermined overhead rate used? (a) To determine when the overhead cost is incurred (b) To apply actual overhead costs to jobs when they are incurred (c) To determine the actual cost of overhead for the period (d) To apply manufacturing overhead to each job 4. A company assigned overhead to work in process. At year end, what does the amount of over-applied overhead mean? (a) The overhead assigned to work in process is less than the actual overhead. (b) The overhead assigned to work in process is greater than the overhead incurred. (c) The overhead assigned to work in process is greater than estimated overhead costs. (d) The overhead assigned to work in process is less than the estimated overhead costs. 5. What broad functions do the management of an organization perform? (a) Directing, manufacturing, and controlling (b) Planning, directing, and controlling (c) Planning, directing, and selling (d) Planning, manufacturing and controlling 6. Which one of the following costs would be included in manufacturing overhead of a lawn mower manufacturer? (a) The cost of the wheels (b) The cost of the fuel lines that run from the motor to the gas tank (c) Amortization on the testing equipment (d) The wages earned by motor assemblers 7. Which one of the following represents a period cost? (a) Company advertisement (b) Depreciation of plant equipment (c) Production managers salary (d) Direct materials 2 8. A company uses sandpaper in its production process. How is the cost of the sandpaper classified? (a) Miscellaneous expense (b) A direct material (c) A period cost (d) An indirect material 9. To be useful to management accountants for planning and predictive purposes, mixed costs (a) Must be classified into their fixed and variable elements. (b) Must be classified into their direct and indirect elements. (c) Must be classified into their product and period elements. (d) Must be classified as overhead. 10. What are the two components of a predetermined overhead rate? (a) Actual monthly costs and actual annual activity (b) Estimated monthly costs and actual monthly activity (c) Estimated annual costs and actual activity (d) Estimated annual costs and expected annual activity 11. Property taxes for the entire manufacturing facility, including the front office and factory area are (a) Both fixed and variable product costs. (b) Both direct and indirect costs. (c) Both a product and a period cost. (d) Mixed costs. 12. Why is factory overhead applied to products and jobs by manufacturing companies? (a) Total actual overhead costs can never be accurately determined for production. (b) Because indirect costs are easy to trace to products and jobs. (c) It allows managers more timely determination of product costs during the manufacturing process. (d) It provides a more accurate cost of the job or products being processed. 13. Which of the following companies would be least likely to calculate accounts receivable turnover ratios? (a) A restaurant (b) A construction company (c) A consulting firm (d) An insurance office 14. Which one of the following is part of total manufacturing costs? (a) Estimated overhead costs (b) Actual overhead costs (c) Incurred overhead costs (d) Applied overhead costs 3 15. Juniper, Inc. sells a single product with a contribution margin of $12 per unit, fixed costs of $74,400, and sales for the current year of $100,000. How much is Junipers break-even point (a) 4,600 units (b) $25,600 (c) 6,200 units (d) 2,133 units 16. Estes Company sells two types of computer chips. The sales mix is 30% (Chip A) and 70% (Chip B). Chip A has variable costs per unit of $20 and a selling price of $40. Chip B has variable costs per unit of $25 and a selling price of $55. The weighted-average unit contribution margin for Estes is (a) $23.00. (b) $25.00. (c) $27.00. (d) $50.50. 17. Lion Company sells office chairs with a selling price of $25 and a contribution margin per unit of $15. It takes 3 machine hours to produce one chair. How much is the contribution margin per unit of limited resource? (a) $5 (b) $3 (c) $45 (d) $10 18. SmartCard is considering eliminating one of its product lines. The fixed costs currently allocated to the product line will be allocated to other product lines upon discontinuance. What financial effects occur if the product line is discontinued? (a) Net income will decrease by the contribution margin of the product line being discontinued (b) The company's total fixed costs will increase. (c) Total fixed costs will decrease by the amount of the product line's fixed costs. (d) Net income will decrease by the amount of the product line's fixed costs. 19. Which statement is true about relevant costs in incremental analysis? (a) All costs are relevant if they change between alternatives. (b) Only fixed costs are relevant. (c) Only variable costs are relevant. (d) Relevant costs should be ignored. 20. Roasted Toasters prepared a 2020 budget for 40,000 units of product. Actual production in 2020 was 45,000 units. To be most useful, what amounts should a performance report for this company compare? (a) the actual results for 45,000 units with the original budget for 40,000 units (b) the actual results for 45,000 units with a new budget for 45,000 units (c) the actual results for 45,000 units with last years actual results for 47,000 units (d) It doesnt matter. All of these choices are equally useful