Chap 14
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Managerial accounting:
- is governed by generally accepted accounting principles.
- places emphasis on special-purpose information.
- pertains to the entity as a whole and is highly aggregated.
- is limited to cost data.
places emphasis on special-purpose information.
The management of an organization performs several broad functions. They are:
planning, directing, and selling.
planning, directing, and controlling.
planning, manufacturing, and controlling.
directing, manufacturing, and controlling.
planning, directing, and controlling.
Which of the following costs would a computer manufacturer include in manufacturing overhead?
The cost of the disk drives.
The wages earned by computer assemblers.
The cost of the memory chips.
Depreciation on testing equipment.
Depreciation on testing equipment.
Which of the following is not an element of manufacturing overhead?
Sales manager's salary.
Plant manager's salary.
Factory repairman's wages.
Product inspector's salary.
Sales manager's salary.
Indirect labor is a:
nonmanufacturing cost.
raw material cost.
product cost.
period cost.
product cost.
Which of the following costs are classified as a period cost?
Wages paid to a factory custodian.
Wages paid to a production department supervisor.
Wages paid to a cost accounting department supervisor.
Wages paid to an assembly worker.
Wages paid to a cost accounting department supervisor.
A cost of goods manufactured schedule shows beginning and ending inventories for:
raw materials and work in process only.
work in process only.
raw materials only.
raw materials, work in process, and finished goods.
raw materials and work in process only.
The formula to determine the cost of goods manufactured is:
Beginning raw materials inventory + Total manufacturing costs ? Ending work in process inventory.
Beginning work in process inventory + Total manufacturing costs ? Ending finished goods inventory
Beginning work in process inventory + Total manufacturing costs ? Ending work in process inventory.
A manufacturer may report three inventories on its balance sheet: (1) raw materials, (2) work in process, and (3) finished goods. Indicate in what sequence these inventories generally appear on a balance sheet.
(1), (2), (3)
(2), (3), (1)
(3), (1), (2)
(3
(3), (2), (1)
Which of the following managerial accounting techniques attempts to allocate manufacturing overhead in a more meaningful fashion?
Just-in-time inventory.
Total-quality management.
Balanced scorecard.
Activity-based costing.
Activity-based costing.
Chap15
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Cost accounting involves the measuring, recording, and reporting of:
product costs.
future costs.
manufacturing processes.
managerial accounting decisions.
product costs.
A company is more likely to use a job order costing system if:
it manufactures a large volume of similar products.
its production is continuous.
it manufactures products with unique characteristics.
it uses a periodic inventory system.
it manufactures products with unique characteristics.
In accumulating raw materials costs, companies debit the cost of raw materials purchased in a perpetual system to:
Raw Materials Purchases.
Raw Materials Inventory.
Purchases.
Work in Process.
Raw Materials Inventory.
When incurred, factory labor costs are debited to:
Work in Process.
Factory Wages Expense.
Factory Labor.
Factory Wages Payable.
Factory Labor.
The flow of costs in job order costing:
begins with work in process inventory and ends with finished goods inventory.
begins as soon as a sale occurs.
parallels the physical flow of materials as they are converted into finished goods.
is necessary to prep
parallels the physical flow of materials as they are converted into finished goods.
Raw materials are assigned to a job when:
the job is sold.
the materials are purchased.
the materials are received from the vendor.
the materials are issued by the materials storeroom.
the materials are issued by the materials storeroom.
The source documents for assigning costs to job cost sheets are:
invoices, time tickets, and the predetermined overhead rate.
materials requisition slips, time tickets, and the actual overhead costs.
materials requisition slips, payroll register, and the
materials requisition slips, time tickets, and the predetermined overhead rate.
At the end of an accounting period, a company using a job order costing system prepares the cost of goods manufactured:
from the job cost sheet.
from the Work in Process Inventory account.
by adding direct materials used, direct labor incurred, and manufa
from the Work in Process Inventory account.
Manufacturing overhead is underapplied if:
actual overhead is less than applied.
actual overhead is greater than applied.
the predetermined rate equals the actual rate.
actual overhead equals applied overhead.
actual overhead is greater than applied.
Chap16
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In a process cost system, the flow of costs is:
work in process, cost of goods sold, finished goods.
finished goods, work in process, cost of goods sold.
finished goods, cost of goods sold, work in process.
work in process, finished goods, cost of goods s
work in process, finished goods, cost of goods sold.
In a process cost system, manufacturing overhead:
is assigned to finished goods at the end of each accounting period.
is assigned to a work in process account for each job as the job is completed.
is assigned to a work in process account for each producti
is assigned to a work in process account for each production department on the basis of a predetermined overhead rate.
Conversion costs are the sum of:
fixed and variable overhead costs.
labor costs and overhead costs.
direct material costs and overhead costs.
direct labor and indirect labor costs.
labor costs and overhead costs.
A production cost report:
is an external report.
shows both the production quantity and cost data related to a department.
shows equivalent units of production but not physical units.
contains six sections.
shows both the production quantity and cost data related to a department.
In a production cost report, units to be accounted for are calculated as:
Units started into production + Units in ending work in process.
Units started into production ? Units in beginning work in process.
Units transferred out + Units in beginning work
Units started into production + Units in beginning work in process.
Chap 17
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Activity-based costing (ABC):
can be used only in a process cost system.
focuses on units of production.
focuses on activities performed to produce a product.
uses only a single basis of allocation.
focuses on activities performed to produce a product.
Activity-based costing:
is the initial phase of converting to a just-in-time operating environment.
can be used only in a job order costing system.
is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.
uses d
is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.
Any activity that causes resources to be consumed is called a:
just-in-time activity.
facility-level activity.
cost driver.
non-value-added activity.
cost driver.
The first step in the development of an activity-based costing system is:
identify and classify activities and allocate overhead to cost pools.
assign overhead costs to products.
identify cost drivers.
compute overhead rates.
identify and classify activities and allocate overhead to cost pools.
Which of the following would be the best cost driver for the assembling cost pool?
Number of product lines.
Number of parts.
Number of orders.
Amount of square footage.
Number of parts.
A frequently cited limitation of activity-based costing is:
ABC results in more cost pools being used to assign overhead costs to products.
Certain overhead costs remain to be allocated by means of some arbitrary volume-based cost driver such as labor or
Certain overhead costs remain to be allocated by means of some arbitrary volume-based cost driver such as labor or machine hours.
An activity that adds costs to the product but does not increase its market value is a:
value-added activity.
cost driver.
cost-benefit activity.
non-value-added activity.
non-value-added activity.
The following activity is value-added:
Storage of raw materials.
Moving parts from machine to machine.
Shaping a piece of metal on a lathe.
All of the above.
Shaping a piece of metal on a lathe.
A relevant facility-level cost driver for heating costs is:
machine hours.
direct material.
floor space.
direct labor cost.
floor space.
Under just-in-time processing:
raw materials are received just in time for use in production.
subassembly parts are completed just in time for use in assembling finished goods.
finished goods are completed just in time to be sold.
All of the above.
All of the above.
The primary objective of just-in-time processing is to:
accumulate overhead in activity cost pools.
eliminate or reduce all manufacturing inventories.
identify relevant activity cost drivers.
identify value-added activities.
eliminate or reduce all manufacturing inventories.
Chap 18
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Variable costs are costs that:
vary in total directly and proportionately with changes in the activity level.
remain the same per unit at every activity level.
Neither of the above.
Both (a) and (b) above.
Both (a) and (b) above.
The relevant range is:
the range of activity in which variable costs will be curvilinear.
the range of activity in which fixed costs will be curvilinear.
the range over which the company expects to operate during a year.
usually from zero to 100% of opera
the range over which the company expects to operate during a year.
Mixed costs consist of a:
variable cost element and a fixed cost element.
fixed cost element and a controllable cost element.
relevant cost element and a controllable cost element.
variable cost element and a relevant cost element.
variable cost element and a fixed cost element.
(SO 4)
Which of the following is not involved in CVP analysis?
Sales mix.
Unit selling prices.
Fixed costs per unit.
Volume or level of activity.
Fixed costs per unit.
Contribution margin:
is revenue remaining after deducting variable costs.
may be expressed as contribution margin per unit.
is selling price less cost of goods sold.
Both (a) and (b) above.
Both (a) and (b) above.
Required sales =
Variable costs + Target net income.
Variable costs + Fixed costs + Target net income.
Fixed costs + Target net income.
No correct answer is given.
Variable costs + Fixed costs + Target net income.
Chap23
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(SO 1)
Three of the steps in management's decision-making process are: (1) Review results of decision. (2) Identify the problem. (3) Make the decision. The steps are performed in the following order.
(1), (2), (3).
(3), (2), (1).
(2), (1), (3).
(2), (3),
(2), (3), (1).
Incremental analysis is the process of identifying the financial data that:
do not change under alternative courses of action.
change under alternative courses of action.
are mixed under alternative courses of action.
No correct answer is given.
change under alternative courses of action.
In a make-or-buy decision, relevant costs are:
manufacturing costs that will be saved.
the purchase price of the units.
opportunity costs.
All of the above.
All of the above.
The decision rule in a sell-or-process-further decision is: Process further as long as the incremental revenue from processing exceeds:
incremental processing costs.
variable processing costs.
fixed processing costs.
No correct answer is given.
incremental processing costs.
In a decision to retain or replace equipment, the book value of the old equipment is a(n):
opportunity cost.
sunk cost.
incremental cost.
marginal cost.
sunk cost.
If an unprofitable segment is eliminated:
net income will always increase.
variable expenses of the eliminated segment will have to be absorbed by other segments.
fixed expenses allocated to the eliminated segment will have to be absorbed by other segment
fixed expenses allocated to the eliminated segment will have to be absorbed by other segments.
What is a weakness of the cash payback approach?
It uses accrual-based accounting numbers.
It ignores the time value of money.
It is complicated to compute.
It cannot be used if a project has uneven net annual cash flows.
It ignores the time value of money.
A project should be accepted if its internal rate of return exceeds:
zero.
the rate of return on a government bond.
the company's required rate of return.
the rate the company pays on borrowed funds.
the company's required rate of return.
A positive net present value means that the:
project's rate of return is less than the cutoff rate.
project's rate of return exceeds the required rate of return.
project's rate of return equals the required rate of return.
project is unacceptable.
project's rate of return exceeds the required rate of return.
Chap 20
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Which of the following is not a benefit of budgeting?
Management can plan ahead.
An early warning system is provided for potential problems.
It enables disciplinary action to be taken at every level of responsibility.
The coordination of activities is fac
It enables disciplinary action to be taken at every level of responsibility.
A budget:
is the responsibility of management accountants.
is the primary method of communicating agreed-upon objectives throughout an organization.
ignores past performance because it represents management's plans for a future time period.
may promote ef
is the primary method of communicating agreed-upon objectives throughout an organization.
The essentials of effective budgeting do not include:
top-down budgeting.
management acceptance.
research and analysis.
sound organizational structure.
top-down budgeting
Compared to budgeting, long-range planning generally has the:
same amount of detail.
longer time period.
same emphasis.
same time period.
longer time period.
A sales budget is:
derived from the production budget.
management's best estimate of sales revenue for the year.
not the starting point for the master budget.
prepared only for credit sales.
management's best estimate of sales revenue for the year.
The budgeted income statement is:
the end-product of the operating budgets.
the end-product of the financial budgets.
the starting point of the master budget.
dependent on cash receipts and cash disbursements.
the end-product of the operating budgets.
The budgeted balance sheet is:
developed from the budgeted balance sheet for the preceding year and the budgets for the current year.
the last operating budget prepared.
used to prepare the cash budget.
All of the above.
developed from the budgeted balance sheet for the preceding year and the budgets for the current year.
The budget for a merchandiser differs from a budget for a manufacturer because:
a merchandise purchases budget replaces the production budget.
the manufacturing budgets are not applicable.
None of the above.
Both (a) and (b) above.
Both (a) and (b) above.
In most cases, not-for-profit entities:
prepare budgets using the same steps as those used by profit-oriented businesses.
know budgeted cash receipts at the beginning of a time period, so they budget only for expenditures.
begin the budgeting process by b
begin the budgeting process by budgeting expenditures rather than receipts.
Chap??
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Budgetary control involves all but one of the following:
modifying future plans.
analyzing differences.
using static budgets.
determining differences between actual and planned results.
using static budgets.
Budget reports are prepared:
daily.
weekly.
monthly.
All of the above.
All of the above.
A production manager in a manufacturing company would most likely receive a:
sales report.
income statement.
scrap report.
shipping department overhead report.
scrap report.
A static budget is:
a projection of budget data at several levels of activity within the relevant range of activity.
a projection of budget data at a single level of activity.
compared to a flexible budget in a budget report.
never appropriate in evaluati
a projection of budget data at a single level of activity.
A static budget is useful in controlling costs when cost behavior is:
mixed.
fixed.
variable.
linear.
fixed.
Responsibility centers include:
cost centers.
profit centers.
investment centers.
All of the above.
All of the above.
Responsibility reports for cost centers:
distinguish between fixed and variable costs.
use static budget data.
include both controllable and noncontrollable costs.
include only controllable costs.
include only controllable costs.
The accounting department of a manufacturing company is an example of:
a cost center.
a profit center.
an investment center.
a contribution center.
a cost center.
To evaluate the performance of a profit center manager, upper management needs detailed information about:
controllable costs.
controllable revenues.
controllable costs and revenues.
controllable costs and revenues and average operating assets.
controllable costs and revenues.
In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show:
profit center margin.
controllable margin.
net income.
income from operations.
controllable margin.
Chap22
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Standards differ from budgets in that:
budgets but not standards may be used in valuing inventories.
budgets but not standards may be journalized and posted.
budgets are a total amount and standards are a unit amount.
only budgets contribute to management
budgets are a total amount and standards are a unit amount.
Standard costs:
are imposed by governmental agencies.
are predetermined unit costs which companies use as measures of performance.
can be used by manufacturing companies but not by service or not-for-profit companies.
All of the above.
are predetermined unit costs which companies use as measures of performance.
Normal standards:
allow for rest periods, machine breakdowns, and setup time.
represent levels of performance under perfect operating conditions.
are rarely used because managers believe they lower workforce morale.
are more likely than ideal standards to
allow for rest periods, machine breakdowns, and setup time.
The setting of standards is:
a managerial accounting decision.
a management decision.
a worker decision.
preferably set at the ideal level of performance.
a management decision.
The formula for computing the total overhead variance is:
actual overhead less overhead applied.
overhead budgeted less overhead applied.
actual overhead less overhead budgeted.
No correct answer is given.
actual overhead less overhead applied.