Ashley Bradshaw is the manager of one department in a large store. In this capacity, which of the following kinds of information would she be interested in?
Both Financial data and Nonfinancial data.
All of the following are features of managerial accounting except:
information is characterized by objectivity, reliability, consistency, and accuracy.
Choose the answer that is not a distinguishing characteristic of financial accounting information.
It is focused primarily on the future.
Managerial accounting information is limited or restricted by which of the following authorities or principles?
Managerial Accounting Standards Board
Select the incorrect statement regarding the relationship between type of user and type of information.
Senior executives need less aggregated information than do lower-level managers.
Select the correct statement regarding managerial and financial accounting.
Financial accounting is more highly regulated than managerial accounting.
Which of the following most exemplifies the value-added principle?
Information gathering and reporting activities should be restricted to those activities that add value in excess of their cost.
Which of the following costs would be classified as a direct cost for a company that produces motorcycles?
Both Seats used in the motorcycles and Wages of motorcycle assembly workers are correct.
Which of the following is a product cost for a construction company?
Cost of transporting raw materials to the job site
For a manufacturing company, product costs include all of the following except:
warehousing costs.
During its first year of operations, Connor Company paid $50,000 for direct materials and $36,000 in wages for production workers. Lease payments and utilities on the production facilities amounted to $14,000. General, selling, and administrative expenses
$20.00
During its first year of operations, Forrest Company paid $30,000 for direct materials and $50,000 in wages for production workers. Lease payments, utility costs, and depreciation on factory equipment totaled $15,000. General, selling, and administrative
38,000
Why do accountants normally calculate cost per unit as an average?
All of these are justifications for computing average unit costs.
Which of the following costs is not considered to be a period cost?
Freight paid on a purchase of raw materials
Select the incorrect statement regarding costs and expenses.
Manufacturing-related costs are initially recorded as expenses.
Which of the following costs should be recorded as an expense?
Administrative employee salaries
Which of the following costs should not be recorded as an expense?
Insurance on factory building
Which of the following transactions would cause net income for the period to decrease?
Paid $2,000 for production supplies
Which of the following statements is true with regard to product costs versus general, selling, and administrative costs?
Product costs associated with units sold appear on the income statement as cost of goods sold.
Which of the following statements concerning product costs versus general, selling, and administrative costs is false?
General, selling, and administrative costs are always expensed when paid
During its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $17,000 while general, selling, and administrative ex
$30,000
uring its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $17,000 while general, selling, and administrative exp
$15,000
During its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $17,000 while general, selling, and administrative ex
$20,000
During its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $17,000 while general, selling, and administrative ex
$7,000
Manufacturing costs that cannot be traced to specific units of product in a cost-effective manner are:
Both depreciation on production equipment and indirect labor.
What is the effect on the balance sheet of making cash sales of inventory to customers on profit?
Assets and equity increase.
Which of the following types of labor costs will never flow through the balance sheet?
Sales commissions
Which of the following is not classified as manufacturing overhead?
Product delivery costs
Kirsten believes her company's overhead costs are driven (affected) by the number of direct labor hours because the production process is very labor intensive. During the period, the company produced 5,000 units of Product A requiring a total of 1,600 lab
$10 per labor hour
Anton believes his company's overhead costs are driven (affected) by the number of machine hours because the production process is heavily automated. During the period, the company produced 3,000 units of Product A requiring a total of 100 machine hours a
$80 per machine hour
The following information relates to Cruz Manufacturing for 2013:
Based on this information, what is the company's cost of goods sold for 2013?
$114,000
The following information relates to Marshall Manufacturing's 2013 accounting period:
Based on this information, what is the company's net income for 2013?
$40,000
Costs such as transportation-out, sales commissions, uncollectible accounts receivable, and advertising costs are sometimes called:
downstream costs.
All of the following are downstream costs except:
research and development
Select the incorrect statement regarding upstream and downstream costs.
Upstream and downstream costs are reported as product costs on the income statement
Select the incorrect statement regarding service companies
Because service companies do not carry inventory, it is impossible to determine product costs.
Identify the false statement regarding how product costs in a manufacturing company differ from product costs in a service or merchandising company.
Most labor costs for merchandising companies are treated as product costs
Costs associated with holding inventory often include:
A.
theft, damage, and obsolescence.
B.
financing.
C.
warehouse space.
D.
supervision.
E.
All of these.
E
A company that uses a just in time inventory system:
may find that having less inventory actually leads to increased customer satisfaction.
Howard Lumber Company mistakenly classified a product cost as an expense that totaled $20,000. The company produced 2,000 units of product and sold 1,000 of them during the year. Management is paid a bonus equal to 2% of net income. In the year in which t
management bonuses were underpaid.
Assuming a company's inventory increased during the period, which of the following misclassifications may increase net income?
Recording administrative salaries as a product cost
During her first year with the company, Ann mistakenly accumulated some of the company's period costs in ending inventory. Which of the following indicates how this error affects the company's financial statements assuming number of units produced exceede
Net income is overstated.
If a company misclassifies a general, selling and administrative cost as a product cost in a period when production exceeds sales:
Both net income will be overstated and gross margin will be understated.
Which of the following is not a reason management might be tempted to classify costs as assets rather than expensing them during periods in which production exceeds sales?
Income taxes will be lower.
Certified Management Accountants (CMA) must complete a specified number of continuing professional education credits each reporting period. Which of the four standards of ethical conduct issued by the Institute of Management Accountants likely motivated t
Competence
Which of the following is not one of the four Standards of Ethical Conduct for Management Accountants?
Independence
As a Certified Management Accountant, Suzanne is bound by the standards of ethical conduct issued by the Institute of Management Accountants. During the course of business, Suzanne learned that her company has decided to discontinue a major product line.
confidentiality standard.
As a Certified Management Accountant, Derek is bound by the standards of ethical conduct issued by the Institute of Management Accountants. According to the standards, Derek has a responsibility to:
inform subordinates that they should protect confidential information and monitor the activities of subordinates to assure that confidentiality is maintained.
Which of following practices is not considered an effective means of reengineering business systems?
Increasing non-value added activities
Which of the following best represents a characteristic of managerial accounting?
Information is based on estimates and is bounded by relevance and timeliness.
Which of the following statements concerning manufacturing costs is incorrect?
Depreciation on manufacturing equipment is a period cost.
Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs:
Wages paid to factory machine operators in producing the dog houses should be categorized as:
A.
a product cost and recorded in the inventory account
Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs:
Based on the above information, the amount of period costs shown on Steuben's 12/31/2013 income statement is:
$180,000
Steuben Company produces dog houses. During 2013, Steuben Company incurred the following costs:
Based on the above information, which of the following would not be treated as a product cost:
office manager's salary
The benefits of a just-in-time system would include all of the following except:
increased warehousing costs.
The Sarbanes Oxley Act of 2002:
requires management to establish a whistleblower policy.
A systematic problem-solving philosophy that encourages front line workers to achieve zero defects is known as:
total quality management (TQM).
Randall Company manufactures chocolate bars. The following were among Randall's 2013 manufacturing costs:
Randall's 2013 direct labor costs amounted to:
$300,000
Randall Company manufactures chocolate bars. The following were among Randall's 2013 manufacturing costs:
Randall's 2013 direct materials amounted to:
$225,000
Which of the following items would be reported directly on the income statement as a period cost?
Selling and administrative salaries
Java Joe operates a chain of coffee shops. The company pays rent of $20,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $3,000 per month, and all other employees are
Variable cost
Select the correct statement regarding fixed costs.
The fixed cost per unit decreases when volume increases.
Larry's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:
increases in direct proportion to the number of hours the lawn equipment is operated.
Select the correct statement regarding fixed costs.
A.
There is a contradiction between the term "fixed cost per unit" and the behavior pattern implied by the term.
B.
Fixed cost per unit is not fixed.
C.
Total fixed cost remains constant when volume changes.
D.
All of these are correct statements.
D
Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold.
For Rock Creek Bottling Company, the production manager's salary is an example of:
a fixed cost.
Rock Creek Bottling Company pays its production manager a salary of $6,000 per month. Salespersons are paid strictly on commission, at $1.50 for each case of product sold.
For Rock Creek Bottling Company, the salespersons' commissions are an example of:
B.
a variable cost.
Based on the following cost data, what conclusions can you make about Product A and Product B?
Product A is a variable cost and Product B is a fixed cost.
Based on the following cost data, items labeled (a) and (b) in the table below are which of the following amounts, respectively?
(a) = $5.00; (b) = $2.00
Two different costs incurred by Ruiz Company exhibit the following behavior pattern per unit:
Cost #1 and Cost #2 exhibit which of the following cost behavior patterns, respectively?
A.
Fixed/Variable
Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold.
If the company's volume doubles, the total cost per unit will:
decrease
Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold.
If the company's volume increases to 5,000 units, the total cost per unit will be:
$20.50.
Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold.
If the company's volume increases to 5,000 units, the company's total costs will be:
$102,500
Wu Company incurred $40,000 of fixed cost and $50,000 of variable cost when 4,000 units of product were made and sold.
If the company's volume doubles, the company's total cost will:
increase but will not double
In the graph below, which depicts the relationship between units produced and total cost, the dotted line depicts which type of total cost?
Variable cost
In the graph below, which depicts the relationship between units produced and total cost, the dotted line depicts which type of total cost?
Fixed cost
Pickard Company pays its sales staff a base salary of $4,500 a month plus a $3.00 commission for each product sold. If a salesperson sells 800 units of product in January, the employee would be paid:
$6,900
Quick Change and Fast Change are competing oil change businesses. Both companies have 5,000 customers. The price of an oil change at both companies is $20. Quick Change pays its employees on a salary basis, and its salary expense is $40,000. Fast Change p
Quick Change's profit will increase while Fast Change's profit will fall.
Hard Nails and Bright Nails are competing nail salons. Both companies have the same number of customers. Both charge the same price for a manicure. The only difference is that Hard Nails pays its manicurists on a salary basis (i.e., a fixed cost structure
A.
will earn a higher profit than Bright Nails.
Fixed cost per unit:
decreases as production volume increases.
Cool Runnings operates a chain of frozen yogurt shops. The company pays $5,000 of rent expense per month for each shop. The managers of each shop are paid a salary of $3,000 per month and all other employees are paid on an hourly basis. Relative to the nu
Variable cost
Companies A and B are in the same industry and are identical except for cost structure. At a volume of 50,000 units, the companies have equal net incomes. At 60,000 units, Company A's net income would be substantially higher than B's. Based on this inform
Company A's cost structure has higher fixed costs than B's.
Operating leverage exists when:
D.
small percentage changes in revenue produce large percentage changes in profit.
For the last two years BRC Company had net income as follows:
What was the percentage change in income from 2012 to 2013?
25% increase
The activity director for City Recreation is planning an activity. She is considering alternative ways to set up the activity's cost structure. Select the incorrect statement from the following.
If the director expects a low turnout, she should use a fixed cost structure.
Select the incorrect statement regarding the relationship between cost behavior and profits.
In a pure fixed cost structure, the unit selling price and unit contribution margin are equal.
Select the correct statement from the following.
A fixed cost structure offers greater risk but higher opportunity for profitability than does a variable cost structure.
The manager of Kenton Company stated that 45% of its total costs were fixed. The manager was describing the company's:
cost structure.
Select the incorrect statement regarding cost structures
The more variable cost, the higher the fluctuation in income as sales fluctuate.
Executive management at Ballard Books is very optimistic about the chain's ability to achieve significant increases in sales in each of the next five years. The company will most benefit if management creates a:
high leverage cost structure.
Based on the income statements shown below, which division has the cost structure with the highest operating leverage?
Bottled Water.
The following income statements are provided for two companies operating in the same industry
Assuming sales increase by $1,000, select the correct statement from the following:
Both companies will experience an increase in profit.
The excess of a product's selling price over its variable costs is referred to as:
contribution margin
Select the incorrect statement regarding the contribution margin income statement.
Contribution margin represents the amount available to cover product costs and thereafter to provide profit.
Which of the following items would not be found on a contribution format income statement?
Gross margin
The following income statement is provided for Ramirez Company in 2013:
What amount was the company's contribution margin?
$50,000
In order to prepare a contribution format income statement:
costs must be separated into variable and fixed costs
Select from the following the incorrect statement regarding contribution margin.
Sales - fixed costs = contribution margin
Which of the following equations can be used to compute a firm's magnitude of operating leverage?
Contribution margin/net income
The magnitude of operating leverage for Forbes Corporation is 1.8 when sales are $200,000 and net income is $24,000. If sales increase by 5%, what is net income expected to be?
$26,160
The magnitude of operating leverage for Blue Ridge Corporation is 3.5 when sales are $200,000 and net income is $36,000. If sales decrease by 6%, net income is expected to decrease by what amount?
$7,560
The magnitude of operating leverage for Perkins Corporation is 4.5 when sales are $100,000. If sales increase to $110,000, profits would be expected to increase by what percent?
45%
Based on the income statements of the three following retail businesses, which company has the highest operating leverage?
Alpha Company
Whether a cost behaves as a fixed cost or as a variable cost depends upon the:
presence of fixed costs.
Craft, Inc. normally produces between 120,000 and 150,000 units each year. Producing more than 150,000 units alters the company's cost structure. For example, fixed costs increase because more space must be rented, and additional supervisors must be hired
C.
relevant range.
Mug Shots operates a chain of coffee shops. The company pays rent of $15,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of $2,500 per month and all other employees a
Fixed cost/fixed cost
Select the incorrect statement regarding the relevant range of volume.
Total cost per unit is expected to remain constant.
What are the expected average quarterly costs of running a consulting practice if fixed costs are expected to be $4,000 a month and variable costs are expected to be $100 per client for each quarter? Expected number of clients for the year are:
$24,500
Select the incorrect statement regarding the use of average unit costs
Cost averaging should be used only for fixed costs, and not for variable costs.
The following information is given regarding driving lessons provided by Arrive Alive Company over several spans of time:
Select the incorrect statement from the following.
The average cost based on the total five-year period is probably the most appropriate cost for pricing purposes.
A cost that contains both fixed and variable elements is referred to as a:
mixed cost.
Which of the following costs typically include both fixed and variable components?
Factory overhead
Which characteristic is true of the scatter graph method, high-low method, and regression analysis?
All methods use historic data to estimate variable and fixed costs.
Taste of the Town, Inc. operates a gourmet sandwich shop. The company orders bread, cold cuts, and produce several times a week. If the cost of these items remains constant per customer served, the cost is said to be:
Variable
Once sales reach the break-even point, each additional unit sold will:
increase profit by an amount equal to the per unit contribution margin.
If total fixed costs increase while variable costs and sales price are unchanged, what happens to the break-even point?
The break-even point increases, and therefore more units must be sold to break-even.
Chesterfield Corporation has been operating well above its break-even point. What will happen to Chesterfield's margin of safety if the variable cost per unit increases?
The break-even point would increase, and the margin of safety would decrease.
When performing sensitivity analysis, which of the following is an example of a variable that management may consider changing to answer "what if" questions?
Both Variable cost per unit and Sales price per unit are correct
What happens to break-even volume when the contribution margin ratio increases?
B.
Break-even volume decreases.
What happens to break-even volume when the sales price per unit decreases?
Break-even volume increases.
At the break-even point:
Both Sales would be equal to total costs and Contribution margin would be equal to total fixed costs are correct.