These questions are for "sverma1" 1. Management accounting primarily is concerned with providing: a. information to managers inside the organization as well as information to stockholders, cre

These questions are for “sverma1”

1. Management accounting primarily is concerned with providing:

a. information to managers inside the organization as well as information to stockholders, creditors, and others outside the organization.

b. information to governmental regulatory agencies.

c. information to managers inside the organization.

d. information to stockholders, creditors, and others outside the organization.

2. Managerial accounting reports are:

a. required under the Foreign Corrupt Practices Act of 1977.

b. specified by the Securities and Exchange Commission.

c. designed to meet the needs of the managers and are not mandated by a regulatory body or outside agency.

d. governed by the requirements of generally accepted accounting principles.

3. An example of a direct labor cost is wages paid to a:

Factory machine operator Supervisor in a factory

a. No No

b. No Yes

c. Yes Yes

d. Yes No

4. Within the relevant range:

a. variable cost per unit decreases as production decreases.

b. fixed cost per unit increases as production decreases.

c. fixed cost per unit decreases as production decreases.

d. variable cost per unit increases as production decreases.

5. Manufacturing overhead cost:

a. can be either a variable cost or a fixed cost.

b. includes the costs shipping finished goods to customers.

c. includes all factory labor costs.

d. include all fixed costs.

6. When the level of activity increases within the relevant range, how does each of the following change?

Average cost Total variable Fixed cost

per unit cost per unit

a. Increases Increases Increases

b. Increases No change Increases

c. Decreases No change Decreases

d. Decreases Increases Decreases

7. The manufacturing operation that would be most likely to use a job-order costing system is:

a. Shipbuilding.

b. Toy manufacturing.

c. Candy manufacturing.

d. Crude oil refining.

8. A disadvantage of the high-low method of cost analysis is that:

a. it cannot be used when there are a very large number of observations.

b. it is too time consuming to apply.

c. it uses two extreme data points, which may not be representative of normal conditions.

d. it relies totally on the judgment of the person performing the cost analysis.

9. In computing its predetermined overhead rate, Brady Company included its factory insurance cost twice. This error will result in:

a. the ending balance of Finished Goods to be understated.

b. the credits to the Manufacturing Overhead account to be understated.

c. the Cost of Goods manufactured to be overstated.

d. the Net Operating Income to be overstated.

10. A proper journal entry to close overapplied overhead to Cost of Goods Sold would be:

a. Cost of Goods Sold xxx

Work in Process xxx

b. Cost of Goods Sold xxx

Manufacturing Overhead xxx

c. Cost of Goods Sold xxx

Finished Goods xxx

d. Manufacturing Overhead xxx

Cost of Goods Sold xxx

11. A proper journal entry to record issuing raw materials to be used on a job would be:

a. Finished Goods xxx

Raw Materials xxx

b. Work in Process xxx

Raw Materials xxx

c. Raw Materials xxx

Work in Process xxx

d. Raw Materials xxx

Finished Goods xxx

12. Contribution margin means

a. what remains from total sales after deducting fixed expenses.

b. what remains after deducting cost of goods sold to cover fixed and variable expenses.

c. what remains from total sales after deducting all variable expenses.

d. the sum of cost of goods sold and variable expenses.

13. If the labor efficiency variance is unfavorable, then:

a. actual hours exceeded standard hours allowed for the actual output.

b. standard hours allowed for the actual output exceeded actual hours.

c. the standard rate exceeded the actual rate.

d. the actual rate exceeded the standard rate.

14. An unfavorable material quantity variance indicates that:

a. actual usage of material exceeds the standard material allowed for output.

b. standard material allowed for output exceeds the actual usage of material.

c. actual material price exceeds standard price.

d. standard material price exceeds actual price.

15. Which of the following would most likely be included as part of manufacturing overhead in the production of a wooden table?

a. The amount paid to the individual who stains the table.

b. The commission paid to the salesperson who sold the table.

c. The cost of glue used in the table.

d. The cost of the wood used in the table.

16. In a manufacturing company, direct labor costs combined with direct materials costs are known as:

a. period costs.

b. prime costs.

c. conversion costs.

d. opportunity cost.

17. The property taxes on the factory building for a manufacturer would be an example of:

Prime Cost Conversion Cost

a. Yes No

b. No Yes

c. No No

d. Yes Yes

18. All of the following costs would be found in a company’s accounting records except:

a. Sunk cost.

b. Direct cost.

c. Indirect costs.

d. Opportunity costs.

19. A sunk cost is:

a. a cost that may be saved by not adopting an alternative.

b. a cost that may be shifted to the future with little or no effect on current operations.

c. a cost that cannot be avoided because it has already been incurred.

d. a cost which does not entail any dollar outlay but which is relevant to the decision-making process.

20. The balance in the Work in Process account equals:

a. the balance in the Finished Goods inventory account.

b. the balance in the Cost of Goods Sold account.

c. the balances on the job cost sheets of uncompleted jobs.

d. the balance in the Manufacturing Overhead account.

21. Which of the following costs, if expressed on a per unit basis, would be expected to vary inversely with the level of production and sales?

a. Sales commissions.

b. Fixed manufacturing overhead.

c. Variable manufacturing overhead.

d. Direct materials.

22. All other things equal, if a division’s traceable fixed expenses decrease:

a. the division’s segment margin will increase.

b. the overall company net operating income will decrease.

c. the division’s contribution margin will increase.

d. the division’s sales volume will increase.

23. On January 1, Lake Corporation increased its management salaries. All other costs and revenues were unchanged. How did this increase affect Lake’s break-even point and margin of safety?

Break-even point Margin of safety

a. Increase Decrease

b. Increase Increase

c. Decrease Increase

d. Decrease Decrease

24. The break-even point in units is calculated using:

a. variable expenses and the unit contribution margin.

b. variable expenses and the contribution margin ratio.

c. fixed expenses and the unit contribution margin.

d. fixed expenses and the contribution margin ratio.

25. If sales volume increases and all other factors remain constant, then the:

a. contribution margin ratio will increase.

b. break-even point will decrease.

c. margin of safety will increase.

d. net operating income will decrease.

26. Segmented income statements are most meaningful to managers when they are prepared:

a. in a single-step format.

b. on an absorption cost basis.

c. on a cost behavior (contribution format) basis.

d. on a cash basis.

27. In setting a transfer price, which of the following should not be considered?

a. Production capacity of the selling division.

b. Product demand from outside customers.

c. Costs eliminated by internal transfers.

d. Fixed production costs of the buying division.

28. When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred, then the lowest acceptable transfer price as far as the selling division is concerned is:

a. Variable cost of producing a unit of product.

b. The full absorption cost of producing a unit of product.

c. The market price charged to outside customers, less costs saved by transferring internally.

d. The amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.

1. Electrical costs at one of Gotch Corporation’s factories are listed below:

Machine –Hours Electrical Cost

March …………………… 3,731 $35,243

April …………………….. 3,728 35,248

May ……………………… 3,765 35,479

June ……………………… 3,793 35,651

July ……………………… 3,797 35,692

August …………………… 3,701 35,044

September ……………….. 3,800 35,694

October ………………….. 3,735 35,276

November ……………….. 3,740 35,325

Management believes that electrical cost is a mixed cost that depends on machine-hours. Using the high-low method to estimate the variable and fixed components of this cost, these estimates would be closest to:

a. $0.15 per machine-hour; $35,115 per month

b. $9.11 per machine-hour; $1,249 per month

c. $9.43 per machine-hour; $35,406 per month

d. $6.57 per machine-hour; $10,728 per month

Exhibit 1: The Tingey Company has 500 obsolete microcomputers that are carried in inventory at a total cost of $720,000. If these microcomputers are upgraded at a total cost of $100,000, they can be sold for a total of $160,000. As an alternative, the microcomputers can be sold in their present condition for $50,000.

2. Refer to Exhibit 1. The sunk cost in this situation is:

a. $720,000

b. $160,000

c. $ 50,000

d. $100,000

3. Refer to Exhibit 1: What is the net advantage or disadvantage to the company from upgrading the computers rather than selling them in their present condition?

a. $110,000 advantage.

b. $660,000 disadvantage.

c. $ 10,000 advantage.

d. $ 60,000 advantage.

4. Refer to Exhibit 1. Suppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition?

a. $100

b. $770

c. $ 300

d. $210

Exhibit 2: The Union Company has established standard cost for its single product as follows:

Direct material ………………………….. 2 gallons at $3 per gallon

Direct labor ……………………………… 0.5 hours at $8 per hour

Variable overhead ……………………….. 0.5 hours at $2 per hour

During May, the company made 4,000 units and incurred the following costs:

Direct materials purchased: 8,100 gallons at $3.10 per gallon

Direct material used: 7,600 gallons

Direct labor used: 2,200 hours at $8.25 per hour

Actual Variable overhead cost: $4,175

5. Refer to Exhibit 2. The materials price variance is:

a. $2,310 U

b. $2,310 F

c. $810 U

d. $810 F

6. Refer to Exhibit 2. The materials quantity variance is:

a. $1,200 U

b. $1,200 F

c. $300 U

d. $ 1,500 F

7. Refer to Exhibit 2. The labor rate variance is:

a. $1,050 U

b. $550 U

c. $2,150 U

d. $2,150 F

8. Refer to Exhibit 2. The labor efficiency variance is:

a. $1,050 U

b. $550 U

c. $1,600 F

d. $1,600 U

9. Refer to Exhibit 2. The total variable overhead variance (including both the rate and efficiency variance) for May is:

a. $175 U

b. $225 F

c. $225 U

d. $400 U

10. Division-A makes a part that it sells to customers outside of the company. Data concerning this part appear below:

Selling price to outside customers ———————– $75

Variable cost per unit ————————————– $50

Total fixed costs ————————————- $400,000

Capacity in units —————————————- 25,000

Division-B of the same company would like to use the part manufactured by Division-A in one of its products. Division-B currently purchases a similar part made by an outside company for $70 per unit and would substitute the part made by Division-A. Division-B requires 5,000 units of the part each period. Division-A can already sell all of the units it can produce on the outside market. What should be the lowest acceptable transfer price from the perspective of Division-A?

a. $75

b. $66

c. $16

d. $50

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