50
Questions - Accounting
1. The difference between the
static-budget and the flexible-budget amounts is the _____.
unused
capacity
growth
component
sales
volume variance
flexible-budget
variance
balanced
scorecard
2. The following data was gathered
for Anu-U, an electronic commercial hair dryer manufacturer:
Anu-U
Budgeted fixed costs for production
between 0 and 500,000 units $500,000
Budgeted selling price $5,000
per unit
Budgeted production
and sales 100
units
Actual production
and sales 85
units
Required:
Compute the static-budget variance and identify whether the variance is
favorable, F, or unfavorable, U.
$75,000 U
variance
$89,000 F
variance
$64,000 U
variance
$97,000 F
variance
$58,000 U
variance
3. Cost of a new machine is:
past cost.
relevant.
irrelevant.
sunk cost.
batch
cost.
4. With a well-designed transfer
price, each divisional manager makes the best decision for his or her subunit,
while simultaneously _____ the profits of the firm.
prohibiting
eliminating
maximizing
minimizing
distributing
5. The manager at Total One
manufacturing reported a plant capacity of 225,000 units per month. Unit costs
at capacity were reported as follows:
Direct materials $5.00
Direct labor 7.00
Variable overhead 4.50
Fixed overhead
1.00
Fixed marketing costs
7.00
Variable marketing &
distribution cost
2.75
The current sales were reported as
$190,000 at $31.00 per unit. The manager at Quality Manufacturing contacted the
manager at Total One Manufacturing about the purchase of 2,200 units at $25 per
unit. Current sales would not be
affected by the one-time-only special order. What is the change in operating
profit at Total One Manufacturing if the one-time-only special order is
accepted?
$10,100
increase
$10,250
decrease
$12,650
increase
$14,230
decrease
$16,500
increase
6. _____ products or services at
market prices generally lead to optimal decisions when the market for the
intermediated product is perfectly competitive.
Creating
Evaluating
Comparing
Determining
Transferring
7. Which of the following is not
true about variances?
Variances
alert managers to events not easily or immediately evident.
Variances
permit managers can take corrective actions or exploit available opportunities.
Variances prompt managers to probe how well the company has performed in
implementing its strategies.
Variances
sometimes signal managers that their strategies are ineffective.
Variances
never provide a signal to managers that their strategies are ineffective.
8. Standard Manufacturing Clothing
Curtain reported the following information:
Standard Manufacturing Company
Square yards of cloth per unit
3 sq. yds.
Cost per square yard of
cloth $32.00
Required:
Compute the standard direct material cost per curtain.
$90
$92
$94
$96
$98
9. The managerial accountant at
Rainy Day Umbrella Company needs to calculate the direct material cost per
umbrella that is manufactured. The company produced 35,000 umbrellas in the
fiscal year with a direct material total cost of $760,000.
Required:
Compute the direct material cost per umbrella.
$35.46 per
umbrella
$23.60 per
umbrella
$32.50 per
umbrella
$21.71 per
umbrella
$18.50 per
umbrella
10. Which of the following is not a
manufacturing overhead cost?
Supplies.
Supervision.
Depreciation.
Maintenance.
Forecasted
costs.
11. Which transfer-pricing method's
market may not exist, or may be imperfect or in distress?
Cost-based
Negotiated
Market-based
Minimum-based
Maximum-based
12. Managers maximize operating
income:
to avoid
optimal sales.
to
determine product mix.
to
disregard income supply and demand.
to avoid
individual contribution margins.
to
disregard data about which products to sell and in what quantity.
13. In what important way is the
planning of fixed overhead costs different from the planning of variable
overhead costs?
Timing.
Return on
assets.
Peak
consumption periods.
Imposed
limits on customers.
Choosing
the appropriate level of capacity
14. Which of the following is not a
way that managers use budgeting tools within ERP systems?
Simplify
budgeting.
Perform
calculations.
Reduce the
need to reinput data.
Reduce the
time required to prepare budgets.
Inability
to perform calculations for planning models.
15. The amount of joint costs
incurred before the splitoff point are _____ in deciding whether to process
further.
relevant
irrelevant
not joint
needed
not the
same whether the products are sold at the splitoff point or processed further.
16. In product-mix decisions, as
short-run changes in product mix occur, the costs that change:
are fixed
with the number of units produced or sold.
are mixed
with the number of units produced or sold.
vary with
the number of units produced or sold.
are idle
and they never change with the number of units produced and sold.
are not
relevant because they are only short-run costs.
17. The manager at Frame
Manufacturing reported the cost to product Frame A was $22 per unit in 2011 and
in 2012 the cost increased to $24 per unit. In 2013, the manager at a local
supplier offered to supply Frame A for $20 per unit. For the make-or-buy
decision:
incremental
revenues are $4 per unit.
incremental
costs are $2 per unit.
net
relevant costs are $2 per unit.
differential
costs are $4 per unit.
None of
these are correct.
18 The Hobby Shop, a manufacturer of
toy airplanes, experienced a slow work process at the plant in Norfolk,
Virginia. The setup time at one of the workstations was slow compared to the
other workstation. An employee reported this issue to the floor manager. The
manager proposed a plan to reduce the setup time, but it will cost $75,000. The
change is expected to produce an additional 8,200 planes. The managerial
accountant reported the following information:
Selling price per
plane $20
Direct labor cost per plane
$3.50
Direct material cost per plane
$5.50
Required:
Compute the increase in the throughput contribution:
$110,200
$114,250
$116,500
$118,900
$120,540
19 Which of the following is true
about the informal management control system?
Includes
procedures
Includes
explicit rules.
Includes
incentive plans.
Includes
company culture.
Includes
performance measures.
20 Decision models include:
only
high-low analysis.
only
regression analysis.
only
qualitative analysis.
only
quantitative analysis.
quantitative
and qualitative analysis.
21 Which of the following is not
true about separable costs?
Can be
sunk costs.
Can be
fixed costs.
Can be
allocated costs.
Always
incremental costs.
Not always
incremental costs.
22
Which of the following is not true about subunits in decentralized
organizations?
Decision-making
power resides in individual subunits.
Decision-making
power resides in multiple subunits.
Subunits
interact by supplying goods to one another.
Subunits
interact by supplying services to one another.
When
subunits work together, top management uses transfer prices to coordinate the
actions of the subunits.
23
The managerial accountant at the Chesapeake Bay Circuit Manufacturing
Company expects to sell 120,000 circuits in 2013 for $12 each. There are 5,000
circuits in beginning finished goods inventory with target ending inventory of
$5,000 circuits. The company keeps no work-in-process inventory.
Required:
Compute the amount of sales revenue reported on the 2013 budgeted income
statement.
$1,000,000
$1,200,200
$1,440,000
$1,300,400
$1,600,200
24
Overhead costs allocated to a sales office and individual customers are
always _____.
past
future
current
relevant
irrelevant
25
Estimates suggest that senior managers spend about _____ of their time
on budgeting; and, finance planning departments spend as much as _____ on
budgeting.
0% - 5%;
5%
5% - 10%;
10%
8% - 15%;
30%
10% - 20%;
50%
15% - 25%;
75%
26
Atlas Cable Company has a total variable overhead cost at $3,200,000;
operational management has estimated that one actual output unit takes 0.5
machine hours. The 80,000 machine hours have been budgeted for the year 2013.
Required
Compute the budgeted variable overhead cost rate per output unit.
$35 per
cable unit
$15 per
cable unit
$20 per
cable unit
$30 per
cable unit
$28 per
cable unit
27
Variable overhead flexible-budget variance measures the difference
between _____ and flexible-budget variable overhead amounts.
expected
overhead variance cost
past data
of variable overhead costs
actual
variable overhead costs incurred
the
revenue effect of price of recovery
the cost
effect of price recovery for fixed costs
28
Unfavorable variances are also referred to as _____.
favorable
variances
adverse
variances
bottom-out
variances
substandard
variances
dissatisfactory
variances
29
In contrast to theory to constraints (TOC), activity-based costing (ABC)
systems:
take a
long-run perspective and focus on improving process by eliminating non-value
activities.
take a
short-run perspective and focus on improving process by increasing non-value
activities.
are less
useful for long-run pricing, and capacity management.
are less
useful in long-run cost control.
are less
useful in long-run capacity management.
30
The manager at the Screen Saver Manufacturing manufactures screen
savers. The manager continues to find ways to reduce manufacturing costs and the
manager received a proposal from Entrepreneurial Consultants to rearrange the
production in the upcoming year. The managerial accountant provided the
following information:
Current
Proposed
Total number of workers per
year 5 4
Total hourly wage rate, per
hour $12.00 $14.00
Total hours worked, per
employee 2,300 2,150
Required:
Compute the current and proposed information and decide whether management
should accept the proposal. Which of the following decisions should
management accept?
$138,000;
Current
$120,400;
Proposed
$118,000;
Current
$124,000;
Proposed
$180,000;
Proposed
31
Which of the following is not a benefit of decentralization?
Creates
greater responsiveness to the needs of a subunit's customers, suppliers, and
employees.
Leads to
gains from faster decision making by subunit managers.
Increases
motivation of subunit managers.
Lacks the
ability to help management developement learning in organizations.
Sharpens
the focus of subunit managers, broadens the reach of top management.
32
In competitive markets, it is efficient to set the transfer prices _____
to the market price of the intermediate goods.
Equal
below
above
separate
different
33
In the _____ method, the eventual transfer price results from a
bargaining process between the selling and buying subunits.
negotiated
pricing
negotiated
buying
negotiated
purchasing
negotiated
distribution
negotiated
parallelism
34
Past costs are historical costs, and _____.
constraints
only
make-or-buy
decisions
product-mix
costs only
irrelevant
to decision making
expected
future revenues only
35
Which of the following is true about ethics related to stretch targets?
All
managers regard budgets in a positive manner.
Many
managers regard budgets in a negative manner.
Top
managers convince their subordinates that the budget is not a tool designed to
help them set and reach goals.
Budgets
are used to notify managers of layoffs, strikes, and upcoming organization
downsizing.
There are
no benefits to budgets.
36
Dynamo Building Supply Company's management is calculating the variable
overhead flexible-budget variance for 2012. The actual variable overhead costs
incurred amounted to $245,000 while the flexible budgeted amount was $230,000.
Required
Compute the variable overhead flexible-budget variance for Dynamo Building
Supply Company and identify whether the variance is favorable, F, or
unfavorable, U.
$575,000;
U
$15,000; F
$15,000; U
$575,000;
F
$56,350; U
37
Lump-sum charges in the current year and depreciation charges over two
years are:
past
costs.
future
costs.
current
costs.
relevant
costs.
average
costs.
38
Joint costs are _____ in the sell-or-process further decision.
relevant
needed
essential
statistics
irrelevant
39
In which step of the performance-evaluation model would the manager
replace the machine rather than keep it?
Step 1:
Identify the Problem and Uncertainties.
Step 2:
Obtain information.
Step 3:
Make Predictions about the Future.
Step 4:
Make Decisions by Choosing Among Alternatives.
Step 5:
Implement the Decision, Evaluate Performance, and Learn.
40
Review the transfer-price methods listed below and choose the best
transfer-price method ideal to managers when prices of products and services
listed in trade association Web sites are competitive.
Market-based
transfer prices.
Cost-based
transfer prices.
Hybrid
transfer prices.
Segment-based
transfer prices.
Demographic-based
transfer prices.
41
Mountain Express, a clothing boutique chain has an operating income of
$240,000. The sales revenue of the company was calculated to be $960,000.
Required:
Compute the operating profit margin.
32%
25%
17%
46%
12%
42
Which of the following is not a step related to ongoing-budget related
processes that managers cycle through during the course of the fiscal year?
Managers
take into account past performance, market feedback, and anticipated future
changes to initiate plans for the next period.
Managers
and management work together to develop plans for the company as a whole and
the performance of its subunits, such as departments or divisions.
At the
beginning of the year, senior managers give subordinate managers a frame of
reference, a set of specific financial or nonfinancial expectations to compare
actual results.
During the
course of the year, management accountants help managers investigate variations
from plans, such as unexpected decline in sales.
The use of
information technology resulted in less ongoing-budget related processes and
managers no longer take into account past performances, market feedback, or
anticipated changes in the ongoing-budget related processes.
43
What is a disadvantage to managers that use actual input data from past
periods to calculate price and efficiency variances?
Past data
is typically available at low cost.
Past data
is advantageous because it excludes inefficiencies.
Past data
can serve as benchmarks for continuous improvement.
Past data
can include inefficiencies and does not incorporate any changes expected for
the budget period.
Past data
represents quantities and prices that are real, rather than hypothetical.
44
Managers can use computer-based systems, such as enterprise resource
planning (ERP), to perform calculations for which of these planning models?
Cash
analysis.
Master
budget.
Production
analysis.
Sensitivity
analysis.
Financial
Planning Models.
45
maximize operating income, the manager:
maximizes
the contribution margin of the constrained, or bottleneck resource.
minimizes
the contribution margin of the constrained, or bottleneck resource.
eliminates
the contribution margin of the constrained, or bottleneck resource.
disregards
the contribution margin of the constrained, or bottleneck resource.
stops the
assembly operation process from running to eliminate work.
46 Which of the following is not true about the
framework for judging performance?
Budgets
enable a company's managers to measure actual performance against predicted
performance.
A
limitation of past results often incorporates past mistakes and substandard
performance.
Future
conditions can be expected to differ from the past.
The budget
is not the only benchmark companies use to evaluate past performance.
Using only
the budget fails to create an incentive for subordinates to set targets that
are relatively easy to achieve.
47
The managerial accountant at Bottles for Less makes internal transfers
at 175% of full cost. The Refining Division purchases 25,000 containers per
day, on average, from a local supplier, who delivers the containers through an
external shipper.
To determine if they can reduce costs, the company located an independent
supplier in Virginia who is willing to sell 25,000 containers at $20 each,
delivered to the Shipping Division in Wyoming. The company in Wyoming can ship
the 25,000 containers at a variable cost of $2.50 per container.
Required
Compute the full cost to the company if it purchases the containers from the
independent supplier.
$200,000
$250,000
$300,000
$450,000
$500,000
25,000 containers x $20.00 = $500000
48
There is no opportunity cost when:
other
products are considered.
there are
other uses for the product.
there are
other alternatives.
there are
other uses for a product.
there is
no alternative use of the equipment or space.
49
A__________ is the difference in total cost between two alternatives:
Insourcing
Outsourcing
Make-or-buy
decision
Business
function cost
Differential
cost
50 When managers make decision about adding or
dropping customers, managers only focus on:
Incremental costs only
Opportunity costs only
Allocating overhead costs
Incremental and opportunity
The value chain and not cost factors
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