1. The managers of process manufacturing systems focus on the series of processes needed to complete the production of products. (Points : 3)
True
False
2. Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers. (Points : 3)
True
False
3.
Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15% in the current year, how will unit variable cost and unit fixed cost be affected?
(Points : 3)
Unit Variable costs remain constant, unit fixed costs remain constant
Unit Variable costs increase, unit fixed costs decrease
Unit Variable costs decrease, unit fixed costs remain constant
Unit Variable costs remain constant, unit fixed costs decrease
4.
A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.
(Points : 3)
True
False
5. The responsibility for coordinating the preparation of a master budget should be assigned to the Chief Executive Officer. (Points : 3)
True
False
6. The usual starting point for preparing a master budget is forecasting or estimating: (Points : 3)
Expenditures
Production
Sales
7. Standard costs provide a basis for assessing the reasonableness of actual costs incurred for producing a product or service. (Points : 3)
True
False
8. The formula to compute direct labor rate variance is to calculate the difference between (Points : 3)
actual costs + (actual hours * standard rate)
actual costs - standard cost
(actual hours * standard rate) - standard costs
actual costs - (actual hours * standard rate)
9. Ace Company wants to give their managers the greatest amount of responsibility over their department's accounting. Which of the following responsibility centers would accomplish that goal? (Points : 3)
Cost center
Profit center
Investment center
Company center
10. A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n): (Points : 3)
profit center
investment center
volume center
cost center
11. Another name for relevant cost is unavoidable cost. (Points : 3)
True
False
12.
When a bottleneck occurs between two products, the company must determine the contribution margin for each product and manufacture the product that has the highest contribution margin per bottleneck hour.
(Points : 3)
True
False
13. An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available. (Points : 3)
True
False
14.
Costs that remain constant in total dollar amount as the level of activity changes are called:
(Points : 3)
fixed costs
mixed costs
opportunity costs
variable costs
15. As the level of output activity increases, fixed cost per unit remains constant. (Points : 3)
True
False
16. In Just-In-Time manufacturing large amounts of inventory is kept on hand so items can be produced just when they are needed by the customer. (Points : 3)
True
False
17. Capital budgeting is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell. (Points : 3)
True
False
18. The time value of money concept: (Points : 3)
Means that a dollar today is worth more than a dollar tomorrow.
Means that a dollar tomorrow is worth more than a dollar today.
Means that a dollar today is worth less than a dollar tomorrow
Means that "Time is Money".
19. Both cash dividends received and interest received are considered to be investing inflows. (Points : 3)
True
False
20. The payback method of evaluating an investment fails to consider how long the investment will generate cash inflows beyond the payback period. (Points : 3)
True
False
21. Explain the difference between fixed and variable costs AND give 2 examples of each for a car manufacturer. (Points : 10)
Fixed Costs are costs that remain constant in total and changes on a per unit basis with changes in the level of activity.
Examples of these are: Plant Manager's salary, and Rental of Property
Variable Costs are costs that remain constant on a per unit basis, but changes in total with changes in the level of activity.
Examples of these are: Direct Labor and Direct Materials
22.
For each item shown below, indicate whether it is a product cost or a period cost,and for each item that is a product cost, also indicate whether it is a direct cost or an indirect cost with respect to a unit of finished product.
a. Administrative salaries
b. Direct labor
c. Advertising
d. Property tax on the factory
e. Interest Expense
(Points : 10)
Cost Item Product or Period Cost Direct or Indirect
Product Period Direct Indirect
Administrative Salaries X
Direct Labor X X
Advertising X
Property Tax on Factory X X
Interest Expense X
23.
What is capital budgeting? Why are capital budgeting decisions often difficult and risky?
(Points : 10)
Capital Budgeting is the process of analyzing investment opportunities and decising which investments to undertake.
Capital budgeting decisions are difficult because they are usually based on estimates of future cash flows; and since such estimates are uncertain and since such decisions usually involve large sums of money invested for long periods of time, those decisions are usually irreversible which is why they are risky.
24.
Briefly describe both the payback period method and the net present value method of comparing investment alternatives.
(Points : 10)
Payback period Method is quite simple to apply, where you subtract cash inflows from initial investments until you arrive at the time it would take you to recover your initial investment. If a firm has a policy of accepting investments that is fully recovered within a certain time frame, then the payback period method would help the manager decide. If there is no restrictions, then a firm would usually undertake the investment that is recovered at a shorter time (provided it is profitable – or adds value to the firm)
Under the Net Present Value method, future cash flows are discounted to their present values using the firm's cost of capital and accepting investments with a positive net present values.
25. The two basic types of cost accounting systems are: (Points : 5)
Job order and process costing
Job order and customized product costing
Process costing and perpetual costing
Perpetual costing and periodic costing
26. Which of the following would most likely use a process cost system? (Points : 5)
Guitar manufacturer
Paint manufacturer
Custom furniture manufacturer
Tax consulting company
27. At Flint Company, the unit sales price is $84; the unit variable cost is $62 and fixed costs total $202,400. What is the break-even in units? (Points : 5)
8,400
9,000
9,200
9,400
28.
Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15% in the current year, how will unit variable cost and unit fixed cost be affected?
(Points : 5)
Unit Variable costs remain constant, unit fixed costs remain constant
Unit Variable costs increase, unit fixed costs decrease
Unit Variable costs decrease, unit fixed costs remain constant
Unit Variable costs remain constant, unit fixed costs decrease
29. When preparing a budget, the first budget to be prepared is the _______ budget. (Points : 5)
Administrative
Cash
Purchases
Sales
30. Ecology Company sells a biodegradable product called Run-All and has the following sales on account for the first four months of the current year:
Jan Feb March April
Sales in units: 2,000 2,000 3,000 4,000
The company is preparing a cash budget for April only. Based on past history accounts are collected 50% in the current month, 20% from the prior month, and 20% from 2 months back. Ten percent is considered uncollectible. How much cash will be collected in April?
(Points : 5)
8,700
4,000
3,000
2,000
31. When calculating a labor variance if the standard rate exceeds the actual rate this would be a ________ variance. (Points : 5)
favorable
unfavorable
standard
actual labor
32. The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is:
Actual hours used: 41,000
Actual rate per hour $14
Standard rate per hour $13
Standard hours for units produced 43,000
(Points : 5)
$26,000 Favorable
$41,000 Unfavorable
$41,000 Favorable
$26,000 Unfavorable
33. Ace Company wants to give their managers the greatest amount of responsibility over their department's accounting. Which of the following responsibility centers would accomplish that goal? (Points : 5)
Cost center
Profit center
Investment center
Company center
34. When making a decision to accept additional production work a manager needs to look closely at which of the follow: (Points : 5)
The additional revenue should be at least 25% above the current revenue without the additional production work
The incremental or differential costs of the additional work should not exceed incremental or differential revenue
The additional production should exceed the current capacity by no more than 15%
The combined incremental or differential costs of production should exceed the incremental or differential revenue of the total production run by 15%
35.
A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years and the company has already paid for $2,000 for permit fees. The $2,000 cost is an example of a(n):
(Points : 5)
Sunk costs
Fixed costs
Incremental costs
Uncontrollable costs
36. A retail store has three departments, 1, 2, and 3, and does general advertising that benefits all departments. Advertising expense totaled $41,000 for the year, and departmental sales were as follows. Which department would be allocated the highest amount of the advertising expense if the activity base is sales?
Sales: Department 1 $101,000
Department 2 $212,750
Department 3 $157,750
(Points : 5)
Department 1
Department 2
Department 3
Each department would have and equal amount since advertising benefits all departments
37. Kent Computers manufactures computer parts for 3 different models of computers: laptops, desktops, and mainframes in 3 different departments. They are looking for a way to allocate the cost of electric used by the manufacturing plant. Which of the following would be the most appropriate activity base? (Points : 5)
Number of computers manufactured by each division
Dollar value of the sales for each division
Square footage occupied by each division
The number of employees in each division
38. When using activity based costing method overhead allocation is typically based on: (Points : 5)
One rate
Two or more rates
At least 2 rates but usually many more
Volume based measures such as machine hours
39. The purpose of just-in-time (JIT) manufacturing is to eliminate? (Points : 5)
Payroll
Excess assembly time
Inventory
Employees
40. When using just-in-time (JIT) inventory, which of the following accounts may be eliminated? (Points : 5)
Raw materials inventory
Work in process
Cost of goods sold
Sales
41. A company is considering purchasing a machine for $21,200. The machine will generate an after-tax net income of $4,100 per year. What is the payback period for the new machine? (Points : 5)
9.2 years
11.8 years
0.19 years
5.2 years
42.
In business decision-making, managers typically examine the two fundamental factors of:
(Points : 5)
Risk and capital investment
Risk and rate of return
Capital investment and rate of return
Risk and payback
43. According to the Institute of Management Accountants Statement of Ethical Professional Practice, which of the following is NOT included: (Points : 5)
Competence
Integrity
Credibility
Compliance
44. An employee is dissatisfied with the resolution of an ethical conflict at his place of employment. According to the Institute of Management Accountants, the employee's next step should be to: (Points : 5)
Report the incident to the State Board of Accountancy
Contact the Institute of Management Accountants
Make the president of the company aware of the ethical conflict
Contact the next level of management who is not involved in the ethical conflict
True
False
2. Both process and job order cost systems maintain perpetual inventory accounts with subsidiary ledgers. (Points : 3)
True
False
3.
Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15% in the current year, how will unit variable cost and unit fixed cost be affected?
(Points : 3)
Unit Variable costs remain constant, unit fixed costs remain constant
Unit Variable costs increase, unit fixed costs decrease
Unit Variable costs decrease, unit fixed costs remain constant
Unit Variable costs remain constant, unit fixed costs decrease
4.
A production supervisor's salary that does not vary with the number of units produced is an example of a fixed cost.
(Points : 3)
True
False
5. The responsibility for coordinating the preparation of a master budget should be assigned to the Chief Executive Officer. (Points : 3)
True
False
6. The usual starting point for preparing a master budget is forecasting or estimating: (Points : 3)
Expenditures
Production
Sales
7. Standard costs provide a basis for assessing the reasonableness of actual costs incurred for producing a product or service. (Points : 3)
True
False
8. The formula to compute direct labor rate variance is to calculate the difference between (Points : 3)
actual costs + (actual hours * standard rate)
actual costs - standard cost
(actual hours * standard rate) - standard costs
actual costs - (actual hours * standard rate)
9. Ace Company wants to give their managers the greatest amount of responsibility over their department's accounting. Which of the following responsibility centers would accomplish that goal? (Points : 3)
Cost center
Profit center
Investment center
Company center
10. A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n): (Points : 3)
profit center
investment center
volume center
cost center
11. Another name for relevant cost is unavoidable cost. (Points : 3)
True
False
12.
When a bottleneck occurs between two products, the company must determine the contribution margin for each product and manufacture the product that has the highest contribution margin per bottleneck hour.
(Points : 3)
True
False
13. An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available. (Points : 3)
True
False
14.
Costs that remain constant in total dollar amount as the level of activity changes are called:
(Points : 3)
fixed costs
mixed costs
opportunity costs
variable costs
15. As the level of output activity increases, fixed cost per unit remains constant. (Points : 3)
True
False
16. In Just-In-Time manufacturing large amounts of inventory is kept on hand so items can be produced just when they are needed by the customer. (Points : 3)
True
False
17. Capital budgeting is the process of analyzing alternative long-term investments and deciding which assets to acquire or sell. (Points : 3)
True
False
18. The time value of money concept: (Points : 3)
Means that a dollar today is worth more than a dollar tomorrow.
Means that a dollar tomorrow is worth more than a dollar today.
Means that a dollar today is worth less than a dollar tomorrow
Means that "Time is Money".
19. Both cash dividends received and interest received are considered to be investing inflows. (Points : 3)
True
False
20. The payback method of evaluating an investment fails to consider how long the investment will generate cash inflows beyond the payback period. (Points : 3)
True
False
21. Explain the difference between fixed and variable costs AND give 2 examples of each for a car manufacturer. (Points : 10)
Fixed Costs are costs that remain constant in total and changes on a per unit basis with changes in the level of activity.
Examples of these are: Plant Manager's salary, and Rental of Property
Variable Costs are costs that remain constant on a per unit basis, but changes in total with changes in the level of activity.
Examples of these are: Direct Labor and Direct Materials
22.
For each item shown below, indicate whether it is a product cost or a period cost,and for each item that is a product cost, also indicate whether it is a direct cost or an indirect cost with respect to a unit of finished product.
a. Administrative salaries
b. Direct labor
c. Advertising
d. Property tax on the factory
e. Interest Expense
(Points : 10)
Cost Item Product or Period Cost Direct or Indirect
Product Period Direct Indirect
Administrative Salaries X
Direct Labor X X
Advertising X
Property Tax on Factory X X
Interest Expense X
23.
What is capital budgeting? Why are capital budgeting decisions often difficult and risky?
(Points : 10)
Capital Budgeting is the process of analyzing investment opportunities and decising which investments to undertake.
Capital budgeting decisions are difficult because they are usually based on estimates of future cash flows; and since such estimates are uncertain and since such decisions usually involve large sums of money invested for long periods of time, those decisions are usually irreversible which is why they are risky.
24.
Briefly describe both the payback period method and the net present value method of comparing investment alternatives.
(Points : 10)
Payback period Method is quite simple to apply, where you subtract cash inflows from initial investments until you arrive at the time it would take you to recover your initial investment. If a firm has a policy of accepting investments that is fully recovered within a certain time frame, then the payback period method would help the manager decide. If there is no restrictions, then a firm would usually undertake the investment that is recovered at a shorter time (provided it is profitable – or adds value to the firm)
Under the Net Present Value method, future cash flows are discounted to their present values using the firm's cost of capital and accepting investments with a positive net present values.
25. The two basic types of cost accounting systems are: (Points : 5)
Job order and process costing
Job order and customized product costing
Process costing and perpetual costing
Perpetual costing and periodic costing
26. Which of the following would most likely use a process cost system? (Points : 5)
Guitar manufacturer
Paint manufacturer
Custom furniture manufacturer
Tax consulting company
27. At Flint Company, the unit sales price is $84; the unit variable cost is $62 and fixed costs total $202,400. What is the break-even in units? (Points : 5)
8,400
9,000
9,200
9,400
28.
Last year, Smith Company sold 10,000 units of its only product. If sales increase by 15% in the current year, how will unit variable cost and unit fixed cost be affected?
(Points : 5)
Unit Variable costs remain constant, unit fixed costs remain constant
Unit Variable costs increase, unit fixed costs decrease
Unit Variable costs decrease, unit fixed costs remain constant
Unit Variable costs remain constant, unit fixed costs decrease
29. When preparing a budget, the first budget to be prepared is the _______ budget. (Points : 5)
Administrative
Cash
Purchases
Sales
30. Ecology Company sells a biodegradable product called Run-All and has the following sales on account for the first four months of the current year:
Jan Feb March April
Sales in units: 2,000 2,000 3,000 4,000
The company is preparing a cash budget for April only. Based on past history accounts are collected 50% in the current month, 20% from the prior month, and 20% from 2 months back. Ten percent is considered uncollectible. How much cash will be collected in April?
(Points : 5)
8,700
4,000
3,000
2,000
31. When calculating a labor variance if the standard rate exceeds the actual rate this would be a ________ variance. (Points : 5)
favorable
unfavorable
standard
actual labor
32. The following information describes a company's usage of direct labor in a recent period. The direct labor efficiency variance is:
Actual hours used: 41,000
Actual rate per hour $14
Standard rate per hour $13
Standard hours for units produced 43,000
(Points : 5)
$26,000 Favorable
$41,000 Unfavorable
$41,000 Favorable
$26,000 Unfavorable
33. Ace Company wants to give their managers the greatest amount of responsibility over their department's accounting. Which of the following responsibility centers would accomplish that goal? (Points : 5)
Cost center
Profit center
Investment center
Company center
34. When making a decision to accept additional production work a manager needs to look closely at which of the follow: (Points : 5)
The additional revenue should be at least 25% above the current revenue without the additional production work
The incremental or differential costs of the additional work should not exceed incremental or differential revenue
The additional production should exceed the current capacity by no more than 15%
The combined incremental or differential costs of production should exceed the incremental or differential revenue of the total production run by 15%
35.
A company is considering a new project that will cost $19,000. This project would result in additional annual revenues of $6,000 for the next 5 years and the company has already paid for $2,000 for permit fees. The $2,000 cost is an example of a(n):
(Points : 5)
Sunk costs
Fixed costs
Incremental costs
Uncontrollable costs
36. A retail store has three departments, 1, 2, and 3, and does general advertising that benefits all departments. Advertising expense totaled $41,000 for the year, and departmental sales were as follows. Which department would be allocated the highest amount of the advertising expense if the activity base is sales?
Sales: Department 1 $101,000
Department 2 $212,750
Department 3 $157,750
(Points : 5)
Department 1
Department 2
Department 3
Each department would have and equal amount since advertising benefits all departments
37. Kent Computers manufactures computer parts for 3 different models of computers: laptops, desktops, and mainframes in 3 different departments. They are looking for a way to allocate the cost of electric used by the manufacturing plant. Which of the following would be the most appropriate activity base? (Points : 5)
Number of computers manufactured by each division
Dollar value of the sales for each division
Square footage occupied by each division
The number of employees in each division
38. When using activity based costing method overhead allocation is typically based on: (Points : 5)
One rate
Two or more rates
At least 2 rates but usually many more
Volume based measures such as machine hours
39. The purpose of just-in-time (JIT) manufacturing is to eliminate? (Points : 5)
Payroll
Excess assembly time
Inventory
Employees
40. When using just-in-time (JIT) inventory, which of the following accounts may be eliminated? (Points : 5)
Raw materials inventory
Work in process
Cost of goods sold
Sales
41. A company is considering purchasing a machine for $21,200. The machine will generate an after-tax net income of $4,100 per year. What is the payback period for the new machine? (Points : 5)
9.2 years
11.8 years
0.19 years
5.2 years
42.
In business decision-making, managers typically examine the two fundamental factors of:
(Points : 5)
Risk and capital investment
Risk and rate of return
Capital investment and rate of return
Risk and payback
43. According to the Institute of Management Accountants Statement of Ethical Professional Practice, which of the following is NOT included: (Points : 5)
Competence
Integrity
Credibility
Compliance
44. An employee is dissatisfied with the resolution of an ethical conflict at his place of employment. According to the Institute of Management Accountants, the employee's next step should be to: (Points : 5)
Report the incident to the State Board of Accountancy
Contact the Institute of Management Accountants
Make the president of the company aware of the ethical conflict
Contact the next level of management who is not involved in the ethical conflict
