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Phil Russell
Aug 28, 2017 · 83 min read

ACC 350/ ACC350 WEEK 2 QUIZ 1 — OBJECTIVE 1.1–1.7 STRAYER LATEST

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OBJECTIVE 1.1–38 QUESTIONS & ANSWERS

1) Management accounting ________.

1. A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results

2. B) provides information about the company as a whole

3. C) reports information that has occurred in the past that is verifiable and reliable

4. D) provides information that is generally available only on a quarterly or annual basis

2) Managers use management accounting information to ________.

1. A) help external users such as investors, banks, regulators, and suppliers

2. B) communicate, develop, and implement strategies

3. C) communicate a firm’s financial position to investors, banks, regulators, and other outside parties

4. D) ensure that financial statements are consistent with the SEC rules

3) Financial accounting ________.

1. A) focuses on the future and includes activities such as preparing next year’s operating budget

2. B) must comply with GAAP (generally accepted accounting principles)

3. C) is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization

4. D) is prepared for the use of department heads and other employees

4) The primary user of financial accounting information is a ________.

1. A) factory shift supervisor

2. B) distribution manager

3. C) current shareholder

4. D) department manager

5) The primary user of management accounting information is a(n) ________.

1. A) the controller

2. B) a shareholder evaluating a stock investment

3. C) bondholder

4. D) external regulator

6) Financial accounting provides the primary source of information for ________.

1. A) decision making in the finishing department

2. B) improving customer service

3. C) preparing the income statement for shareholders

4. D) planning next year’s operating budget

7) Which of the following is true of management accounting information?

1. A) It focuses on documenting past business actions of a firm.

2. B) It is prepared based on SEC rules and FASB accounting principles.

3. C) It is prepared for shareholders.

4. D) It co-ordinates product design, production, and marketing decisions.

8) Which of the following statements refers to management accounting information?

1. A) There are no regulations governing the reports.

2. B) The reports are generally delayed and historical.

3. C) The audience tends to be stockholders, creditors, and tax authorities.

4. D) It primarily measures manager’s compensation on reported financial results.

9) Which of the following groups would be least likely to receive detailed management accounting reports?

1. A) stockholders

2. B) sales managers

3. C) production supervisors

4. D) distribution managers

10) Management accounting information typically includes ________.

1. A) tabulated results of customer satisfaction surveys

2. B) the cost of producing a product

3. C) the percentage of units produced that are defective

4. D) All of these answers are correct.Objective 1.2

OBJECTIVE 1.2–22 QUESTIONS & ANSWERS

1) Which of the following statements concerning an organization’s strategy is true?

1. A) Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.

2. B) Cost accountants formulate strategy in an organization since they have more inputs about costs.

3. C) A good strategy will always overcome poor implementation.

4. D) Businesses usually follow one of two broad strategies: offering a quality product at a high price, or offering a unique product or service priced lower than the competition.

2) Strategy specifies ________.

5. A) how an organization matches its own capabilities with the opportunities in the marketplace

6. B) standard procedures to ensure quality products

7. C) incremental changes for improved performance

8. D) the demand created for products and services

3) Which of the following is not a concern for management accountants in formulating a strategy?

9. A) identifying the most important warehouse location for the distribution of goods

10. B) substituting products that exist in the marketplace

11. C) strategizing compliance with GAAP (Generally Accepted Accounting Principles)

12. D) maintaining adequate fixed assets available to implement the strategy

4) Strategy is formulated ________.

13. A) by identifying the most important customers

14. B) by forecasting the composition of adequate fixed assets

15. C) based on the qualified opinion of external auditors

16. D) by eliminating sunk costs

5) In designing strategy, a company must match its opportunities in the marketplace with ________.

17. A) environment friendly goals

18. B) its resources and capabilities

19. C) branding opportunities

20. D) the requirements of credit rating agencies

6) Which of the following statements about customer value is true?

21. A) Customer value is shown in a corporation’s balance sheet.

22. B) Creating value for customers is an important part of planning and implementing strategy.

23. C) Customer value is the only focus that helps managers to formulate strategies.

24. D) Customer value is lost with increase in costs of the product.

7) A company’s strategy specifies how an organization matches its capabilities with the opportunities in the marketplace.

8) The two broad strategies that companies follow are cost leadership strategy and product differentiation strategy.

9) The best-designed strategies are valuable whether or not they are effectively implemented.

10) The key to a company’s success is creating value for customers while differentiating itself from its competitors.

OBJECTIVE 1.3–45 QUESTIONS & ANSWERS

1) Place the four business functions in the order they appear along the value chain:

2) R&D, production, and customer service are business functions that are all included as part of ________.

25. A) the value chain

26. B) benchmarking

27. C) customer relationship management

28. D) the supply chain

3) The value chain is the sequence of business functions in which ________.

29. A) value is deducted from the products or services of an organization

30. B) producing and delivering the product or service is of prime importance

31. C) products and services are evaluated with respect to their value to the supply chain

32. D) usefulness is added to the products or services of an organization

4) ________ is the generation of, and experimentation with, ideas related to new products, services, or processes.

33. A) Research and development

34. B) Design of products, services, or processes

35. C) Production

36. D) Marketing

5) ________ is the detailed planning and engineering and testing of products, services, or processes.

37. A) Plan of implementation

38. B) Design

39. C) Production

40. D) Research and development

6) Production is the ________.

41. A) generation of, and experimentation with, ideas related to new products, services, or processes

42. B) processing orders and shipping products or services to customers

43. C) acquisition, coordination, and assembly of resources to produce a product or deliver a service

44. D) detailed planning and engineering of products, services, or processes

7) Marketing is the ________.

45. A) generation of, and experimentation with, ideas related to new products, services, or processes

46. B) detailed planning and engineering of products, services, or processes

47. C) acquisition, coordination, and assembly of resources to produce a product or deliver a service

48. D) the manner by which companies promote and sell their products or services to customers or

8) Which of the following differentiates marketing from customer service?

49. A) Marketing is the process of promoting and selling products or services to customers or prospective customers, whereas customer service is the process of providing after-sales service to customers.

50. B) Marketing is the process of processing orders and shipping products or services to customers, whereas customer service is the process of providing additional information to customers about the product.

51. C) Marketing is the process of detailed planning, engineering, and testing of products and processes, whereas customer service concentrates on existing customers.

52. D) Marketing is the process of processing orders and shipping products or services to customers, whereas customer service is concerned with choosing the right customer for the product.

9) ________ is an after-sale support provided to customers.

53. A) Distribution

54. B) Customer service

55. C) Production

56. D) Marketing

10) ________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors.

57. A) Supply-chain analysis

58. B) Customer relationship management

59. C) Value-chain analysis

60. D) Continuous quality improvement
Objective 1.4–35 Questions & Answers

1) Place the five steps in the decision-making process in the correct order:

2) Which of the following is true of planning in decision making?

3) The most important planning tool is a ________.

4) A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________.

5) A budget ________.

6) Which of the following is true of planning?

7) A budget serves as much as a control tool as a planning tool because ________.

8) Which of the following is an example of an extrinsic reward?

9) Which of the following is an example of an intrinsic reward?

10) Linking rewards to performance ________.

Objective 1.5–22 Questions & Answers

1) Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?

2) The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes ________.

3) Which of the following is true of a budgeting system?

4) In a cost-benefit approach, managers should spend resources if the ________.

5) Technical consideration ________.

6) Which of the following statements about the cost-benefit approach is true?

7) Management is primarily a human activity that should focus on encouraging individuals to do their jobs better.

8) The technical considerations of budgeting encourage managers and other employees to strive for

9) The same cost concept used for external and internal reporting purposes.

10) Accounting methods for internal reporting purposes are specified by Generally Accepted Accounting Principles (GAAP).

Objective 1.6–21 Questions & Answers

1) Which of the following is true of line management?

2) Which of the following is true of staff management?

3) ________ includes providing financial information for reports to managers and shareholders, and overseeing the overall operations of the accounting system.

4) ________ includes banking and short- and long-term financing, investments, and cash management.

A) Risk management

5) Line management includes ________.

6) Staff management includes ________.

7) Which of the following is a responsibility of the CFO?

8) The ________ is primarily responsible for management accounting and financial accounting.

9) Which of the following reports to the CFO?

10) Which of the following is a function of a controller?

Objective 1.7–22 Questions & Answers

1) Which of the following issues is addressed by the Sarbanes-Oxley legislation?

2) The Standards of Ethical Conduct for management accountants include concepts related to ________.

3) Which item is an indication of competence under the Standards of Ethical Conduct?

4) Which of the following differentiates confidentiality and credibility under the Standards of Ethical

Conduct?

5) Which item is an indication of integrity under the Standards of Ethical Conduct?

6) Which item is an indication of credibility under the Standards of Ethical Conduct?

7) Ethical challenges for management accountants include ________.

8) Which of the following actions should a management accountant take first in confronting a potential ethical conflict concerning your direct supervisor?

9) If there is an ethical conflict concerning your direct supervisor, you may contact ________.

10) If there is an ethical conflict concerning your direct supervisor, when is it appropriate to contact authorities or individuals not employed by the organization?

ACC 350/ ACC350 WEEK 3 QUIZ 2 — OBJECTIVE 2.1–2.8 STRAYER LATEST

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Cost Accounting, 15e (Horngren/Datar/Rajan)

Chapter 2 An Introduction to Cost Terms and Purposes

Objective 2.1 (12 Questions with Answers)

1) An actual cost is ________.

2) Comparing budgeted costs to actual costs helps managers to improve ________.

3) Budgeted costs are ________.

4) Cost assignment ________.

5) A cost system determines the cost of a cost object by ________.

6) A cost object is anything for which a cost measurement is desired.

7) Costs are accounted for in two basic stages: assignment followed by accumulation.

8) An actual cost is the cost incurred–a historical or past cost.

9) Accountants define a cost as a resource to be sacrificed to achieve a specific objective.

10) A cost is a resource sacrificed or forgone to achieve a specific objective.

Objective 2.2 (26 Questions with Answers)

1) Which of the following factors affect the direct/indirect classification of a cost?

2) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________.

3) Cost accumulation is ________.

4) Which of the following statements about the direct/indirect cost classification is true?

5) Cost tracing is ________.

6) Cost allocation is ________.

7) The determination of a cost as either direct or indirect depends upon the ________.

8) Classifying a cost as either direct or indirect depends upon ________.

9) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.

10) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________.

Objective 2.3 (33 Questions with Answers)

1) Which of the following is true if the volume of sales increases?

2) Which of the following is a fixed cost?

3) Cost behavior refers to ________.

4) Which of the following is true if the production volume decreases?

5) At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually ________.

6) Variable costs ________.

7) Maize Plastics manufactures and sells 50 bottles per day. Fixed costs are $30,000 and the variable costs for manufacturing 50 bottles are $10,000. Each bottle is sold for $1,000. How would the daily profit be affected if the daily volume of sales drop by 10%?

8) Fixed costs depend on the ________.

9) Which one of the following is a variable cost for an insurance company?

10) Which of the following is a fixed cost for an automobile manufacturing plant?

Objective 2.4 (22 Questions with Answers)

1) A unit cost is computed by ________.

2) In making product mix and pricing decisions, managers should focus on ________.

3) When 20,000 units are produced, fixed costs are $16 per unit. Therefore, when 16,000 units are produced, fixed costs will ________.

4) When 20,000 units are produced, variable costs are $8 per unit. Therefore, when 10,000 units are produced ________.

5) Eigen Manufacturing Corp. provided the following information for last month:

If sales reduce to half of the amount in the next month, what is the projected operating income?

6) Genosis Metals provided the following information for last month:

If sales reduce to half the amount in the next month, what is the projected operating income?

7) Grip Manufacturing currently produces 1,000 tires per month. The following per unit data for 1,000 tires apply for sales to regular customers:

The plant has capacity for 3,000 tires and is considering expanding production to 2,000 tires. What is the total cost of producing 2,000 tires?

8) XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually. Currently XIAN produces 40,000 valves and is thinking about increasing production to 45,000 valves next year. What is the most likely behavior of total manufacturing costs and unit manufacturing costs given this change?

9) Ridez Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers:

The plant has capacity for 3,000 bicycles and is considering expanding production to 2,000 bicycles. What is the per unit cost of producing 2,000 bicycles?

Buildz Manufacturing currently produces 1,000 tables per month. The following per unit data for 1,000 tables apply for sales to regular customers:

10) The plant has capacity for 3,000 tables and is considering expanding production to 3,000 tables. What is the total cost of producing 3,000 tables?

Objective 2.5 (67 Questions with Answers)

1) Pederson Company reported the following:

What is the amount of gross profit margin?

2) ________ sector companies purchase materials and components and convert them into finished goods.

3) Merchandising-sectors ________.

4) Service-sector companies ________.

5) Wages paid to machine operators on an assembly line are classified as a ________.

6) The following information pertains to Alleigh’s Mannequins:

What is the amount of gross margin?

7) Which of the following companies is part of the service sector of our economy?

8) Which of the following companies is part of the merchandising sector of our economy?

9) Which of the following companies is part of the manufacturing sector of our economy?

10) Yahoo, an Internet search firm, would be classified as a(n) ________.

Objective 2.6 (31 Questions with Answers)

1) Which of the following formulas determine cost of goods sold in a merchandising entity?

2) Which of the following formulas determine cost of goods sold in a manufacturing entity?

3) A company reported revenues of $375,000, cost of goods sold of $118,000, selling expenses of $11,000, and total operating costs of $70,000. Gross margin for the year is ________.

4) What is Leslie’s cost of goods sold?

5) What is Leslie’s gross margin (or gross profit)?

6) Inventoriable costs and period costs flow through the income statement at a merchandising company similar to the way costs flow at a manufacturing company.

7) Cost of goods sold refers to the products brought to completion, whether they were started before or during the current accounting period.

8) Springfield Manufacturing produces electronic storage devices, and uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and indirect manufacturing costs. Total indirect manufacturing costs for January were $300 million, and were allocated to each product on the basis of direct manufacturing labor costs of each line. Summary data (in millions) for January for the most popular electronic storage device, the Big Bertha, was:

9) Helmer Sporting Goods Company manufactured 100,000 units in 2015 and reported the following costs:

10) Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

Objective 2.7 (26 Questions with Answers)

1) Which of the following is a manufacturing overhead cost?

2) Flyers Inc., had the following activities during 2015:

3) Product cost for reimbursement under government contracts includes ________.

4) On the assembly floor, Crystal is paid $20 an hour for straight-time assuming 8 working hours a day and five working days in a week. She is paid $30 an hour for overtime. One week she worked 52 hours.

5) In the manufacturing plant, Alex is paid $40 an hour for straight-time and $60 an hour for overtime. One week she worked 54 hours, which included 8 hours of overtime, and 6 hours of idle time caused by material shortages.

6) Bosely Manufacturing Co. wants to classify costs for the product produced at its facility. The company produces only one product at the facility and operates continually. The cost categories are:

7) Which of the following is included in product cost for pricing and product-mix decisions?

8) Under GAAP, only ________ can be assigned to inventories in the financial statements.

9) Product costs for financial statements may refer to ________.

10) Under GAAP, for the purposes of calculating inventory costs, product costs include ________.

Objective 2.8 (7 Questions with Answers)

1) Which of the following influences the make or buy decision to the company?

2) Budgeting often plays a major role in affecting behavior and decisions.

3) Cost accounting and cost management include calculating various costs, obtaining financial and nonfinancial information, and analyzing relevant information for decision making.

4) An efficient management accounting system traces direct costs and allocates indirect costs to products.

5) Management accountants help managers identify what information is relevant and what information is

irrelevant that help in decision making.

6) When making strategic decisions about which products and how much to produce, managers must need to distinguish fixed costs from variable costs.

7) A company is considering buying a product at $15 per unit, the in-house manufacturing of the same product is $17. The fixed cost per unit is $3 is included in the $17 in-house product manufacturing cost. What should the company do in this scenario?

ACC 350/ ACC350 WEEK 4 QUIZ 3 — OBJECTIVE 3.1–3.9 STRAYER LATEST

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Cost Accounting, 15e (Horngren/Datar/Rajan)

Chapter 3 Cost-Volume-Profit Analysis

Objective 3.1 (43 Questions with Answers)

1) Managers use cost-volume-profit (CVP) analysis to ________.

2) One of the first steps to take when using CVP analysis to help make decisions is ________.

3) Which of the following is true of cost-volume-profit analysis?

4) The selling price per unit less the variable cost per unit is the ________.

5) In the graph method of CVP analysis, the total revenues line always begins from the x-axis and the total costs line begins from the fixed cost line.

6) Which of the following is an assumption of CVP analysis?

7) Which of the following is true of CVP analysis?

8) A revenue driver is defined as ________.

9) As per CVP, operating income calculations use ________.

10) Which of the following is true about the assumptions underlying basic CVP analysis?

Objective 3.2 (43 Questions with Answers)

1) Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. To achieve $150,000 in operating income, sales must total ________.

2) Breakeven point in units is ________.

3) The number of units that must be sold to achieve $40,000 of operating income is ________.

4) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. Breakeven point in units is ________.

5) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of

sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. The number of helicopters that must be sold to achieve $300,000 of operating income is ________.

6) At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs total $6,000. The 2,001st unit sold will contribute ________ to profits.

7) The breakeven point is the activity level where ________.

8) Breakeven point in units is ________.

9) Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000. The breakeven point in sales dollars is ________.

10) The breakeven point revenues is calculated by dividing ________.

11) At breakeven point, ________.

12) The breakeven point decreases if ________.

13) Assume only the specified parameters change in a CVP analysis. The contribution margin percentage increases when ________.

14) What is the breakeven point in units, assuming a product’s selling price is $100, fixed costs are $16,000, unit variable costs are $20, and operating income is $5,200?

15) If unit outputs exceed the breakeven point ________.

Objective 3.3 (21 Questions with Answers)

1) Stephanie’s Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%?

2) Zeta Corp’s most recent income statement is given below.

3) Black Pearl, Inc., sells a single product. The company’s most recent income statement is given below.

4) The selling price per unit is $25, variable cost per unit $15, and fixed cost per unit is $4. When this company operates above the breakeven point, the sale of one more unit will increase net income by $6.

5) A company with sales of $50,000, variable costs of $35,000, and fixed costs of $25,000 will earn a net income of $15,000.

6) Which of the following statements about net income (NI) is true?

7) What minimum volume of sales dollars is required to earn an after-tax net income of $30,000?

9) In CVP analysis, focusing on target net income rather than operating income ________.

8) What is the number of units that must be sold to earn an after-tax net income of $42,000?

10) Which of the following is true of net income?

Objective 3.4 (16 Questions with Answers)

1) Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________.

2) Which of the following forms a part of decision making in CVP analysis?

3) All else being equal, a reduction in selling price will ________.

4) All else being equal, an increase in advertising expenditures will ________.

5) Blistre Company operates on a contribution margin of 20% and currently has fixed costs of $500,000. Next year, sales are projected to be $3,000,000. An advertising campaign is being evaluated that costs an additional $80,000. How much would sales have to increase to justify the additional expenditure?

6) Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500

units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose management believes that a $75,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure?

7) Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500

units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented ________.

8) Craylon Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25. The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. Suppose that management believes that a $10,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure.

9) Craylon Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25.

The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. What is the effect on operating income with the increase of advertising expenses?

10) If contribution margin decreases by $1 per unit, then operating profits will increase by $1 per unit.

Objective 3.5 (12 Questions with Answers)

1) The margin of safety is the difference between ________.

2) To apply CVP analysis in the hotel industry, which of the following is the most important measure of

output?

3) Stones Manufacturing, sells a marble slab for $1,000. Fixed costs are $30,000, while the variable costs are $400 per slab. The company currently plans to sell 200 slabs this month. What is the margin of safety assuming 75 slabs are budgeted?

4) Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If variable costs decrease by $1 per unit, the new margin of safety is ________.

5) Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If a change is made in one parameter of CVP analysis, it is an example of ________.

6) Sensitivity analysis is a “what-if” technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

7) Margin of safety measures the difference between budgeted revenues and breakeven revenues.

8) If a company’s breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of safety percentage is 20%.

9) Sensitivity analysis helps to evaluate the risk associated with decisions.

10) Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000.

Objective 3.6 (27 Questions with Answers)

1) Which option provides the least amount of risk?

2) Which option has the lowest breakeven point?

3) Which option provides the greatest operating income if 600 people attend?

4) Which option provides the greatest degree of operating leverage if 600 people attend?

5) Option one: Fixed costs of $10,000 and a breakeven point of 500 units.

6) Sales of Blistre Autos are 350,000, variable cost is 200,000, fixed cost is 75,000, tax rate is 20%. Calculate the operating leverage of the company.

7) In a company with low operating leverage, ________.

8) If the contribution margin ratio is 0.40, targeted operating income is $80,000, and targeted sales volume in dollars is $500,000, then the degree of operating leverage is ________.

9) If the contribution margin ratio is 0.40, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________.

10) If the contribution margin ratio is 0.25, targeted operating income is $50,000, and targeted sales volume in dollars is $250,000, then total fixed costs are ________.

Objective 3.7 (25 Questions with Answers)

1) What is the breakeven point assuming the sales mix consists of two units of Product X and one unit of Product Y?

2) What is the operating income, assuming actual sales total 150,000 units, and the sales mix is two units of Product X and one unit of Product Y?

3) ) If the sales mix shifts to one unit of Product X and two units of Product Y, then the weighted-average contribution margin will ________.

4) If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.

5) What is the breakeven point, assuming the sales mix consists of three units of Product A and one unit of Product B?

6) What is the operating income of Jeffries Corporation, assuming actual sales total 25,000 units, and the sales mix is three units of Product A and one unit of Product B?

7) If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will ________.

8) If the sales mix shifts to four units of Product A and one unit of Product B, then the breakeven point will ________.

9) Assuming a constant mix of 3 units of X for every 1 unit of Y.

10) In multiproduct situations, when sales mix shifts toward the product with the lowest contribution margin then ________.

Objective 3.8 (5 Questions with Answers)

1) Multiple cost drivers ________.

2) A nonprofit organization aids the unemployed by supplementing their incomes by $5,000 annually, while they seek new employment skills. The organization has fixed costs of $200,000 and the budgeted appropriation for the year totals $700,000. How many individuals can receive financial assistance this year?

3) Helping Hands is a nonprofit organization that supplies electric fans during summer for individuals in need. Fixed costs are $225,000. The fans cost $25.00 each. The organization has a budgeted appropriation of $675,000. How many people can receive a fan during summer?

4) To apply CVP analysis in not-for profit organization ________.

5) Which of the following is an output measure for a hospital?

Objective 3.9 (7 Questions with Answers)

1) Gross margin is ________.

2) In the merchandising sector ________.

3) In the manufacturing sector, ________.

4) Contribution margin and gross margin are terms that can be used interchangeably.

5) Gross Margin will always be greater than contribution margin.

6) Jacob’s Manufacturing sales is equal to production.If Jacob’s Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of $180,000, a Contribution Income Statement emphasizing contribution margin would show a different operating income.

7) Beta Corp reported the following:

Objective 3.A (10 Questions with Answers)

1) What would be the expected monetary value for Avalia Corp using the probability method?

2) Lobster Liquidators will make $500,000 if the fishing season weather is good, $200,000 if the weather is fair, and would actually lose $50,000 if the weather is poor during the season. If the weather service gives a 40% probability of good weather, a 25% probability of fair weather, and a 35% probability of poor weather, what is the expected monetary value for Lobster Liquidators?

3) How many actions and events will a decision table contain?

4) Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

5) An expected value is the weighted average of the outcomes, with the probability of each outcome

6) When there are multiple cost drivers the simple CVP formula of Q = (FC + OI)/CMU can still be used.

7) A decision table is a summary of the alternative actions, events, outcomes, and probabilities of events.

8) Produce Company needs to know the pounds of apples to have on hand each day. Each pound of apples costs $0.50 and can be sold for $0.80. Unsold apples are worthless at the end of the day. The following demands were found after studying the last six months’ sales:

9) Lauren had been a manager of a major hotel chain for 15 years. Due to a hotel owner’s illness, Lauren was offered the opportunity to purchase a hotel near a vacation area she had often visited. It was a great place surrounded by mountains and known for its scenic beauty. After obtaining a lawyer and an accountant to assist her, Lauren did an analysis of the business and evaluated several contingencies relating to various scenarios. Since the expected monetary value of the various scenarios was much higher than the price of the hotel, she decided to purchase the hotel. She resigned her position, obtained a loan, and purchased the hotel. The following year, there was a severe economic downturn and also a very bad weather season that reduced the number of guests and also caused a resulting mold situation in the hotel building that required expensive repair work. Lauren ran short of cash, became emotionally distraught, and eventually had to sell the hotel at a significant loss. Was it a bad decision for her to purchase the hotel instead of keeping her other managerial position? Explain.

Answer: A decision made has its own ups and downs. Decisions were made based on information that was available at the time of evaluating and making the decision. Since she used to visit the place often for her vacation, she should have known about the occupancy level of the hotel and should have known on the area’s climatic conditions and its implications. However, a downturn in the market is unpredictable. She should have made an alternative plan in the event of an economic downturn. Thus, it is a case of misfortune and carelessness in evaluating the project completely.

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Objective 1.1 (38 Questions with Answers)

1) Management accounting ________.

2) Managers use management accounting information to ________.

3) Financial accounting ________.

4) The primary user of financial accounting information is a ________.

5) The primary user of management accounting information is a(n) ________.

6) Financial accounting provides the primary source of information for ________.

7) Which of the following is true of management accounting information?

8) Which of the following statements refers to management accounting information?

9) Which of the following groups would be least likely to receive detailed management accounting reports?

10) Management accounting information typically includes ________.

OBJECTIVE 1.2 (22 QUESTIONS WITH ANSWERS)

1) Which of the following statements concerning an organization’s strategy is true?

2) Strategy specifies ________.

3) Which of the following is not a concern for management accountants in formulating a strategy?

4) Strategy is formulated ________.

5) In designing strategy, a company must match its opportunities in the marketplace with ________.

6) Which of the following statements about customer value is true?

7) A company’s strategy specifies how an organization matches its capabilities with the opportunities in the marketplace.

8) The two broad strategies that companies follow are cost leadership strategy and product differentiation strategy.

9) The best-designed strategies are valuable whether or not they are effectively implemented.

10) The key to a company’s success is creating value for customers while differentiating itself from its competitors

OBJECTIVE 1.3 (45 QUESTIONS WITH ANSWERS)

1) Place the four business functions in the order they appear along the value chain:

2) R&D, production, and customer service are business functions that are all included as part of ________.

3) The value chain is the sequence of business functions in which ________.

4) ________ is the generation of, and experimentation with, ideas related to new products, services, or processes.

5) ________ is the detailed planning and engineering and testing of products, services, or processes.

6) Production is the ________.

7) Marketing is the ________.

8) Which of the following differentiates marketing from customer service?

9) ________ is an after-sale support provided to customers.

10) ________ is a strategy that integrates people and technology in all business functions to enhance relationships with customers, partners, and distributors.

OBJECTIVE 1.4 (35 QUESTIONS WITH ANSWERS)

1) Place the five steps in the decision-making process in the correct order:

2) Which of the following is true of planning in decision making?

3) The most important planning tool is a ________.

4) A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________.

5) A budget ________.

6) Which of the following is true of planning?

7) A budget serves as much as a control tool as a planning tool because ________.

8) Which of the following is an example of an extrinsic reward?

9) Which of the following is an example of an intrinsic reward?

10) Linking rewards to performance ________.

OBJECTIVE 1.5 (12 QUESTIONS WITH ANSWERS)

1) Which of the following is a guideline used by management accountants to assist in strategic and operational decision making?

2) The scenario that resources should be spent if the expected benefits to the company exceed the expected costs describes ________.

3) Which of the following is true of a budgeting system?

4) In a cost-benefit approach, managers should spend resources if the ________.

5) Technical consideration ________.

6) Which of the following statements about the cost-benefit approach is true?

7) Management is primarily a human activity that should focus on encouraging individuals to do their jobs better.

8) The technical considerations of budgeting encourage managers and other employees to strive for achieving the goals of the organization.

9) The same cost concept used for external and internal reporting purposes.

10) Accounting methods for internal reporting purposes are specified by Generally Accepted Accounting Principles (GAAP).

OBJECTIVE 1.6 (21 QUESTIONS WITH ANSWERS)

1) Which of the following is true of line management?

2) Which of the following is true of staff management?

3) ________ includes providing financial information for reports to managers and shareholders, and overseeing the overall operations of the accounting system.

4) ________ includes banking and short- and long-term financing, investments, and cash management.

5) Line management includes ________.

6) Staff management includes ________.

7) Which of the following is a responsibility of the CFO?

8) The ________ is primarily responsible for management accounting and financial accounting.

9) Which of the following reports to the CFO?

10) Which of the following is a function of a controller?

OBJECTIVE 1.7 (22 QUESTIONS WITH ANSWERS)

1) Which of the following issues is addressed by the Sarbanes-Oxley legislation?

2) The Standards of Ethical Conduct for management accountants include concepts related to ________.

3) Which item is an indication of competence under the Standards of Ethical Conduct?

4) Which of the following differentiates confidentiality and credibility under the Standards of Ethical

Conduct?

5) Which item is an indication of integrity under the Standards of Ethical Conduct?

6) Which item is an indication of credibility under the Standards of Ethical Conduct?

7) Ethical challenges for management accountants include ________.

8) Which of the following actions should a management accountant take first in confronting a potential ethical conflict concerning your direct supervisor?

9) If there is an ethical conflict concerning your direct supervisor, you may contact ________.

10) If there is an ethical conflict concerning your direct supervisor, when is it appropriate to contact authorities or individuals not employed by the organization?

OBJECTIVE 2.1 (12 QUESTIONS WITH ANSWERS)

1) An actual cost is ________.

2) Comparing budgeted costs to actual costs helps managers to improve ________.

3) Budgeted costs are ________.

4) Cost assignment ________.

5) A cost system determines the cost of a cost object by ________.

6) A cost object is anything for which a cost measurement is desired.

7) Costs are accounted for in two basic stages: assignment followed by accumulation.

8) An actual cost is the cost incurred–a historical or past cost.

9) Accountants define a cost as a resource to be sacrificed to achieve a specific objective.

OBJECTIVE 2.2 (26 QUESTIONS WITH ANSWERS)

1) Which of the following factors affect the direct/indirect classification of a cost?

2) The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________.

3) Cost accumulation is ________.

4) Which of the following statements about the direct/indirect cost classification is true?

5) Cost tracing is ________.

6) Cost allocation is ________.

7) The determination of a cost as either direct or indirect depends upon the ________.

8) Classifying a cost as either direct or indirect depends upon ________.

9) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.

10) A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of indirect cost for the soccer equipment line is the ________.

OBJECTIVE 2.3 (33 QUESTIONS WITH ANSWERS)

1) Which of the following is true if the volume of sales increases?

2) Which of the following is a fixed cost?

3) Cost behavior refers to ________.

4) Which of the following is true if the production volume decreases?

5) At a plant where a union agreement sets annual salaries and conditions, annual labor costs usually ________.

6) Variable costs ________.

7) Maize Plastics manufactures and sells 50 bottles per day. Fixed costs are $30,000 and the variable costs for manufacturing 50 bottles are $10,000. Each bottle is sold for $1,000. How would the daily profit be affected if the daily volume of sales drop by 10%?

8) Fixed costs depend on the ________.

9) Which one of the following is a variable cost for an insurance company?

10) Which of the following is a fixed cost for an automobile manufacturing plant?

OBJECTIVE 2.4 (22 QUESTIONS WITH ANSWERS)

1) A unit cost is computed by ________.

2) In making product mix and pricing decisions, managers should focus on ________.

3) When 20,000 units are produced, fixed costs are $16 per unit. Therefore, when 16,000 units are produced, fixed costs will ________.

4) When 20,000 units are produced, variable costs are $8 per unit. Therefore, when 10,000 units are produced ________.

5) Eigen Manufacturing Corp. provided the following information for last month:

6) Genosis Metals provided the following information for last month:

7) Grip Manufacturing currently produces 1,000 tires per month. The following per unit data for 1,000 tires apply for sales to regular customers:

8) XIAN Manufacturing produces a unique valve, and has the capacity to produce 50,000 valves annually.

9) Ridez Manufacturing currently produces 1,000 bicycles per month. The following per unit data apply for sales to regular customers:

10) The plant has capacity for 3,000 tables and is considering expanding production to 3,000 tables. What is the total cost of producing 3,000 tables?

10) A cost is a resource sacrificed or forgone to achieve a specific objective.

11) Managers use cost accumulation data to make decisions and implement them.

12) Lucas Manufacturing has three cost objects that it uses to accumulate costs for its manufacturing plants. They are:

OBJECTIVE 2.5 (67 QUESTIONS WITH ANSWERS)

1) Pederson Company reported the following:

What is the amount of gross profit margin?

2) ________ sector companies purchase materials and components and convert them into finished goods.

3) Merchandising-sectors ________.

4) Service-sector companies ________.

5) Wages paid to machine operators on an assembly line are classified as a ________.

6) The following information pertains to Alleigh’s Mannequins:

7) Which of the following companies is part of the service sector of our economy?

8) Which of the following companies is part of the merchandising sector of our economy?

9) Which of the following companies is part of the manufacturing sector of our economy?

10) Yahoo, an Internet search firm, would be classified as a(n) ________.

OBJECTIVE 2.6 (31 QUESTIONS WITH ANSWERS)

1) Which of the following formulas determine cost of goods sold in a merchandising entity?

2) Which of the following formulas determine cost of goods sold in a manufacturing entity?

3) A company reported revenues of $375,000, cost of goods sold of $118,000, selling expenses of $11,000, and total operating costs of $70,000. Gross margin for the year is ________.

4) What is Leslie’s cost of goods sold?

5) What is Leslie’s gross margin (or gross profit)?

6) Inventoriable costs and period costs flow through the income statement at a merchandising company similar to the way costs flow at a manufacturing company.

7) Cost of goods sold refers to the products brought to completion, whether they were started before or during the current accounting period.

8) Springfield Manufacturing produces electronic storage devices, and uses the following three-part classification for its manufacturing costs: direct materials, direct manufacturing labor, and indirect manufacturing costs. Total indirect manufacturing costs for January were $300 million, and were allocated to each product on the basis of direct manufacturing labor costs of each line. Summary data (in millions) for January for the most popular electronic storage device, the Big Bertha, was:

9) Helmer Sporting Goods Company manufactured 100,000 units in 2015 and reported the following costs:

10) Messinger Manufacturing Company had the following account balances for the quarter ending March 31, unless otherwise noted:

OBJECTIVE 2.7 (26 QUESTIONS WITH ANSWERS)

1) Which of the following is a manufacturing overhead cost?

2) Flyers Inc., had the following activities during 2015:

3) Product cost for reimbursement under government contracts includes ________.

4) On the assembly floor, Crystal is paid $20 an hour for straight-time assuming 8 working hours a day and five working days in a week. She is paid $30 an hour for overtime. One week she worked 52 hours.

5) In the manufacturing plant, Alex is paid $40 an hour for straight-time and $60 an hour for overtime. One week she worked 54 hours, which included 8 hours of overtime, and 6 hours of idle time caused by material shortages.

6) Bosely Manufacturing Co. wants to classify costs for the product produced at its facility. The company produces only one product at the facility and operates continually. The cost categories are:

7) Which of the following is included in product cost for pricing and product-mix decisions?

8) Under GAAP, only ________ can be assigned to inventories in the financial statements.

9) Product costs for financial statements may refer to ________.

10) Under GAAP, for the purposes of calculating inventory costs, product costs include ________.

OBJECTIVE 2.8 (7 QUESTIONS WITH ANSWERS)

1) Which of the following influences the make or buy decision to the company?

2) Budgeting often plays a major role in affecting behavior and decisions.

3) Cost accounting and cost management include calculating various costs, obtaining financial and nonfinancial information, and analyzing relevant information for decision making.

4) An efficient management accounting system traces direct costs and allocates indirect costs to products.

5) Management accountants help managers identify what information is relevant and what information is

irrelevant that help in decision making.

6) When making strategic decisions about which products and how much to produce, managers must need to distinguish fixed costs from variable costs.

7) A company is considering buying a product at $15 per unit, the in-house manufacturing of the same product is $17. The fixed cost per unit is $3 is included in the $17 in-house product manufacturing cost. What should the company do in this scenario?

Answer: If the company purchases the product from the vendor it will incur a cost of $15 + $3 = $18, whereas it manufactures the product in-house for $17. Thus, the company saves $1 per unit by manufacturing in-house. Hence, it should manufacture the product in-house.

OBJECTIVE 3.1 (43 QUESTIONS WITH ANSWERS)

1) Managers use cost-volume-profit (CVP) analysis to ________.

2) One of the first steps to take when using CVP analysis to help make decisions is ________.

3) Which of the following is true of cost-volume-profit analysis?

4) The selling price per unit less the variable cost per unit is the ________.

5) In the graph method of CVP analysis, the total revenues line always begins from the x-axis and the total costs line begins from the fixed cost line.

6) Which of the following is an assumption of CVP analysis?

7) Which of the following is true of CVP analysis?

8) A revenue driver is defined as ________.

9) As per CVP, operating income calculations use ________.

10) Which of the following is true about the assumptions underlying basic CVP analysis?

OBJECTIVE 3.2 (43 QUESTIONS WITH ANSWERS)

1) Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. To achieve $150,000 in operating income, sales must total ________.

2) Breakeven point in units is ________.

3) The number of units that must be sold to achieve $40,000 of operating income is ________.

4) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. Breakeven point in units is ________.

5) Sky High sells helicopters. During the current year, 100 helicopters were sold resulting in $820,000 of

sales revenue, $250,000 of variable costs, and $342,000 of fixed costs. The number of helicopters that must be sold to achieve $300,000 of operating income is ________.

6) At the breakeven point of 2,000 units, variable costs total $4,000 and fixed costs total $6,000. The 2,001st unit sold will contribute ________ to profits.

7) The breakeven point is the activity level where ________.

8) Breakeven point in units is ________.

9) Sales total $400,000 when variable costs total $300,000 and fixed costs total $50,000. The breakeven point in sales dollars is ________.

10) The breakeven point revenues is calculated by dividing ________.

OBJECTIVE 3.3 (21 QUESTIONS WITH ANSWERS)

1) Stephanie’s Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%?

2) Zeta Corp’s most recent income statement is given below.

3) Black Pearl, Inc., sells a single product. The company’s most recent income statement is given below.

4) The selling price per unit is $25, variable cost per unit $15, and fixed cost per unit is $4. When this company operates above the breakeven point, the sale of one more unit will increase net income by $6.

5) A company with sales of $50,000, variable costs of $35,000, and fixed costs of $25,000 will earn a net income of $15,000.

6) Which of the following statements about net income (NI) is true?

7) What minimum volume of sales dollars is required to earn an after-tax net income of $30,000?

8) What is the number of units that must be sold to earn an after-tax net income of $42,000?

9) In CVP analysis, focusing on target net income rather than operating income ________.

10) Which of the following is true of net income?

OBJECTIVE 3.4 (16 QUESTIONS WITH ANSWERS)

1) Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________.

2) Which of the following forms a part of decision making in CVP analysis?

3) All else being equal, a reduction in selling price will ________.

4) All else being equal, an increase in advertising expenditures will ________.

5) Blistre Company operates on a contribution margin of 20% and currently has fixed costs of $500,000. Next year, sales are projected to be $3,000,000. An advertising campaign is being evaluated that costs an additional $80,000. How much would sales have to increase to justify the additional expenditure?

6) Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500

units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose management believes that a $75,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure?

7) Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500

units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose that management believes that a 10% reduction in the selling price will result in a 10% increase in sales. If this proposed reduction in selling price is implemented ________.

9) Craylon Manufacturing produces a single product that sells for $100. Variable costs per unit equal $25.

The company expects total fixed costs to be $60,000 for the next month at the projected sales level of 1,000 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately. What is the effect on operating income with the increase of advertising expenses?

10) If contribution margin decreases by $1 per unit, then operating profits will increase by $1 per unit.

OBJECTIVE 3.5 (12 QUESTIONS WITH ANSWERS)

1) The margin of safety is the difference between ________.

2) To apply CVP analysis in the hotel industry, which of the following is the most important measure of

output?

3) Stones Manufacturing, sells a marble slab for $1,000. Fixed costs are $30,000, while the variable costs are $400 per slab. The company currently plans to sell 200 slabs this month. What is the margin of safety assuming 75 slabs are budgeted?

4) Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If variable costs decrease by $1 per unit, the new margin of safety is ________.

5) Globus Autos sells a single product. 8,000 units were sold resulting in $80,000 of sales revenue, $20,000 of variable costs, and $10,000 of fixed costs. If a change is made in one parameter of CVP analysis, it is an example of ________.

6) Sensitivity analysis is a “what-if” technique that managers use to examine how a result will change if the originally predicted data are not achieved or if an underlying assumption changes.

7) Margin of safety measures the difference between budgeted revenues and breakeven revenues.

8) If a company’s breakeven revenue is $1,000 and its budgeted revenue is $1,250, then its margin of safety percentage is 20%.

9) Sensitivity analysis helps to evaluate the risk associated with decisions.

10) Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000.

OBJECTIVE 3.6 (27 QUESTIONS WITH ANSWERS)

Answer the following questions using the information below:

1) Which option provides the least amount of risk?

2) Which option has the lowest breakeven point?

3) Which option provides the greatest operating income if 600 people attend?

4) Which option provides the greatest degree of operating leverage if 600 people attend?

5) Option one: Fixed costs of $10,000 and a breakeven point of 500 units.

6) Sales of Blistre Autos are 350,000, variable cost is 200,000, fixed cost is 75,000, tax rate is 20%. Calculate the operating leverage of the company.

7) In a company with low operating leverage, ________.

8) If the contribution margin ratio is 0.40, targeted operating income is $80,000, and targeted sales volume in dollars is $500,000, then the degree of operating leverage is ________.

9) If the contribution margin ratio is 0.40, targeted operating income is $50,000, and fixed costs are $75,000, then sales volume in dollars is ________.

10) If the contribution margin ratio is 0.25, targeted operating income is $50,000, and targeted sales volume in dollars is $250,000, then total fixed costs are ________.

OBJECTIVE 3.7 (25 QUESTIONS WITH ANSWERS)

1) What is the breakeven point assuming the sales mix consists of two units of Product X and one unit of Product Y?

2) What is the operating income, assuming actual sales total 150,000 units, and the sales mix is two units of Product X and one unit of Product Y?

3) ) If the sales mix shifts to one unit of Product X and two units of Product Y, then the weighted-average contribution margin will ________.

4) If the sales mix shifts to one unit of Product X and two units of Product Y, then the breakeven point will ________.

5) What is the breakeven point, assuming the sales mix consists of three units of Product A and one unit of Product B?

6) What is the operating income of Jeffries Corporation, assuming actual sales total 25,000 units, and the sales mix is three units of Product A and one unit of Product B?

7) If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will ________.

8) If the sales mix shifts to four units of Product A and one unit of Product B, then the breakeven point will ________.

9) Assuming a constant mix of 3 units of X for every 1 unit of Y.

The breakeven point in units would be ________.

10) In multiproduct situations, when sales mix shifts toward the product with the lowest contribution margin then ________.

OBJECTIVE 3.8 (5 QUESTIONS WITH ANSWERS)

1) Multiple cost drivers ________.

2) A nonprofit organization aids the unemployed by supplementing their incomes by $5,000 annually, while they seek new employment skills. The organization has fixed costs of $200,000 and the budgeted appropriation for the year totals $700,000. How many individuals can receive financial assistance this year?

3) Helping Hands is a nonprofit organization that supplies electric fans during summer for individuals in need. Fixed costs are $225,000. The fans cost $25.00 each. The organization has a budgeted appropriation of $675,000. How many people can receive a fan during summer?

4) To apply CVP analysis in not-for profit organization ________.

5) Which of the following is an output measure for a hospital?

OBJECTIVE 3.9 (7 QUESTIONS WITH ANSWERS)

1) Gross margin is ________.

2) In the merchandising sector ________.

3) In the manufacturing sector, ________.

4) Contribution margin and gross margin are terms that can be used interchangeably.

5) Gross Margin will always be greater than contribution margin.

6) Jacob’s Manufacturing sales is equal to production.If Jacob’s Manufacturing presented a Financial Accounting Income Statement emphasizing gross margin showing operating income of $180,000, a Contribution Income Statement emphasizing contribution margin would show a different operating income.

7) Beta Corp reported the following:

OBJECTIVE 3.A (9 QUESTIONS WITH ANSWERS)

1) What would be the expected monetary value for Avalia Corp using the probability method?

2) Lobster Liquidators will make $500,000 if the fishing season weather is good, $200,000 if the weather is fair, and would actually lose $50,000 if the weather is poor during the season. If the weather service gives a 40% probability of good weather, a 25% probability of fair weather, and a 35% probability of poor weather, what is the expected monetary value for Lobster Liquidators?

3) How many actions and events will a decision table contain?

4) Which option should Patrick choose to maximize income assuming there is a 40% probability that 70 units will be sold and a 60% probability that 40 units will be sold?

5) An expected value is the weighted average of the outcomes, with the probability of each outcome serving

6) When there are multiple cost drivers the simple CVP formula of Q = (FC + OI)/CMU can still be used.

7) A decision table is a summary of the alternative actions, events, outcomes, and probabilities of events.

8) Produce Company needs to know the pounds of apples to have on hand each day. Each pound of apples costs $0.50 and can be sold for $0.80. Unsold apples are worthless at the end of the day. The following demands were found after studying the last six months’ sales:

9) Lauren had been a manager of a major hotel chain for 15 years. Due to a hotel owner’s illness, Lauren was offered the opportunity to purchase a hotel near a vacation area she had often visited. It was a great place surrounded by mountains and known for its scenic beauty. After obtaining a lawyer and an accountant to assist her, Lauren did an analysis of the business and evaluated several contingencies relating to various scenarios. Since the expected monetary value of the various

OBJECTIVE 4.1 (19 QUESTIONS WITH ANSWERS)

Chapter 4 Job Costing

1) Job costing information is used ________.

2) Product costing information will include ________.

3) A ________ is a grouping of individual indirect cost items.

4) Each indirect-cost pool of a manufacturing firm ________.

5) Direct costs ________.

6) In a costing system, ________.

7) Assigning direct costs to a cost object is called ________.

8) ________ is the process of distributing indirect costs to products.

9) A ________ links an indirect cost to a cost object.

10) Which of the following includes both traced direct costs and allocated indirect costs?

OBJECTIVE 4.2 (16 QUESTIONS WITH ANSWERS)

1) Process costing is ________.

2) Process costing ________.

3) Job costing is ________.

4) Job costing ________.

5) Job-costing is likely to be used by________.

6) Which of the following differentiates job costing from process costing?

7) Which of the following companies will use a process costing system?

8) A company may use job costing to assign costs to different product lines and then use process costing to calculate unit costs within each product line.

) In each period, job costing divides the total cost of producing an identical or similar product produced in batches by the total number of units produced to obtain a per-unit cost.

9

10) Oil refining companies primarily use job costing to estimate costs.

OBJECTIVE 4.3 (8 QUESTIONS WITH ANSWERS)

1) Which of the following are reasons for using longer periods, such as a year, to calculate indirect cost rates?

2) The actual indirect-cost rate is calculated by ________.

3) Actual costing is a costing system that traces direct costs to a cost object by ________.

4) An example of a numerator reason for calculating annual indirect-cost rates includes ________.

5) An example of a denominator reason for calculating annual indirect-cost rates includes ________.

6) When calculating indirect cost rates, the longer the time period, the greater the

influence of seasonal patterns on the amount of costs.

7) Actual prices paid for materials usually serve as actual direct-cost rates for charging material costs to jobs.

8) The actual indirect-cost rate is calculated by dividing actual total indirect costs by the budgeted total quantity of the cost-allocation base.

OBJECTIVE 4.4 (34 QUESTIONS WITH ANSWERS)

1) A job that shows low profitability may be the result of ________.

2) For a given job the direct costs associated with the job are ________.

3) Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs:

4) The basic source document for direct manufacturing labor is the ________.

5) Problems with costing occur when ________.

6) The budgeted indirect-cost rate for each cost pool is computed as ________.

7) If indirect-cost rates are calculated monthly, distortions might occur because of ________.

8) Bernard Company’s budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate?

9) Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000.

10) In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job.

OBJECTIVE 4.5 (28 QUESTIONS WITH ANSWERS)

1) The budgeted indirect-cost rate is calculated ________.

2) The difference between actual costing and normal costing is ________.

3) Which of the following statements about normal costing is true?

4) When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.

5) Which of the following statements about actual costing is true?

6) Using job costing, the 2014 budgeted manufacturing overhead rate is ________.

7) What is the difference between the budgeted and the actual manufacturing overhead using job costing?

8) A single indirect-cost rate based on direct manufacturing labor-hours for the entire plant is ________.

9) The budgeted indirect-cost driver rate for Y based on the number of machine-hours is in excess of X by ________.

10) Kamrock applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials of $50,000; 600 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs. Manufacturing overhead cost estimates for this special order total ________.

OBJECTIVE 4.6 (51 QUESTIONS WITH ANSWERS)

1) In a normal costing system, the Manufacturing Overhead Control account ________.

2) The Materials Control account is increased when ________.

3) Which of the following is true of the Work-in-Process Control account?

4) Which of the following general ledger accounts will have a subsidiary ledger account?

5) Which of the following increases (are debited to) the Work-in-Process Control account?

6) When direct materials are requisitioned the ________ account is increased.

7) Payment of the factory rent increases the ________.

8) Which of the following is true of plant utility costs?

9) Actual (rather than allocated) manufacturing overhead costs are first recorded in the ________.

10) The ending balance in the Work-in-Process Control account represents the costs of all jobs that ________.

OBJECTIVE 4.7 (29 QUESTIONS WITH ANSWERS)

1) The spreading of underallocated or overallocated overhead among ending work-in-process, finished goods, and cost of goods sold is called ________.

2) The method that restates all overhead entries in the general ledger and subsidiary ledgers using actual cost rates rather than budgeted cost rates is called ________.

3) When the allocated amount of indirect costs are less than the actual amount, indirect costs have been ________.

4) One reason indirect costs may be overapplied is because ________.

5) The ________ adjusts individual job-cost records to account for underallocated or overallocated overhead.

6) The adjusted allocation approach yields the benefits of ________.

7) The approach often used when dealing with small amounts of underallocated or overallocated overhead is the ________.

8) The ________ approach carries the underallocated or overallocated amounts to overhead accounts in the following year.

9) A company would use multiple cost-allocation bases ________.

10) Under the writeoff approach, the difference between Manufacturing Overhead Control and Manufacturing Overhead Allocated is adjusted in the ________.

OBJECTIVE 4.8 (14 QUESTIONS WITH ANSWERS)

1) In the service sector ________.

2) In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use ________.

3) Luke employs 20 professional cleaners. Budgeted costs total $1,800,000 of which $1,550,000 is direct costs. Budgeted indirect costs are $750,000 and actual indirect costs were $795,800. Budgeted professional labor-hours are 1,000,000 and actual hours were 1,218,000. What is the budgeted direct cost-allocation rate?

4) The budgeted direct-labor cost rate includes ________.

5) The law firm of Smith & Jones has a staff of 30 lawyers and administrative staff. Budgeted total costs of the firm total $4,000,000 of which $2,500,000 is direct-labor costs. Assuming that the remaining costs are indirect and direct-labor cost is the allocation base, calculate the budgeted indirect cost rate.

6) What is the budgeted direct labor cost rate per hour?

7) What is the budgeted indirect-cost rate per hour?

8) If ten clients are lost and the workforce stays at 20 employees, then the direct labor cost rate per hour:

9) A company may choose to use budgeted rates to allocate direct labor accounts if direct labor costs are difficult to trace to jobs as they are completed.

10) In some variations of normal costing, organizations use budgeted rates to assign direct costs as well as indirect costs to jobs.

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OBJECTIVE 5.1 (13 QUESTIONS WITH ANSWERS)

1) Which of the following statements is true of a peanut-butter costing system?

2) Overcosting a particular product may result in ________.

3) For a company with diverse products, undercosting overhead of a product will lead to ________.

4) Aqua Company produces two products–Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta’s cost is shared between design and setup costs, while Alpha’s major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua?

5) Product-cost cross-subsidization ________.

6) An accelerated need for refined cost systems is due to ________.

7) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called ________.

8) Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

9) Companies that overcost products will most likely lose market share.

10) If companies increase market share in a given product line because their reported costs are less than their actual costs, they will become more profitable in the long run.

OBJECTIVE 5.2 (11 QUESTIONS WITH ANSWERS)

1) Refining a cost system includes ________.

2) Which of the following is true of refinement of a costing system?

3) Which of the following is a reason that has accelerated the demand for refinements to the costing system?

4) Demand for refinements to the costing system has accelerated due to ________.

5) Collin Inc. produces hospital equipment and the setup requirements vary from product to product.

Collin produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid?

6) When refining a costing system, a company should classify as many costs as possible as indirect costs, thereby minimizing the extent to which costs have to be traced rather than allocated.

7) A refined costing system provides better measurement of the costs of indirect resources used by different cost objects, no matter how differently various cost objects use indirect resources.

8) Indirect labor and distribution costs would most likely be in the same activity-cost pool.

9) Direct tracing of costs reduces the amount of costs classified as indirect costs.

10) A cost-allocation base is a necessary element when using a strategy that will refine a costing system.

OBJECTIVE 5.3 (35 QUESTIONS WITH ANSWERS)

1) ABC systems create ________.

2) Activity based costing system differs from traditional costing systems in the treatment of ________.

3) ABC systems ________.

4) Which of the following statements is true of activity-based costing?

5) A single indirect-cost rate distort product costs because ________.

6) Extracts from cost information of Hebar Corp.:

7) Which of the following statements is true of activity-based costing?

8) Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.

9) Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into ________.

10) How much of the account inquiry cost will be assigned to Department A?

OBJECTIVE 5.4 (17 QUESTIONS WITH ANSWERS)

1) ________ is an example of an output unit-level cost in the cost hierarchy.

2) For a company which produce its products in batches, the CEO’s salary is a(n) ________ cost.

3) Top management compensation cost is an example of ________ in the cost hierarchy.

4) ________ costs support the organization as a whole.

5) It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.

6) Facility-sustaining costs are the costs of activities ________.

7) ________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

8) Unit-level cost drivers are most appropriate as an overhead assignment base when ________.

9) With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related

drivers.

10) According to an ABC system, CP8 is ________ under the traditional system.

OBJECTIVE 5.5 (39 QUESTIONS WITH ANSWERS)

1) Put the following ABC implementation steps in order ________.

2) ________ is considered while choosing a cost allocation base for activity costs in ABC costing.

3) Which of the following cost and cost allocation base have a strong cause and effect relationship?

4) Management accountants use the cost hierarchy to first calculate the ________.

5) ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

6) A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. Of the following, the most appropriate cost driver for assigning materials handling costs to the various products is ________.

7) Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the standard model?

8) Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe model?

9) Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?

10) Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe model?

OBJECTIVE 5.6 (20 QUESTIONS WITH ANSWERS)

1) Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:

2) It only makes sense to implement an ABC system when ________.

3) Which of the following is a sign that an ABC system may be useful for an organization?

4) Smaller cost distortions occur when the traditional systems’ single indirect-cost rate and the activity-cost-driver rates ________.

5) Which of the following statements is true of ABC systems?

6) Recognizing ABC information is not always perfect because ________.

7) Which of the following is a sign that a “smoothing out” costing system exists?

8) The total amount of indirect costs assigned to product SR6 using the traditional method is ________ the total amount assigned using ABC.

9) Given this change in the cost ________.

10) The reduction in cost per unit of wooden chess pieces under ABC system is due to difference in allocation of ________.

OBJECTIVE 5.7 (14 QUESTIONS WITH ANSWERS)

1) Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.

2) Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.

3) Activity-based costing information can be used for ________.

4) Which of the following statements is true of costing systems?

5) Lavender Company is a logistics company and has recently implemented ABC system. Using activity-based information, it decides to reduce the bulkiness of the packages delivered, thereby reducing costs. This suggests that ABC system helps managers in ________ decisions.

6) ABC and traditional systems are quite similar in ________.

7) It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.

8) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.

9) One reason for assigning selling and distribution costs to products for analytical purposes is ________.

10) ABC systems help managers to ________.

OBJECTIVE 5.8 (27 QUESTIONS WITH ANSWERS)

1) Which of the following statements is true of ABC systems?

2) The unique feature of an ABC system is the emphasis on ________.

3) Which of the following is a disadvantage of an activity-based costing system?

4) If advertising expense of $483,000 is allocated on the basis of sales, the cost per cost driver rate would be ________.

5) If total advertising expense of $483,000 is allocated on the basis of sales, the amount allocated to the Large Department would be ________.

6) If total payroll processing costs of $64,000 are allocated on the basis of number of employees, the amount allocated to the Small Department would be ________.

7) If total payroll processing costs of $64,000 are allocated on the basis of number of employees, the amount allocated to the Large Department would be ________.

8) If total rent expense of $180,000 is allocated on the basis of square footage, the amount allocated to the Small Department would be ________.

9) If total rent expense of $180,000 is allocated on the basis of square footage, the amount allocated to the Large Department would be ________.

10) If administrative expense of $62,500 is allocated on the basis of number of employees, the cost per cost driver rate would be ________.

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OBJECTIVE 6.1 (22 QUESTIONS WITH ANSWERS)

1) Which of the following is true of a budget?

2) Which of the following is a financial budget?

3) Budgets are used to ________.

4) Which of the following is true of master budgets?

5) Operating decisions primarily deal with ________.

6) Financing decisions primarily deal with ________.

7) A master budget ________.

8) Which of the following is generally expressed through a short-run budget?

9) Which of the following statements is true of budgets?

10) A master budget forces managers to examine the business as they plan, so they can ________.

OBJECTIVE 6.2 (21 QUESTIONS WITH ANSWERS)

1) Which of the following is true of budgets when they are administered thoughtfully?

2) A budget is an end product of negotiations among senior and subordinate mangers because ________.

3) Which of the following is a limitation of using past performance as a basis for judging actual results?

4) Challenging budgets tend to ________.

5) A limitation of using past performance as a basis for judging actual results is that ________.

6) A company’s actual performance should be compared against budgeted amounts for the same accounting period so that ________.

7) Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process?

8) Demanding but achievable targets tend to ________.

9) Which of the following is referred to as the bottom-up aspect of the budgeting process?

10) Participation of employees in the budgeting process helps ________.

OBJECTIVE 6.3 (79 QUESTIONS WITH ANSWERS)

1) Which of the following is a factor while choosing the period of a budget?

2) Which of the following is a component of operating budgets?

3) The operating budget process generally concludes with the preparation of the ________.

4) Which of the following best describes a rolling budget?

5) The ________ is a component of financial budgets.

6) ________ include a budgeted statement of cash flows and a budgeted balance sheet.

7) The order to follow when preparing the operating budget is ________.

8) In which order are the following developed? First to last:

9) The budgeting process is most strongly influenced by ________.

10) ________ is the usual starting point for budgeting.

OBJECTIVE 6.4 (18 QUESTIONS WITH ANSWERS)

1) Financial planning models ________.

2) Financial planning software packages assist management with ________.

3) ERP systems store vast quantities of information about the materials, machines and equipment, labor, power, maintenance, and setups needed to manufacture different products. This helps simplify the budgeting process as ERP systems ________.

4) When performing a sensitivity analysis, if the selling price per unit is increased, then the ________.

5) Sensitivity analysis helps managers evaluate risks ________.

6) What is budgeted sales for 2016?

7) What is budgeted cost of goods sold for 2016?

8) Should Kramer increase the selling price in 2016?

9) What is budgeted sales for 2016?

10) What is budgeted cost of goods sold for 2016?

OBJECTIVE 6.5 (25 QUESTIONS WITH ANSWERS)

1) Which of the following is true of responsibility accounting?

2) Which of the following departments is most likely to be a cost center?

3) Which of the following departments is most likely to be a profit center?

4) A maintenance manager of a theatre is most likely to be responsible for a(n) ________.

5) The regional sales office manager of a national firm is most likely responsible for a(n) ________.

6) A regional manager of a restaurant chain in charge of finding additional locations for expansion is most likely responsible for a(n) ________.

7) Silas has been recently promoted to head his department. He is responsible for maximizing the profits of the department and to ensure that the earnings are ploughed back into the business. Silas is most likely to head a (n) ________.

8) A manager of a revenue center is responsible ________.

9) A controllable cost is any cost that can be ________ by a responsibility center manager for a period of time.

10) Which of the following statements is true about responsibility accounting statements?

OBJECTIVE 6.6 (31 QUESTIONS WITH ANSWERS)

1) The Japanese use the term kaizen when referring to________.

2) Kaizen refers to incorporating cost reductions ________.

3) Tom Magic Company manufactures various kinds of toys for different age groups. The company’s flagship product is Rx. The company currently requires 8.50 labor hours to manufacture per unit of Rx. The company believes that because of numerous small improvements in the process, it will require 0.10 labor-hours less and hence will only 8.40 labor-hours in the next quarter. It will require 8.35 and 8.25 labor-hours in third and fourth quarter. The company has adopted ________.

4) Kaizen budgeting involves ________.

5) Kaizen budgeting is driven by ________.

6) What is budgeted cost of goods sold for March 2015?

7) What is budgeted gross margin for March 2015?

8) What is the budgeted operating income for February 2015?

9) To reduce budgetary slack management may ________.

10) A stretch budget is a budget that ________.

OBJECTIVE 6.7 (5 QUESTIONS WITH ANSWERS)

1) Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm’s performance relative to its budgets?

2) Which of the following statements is true in the case of budgeting for multinational companies?

3) Budgeting for a multinational company is made more complex due to the possibility of exchange rate fluctuations.

4) The possibility of exchange rate fluctuations does NOT influence the budgeting procedures in a multinational corporation.

5) In a multinational company, budgeting is primarily done to evaluate the firm’s performance relative to its budgets.

OBJECTIVE 6.A (25 QUESTIONS WITH ANSWERS)

1) The ________ is required to prepare the cash budget of an organization.

2) Financial analysts use the projected cash flow statement to ________.

3) The cash flow statement includes ________.

4) The cash budget is a schedule of expected cash receipts and disbursements that ________.

5) How much cash will be collected from customers in March?

6) How much cash will be paid to suppliers in March?

7) How much cash will be disbursed in total in March?

8) What is the ending cash balance for March?

9) Cash collections for September are ________.

10) What is the ending balance of accounts receivable for the end of September, assuming uncollectible balances are written off at the end of the second month following the sale?

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OBJECTIVE 8.1 (12 QUESTIONS WITH ANSWERS)

1) Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of ________.

2) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.

3) Which of the following statements is true of variable overhead costs?

4) Fixed overhead costs include ________.

5) Effective planning of fixed overhead costs includes ________.

6) Effective planning of variable overhead costs includes ________.

7) Most of the decisions determining the level of fixed overhead costs to be incurred will be made ________.

8) The major challenge when planning fixed overhead is ________.

9) An effective plan for variable overhead costs will eliminate activities that do not add value.

10) At the start of the budget period, management will have made most decisions regarding the level of fixed overhead costs to be incurred.

OBJECTIVE 8.2 (14 QUESTIONS WITH ANSWERS)

1) Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

2) While calculating the costs of products and services, a standard costing system ________.

3) Which of the following is a step in developing budgeted variable overhead rates?

4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

5) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ________.

6) Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:

7) Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:

8) Green Energy Inc. produces fertilizer and distributes the product by using his tanker trucks. Green Energy uses budgeted fleet hours to allocate variable manufacturing overhead. The following information relates to the company’s manufacturing overhead data:

9) Standard costing is a costing system that allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.

10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.

Objective 8.3 (56 Questions with Answers)

1) The variable overhead spending variance measures the difference between ________, multiplied by the actual quantity of variable overhead cost-allocation base used.

2) A $5,000 unfavorable flexible-budget variance indicates that ________.

3) What is the flexible-budget amount for variable manufacturing overhead?

4) What is the flexible-budget variance for variable manufacturing overhead?

5) What is the amount of the budgeted variable manufacturing overhead cost per unit?

6) What is the amount for budgeted variable manufacturing overhead cost per unit?

7) What is the flexible-budget amount for variable manufacturing overhead?

8) What is the amount of the budgeted variable manufacturing overhead cost per unit?

9) What is the flexible-budget amount for variable manufacturing overhead?

10) What is the flexible-budget variance for variable manufacturing overhead?

OBJECTIVE 8.4 (43 QUESTIONS WITH ANSWERS)

1) When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.

2) The amount reported for fixed overhead on the static budget is also reported ________.

3) An unfavorable fixed overhead spending variance indicates that ________.

4) Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?

5) For fixed manufacturing overhead, there is no ________.

6) Luke’s Football Manufacturing Company reported:

7) What is the flexible-budget amount?

8) What is the amount of fixed overhead allocated to production?

9) What is the fixed overhead spending variance?

10) What is the flexible-budget amount?

OBJECTIVE 8.5 (19 QUESTIONS WITH ANSWERS)

1) Which of the following statements is true of variable overhead costs?

2) Fixed overhead costs ________.

3) When variable overhead spending variance is unfavorable, it can be safely assumed that ________.

4) When fixed overhead spending variance is unfavorable, it can be safely assumed that ________.

5) Which of the following statements is true of fixed overhead cost variances?

6) If Skizone’s combined 4-Variance Analysis shows an unfavorable spending variance of $2,300, what is the fixed overhead spending variance (a)?

7) Which of the following statements is true of Skizone’s overhead variances?

8) The above table is a ________.

9) In the above table, the amounts for (A) and (B), respectively, are ________.

10) In a combined 3-variance analysis, the total spending variance would be ________.

OBJECTIVE 8.6 (12 QUESTIONS WITH ANSWERS)

1) The fixed overhead cost variance can be further subdivided into the ________.

2) The production-volume variance may also be referred to as the ________.

3) Which of the following is a component of sales-volume variance?

4) Under standard costing, ________.

5) An unfavorable production-volume variance ________.

6) The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead ________.

7) The production volume variance arises only for variable overhead costs.

8) The production-volume variance is a component of the sales-volume variance.

9) Under standard costing, fixed overhead costs are treated as if they are a variable cost.

10) A favorable production-volume variance arises when manufacturing capacity planned for is NOT used.

OBJECTIVE 8.7 (16 QUESTIONS WITH ANSWERS)

1) Calculate the efficiency variance for variable overhead setup costs.

2) Calculate the spending variance for variable overhead setup costs.

3) Calculate the flexible-budget variance for variable overhead setup costs.

4) Calculate the spending variance for fixed setup overhead costs.

5) Calculate the production-volume variance for fixed overhead setup costs.

6) Calculate the efficiency variance for variable overhead setup costs.

7) Calculate the spending variance for variable overhead setup costs.

8) Calculate the flexible-budget variance for variable overhead setup costs.

9) Calculate the spending variance for fixed overhead setup costs.

10) Calculate the production-volume variance for fixed overhead setup costs.

OBJECTIVE 8.8 (4 QUESTIONS WITH ANSWERS)

1) Standard costing can provide managers with reliable and timely information on variable distribution overhead ________.

2) Managers can use variance analysis to make decisions about the mix of products to make.

3) Service-sector companies have no use of variance analysis as only few costs can be traced to their outputs in a cost effective way.

4) Explain how service-sector companies can benefit from variance analysis.

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OBJECTIVE 5.1 (13 QUESTIONS WITH ANSWERS)

1) Which of the following statements is true of a peanut-butter costing system?

2) Overcosting a particular product may result in ________.

3) For a company with diverse products, undercosting overhead of a product will lead to ________.

4) Aqua Company produces two products–Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta’s cost is shared between design and setup costs, while Alpha’s major portions of costs are direct costs. Alpha is using a single cost pool to allocate indirect costs. Which of the following statements is true of Aqua?

5) Product-cost cross-subsidization ________.

6) An accelerated need for refined cost systems is due to ________.

7) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called ________.

8) Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

9) Companies that overcost products will most likely lose market share.

10) If companies increase market share in a given product line because their reported costs are less than their actual costs, they will become more profitable in the long run.

OBJECTIVE 5.2 (11 QUESTIONS WITH ANSWERS)

1) Refining a cost system includes ________.

2) Which of the following is true of refinement of a costing system?

3) Which of the following is a reason that has accelerated the demand for refinements to the costing system?

4) Demand for refinements to the costing system has accelerated due to ________.

5) Collin Inc. produces hospital equipment and the setup requirements vary from product to product.

Collin produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distribution costs are pooled together. Costs in this pool are allocated using number of customer orders for the easiness of costing operations. Based on the information provided, which of the following arguments is valid?

6) When refining a costing system, a company should classify as many costs as possible as indirect costs, thereby minimizing the extent to which costs have to be traced rather than allocated.

7) A refined costing system provides better measurement of the costs of indirect resources used by different cost objects, no matter how differently various cost objects use indirect resources.

8) Indirect labor and distribution costs would most likely be in the same activity-cost pool.

9) Direct tracing of costs reduces the amount of costs classified as indirect costs.

10) A cost-allocation base is a necessary element when using a strategy that will refine a costing system.

OBJECTIVE 5.3 (35 QUESTIONS WITH ANSWERS)

1) ABC systems create ________.

2) Activity based costing system differs from traditional costing systems in the treatment of ________.

3) ABC systems ________.

4) Which of the following statements is true of activity-based costing?

5) A single indirect-cost rate distort product costs because ________.

6) Extracts from cost information of Hebar Corp.:

7) Which of the following statements is true of activity-based costing?

8) Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.

9) Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into ________.

10) How much of the account inquiry cost will be assigned to Department A?

OBJECTIVE 5.4 (17 QUESTIONS WITH ANSWERS)

1) ________ is an example of an output unit-level cost in the cost hierarchy.

2) For a company which produce its products in batches, the CEO’s salary is a(n) ________ cost.

3) Top management compensation cost is an example of ________ in the cost hierarchy.

4) ________ costs support the organization as a whole.

5) It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.

6) Facility-sustaining costs are the costs of activities ________.

7) ________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

8) Unit-level cost drivers are most appropriate as an overhead assignment base when ________.

9) With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related

drivers.

10) According to an ABC system, CP8 is ________ under the traditional system.

OBJECTIVE 5.5 (39 QUESTIONS WITH ANSWERS)

1) Put the following ABC implementation steps in order ________.

2) ________ is considered while choosing a cost allocation base for activity costs in ABC costing.

3) Which of the following cost and cost allocation base have a strong cause and effect relationship?

4) Management accountants use the cost hierarchy to first calculate the ________.

5) ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

6) A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. Of the following, the most appropriate cost driver for assigning materials handling costs to the various products is ________.

7) Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the standard model?

8) Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe model?

9) Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?

10) Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe model?

OBJECTIVE 5.6 (20 QUESTIONS WITH ANSWERS)

1) Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:

2) It only makes sense to implement an ABC system when ________.

3) Which of the following is a sign that an ABC system may be useful for an organization?

4) Smaller cost distortions occur when the traditional systems’ single indirect-cost rate and the activity-cost-driver rates ________.

5) Which of the following statements is true of ABC systems?

6) Recognizing ABC information is not always perfect because ________.

7) Which of the following is a sign that a “smoothing out” costing system exists?

8) The total amount of indirect costs assigned to product SR6 using the traditional method is ________ the total amount assigned using ABC.

9) Given this change in the cost ________.

10) The reduction in cost per unit of wooden chess pieces under ABC system is due to difference in allocation of ________.

OBJECTIVE 5.7 (14 QUESTIONS WITH ANSWERS)

1) Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.

2) Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.

3) Activity-based costing information can be used for ________.

4) Which of the following statements is true of costing systems?

5) Lavender Company is a logistics company and has recently implemented ABC system. Using activity-based information, it decides to reduce the bulkiness of the packages delivered, thereby reducing costs. This suggests that ABC system helps managers in ________ decisions.

6) ABC and traditional systems are quite similar in ________.

7) It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.

8) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.

9) One reason for assigning selling and distribution costs to products for analytical purposes is ________.

10) ABC systems help managers to ________.

OBJECTIVE 5.8 (27 QUESTIONS WITH ANSWERS)

1) Which of the following statements is true of ABC systems?

2) The unique feature of an ABC system is the emphasis on ________.

3) Which of the following is a disadvantage of an activity-based costing system?

4) If advertising expense of $483,000 is allocated on the basis of sales, the cost per cost driver rate would be ________.

5) If total advertising expense of $483,000 is allocated on the basis of sales, the amount allocated to the Large Department would be ________.

6) If total payroll processing costs of $64,000 are allocated on the basis of number of employees, the amount allocated to the Small Department would be ________.

7) If total payroll processing costs of $64,000 are allocated on the basis of number of employees, the amount allocated to the Large Department would be ________.

8) If total rent expense of $180,000 is allocated on the basis of square footage, the amount allocated to the Small Department would be ________.

9) If total rent expense of $180,000 is allocated on the basis of square footage, the amount allocated to the Large Department would be ________.

10) If administrative expense of $62,500 is allocated on the basis of number of employees, the cost per cost driver rate would be ________.

OBJECTIVE 6.1 (22 QUESTIONS WITH ANSWERS)

1) Which of the following is true of a budget?

2) Which of the following is a financial budget?

3) Budgets are used to ________.

4) Which of the following is true of master budgets?

5) Operating decisions primarily deal with ________.

6) Financing decisions primarily deal with ________.

7) A master budget ________.

8) Which of the following is generally expressed through a short-run budget?

9) Which of the following statements is true of budgets?

10) A master budget forces managers to examine the business as they plan, so they can ________.

OBJECTIVE 6.2 (21 QUESTIONS WITH ANSWERS)

1) Which of the following is true of budgets when they are administered thoughtfully?

2) A budget is an end product of negotiations among senior and subordinate mangers because ________.

3) Which of the following is a limitation of using past performance as a basis for judging actual results?

4) Challenging budgets tend to ________.

5) A limitation of using past performance as a basis for judging actual results is that ________.

6) A company’s actual performance should be compared against budgeted amounts for the same accounting period so that ________.

7) Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process?

8) Demanding but achievable targets tend to ________.

9) Which of the following is referred to as the bottom-up aspect of the budgeting process?

10) Participation of employees in the budgeting process helps ________.

OBJECTIVE 6.3 (79 QUESTIONS WITH ANSWERS)

1) Which of the following is a factor while choosing the period of a budget?

2) Which of the following is a component of operating budgets?

3) The operating budget process generally concludes with the preparation of the ________.

4) Which of the following best describes a rolling budget?

5) The ________ is a component of financial budgets.

6) ________ include a budgeted statement of cash flows and a budgeted balance sheet.

7) The order to follow when preparing the operating budget is ________.

8) In which order are the following developed? First to last:

9) The budgeting process is most strongly influenced by ________.

10) ________ is the usual starting point for budgeting.

OBJECTIVE 6.4 (18 QUESTIONS WITH ANSWERS)

1) Financial planning models ________.

2) Financial planning software packages assist management with ________.

3) ERP systems store vast quantities of information about the materials, machines and equipment, labor, power, maintenance, and setups needed to manufacture different products. This helps simplify the budgeting process as ERP systems ________.

4) When performing a sensitivity analysis, if the selling price per unit is increased, then the ________.

5) Sensitivity analysis helps managers evaluate risks ________.

6) What is budgeted sales for 2016?

7) What is budgeted cost of goods sold for 2016?

8) Should Kramer increase the selling price in 2016?

9) What is budgeted sales for 2016?

10) What is budgeted cost of goods sold for 2016?

OBJECTIVE 6.5 (25 QUESTIONS WITH ANSWERS)

1) Which of the following is true of responsibility accounting?

2) Which of the following departments is most likely to be a cost center?

3) Which of the following departments is most likely to be a profit center?

4) A maintenance manager of a theatre is most likely to be responsible for a(n) ________.

5) The regional sales office manager of a national firm is most likely responsible for a(n) ________.

6) A regional manager of a restaurant chain in charge of finding additional locations for expansion is most likely responsible for a(n) ________.

7) Silas has been recently promoted to head his department. He is responsible for maximizing the profits of the department and to ensure that the earnings are ploughed back into the business. Silas is most likely to head a (n) ________.

8) A manager of a revenue center is responsible ________.

9) A controllable cost is any cost that can be ________ by a responsibility center manager for a period of time.

10) Which of the following statements is true about responsibility accounting statements?

OBJECTIVE 6.6 (31 QUESTIONS WITH ANSWERS)

1) The Japanese use the term kaizen when referring to________.

2) Kaizen refers to incorporating cost reductions ________.

3) Tom Magic Company manufactures various kinds of toys for different age groups. The company’s flagship product is Rx. The company currently requires 8.50 labor hours to manufacture per unit of Rx. The company believes that because of numerous small improvements in the process, it will require 0.10 labor-hours less and hence will only 8.40 labor-hours in the next quarter. It will require 8.35 and 8.25 labor-hours in third and fourth quarter. The company has adopted ________.

4) Kaizen budgeting involves ________.

5) Kaizen budgeting is driven by ________.

6) What is budgeted cost of goods sold for March 2015?

7) What is budgeted gross margin for March 2015?

8) What is the budgeted operating income for February 2015?

9) To reduce budgetary slack management may ________.

10) A stretch budget is a budget that ________.

OBJECTIVE 6.7 (5 QUESTIONS WITH ANSWERS)

1) Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm’s performance relative to its budgets?

2) Which of the following statements is true in the case of budgeting for multinational companies?

3) Budgeting for a multinational company is made more complex due to the possibility of exchange rate fluctuations.

4) The possibility of exchange rate fluctuations does NOT influence the budgeting procedures in a multinational corporation.

5) In a multinational company, budgeting is primarily done to evaluate the firm’s performance relative to its budgets.

OBJECTIVE 6.A (25 QUESTIONS WITH ANSWERS)

1) The ________ is required to prepare the cash budget of an organization.

2) Financial analysts use the projected cash flow statement to ________.

3) The cash flow statement includes ________.

4) The cash budget is a schedule of expected cash receipts and disbursements that ________.

5) How much cash will be collected from customers in March?

6) How much cash will be paid to suppliers in March?

7) How much cash will be disbursed in total in March?

8) What is the ending cash balance for March?

9) Cash collections for September are ________.

10) What is the ending balance of accounts receivable for the end of September, assuming uncollectible balances are written off at the end of the second month following the sale?

OBJECTIVE 7.1 (25 QUESTIONS WITH ANSWERS)

1) A master budget is ________.

2) Management by exception is a practice whereby managers focus more closely on ________.

3) A variance is ________.

4) An unfavorable variance indicates that ________.

5) A favorable variance indicates that ________.

6) What is the static-budget variance of revenues?

7) What is the static-budget variance of variable costs?

8) What is the static-budget variance of operating income?

9) What is the static-budget variance of revenues?

10) What is the static-budget variance of variable costs?

OBJECTIVE 7.2 (32 QUESTIONS WITH ANSWERS)

1) The flexible budget contains ________.

2) Which of the following items will be same for a flexible budget and a master budget?

3) A flexible budget ________.

4) Which of the following elements are used in calculating revenue in a flexible budget?

5) An unfavorable flexible-budget variance for variable costs may be the result of ________.

6) In a flexible budget ________.

7) Which of the following information is needed to prepare a flexible budget?

8) Which of the following is true of flexible budget?

9) A flexible-budget variance is $600 favorable for unit-related costs. This indicates that costs were ________.

10) The flexible-budget amount for materials is ________.

OBJECTIVE 7.3 (16 QUESTIONS WITH ANSWERS)

1) The actual information pertains to the month of September. As part of the budgeting process, Kriger Fencing Company developed the following static budget for September. Kriger is in the process of preparing the flexible budget and understanding the results.

2) The flexible budget will report ________ for variable costs.

3) The flexible budget will report ________ for the fixed costs.

4) The flexible-budget variance for variable costs is ________.

5) The sales-volume variance is sometimes due to ________.

6) An unfavorable sales-volume variance could result from ________.

7) If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.

8) The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.

9) What amounts are reported for revenues in the flexible-budget (A) and the static-budget (B), respectively?

10) What are the actual variable costs ©?

OBJECTIVE 7.4 (14 QUESTIONS WITH ANSWERS)

1) The flexible-budget variance for direct cost inputs can be further subdivided into a ________.

2) An efficiency variance reflects the difference between ________.

3) Which of the following is an advantage of using actual input data from past periods to develop a budget?

4) Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

5) A price variance reflects the difference between ________.

6) Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.

7) Standard material cost per kg of raw material is $5. Standard material allowed per unit is 2 Kg. Actual material used per unit is 2.5 Kg. Actual cost per kg is $4.5. What is the standard cost per output unit?

8) Standard labor rate is $8 per hour. Standard labor allowed per unit is 0.6 hours. Actual cost per labor hour is $7.5 and actual labour hour per unit is 0.7 hours. What is the standard labor cost per output unit?

9) A standard price is the minimum price a company will have to pay for a unit of input.

10) To prepare budgets based on actual data from past periods is preferred since past inefficiencies are EXCLUDED.

OBJECTIVE 7.5 (51 QUESTIONS WITH ANSWERS)

1) Which of the following can be a reason for a favorable price variance for direct materials?

2) A favorable efficiency variance for direct manufacturing labor indicates that ________.

3) An unfavorable price variance for direct materials might indicate ________.

4) A favorable efficiency variance for direct materials might indicate that ________.

5) A favorable price variance for direct manufacturing labor might indicate that ________.

6) An unfavorable efficiency variance for direct manufacturing labor might indicate that ________.

7) June’s direct material flexible-budget variance is ________.

8) The direct material price variance during June is ________.

9) The direct manufacturing labor price variance during June is ________.

10) The direct manufacturing labor efficiency variance during June is ________.

9) Variances should be investigated ________.

OBJECTIVE 7.6 (33 QUESTIONS WITH ANSWERS)

1) A purchasing manager’s performance is best evaluated using the ________.

2) Which of the following is a reason for a favorable material price variance?

3) Efficiency is ________.

4) Which of the following is true of variance?

5) The degree to which a predetermined objective or target is met is known as ________.

6) If manufacturing machines are breaking down more than expected, this will contribute to a(n) ________.

7) Which of the following statements is true about analyzing a single variance?

8) Variance analysis should be used ________.

10) Cost reductions can be the result of ________.

OBJECTIVE 7.7 (9 QUESTIONS WITH ANSWERS)

1) The process by which a company’s products or services are measured relative to the best possible levels of performance is known as ________.

2) Benchmarking is a process ________.

3) Which of the following statements is true of benchmarking?

4) When benchmarking, management accountants are most valuable when they ________.

5) Benchmarking is the continuous process of measuring products, services, and activities against the best possible levels of performance, either inside or outside the organization.

6) Benchmarking measures how well a company and its managers are doing in comparison to other organizations.

7) It is difficult for firms to find appropriate benchmarks because differences can exist across companies in their strategies, inventory costing methods, depreciation methods, and so on.

8) When benchmarking it is best when management accountants simply analyze the costs and allow management to provide the insight as to why the revenues and costs differ between companies.

9) What is benchmarking, and how is it useful to a company?

OBJECTIVE 8.1 (12 QUESTIONS WITH ANSWERS)

1) Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of ________.

2) Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.

3) Which of the following statements is true of variable overhead costs?

4) Fixed overhead costs include ________.

5) Effective planning of fixed overhead costs includes ________.

6) Effective planning of variable overhead costs includes ________.

7) Most of the decisions determining the level of fixed overhead costs to be incurred will be made ________.

8) The major challenge when planning fixed overhead is ________.

9) An effective plan for variable overhead costs will eliminate activities that do not add value.

10) At the start of the budget period, management will have made most decisions regarding the level of fixed overhead costs to be incurred.

OBJECTIVE 8.2 (14 QUESTIONS WITH ANSWERS)

1) Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

2) While calculating the costs of products and services, a standard costing system ________.

3) Which of the following is a step in developing budgeted variable overhead rates?

4) Which of the following is the mathematical expression for the budgeted fixed overhead cost per unit of cost allocation base?

5) In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ________.

6) Alka Corporation manufactures industrial-sized gas furnaces and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:

7) Christine Corporation manufactures baseball uniforms and uses budgeted machine-hours to allocate variable manufacturing overhead. The following information pertains to the company’s manufacturing overhead data:

8) Green Energy Inc. produces fertilizer and distributes the product by using his tanker trucks. Green Energy uses budgeted fleet hours to allocate variable manufacturing overhead. The following information relates to the company’s manufacturing overhead data:

9) Standard costing is a costing system that allocates overhead costs on the basis of the standard overhead-cost rates times the standard quantities of the allocation bases allowed for the actual outputs produced.

10) Fixed costs automatically increase or decrease with the level of activity within a relevant range of activity.

Objective 8.3 (56 Questions with Answers)

1) The variable overhead spending variance measures the difference between ________, multiplied by the actual quantity of variable overhead cost-allocation base used.

2) A $5,000 unfavorable flexible-budget variance indicates that ________.

3) What is the flexible-budget amount for variable manufacturing overhead?

4) What is the flexible-budget variance for variable manufacturing overhead?

5) What is the amount of the budgeted variable manufacturing overhead cost per unit?

6) What is the amount for budgeted variable manufacturing overhead cost per unit?

7) What is the flexible-budget amount for variable manufacturing overhead?

8) What is the amount of the budgeted variable manufacturing overhead cost per unit?

9) What is the flexible-budget amount for variable manufacturing overhead?

10) What is the flexible-budget variance for variable manufacturing overhead?

OBJECTIVE 8.4 (43 QUESTIONS WITH ANSWERS)

1) When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.

2) The amount reported for fixed overhead on the static budget is also reported ________.

3) An unfavorable fixed overhead spending variance indicates that ________.

4) Which of the following is the correct mathematical expression to calculate the fixed overhead spending variance?

5) For fixed manufacturing overhead, there is no ________.

6) Luke’s Football Manufacturing Company reported:

7) What is the flexible-budget amount?

8) What is the amount of fixed overhead allocated to production?

9) What is the fixed overhead spending variance?

10) What is the flexible-budget amount?

OBJECTIVE 8.5 (19 QUESTIONS WITH ANSWERS)

1) Which of the following statements is true of variable overhead costs?

2) Fixed overhead costs ________.

3) When variable overhead spending variance is unfavorable, it can be safely assumed that ________.

4) When fixed overhead spending variance is unfavorable, it can be safely assumed that ________.

5) Which of the following statements is true of fixed overhead cost variances?

6) If Skizone’s combined 4-Variance Analysis shows an unfavorable spending variance of $2,300, what is the fixed overhead spending variance (a)?

7) Which of the following statements is true of Skizone’s overhead variances?

8) The above table is a ________.

9) In the above table, the amounts for (A) and (B), respectively, are ________.

10) In a combined 3-variance analysis, the total spending variance would be ________.

OBJECTIVE 8.6 (12 QUESTIONS WITH ANSWERS)

1) The fixed overhead cost variance can be further subdivided into the ________.

2) The production-volume variance may also be referred to as the ________.

3) Which of the following is a component of sales-volume variance?

4) Under standard costing, ________.

5) An unfavorable production-volume variance ________.

6) The difference between budgeted fixed manufacturing overhead and the fixed manufacturing overhead allocated to actual output units achieved is called the fixed overhead ________.

7) The production volume variance arises only for variable overhead costs.

8) The production-volume variance is a component of the sales-volume variance.

9) Under standard costing, fixed overhead costs are treated as if they are a variable cost.

10) A favorable production-volume variance arises when manufacturing capacity planned for is NOT used.

OBJECTIVE 8.7 (16 QUESTIONS WITH ANSWERS)

1) Calculate the efficiency variance for variable overhead setup costs.

2) Calculate the spending variance for variable overhead setup costs.

3) Calculate the flexible-budget variance for variable overhead setup costs.

4) Calculate the spending variance for fixed setup overhead costs.

5) Calculate the production-volume variance for fixed overhead setup costs.

6) Calculate the efficiency variance for variable overhead setup costs.

7) Calculate the spending variance for variable overhead setup costs.

8) Calculate the flexible-budget variance for variable overhead setup costs.

9) Calculate the spending variance for fixed overhead setup costs.

10) Calculate the production-volume variance for fixed overhead setup costs.

OBJECTIVE 8.8 (4 QUESTIONS WITH ANSWERS)

1) Standard costing can provide managers with reliable and timely information on variable distribution overhead ________.

2) Managers can use variance analysis to make decisions about the mix of products to make.

3) Service-sector companies have no use of variance analysis as only few costs can be traced to their outputs in a cost effective way.

4) Explain how service-sector companies can benefit from variance analysis.

OBJECTIVE 9.1 (27 QUESTIONS WITH ANSWERS)

1) Which of the following costs is inventoried when using variable costing?

2) Which of the following costs is inventoried when using absorption costing?

3) ________ is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded.

4) ________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.

5) Which of the following is true of absorption costing?

6) Which of the following is true of variable costing?

7) In ________, fixed manufacturing costs are included as inventoriable costs.

8) ________ method includes fixed manufacturing overhead costs as inventoriable costs.

9) Which of the following costs will be treated as period costs under absorption costing?

10) Under absorption costing, fixed manufacturing costs ________.

OBJECTIVE 9.2 (59 QUESTIONS WITH ANSWERS)

1) The contribution-margin format is used for ________.

2) The gross-margin format is used for ________.

3) Which of the following statements is true of contribution-margin format of the income statement?

4) Which of the following statements is true of gross-margin format of the income statement?

5) ________ is subtracted from sales while calculating contribution margin.

6) ________ are subtracted from sales to calculate gross margin.

7) What is cost of goods sold per unit using variable costing?

8) What is cost of goods sold using variable costing?

9) What is the contribution margin using variable costing?

10) What is the operating income using variable costing?

OBJECTIVE 9.3 (22 QUESTIONS WITH ANSWERS)

1) Which of the following is a reason for companies to use absorption costing for internal accounting?

2) Many companies have switched from absorption costing to variable costing for internal reporting ________.

3) Ways to “produce for inventory” that result in increasing operating income include ________.

4) Switching production to products that absorb the highest amount of fixed manufacturing costs is also called ________.

5) To discourage producing for inventory, management can ________.

6) Which of the following steps can a management take to reduce the undesirable effects of absorption costing?

7) Under absorption costing, if a manager’s bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

8) Under variable costing, if a manager’s bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

9) Critics of absorption costing suggest evaluating management on its ability to ________.

10) Which of the following is a reason for companies adopting variable costing for internal reporting purposes?

OBJECTIVE 9.4 (22 QUESTIONS WITH ANSWERS)

1) Throughput costing is also called ________.

2) Advocates of throughput costing argue that ________.

3) Assume a manufacturing company that has started production in the current year. Which of the following would result in the highest profit being reported if the company has 1,000 units of ending inventory?

4) Throughput contribution equals ________.

5) If 1,000 units are produced and only 700 units are sold, ________ results in the greatest amount of expense reported on the income statement.

6) If 800 units are produced and 1,200 units are sold, the costing method which will result in the greatest operating income is ________.

7) Advocates of throughput costing maintain that ________.

8) What is the cost per statue if throughput costing is used?

9) What is the total throughput contribution?

10) What is the cost per statue if throughput costing is used?

OBJECTIVE 9.5 (23 QUESTIONS WITH ANSWERS)

1) Practical capacity is the denominator-level concept that ________.

2) ________ reduces theoretical capacity for unavoidable operating interruptions.

3) ________ is based on the level of capacity utilization that satisfies average customer demand over periods generally longer than one year.

4) ________ is the level of capacity utilization that managers expect for the current budget period, which is typically one year.

5) ________ is the level of capacity based on producing at full efficiency all the time.

6) Which of the following measures capacity levels in terms of demand for the output of the plant?

7) Which of the following best describes practical capacity?

8) The budgeted fixed manufacturing cost rate is the lowest for ________.

9) ________ provides the lowest estimate of denominator-level capacity in case demand of the product is not a limiting factor.

10) What is the master-budget capacity utilization level for this budget period?

OBJECTIVE 9.6 (31 QUESTIONS WITH ANSWERS)

1) Which of the following is true of theoretical capacity?

2) The use of theoretical capacity results in an unrealistically low fixed manufacturing cost per unit because it is based on ________.

3) Budgeted fixed manufacturing costs of a product using practical capacity ________.

4) Which of the following is true of normal capacity utilization?

5) Which of the following is true of master-budget capacity utilization?

6) Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

7) Customers expect to pay a price that includes ________.

8) The marketing manager’s performance evaluation is most fair when based on a denominator level using ________.

9) ________ is the continuing reduction in the demand for a company’s products that occurs when competitor prices are not met.

10) Using master-budget capacity to set selling prices ________.

OBJECTIVE 9.7 (13 QUESTIONS WITH ANSWERS)

1) It is most difficult to estimate ________ because of the need to predict demand for the next few years.

2) Which of the following capacity levels do proponents of activity-based costing recommend to be used as the denominator level to calculate activity cost rates?

3) Which of the following is true of unused capacity?

4) Which of the following is true of capacity costs?

5) Product-sustaining costs in activity-based costing are similar to ________.

6) There is no output-level variance for variable costing, when ________.

7) When actual production is below practical capacity, there will be unused-capacity cost only in the manufacturing function and not in nonmanufacturing parts like distribution function.

8) Managers cannot use human resource consideration to obtain a reliable estimate of the denominator level for the budget period as they cannot be quantified.

9) Companies can more reliably estimate master-budget capacity utilization than normal capacity utilization.

10) Explain how using master-budget capacity utilization for setting prices can lead to a downward demand spiral.

OBJECTIVE 9.A (12 QUESTIONS WITH ANSWERS)

1) What are breakeven sales in units using variable costing?

2) What are breakeven sales in units using absorption costing?

3) What are breakeven sales in units using absorption costing if the production units are actually 25,000?

4) What is the variable costing breakeven point in units?

5) What is the absorption costing breakeven point in units?

6) What will be the breakeven point if variable costing is used?

7) What will be the breakeven point in units if absorption costing is used?

8) What is the breakeven point in units using absorption costing if the units produced are actually 2,250?

9) Jeff Corporation is having trouble selling its inventory because of its ongoing dispute with its logistical partner. The company was not able to sell any inventory in the month of January because of the dispute. It manufactured 8,000 units in January. Jeff had no other fixed costs commitment other than fixed manufacturing costs of $100,000. It follows absorption costing. If actual production in January was equal to the denominator level, what is the amount of sales required to attain breakeven point?

10) Bosely Corporation is in the business of selling computers. The following expenses were incurred in March 2011:

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