CHAPTER 16_MA

Questions 8 and 9 use the data that follow. Suppose a bakery reports this
1. Which is not a characteristic of managerial accounting information? information:
a. Emphasizes the external financial statements
b. Provides detailed information about individual parts of the company Beginning materials inventory $ 8,000
c. Emphasizes relevance Ending materials inventory 7,000
d. Focuses on the future Beginning work in process inventory 4,000
Ending work in process inventory 3,000
Beginning finished goods inventory 3,000
2. World-class businesses use which of these systems to integrate all of a Ending finished goods inventory 5,000
company’s worldwide functions, departments, and data into a single system? Direct labor 30,000
a. Cost standards c. Just-in-time management Purchases of direct materials 95,000
b. Enterprise resource planning d. Items a, b, and c are correct Manufacturing overhead 21,000

3. Today’s business environment is characterized by 8. What is cost of direct materials used?

a. global competition. c. a shift toward a service economy. a. $95,000 c. $103,000
b. time-based competition. d. Items a, b, and c are correct b. $96,000 d. $94,000

4. Which of the following accounts does a manufacturing company, but not a 9. What is the cost of goods manufactured?
service company, have? a. $146,000 c. $144,000
a. Advertising expense c. Cost of goods sold b. $148,000 d. $147,000
b. Salary payable d. Retained earnings

10. A management accountant who avoids conflicts of interest meets the

5. In computing cost of goods sold, which of the following is the ethical standard of
manufacturer’s equivalent a. confidentiality. c. credibility.
to the merchandiser’s purchases? b. competence. d. integrity.
a. Total manufacturing costs to account for
b. Direct materials used CHAPTER 17_Job order costing
c. Total manufacturing costs incurred during the period 1. Would an advertising agency use job or process costing? What about a
d. Cost of goods manufactured cell phone
6. Which of the following is a direct cost of manufacturing a sportboat? manufacturer?
a. Salary of engineer who rearranges plant layout a. Advertising agency—process costing; Cell phone manufacturer—process
b. Depreciation on plant and equipment costing
c. Cost of boat engine b. Advertising agency—job order costing; Cell phone manufacturer—job
d. Cost of customer hotline order costing
c. Advertising agency—process costing; Cell phone manufacturer—job order
costing
7. Which of the following is not part of manufacturing overhead for producing d. Advertising agency—job order costing; Cell phone manufacturer—process
a computer? costing
a. Manufacturing plant property taxes c. Depreciation on delivery trucks
b. Manufacturing plant utilities d. Insurance on plant and equipment
2. When a manufacturing company uses direct materials, it assigns the cost ABC.
by debiting b. An ABC system is more refined than one that uses a company-wide
a. Direct materials. c. Manufacturing overhead. overhead rate.
b. Work in process inventory. d. Materials inventory. c. ABC focuses on indirect costs.
d. ABC is used ONLY for manufacturing companies

3. When a manufacturing company uses indirect materials, it assigns the

cost by debiting
a. Work in process inventory. c. Materials inventory. 5. Compute It can use ABC information for what decisions?
b. Indirect materials. d. Manufacturing overhead. a. Cost cutting c. Product mix
b. Pricing d. Items a, b, and c are all correct

4. When a manufacturing company uses direct labor, it assigns the cost by

debiting 6. Which of the following would be true for a computer manufacturing
a. Work in process inventory. c. Direct labor. company?
b. Manufacturing overhead. d. Wages payable. a. ABC helps the company make more informed decisions about products.
b. Manufacturing computers use only a few activities, so a companywide
overhead allocation rate would work well.
c. Most of the company’s costs are for direct materials and direct labor.
8. What entry would Gell make to close the manufacturing overhead Indirect costs are a small proportion of total costs.
account? d. All the above are true.

CHAPTER 19_CVP

1. For Frank’s Funky Sounds, units of production depreciation on the trucks

is a
a. variable cost. c. mixed cost.
b. fixed cost. d. high-low cost.
b
2. Assume Intervale Railway is considering hiring a reservations agency to
9. A manufacturing company’s management can use product cost
handle passenger reservations. The agency would charge a flat fee of
information to
$13,000 per month, plus $3 per passenger reservation. What is the total
a. set prices of its products. c. identify ways to cut production costs.
reservation cost if 200,000 passengers take the trip next month?
b. decide which products to emphasize. d. a, b, and c are correct
a. $613,000 c. $600,000
b. $3.07 d. $13,000
10. For which of the following reasons would David Laugherty, owner of the
Laughtery Associates law firm, want to know the total costs of a job (serving
3. If Intervale Railway’s fixed costs total $90,000 per month, the variable cost
a particular client)?
per passenger is $45, and tickets sell for $75, what is the breakeven point in
a. For inventory valuation c. For external reporting
units?
b. To determine the fees to charge clients d. a, b, and c are correct
a. 1,200 passengers c. 225,000 passengers
CHAPTER 18_ABC method b. 2,000 passengers d. 3,000 passengers

1. Which statement is false?

a. Information technology makes it feasible for most companies to adopt 4. Suppose Intervale Railway’s total revenues are $4,000,000, its variable
costs are $2,000,000, and its fixed costs are $800,000. Compute the a. Avoidable costs c. Sunk costs
breakeven point in dollars. b. Costs that differ between alternatives d. Variable costs
a. $4,000,000 c. $1,600,000
b. $800,000 d. $2,000,000
4. When making decisions, managers should consider
a. revenues that differ between alternatives.
5. If Intervale Railway’s fixed costs total $90,000 per month, the variable cost b. costs that do not differ between alternatives.
per passenger is $45, and tickets sell for $75, how much revenue must the c. only variable costs.
Railway generate to earn $120,000 in operating income per month? d. sunk costs in their decisions.
a. $350,000 c. $7,000
b. $210,000 d. $525,000
5. When pricing a product or service, managers must consider which of the
following?
6. On a CVP graph, the total cost line intersects the vertical (dollars) axis at a. Only period costs c. Only variable costs
a. the origin. c. the breakeven point. b. Only manufacturing costs d. All costs
b. the level of the fixed costs. d. the level of the variable costs.

6. When companies are price-setters, their products and services

7. If a company increases its selling price per unit for Product A, then the a. are priced by managers using a target-pricing emphasis.
new breakeven point will b. tend to have a lot of competitors.
a. increase.. b. decrease. c. remain the same c. tend to be commodities.
d. tend to be unique.

8. If a company increases its fixed costs for Product B, then the contribution
margin per unit will 7. In deciding whether to drop its electronics product line, Kitchenware.com
a. increase b. decrease. c. remain the same. would consider
a. how dropping the electronics product line would affect sales of its other
CHAPTER 20 Short-term business decision products
1. In making short-term special decisions, you should like CDs.
a. use a traditional absorption costing approach. b. the costs it could save by dropping the product line.
b. focus on total costs. c. the revenues it would lose from dropping the product line.
c. separate variable from fixed costs. d. All of the above
d. only focus on quantitative factors.
8. In deciding which product lines to emphasize, Kitchenware.com should
2. Which of the following is relevant to Kitchenware.com’s decision to accept focus on the product line that has the highest
a special order a. contribution margin per unit of product.
at a lower sale price from a large customer in China? b. contribution margin per unit of the constraining factor.
a. The cost of shipping the order to the customer c. profit per unit of product.
b. The cost of Kitchenware.com’s warehouses in the United States d. contribution margin ratio.
c. Founder Eric Crowley’s salary
d. Kitchenware.com’s investment in its Web site 9. When making outsourcing decisions
a. expected use of the freed capacity is irrelevant.
3. Which of the following costs are irrelevant to business decisions? b. the variable cost of producing the product in-house is relevant.
c. the total manufacturing unit cost of making the product in-house is
relevant. actual and budgeted revenues and costs.
d. avoidable fixed costs are irrelevant. b. rolling up individual units’ budgets into the companywide budget.
c. sensitivity analyses.
10. When deciding whether to sell as is or process a product further, d. removing slack from the budget.
managers should ignore which of the following?
a. The costs of processing the product thus far
b. The cost of processing further 9. Which of the following managers is responsible for revenues and
c. The revenue if the product is sold as is expenses but not ROI?
d. The revenue if the product is processed further a. Investment center manager c. Profit center manager
b. Cost center manager d. Revenue center manager
CHAPTER 22_Master Budget
CHAPTER 24 Perform Evaluation
1. Amazon.com expected to receive which of the following benefits when it
started its budgeting process? 1. Which is not one of the potential advantages of decentralization?
a. The budget provides Amazon.com’s managers with a benchmark against a. Improves motivation and retention c. Improves customer relations
which to b. Supports use of expert knowledge d. Increases goal congruence
compare actual results for performance evaluation.
b. The planning required to develop the budget helps managers foresee and
avoid potential problems before they occur. 2. The Quaker Foods division of PepsiCo is most likely treated as a(n)
c. The budget helps motivate employees to achieve Amazon.com’s sales a. revenue center. c. investment center.
growth and costreduction goals. b. cost center. d. profit center.
d. All of the above
3. Decentralization is often based on all the following except
2. Which of the following is the cornerstone (or most critical element) of the a. revenue size. c. business function.
master budget? b. geographic region. d. product line.
a. The operating expenses budget c. The sales budget
b. The budgeted balance sheet d. The inventory, purchases, and cost of 4. Which of the following is NOT a goal of performance evaluation systems?
goods a. Promoting goal congruence and coordination
sold budget b. Communicating expectations
3. The budgeted statement of cash flows is part of which element of c. Providing feedback
Amazon.com’s master budget? d. Reprimanding unit managers
a. The financial budget c. The capital expenditures budget
b. The operating budget d. None of the above 5. Which of the following balanced scorecard perspectives essentially asks,
7. Which of the following expenses would not appear in Mallcentral’s cash “Can we continue
budget? to improve and create value?”
a. Depreciation expense c. Interest expense a. Customer c. Financial
b. Marketing expense d. Wages expense b. Learning and growth d. Internal business

8. Information technology has made it easier for Amazon.com’s managers to 10. The performance evaluation of a cost center is typically based on its
perform all of the following tasks except a. sales volume variance. c. static budget variance.
a. preparing responsibility center performance reports that identify variances b. ROI. d. flexible budget variance.
between
Predermind MOH allocation rate= Total estimated MOH costs / Total estimated Q of the MOH allocation base
MOH allocated = Predetermined MOH rate * AQ of MOH allocation base used
Operating Income = Revenue – Total costs =(Total Direct labour cost * X%) – (Total Direct labour cost + Total MOH cost)
Q= (FC + OI) / CM ratio
Q*=BEP in units = FC / CM per unit
P.Q*=BEP in dollar= FC / CM ratio= FC / (CM per unit / p)
Ending Inventory= Beginning Inventory + Purchase – COGS
Price Variance= (Actual Price – Budgeted Price) * Actual Quantity = (AP – BP) *AQ
Efficiency Variance= (Actual Quantity – Budgeted Quantity) * Budgeted Price = (AQ - BQ)* BP
Variable Overhead Spending Variance = (Actual allocation rate – Budgeted allocation rate) *AQ of cost allocation base
Variable Overhead Efficiency Variance = (AQ of cost allocation base – BQ of cost allocation base) * Budgeted allocation rate
Return on Investment _ROI = Operating income / Average total assets = 1*2
1. Profit margin = Operating income / Sales
2. Asset turnover = Sales / Average total assets
Economic Value Added_RI = Operating income – (Target rate of return * Average total assets)
Economic Value Added_EVA = After-tax operating income – [(Average total assets – Current liabilities) *WACC%]