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