Question 1
Which of the following is a correct form of the break-even equation when using activity-based costing?
BE ($) = (fixed costs + batch-level costs)/contribution margin per unit
BE (units) = (fixed costs + facility-level costs)/contribution margin per unit
BE ($) = (fixed costs + batch-level costs + product-level costs)/contribution margin per unit
BE (units) = (fixed cost + batch-level costs + product-level costs)/contribution margin per unit
Question 2
For financial statements reporting purposes, what method complies with GAAP and IRS?
varible costing
traditional costing
absorption or full costing
both b and c
Question 3
When a company nears the break-even point, its operating leverage will:
not change
dramatically decrease
dramatically break-even
dramicatically increase
Question 4
Which of the following is not an assumption of cost-volume-profit analysis?
Selling prices change only at the end of the month
Costs can be thought of as fitting a linear function within the relevant range
Sale mix is constant
Inventory levels do not change
Question 5
What factors are relevant to a company when evaluating "what if"scenarios to examine the impact options on a company's financial statement?
change in product's sale price
advertising expenses that will not change
increases in products variable manufacturing costs
the quantity of product that is expected to sell
Question 6
The contribution margin income statement is structured to emphasize what?
Cost Functionality
Cost Behavior
Organizational Efficiency
Cost Drivers
Question 7
Which of the following statements is correct
When an equal number of units are produced and sold, net income is significantly higher under the absorption costing than variable costing
When an equal number of units are produced and sold, net income is higher under variable costing that absorption costing
When an equal number of units are produced and sold, net income is marginally higher under the absorption costing than variable costing
When an equal number of units are produced and sold, net income under absorption costing is the same as net income under variable costing
Question 8
If a company has a positive contribution margin but net income is low or negative, what are some ways of increasing net income?
increase sales price
increase sales volume
decrease variable costs
all of the above
Question 9
When a company has scare (limited) resources, it should seek to?
a. maximize the contribution margin per unit of the scarce resource
b. maximize the contribution margin per unit of the scarce overhead costs
c. maximize the contribution margin per unit of the scare basis
d. maximize the contribution margin per unit of the scarce source
Question 10
Way Out There Golf Balls, Inc. produces two types of golf balls: the pro model and tour model. The golf balls are sold to retailers in cartons containing 360 balls (30 boxes containing 4 sleeves per box, with each sleeve holding 3 balls). Both models are made with the same machines. It takes 15 minutes of machine time to produce 360 pro model golf balls, whereas it takes 30 minutes to produce the same number of tour model balls. The difference in production time results mainly from the different materials used in construction. If the amount of machine time is available to Way Out There Golf Balls, Inc., which golf balls should be produced in larger quantity? The relevant data concerning the two models are as follow:
|
Description
|
Pro Model
|
Tour Model
|
|
Sales Price (per carton)
|
$500
|
$590
|
|
Less: Direct Materials
|
200
|
265
|
|
Direct Labor
|
50
|
50
|
|
Variable Overhead
|
50
|
75
|
|
Contribution Margin
|
$200
|
$200
|
|
Required Machine Time
|
¼ hour
|
½ hour
|
Tour Model
Pro Model
The quantity of production should be equal because the contribution margins are the same
Way Out There Model
Question 11
To earn an after-tax profit when using the cost-volume-profit computations, a company must:
gross-up production
gross-up costs
gross-up sales
gross-up sales and fixed costs
Question 12
A company would typically use backflushing
when inventory levels are kept at a minimum (such as in just-in-time-JIT)
when inventory levels are kept at a maximum (such as in a tradition inventory manufacturing system)
when manufacturing costs are flushed
both a and b
Question 13
In a make-or-buy decision, the relevant costs are typically?
a. costs of buying the product from the outside source
b. variable costs of making the product that can be avoided by buying it
c. any avoidable fixed costs, and opportunity costs incurred by forgoing production of another product
d. all are typically costs
Question 14
The primary objectives of a for profit and non-profit entities include:
minimize costs and maximize profit (or services)
minimize cost and maximize compliance (or services)
minimize costs and maximize sale (or services)
minimize costs and maximize variable/fixed costs (or services)
Question 15
How are selling and administrative costs treated under variable costing?
as a product cost
as a service cost
as a period cost
as product and service costs
Question 16
How are fixed manufacturing overhead costs moved from one year to another under absorption costing?
to work-in-process
to finished goods
to cost of goods sold
to variable costs
Question 17
Which of the following statement is correct as it relates to a company that sells multiple products?
CVP analysis cannot be used
Contribution margin is based on sales mix
CVP analysis is much easier to use
The break-even point remains the same even if sales mix changes
Question 18
A decision maker favors a buy choice when some of the qualitative factors include
a. quality of vendor, reliability of product, and impact of changing employees
b. quality of product, reliability of vendor, and impact of changing technology
c. quality of product, reliability of vendor, and impact of changing management
d. quality of product, reliability of variable costs, and impact of changing technology
Question 19
The decision to drop a product line is based the following factors, except:
a. contribution margin lost is less than fixed costs avoided
b. contribution margin lost is greater than fixed costs avoided
c. decline in sales of the company's other products
d. loss of customers who purchase other products
Question 20
A special order will increase net income when?
a. additional revenue from the special order is greater than the additional costs, including any sunk costs
b. additional revenue from the special order is greater than the additional costs, including any direct material costs
c. additional revenue from the special order is greater than the additional costs, including any period costs
d. additional revenue from the special order is greater than the additional costs, including any opportunity costs
Question 21
Business managers make decisions every day, what impact(s) must they be sensitive to?
economic impact
ethical impact
relationship impact
both a and b
Question 22
Way Out There Golf Balls, Inc. produces two types of golf balls: the pro model and tour model. The golf balls are sold to retailers in cartons containing 360 balls (30 boxes containing 4 sleeves per box, with each sleeve holding 3 balls). Both models are made with the same machines. It takes 15 minutes of machine time to produce 360 pro model golf balls, whereas it takes 30 minutes to produce the same number of tour model balls. The difference in production time results mainly from the different materials used in construction. If the total machine time available is 110 hours per month and the demand for each model of golf ball is 108,000 per month how many of each model should be produced to maximize profit? The relevant data concerning the two models are as follow:
|
Description
|
Pro Model
|
Tour Model
|
|
Sales Price (per carton)
|
$500
|
$590
|
|
Less: Direct Materials
|
200
|
265
|
|
Direct Labor
|
50
|
50
|
|
Variable Overhead
|
50
|
75
|
|
Contribution Margin
|
$200
|
$200
|
|
Required Machine Time
|
¼ hour
|
½ hour
|
a. 300 Cartons of Pro Model & 75 Cartons of Tour Model
b. 305 Cartons of Pro Model & 70 Cartons of Tour Model
c. 375 Cartons of Pro Model & 70 Cartons of Tour Model
d. 300 Cartons of Pro Model & 70 Cartons of Tour Model
Question 23
Which of the following items is not subtracted from sales revenue to arrive at contribution margin on a contribution margin income statement?
variable manufacturing overhead
sales commissions paid only on items that are sold
variable sales and administrative expenses
fixed manufacturing overhead
Question 24
Under absorption costing, how can net income increase without sales increasing?
decrease variable costs
decrease fixed costs
increase production
increase production manager's salary
Question 25
The primary difference between variable and absorption costing is the treatment of:
fixed selling and administration costs
variable selling and administrative costs
fixed manufacturing overhead
variable manufacturing overhead
Question 26
Canned Foods Unlimited is deciding whether to sell its canned corn in whole kernels or to process it further into creamed corn. The cost of producing whole kernel corn is $.20 per can, and the can sells for $.40. Additional processing costs to produce the creamed corn are $.06 per can, and each can sells for $.45. Which of the following costs are relevant in this decision to sell or process further?
$.20 production cost
$.06 additional processing cost
both A and B are relevant
neither A nor B is relevant
Question 27
When using job costing, the following two components of product costs must be carefully measured and track:
direct labor and factory overhead
direct material and direct labor
direct material and indirect labor
indirect mater and indirect labor
Question 28
Which of the following costs is least likely to be relevant in deciding whether to accept a special order?
variable direct labor costs
variable selling costs
fixed manufacturing overhead
variable packaging and shipping costs
Question 29
What steps should a manager take when dealing with a production bottleneck?
a. focusing time and resources on alleviating the bottleneck
b. focusing time and resources on elevating the bottleneck
c. focusing time and resources on improving the efficiency of the bottleneck process
d. both a and c