1. _____ refers to accounting information developed for managers
within an organization.
a. Internal auditing
b. Managerial accounting
c. Financial accounting
d. Tax accounting
2. The primary users of management accounting information are _____.
b. governmental regulatory authorities
c. internal decision makers
3. Which scorecard function is associated with planning and control?
a. Scorekeeping is associated with planning and control.
b. Attention directing is associated with planning and control.
c. Problem solving is associated with planning and control.
d. None of these answers is correct.
4. Which scorecard function is associated with making nonroutine decisions?
a. Scorekeeping is associated with making nonroutine decisions.
b. Attention directing is associated with making nonroutine decisions.
c. Problem solving is associated with making nonroutine decisions.
d. None of these answers is correct.
5. Information is relevant if it is a(n) _____.
a. expected future cost or it differs among alternatives
b. expected future cost and it differs among alternatives
c. historical cost and it differs among alternatives
d. expected future cost that differs from a past cost
6. Management by exception _____.
a. is the quantitative expression of action plans
b. provides feedback by comparing results with plans and by highlighting deviations from plans
c. is a summary report of plan results
d. focuses on areas that are presumed to be running smoothly
7. Which of the following is not a cost driver of customer services costs?
a. Hours spent servicing products are not a cost driver of customer services costs.
b. Travel costs are not a cost driver of customer services costs.
c. Number of service calls is not a cost driver of customer services costs.
d. All of these answers are correct.
8. Output measures of both resources and activities are _____.
a. cost drivers
b. stages of production
c. fixed activities
d. variable activities
9. _____ is how the activities of an organization affect its costs.
a. Cost behavior
b. Cost driver
c. Volume-related cost drivers
d. None of these answers is correct
10. Which of the following is correct?
a. The contribution income statement provides a gross margin.
b. The absorption income statement provides a contribution margin.
c. Both statements are correct.
d. Neither statement is correct.
11. One advantage of the management-by-exception approach is that it _____.
a. frees managers from needless concern over operations that are running smoothly
b. allows managers to ignore aspects of the business outside their area of expertise
c. allows managers to ignore day-to-day concerns so they can focus on crises
d. takes advantage of computerization
12. When analyzing cost, think of _____.
a. variable costs as a total
b. variable costs on a per-unit basis
c. fixed costs on a per-unit basis
d. variable costs as a total and fixed costs on a per-unit basis
13. _____ is not a primary purpose of a cost management system.
a. Providing aggregate measures of inventory value and cost of goods sold
b. Providing cost information for strategic management decisions
c. Providing cost information for operational control
d. All of these answers are correct
14. Fixed costs _____.
a. are fixed on a per-unit basis, but vary in total
b. vary on a per-unit basis, but are fixed in total
c. are fixed on a per-unit basis, and fixed in total
d. vary on a per-unit basis, and often vary in total
15-16. The Hola Company held a Christmas party. The company expected attendance of 100 persons and prepared the following budget:
Hotel room rental $500
After all bills for the party were paid, the total came to $2,315. Details are: $575 for hotel room rental; $640 for food; $750 for entertainment; and $350 for decorations. One hundred persons attended the party.
15. What is the total budget variance?
a. $115 unfavorable is the total budget variance.
b. $115 favorable is the total budget variance.
c. $25 favorable is the total budget variance.
d. $140 unfavorable is the total budget variance.
16. Which of the following costs deserves further examination assuming the Flintstone Company uses the management-by-exception rule?
a. Hotel room rental deserves further examination
b. Food deserves further examination.
c. Entertainment deserves further examination.
d. Decorations deserve further examination.
17. The level of sales at which revenues equal expenses and net income is zero is called the _____.
a. margin of safety
b. contribution margin
c. break even point
d. marginal income point
18. If the sales price per unit is $30, the unit contribution margin is $8, and total fixed costs are $32,000, the break even point in units is _____.
19. Nevada Company provided the following information regarding its only product--skateboards.
Direct materials used $200,000
Direct labor 80,000
Fixed overhead 180,000
Fixed selling and administrative costs 150,000
Variable overhead 30,000
Variable selling and administrative 60,000
Selling unit price 127
Units produced and sold 10,000
_____ is the manufacturing cost per unit if the contribution approach is used.
20. Missouri Company has a current production capacity level of 200,000 units per month.
At this level of production, variable costs are $0.50 per unit and fixed costs are $0.50 per unit. Current monthly sales are 173,000 units. Gates Company has contacted Missouri Company about purchasing 20,000 units at $1.00 each. Current sales would not be affected by the special order and no additional fixed costs would be incurred on the special order. Missouri Company's change in profits if the order is accepted will be a _____:
a. $20,000 increase
b. $20,000 decrease
c. $10,000 increase
d. $10,000 decrease
21. If the sales price per unit is $34, the unit variable cost is $19, and the break even point is 12,000 units, then the total fixed costs are _____.
22. Cost of goods manufactured is computed as _____.
a. Direct materials + indirect materials
b. Direct materials + direct labor + indirect manufacturing (overhead)
c. Direct labor + direct materials
d. Direct labor + indirect labor
23. Walnut Corporation sells desks at $480 per desk. The costs associated with each desk are as follows:
Direct materials $195
Direct labor 126
Variable factory overhead 51
Total fixed costs for the period are $456,840. The contribution margin per desk is _____.
24. On Fire Company, a producer of salsa, has the following information:
Income tax rate 30%
Selling price per unit $5.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
The contribution-margin ratio is _____.
25. Bombay Industries budgeted the following costs for the production of its only product, tennis balls, for the next fiscal year:
Selling and administrative:
Total costs $125,000
Bombay Industries has a target profit of $40,000. The average target markup for setting prices as a percentage of total production costs would be _____.
26. The following information is for Kinsner Corporation:
Total fixed costs $313,500
Variable costs per unit $99
Selling price per unit $154
If management has a targeted net income of $46,200 (ignore income taxes), then the number of units that must be sold is _____.
a. 2,036 units
b. 2,336 units
c. 5,700 units
d. 6,540 units
27-30 The following information is for Wildwood Corporation:
Total fixed costs $500,000
Unit variable costs $50.95
Unit selling price $68.50
Required (4 pts each):
27. Compute the contribution margin per unit.
28. Compute the contribution margin ratio.
29. Compute the break even point in units.
30. Compute the break even volume in dollars.
31&32. Brunswick Manufacturing Inc.’s most recent income statement is presented below:
Cost of goods sold 200,000
Gross margin 250,000
Other operating expenses 196,000
Operating income $54,000
Brunswick Manufacturing Inc. has determined that $50,000 of cost of goods sold and $166,000 of operating expenses is fixed.
Required (4 pts each):
31. Compute the contribution margin.
32. Compute the contribution-margin percentage.
33&34. Georgia Company has been producing and selling 100,000 units per year. They have excess capacity. The following budget was prepared for the next year:
Selling price per unit $12.50
Variable cost per unit:
Direct materials $5.00
Direct labor 3.00
Selling and administrative .25
Fixed costs in total:
Selling and administrative 35,000
Required (5 pts each):
33. Prepare an income statement using the contribution approach.
34. Prepare an income statement using the absorption approach.