92 test bank for managerial accounting 4th

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92 Test Bank for Managerial Accounting 4th

Edition by Jiambalvo

Multiple Choice Questions-Page 1

A retailer purchased some trendy clothes that have gone out of style and must be marked down to 40% of the original selling price

in order to be sold Which of the following is a sunk cost in this situation?

1 A the current selling price

2 B the original selling price

3 C the original purchase price

4 D the anticipated profit

Variable cost per unit

1 A increases when the number of units produced increases.

2 B does not change when the number of units produced increases.

3 C decreases when the number of units produced increases.

4 D decreases when the number of units produced decreases.

Which of the following is not likely to be a fixed cost?

1 A direct materials

2 B rent

3 C depreciation

4 D salary of the human resources director

Costs incurred in the past which are not relevant to present

decisions are

1 A fixed costs.

2 B sunk costs.

3 C opportunity costs.

4 D indirect costs.

Sunk costs

1 A are not relevant for decision making

2 B would include the cost of your tuition after the refund deadline has passed.

3 C are costs that have been incurred in the past.

4 D All of the above are correct.

You own a car and are trying to decide whether or not to trade it in and buy a new car Which of the following costs is an opportunity cost in this situation?

1 A the trip to Cancun that you will not be able to take if you buy the car

2 B the cost of the car you are trading in

3 C the cost of your books for this term

4 D the cost of your car insurance last year

The principle that managers follow when they only investigate

departures from the plan that appear to be significant is commonly known as

1 A small amounts don’t matter.

2 B management by exception.

3 C only labor and materials deserve attention.

4 D exceptional costs yield exceptional results.

Which of the following is not a difference between financial

accounting and managerial accounting?

1 A Financial accounting is primarily concerned with reporting the past, while managerial accounting is more concerned with the future.

2 B Managerial accounting uses more nonmonetary information than is used in financial accounting.

3 C Managerial accounting is primarily concerned with providing information for external users while financial accounting is concerned with internal users.

4 D Financial accounting must follow GAAP while managerial accounting is not required to follow GAAP.

The goal of managerial accounting is to provide information that managers need for

1 A planning.

2 B control.

3 C decision making.

4 D All of the above answers are correct.

Which of the following statements regarding direct and indirect

costs is true?

1 A The amount of direct costs in a department is always less than the amount

of indirect costs in that department.

2 B A department with no variable costs will also have no direct costs.

3 C The distinction between a direct and indirect cost depends on the object of the cost tracing.

4 D If a cost is indirect to a department within a plant, it will also be indirect for the plant as a whole.

A company has a cost that is $2.00 per unit at a volume of 12,000 units and $2.00 per unit at a volume of 16,000 units What type of cost is this?

1 A fixed

2 B variable

3 C sunk

4 D incremental

Which of the following statements regarding fixed costs is true?

1 A When production increases, fixed cost per unit increases.

2 B When production decreases, total fixed costs decrease.

3 C When production increases, fixed cost per unit decreases.

4 D When production decreases, total fixed costs increase.

The fundamental difference between managerial and financial

accounting is that

1 A all financial accounting information is audited by Certified Public

Accountants whereas managerial accounting information is not audited by anyone.

2 B managerial accounting is concerned principally with determining the cost of inventory (ending inventory and cost of goods sold), whereas financial

accounting is concerned with a wider range of the organization’s activities.

3 C managerial accounting provides information for decision-makers within the organization, whereas financial accounting provides information for individuals and institutions external to the organization.

4 D financial accounting information follows U.S Generally Accepted

Accounting Principles, whereas managerial accounting information generally follows rules set forth by the Institute of Management Accountants.

A difference between actual costs and planned costs

1 A should be investigated if the amount is exceptional.

2 B indicates that the planned cost was poorly estimated.

3 C indicates that the manager is doing a poor job.

4 D should be ignored unless it involves the cost of ingredients.

Uno Pizza produced and sold 800 pizzas last month and had total variable ingredients that cost $3,440 If production and sales are expected to increase by 10% next month, which of the following statements is true?

1 A Total variable materials costs are expected to be $3,784

2 B Variable material cost per unit is expected to be $4.73

3 C Total variable materials costs are expected to be $3,444.30

4 D Total variable materials costs are expected to be $344

Marco Diner produced and sold 2,000 bagels last month and had fixed costs of $6,000 If production and sales are expected to

increase by 10% next month, which of the following statements is true?

1 A Total fixed costs will increase.

2 B Total fixed costs will decrease.

3 C Fixed cost per unit will increase.

4 D Fixed cost per unit will decrease.

The benefits that are given up when another alternative is selected

is a(n)

1 A sunk cost.

2 B controllable cost.

3 C opportunity cost.

4 D direct cost.

Opportunity costs are

1 A considered to be fixed costs in the short term.

2 B another term for sunk costs.

3 C able to be controlled by most effective managers.

4 D the value of benefits foregone when one decision is selected over another.

Managerial accounting

1 A is primarily directed at external users of accounting information.

2 B is required by taxing authorities such as the IRS.

3 C must follow GAAP.

4 D is optional.

It is possible for a manager to receive a positive evaluation when the operation receives a(n)

1 A favorable evaluation.

2 B neutral or mixed evaluation.

3 C unfavorable evaluation.

4 D All of the above answers are correct.

A sunk cost is a cost

1 A incurred in the past which is not relevant to present decisions.

2 B incurred in the current period which changes with changes in production activity.

3 C incurred in the current period which remains constant even though

production activity changes.

4 D which is estimated to occur in the future.

Performance reports often compare current period performance with

1 A performance in a prior period.

2 B planned (budgeted) performance.

3 C Both A and B are correct.

4 D Neither A nor B is correct.

The last step in the planning and control process is to

1 A implement the plan.

2 B construct the plan.

3 C make decisions based on the evaluation of the results.

4 D compare actual results to the planned results.

Managerial accounting stresses accounting concepts and

procedures that are relevant to preparing reports for

1 A taxing authorities.

2 B internal users of accounting information.

3 C external users of accounting information.

4 D the Securities and Exchange Commission (SEC).

Which of the following is a direct cost in relation to the cost of

teaching the managerial accounting course you are currently

taking?

1 A The cost of the paper that you receive as handouts for the class

2 B The cost of the room you are using for the class

3 C The cost of the registration system that allowed you to enroll in the class

4 D The cost of the financial aid department that helps you fund the cost of taking the class

Which of the following is not a reason that actual results may differ from the company’s plan?

1 A The plan may not have been followed properly.

2 B The plan may not have been well thought-out.

3 C Changing circumstances may have made the plan out of date.

4 D All of the above are reasons that actual results may differ from the

company’s plan.

A cost which is directly traceable to a product, activity, or

department is a(n)

1 A fixed cost.

2 B managerial cost.

3 C opportunity cost.

4 D direct cost.

Which of the following is most likely to make use of Spruce

Company’s managerial accounting information?

1 A the IRS

2 B an individual contemplating an investment in Spruce Company

3 C a company that is one of Spruce’s main competitors

4 D the production manager of Spruce’s plant in Minnesota

The financial plans prepared by managerial accountants are

referred to as

1 A budgets.

2 B financial statements.

3 C treasurer’s reports.

4 D controller’s opinions.

Which of the following costs does not change when the level of

business activity changes?

1 A total fixed costs

2 B total variable costs

3 C total direct materials costs

4 D fixed costs per unit

92 Free Test Bank for Managerial Accounting 4th Edition

by Jiambalvo Multiple Choice Questions-Page 2

Books Galore plans to produce 50,000 books next year at a total cost of $1,900,000 Fixed costs total $120,000 Selling price per book is $65.00 Management is considering lowering the price to

$62.00 per unit, and feels that this action will cause sales to climb to 54,000 books What is the incremental profit or loss if 54,000 units are produced and sold?

1 A $1,425,600 profit

2 B $44,400 loss

3 C $142,400 loss

4 D $1,305,600 profit

Ceradyne projects its factory rent to be $6,000 in August when

8,600 units are expected to be produced If rent is a fixed cost, and

if production is expected to drop to 7,000 units in September, what

is the expected cost of rent in September?

1 A $6,000

2 B $4,884

3 C $4,900

4 D The answer can not be determined with the information that is given.

Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials,

$4,080; hourly labor (variable), $5,200; rent (fixed), $1,700;

depreciation, $800; and other fixed costs, $600 Each steak dinner sells for $14.00 each What is Shula’s budgeted profit?

1 A $22,400

2 B $13,120

3 C $10,020

4 D $12,380

Calculating the difference in revenue and the difference in cost between decision alternatives is called

1 A budgeting production.

2 B incremental analysis.

3 C profit planning.

4 D systems development.

Paradise Pottery had the following costs in May when production is

800 ceramic pots: materials, $8,700; labor (variable), $2,900;

depreciation, $1,100; rent, $900; and other fixed costs, $1,500 If production changes to 850 units, which will stay the same?

1 A variable cost per unit

2 B fixed cost per unit

3 C total variable cost

4 D total cost per unit

Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials,

$4,080; hourly labor (variable), $5,200; rent (fixed), $1,700;

depreciation, $800; and other fixed costs, $600 Each steak dinner sells for $14.00 each What is the budgeted fixed cost per unit?

1 A $1.06

2 B $1.44

3 C $4.49

4 D $1.94

Which of the following is not a reasonable measure of a manager’s performance?

1 A profit

2 B depreciation method used

3 C number of late deliveries

4 D market share

Variable cost per unit is budgeted to be $6.00 and fixed cost per unit is budgeted to be $3.00 in a period when 5,000 units are

produced If production is actually 4,500 units, what is the expected total cost of the units produced?

1 A $45,000

2 B $40,500

3 C $43,500

4 D $42,000

Books Galore plans to produce 50,000 books next year at a total cost of $1,900,000 Fixed costs total $120,000 Selling price per book is $65.00 Management is considering lowering the price to

$62.00 per unit, and feels that this action will cause sales to climb to 54,000 books What are the incremental costs generated if 54,000 units are sold?

1 A $1,900,000

2 B $1,922,400

3 C $142,400

4 D $152,000

Which of the following statements regarding incremental analysis is not true? Assume that there are no opportunity costs and that the capacity exists to complete any of the alternatives

1 A The preferred alternative will always have revenues that are greater than the revenues of the other alternatives.

2 B The preferred alternative will always have expenses that are greater than the expenses of the other alternatives.

3 C The preferred alternative will always have expenses that are less than the expenses of the other alternatives.

4 D The preferred alternative will always have profits that are greater than the profits of the other alternatives.

Paradise Pottery had the following costs in May when production is

800 ceramic pots: materials, $8,700; labor (variable), $2,900;

depreciation, $1,100; rent, $900; and other fixed costs, $1,500 If production changes to 900 units, how much will the total variable costs and total fixed costs be, respectively?

1 A $13,050 and $3,500

2 B $10,311 and $3,500

3 C $ $3,267 and $12,200

4 D $14,288 and $2,400

Raron’s Rockers is in the process of preparing a production cost budget for August Actual costs in July for 120 rocking chairs were: Materials cost:$4,800; Labor cost: 3,000; Rent:1,500;

Depreciation:2,500; Other fixed costs:3,200; Total:$15,000

Materials and labor are the only variable costs If production and sales are budgeted to increase to 150 chairs in August, how much

is the expected total variable cost on the August budget?

1 A $18,750

2 B $9,750

3 C $16,950

4 D $17,325

A manager should be evaluated based on

1 A noncontrollable costs.

2 B opportunity costs.

3 C controllable costs.

4 D sunk costs.

Paradise Pottery had the following costs in May when production is

800 ceramic pots: materials, $8,700; labor (variable), $2,900;

depreciation, $1,100; rent, $900; and other fixed costs, $1,500 The variable cost per unit and fixed cost per unit are, respectively,

1 A $3.63 and $15.25

2 B $17.00 and $1.88

3 C $14.50 and $4.38

4 D $15.88 and $3.00

Actions of managers are greatly influenced by

1 A sunk costs.

2 B performance measures.

3 C noncontrollable costs.

In a period when anticipated production is 10,000 units, budgeted variable costs are $85,000 and budgeted fixed costs are $45,000 If 12,000 units are actually produced, what is the expected total cost?

1 A $130,000

2 B $156,000

3 C $147,000

4 D $139,000

In a period when anticipated production is 20,000 units, budgeted variable costs are $85,000 and budgeted fixed costs are $45,000 If 15,000 units are actually produced, what is the expected total cost?

1 A $130,000

2 B $97,500

3 C $108,750

4 D $118,750

Which of the following is likely to be a noncontrollable cost of a department supervisor?

1 A labor in the department

2 B materials used in the department

3 C insurance on the plant

4 D overtime premium pay earned by those working in the department

Which of the following statements regarding performance measures

is not true?

1 A GAAP requires performance measures for all salaried employees.

2 B Companies can select from many possible performance measures when deciding how they want to assess performance.

3 C Employees tend to direct their attention to what is measured and may neglect what isn’t measured.

4 D Companies need to develop a balanced set of performance measures and avoid placing too much emphasis on any single measure.

Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials,

$4,080; hourly labor (variable), $5,200; rent (fixed), $1,700;

depreciation, $800; and other fixed costs, $600 Each steak dinner sells for $14.00 each What is the budgeted total fixed cost?

1 A $7,180

2 B $1,700

3 C $2,300

4 D $3,100

If management informs employees that bonuses will depend solely

on improving the gross profit ratio (gross profit/sales), which of the following behaviors would be likely to be observed?

1 A Sales people would quit trying to sell high volume, low margin core

products

2 B Overall sales would fall

3 C Overall gross profit would fall

4 D All of the above

Shula’s 347 Grill has budgeted the following costs for a month in which 1,600 steak dinners will be produced and sold: Materials,

$4,080; hourly labor (variable), $5,200; rent (fixed), $1,700;

depreciation, $800; and other fixed costs, $600 Each steak dinner sells for $14.00 each How much is the budgeted variable cost per unit?

1 A $5.80

2 B $7.74

3 C $6.68

4 D $3.25

ProGo plans to sell 1,200 carriers next year and has budgeted

sales of $48,000 and profits of $20,000 Variable costs are