Test bank for managerial accounting 4th edition

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 rang

Test Bank for Managerial Accounting 4th Edition

Managerial accounting stresses accounting concepts and procedures that are relevant to preparing reports for internal users of accounting information

A thorough understanding of managerial accounting is essential for an effective

An unfavorable evaluation of an operation indicates that the manager of that operation

is not performing adequately

Performance reports may show comparisons of current period performance to the planned, or budgeted, performance

Financial accounting is concerned with presenting results of past transactions while managerial accounting places considerable emphasis on the future

Direct costs are directly traceable to a product, activity, or department

The current business era is referred to as the information age

Enterprise resource planning systems (ERP) often support accounting, human

resources, and e-commerce, in addition to production

Customer Relationship Management Systems (CRM) automate customer service and support

When making ethical choices, one question you should ask yourself is: “Which

alternative will do the most good or the least harm?”

The Sarbanes-Oxley Act requires that companies provide relevant managerial

accounting information to decision-makers

1. True

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)

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

The financial plans prepared by managerial accountants are referred to as

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3 C Changing circumstances may have made the plan out of date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

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

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

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

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

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

Below is a performance report that compares budgeted and actual profit of Mandarin Smoothie for the month of June: Budget Actual Difference Sales $180,000 $182,000

$2,000 Less: Cost of ingredients 142,000 146,000 (4,000) Salaries 11,000 11,200 (200) Controllable profit $27,000 $24,800 ($2,200) In evaluating the department in terms of its increases in sales and expenses, what will be most important to investigate?

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

The fundamental difference between managerial and financial accounting is that

1. A all financial accounting information is audited by Certified Public Accountants whereasmanagerial 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

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 tofollow GAAP

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

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

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

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

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?

4 D salary of the human resources director

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

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

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

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 activitychanges

4 D which is estimated to occur in the future

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

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

The benefits that are given up when another alternative is selected is a(n)

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

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

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 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 indirectcosts 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

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 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

A manager should be evaluated based on

1. A $7,180

2 B $1,700

3 C $2,300

4 D $3,100

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 $140.00

2 B $62.60

3 C $58.00

4 D $82.00

Ceradyne projects variable labor costs of $21,500 in July when 8,600 units are

produced If production is expected to drop to 8,000 units in August, what is the

expected labor cost in August?

1. A $21,500

2 B $20,000

3 C $23,113

4 D $20,900

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

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,

1. A variable cost per unit

2 B fixed cost per unit

3 C total variable cost

4 D total cost per unit

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

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

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?

150 chairs in August, how much is the expected total cost on the August budget?

1. A $18,750

2 B $9,750

3 C $16,950

4 D $17,325

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

to 150 chairs in August if it changes the selling price of rockers to $145 instead of the current $160 per unit What is expected to occur to the cost per unit given the expected changes?

1. A It will decline, because fixed costs do not increase with increases in volume

2 B It will decline because selling price per unit declines

3 C It will increase because more units will be produced

4 D It will increase because fixed costs do not increase with increases in volume

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 revenues generated if 54,000 units are sold?

1. A $44,400

2 B $98,000

3 C $3,348,00

4 D $3,250,000

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

to 54,000 books What is the incremental profit or loss if 54,000 units are produced and sold?

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