This document contains a summary of 29 multiple choice questions related to management accounting concepts. Some key points covered include:
- Definitions of terms like "committed costs" and "cost drivers"
- Classifying costs as fixed, variable, or discretionary
- Cost estimation techniques like high-low analysis and regression analysis
- Project planning methods like PERT analysis and critical path method
- Using linear programming to optimize allocation of scarce resources
This document contains a summary of 29 multiple choice questions related to management accounting concepts. Some key points covered include:
- Definitions of terms like "committed costs" and "cost drivers"
- Classifying costs as fixed, variable, or discretionary
- Cost estimation techniques like high-low analysis and regression analysis
- Project planning methods like PERT analysis and critical path method
- Using linear programming to optimize allocation of scarce resources
This document contains a summary of 29 multiple choice questions related to management accounting concepts. Some key points covered include:
- Definitions of terms like "committed costs" and "cost drivers"
- Classifying costs as fixed, variable, or discretionary
- Cost estimation techniques like high-low analysis and regression analysis
- Project planning methods like PERT analysis and critical path method
- Using linear programming to optimize allocation of scarce resources
This document contains a summary of 29 multiple choice questions related to management accounting concepts. Some key points covered include:
- Definitions of terms like "committed costs" and "cost drivers"
- Classifying costs as fixed, variable, or discretionary
- Cost estimation techniques like high-low analysis and regression analysis
- Project planning methods like PERT analysis and critical path method
- Using linear programming to optimize allocation of scarce resources
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MANAGEMENT ADVISORY SEVICES REVIEWERS / TESTBANKS
1. The term "committed costs" refers to costs that
a. are likely to respond to the amount of attention devoted to them by a specified manager b. are governed mainly by past decisions that established the present levels of operating and organizational capacity and that only change slowly in response to small changes in capacity c. fluctuate in total in response to small changes in the rate of utilization of capacity d. management decides to incur in the current period to enable the company to achieve objectives other than the filling of orders placed by customers 2. Which of the following is likely to be a discretionary cost in most organizations? a. managerial training programs c. managerial labor costs b. factory utilities d. factory rent 3. A cost driver a. causes fied costs to rise because of production changes b. has a direct cause!effect relationship to a cost c. can predict the cost behavior of a variable" but not a fied" cost d. is an overhead cost that causes distribution costs to change in distinct increments with changes in production volume 4. #osts that are incurred for monitoring and inspecting are$ a. prevention costs c. appraisal costs b. detection costs d. failure costs 5. The cost estimation method that gives the most mathematically precise cost production e%uation is a. The high!low method c. The scatter!graph method b. The contribution margin method d. The regression analysis 6. A local &'(A chapter wants to rent a half for ')"*** a day to hold a +ingo fund raiser. ,very session of bingo re%uires a caller for '-**. There are supplies that are needed that cost ') per person playing bingo. .n average each bingo player spends '-* and /"*** people attend each session. '/*"*** in prizes are awarded each session. Total cost for / session can be classified as$ 0ied #osts!1ariable #osts 0ied#osts!1ariable #osts a. ' /)"-**!' ) c. ' )"***!' /)"-** b. ' /)"-**!' )"*** d. ' /*"***!' )"-** 7. Which is not a common accounting classification of costs? a. +y the method of payment for the ependiture b. +y the objective of ependiture c. +y behavior d. +y the function incurring the ependiture 8. The principal advantage of the scatter!diagram method over the high!low method of cost estimation is that the scatter!diagram method a. includes costs outside the relevant range b. considers more than two points c. can be used with more types of costs than the high!low method d. gives a precise mathematical fit of the points to the line 9. Which statement is true? a. A variable cost remains constant on a per!unit basis as production increases b. A fied cost remains constant on a per!unit basis as production changes c. The relevant range is valid for all levels of activity d. An indirect cost can be easily traced to a cost object. 'ure 0oods wishes to analyze the fied and variable components of the semi!variable costs. The following information is available$ .utput .utput 2onth 3nits #osts 2onth 3nits #osts &anuary /"*** ' /-"*** April 4** ' //"*** 0ebruary 5** /*"*** 2ay /"6** /4"57* 2arch /"/** /6"*** &une /"-** /7"*** 10. 3sing the high!low method" which one of the following is correct. application a. 1ariable costs is ' /7 per unit c. 0ied costs is ' /"-7* per month b. 1ariable costs is ' /* per unit d. 0ied costs is ' /"*** per month 11. +8' #ompany earned ' /**"*** on sales of ' /"***"***. (t earned ' /)*"*** on sales of ' /"/**"***. Total fied costs are a. ' * b. ' -**"*** c. ' 6-*"*** d. ' 9**"*** 12. Which of the following is a prevention cost? a. (nspecting and testing materials c. %uality audits b. 'ackaging inspection d. cost of recalls 13. Which of the following costs is an internal failure cost? a. 'ackaging inspection c. %uality engineering b. :ework d. lost sales 14. .ne of the ways managerial accounting differs from financial accounting is that managerial accounting a. is bound by generally accepted accounting principles b. classifies information in different ways c. does not use financial statements d. deals only with economic events 15. 2anagerial accounting places considerable weight on$ a. generally accepted accounting principles b. the financial history of the entity c. ensuring that all transactions are properly recorded d. detailed segment reports about departments" products and customers 16. The cost management function is usually under a. the chief information officer c. purchasing manager b. controller d. treasurer 17. 'lanning is a function that involves a. hiring the right people for a particular job b. coordinating the accounting information system c. setting goals and objectives for an entity d. analyzing financial statements 18. The treasurer function is usually not concerned with a. investors relation c. financial reports b. short!term financing d. credit etension and collection of bad debts 19. The following characterized management advisory services" ecept a. (t involves decision for the future b. (t broader in scope and varied in nature c. (t utilizes more junior staff than senior members of the firm d. (t relates to specific problems where epert help is re%uired 20. 3nder which ethical standard of conduct does the managerial accountant have the responsibility to disclose fully all relevant information that could reasonably be epected to influence an intended user;s understanding of the reports" comments and recommendations presented? a. .bjectivity b. competence c. confidentiality d. integrity <anson #ompany manufactures two different types of receivers" a regular 2odel : and a special features 2odel 8. The company has limited resources. .n an annual basis it has a total of 64* direct labor!hours and a total of )** lbs. of material available for use in the manufacture of these receivers. The company uses linear programming to determine a production schedule that will maimize the company;s profit. +ased on the company;s current data on selling prices and production costs" it is estimated that the sale of 2odel : will contribute '5 profit per unit and the sale of 2odel 8 will contribute '/* profit per unit. :esources used in the production of the two receivers are as follows. =>et 2odel 8 ? 8 and 2odel : ? :.@ 2odel 8 2odel : :aw materials used per unit 7 lbs. ) lbs. >abor used per unit A hours 6 hours 21. The objective function for <anson #ompany can be epressed as a. 78 B ): C ? )** c. A8 B 6: C ? 64* b. 2a ? 5: B /*8 d. 2in ? 78 B ) : 22. A beverage stand can sell either softdrinks or coffee on any given day. (f the stand sells softdrinks and the weather is hotD it will make '-"7**D if the weather is cold" the profit will be '/"***. (f the stand sells coffee and the weather is hot" it will make '/"9**D if the weather is cold" the profit will be '-"***. The probability of cold weather on a given day at this time is A*E. The epected payoff if the vendor has perfect information is$ a. ')"9** b. '/")A* c. '-"-** d. '/"9A* 23. 8oft (nc. has a target total labor cost of ' )"A** for the first four batches of a product. >abor is paid '/* an hour. (f 8oft epects an 4*E learning curve" how many hours should the first batch take? a. )A* hours b. /6*.A) hours c. 75.A hours d. -)*.6 hours 24. #ritical 'ath 2ethod =#'2@ is a techni%ue for analyzing" planning" and scheduling large" comple projects by determining the critical path from single time estimate from each event in a project. The critical path$ a. (s the shortest path from the first event to the last event for a project b. (s an activity within the path that re%uires the most number of time c. <as completion that reflects the earliest time to complete the project d. (s the maimum amount of time an activity may be delayed without delaying the total project beyond its target completion time 25. A company is designing a new regional distribution warehouse. To minimize delays in loading and unloading trucks" an ade%uate number of loading docks must be built. The most relevant techni%ue to assist in determining the proper number docks is a. #ost!volume!profit analysis c. ',:T F #'2 analysis b. Gueuing theory d. >inear programming A& #onstruction (nc. is considering a three!phase research project. The time estimates for completion of 'hase / of the project are$ 'essimistic -9 weeks 2ost likely -7 weeks .ptimistic /7 weeks 26. 3sing the program evaluation and review techni%ue =',:T@" the epected time for completion of 'hase / should be a. -* weeks b. /9 weeks c. /4 weeks d. -6 weeks 2oon" (nc. manufactures product H and product I" which are processed as follows$ Type A machine Type + machine 'roduct H A hours 6 hours 'roduct I 9 hours 7 hours 27. The contribution margin is '/- for product H and '5 for product I. The available time daily for processing the two products is /-* hours for machine Type A and 4* hours for machine Type +. What is the best combination of product that will maimize profit? a. /*H" /*I b. /7H" 7I c. -*H" *I d. *H" -*I 28. >inear programming is used most commonly to determine a. The fastest timing b. The best use of scarce resources c. The most advantageous prices d. The mi of variable that will result in the largest %uantity The network below describes the interrelationships of several activities necessary to complete a project. The arrows represent the activities. The numbers between the arrows indicate the number of months to complete each activity. - 6 6 8tart A ,nd - A 6 29. The shortest time to complete the project is a. /* months b. /- months c. /A months d. -4 months 30. 8uper #ompany is preparing -*// budget and" taking into consideration the recent pace of economic recovery" has developed several sales forecasts and the estimated probability associated with each sales forecasts. To determine the sales forecasts to be used for -*// budgeting purposes" which of the following techni%ues should 8uper use? a. ,pected value analysis c. 2onte #arlo simulation b. #ontinuous probability simulation d. 8ensitivity Analysis 31. The epected value of perfect information is the a. Jifference between the epected profit under certainty and the epected monetary value of the best act under uncertainty. b. Jifference between the epected profit under certainty and the epected opportunity loss c. 8um of the conditional profit =loss@ for the best event of each act times the probability of each events occurring d. 8ame as the epected profit under certainty A dough distributor has decided to increase its daily muffin purchases by /** boes. A bo of muffins costs ' - and sells for ' ) through regular stores. Any boes not sold through regular stores are sold through Jough;s thrift store for ' /. Jough assigns the following probabilities to selling additional boes. Additional sales probabilities A* .6* 1 2 4 3 5 5 /** .A* 32. What is the epected value of Jough;s decision to buy /** additional boes of muffins? a. ' -4 b. ' 6* c. ' 7- d. ' A4 33. As a company becomes more conservative with respect to working capital policy" it would tend to have a=n@ a. (ncrease in the operating cycle. b. Jecrease in the operating cycle. c. (ncrease in the ratio of current assets to current liabilities. d. (ncrease in the ratio of current liabilities to noncurrent liabilities. 34. Temporary working capital supports a. The cash needs of the company c. 'ayment of long term debt. b. Ac%uisition of capital e%uipment d. 8easonal peaks 35. Kap #ompany follows an aggressive financing policy in its working capital management while King #orporation follows a conservative financing policy. Which one of the following statements is correct? a. Kap has a low current ratio while King has a high current ratio. b. Kap has less li%uidity risk while King has more li%uidity risk. c. Kap finances short!term assets with long term debt while King finances short!term assets with short!term debt. d. Kap has low ratio of short!term debt to total debt while King has a high ratio of short!term debt to total debt. 36. All of these factors are used in credit policy administration" ecept$ a. #redit standards c. Terms of trade b. 'eso amount of receivables d. #ollection policy 37. The use of safety stock by a firm will$ a. :educe inventory costs c. (ncrease inventory costs b. <ave no effect on inventory costs d. Lone of the above 38. Which of the following statements is correct for a firm that currently has total costs of carrying and ordering inventory that is 7*E higher than total carrying costs? a. #urrent order size is greater than optimal c. #urrent order size is less than optimal b. 'er unit carrying costs are too high d. The optimal order size is currently being used 39. The 8pades #ompany has an inventory conversion period of 57 days" a receivables conversion period of )4 days" and a payable payment period of )* days. What is the length of the firm;s cash conversion cycle? a. 4) days b. //) days c. A5 days d. 67 days 40. 8amaritan 8upplies" (nc. has '7 million in inventory and '- million in accounts receivable. (ts average daily sales are '/**"***. The company has '/.7 million in accounts payable. (ts average daily purchases are '7*"***. What is the length of the company;s inventory conversion period? a. /-* days b. 9* days c. 7* days d. 6* days 41. :awson #orporation;s order %uantity for 2aterial T is 7"*** lbs. (f the company maintains a safety stock of T at 7** lbs." and its order point is /"7** lbs. What is the lead time assuming daily usage is 7* lbs.? a. )* days b. /** days c. /* days d. -* days 42. :efer to M /AD what would be the total annual carrying costs assuming the carrying cost per unit is '4.6*? a. ' 6-"*** b. ' -7"-** c. ' 6"-** d. ' 6A"-** 43. 8imile (nc. has a total annual cash re%uirement of ' 9"*57"*** which is to be paid uniformly. 8imile has the opportunity to invest the money at -6E per annum. The company spends" on the average" '6* for every cash conversion to marketable securities. What is the optimal cash conversion size? a. '77"*** b. 'A*"*** c. '67"*** d. '57"7** 44. 'alm #ompany;s budgeted sales of the coming year are ' 6*"7**"*** of which 4*E are epected to be credit sales at terms of nF)*. 'alm estimates that a proposed relaation of credit standards will increase credit sales by -*E and increase the average collection period from )* days to 6* days. +ased on a )A*!day year" the proposed relaation of credit to standards will result in an epected increase in the average accounts receivable balance of a. '76*"*** b. '9**"*** c.'-"5**"*** d. '/"A-*"*** 45. (f a firm is given a trade credit terms of -F/*" net )*" then the cost to the firm failing to take the discounts and pay instead its obligation at the end of the maturity date is$ a. -E b. )*E c. )A.5E d. /*E 6A.@ Jepreciation is incorporated eplicitly in the discounted cash flow analysis of an investment proposal because it A. (s a cash inflow. +. (s a cost of operations that cannot be avoided. #. Reduces te cas outla! "o# inco$e ta%es& J. :epresents the initial cash outflow spread over the life of the investment. 65.@ Assume that the old e%uipment must be sold in order to purchase the new e%uipment. Niven a constant effective corporate income ta rate and straight!line depreciation on both disposed and newly purchased pieces of e%uipment" the depreciation ta shield during the later years of a capital project" assuming the old e%uipment was not yet fully depreciated when it was disposed of" is generally A.@ >ess than that during the earlier years. +.@ Lot determinable from the information given. #.@ G#eate# tan tat du#in' te ea#lie# !ea#s& J.@ The same as that during the earlier years. 64.@ 0uture" (nc. is in the enviable situation of having unlimited capital funds. The best decision rule" in an economic sense" for it to follow would be to invest in all projects in which the a.@ (nternal rate of return is greater than zero. b.@ Net p#esent (alue is '#eate# tan )e#o& c.@ Accounting rate of return is greater than the earnings as a percent of sales. d.@ 'ayback reciprocal is greater than the internal rate of return. 69.@ Oore (ndustries is analyzing a capital investment proposal for new e%uipment to produce a product over the net 4 years. The analyst is attempting to determine the appropriate "end!of!life" cash flows for the analysis. At the end of 4 years" the e%uipment must be removed from the plant and will have a net book value of zero" a ta basis of '57"***" a cost to remove of '6*"***" and scrap salvage value of '/*"***. Oore;s effective ta rate is 6*E. What is the appropriate "end!of!life" cash flow related to these items that should be used in the analysis? a. '-5"*** inflow b. '/4"*** outflow c. '67"*** outflow d. *+,-... in"lo/ 7*.@ +arker" (nc. has no capital rationing constraint and is analyzing many independent investment alternatives. +arker should accept all investment proposals a. That provide returns greater than the before!ta cost of debt. b. Tat a(e a positi(e net p#esent (alue& c. (f debt financing is available for them. d. That have positive cash flows. 7/.@ The rankings of mutually eclusive investments determined using the internal rate of return method =(::@ and the net present value method =L'1@ may be different when a. The lives of the multiple projects are e%ual and the size of the re%uired investments is e%ual. b. The re%uired rate of return e%uals the (:: of each project. c. The re%uired rate of return is higher than the (:: of each project. d. Multiple p#o0ects a(e une1ual li(es and te si)e o" te in(est$ent "o# eac p#o0ect is di""e#ent& 7-. All of the following items are included in discounted cash flow analysis ecept
a. 0uture operating cash savings. b. Te "utu#e asset dep#eciation e%pense& c. The current asset disposal price. d. The ta effects of future asset depreciation. 7).@ A firm is considering a capital project for which the following information is available$ An eisting piece of e%uipment that would be disposed of to make room for new e%uipment has a historical cost of ')5*"***. (t has a salvage value of '/*"*** and has been depreciated on a straight!line basis for /A of the estimated /4 years of its useful life. The new e%uipment has a cost of '7**"*** and the firm epects it will have to devote '-*"*** in cash and '-6"*** in accounts receivable to the new project. The firm;s effective ta rate is 6*E. The re%uired net initial investment in the new project is a. '7)6"*** 2& *3+4-... c. '766"*** d. '694"*** 76.@ (f income ta considerations are ignored" how is depreciation handled by the following capital budgeting techni%ues? A. E%cluded&&&Included&&&E%cluded #. (ncluded...,cluded...(ncluded +. ,cluded...,cluded...(ncluded J. (ncluded...(ncluded...(ncluded
77. The following are inherent to management accounting$ /. ,ternal report -. <istorical information ). #ontribution approach income statement 6. Nenerally accepted accounting principle 7. prospective financial statements a. All of them b. -")"7 c& 5-3 d. /.-"7 7A. What is the study of the need for activities and whether they are operating efficiently called? a. Jirect and indirect cost management 2&Acti(it!62ased $ana'e$ent c. 1ariable and fied cost management d. Total %uality management 75. Which of the following is the appropriate procedure to apply overhead to production using normal costing? a& Assi'n actual di#ect $ate#ial and di#ect la2o# costs plus an a$ount #ep#esentin' 7no#$al8 $anu"actu#in' o(e#ead to p#oducts& b. Assign PnormalQ direct material and direct labor costs plus an amount representing PnormalQ manufacturing overhead to products. c. Assign actual direct material and direct labor costs plus an amount representing PnormalQ manufacturing overhead to products. d. All of the above answers are correct. 74. '& #ompany;s direct labor is )*E of its conversion cost. (f the direct materials costs last week was '7-"7** and the manufacturing overhead cost was '-/"***" compute the cost of the direct labor for the week. a. '57"*** b. P9,000 c. ')*"*** d. 'A")** Guestions 7 through 4 are based on the following information$ ,lvin #orporation manufactures and sells T!shirts inspired with college names and slogans. >ast year" the shirts sold for '5.7* each" and the variable epenses was '-.-7 per unit. The company needed to sell -*"** shirts to breakeven. The net operating income last year was '4"6**. ,lvin;s epectations for the coming year include the following$ - The selling price of the t!shirts would be '9.** - 1ariable epenses would increase by one!third. - 0ied epenses will increase by /*E.
79. The number of t!shirts ,lvin #orporation must sell to breakeven in the coming year is$ b. /5"7** b. 19,250 c. -*"*** d. --"*** A*. 8ales for the coming year are epected to eceed last years by /"*** units. if this occurs" ,lvin;s sales volume in the coming year will be$ c. 22,600 units b. -/"9A* units c. -)"6** units d. -/"*** units A/. (f ,lvin wishes to earn '--"7** in net operating income for the coming year" the company;s sales volume in pesos must be$ d. -/5"57* b. '-75"A-7 c. P207,000 d. '--9"7** A-. The selling price needed net year to maintain the same contribution margin ratio as last year is$ e. '9.** b. '4.-7 c. P10.00 d. '9.57 A). W #ompany had a net operating income of '57"*** using variable costing and a net operating income of '75"*** using absorption costing. 1ariable production costs were '/7 per unit. Total fied manufacturing overhead was '/-*"*** and /*"*** units were produced. Juring the year" the inventory level$ f. (ncreased by /"-** units. c. Decreased by 1,500 units. g. (ncreased by /"7** units. d. Jecreased by /"-** units. A6. An activity!based costing system that is designed for internal decision!making will not conform to generally accepted accounting principles because$ h. 8ome manufacturing costs =the cost of idle capacity and organization sustaining costs@ will not be assigned to products. i. 8ome nonmanufacturing costs are assigned to products. j. 0irst!sage allocation may be based on subjective interview data. k. All of the above are reasons hy an activity!based costin" syste# that is desi"ned for internal decision!#akin" ill not confor# to "enerally acce$ted accountin" $rinci$les. A7. &O> #ompany has a standard of /7 parts of component H costing '/.7* each. &O> purchases /6"*/* units of component H for '--"/-7. &O> generated a '--* favorable price variance and a ')")57 favorable %uantity variance. (f there were no changes in the component inventory" how many units of finished product were produced? a. 996 units b. /"A7* units c. /"*** units d. 1,160 units AA. 8hown below is the sales forecast for # (nc." for the first four months of the coming year$ &an 0eb 2ar Apr #ash 8ales '/7"*** ' -6"*** ' /4"*** ' /6"*** #redit 8ales /**"*** /-*"*** 9*"*** 5*"*** .n average" 7*E of credit sales are paid for in the month of the sale" )*E in the month following sale" and the remainder is paid two months after the month of the sale. Assuming there are no bad debts" the epected cash inflow in 2arch is$ l. '/)4"*** b. '/--"*** c. P119,000 d. '/*4"*** A5. T #ompany budgeted sales on account of '/-*"*** for &uly" '-//"*** for August" and '/94"*** for 8eptember. #ollection eperience indicates that none of the budgeted sales will be collected in the month of the sale" A*E will be collected the month after the sale" )AE in the second month" and 6E will be uncollectible. The cash receipts from accounts receivable that should be budgeted for 8eptember would be$ a.P169,%00 b. '/65"9A* c. '/95"44* d.'/96"4A* A4. ' #ompany budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels =in units@ are planned for the net year$ +eginning ,nding :aw 2aterials 6*"*** 7*"*** 0inished goods 4*"*** 7*"*** Three pounds of materials are needed to produce each unit of finished product. (f ' #ompany plans to sell 64*"*** units during net year" the number of units it would have to manufacture during the year would be m. 66*"*** units b. 64*"*** units c. 7/*"*** units d. &50,000 units A9. + #ompany is preparing its budget for -**A. 0or -**7" the following were reported$ 8ales =/**"*** units@ '/"***"*** #ost of goods sold A**"*** Nross profit 6**"*** .perating epensesR -6*"*** Let (ncome ' /A*"*** Rincluding depreciation of '6*"*** 8elling prices will increase by /*E and sales volume in units will decrease by 7E. The cost of goods sold as a percent of sales will increase to A-E. .ther than depreciation" all operating costs are variable. + will budget a net income for -**A of a. P167,100 b. '/A5"7** c. '/A4"*** d. '/5A"*** Guestions /A through /9 are based on the following information$ A (ndustries employs a standard cost system in which direct materials inventory is carried at standard cost. A has established the following standards for the prime costs of one unit of product. 8tandard Guantity 8tandard 'rice 8tandard #ost Jirect materials 4 pounds '/.4* per pound /6.6* Jirect labor *.-7 hour '4.** per hour -.** Juring 2ay" A purchased /A*"*** pounds of direct materials at a cost of ')*6"***. The total direct labor for 2ay were ')5"4**. A manufactured /9"*** units of product during 2ay using /6-"7** pounds of direct materials and 7"*** direct labor hours. 5*. The direct materials price variance for 2ay is a. '/A"*** 0 b. P16,000 '( c. '/6"-7* 0 d. '/6"-7* 30 5/. The direct materials %uantity variance for 2ay is a. '/6"6** 30 b. '/"/** 0 c. '/5"/** 30 d. P17,100 ( 5-. The direct labor rate variance for 2ay is a. P2,200 ( b. '/"9** 30 c. '-"*** 30 d. '-"*9* 0 5). The direct labor efficiency variance for 2ay is a. '-"-** 0 b. '-"*** 0 c. P2,000 '( d. '/"4** 30 0 Nlass Works uses a standard cost system in which manufacturing overhead is applied to units of product on the basis of direct labor! hours. ,ach unit re%uires two standard hours of labor for completion. The denominator activity for the year was based on budgeted production of -**"*** units. Total overhead was budgeted at '9**"*** for the year" and the fied overhead rate was ').** per unit. The actual data pertaining to the manufacturing overhead for the year are presented below$ Actual production /94"*** units Actual J>< 66*"*** Actual variable overhead ')7-"*** Actual fied overhead '757"*** 56. The standard hours allowed for actual production for the year total a. -65"7** b. )96,000 c. 6**"*** d. 697"*** 57. 0;s variable overhead efficiency variance for the year is a. P)),000 '( b. ')7"-** 0 c. ')7"-** 30 d. ')"*** 0 5A. 0;s variable overhead spending variance for the year is a. '-*"*** 30 b. '--"*** 0 c. P22,000 '( d. '-*"*** 0 55. 0;s fied overhead budget variance for the year is a. '/9"*** 0 b. P25,000 ( c. '-7"*** 30 d. '/9"*** 30 54. The fied overhead applied in 0;s production for the year is a. '646"-** b. '757"*** c. P59&,000 d. '4**"*** 59. 0;s overhead volume variance for the year is a. P6,000 '( b. '/9"*** 0 c. '-7"*** 0 d. '77"*** 30 4*. 0ollowing is information relating to O #ompany;s H Jivision last year$ 8ales '7**"*** 1ariable epenses )**"*** Traceable fied epenses 7*"*** Average operating assets /**"*** 2inimum re%uired rate of return AE H;s residual income was a. P1&&,000 b. '/7*"*** c. '/7A"*** d. '-**"*** 4/. #J, #ompany manufactures communication satellites used in T1 in signal transmission. The firm currently purchases one component for its satellite from a ,uropean firm. A #J, engineering team has found a way to use the company;s own component" namely 'art Lo. A-** instead of the ,uropean component. <owever" the #J, component must be modified at a cost of '7** per part. The ,uropean component costs '4"9** per part. #J,;s part no A-** costs '7"/** before it is modified. #J, currently uses /* of the ,uropean component per year. <ow much is the annual differential cost between #J,;s two production alternatives? a. P)),000 b. ')5"*** c.')6"*** d. ')7"*** 4-. 2 #ompany plans to discontinue a department that has a contribution margin of '-6"*** and '64"*** in fied costs. .f the fied costs" '-/"*** cannot be eliminated. The effect of this discontinuance on 2;s net operating income would be a=n@ a. Jecrease of ')"*** c. Jecrease of '-6"*** b. *ncrease of P),000 d. (ncrease of '-6"*** The T #ompany has 7** obsolete microcomputers that are carried in inventory at a total cost of '5-*"***. (f these microcomputers are upgraded at a total cost of '/**"***" they can be sold for a total of '/A*"***. As an alternative" the microcomputers can be sold in their present condition for '7*"***. 4). The sunk cost in this situation a. P720,000 b. '/A*"*** c. '7*"*** d. '/**"*** 46. What is net advantage or disadvantage to the company from upgrading the computers rather than selling in their present condition? a. '//*"*** advantage c. P10,000 advanta"e b. 'AA*"*** disadvantage d. 'A*"*** advantage 47. 8uppose the selling price of the upgraded computers has not been set. At what selling price per unit would the company be as well off upgrading the computers as if it just sold the computers in their present condition? a. '/** b. '55* c. P)00 d. '-/* 4A. 0 #aterers %uotes price of 'A* per person for a dinner party. This price includes the AE sales ta and the /7E service charge. 8ales ta is computed on the food plus service charge. The service charge is computed on the food only. At what amount does 0 #aterers price the food? a. '77.6* b. '7*.** c.'65.6* d. P&9.22 45. Which is L.T a common accounting classification of costs? a& B! te $etod o" pa!$ent "o# te e%penditu#e& b. +y the objective of ependiture. c. +y behavior. d. +y the function incurring the ependiture. 44. (ntroducing income taes into cost!volume!profit analysis a. raises the break!even point. b. lowers the break!even point. c& inc#eases unit sales needed to ea#n a pa#ticula# ta#'et p#o"it& d. decreases the contribution margin percentage. 49. The principal advantage of the scatter!diagram method over the high!low method of cost estimation is that the scatter!diagram method a. includes costs outside the relevant range. 2& conside#s $o#e tan t/o points& c. can be used with more types of costs than the high!low method. d. gives a precise mathematical fit of the points to the line. 9*. >ooking at the following scatter diagrams we can conclude that S S T R R T RR T R R R T RR R T R R R R T R R T R R T R R T T T T TUUUUUUUUUUUUUUUUUU TUUUUUUUUUUUUUUUUUU activity activity #ost A #ost + a. cost A will be easier to predict than cost +. 2& cost B /ill 2e easie# to p#edict tan cost A& c. cost A is out!of!control. d. cost + has no fied component. 9/. The cost to repair a unit of product that fails after it is sold is a=n@ a. appraisal cost. 2& e%te#nal "ailu#e cost& c. internal failure cost. d. prevention cost. 9-. Nenco manufactures two versions of a product. 'roduction and cost information show the following$ 2odel A 2odel + 3nits produced -** 6** 2aterial moves =total@ -* 4* Jirect labor hours per unit / - 2aterial handling costs total S-**"***. 3nder A+#" the material handling costs allocated to each unit of 2odel A would be$ a. S/* 2& 9,.. c. S))) d. 8ome other number 9). +uchanan #ompany currently sells 6"*** units of product G for S/ each. #apacity is 7"*** units. 1ariable costs are S*.6* and avoidable fied costs are S6**. A chain store has offered S*.4* per unit for 6** units of G. (f +uchanan accepts the order" the change in income will be a a. SA* decrease. b. S4* decrease. c& 9+:. inc#ease& d. S64* increase. 96. An imposed budget a. is the same as a static budget. 2& can lead to poo# pe#"o#$ance& c. is best for planning purposes. d. eliminates the need for a sales forecast. 97. (f the present value of the future cash flows for an investment e%uals the re%uired investment" the (:: is a& e1ual to te cuto"" #ate& b. e%ual to the cost of borrowed capital. c. e%ual to zero. d. lower than the companyVs cutoff rate of return. 9A. Which of the following combinations is possible? 'rofitability (nde L'1 (:: !!!!!!!!!!!!!!!!!!! !!!!!!!! !!!!!!!!!!!!!!!!!!!!!!!!! a. greater than / positive e%uals cost of capital b. greater than / negative less than cost of capital c& less tan + ne'ati(e less tan cost o" capital d. less than / positive less than cost of capital 95. Altoona #ompany is considering replacing a machine with a book value of S-**"***" a remaining useful life of 6 years" and annual straight!line depreciation of S7*"***. The eisting machine has a current market value of S/57"***. The replacement machine would cost S)-*"***" have a 6 year life" and save S/**"*** per year in cash operating costs. (f the replacement machine would be depreciated using the straight! line method and the ta rate is 6*E" what would be the increase in annual income taes if the company replaces the machine? a& 9,4-... b. S6*"*** c. S6-"*** d. SA6"*** 94. Jirect" step!down" and reciprocal are names for a. the allocation methods most likely to produce goal congruence. b. transfer!pricing methods. c& $etods "o# allocatin' costs o" se#(ice depa#t$ents to ope#atin' depa#t$ents& d. alternative organizational structures. 99. #ascade #ompany had the following results in &une.
'lanned Actual !!!!!!! !!!!!!! 8ales S4*"*** S54"9** 1ariable costs 7*"*** 64"7** !!!!!!! !!!!!!! #ontribution margin S)*"*** S)*"6** ??????? ??????? 'lanned sales were /*"*** unitsD actual sales were 9"5** units. The sales price variance is a. S/"/** 3. 2& 9+-... ;& c. S9** 3. d. S6** 0. /**. Alcatraz Jivision of HIK #orp. sells 4*"*** units of part H to the outside market. 'art H sells for S6*" has a variable cost of S--" and a fied cost per unit of S/*. Alcatraz has a capacity to produce /**"*** units per period. #apone Jivision currently purchases /*"*** units of part H from Alcatraz for S6*. #apone has been approached by an outside supplier willing to supply the parts for S)A. What is the effect on HIKVs overall profit if Alcatraz :,038,8 the outside price and #apone decides to buy outside? a. no change 2& 9+<.-... dec#ease in =Y> p#o"its c. S4*"*** decrease in HIK profits d. S6*"*** increase in HIK profits /*/. 0ilter #ompanyVs budget for overhead costs is$ total overhead cost ? S7*"*** B =S6 direct labor hours@ 8tandard direct labor time is /.7 hours per unit of product. The standard wage rate is SA per hour. 8tandard variable overhead cost for a unit of product is a. S6.**. 2& 9:&..& c. S9.**. d. S/*.**. /*-. #hippewa paid S)-"--7 to direct labor for the production of /"5** units. 8tandards allow ) labor hours per unit at a rate of SA.7* per hour. Actual hours totaled 7"/7*. The direct labor rate variance was a& 9+-,3. "a(o#a2le b. S9-7 favorable c. S)-7 favorable d. S)-7 unfavorable /*). A company using activity!based overhead rates a. will usually have higher budget variances than one using a single rate. b. will usually have higher volume variances than one using a single rate. c. cannot compute fied and variable components of overhead cost. d& sould a(e 2ette# in"o#$ation "o# plannin' and cont#ol tan one usin' a sin'le #ate& /*6. 1ariable costing and absorption costing will show the same incomes when there are no a. beginning inventories. b. ending inventories. c. variable costs. d& 2e'innin' and endin' in(ento#ies& /*7. 2adison (ndustries manufactures a single product using standard costing. 1ariable production costs are S-A and fied production costs are S-7*"***. 2adison uses a normal activity of /-"7** units to set its standard costs. 2adison began the year with /"*** units in inventory" produced //"*** units" and sold //"7** units. The standard cost of goods sold under variable costing would be a. S-)*"***. 2& 9,??-...& c. S7*A"***. d. S7-9"***. /*A. +ackflushing" or backflush costing a& #e1ui#es si'ni"icantl! less #eco#d@eepin' tan ote# $etods& b. can be used by any company. c. ignores inventories. d. does not distinguish between materials and conversion costs. /*5. Which of the following will not impair the independence of a #'A in the rendition of 2anagement 8ervices? a. The #'A performs decision!making services for his client. b. The #'A performs services wherein he is in effect" acting as an employee of the client. c. The #'A loses his objectivity and acts in a manner as if he is advocating for the interest of his client. d& Te C*A does not e%tend is se#(ices 2e!ond te p#esentation o" #eco$$endations o# 'i(in' o" ad(ice& /*4. The type of data processing in which remote terminals provide direct access to the computer is a. On6line p#ocessin' c. +atch processing b. :emote processing d. #entral processing /*9. 8e%uential access means that a. Jata are stored on magnetic tape. b. The address of the location of data is found through the use of either an algorithm or an inde. c. ,ach record can be accessed in the same amount of time. d& To #ead #eco#d 3..- #eco#ds + t#ou' <?? $ust 2e #ead "i#st&