Questions -

1. An example of a qualitative factor is:

A. an irrelevant cost

B. customer satisfaction

C. A relevant cost

D. increased income

2. Using another firm to make a product or part of a product, rather than making it internally, is an example of:

A. relevant costing

B. outsourcing

C. opportunity costing

D. special ordering

3. The break-even point is important to managers because it:

A. tells managers how far sales can decline before the company will incur a loss

B. determines the required sales in dollars to achieve a profit

C. is useful to owners and managers starting a business

D. Answers A and C are both correct

4. There are several variations of the cost-volume-profit formula. One determines the required sales in dollars, while the other determines sales in units. The formula which determines required sales in dollars uses the:

A. break-even point in units

B. contribution margin ratio

C. contribution margin per unit

D. gross profit point

5. Variable costs are costs that _______ in total, but ________ as the business activity level changes:

A. change; remain constant per unit

B. change; change per unit

C. remain constant; remain constant per unit

D. remain constant; change per unit

6. A typical example of a quantitative factor is:

A. the purchase price of a new machine

B. customer satisfaction

C. product quality

D. employee morale

7. A cost is relevant only if it is:

A. different between alternatives

B. a sunk cost

C. a past cost

D. the same for all alternatives

8. Increases and decreases in any business activity:

A. generally have no impact on cost

B. will impact some costs and not others

C. will impact only fixed costs

D. will impact all costs

9. Sales Revenue minus Variable Costs equals Contribution Margin.

True

False

10. A cost that is common to more than one cost objective is a(n):

A. direct cost

B. product cost

C. indirect cost

D. period cost

11. Relevant range is the range of activity within which cost behavior assumptions are valid,

True

False

12. Anita's Art Gallery sells pictures for $50 each. She pays $20 for the print and frame, and pays the sales clerk 10% as a commission. She has $5,000 of monthly fixed costs as well. How many sales dollars in pictures does Anita need to sell to break even?

A. $12,500

B. $5,000

C. $20,000

D. $10,000

13. One benefit of using activity-based costing is that it:

A. views more costs as indirect costs and therefore they need to be allocated

B. is easier to use than more traditional methods

C. follows established GAAP guidelines and is therefore more accepted

D. reclassifies certain manufacturing overhead costs into direct components

14. A cost object is identified to:

A. determine if a product line should be improved due to technological change

B. determine the cost of that particular object

C. determine the range of costs for a corporation

D. None of these answers is correct

15. Activities that are outside of the relevant range:

A. only affect fixed costs in a business setting

B. only impact variable costs in a business setting

C. can still affect costs in a business setting

D. do not affect costs in a business setting

16. Activity-based costing (ABC):

A. has several advantages over traditional overhead allocation

B. is less expensive to implement and use than a traditional single cost pool, single allocation rate method

C. simplifies the process of allocating manufacturing overhead costs to products

D. All of these answers are correct

17. The equation to determine total costs is:

A. total cost + fixed cost = variable cost

B. total costs = variable cost - fixed cost

C. total costs = fixed cost - variable cost

D. total costs = fixed cost + variable cost

18. One type of income statement that is only used internally within a company is the:

A. full-costing income statement

B. contribution income statement

C. functional income statement

D. absorption income statement

19. Hemingway's Hot Dogs sell for $2.00 each. The hot dogs cost Hemingway $0.95 and commissions are $0.15 per hot dog. How many dogs must Hemingway sell if his fixed costs for the stand and rent are $3,500?

A. $3,889

B. $2,500

C. $1,750

D. $3,182

20. The job order and process costing systems are:

A. not considered a part of management accounting

B. not interchangeable

C. based on GAAP

D. interchangeable

21. One problem with using an actual cost system to allocate overhead is that:

A. the overhead allocation rate fluctuates as the actual allocation base, such as direct labor fluctuates

B. the overhead allocation rate fluctuates as actual overhead fluctuates

C. managers must wait until the end of an accounting period to receive information

D. All of these answers are correct

22. A fixed cost is a cost that remains constant in total regardless of the level of activity.

True

False

23. The two methods for determining the cost of products are:

A. process and absorption costing

B. job order and consumer based costing

C. activity-based and process costing

D. job order and process costing

24. Activity-based costing uses:

A. multiple cost pools to develop a single allocation rate

B. multiple cost pools to develop multiple allocation rates

C. a single cost pool to develop multiple allocation rates

D. a single cost pool to develop a single allocation rate

25. Sunk costs:

A. can be changed by future actions only

B. can be changed by current actions only

C. can be changed by current or future actions depending on the situation

D. None of these answers is correct

26. A variable cost is a cost that remains constant in total regardless of the level of activity.

True

False

27. Any activity or item for which a separate cost measurement is desired by management is called a(n):

A. common cost

B. indirect cost

C. cost object

D. direct cost

28. Manufacturing overhead allocation is not the process of assigning or allotting an amount of manufacturing overhead costs to each unit of product produced bsed on some reasonable basis of distribution.

True

False

29. The key element of a contribution income statement is that costs are separated into:

A. variable and period

B. fixed and variable

C. product and period

D. product and fixed

30. In a job order costing system the term "job" refers to a:

A. single unit

B. batch of units

C. process

D. Answers A and B are both correct

31. An appropriate cost allocation base should:

A. be correlated to the amount of administrative overhead incurred annually

B. be easy to identify, compute, and journalize

C. be correlated to the amount of overhead resources consumed

D. None of these answers is correct

32. Based on estimated direct labor hours of 15,000, a company has calculated that it should allocate manufacturing overhead at a rate of $70 per direct labor. If 14,000 direct labor hours are actually worked to manufacture products, the total overhead allocation for productoin should be:

A. $980,000

B. $1,050,000

C. $2,030,000

D. None of these answers is correct

33. Cost behavior is how costs react to different seasons in the year.

True

False

34. A method used to separate a mixed cost using experts or other professionals that are familiar with technical aspects of the activity and associated costs is the:

A. scatter graphing

B. high-low metho

C. engineering approach

D. regression analysis

35. Sales Revenue minus Variable Costs equals Gross Margin.

True

False

36. Cost pool is an accumulation of the costs associated with a specific cost object.

True

False

37. The Contribution Income Statement is also referred to as the Functional Income Statement.

True

False

38. Another term used for regression analysis is:

A. the least-squares method

B. the high-low metho

C. the engineering approach

D. scatter graphing

39. Cost Volume Profit Analysis (CVP) calculation is to divide Total Costs by Total Income.

True

False

40. GAAP requires that the "Contribution Income Statement" be submitted to the SEC on an annual basis.

True

False

41. The income statement that classifies costs by their behavior is called the:

A. functional income statement

B. Cash-basis income statement

C. contribution income statementss

D. single-step income statement

42. Activity Based Costing (ABC) is a technique to allocate indirect costs to cost objects based on activities that cause the cost to occur. It is more accurate than traditional cost allocation.

True

False

43. Manufacturing overhead allocated using ABC will:

A. be more accurate and representative of resources consumed than a traditional allocation method

B. always be lower than if a traditional allocation method is used

C. always be higher than if a traditional allocation method is used

D. generally be the same as when a traditional allocation method is used

44. A product held for sale by a retailer is know as a(n):

A. common cost

B. liability

C. asset

D. indirect cost

45. Using ABC can help a firm:

A. reduce costs

B. increase the retail price of its products

C. decrease the wholesale prices of its products

D. reduce its workforce

46. Fixed costs are costs that _______ in total, but ______ as the business activity level changes

A. remain constant; change per unit

B. fluctuate; are relatively stable

C. change; remain fixed per unit

D. None of these answers is correct

47. A drawback to using the high-low methos is that this method is based on:

A. only two data points at opposite extremes

B. costs

C. mathematical calculations

D. activity

48. An example of a period cost is a(n):

A. selling cost

B. product cost

C. manufacturing cost

D. inventoriable cost

49. The reaction of costs to changes in levels of business activity is called:

A. managerial decision behavior

B. cost behavior

C. marketing mix

D. semi-variable cost tracking

50. A cost that does not change as the level of business activity changes is a:

A. variable cost

B. fixed cost

C. mixed cost

D. semi-variable cost