Ch 1

1.     Reports prepared in managerial accounting are general-purpose reports, whereas reports prepared in financial accounting are usually special-purpose reports.  FALSE

2.     Managerial accounting information generally pertains to an entity as a whole and is very detailed.  FALSE

3.     Managerial accounting applies only to manufacturing companies.  FALSE

4.     Determining the unit cost of manufacturing a product is an output of managerial accounting.  TRUE

MULTIPLE CHOICE QUESTIONS 

Ch 2 

5.     What does cost accounting measure, record, and report? 

a.     Product costs 

b.     Future costs 

c.     Manufacturing processes 

d.     Managerial accounting decisions 

6.          Which one of the following is a major purpose of cost accounting? 

          a.     To provide gross profit rates to managers 

          b.     To allocate overhead costs to jobs 

          c.     To classify all costs as direct or indirect 

          d.     To measure, record, and report product costs 

7.          Which of the following represents the two basic types of cost accounting systems? 

          a.     Job order and process cost systems 

          b.     Job order and job accumulation systems 

          c.     Job order and batch systems 

          d.     Process cost and batch systems 

8.          Which of the following would be accounted for using a job order cost system? 

          a.     The pasteurization of milk 

          b.     The production of town homes 

          c.     The production of textbooks 

          d.     The production of cans of spinach

Ch 3

9.     Which one of the following is a similarity of both a job order and a process cost system? 

     a.     They both track direct materials and direct labor, but not manufacturing overhead. 

     b.     They both track conversion costs, but not materials. 

     c.     They both track the same three manufacturing cost elements – direct materials, direct labor, and manufacturing overhead. 

     d.     They both are used for the same type of inventory production items. 

10.     How are costs assigned in a process cost system? 

a.     To only one work in process account 

b.     To work in process and finished goods inventory 

c.     To work in process, finished goods, and cost of goods sold 

d.     To multiple work in process accounts 

11.     In the Carter Company, there are 1,000 units in beginning work in process, 9,000 units started into production, and 800 units in ending work in process 40% completed. How many physical units are to be accounted for? 

a.     10,000 

b.     9,200 

c.     10,800 

d.     8,800 

12.     What is a production cost report used for? 

a.     It is an external report provided to shareholders. 

b.     It shows costs charged to a department and costs accounted for. 

c.     It shows equivalent units of production but not physical units. 

d.     It shows the basis on which overhead is allocated

Ch 4 

13.          Which of the following is not typical of traditional costing systems? 

          a.     Use of a single predetermined overhead rate. 

          b.     Use of direct labor hours or direct labor cost to assign overhead. 

          c.     Assumption of correlation between direct labor and incurrence of overhead cost. 

          d.     Use of multiple cost drivers to allocate overhead

14.          In traditional costing systems, overhead is generally applied based on 

          a.     direct labor. 

          b.     machine hours. 

          c.     direct material dollars. 

          d.     units of production. 

15.          An activity that has a direct cause-effect relationship with the resources consumed is a (n) 

          a.     cost driver. 

          b.     overhead rate. 

          c.     cost pool. 

          d.     product activity. 

16.          Which best describes the flow of overhead costs in an activity-based costing system? 

          a.     Overhead costs ? direct labor cost or hours ? products 

          b.     Overhead costs ? products 

          c.     Overhead costs ? activity cost pools ? cost drivers ? products 

          d.     Overhead costs ? machine hours ? products 

Ch 5 

17.          Which one of the following is a cost which remains constant in total at various levels of activity? 

               a.     A variable cost 

               b.     A mixed cost 

               c.     A fixed cost 

               d.     A contribution margin 

18.          Which statement below describes a variable cost? 

          a.     It varies in total with changes in the level of activity. 

          b.     It remains constant in total over different levels of activity. 

          c.     It varies inversely in total with changes in the level of activity. 

          d.     It varies proportionately per unit with changes in the level of activity. 

19.          Which one of the following would most likely be considered a mixed cost?           

          a.     Cost of using a copy machine 

          b.     Direct labor 

          c.     Supervisory salaries 

          d.     Direct materials 

20.          Which one of the following is an assumption of CVP analysis? 

          a.     Sales in units remains constant. 

          b.     All costs are variable. 

          c.     The change in beginning and ending inventories is reflected in the analysis. 

          d.     The behavior of costs and revenues are linear within the relevant range. 

21.          Which one of the following is a consideration of CVP analysis? 

          a.     The level of activity must remain constant over the relevant range. 

          b.     Total fixed costs remain constant over the relevant range. 

          c.     Total variable costs remain constant over the relevant range. 

          d.     Cost behavior can change as long as total costs remain the same at all activity levels. 

22.          Which of the following is an underlying assumption of CVP analysis? 

          a.     Factors other than changes in activity may affect costs. 

          b.     Cost classifications are reasonably accurate. 

          c.     Increases in inventories cause increase in total fixed costs. 

          d.     Unit costs remain the same over the relevant range. 

Ch 6 

23.          Which of the following is a major accounting contribution to the managerial decision-making process in evaluating possible courses of action? 

          a.     Determine who is responsible for the decision. 

          b.     Prepare internal reports that review the actual impact of a decision made. 

          c.     Calculate how much should be invested for each potential project.           

          d.     Select possible actions that management should consider. 

24.          Which one of the following is nonfinancial information that management might evaluate in making a decision? 

          a.     Opportunity costs of a decision 

          b.     Contribution margin 

          c.     The effect on profit of a decision 

          d.     The corporate profile in the community

25.          Which one of the following is an alternative name for incremental analysis? 

          a.     Managerial analysis 

          b.     Cost analysis 

          c.     Contribution margin analysis 

          d.     Differential Analysis

Ch 7

26.          Which cost is not charged to the product under variable costing? 

          a.     direct materials. 

     b.     direct labor. 

          c.     variable manufacturing overhead. 

          d.     fixed manufacturing overhead. 

27.          Which cost is not charged to the product under absorption costing? 

          a.     direct materials. 

     b.     direct labor. 

          c.     variable manufacturing overhead. 

          d.     fixed administrative expenses. 

28.          Absorption costing 

          a.     is required under GAAP. 

          b.     is required for external reporting purposes. 

          c.     allows income to be manipulated through production decisions. 

          d.     is (does) all of the above (a, b, and c). 

Ch 8

29.          The cost-plus pricing approach’s major advantage is 

          a.     it considers customer demand. 

          b.     that sales volume has no effect on per unit costs. 

          c.     it is simple to compute. 

          d.     it can be used to determine a product’s target cost. 

30.          Factors that can affect pricing decisions include all of the following except 

          a.     cost considerations. 

          b.     environment. 

          c.     pricing objectives. 

          d.     all of these are factors. 

31.      In most cases, prices are set by the 

          a.     customers. 

          b.     competitive market. 

          c.     largest competitor. 

          d.     selling company.

32.          A company must price its product to cover its costs and earn a reasonable profit in 

          a.     all cases. 

          b.     its early years. 

          c.     the long run. 

          d.     the short run. 

Ch 9 

TRUE-FALSE STATEMENTS 

33.          Budgets represent management’s plans in financial terms. TRUE

34.          Budgets promote efficiency and serve as a deterrent to waste. TRUE

35.          A budget can be a means of communicating a company’s objectives to external parties. FALSE

36.          A budget facilitates coordination of activities within the business but is a poor tool for evaluating performance. FALSE

37.          A budget is more beneficial if accepted by lower level management. FALSE

Ch 10

38.          Budget reports comparing actual results with planned objectives should be prepared weekly to be most effective. FALSE

39.          If actual results are different from planned results by a large amount, the difference should be investigated by management to achieve effective budgetary control. TRUE

40.          Cash budget reports are often prepared daily, whereas others are prepared less frequently depending on the activities being monitored.  FALSE

41.          The master budget is the basis of developing flexible budgets. TRUE

42.          A flexible budget is more useful in evaluating a manager’s performance than a static budget. TRUE

43.          A static budget is one that is geared to the most profitable level of activity for a company. TRUE

Ch 11

44.          Inventories cannot be valued at standard cost in financial statements. FALSE

45.          Standard cost is the industry average cost for a particular item.  FALSE

46.          A standard is a unit amount, whereas a budget is a total amount. TRUE

47.          Standard costs may be incorporated into the accounts in the general ledger. TRUE

48.          An advantage of standard costs is that they simplify costing of inventories and reduce clerical costs. TRUE

49.          Setting standard costs is relatively simple because it is done entirely by accountants. TRUE

50.          Normal standards should be rigorous but attainable. TRUE