MBA5121 – Managerial Accounting

Managerial Accounting

Final Exam – Chapters 1-13 (excluding chapters 8 and 12)

Spring Semester 2017

1. Which of the following is true of Managerial Accounting?

a.	Complies with Securities and Exchange Commission rules and regulations.
b.	Uses cost-benefit analysis to determine the amount of detail presented.
c.	Prepares general-purpose reports for people outside an organization.
d.	Presents summary historical data in compliance with generally accepted accounting principles.

2. The best example of using managerial accounting information to help organizations succeed includes which of the following?

a.	implementing strategies.
b.	processing travel vouchers.
c.	tracking employee time and attendance.
d.	reconciling petty cash balances.

3. Accounting data used for managerial reports

a.	must be the same data used for reporting to shareholders, but may be different for tax purposes.
b.	must be the same data used for tax purposes, but may be different data for reporting to shareholders.
c.	must be the same data used for both tax purposes and reporting to shareholders.
d.	may be different from data used for both tax purposes and reporting to shareholders.

4. What is an opportunity cost?

a.	The difference in total costs which results from selecting one choice instead of another.
b.	The profit forgone by selecting one choice instead of another.
c.	A cost that may be saved by not adopting an alternative.
d.	A cost that may be shifted to the future with little or no effect on current operations.

5. Costs that donotrelate directly to a cost object are its

a.	marginal cost.
b.	indirect cost.
c.	sunk cost.
d.	target cost.

6. The nursing station on the fourth floor of Columbia Hospital for Women is responsible for the care of patients who have just given birth. The costs of drugs administered by the nurses to patients would be classified as

a.	direct costs.
b.	indirect costs.
c.	overhead costs.
d.	period costs.

7. Which of the following statements is true concerning total variable costs?

a.	Total variable costs do not vary in total within the relevant range.
b.	Total variable costs vary in total in proportion to the activity level.
c.	Total variable costs vary in total in an inverse relationship with production.
d.	Total variable costs vary in total, but not in proportion to changes in the activity level.

8. Data for Cost A and Cost B are as follows:

# of Units Produced	Total Cost
Cost A	1	$ 10
10	100
100	1,000
# of Units	Per Unit Cost
Cost B	1	5,000
10	500
100	50

Which of the following best describes the behavior of Costs A and B?

a.	Cost A is fixed, Cost B is variable.
b.	Cost A is variable, Cost B is fixed.
c.	Both Cost A and Cost B are variable.
d.	Both Cost A and Cost B are fixed.

9. Which of the following is notone of the three major manufacturing cost categories?

a.	Direct materials costs that can be easily traced to a product
b.	Direct labor costs of workers who transform materials into finished products and whose time can be easily traced to a product
c.	Manufacturing overhead costs which represents all other manufacturing costs that do not fit into the other categories
d.	Opportunity costs which are the manufacturing costs forgone by accepting another production alternative

Little League Baseball Manufacturer

The Little League Baseball Manufacturer purchases materials for the production of customized little league baseball bats, hires workers to convert the materials to customized finished baseball bats, and then offers the customized baseball bats for sale to little league teams and the general public.

10. Refer to Little League Baseball Manufacturer.

Manufacturing costs such as cleaning supplies which are not easily traced to a specific customized baseball bat fall into which of the following categories?

a.	direct material costs.
b.	direct labor costs.
c.	manufacturing overhead costs.
d.	opportunity costs.

11. Refer to Little League Baseball Manufacturer.

Manufacturing costs, such as the wages for janitorial staff to sweep and mop the floors, that are not easily traced to a specific customized baseball bat fall into which of the following categories?

a.	direct material costs.
b.	direct labor costs.
c.	manufacturing overhead costs.
d.	opportunity costs.

12. Refer to Little League Baseball Manufacturer.

Manufacturing costs such as the cost of the high quality hard woods specifically selected by the customer for producing their own customized baseball bat fall into which of the following categories?

a.	direct material costs.
b.	direct labor costs.
c.	manufacturing overhead costs.
d.	opportunity costs.

13. Refer to Little League Baseball Manufacturer.

Manufacturing costs such as the cost of production supervisors overseeing the production of several different products fall into which of the following categories?

a.	direct material costs.
b.	direct labor costs.
c.	manufacturing overhead costs.
d.	opportunity costs.

14. Refer to Little League Baseball Manufacturer.

Manufacturing costs such as depreciation and insurance for the factory building, as well as heat, light, power, and similar expenses incurred to keep the factory operating, fall into which of the following categories?

a.	direct material costs.
b.	direct labor costs.
c.	manufacturing overhead costs.
d.	opportunity costs.

15. Under normal costing, the Predetermined Manufacturing Overhead Rate equals

a.	Actual Manufacturing Overhead divided by the Actual Activity Level.
b.	Actual Manufacturing Overhead divided by the Normal (or Estimated) Activity Level.
c.	Estimated Manufacturing Overhead divided by the Normal (or Estimated) Activity Level.
d.	None of the answers is correct.

16. Which of the following is/are abenefitof normal costing?

a.	Normal costing enable companies to smooth out, or normalize, seasonal production fluctuations.
b.	Under normal costing, a firm can quickly calculate the cost of items manufactured.
c.	Under normal costing, a firm uses a predetermined overhead rate in applying overhead to each unit as the firm produces it throughout the year, rather than wait for the actual overhead rate to be determined at the end of the year.
d.	All of the answers are correct.

17. Which of the following represents an example of an organization that would use continuous flow processing methods?

a.	a chemical manufacturer.
b.	a custom home builder.
c.	a hospital.
d.	a custom jeweler.

18. What is the firststep in the activity analysis process used to implement Activity Based Management?

a.	Chart, from start to finish, the activities used to complete the product or service
b.	Classify activities as value-added or non-value-added
c.	Eliminate non-value-added activities
d.	Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities

19. Which is not an example of a cost driver?

a.	General and administrative expenses.
b.	Machine hours.
c.	Number of inspections.
d.	Number of different customers.

20. Which of the following reflects the simplest allocation method for a factory?

a.	The department allocation method.
b.	The unit cost allocation method.
c.	The plantwide allocation method.
d.	The use of activity-based costing.

21. Significant differences between the "traditional view" of quality and the emerging "quality-based view" relate to which of the following?

a.	quality production, inspections, causes of defects, standards, purchasing, and customer focus.
b.	financial, internal business process, learning and growth, customer.
c.	total quality, smooth production flow, purchasing quality materials, well trained and flexible workforce, short customer-response times, backlog of orders.
d.	prevention costs, appraisal costs, internal failure costs, and external failure costs.

22. Which of the following is an example of internal failure costs?

a.	Warranty repairs
b.	Reinspection / retesting
c.	machine inspection
d.	Inspection of incoming materials

23. Procurement inspection, processing control (inspection), design, quality training, and machine inspection are all examples of

a.	prevention costs.
b.	appraisal costs.
c.	internal failure costs.
d.	external failure costs.

24. Costs incurred for detecting nonconforming products and services beforedelivering them to customers are called

a.	prevention costs.
b.	appraisal costs.
c.	internal failure costs.
d.	external failure costs.

25. Which of the following costs relate to warranty repairs, product liability costs, marketing costs, and lost sales?

a.	prevention costs.
b.	appraisal costs.
c.	internal failure costs.
d.	external failure costs.

26. Which of the following terms describes the range of activity over which the firm expects a set of cost behaviors to be consistent?

a.	irrelevant range.
b.	relevant range.
c.	short-range.
d.	long-range.

27. J-Mobile provides cellular phone and Internet services with a plan that provides up to 1,000 minutes of airtime usage for a flat rate of $99.99 per month plus a charge for any minutes used over this amount at the rate of $0.10 per minute in excess of the minimum 1,000 airtime minutes. Which of the following describes the cost of the J-Mobile service?

a.	fixed cost, only.
b.	variable cost, only.
c.	semi-variable cost.
d.	semi-fixed cost.

28. The CVP model is one example of a financial model that can be used to calculate which of the following?

a.	required selling price and conduct sensitivity analysis.
b.	new break-even points and calculate multiple break-even points.
c.	target profit points and compare alternatives.
d.	All of the answers are correct.

29. Which of the following is the correct formula to use to calculate the contribution margin per unit?

a.	Selling price per unit less fixed costs and variable costs per unit.
b.	Selling price per unit less fixed costs per unit.
c.	Selling price per unit less variable costs per unit.
d.	None of the answers is correct.

30. What happens to the contribution margin if fixed expenses decrease while variable cost per unit remain constant.

a.	Contribution margin will be unchanged.
b.	Contribution margin will be higher.
c.	Contribution margin will be lower.
d.	Cannot determine the change.

31. Sensitivity analysis is used to show how the financial model responds to changes in which of the following?

a.	any or all of its variables.
b.	fixed costs, only.
c.	variable costs, only.
d.	operating profit.

32. What effect would an increase in the selling price of the product have on the break-even point and the contribution margin?

Break-even Point Contribution Margin

a.	Increase Increase
b.	Increase Decrease
c.	Decrease Increase
d.	Decrease Decrease

33. Which of the following statements is the correct calculation for the margin of safety in dollars?

a.	The excess of projected (or actual) sales dollars over the break-even sales dollars.
b.	The excess of projected (or actual) sales price over the break-even sales price.
c.	The excess of projected (or actual) cost of sales in dollars over the break-even costs of sales in dollars level.
d.	None of the answers is correct.

34. Which of the following statements is true?

a.	The higher the firm’s leverage, the higher the degree of sensitivity of profits to cost changes.
b.	The higher the firm’s leverage, the lower the degree of sensitivity of profits to cost changes.
c.	The higher the firm’s leverage, the higher the degree of sensitivity of profits to volume changes.
d.	The higher the firm’s leverage, the lower the degree of sensitivity of profits to volume changes.

35. A cost that changes as a result of changing activitiesor levels of activities is called which of the following?

a.	product cost.
b.	department cost.
c.	batch cost.
d.	differential cost.

36. Which of the following terms describes the optimal number of units to order or produce?

a.	economic order quantity.
b.	effective order quantity.
c.	efficient order quantity.
d.	elastic order quantity.

37. Which of the following statements is true concerning the flexible budget?

a.	The flexible budget shows the expected relation between costs and volume.
b.	The flexible budget has a fixed cost component which is expected to be incurred regardless of the level of activity.
c.	The flexible budget has a variable cost per unit of activity component where variable costs change in total as the level of activity changes.
d.	all of the above.

38. What is the primary difference between a fixed budget and a flexible budget?

a.	A fixed budget includes only fixed costs, while a flexible budget includes only variable costs.
b.	A fixed budget is concerned only with future acquisitions of fixed assets, while a flexible budget is concerned with expenses, which vary with sales.
c.	A fixed budget cannot be changed after the period begins, while a flexible budget can be changed after the period begins.
d.	A fixed budget is a plan for a single level of sales (or other measure of activity), while a flexible budget consists of several plans, one for each of several levels of sales (or other measure of activity).

39. Which of the following might cause a materials variance?

a.	Failing to take purchase discounts.
b.	Using a better grade of raw material.
c.	Changes in the market supply for the raw materials.
d.	All of the above.

40. Which is not a reason direct labor variances may occur?

a.	Managers do not correctly anticipate changes in wage rates.
b.	Poor materials are used in production.
c.	Prices rise with direct materials.
d.	All of the above.

41. Which of the following is the correct calculation for Division return on investment?

a.	Divide division profit margin by division investment.
b.	Divide profit margin by division investment.
c.	Divide profit margin by division revenue.
d.	Divide division revenue by division investment.

42. In calculating return on investment (ROI), the use of book values of assets–particularly fixed assets–in the ROI denominator

a.	is the preferable method.
b.	may cause a manager of a division with fully depreciated assets to be reluctant to replace the assets with more costly assets.
c.	is required by generally accepted accounting principles.
d.	may cause a manager of a division with fully depreciated assets to replace the assets with newer, more efficient, but more costly assets.

43. A shortcoming of return on investment (ROI) is that it may not lead managers to accept good investment opportunities if

a.	ROI of the investment is higher than the present ROI of the division.
b.	the ROI of the investment is the same as the present ROI of the division.
c.	the ROI of the investment is lower than the present ROI of the division.
d.	None of the answers is correct.

44. Which of the following statements is true concerning economic value added (EVA)?

a.	EVA alleviates the shortcoming of the return on investment measurement.
b.	EVA calculates a percentage for comparison purposes.
c.	EVA is required by the New York Stock Exchange.
d.	EVA is the same as economic payback analysis.

45. Which of the following defines Economic value added (EVA)?

a.	annual after-tax operating profit minus the total annual cost of capital.
b.	annual before-tax operating profit minus the total annual cost of capital.
c.	annual after-tax operating profit plus the total annual cost of capital.
d.	annual before-tax operating profit plus the total annual cost of capital.

46. Which statement is true concerning economic value added (EVA)?

a.	EVA indicates how much employee wealth is being created by company managers.
b.	EVA indicates how much shareholder wealth is being created by company managers.
c.	EVA indicates how much customer wealth is being created by company managers.
d.	EVA indicates how much national wealth is being created by company managers.

47. Joint-process cost allocations arise from the need to assign joint-process costs to

a.	a single product manufactured from a common input.
b.	a single product manufactured from two or more common inputs.
c.	two or more products manufactured from a common input.
d.	two or more products manufactured from two or more common inputs.

48. The methodology(ies) of allocating joint-process costs is(are) based on

a.	net realizable value, only.
b.	physical measures, only.
c.	both net realizable value and physical measures.
d.	None of the answers is correct.

49. The stage of processing when two or more products are separated from the processing of a common input in the forest products, oil and gas, chemicals and mining industries is called a

a.	point of no return.
b.	separation point.
c.	splitoff point.
d.	breakout point.

50. Why bother allocating joint-process costs?

a.	It is a performance measurement.
b.	It is used for determining and responding to regulatory rate changes.
c.	It is used in estimating casualty losses.
d.	All of the answers are correct.