acct ch1-6

Question 1

All of the following are features of managerial accounting except:

information is provided primarily to insiders such as managers.

information includes economic and non-financial data as well as financial data.

information is characterized by objectivity, reliability, consistency, and accuracy.

information is reported continuously with a present or future orientation.

Answer 1

information is characterized by objectivity, reliability, consistency, and accuracy.

Question 2

Managerial accounting information is limited or restricted by which of the following authorities or principles?

Securities and Exchange Commission

Generally Accepted Accounting Principles

Managerial Accounting Standards Board

Value-Added Principle

Answer 2

Value-Added Principle

Question 3

Which of the following is a feature of managerial accounting information?

Information is not distributed to the public

Information reports on the company as a whole

Information is focused on the past

Information is reported annually

Answer 3

Information is not distributed to the public

Question 4

Which of the following most exemplifies the value-added principle?

An ongoing process where continuous improvement is the goal.

A competitive management program that emphasizes quality.

Information gathering and reporting activities should be restricted to those activities that add value in excess of their cost.

Managerial accounting information is measured in economic, physical, and financial terms.

Answer 4

Information gathering and reporting activities should be restricted to those activities that add value in excess of their cost.

Question 5

For a manufacturing company, product costs include all of the following except:

indirect material costs.
warehousing costs of finished goods.
direct labor costs.
All of these are product costs.

Answer 5

warehousing costs of finished good

Question 6

Larry’s Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total gasoline cost:

Varies inversely with the number of hours the lawn equipment is operated.

Is not affected by the number of hours the Lawn equipment is operated.

Increases in direct proportion to the number of hours the lawn equipment is operated.

None of these are correct.

Answer 6

Increases in direct proportion to the number of hours the lawn equipment is operated.

Question 7

At its $60 selling price, Atlantic Company has sales of $15,000, variable manufacturing costs of $4,000, fixed manufacturing costs of $1,000, variable selling and administrative costs of $2,000, and fixed selling and administrative costs of $1,000. What is the company’s contribution margin per unit?
$26
$28
$44
$36

Answer 7

$36

Question 8

Bates Company currently produces and sells 4,000 units of a product that has a contribution margin of $5 per unit. The company sells the product for a sales price of $20 per unit. Fixed costs are $20,000. The company has recently invested in new technology and expects the variable cost per unit to fall to $12 per unit. The investment is expected to increase fixed costs by $15,000.After the new investment is made, how many units must be sold to break even?
2,917 units
4,375 units
7,000 units
4,000 units

Answer 8

4,375 units

Use contribution unit and B-E in units formulas

Question 9

Mitchell Company sells its product for $100 per unit. The company’s accountant provided the following cost information:
Manufacturing costs $25,000+45%of sales
Selling costs $15,000+20%of sales
Administrative costs $25,000+10%of sales

What is the company’s break-even point in units?
1,000
750
2,600
4,000

Answer 9

2,600

Use the contribution margin per unit and B-E pt in uunir5ts formulas

Question 10

Crown Company produces and sells two products. The following monthly data are provided:

                                            Slicer    Chopper Unit selling price                  $14         $19 V.manufacturing costs          8             10 V. selling and admin costs    1              1 Estimated unit sales/month300        440

The break-even point for the current sales mix is 370 units (145 Slicer models and 225 Chopper models). What would be the impact on profit if 370 units are sold but 146 Slicer models are sold instead of 145?
$5 decrease
$8 increase
$3 decrease
$3 increase

Answer 10

$3 decrease

Explanation: if the total units sold does not change but one additional Slicer is sold, then one less Chopper is
sold. The impact on profit = the change in the total contribution margin.
[(1 × ($14 − $8 −$1)] − [(1 × ($19 − $10 − $1)] = ($3)

Question 11

Thomas Company buys and sells a product that has a variable cost per unit of $23. Thomas’ fixed costs amount to $80,000. The product sells for $28 each. Thomas currently expects to make and sell 30,000 units. Management believes that if the price per unit is lowered by one dollar, the Company could sell an additional 6,500 units of product. If Thomas implements the lower price strategy, profitability will

increase by $1,600.
decrease by $6,500.
decrease by $4,000.
increase by $10,500.

Answer 11

16. decrease by $4,000.

Use Profit formula= Sales Revenue- Vc- Fc

Question 12

Jasper Company has variable costs per unit of $23, fixed costs of $600,000, and a break-even point of 120,000 units. What will be the new break-even point in units if variable costs decrease by $7 per unit and fixed costs increase by $300,000?

140,000 units
50,000 units
75,000 units
300,000 units

Answer 12

75,000 units

Use formulas:
B-E in units before change
Then, CM per unit
B-E pts in units after change

Question 13

Overhead costs include:

Direct and indirect costs.
Indirect costs only.
Direct costs only.
Neither direct nor indirect costs.

Answer 13

Indirect costs only.

Question 14

19

Question 15

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $121,000 at the beginning of the year was expected to deliver 204,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site:
Construction Sites: A B C D
Tons Delivered: 2,400 3,900 4,400 1,900

How much truck depreciation should be allocated to Site A?
Note: Do not round intermediate calculations. Round your answer to the nearest dollar.

$18,246
$1,424
$1,210
None of the answers are correct.

Answer 15

$1,424

Use these formulas:
Allocation rate
Allocation per object
Allocation cost to site A

Question 16

of students 700 400 200

State University’s College of Business is divided into three departments, accounting, marketing, and management. Relevant information for each department is provided below:
Cost Driver Acct. Mktg Manage.
# of classes/semester32 18 14
# of faculty 10 12 5

The Dean of the College of Business is trying to assign funds from the operating budget to the three departments. Assuming that the chair of each department is trying to attain the highest funding possible for his/her department, which of the following most accurately describes the allocation base that each chair will favor?

The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty.

The chair of the accounting department and the chair of the Management department will want to use the number of faculty.

The chair of the Marketing department will want to use number of students, while the chair of the Accounting department will want to use number of classes per semester.

The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty.

Answer 16

21

Question 17

Great Outdoors Company operates a store in downtown Denver that has five departments including a fishing department. If the fishing department is closed, the store manager’s position will not be affected, but if the entire store is closed, the manager will be terminated. Which of the following lessons should be learned from this example?

Opportunity costs are always present.
Sunk costs cannot be avoided.
Relevance of costs is context sensitive.
Information does not have to be precisely accurate in order to be relevant.

Answer 17

Relevance of costs is context sensitive.

Question 18

Which of the following is a way to relax a constraint or bottleneck?
Have employees work overtime.
Install faster machinery.
Train workers to improve productivity.
All of these choices are correct.

Answer 18

All of these choices are correct.

Question 19

Select the correct statement regarding relevant costs and revenues.
Relevant costs are also known as unavoidable costs.
Relevant costs are only those that are based on past experience.
Relevant revenues must differ among the alternatives.
All of these choices are correct.

Answer 19

Relevant costs are also known as unavoidable costs