Q: 1-40

Question 1

According to agency theory, what are the two major activities that the owners may use to align the interest of management with the interest of the owners?

A
Setting the overall direction of business
B
Communicating with stakeholders
C
Incentivizing and controlling
D
Raising their salaries for management and lowering for the employees
E
Only hiring shareholders and family

Answer 1

C

Incentivizing and controlling

Question 2

Who appoints the Board of Directors?
A
The finance department
B
The shareholders
C
The government
D
The labour union
E

Answer 2

B

The shareholders

Question 3

The difference between a mission statement and a vision statement is…
A
… that the vision statement includes aspirations
B
… the vision statement is a historical narrative
C
… the mission statement seeks to position the firm in relation to other actors in the industry
D
.. the mission statement has to include accounting information
E
… none of the above.

Answer 3

A

… that the vision statement includes aspirations

Question 4

Which of these qualities are related to accounting relevance?
A
The information makes a difference
B
The linformation must be presented in financial numbers
C
The linformation must be presented in non-financial numbers
D
The information should help predict the future
E
It must be material (i.e. significant enough so its omission or restatement could change the decision)

Answer 4

Which of these qualities are related to accounting relevance?
A
The information makes a difference

D
The information should help predict the future

E
It must be material (i.e. significant enough so its omission or restatement could change the decision)

Question 5

Typically, a risk-return tradeoff suggests that the potential return increases with an increase in risk.
T
True
F
False

Answer 5

TRUE

Question 6

Which of these (one or more) concepts are part of the enhancing qualitative characteristics of accounting
A
Timeliness
B
Verifiability
C
Comparability
D
Understandability
E
Costly

Answer 6

Which of these (one or more) concepts are part of the enhancing qualitative characteristics of accounting
A
Timeliness
B
Verifiability
C
Comparability
D
Understandability

Question 7

calculations are about comparing costs and benefits.
T
True
F
False

Answer 7

True

Question 8

In relation to financial accounting, management accounting is

A
... often more detailed
B
... unregulated
C
... has a general purpose
D
... contains only financial information
E
... almost always builds on historical data from firms in the same industry

Answer 8

In relation to financial accounting, management accounting is

A
… often more detailed
B
… unregulated

Question 9

Key Performamce Indicators are typically numbers that are perceived as indicators for phenomenon that are critical for the success of the firm

T
True
F
False

Answer 9

True

Question 10

The objective of the public sector is typically to make a huge profit so the citizens can choose to get a better service the next period or get dividends.

True

False

Answer 10

False
Explanation:
It is probably fair to say that public sector organizations should spend the money allocated because the money allocated to the organization should reflect the will of the politicians (and by proxy, the will of the people)

Question 11

An opportunity cost is the value of the opportunity lost in order to pursue the other course of action.
T
True
F
False

Answer 11

True

Question 12

Which two characteristics are typical for a relevant (outlay) cost? It...
A
... directly relates to book-keeping practices.
B
... is an opportunity to make a profit
C
... relates to the future
D
... is sunk
E
... varies with a decision

Answer 12

C
… relates to the future

E
… varies with a decision

Question 13

A sunc cost and a past cost is practically the same thing

True

False

Answer 13

True

Question 14

When a firm signs a contract it is faced with an opportunity cost.
T
True
F
False

Answer 14

False

Explanation:
This is false because when a firm signs a contract it is faced with a committed cost.

Question 15

At the theatre (Denna kommer på tentan)
“Do you agree that this is an awful play?”
“Yes! But since we already paid for the ticket, we should stay.”
==
This conversation is an illustration of … what?

Answer 15

Explanation:
This is an illustration of the sunk cost fallacy, i.e. when we have a hard time to consider relevant costs and, rather, accept sunk costs as being relevant..

Question 16

Fixed cost = 29000
Variable cost = 10
Price = 13

Breakeven?

Answer 16

Correct Answer:
9667
Explanation:
Although the correct division is something like 9 666,6666666667 [29000/(13-10)] the business can hardly be expected to sell 0,6666666667 t-shirts. More, since break-even is calculated to find when there is no loss, it makes sense to - if there is no logical break-even - to round the number up to 9667. It is a prudent way to calculate.

Question 17

If the fixed costs are 10 000 and the variable costs are 5 and the firm aims for a profit of 10 000, which of these options are in line with this ambition?
A
Volume 20000 and Price per unit 6
B
Volume 1250 and Price per unit 21
C
Volume 4000  and contribution per unit 5
D
Volume 1 and price per unit 20 005
E
Volume 1 000 000 and price per unit 5,01

Answer 17

Correct Answers
Volume 4000 and contribution per unit 5

Volume 1 and price per unit 20 005

Volume 20000 and Price per unit 6

Volume 1250 and Price per unit 21

Question 18

If the total revenue is 25 000 , the cost of goods sold (only variable) is 20 000 and the profit 5 000, the firm had 5 000 in fixed costs.

True

False

Answer 18

Question:
If the total revenue is 25 000 , the cost of goods sold (only variable) are 20 000 and the profit 5 000, the firm had 5 000 in fixed costs.
Correct Answer:
False
Explanation:
False because: 25’-20’ (variable cost) - 5’ (profit) = 0 (fixed costs).

Question 19

If the department only sells one product, the contribution margin ratio is 20%, the sales are 200 000 , the profit is 20 000 and the department sells the product for 8.99 per unit, then the fixed costs are 30 000.
T
True
F
False

Answer 19

Correct Answer:
False
Explanation:
False. Fixed costs are 20 000.
(1) 20% (CMR) * 200 000 (Sales) => 40 000 in total contribution (TC).
(2) Total variable costs = 200 000 - 40 000 (TC) => 160 000
(3) 20 000 (Profit) = 200 000 (Sales) - 160 000 VC - X (Fixed costs) => X
(4) X = 200 000 - 160 000 - 20 000 => Fixed costs = 20 000.
(PS) The information about price per unit is there only to mess you up…
OK

Question 20

It is probably more correct to speak about fixed costs within a volume interval because even fixed costs tend to vary at some volume.

True

False

Answer 20

True

Question 21

If the firm only sells one product and it sells 200 of these products, and
* the full costs per product is 250 each, and
* the variable costs are 50 each, then the total fixed costs amount to 40 000
T
True
F
False

Answer 21

True

Question 22

Work in progress (W-I-P) are the plans being made for next periods production.
T
True
F
False

Answer 22

False
Explanation:
W-I-P are partially completed products.

Question 23

It is fair to define indirect costs as total costs minus costs that can be identified with specific units.
T
True
F
False

Answer 23

True

Question 24

One of the most important aspects of finding direct costs is that one considers the reliability of tracing costs relating to a cost unit.

True

False

Answer 24

True

Question 25

Indirect costs are sometimes called underheads.

True

False

Answer 25

False

Explanation:
No…. OVERheads.

Question 26

Total variable costs + total fixed costs = total direct costs + total indirect costs.
T
True
F
False

Answer 26

True

Question 27

If a firm only has one product, it has no indirect costs.

True

False

Answer 27

True

Question 28

An overhead recovery rate can be defined as the rate at which indirect costs (overheads) are charged to cost units.

T
True
F
False

Answer 28

True

Question 29

Imagine a department of a large service firm (with many departments) in which the charging of indirect costs is carried out in relation to direct costs of labour. The overhead recovery rate is 120% (indicating that there is a large portion of overhead in the firm). The policy of the firm is to book the costs of consultants as overhead and books employees under direct costs of labour. Now imagine that you are the manager of the department and you need more man power. You can either hire a person directly or hire a person through a consultancy firm (30% more expensive). What do you think the manager would do: hire a person directly or enter into a contract with the consultancy firm?

Answer 29

Explanation:
The manager, probably, gets evaluated on the profit they make. The profit, in turn, may be assessed by summing up the full cost per service times the number of services that they produce. From this follows that, everything else being equal, the manager wants to have as low costs per service as possible. It is therefor likely that the manager will try to hire the employee as a “consultant” because then the overhead recovery will be smaller. Also, this makes the other departments “pay” some of the salary of the consultant. However, it is possible that the manager takes the cheaper alternative (hiring a person) and tries to talk some sense into the accountant….

Question 30

There might be a difference in the full cost account of a product in the financial account compared to the management accounting information used for e.g. pricing. That is, the firm is allowed to use different methods of cost allocation.
T
True
F
False

Answer 30

explanation:
This is true because in firms that report financial statements according to IFRS, the inventories (including W-I-P) should be valued at full cost. This definition of full cost is, however, only those variable costs and overheads related to the manufacturing process. In management accounting, however, the firm might want to include overheads that are part of non-manufacturing overheads (or just ignore overheads) in their calculation of full cost.

Question 31

Which overheads should not be included in full cost accounting in firms reporting according to IFRS (please choose all the relevant options):

A
Costs for the human resource (HR) department
B
Costs for the CEO and the management team
C
Costs for handling production waste
D
Marketing

E
Costs for transportation of raw material

Answer 31

Correct Answers

A
Costs for the human resource (HR) department

B
Costs for the CEO and the management team

D
Marketing

Question 32

Activity based costing can be considered as a method to mitigate the problems of charging indirect costs to cost centers.
T
True
F
False

Answer 32

True!

Question 33

A difference between activity-based costing and traditional full cost accounting is that traditionell cost accounting often is organized around cost centers rather than activities.

T
True
F
False

Answer 33

True

Question 34

In a store that sells shirts the pricing strategy is to add 150% on the costs of buying the shirts. This way of pricing could be called:
A
Target pricing
B
Market pricing
C
Cost plus pricing
D
Kaizen
E
None of the above

Answer 34

C

Cost plus pricing

Question 35

Target costing and target pricing can be understood as a critique to a "cost plus" approach
T
True
F
False

Answer 35

Correct Answer:
True
Explanation:
This is true because target costing approaches pricing from the opposite price of “cost plus”. Instead of starting with the costs, the idea is to start with the potential price that the customer is willing to pay. That, in turn, affects the ways in which costing is approached (and managed).

Question 36

Budgets and forecasts are the same thingT
True
F
False

Answer 36

False
Explanation:
Although both forecasts and budgets deal with the future, budgets are used as plans whereas forecasts are predictions about the future. Thus, although a budget can be a prediction of the future, its main ambition is to give input to the organization about the managers’ ambitions.

Question 37

Depreciation affects the cash flow budget directly.
T
True
F
False

Answer 37

Correct Answer:
False
Explanation:
No. Depreciation is not a cash transaction

Question 38

Your budgets for 2020 are ready. And now the management team has decided to increase the marketing budget with 3 million for a large advertisement campaign in January 2020 paid in cash. Everything else being equal, what will the outcomes of the budgets for January?
A
Income will be 3 000 000 less.
B
Outflow of cash will decrease by 3 000 000.
C
Outflow of cash will increase by 3 000 000.
D
The cash account (in the budget for the balance sheet) will increase by 3 000 000.
E
The marketing expense will increase with 3 000 000.

Answer 38

Correct Answers
The marketing expense will increase with 3 000 000.

Outflow of cash will increase by 3 000 000.

Income will be 3 000 000 less.

Question 39

There are practically three reasons why we need to discount payments over time. They are:
A
Relevant costs
B
interest lost
C
risk
D
inflation
E
goodwill

Answer 39

D) inflation

c) risk

B) interest lost

Question 40

If you save 200 SEK on January 1, 2020 and get a deal on a yearly interest of 10%, how much will you have in your savings account December 31 2021?
A
220
B
240
C
200
D
242
E
162

Answer 40

D) 242