STRACOMA FINALS

Question 1

Which of the following cost(s) are inventoried when using variable costing? A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) Both A and B are correct

Answer 1

A) direct manufacturing costs

Question 2

Which of the following cost(s) are inventoried when using absorption costing? A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) Both A and C are correct

Answer 2

D) Both A and C are correct

direct manufacturing cost
fixed manufacturing costs

Question 3

is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded

Answer 3

variable costing

Question 4

Absorption costing is required for all of the following except: A) generally accepted accounting principles B) determining a competitive selling price C) external reporting to shareholders D) income tax reporting

Answer 4

B) determining a competitive selling price

Question 5

The only difference between variable and absorption costing is the expensing of: A) direct manufacturing costs B) variable marketing costs C) fixed manufacturing costs D) Both A and C are correct.

Answer 5

C) fixed manufacturing costs

Question 6

Absorption costing: A) expenses marketing costs as cost of goods sold B) treats direct manufacturing costs as a period cost C) includes fixed manufacturing overhead as an inventoriable cost D) is required for internal reports to managers

Answer 6

C) includes fixed manufacturing overhead as an inventoriable cost

Question 7

Variable costing: A) expenses administrative costs as cost of goods sold B) treats direct manufacturing costs as a product cost C) includes fixed manufacturing overhead as an inventoriable cost D) is required for external reporting to shareholders

Answer 7

B) treats direct manufacturing costs as a product cost

Question 8

method(s) expense(s) variable marketing costs in the period incurred. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct

Answer 8

D) All of these answers are correct

Question 9

method(s) include(s) fixed manufacturing overhead costs as inventoriable costs. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct

Answer 9

B) Absorption costing

Question 10

method(s) expense(s) direct material costs as cost of goods sold. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct

Answer 10

D) All of these answers are correct

Question 11

method(s) is required for tax reporting purposes. A) Variable costing B) Absorption costing C) Throughput costing D) All of these answers are correct

Answer 11

B) Absorption costing

Question 12

Variable costing regards fixed manufacturing overhead as a(n): A) administrative cost B) inventoriable cost C) period cost D) product cost

Answer 12

C) period cost

Question 13

A ___ is any part or activity of an organization about which manager seeks costs, revenue or profit data.

Answer 13

segment

Question 14

In the preparation of an income statement for a particular segment, ____ are deducted from sales to yield the contribution margin for the segment.

Answer 14

variable expenses

Question 15

is the sequence of activities within the firm that begins with research and development, followed by design, manufacturing, marketing/distribution and customer service.

Answer 15

Cost life cycle

Question 16

is the sequence of phases in the product’s or service’s life in the market from the introduction of the product or service to growth in sales and finally maturity, decline and withdrawal from the market.

Answer 16

Sales life cycle

Question 17

is used throughout the cost life cycle to minimize overall cost.

reduction of cost

Answer 17

Life-Cycle Costing

Question 18

is used for managing costs primarily in the design activity

cost control

Answer 18

Target Costing

Question 19

is a method for managing manufacturing costs.

Answer 19

Theory of Constraints

Question 20

is a management technique used to identify and monitor the costs of product or service throughout its life cycle. It provides a long-term perspective of product costs and product or service profitability.

Answer 20

Life-Cycle Costing

Question 21

R & D
Design

Answer 21

Upstream Activities

Question 22

The most critical in life cycle costing

Answer 22

Design

Question 23

Marketing and Distribution
Customer Service

Answer 23

Downstream Activities

Question 24

Industries with high downstream costs include

Answer 24

pharmacratic, performer
, cosmetics and toiletries

Question 25

prototyping, testing, concurrent engineering and quality development

Answer 25

Design

Question 26

The critical success factors at the design stage include:

1. Reduced time-to-market.
   2 Reduced expected service costs.
   3 Improved ease-of-manufacture.
2. Process planning and design.

Question 27

The speed of product development and the speed of delivery and efforts to reduce time-to-market are critical for a business firm to sustain its competitiveness.

Answer 27

Reduced time-to-market

Question 28

By careful simple design and the use of interchangeable or modular
components can reduce expected service costs.

Answer 28

Reduced expected service costs

Question 29

This is a method in which product designers work independently from marketing and manufacturing to develop a design from specific plans and specifications.

Answer 29

Basic engineering

Question 30

This is a method in which functional models of the product are developed and tested by engineers and trial customers.

Answer 30

Prototyping

Question 31

This is a design method in which an existing product is scaled up or down to fit the specifications of the desired new product.

Answer 31

Templating

Question 32

or simultaneous engineering, is an important new approach in which product design is integrated with manufacturing and marketing throughout the product’s life cycle.

Answer 32

Concurrent engineering

Question 33

The ____ is the sequence of phases in the product’s or service’s life in the market from the introduction of the product or service to growth in sales and finally, maturity, decline and withdrawal from the market. Sales are at first small, then peak in the maturity phase and decline thereafter

Answer 33

sales life cycle

Question 34

there is little competition, and sales rise slowly as customers become aware of the new product or service.

Answer 34

Product Introduction

Question 35

Costs are relatively high because of high R&D expenditures and capital costs for setting up production facilities and marketing efforts. Process are relatively high because of product differentiation and the high costs at this phase.

Answer 35

Product Introduction

Question 36

Product variety is limited.

Answer 36

Product Introduction

Question 37

Sales begin to grow rapidly and product variety increases. The product continues to enjoy the benefits of differentiation.

Answer 37

Growth

Question 38

There is increasing competition and prices begin to soften.

Answer 38

Growth

Question 39

Sales continue to increase but at a decreasing rate, there is a reduction in the number of competitors and of product variety.

Answer 39

Maturity

Question 40

Prices soften further, and differentiation is no longer important. Competition is based on cost, given competitive quality and functionality.

Answer 40

Maturity

Question 41

Sales begin to decline, as do the number of competitors. Prices stabilize.

Answer 41

Decline

Question 42

Emphasis on differentiation returns. Survivors are able to differentiate their product, control costs, and deliver quality and excellent service.

Answer 42

Decline

Question 43

Control of costs and an effective distribution network are key to continued survival.

Answer 43

Decline

Question 44

In the ___, the focus of management is on design, differentiation, and marketing.

Answer 44

first phase or Product Introduction

Question 45

The focus shifts to new product development and pricing strategy as competition develops

Answer 45

Second phase or Growth

Question 46

In the ____ management’s attention turns to cost control, quality and service as the market continues to become more competitive.

Answer 46

third and fourth phases
maturity and decline

Question 47

Thus, the firm’s strategy for the product or service changes over the sales life cycle, from ____ in the early phases to ____ in the final phases.

Answer 47

differentiation
cost leadership

Question 48

is a technique in which the firm determines the desired cost for the product or service, given a competitive market price so the firm can earn a desired profit.

Answer 48

Target Costing

Question 49

How to Reduce Costs to a Target Cost Level

1. Integrate new manufacturing technology using advanced cost management techniques such as activity-based costing and seeking higher productivity through improved organization and labor relations.
2. Redesign the product or service. This approach is more common than the first one because it recognizes that design decisions account for mush of the product life cycle costs.

Question 50

are computer-based databases that include comprehensive information about the firm’s drivers. Cost drivers include, for example, the size of the product, the materials used in its manufacture, and the number of features.

Answer 50

Cost tables

Question 51

is a method of identifying similarities in the parts of products a firm manufactures, so the same parts can be used in two or more products, thereby reducing costs.

Answer 51

Group technology

Question 52

is the process of studying and evaluating two or more available alternatives leading to a final choice.

Answer 52

Decision making

Question 53

can be defined as a cost that is applicable to a particular decision in the sense that it will have a bearing on which alternative the manager selects.

Answer 53

relevant cost

Question 54

are expected future costs which differ between the decision alternatives. These are costs that will be increased or decreased as a result of a decision.

Answer 54

Relevant costs

Question 55

can be defined as a cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another in a decision-making situation. ALL costs are considered ___, except:

1. Sunk costs
2. Future costs that do not differ between the alternatives at hand.

Answer 55

Avoidable cost

Question 56

are the profits lost by the diversion of an input factor from one use to another. They are the net economic benefit given up when an alternative is rejected. They are relevant when a company is considering eliminating one activity and using plant facilities advantageously in another activity.

Answer 56

Opportunity Costs

Question 57

involve either an intermediate or near-future cash outlay; they are usually relevant to decisions. Frequently, variable costs fall into this classification.

Answer 57

Out-of-pocket costs

Question 58

is irrelevant in decision only if it relates to a sunk cost.

Answer 58

Depreciation

Question 59

are important in decision making because management should determine whether a proposed project would, at the minimum return is initial cash outlay.

Answer 59

Out-of-pocket costs

Question 60

is used to describe those manufacturing costs that are incurring is producing the joint products up to the split-off point.

Answer 60

Joint product costs

Question 61

is that point in the manufacturing process at which the joint product can be recognized as separate products.

Answer 61

split-off point

Question 62

are irrelevant in decisions regarding what to do with a product from the split off point forward because they have already been incurred and therefore are ___.

Answer 62

Joint product costs
sunk cost

Question 63

Costs incurred after the split-off point for the benefit of only one particular product are called _____. They are relevant costs in the sell-or-process-further decision.

Answer 63

separable costs

Question 64

A responsibility center in which a manger has only the authority to control cost is referred to as a

Answer 64

Cost center

Question 65

Which of the following is more characteristic of a decentralized than a centralized business structure?

a. The firm’s environment is stable.
b. There is little confidence in lower-level management to make decisions.
c. The firm grows very quickly.
d. The firm is relatively small

Answer 65

C

Question 66

Costs of decentralization include all of the following except
a. more elaborate accounting control systems.
b. potential costs of poor decisions.
c. additional training costs.
d. slow response time to changes in local conditions

Answer 66

D

Question 67

Performance evaluation measures in an organization

a. affect the motivation of subunit managers to transact with one another.
b. always promote goal congruence.
c. are less motivating to managers than overall organizational goals.
d. must be the same for all managers to eliminate suboptimization

Answer 67

A

Question 68

A management decision may be beneficial for a given profit center, but not for the entire company. From the overall company viewpoint, this decision would lead to

a. goal congruence
b. centralization
c. suboptimization
d. maximization

Answer 68

C

Question 69

To avoid waste and maximize efficiency when transferring products among divisions in a competitive economy, a large diversified corporation should base transfer prices on

a. variable cost
b. market price.
c. full cost.
d. production cost

Answer 69

B

Question 70

The presence of idle capacity in the selling division may increase
a. the incremental costs of production in the selling division.
b. the market price for the good.
c. the price that a buying division is willing to pay on an internal transfer.
d. a negotiated transfer price

Answer 70

A

Question 71

Top management can preserve the autonomy of division managers and encourage an optimal level of internal transactions by
a. selecting performance evaluation measures that are consistent with the achievement of overall corporate goals.
b. selecting division managers who are most concerned about their individual performance.
c. prescribing transfer prices between segments.
d. setting up all organizational units as revenue centers

Answer 71

A

Question 72

A company’s return on investment is the:
a. margin divided by turnover.
b. margin multiplied by turnover.
c. turnover divided by average operating assets.
d. turnover multiplied by average operating assets

Answer 72

B

Question 73

Responsibility accounting is a system whose attributes include
a. Culpability, liability and accountability
b. Responsibility, liability and culpability
c. Performance evaluation, accountability, and responsibility
d. Liability, accountability, and performance evaluation

Answer 73

C

Question 74

What term identifies an accounting system in which the operations of the
business are broken down into reportable segments and the control functions
of a foreperson, sales managers or supervisor is emphasized?
a. Responsibility accounting
b. Operations-research accounting
c. Control accounting
d. Budgetary accounting

Answer 74

A

Question 75

Segmented income statements are most meaningful to managers when they
are prepared
a. In a multi-step format
b. On an absorption cost basis
c.
On a cost behavior basis
d. On a cash basis

Answer 75

C

Question 76

When used for performance evaluation, periodic internal reports based on a responsibility accounting system should not
a. Distinguish between controllable and noncontrollable costs
b. Include allocated fixed overhead
c. Be related to the organization chart
d. Include variances between actual and budgeted controllable costs

Answer 76

B

Question 77

In a company with decentralized approach to responsibility accounting, upper-level managers typically
a. Make key decisions only
b. Implement key decisions only
c. Both make and implement key decisions
d. Review the outcomes of key decisions only

Answer 77

C

Question 78

Advantages of decentralization include all of the following except
a. Divisional management is able to react to changing market conditions
more rapidly than top management
b. Divisional management is a source of personnel for promotion to top
management positions
c. Decentralization can motivate divisional managers
d. Decentralization permits divisional management to concentrate on
company-wide problems and long-range planning

Answer 78

D

Question 79

A good example of a common cost which normally could not be assigned to products on a segmented income statement except on an arbitrary basis would be:
a. Product advertising outlays
b. Salary of a corporation president
c. Direct materials
d. The product manager’s salary

Answer 79

A

Question 80

All other things being equal, if a division’s traceable fixed expenses increase:
a. The division’s contribution margin ratio will decrease
b. The division’s segment margin ratio will remain the same
c. The division’s segment margin will decrease
d. The overall company profit will remain the same

Answer 80

B

Question 81

There are costs that are charged directly to the segments in the report, choose the exception.
a. Insurance and maintenance of the division building
b. Salary of the division manager
c. Common fixed expenses not traceable
d. Direct fixed costs

Answer 81

C

Question 82

Which of the following expenses incurred by the sporting goods department of a department store is a direct expense?
a. Depreciation expense–office equipment
b. Insurance on inventory of sporting goods
c. Uncollectible accounts expense
d. Office salaries

Answer 82

B

Question 83

For higher levels of management, responsibility accounting reports:
a. are more detailed than for lower levels of management
b. are more summarized than for lower levels of management
c. contain about the same level of detail as reports for lower levels of
management
d. are rarely provided or reviewed

Answer 83

B

Question 84

Operating expenses directly traceable to or incurred for the sole benefit of a specific department and usually subject to the control of the department
manager are termed:
a. miscellaneous administrative expenses
b. direct expenses
c. indirect expenses
d. operating expenses

Answer 84

B

Question 85

The investment turnover is the:
a. ratio of income from operations to sales
b. ratio of income from operations to invested assets
c. ratio of assets to liabilities
d. ratio of sales to invested assets

Answer 85

D

Question 86

cost that would beincluded in product costs under both absorptioncosting and variable costing would be:
a. supervisory salaries.
b. equipment depreciation.
c. variable manufacturing costs.
d. variable selling expenses

Answer 86

C

Question 87

An allocated portion of fixed manufacturing overhead is included in product costs under: Absorption Costing and Variable Costing

Answer 87

AC - YES
VC - NO

Question 88

Which of the following are considered to be product costs undervariable costing?
I. Variable manufacturing overhead. II. Fixed manufacturing overhead.
III. Selling and administrative expenses

Answer 88

I

Question 89

What factor is the cause of the difference between net income as computed under absorption costing and net income as computed undervariable costing?
a. Absorption costing considers all manufacturing costs in the determination of net income, whereas variable costing considers only prime costs.
b. Absorption costing allocates fixed manufacturing costs between cost of goods sold and inventories, and variable costing considers all fixed manufacturing costs as period costs.
c. Absorption costing includes all variable manufacturing costs in product costs, but variable costing considers variablemanufacturing costs to be period costs.
d. Absorption costing includes all fixed manufacturing costs inproduct costs, but variable costing expenses all fixedmanufacturing costs.

Answer 89

B

Question 90

Under variable costing, costs which are treated as period costsinclude:
a. only fixed manufacturing costs.
b. both variable and fixed manufacturing costs.
c. all fixed costs.
d. only fixed selling and administrative costs

Answer 90

C

Question 91

Which of the following statements is truefor a firm that uses variable costing?
a. The unit product cost changes asa result of changes in the number of units manufactured.
b.Bothvariablesellingcostsandvariableproductioncostsare included in the unit product cost.
c. Net income moves in thesame direction as sales.
d.Netincomeisgreatestinperiodswhenproductionis highest

Answer 91

C

Question 92

The term “gross margin” for a manufacturing company refers to theexcess of sales over
a. cost of goods sold, excluding fixed manufacturing overhead.
b. all variable costs, including variable selling andadministrative expenses.
c. cost of goods sold, including fixed manufacturing overhead.
d. variable costs, excluding variable selling and administrativeexpenses

Answer 92

C

Question 93

Ney income determined using full absorption costing can be reconciled to net income determined using variable costing by computing the difference between:
a. Fixed manufacturing overhead costs deferred in or released from inventories.
b. Inventoried discretionary costs in the beginning and endinginventories.
c. Gross margin (absorption costing method) and contributionmargin (variable costing method).
d. Sales as recorded under the variable costing method and sales asrecorded under the absorption costing method

Answer 93

A

Question 94

Net income reported under absorption costing will exceed netincomereported under variable costing for a given periodif:
a. production equals sales for that period.
b. production exceeds sales for that period.
c. sales exceed production for that period.
d. the variable manufacturing overhead exceeds the fixedmanufacturing overhead

Answer 94

B

Question 95

What will be the difference innet income between variable costing andabsorption costing if the number of unitsin work in process and finished goods inventories increase?
a. There will be nodifference in net income.
b. Net income computed using variable costing willbe higher.
c. The difference in net incomecannot be determined from the information given.
d. Net income computed using variable costing willbe lower

Answer 95

D

Question 96

The costing method that can be used most easily with break-evenanalysis and other cost-volume-profit techniques is:
a. variable costing.
b. absorption costing.
c. process costing.
d. job-order costing

Answer 96

A

Question 97

The impact on net operating income of short-run changes in sales for a
segment can be most clearly predicted by analyzing:

Answer 97

a. the contribution margin ratio

Question 98

The biggest challenge in making a decentralized organization function
effectively is:
a. earning maximum profits through fair practices.
b. minimizing losses.
c. taking advantage of the specialized knowledge and skills of highly
talented managers.
d. obtaining goal congruence among division managers.
e. developing an adequate budgetary control system

Answer 98

D

Question 99

Spiedino Company sells its products to both residential and commercial
customers in eight sales territories. In which of the following ways could
Spiedino be segmented?
a. by product and then further segmented by type of customer.
b. by type of customer and then further segmented by sales territory.
c. by sales territory and then further segmented by product line.
d. all of the above.

Answer 99

D

Question 100

A national retail company has segmented its income statement by
sales territories. If each sales territory statement is further segmented by
individual stores, which of the following will most likely occur?
a. some common fixed expenses in the sales territory segmented
statement will become traceable fixed expenses in the individual store
segmented statement.
b. some traceable fixed expenses in the sales territory segmented
statement will become common fixed expenses in the individual store
segmented statement.
c. the sum total of the individual stores’ segment margins in each sales
territory will be equal to the segment margin for the sales territory.
d. both A and C above

Answer 100

B

Question 101

Hayworth Company has just segmented last year’s income statements
into its ten product lines. The chief executive officer (CEO) is curious as to
what effect dropping one of the product lines at the beginning of last year
would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating
income of the company as a whole?
a. the product line’s sales dollars.
b. the product line’s contribution margin.
c. the product line’s segment margin.
d. the product line’s segment margin minus an allocated portion of
common fixed expenses

Answer 101

C

Question 102

Which of the following statements is correct concerning return on
investment calculations?
a. Margin equals stockholders’ equity divided by sales.
b. Return on investment equals margin divided by turnover.
c. Turnover equals return on investment divided by margin.
d. Sales equals turnover divided by margin.

Answer 102

C

Question 103

All other things equal, which of the following would increase a
division’s residual income?
a. Increase in expenses.
b. Decrease in average operating assets.
c. Increase in minimum required return.
d. Decrease in net operating income.

Answer 103

B

Question 104

A company’s sales margin:
a. must, by definition, be greater than the firm’s net sales.
b. has basically the same meaning as the term “contribution margin.”
c. is computed by dividing sales revenue into income.
d. is computed by dividing income into sales revenue.
e. shows the sales dollars generated from each dollar of income

Answer 104

C

Question 105

.An emphasis on obtaining goal congruence is consistent with a broad
managerial approach called
A. management by crisis
B. management by objectives
C. management through goal congruence
D. just-in-time philosophy

Answer 105

B

Question 106

All of the following are inventoried under absorption costing except:
A. direct labor.
B. raw materials used in production.
C. utilities cost consumed in manufacturing.
D. sales commissions.
E. machine lubricant used in production.

Answer 106

D

Question 107

Which of the following conditions would cause absorption-costing net income to be lower
than variable-costing net income?
A. Units sold exceeded units produced.
B. Units sold equaled units produced.
C. Units sold were less than units produced.
D. Sales prices decreased.
E. Selling expenses increased

Answer 107

A

Question 108

Which of the following methods defines product cost as the unit-level cost incurred each time
a unit is manufactured?
A. Throughput costing.
B. Indirect costing.
C. Process costing.
D. Absorption costing.
E. Back-flush costing.

Answer 108

A

Question 109

The opportunity cost of making a component part in a factory withno excess capacity is the:
a. variable manufacturing cost of the component.
b. fixed manufacturing cost of the component.
c. cost of the production given up in order to manufacture the component.
d. net benefit foregone from the best alternative use of the capacity required

Answer 109

D

Question 110

A joint product is:
a. any product which consists of several parts.
b. any product produced by a firm with more than one product line.
c. any product involved in a make or buy decision.
d. one of several products produced from a common input

Answer 110

D

Question 111

Which of the following is not an effective way of dealing with a production constraint (i.e., bottleneck)?
a. Reduce the number of defective units produced at the bottleneck.
b. Pay overtime to workers assigned to the bottleneck.
c. Pay overtime to workers assigned to work stations located after the bottleneck in the production process.
d. Subcontract work that would otherwise required use of the bottleneck

Answer 111

C

Question 112

A plant operating at capacity would suggest that:

a. every machine and person in the plant is working at the maximum possible rate.
b. only some specific machines or processes are operating at the maximum rate possible.
c. fixed costs will need to change to accommodate increased demand.
d. managers should produce those products with the highest contribution margin in order to deal with the constrained resource

Answer 112

B

Question 113

Consider a decision facing a firm of either accepting or

rejecting a special offer for one of its products. A cost that is not relevant is:

a. direct materials.
b. variable overhead.
c. fixed overhead that will be avoided if the special offer is accepted.
d. common fixed overhead that will continue if the special offer is not accepted.

Answer 113

D

Question 114

Costs which are always relevant in decision making are those costs which are:
a. variable.
b. avoidable.
c. sunk.
d. fixed

Answer 114

b

Question 115

To maximize total contribution margin, a firm faced with a production constraint should:
a. promote those products having the highest unit contribution margins.
b. promote those products having the highest contribution margin ratios.
c. promote those products having the highest contribution marginper unit of constrained resource.
d. promote those products have the highest contribution margins and contribution margin ratios

Answer 115

C