Test 2 MC Practice Flashcards
A The cost of safety and alarm systems.
B The costs that can occur from inventory shrinkage.
C The costs of the annual physical inventory count required for the external audit.
D The costs associated with space allocated to inventory storage in a manufacturing plant.
Answer
Last year the Temperate Garden’s Cash Conversion Efficiency (CCE) ratio was 5.1% and revenues were $125,000. Vera, the owner, wants a CCE ratio of 7.5% this year with expected revenues of $150,000. What is the amount of cash provided by operating activities required to achieve the desired ratio?
A $6,375
B $7,650
C $11,250
D Cash provided by operating activities remains unchanged.
C
Elphalba’s Magic Supplies Ltd. is considering a change to its credit terms from net 30 to net 60 days. If the change is made sales will increase from $10 million to $12 million, average accounts receivable will increase from $500,000 to $1 million, average inventory levels will increase from $125,000 to $225,000 and operating profit will increase from $1 million to $1.1 million. If the effective tax rate is 25% and the desired return on investment is 15% should Elphalba’s proceed with the proposed change and why?
A Yes, because the return on investment is 17% if the change is implemented.
B Yes, because the return on investment is 333% if the change is implemented.
C No, because the return on investment is 13% if the change is implemented.
D Yes, because the return on investment is 250% if the change is implemented.
Answer
4. All of the following are included in working capital except: A Trade and other payables. B Interest payments. C Prepaid expenses. D Short-term loans and investments.
B Interest payments
The following relate to production expenses at the Temperate Garden to produce 1 unit of bedding plants:
Greenhouse labour $0.95
Depreciation on equipment $0.05
Sales counter labour $0.85
Veterinary bills for, Mimi, the resident mouse catcher $0.01
Benefits for greenhouse labour $0.05 Water, fertilizer, pot, soil & seed $0.25 Benefits for sales counter labour $0.05
Based on the above information the prime cost for one unit of bedding plants is:
A $1.25 B $1.30 C $2.20 D $2.21
A $1.25
The benefit given up when one alternative is chosen over another is referred to as:
Answer:
5. The following relate to production expenses at the Temperate Garden to produce 1 unit of bedding plants:
Greenhouse labour $0.95
Depreciation on equipment $0.05
Sales counter labour $0.85
Veterinary bills for, Mimi, the resident mouse catcher $0.01
Benefits for greenhouse labour $0.05 Water, fertilizer, pot, soil & seed $0.25 Benefits for sales counter labour $0.05
A A sunk cost.
B An assigned loss cost.
C An opportunity cost.
D A conversion cost.
C An opportunity cost.
Materials inventories include which of the following:
Answer:
A Raw materials, work in progress and finished goods.
B Raw materials and indirect work in progress materials.
C Direct and indirect materials not yet used in the manufacturing process.
D Direct and indirect materials net of scrap and wastage.
C Direct and indirect materials not yet used in the manufacturing process.
Cost of goods sold is considered a \_\_\_\_\_\_ cost while depreciation is considered a \_\_\_\_\_\_\_ cost. A Selling; Overhead. B Period, Manufacturing. C Product, Period. D Period, Product
C Product, Period
Hazel's Magic Kitchen ships gourmet products to customers across North America. The following data was collected over the past six months. Page 5 of 18 90 Minutes 8. Packages Shipped 10 20 15 15 18 25 Total Cost $800 $1,100 $900 $900 $1,050 $1,250 Based on the above information what is the fixed component of Hazel's shipping costs? A $1,000 B $30 C $5,000 D $500
D $500
Which of the following is true regarding unit cost?
Answer:
A Fixed components vary inversely throughout the relevant range of production.
B Unit costs are accrued at the end of each accounting period.
C Variable components are fixed throughout the relevant range of production.
D A and C
D A and C
Which of the following is not a method used to separate a mixed cost into its fixed and variable components?
A High - low method.
B Method of least squares.
C Scatter graph method.
D Maslow’s cost hierarchy.
D Maslow’s cost hierarchy.
Costs that have both a fixed and variable component are referred to as: A Step costs B Mixed costs C Semi-variable costs. D B and C
D B and C
If fixed costs are $500,000, variable manufacturing costs are $300,000, variable selling costs are $300,000, the effective tax rate is 25% , the selling price is $25 and 50,000 units are expected to be sold, then the break even point is:
A $961,538
B $1,250,000
C $657,895
D $721,154
A $961,538
Refer to the data for question 13. What is the margin of safety in units? A 26,316 B 28,846 C 25,000 D 11,538
D 11,538
The relative combination of products or services being sold by an organization is referred to as: A Cost structure. B Sale mix. C Contribution leverage. D Operating leverage.
B Sale mix.
Which of the following is not true regarding contribution margin income statements?
A They separate costs into fixed and variable components.
B They provide management with useful information regarding CVP behaviour.
C They are must be included in the annual report for manufacturers under IFRS.
D They are prepared for internal use.
C They are must be included in the annual report for manufacturers under IFRS.
Activity Based Costing (ABC) differs from traditional costing because:
A Traditional costing allocated overhead while ABC does not.
B ABC allows for detailed inventory tracking while traditional costing does not.
C Traditional costing allocates cost more effectively while ABC allocates costs more efficiently.
D Traditional costing allocates indirect costs using a single rate while ABC allocates indirect costs using multiple rates.
D Traditional costing allocates indirect costs using a single rate while ABC allocates indirect costs using multiple rates.
Which of the following is not a reason to adopt Activity Based Costing?
A Simple to use and easy to implement.
B Fierce global competition and shrinking profit margins.
C Indirect costs are more important in today’s business world.
D Better tracking of a company’s share resources among different products and customers.
A Simple to use and easy to implement.
Problem with question. No answer
machine hours and takes 600 setup hours. The activity rates are $20 per machine hour and $50 per setup hour. Total plant overhead is $800,000. The cost per unit for game consoles is: $10.00 $30.00 $190.00 $40.00
$10.00
$30.00
$190.00
$40.00
Scrap and rework costs are examples of: A External failure costs. B Appraisal costs. C Prevention costs. D Internal failure costs.
D Internal failure costs.
Define Cost
The amount of cash or cash equivalent sacrificed for goods and/or services that are expected to bring a current or future benefit to the organization
Revenue per unit is called
Price
Define Accumulating Costs
The way that’s costs are measured and recorded
Define Assigning costs
The way that a Cost is linked to an object
