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
Define Cost Object
Any item such as a product, service, customer, department, project for which costs are measured and assigned.
What 3 elements equal total product cost?
Direct Materials, Direct Labour, Manufacturing Overhead
Define Prime Costs
The sum of direct materials cost and direct labour costs
Define conversion cost
The sum of direct labour cost and manufacturing overhead.
Can be remembered as the cost of converting direct material into a finished good
Define Period costs
All costs that are not products costs. All areas of the value chain except production.
Ex. Office supplies, research and development, CEO’s salary, advertising
