Accy 3

managerial accounting, as compared to financial accounting
uses frequent and prompt control reports
the scattergram allows cost-volume relationships to be visually scanned for outlier observations that should be
ignored in the calculation of the cost formula of a mixed cost
knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes
the effect on net income will depend on the behavior pattern of various costs
the concept of operating leverage refers to which of the following
operating income changes proportionately more than revenues for any given change in activity level
managerial accounting can best be described as
the preparation and use of accounting information within the organization
as the level of activity decreases
fixed cost remains constant in total
as the total volume of activity changes
the total of variable costs changes
___ costs between two alternative projects are those that would result from selecting one alternative instead of the other
differential
relevant costs in decision-making
are future costs that represent differences between decision alternatives
performance analysis in the planning and control cycle relates to the act of
controlling
each of a company’s two product lines has a different contribution margin ratio. if the company’s total sales remain the same but the sales mix shifts toward selling more of the product with the higher contribution ratio, which of the following is true
the average contribution margin ratio will increase
the break-even point will decrease
operating income will increase
a management decision that would have a long term influence on the operating leverage of a firm would be
substituting robots for hourly paid production workers
ABU co. has several products, each with a different contribution margin ratio. if the same number of units were sold in july as in june, but the sales mix changed
total contribution margin in july would be different from that in june
the term relevant range refers to
the range of activity where cost relationships are valid
which of the following is another term for mixed costs
semivariable costs
a example of a cost likely to have a mixed behavior pattern is
electricity cost for the manufacturing plant
a(n) ___ is the minimum cost that can be incurred, which when subtracted from the selling price, allows for a desired profit to be earned
target cost
opportunity costs are
foregone benefits
to which function of management is CVP analysis most applicable
planning
the contribution margin format income statement is organized by
cost behavior classifications
managerial accounting, as opposed to financial accounting, is primarily concerned with
present and future planning and control
an income statement organized by cost behavior does not include
gross profit
which of the following is the correct calculation for the contribution margin ratio
contribution margin divided by sales revenue
the contribution margin format income statement
uses a behavior pattern classification for costs rather than functional cost classification approach
simplifying assumptions made when using cost behavior pattern data include
relevant range and linearity
when a cost formula is used to describe a mixed(semi-variable) cost behavior pattern, total costs are expected to increase and per unti costs are expected to
decrease as the level of activity increases
in a make or buy decision, which of the following costs would be considered relevant
avoidable costs
opportunity costs are
foregone benefits
when the high0low method of estimating a cost behavior pattern is used
cost and volume must be reviewed for outliers
when the firms activity requires it to operate at a level above the upper boudary of the relevant range, fixed expenses are likely to
increase
the relevant range concept refers to
a firms range of activity
expressing fixed costs on a per unit basis of activity is misleading because
fixed cost per unit decrease as activity increases
which of the following terms do not appear on the contribution margin format income statement
gross profit
which of the following statements does NOT describe a characteristic of management accounting
management accounting must conform to GAAP
a sunk cost is a cost that
has been incurred and cannot be eliminated
is never relevant in decision-making
is never a differential cost
an example of a cost that is likely to have a variable behavior pattern is
production labor wages
cost behavior refers to
costs that are variable or fixed
which of the following costs are not relevant in a decision to continue or discontinue a segment of the organization
unavoidable costs
in order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is replaced by
activity-based costing
cost of goods manufactured can be computed as
beginning balance of work in process+raw materials used+direct labor costs incurred+manufacturing overhead costs applied-ending balance of work in process
which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accoutning period
raw materials
in the T account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account
cost of goods manufactured is debited to finished goods inventory
the use of activity based costing information to support the decision making process is known as
activity based management
which of the following is NOT an inventory account for a manufacturing company
cost of goods sold
product costs are inventoried and treated as assets
the period in which the products they relate to are sold
the term cost means
the wage paid to a worker
the price paid for a raw material
the price charged by an entity for its services
common costs pertain to costs that
are not directly traceable to a cost object
standards are most appropriately used to
support the planning and control processes of the firm
which of the following will cause income determined with absorption costing to be higher than income determined with direct costing
units produced are greater than units sold
an example of a cost likely to have an indirect relationship with products being manufactured is
electricity costs for packaging equipment
the primary difference between absorption costing and direct costing is the treatment of
fixed manufacturing overhead
a predetermined overhead rate is used to
assign indirect costs to cost objects
direct costs pertain to costs that
are traceable to a cost object
direct costing may be used for
internal reporting purposes
the operating budget depends on key information developed in the
sales forecast
the overhead component of product cost is
an estimated amount based on labor hours, machine hours, or some other activity
an organizations value chain refers to
the sequence of functions and related activities that add value for the customer
the predetermined overhead application rate based on direct labor hours is computed as
estimated total overhead costs divided by estimated direct labor hours
which of the following is a true statement regarding absorption and/or direct costing
absorption costing includes fixed overhead in product costs whereas direct costing does not
cost accounting is a subset of
managerial accounting
the budgeting process that most likely creates an attitude supportive of achieving organization goals is
participative approach
an example of a cost that is likely to have a direct relationship with products being manufactured is
production labor costs
an example of product cost is
production line maintenance
cost accounting is primarily concerned with
accumulation and determination of product or service cost
generally accepted accounting principles
income measurement and inventory valuation
an excess of cost of goods manufactured over cost of goods sold for a period represents
an increased in finished goods inventory
the three sections of a statement of cost of goods manufactured include
raw material, direct labor, manufacturing overhead
the sequence of activities that add value to the organization are
the value chain
the operating expense budget is based on the
sales budget
a budget that has been prepared only once prior to the budget period is called
single-period budget
for performance reports to be most effective for management by exception, they should
be issued as soon after the activity or period covered as possible
a set of integrated financial and operating performance measures that communicate an organizations priorities associated with achieving strategic goals is know as a
balanced scorecard
the term transfer price refers to
the price at which a product or service is sold by one segment to another related segment
the total variance for any particular cost component is referred to as the
budget variance
the part of the variable overhead budget variance due to the difference between actual variable overhead cost and the standard cost allowed for the actual inputs used is called the
variable overhead spending variance
if the net of all variances is immaterial relative to the total production costs incurred during the period, the net variance is
treated as an adjustment to cost of goods sold
a favorable materials quantity variance would occur if
actual pounds of materials used were less than the standard pounds allowed
how is performance evaluated for an investment center
actual segment margin compared to budgeted segment margin
how is performance evaluated at a profit center
comparison of actual and budgeted return on investment based on segment margin and asset controlled by the segment
the best reason for flexing a budget is to
permit a more accurate determination of variances
a variance is the difference between actual costs and
expected costs
the principal objective of a performance report is to
highlight activities that need management attention
the difference between standard and actual cost per unit of input is measured by
the variable overhead spending variance
the direct labor rate variance
the raw materials price variance
a performance report for direct labor shows a variance between the budget and actual amounts. this difference is a
budget variance
is a technique used to filter cost information contained in performance reports to each manager within the organization at an appropriate level of detail or summarization
responsibility reporting
the purchasing agent of an organization acquired some raw materials at a bargain price, even though she knew that their quality was lower than that of the materials customarily used. this action resulted in a favorable raw materials purchase price variance that might very well have been more than offset by
an unfavorable raw materials usage variance
if the net variance of a business using standard costing is significant relevant to total production cost, the net variance should be
cost of goods sold allocated between WIP ad FG inventor
the term noncontrollable cost
implies that there is really nothing the manager can do to influence the amount of cost
the part of the variable overhead budget variance due to the difference between actual hours required and standard hours allowed for work done is called the
variable overhead efficiency variance
when an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization
only direct revenues and direct expenses should be assigned to segments
if the actual level of activity is different from the budgeted level, a ___ budget is prepared for the actual level of activity
flexible
when analyzing end of period production cost variances, which of the following product cost components will not need flexing
fixed manufacturing overhead
how is performance evaluated for a cost center
actual costs incurred compared to budgeted costs
the preferred format for a segmented income statement emphasizes
direct and common fixed costs
most entities satisfy the accounting criteria for recognizing an expense when
a cost is incurred in the revenue generating process
the term earned in revenue recognition refers to which of the following
the entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits
the concept of matching revenue and expense refers to the fact that
all costs incurred in the process of earning revenues during a period are recorded as expenses in that period
which of the following is an accurate statement regarding a statement of cash flows
all material operating, investing, and financing activities are included
the major difference between the indirect and the direct method of a statement of cash flows appears in which the following activities sections
the operating activities section only
revenue may be recognized
if a company trades inventory at its usual selling price for newspaper advertising
under most circumstances, in order to recognize revenue
the revenue must be realized or realizable, and earned
the first caption in most income statements in annual reports is
net sales
which of the following accounts/captions are not ever included in the calculation for gross profit
general and selling expenses
when the periodic inventory system is used
cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and net purchases
in the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would
be subtracted from net income because this means that revenues were more than cash collected
in the statement of cash flows, depreciation and amortization expense is added back to net income because
these expenses do not affect cash, but were subtracted in the determination of net income
recognition of revenue in accrual accounting requires
that the revenue be realized or realizable, and earned
most entities satisfy the accounting criteria for recognizing revenue when
a product is delivered or a service is provided
gains differ from revenues because gains
are not a result of the entity’s ongoing, central operations
the term realization in revenue recognition refers to which of the following
the product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash
income from operations is
sometimes used in the ROI calculation
the gross profit ratio is useful to the manager for each of the following purposes except that
it can be used to estimate the amount of operating expenses for a period
which of the following Is NOT usually considered a measure of an entity’s liquidity
cash ratio
which of the following accounts is part of working capital
merchandise inventory
another term for return on investment is
return on assets
book value per share of common stock of manufacturing company
is not a very useful measure most of the time
management’s use of resources can be best evaluated by focusing on measures of
activity
the price/earnings ratio
is a measure of the relative expensiveness of a firms common stock
another term for price/earnings ratio is
earnings multiple
asset turnover calculation
should be evaluated by observing the turnover trend over a period of time
an entity’s current ratio will be influenced by
the inventory cost flow assumption used
the inventory turnover calculation
is an alternative way of expressing the number of days’ sales in inventory
which of the following is a universally accepted measure of profitability
return on investment
financial leverage
arises because most borrowed funds have a fixed interest rate
a common size income statement
expresses items as a percentage of revenues
when a firm has financial leverage
risk is greater than if there wasn’t any leverage
a higher P/E ratio means that
the stock is relatively expensive
an advantage of the dupont model for calculating ROI is that
it focuses on asset utilization as well as net income
the comparison of activity measures of different companies is complicated by the fact that
different inventory cost flow assumptions may be used
the dividend payout ratio describes
the proportion of earnings paid as dividends
which of the following is(are) an example of a measure of leverage
debt/equity ratio
the common size income statement
expresses items as a percentage of revenues
financial statement ratios support informed judgements and decisions most effectively
when the trend of the entity data is compared to the trend of industry data
when a cost formula is used to describe mixed cost behavior pattern, total costs are expected
to remain constant as the level of activity increases
a cost is considered relevant if
it makes a difference
which of the following costs are included in the “for cost accounting purposes” classification
product cost and period cost
which of the following describes the correct sequence of flow of costs for a manufacturing firm
raw materials, work in process, finished goods, cost of goods sold
the key difference between controllable cost and a noncontrollable cost is
the short term ability to influence the cost by the manager