Review Test Submission: Midterm _2022_Spring

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Review Test Submission: Midterm _2022_Spring

October 04, 2022 Essayheroes

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Course	2022SP-23007-ACCT3311-Costs/Budgets
Test	Midterm _2022_Spring
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Question 1

The following data relates to the Washington Co.:

Direct Materials Inventory, Beginning	$300
Direct Materials Inventory, Ending	$250
Direct Materials Purchases	$2,100
Direct Labor	$1,300
Manufacturing Overhead	$1,100
Work-in-Process Inventory, Beginning	$850
Work-in-Process Inventory, Ending	$900
Finished Goods Inventory, Beginning	$1,250
Finished Goods Inventory, Ending	$1,300

Sales Revenue	$10,500
Selling and Administrative Expenses	$1,800

Income Tax Rate	20%

Required:
a. Prepare a Statement of Cost of Goods Manufactured.
b. Prepare an Income Statement.

Selected Answer:

a)

Direct Material Inventory , beginning	300
Add Direct material purchases	2100
Less Direct material inventory , ending	250
Direct Material used		2150
Direct labor		1300
Factory overhead		1100
Work in progress inventory, beginning	850
Less Work in progress inventory, ending	900
Work in progress		-50
Cost of goods manufactured		4500

b)

Cost of good manufactured		4500
Finished goods inventory , beginning	1250
Less : Finished goods inevntory , ending	1300	-50
Cost of good sold		4450

Income statement
Sale revenue		10500
Less cost of goods sold		4500
Gross profit		6000
Less sellind and administrative expenses		1800
Net profit		4200
Less Income tax @ 20%		850
Net profit after tax		3350

Correct Answer:

a. Cost of Goods Manufactured

Direct Materials, Beginning	$300
Materials Purchased	$2,100
Less: Direct Materials, Ending	$250
Direct Materials (Used in Production)	$2,150
Direct Labor	$1,300
Manufacturing Overhead	$1,100
Total Manufacturing Costs	$4,550
Work in Process Inventory, Beginning	$850
Less: Work in Process Inventory, Ending	$900
Cost of Goods Manufactured	$4,500

b) Income statement

Sales		$10,500
Cost of Goods Manufactured	$4,500
Finished Goods Inventory, Beginning	$1,250
Less: Finished Goods Inventory, Ending	$1,300
Costs of Goods Sold		$4,450
Gross Profit Margin		$6,050
Less: Selling Administrative Expense		$1,800
Operating Income (pre-tax)		$4,250
Less: Income Tax (20%)		$850
Net Income (after tax)		$3,400

Response Feedback:

[None Given]

Question 2

23 out of 25 points

Toronto Co. plans to produce and sell security cameras.
The projected data for producing a security camera are as follows:

Budgeted sales per year (in units)	1,500
Selling price	$150
Variable costs	$90
Total fixd costs	$60,000
Income tax rate	20%
Desired annual profit after tax	$72,000

Required:
a) How many security camera would it have to sell in order to break even?
b) How many sales revenue would it have in order to break even?
c) To earn deired after-tax profit, how many security camera would it have to sell?
d) Calculate margin of safety ratio (MOSR) with the budgeted sales volume.
e) Calculate degree of operating leverage (DOL) with budgeted sales volume.

Selected Answer:

a) Break even cameras = Fixed cost/ contribution margin

contributon margin = selling price – variable costs

= $150 – $90 = $60

break-even cameras = $60000/$60

= 1000

b) Break – even sales revenue = 1000*$150

= $150000

c) Net income before tax = 72000+(72000*0.2)

= $86400

Number of security cameras = 86400/60

= 1440

d)Margin of safety in units = Actual sales units – Break even sales in units

= 1500-1000

= 500

e) Contribution margin = 1500*60

= $90000

Net income = $90000-$60000

= $30000

DOL = $90000/$30000

= 3.00

Correct Answer:

a) BEP (in units)	1,000
b) BEP (in Sales $)	$150,000
c) Q with desired after-tax profit	2,500
d) MOSR w/ budgeted volume	0.333
fe DOL w/ budgeted volume	3.00

Revenue	$225,000
Less: Total Variable Costs	$135,000
Total Contribution Margin	$90,000
Less: Fixed Costs	$60,000
Operating Income	$30,000

Response Feedback:

[None Given]

Question 3

25 out of 25 points

The Western Co. established the following overhead cost pools and cost drivers:

	Budgeted		Estimated Cost
Overhead Cost Pool	Overhead	Cost Driver	Driver Level
Assembly	$1,400,000	# of labor hrs	40,000	labor hrs
Setups	$900,000	# of setups	30,000	setups
Machine operating costs	$700,000	# of machine hrs	50,000	machine hrs
Total overhead costs	$3,000,000

A recent order for sailboats used:
Assembly	4,000	labor hrs
Setups	200	setups
Machine hours (MHs)	2,500	machine hours

Required:

a) What is the overhead rate per machine hour if the number of machine hours (MHs) is used as a single cost driver under traditional costing system?

b) Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?

c) Utilizing activity-based costing, how much overhead is assigned to the order?

d) Explain the reasons why the overhead costs computed under two systems are different.

Selected Answer:

a) overhead rate for every machine hour

= Total cost/Total machine hour

=$3,000,000/50,000

=$60 per machine hour

b) OH cost assigned = OH rate per machine hour*Machine hours by order

=$60*2,500

=$150,000

c)

Activity	Cost	Driver	Rate per activity
Assembly	$1,400,000	40,000	$35 / labor hour
Setups	$900,000	30,000	$30 / set up
Machine Operating Cost	$700,000	50,000	$14/ Machine hour

Cost per activity	Cost driver used	OH allocated
$35 per labor hour	4,000	$140,000
$30 per set up	200	$6,000
$14 per Machine hour	2,500	$35,000
Total OH assigned		$181,000

d) A job costs more or less depending on how many machine hours, labor hours, set up, and machine hours are used. This is because the job’s ABC is different.

Single OH rate has used machine hour to figure out how much it costs. ABC costing has used labor hour, setups, and machine hour to figure out how much it costs.

Correct Answer:

a) $3,000,000/50,000=$60 per MH

b) $60*2,500=$150,000

c) $35*4,000+$30*200+$14*2,500=$181,000.

d)

Response Feedback:

[None Given]

Question 4

5 out of 5 points

Why do most companies adhere to GAAP for their basic internal financial statements?

Selected Answer:	Accrual accounting provides a uniform method to measure an organization’s financial performance.
Answers:	GAAP is required by law for publicly held companies.
	To use GAAP and another system of reporting would be too costly for most companies.
	Accountants are required by their code of ethics to use GAAP accounting.
	Accrual accounting provides a uniform method to measure an organization’s financial performance.

Question 5

5 out of 5 points

Which of the following accounts is not classified as an asset?

Selected Answer:	Manufacturing Overhead Control
Answers:	Manufacturing Overhead Control
	Materials Control
	Work-in-Process Control
	Finished Goods Control

Question 6

5 out of 5 points

In refining a cost system

Selected Answer:	the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object.
Answers:	total direct costs are unchanged because they can be traced in an economically feasible way to the product and traced costs are more accurate.
	the costs are grouped in homogeneous pools of the same or similar amounts.
	the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object.
	the organization looks for cost-allocation bases that will provide a uniform spreading of indirect costs to each product.

Question 7

5 out of 5 points

Evaluating customer reaction of the trade-off of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management?

Selected Answer:	Design decisions
Answers:	Pricing and product-mix decisions
	Cost reduction decisions
	Design decisions
	Discretionary decisions

Question 8

5 out of 5 points

Advertising of a specific product is an example of

Selected Answer:	product-sustaining costs.
Answers:	unit-level costs.
	batch-level costs.
	product-sustaining costs.
	facility-sustaining costs.

Question 9

0 out of 5 points

A significant limitation of activity-based costing is the

Selected Answer:	many necessary calculations.
Answers:	attention given to indirect cost allocation.
	many necessary calculations.
	operations staff’s attitude toward the accounting staff.
	use it makes of technology.

Question 10

5 out of 5 points

The value chain

Selected Answer:	is the sequence of business functions in which customer usefulness is added to products or services.
Answers:	involves external companies as well as internal activities.
	is the sequence of business functions in which customer usefulness is added to products or services.
	applies only to manufacturing companies.
	is not relevant in today’s cost accounting environment.

Question 11

5 out of 5 points

One way for managers to cope with uncertainty in profit planning is to

Selected Answer:	use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.
Answers:	use CVP analysis because it assumes certainty.
	recommend management hire a futurist whose work is to predict business trends.
	wait to see what does happen and prepare a report based on actual amounts.
	use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.

Question 12

5 out of 5 points

Production-cost cross-subsidization results from

Selected Answer:	assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.
Answers:	allocating indirect costs to multiple products.
	assigning traced costs to each product.
	assigning costs to different products using varied costing systems within the same organization.
	assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

Question 13

5 out of 5 points

The first step in the seven-step approach to job costing is to

Selected Answer:	identify the job that is the chosen cost object.
Answers:	select the cost-allocation base to use in assigning indirect costs to the job.
	identify the direct costs of the job.
	identify the job that is the chosen cost object.
	identify the indirect-cost pools associated with the job.

Question 14

5 out of 5 points

_____ management exists to provide advice and assistance to those responsible for attaining the objectives of the organization.

Selected Answer:	Staff
Answers:	Line
	Functional
	Staff
	Risk

Question 15

5 out of 5 points

Which of the following is not a key success factor in a company’s effort to deliver increased levels of performance to the customer?

Selected Answer:	Price reduction
Answers:	Time
	Innovation
	Quality
	Price reduction

Question 16

5 out of 5 points

Finished goods inventory would normally include ________.

Selected Answer:	goods fully completed but not yet sold
Answers:	direct materials in stock and awaiting use in the manufacturing process
	goods returned after being sold to be re-worked on further improvements and quality
	goods fully completed but not yet sold
	goods partially worked on but not yet fully completed

Question 17

5 out of 5 points

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.

Selected Answer:	monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver
Answers:	salaries of the clerical staff that work in the company administrative offices
	monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver
	beverages provided daily in the plant break room
	overheads incurred in producing both golf and soccer equipment

Question 18

5 out of 5 points

Service-sector companies ________.

Selected Answer:	provide intangible products
Answers:	purchase and then sell tangible products by changing their basic form
	purchase materials and components and convert them into finished goods
	purchase and then sell tangible products without changing their basic form
	provide intangible products

Question 19

5 out of 5 points

An actual cost is ________.

Selected Answer:	is the cost incurred
Answers:	is a predicted or forecasted cost
	is the cost incurred
	is anything for which a cost measurement is desired
	is the collection of cost data in some organized way by means of an accounting system

Question 20

0 out of 5 points

Direct materials inventory would normally include ________.

Selected Answer:	goods fully completed but not yet sold
Answers:	goods partially worked on but not yet fully completed
	direct materials in stock and awaiting use in the manufacturing process
	products in their original form intended to be sold without changing their basic form
	goods fully completed but not yet sold

Question 21

5 out of 5 points

A job that shows low profitability may be the result of ________.

Selected Answer:	inefficient direct manufacturing labor
Answers:	excessive usage of direct materials
	inefficient direct manufacturing labor
	insurance claim of the damaged goods
	overpricing the job

Question 22

5 out of 5 points

The budgeted direct-labor cost rate includes ________.

Selected Answer:	budgeted total direct-labor costs in the numerator
Answers:	budgeted total direct-labor hours in the numerator
	budgeted total costs in indirect cost pool
	budgeted total direct-labor costs in the numerator
	budgeted total direct-labor costs in the denominator

Question 23

5 out of 5 points

In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use ________.

Selected Answer:	budgeted rates for some direct costs and indirect costs
Answers:	budgeted rates for all direct costs
	actual costing
	budgeted rates for some direct costs and indirect costs
	budgeted rates for indirect costs

Question 24

5 out of 5 points

The cost allocation base ________.

Selected Answer:	is a systematic way to link an indirect cost or group of indirect costs to cost objects
Answers:	is a systematic way to link an indirect cost or group of indirect costs to cost objects
	are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way
	is anything for which a measurement of costs is desired
	is a grouping of individual indirect cost items

Question 25

5 out of 5 points

________ is used to record and accumulate all the costs assigned to a specific job.

Selected Answer:	Job-cost record
Answers:	Cost-allocation base
	Labor-requisition record
	Job-cost record
	Materials-requisition record

Question 26

5 out of 5 points

Facility-sustaining costs are the costs of activities ________.

Selected Answer:	that managers cannot trace to individual products or services but that support the organization as a whole
Answers:	performed on each individual unit of a product or service such as the cost of energy, machine depreciation, and repair
	that managers cannot trace to individual products or services but that support the organization as a whole
	related to a group of units of a product or service rather than each individual unit of product or service
	undertaken to support individual products or services regardless of the number of units or batches in which the units are produced

Question 27

5 out of 5 points

For a company with diverse products, undercosting overhead of a product will lead to ________.

Selected Answer:	misallocating indirect costs of another product
Answers:	misallocating indirect costs of another product
	misallocating direct costs of another product
	misallocating direct labor costs of the product.
	misallocating direct material costs of the product

Question 28

5 out of 5 points

Which of the following cost and cost allocation base have a strong cause and effect relationship?

Selected Answer:	machine depreciation and output units
Answers:	machine maintenance and setup hours
	machine depreciation and output units
	administration costs and cubic feet
	setup costs and square feet

Question 29

5 out of 5 points

The goal of a properly constructed ABC system is to ________.

Selected Answer:	develop the best cost system for an economically reasonable cost
Answers:	develop the best cost system for an economically reasonable cost
	identify more indirect costs
	have separate allocation rates for each department
	have the most accurate cost system

Question 30

5 out of 5 points

________ aims to improve operations throughout the value chain and to deliver products
and services that exceed customer expectations.

Selected Answer:	Total Quality Management
Answers:	Cost and efficiency
	Customer response time
	Total Quality Management
	Innovation

Question 31

5 out of 5 points

Which of the following is true of sustainability?

Selected Answer:	It helps the development and implementation of strategies to achieve long-term financial, social, and environmental goals.
Answers:	It concerns with purchase of material in larger quantities.
	It helps manufacturing firms produce products more efficiently ensuring lower costs at an optimum use of available resources.
	It helps in implementing strategies to improvise the product.
	It helps the development and implementation of strategies to achieve long-term financial, social, and environmental goals.

Question 32

5 out of 5 points

The Institute of Management Accountants issues which certification?

Selected Answer:	CMA
Answers:	CPA
	CIA
	CFE
	CMA

Question 33

5 out of 5 points

A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________.

Selected Answer:	performance report
Answers:	management forecast
	strategic plan
	revised plan
	performance report

Question 34

5 out of 5 points

Management accounting is considered most likely to be successful when it ________.

Selected Answer:	is timely
Answers:	helps creditors evaluate the company’s performance
	is relevant and reported annually
	helps investors improve their decisions
	is timely

Question 35

5 out of 5 points

Stones Manufacturing, sells a marble slab for $1000. Fixed costs are $35,000, while the variable costs are $450 per slab. The company currently plans to sell 230 slabs this month. What is the margin of safety assuming 85 slabs are budgeted?

Selected Answer:	$21,363.6364
Answers:	$166,363.636
	$62,863.6364
	$35,000
	$21,363.6364

Response Feedback:

Breakeven in number of slabs = $35,000 / ($1000 − $450) = 64 slabs

Question 36

5 out of 5 points

Which of the following is true about the assumptions underlying basic CVP analysis?

Selected Answer:	Only selling price, variable cost per unit, and total fixed costs are known and constant.
Answers:	Only selling price, variable cost per unit, and total fixed costs are known and constant.
	Only selling price and variable cost per unit are known and constant.
	Selling price varies with demand and supply of the product.
	Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant.

Question 37

5 out of 5 points

As per CVP, operating income calculations use ________.

Selected Answer:	contribution margins and fixed costs
Answers:	contribution margins and fixed costs
	nonoperating revenues and nonoperating expenses
	income tax expense and net income
	net income and dividends

Question 38

5 out of 5 points

At the breakeven point of 3000 units, variable costs total $4000and fixed costs total $10,000. The 3001st unit sold will contribute ________ to profits.

Selected Answer:	$3.33
Answers:	$2.00
	$1.33
	$3.33
	$4.67

Response Feedback:

Fixed costs of $10,000/3000 units = Contribution Margin of $3.33 per unit.

User
Course	2022SP-23007-ACCT3311-Costs/Budgets
Test	Midterm _2022_Spring
Started
Submitted
Due Date
Status
Attempt Score
Time Elapsed
Results Displayed	All Answers, Submitted Answers, Correct Answers, Feedback

Question 1

The following data relates to the Washington Co.:

Direct Materials Inventory, Beginning	$300
Direct Materials Inventory, Ending	$250
Direct Materials Purchases	$2,100
Direct Labor	$1,300
Manufacturing Overhead	$1,100
Work-in-Process Inventory, Beginning	$850
Work-in-Process Inventory, Ending	$900
Finished Goods Inventory, Beginning	$1,250
Finished Goods Inventory, Ending	$1,300

Sales Revenue	$10,500
Selling and Administrative Expenses	$1,800

Income Tax Rate	20%

Required:
a. Prepare a Statement of Cost of Goods Manufactured.
b. Prepare an Income Statement.

Selected Answer:

a)

Direct Material Inventory , beginning	300
Add Direct material purchases	2100
Less Direct material inventory , ending	250
Direct Material used		2150
Direct labor		1300
Factory overhead		1100
Work in progress inventory, beginning	850
Less Work in progress inventory, ending	900
Work in progress		-50
Cost of goods manufactured		4500

b)

Cost of good manufactured		4500
Finished goods inventory , beginning	1250
Less : Finished goods inevntory , ending	1300	-50
Cost of good sold		4450

Income statement
Sale revenue		10500
Less cost of goods sold		4500
Gross profit		6000
Less sellind and administrative expenses		1800
Net profit		4200
Less Income tax @ 20%		850
Net profit after tax		3350

Correct Answer:

a. Cost of Goods Manufactured

Direct Materials, Beginning	$300
Materials Purchased	$2,100
Less: Direct Materials, Ending	$250
Direct Materials (Used in Production)	$2,150
Direct Labor	$1,300
Manufacturing Overhead	$1,100
Total Manufacturing Costs	$4,550
Work in Process Inventory, Beginning	$850
Less: Work in Process Inventory, Ending	$900
Cost of Goods Manufactured	$4,500

b) Income statement

Sales		$10,500
Cost of Goods Manufactured	$4,500
Finished Goods Inventory, Beginning	$1,250
Less: Finished Goods Inventory, Ending	$1,300
Costs of Goods Sold		$4,450
Gross Profit Margin		$6,050
Less: Selling Administrative Expense		$1,800
Operating Income (pre-tax)		$4,250
Less: Income Tax (20%)		$850
Net Income (after tax)		$3,400

Response Feedback:

[None Given]

Question 2

23 out of 25 points

Toronto Co. plans to produce and sell security cameras.
The projected data for producing a security camera are as follows:

Budgeted sales per year (in units)	1,500
Selling price	$150
Variable costs	$90
Total fixd costs	$60,000
Income tax rate	20%
Desired annual profit after tax	$72,000

Required:
a) How many security camera would it have to sell in order to break even?
b) How many sales revenue would it have in order to break even?
c) To earn deired after-tax profit, how many security camera would it have to sell?
d) Calculate margin of safety ratio (MOSR) with the budgeted sales volume.
e) Calculate degree of operating leverage (DOL) with budgeted sales volume.

Selected Answer:

a) Break even cameras = Fixed cost/ contribution margin

contributon margin = selling price – variable costs

= $150 – $90 = $60

break-even cameras = $60000/$60

= 1000

b) Break – even sales revenue = 1000*$150

= $150000

c) Net income before tax = 72000+(72000*0.2)

= $86400

Number of security cameras = 86400/60

= 1440

d)Margin of safety in units = Actual sales units – Break even sales in units

= 1500-1000

= 500

e) Contribution margin = 1500*60

= $90000

Net income = $90000-$60000

= $30000

DOL = $90000/$30000

= 3.00

Correct Answer:

a) BEP (in units)	1,000
b) BEP (in Sales $)	$150,000
c) Q with desired after-tax profit	2,500
d) MOSR w/ budgeted volume	0.333
fe DOL w/ budgeted volume	3.00

Revenue	$225,000
Less: Total Variable Costs	$135,000
Total Contribution Margin	$90,000
Less: Fixed Costs	$60,000
Operating Income	$30,000

Response Feedback:

[None Given]

Question 3

25 out of 25 points

The Western Co. established the following overhead cost pools and cost drivers:

	Budgeted		Estimated Cost
Overhead Cost Pool	Overhead	Cost Driver	Driver Level
Assembly	$1,400,000	# of labor hrs	40,000	labor hrs
Setups	$900,000	# of setups	30,000	setups
Machine operating costs	$700,000	# of machine hrs	50,000	machine hrs
Total overhead costs	$3,000,000

A recent order for sailboats used:
Assembly	4,000	labor hrs
Setups	200	setups
Machine hours (MHs)	2,500	machine hours

Required:

a) What is the overhead rate per machine hour if the number of machine hours (MHs) is used as a single cost driver under traditional costing system?

b) Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?

c) Utilizing activity-based costing, how much overhead is assigned to the order?

d) Explain the reasons why the overhead costs computed under two systems are different.

Selected Answer:

a) overhead rate for every machine hour

= Total cost/Total machine hour

=$3,000,000/50,000

=$60 per machine hour

b) OH cost assigned = OH rate per machine hour*Machine hours by order

=$60*2,500

=$150,000

c)

Activity	Cost	Driver	Rate per activity
Assembly	$1,400,000	40,000	$35 / labor hour
Setups	$900,000	30,000	$30 / set up
Machine Operating Cost	$700,000	50,000	$14/ Machine hour

Cost per activity	Cost driver used	OH allocated
$35 per labor hour	4,000	$140,000
$30 per set up	200	$6,000
$14 per Machine hour	2,500	$35,000
Total OH assigned		$181,000

d) A job costs more or less depending on how many machine hours, labor hours, set up, and machine hours are used. This is because the job’s ABC is different.

Single OH rate has used machine hour to figure out how much it costs. ABC costing has used labor hour, setups, and machine hour to figure out how much it costs.

Correct Answer:

a) $3,000,000/50,000=$60 per MH

b) $60*2,500=$150,000

c) $35*4,000+$30*200+$14*2,500=$181,000.

d)

Response Feedback:

[None Given]

Question 4

5 out of 5 points

Why do most companies adhere to GAAP for their basic internal financial statements?

Selected Answer:	Accrual accounting provides a uniform method to measure an organization’s financial performance.
Answers:	GAAP is required by law for publicly held companies.
	To use GAAP and another system of reporting would be too costly for most companies.
	Accountants are required by their code of ethics to use GAAP accounting.
	Accrual accounting provides a uniform method to measure an organization’s financial performance.

Question 5

5 out of 5 points

Which of the following accounts is not classified as an asset?

Selected Answer:	Manufacturing Overhead Control
Answers:	Manufacturing Overhead Control
	Materials Control
	Work-in-Process Control
	Finished Goods Control

Question 6

5 out of 5 points

In refining a cost system

Selected Answer:	the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object.
Answers:	total direct costs are unchanged because they can be traced in an economically feasible way to the product and traced costs are more accurate.
	the costs are grouped in homogeneous pools of the same or similar amounts.
	the criterion of cause-and-effect is used to relate indirect costs to a factor that systematically links to a cost object.
	the organization looks for cost-allocation bases that will provide a uniform spreading of indirect costs to each product.

Question 7

5 out of 5 points

Evaluating customer reaction of the trade-off of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management?

Selected Answer:	Design decisions
Answers:	Pricing and product-mix decisions
	Cost reduction decisions
	Design decisions
	Discretionary decisions

Question 8

5 out of 5 points

Advertising of a specific product is an example of

Selected Answer:	product-sustaining costs.
Answers:	unit-level costs.
	batch-level costs.
	product-sustaining costs.
	facility-sustaining costs.

Question 9

0 out of 5 points

A significant limitation of activity-based costing is the

Selected Answer:	many necessary calculations.
Answers:	attention given to indirect cost allocation.
	many necessary calculations.
	operations staff’s attitude toward the accounting staff.
	use it makes of technology.

Question 10

5 out of 5 points

The value chain

Selected Answer:	is the sequence of business functions in which customer usefulness is added to products or services.
Answers:	involves external companies as well as internal activities.
	is the sequence of business functions in which customer usefulness is added to products or services.
	applies only to manufacturing companies.
	is not relevant in today’s cost accounting environment.

Question 11

5 out of 5 points

One way for managers to cope with uncertainty in profit planning is to

Selected Answer:	use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.
Answers:	use CVP analysis because it assumes certainty.
	recommend management hire a futurist whose work is to predict business trends.
	wait to see what does happen and prepare a report based on actual amounts.
	use sensitivity analysis to explore various what-if scenarios in order to analyze changes in revenues or costs or quantities.

Question 12

5 out of 5 points

Production-cost cross-subsidization results from

Selected Answer:	assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.
Answers:	allocating indirect costs to multiple products.
	assigning traced costs to each product.
	assigning costs to different products using varied costing systems within the same organization.
	assigning broadly averaged costs across multiple products without recognizing amounts of resources used by which products.

Question 13

5 out of 5 points

The first step in the seven-step approach to job costing is to

Selected Answer:	identify the job that is the chosen cost object.
Answers:	select the cost-allocation base to use in assigning indirect costs to the job.
	identify the direct costs of the job.
	identify the job that is the chosen cost object.
	identify the indirect-cost pools associated with the job.

Question 14

5 out of 5 points

_____ management exists to provide advice and assistance to those responsible for attaining the objectives of the organization.

Selected Answer:	Staff
Answers:	Line
	Functional
	Staff
	Risk

Question 15

5 out of 5 points

Which of the following is not a key success factor in a company’s effort to deliver increased levels of performance to the customer?

Selected Answer:	Price reduction
Answers:	Time
	Innovation
	Quality
	Price reduction

Question 16

5 out of 5 points

Finished goods inventory would normally include ________.

Selected Answer:	goods fully completed but not yet sold
Answers:	direct materials in stock and awaiting use in the manufacturing process
	goods returned after being sold to be re-worked on further improvements and quality
	goods fully completed but not yet sold
	goods partially worked on but not yet fully completed

Question 17

5 out of 5 points

A manufacturing plant produces two product lines: golf equipment and soccer equipment. An example of direct costs for the golf equipment line is ________.

Selected Answer:	monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver
Answers:	salaries of the clerical staff that work in the company administrative offices
	monthly lease payments for a specialized piece of equipment needed to manufacture the golf driver
	beverages provided daily in the plant break room
	overheads incurred in producing both golf and soccer equipment

Question 18

5 out of 5 points

Service-sector companies ________.

Selected Answer:	provide intangible products
Answers:	purchase and then sell tangible products by changing their basic form
	purchase materials and components and convert them into finished goods
	purchase and then sell tangible products without changing their basic form
	provide intangible products

Question 19

5 out of 5 points

An actual cost is ________.

Selected Answer:	is the cost incurred
Answers:	is a predicted or forecasted cost
	is the cost incurred
	is anything for which a cost measurement is desired
	is the collection of cost data in some organized way by means of an accounting system

Question 20

0 out of 5 points

Direct materials inventory would normally include ________.

Selected Answer:	goods fully completed but not yet sold
Answers:	goods partially worked on but not yet fully completed
	direct materials in stock and awaiting use in the manufacturing process
	products in their original form intended to be sold without changing their basic form
	goods fully completed but not yet sold

Question 21

5 out of 5 points

A job that shows low profitability may be the result of ________.

Selected Answer:	inefficient direct manufacturing labor
Answers:	excessive usage of direct materials
	inefficient direct manufacturing labor
	insurance claim of the damaged goods
	overpricing the job

Question 22

5 out of 5 points

The budgeted direct-labor cost rate includes ________.

Selected Answer:	budgeted total direct-labor costs in the numerator
Answers:	budgeted total direct-labor hours in the numerator
	budgeted total costs in indirect cost pool
	budgeted total direct-labor costs in the numerator
	budgeted total direct-labor costs in the denominator

Question 23

5 out of 5 points

In the service sector, to achieve timely reporting on the profitability of an engagement, a company will use ________.

Selected Answer:	budgeted rates for some direct costs and indirect costs
Answers:	budgeted rates for all direct costs
	actual costing
	budgeted rates for some direct costs and indirect costs
	budgeted rates for indirect costs

Question 24

5 out of 5 points

The cost allocation base ________.

Selected Answer:	is a systematic way to link an indirect cost or group of indirect costs to cost objects
Answers:	is a systematic way to link an indirect cost or group of indirect costs to cost objects
	are costs related to a particular cost object that cannot be traced to that cost object in an economically feasible way
	is anything for which a measurement of costs is desired
	is a grouping of individual indirect cost items

Question 25

5 out of 5 points

________ is used to record and accumulate all the costs assigned to a specific job.

Selected Answer:	Job-cost record
Answers:	Cost-allocation base
	Labor-requisition record
	Job-cost record
	Materials-requisition record

Question 26

5 out of 5 points

Facility-sustaining costs are the costs of activities ________.

Selected Answer:	that managers cannot trace to individual products or services but that support the organization as a whole
Answers:	performed on each individual unit of a product or service such as the cost of energy, machine depreciation, and repair
	that managers cannot trace to individual products or services but that support the organization as a whole
	related to a group of units of a product or service rather than each individual unit of product or service
	undertaken to support individual products or services regardless of the number of units or batches in which the units are produced

Question 27

5 out of 5 points

For a company with diverse products, undercosting overhead of a product will lead to ________.

Selected Answer:	misallocating indirect costs of another product
Answers:	misallocating indirect costs of another product
	misallocating direct costs of another product
	misallocating direct labor costs of the product.
	misallocating direct material costs of the product

Question 28

5 out of 5 points

Which of the following cost and cost allocation base have a strong cause and effect relationship?

Selected Answer:	machine depreciation and output units
Answers:	machine maintenance and setup hours
	machine depreciation and output units
	administration costs and cubic feet
	setup costs and square feet

Question 29

5 out of 5 points

The goal of a properly constructed ABC system is to ________.

Selected Answer:	develop the best cost system for an economically reasonable cost
Answers:	develop the best cost system for an economically reasonable cost
	identify more indirect costs
	have separate allocation rates for each department
	have the most accurate cost system

Question 30

5 out of 5 points

________ aims to improve operations throughout the value chain and to deliver products
and services that exceed customer expectations.

Selected Answer:	Total Quality Management
Answers:	Cost and efficiency
	Customer response time
	Total Quality Management
	Innovation

Question 31

5 out of 5 points

Which of the following is true of sustainability?

Selected Answer:	It helps the development and implementation of strategies to achieve long-term financial, social, and environmental goals.
Answers:	It concerns with purchase of material in larger quantities.
	It helps manufacturing firms produce products more efficiently ensuring lower costs at an optimum use of available resources.
	It helps in implementing strategies to improvise the product.
	It helps the development and implementation of strategies to achieve long-term financial, social, and environmental goals.

Question 32

5 out of 5 points

The Institute of Management Accountants issues which certification?

Selected Answer:	CMA
Answers:	CPA
	CIA
	CFE
	CMA

Question 33

5 out of 5 points

A report showing the actual financial results for a period compared to the budgeted financial results for that same period would most likely be called a ________.

Selected Answer:	performance report
Answers:	management forecast
	strategic plan
	revised plan
	performance report

Question 34

5 out of 5 points

Management accounting is considered most likely to be successful when it ________.

Selected Answer:	is timely
Answers:	helps creditors evaluate the company’s performance
	is relevant and reported annually
	helps investors improve their decisions
	is timely

Question 35

5 out of 5 points

Stones Manufacturing, sells a marble slab for $1000. Fixed costs are $35,000, while the variable costs are $450 per slab. The company currently plans to sell 230 slabs this month. What is the margin of safety assuming 85 slabs are budgeted?

Selected Answer:	$21,363.6364
Answers:	$166,363.636
	$62,863.6364
	$35,000
	$21,363.6364

Response Feedback:

Breakeven in number of slabs = $35,000 / ($1000 − $450) = 64 slabs

Question 36

5 out of 5 points

Which of the following is true about the assumptions underlying basic CVP analysis?

Selected Answer:	Only selling price, variable cost per unit, and total fixed costs are known and constant.
Answers:	Only selling price, variable cost per unit, and total fixed costs are known and constant.
	Only selling price and variable cost per unit are known and constant.
	Selling price varies with demand and supply of the product.
	Selling price, variable cost per unit, fixed cost per unit, and total fixed costs are known and constant.

Question 37

5 out of 5 points

As per CVP, operating income calculations use ________.

Selected Answer:	contribution margins and fixed costs
Answers:	contribution margins and fixed costs
	nonoperating revenues and nonoperating expenses
	income tax expense and net income
	net income and dividends

Question 38

5 out of 5 points

At the breakeven point of 3000 units, variable costs total $4000and fixed costs total $10,000. The 3001st unit sold will contribute ________ to profits.

Selected Answer:	$3.33
Answers:	$2.00
	$1.33
	$3.33
	$4.67

Response Feedback:

Fixed costs of $10,000/3000 units = Contribution Margin of $3.33 per unit.

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Review Test Submission: Midterm _2022_Spring

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