Question 1.
1. (TCO 3) A characteristic of managerial accounting would include: (Points : 3)

being based on historical financial information.
following GAAP.
foregoing accuracy for timeliness.
being designed to report information to external users.
Question 2.
2. (TCO 3) All of the following add value except: (Points : 3)

product design.
rework of defective units.
customer service.
research and development.
Question 3.
3. (TCO 3) The Coyote Cafe had sales revenues and food costs in 2007 of $800,000

and $600,000, respectively. In 2008, Coyote will be introducing a new menu item that
will generate $100,000 in sales revenues and $45,000 in food costs. Assuming no
changes are expected for the other food items, the differential operating profit for
2008 is: (Points : 3)
Question 4.
4. (TCO 1) The terms direct cost and indirect cost are commonly used in accounting. A

particular cost might be considered a direct cost of a manufacturing department, but
an indirect cost of the product produced in the manufacturing department. Classifying

a cost as either direct or indirect depends upon: (Points : 3)
whether an expenditure is unavoidable because it cannot be changed, regardless
of any action taken.
whether the cost is expensed in the period in which it is incurred.
the behavior of the cost in response to volume changes.
the cost object to which the cost is being related.
Question 5.
5. (TCO 1) Which of the following is NOT a product cost under full absorption costing?
(Points : 3)

Salaries of CEOs
Raw materials used in production
Supplies used in the factory
Direct labor
Question 6.
6. (TCO 1) Calculate the conversion

costs from the following
Fixed manufacturing overhead
Variable manufacturing overhead
Direct materials
Direct labor
(Points : 3)


Question 7.
7. (TCO 1) The excess of sales over the cost of merchandise sold is termed: (Points : 3)


net income.
contribution margin.
operating profit.
gross margin.

Question 8.
8. (TCO 6) Western Sales has the following information concerning its one and only

Selling price per unit: $40
Variable cost per unit: $15
Total fixed costs:
Compute the break-even point in sales dollars. (Points : 3)
Question 9.
9. (TCO 6) The profit equation may be expressed as: (Points : 3)

total revenues – total costs = operating profit.
total fixed costs – total variable costs = operating profit.
price x units of output = operating profit.
revenue – contribution margin = operating profit.

Question 10.
10. (TCO 6) The following information pertains to Sly’s Company:

Variable costs: $160,000
Fixed costs:
What is Sly’s total contribution margin? (Points : 3)