For financial statements reporting purposes

Question 2

For financial statements reporting purposes, what method complies with GAAP and IRS?

	varible costing
	traditional costing
	absorption or full costing
	both b and c

Question 3

When a company nears the break-even point, its operating leverage will:

	not change
	dramatically decrease
	dramatically break-even
	dramicatically increase

Question 4

Which of the following is not an assumption of cost-volume-profit analysis?

	Selling prices change only at the end of the month
	Costs can be thought of as fitting a linear function within the relevant range
	Sale mix is constant
	Inventory levels do not change

Question 5

What factors are relevant to a company when evaluating “what if”scenarios to examine the impact options on a company’s financial statement?

	change in product’s sale price
	advertising expenses that will not change
	increases in products variable manufacturing costs
	the quantity of product that is expected to sell

Question 6

The contribution margin income statement is structured to emphasize what?

	Cost Functionality
	Cost Behavior
	Organizational Efficiency
	Cost Drivers

Question 7

Which of the following statements is correct

	When an equal number of units are produced and sold, net income is significantly higher under the absorption costing than variable costing
	When an equal number of units are produced and sold, net income is higher under variable costing that absorption costing
	When an equal number of units are produced and sold, net income is marginally higher under the absorption costing than variable costing
	When an equal number of units are produced and sold, net income under absorption costing is the same as net income under variable costing

Question 8

If a company has a positive contribution margin but net income is low or negative, what are some ways of increasing net income?

	increase sales price
	increase sales volume
	decrease variable costs
	all of the above

Question 9

When a company has scare (limited) resources, it should seek to?

	a.	maximize the contribution margin per unit of the scarce resource
	b.	maximize the contribution margin per unit of the scarce overhead costs
	c.	maximize the contribution margin per unit of the scare basis
	d.	maximize the contribution margin per unit of the scarce source

Question 10

Way Out There Golf Balls, Inc. produces two types of golf balls: the pro model and tour model. The golf balls are sold to retailers in cartons containing 360 balls (30 boxes containing 4 sleeves per box, with each sleeve holding 3 balls). Both models are made with the same machines. It takes 15 minutes of machine time to produce 360 pro model golf balls, whereas it takes 30 minutes to produce the same number of tour model balls. The difference in production time results mainly from the different materials used in construction. If the amount of machine time is available to Way Out There Golf Balls, Inc., which golf balls should be produced in larger quantity? The relevant data concerning the two models are as follow:

Description	Pro Model	Tour Model
Sales Price (per carton)	$500	$590
Less: Direct Materials	200	265
Direct Labor	50	50
Variable Overhead	50	75
Contribution Margin	$200	$200
Required Machine Time	¼ hour	½ hour

	Tour Model
	Pro Model
	The quantity of production should be equal because the contribution margins are the same
	Way Out There Model

Question 11

To earn an after-tax profit when using the cost-volume-profit computations, a company must:

	gross-up production
	gross-up costs
	gross-up sales
	gross-up sales and fixed costs

Question 12

A company would typically use backflushing

	when inventory levels are kept at a minimum (such as in just-in-time-JIT)
	when inventory levels are kept at a maximum (such as in a tradition inventory manufacturing system)
	when manufacturing costs are flushed
	both a and b

Question 13

In a make-or-buy decision, the relevant costs are typically?

	a.	costs of buying the product from the outside source
	b.	variable costs of making the product that can be avoided by buying it
	c.	any avoidable fixed costs, and opportunity costs incurred by forgoing production of another product
	d.	all are typically costs

Question 14

The primary objectives of a for profit and non-profit entities include:

	minimize costs and maximize profit (or services)
	minimize cost and maximize compliance (or services)
	minimize costs and maximize sale (or services)
	minimize costs and maximize variable/fixed costs (or services)

Question 15

How are selling and administrative costs treated under variable costing?

	as a product cost
	as a service cost
	as a period cost
	as product and service costs

Question 16

How are fixed manufacturing overhead costs moved from one year to another under absorption costing?

	to work-in-process
	to finished goods
	to cost of goods sold
	to variable costs

Question 17

Which of the following statement is correct as it relates to a company that sells multiple products?

	CVP analysis cannot be used
	Contribution margin is based on sales mix
	CVP analysis is much easier to use
	The break-even point remains the same even if sales mix changes

Question 18

A decision maker favors a buy choice when some of the qualitative factors include

	a.	quality of vendor, reliability of product, and impact of changing employees
	b.	quality of product, reliability of vendor, and impact of changing technology
	c.	quality of product, reliability of vendor, and impact of changing management
	d.	quality of product, reliability of variable costs, and impact of changing technology

Question 19

The decision to drop a product line is based the following factors, except:

	a.	contribution margin lost is less than fixed costs avoided
	b.	contribution margin lost is greater than fixed costs avoided
	c.	decline in sales of the company’s other products
	d.	loss of customers who purchase other products

Question 20

A special order will increase net income when?

	a.	additional revenue from the special order is greater than the additional costs, including any sunk costs
	b.	additional revenue from the special order is greater than the additional costs, including any direct material costs
	c.	additional revenue from the special order is greater than the additional costs, including any period costs
	d.	additional revenue from the special order is greater than the additional costs, including any opportunity costs

Question 21

Business managers make decisions every day, what impact(s) must they be sensitive to?

	economic impact
	ethical impact
	relationship impact
	both a and b

Question 22

Way Out There Golf Balls, Inc. produces two types of golf balls: the pro model and tour model. The golf balls are sold to retailers in cartons containing 360 balls (30 boxes containing 4 sleeves per box, with each sleeve holding 3 balls). Both models are made with the same machines. It takes 15 minutes of machine time to produce 360 pro model golf balls, whereas it takes 30 minutes to produce the same number of tour model balls. The difference in production time results mainly from the different materials used in construction. If the total machine time available is 110 hours per month and the demand for each model of golf ball is 108,000 per month how many of each model should be produced to maximize profit? The relevant data concerning the two models are as follow:

Description	Pro Model	Tour Model
Sales Price (per carton)	$500	$590
Less: Direct Materials	200	265
Direct Labor	50	50
Variable Overhead	50	75
Contribution Margin	$200	$200
Required Machine Time	¼ hour	½ hour

	a.	300 Cartons of Pro Model & 75 Cartons of Tour Model
	b.	305 Cartons of Pro Model & 70 Cartons of Tour Model
	c.	375 Cartons of Pro Model & 70 Cartons of Tour Model
	d.	300 Cartons of Pro Model & 70 Cartons of Tour Model

Question 23

Which of the following items is not subtracted from sales revenue to arrive at contribution margin on a contribution margin income statement?

	variable manufacturing overhead
	sales commissions paid only on items that are sold
	variable sales and administrative expenses
	fixed manufacturing overhead

Question 24

Under absorption costing, how can net income increase without sales increasing?

	decrease variable costs
	decrease fixed costs
	increase production
	increase production manager’s salary

Question 25

The primary difference between variable and absorption costing is the treatment of:

	fixed selling and administration costs
	variable selling and administrative costs
	fixed manufacturing overhead
	variable manufacturing overhead

Question 26

Canned Foods Unlimited is deciding whether to sell its canned corn in whole kernels or to process it further into creamed corn. The cost of producing whole kernel corn is $.20 per can, and the can sells for $.40. Additional processing costs to produce the creamed corn are $.06 per can, and each can sells for $.45. Which of the following costs are relevant in this decision to sell or process further?

	$.20 production cost
	$.06 additional processing cost
	both A and B are relevant
	neither A nor B is relevant

Question 27

When using job costing, the following two components of product costs must be carefully measured and track:

	direct labor and factory overhead
	direct material and direct labor
	direct material and indirect labor
	indirect mater and indirect labor

Question 28

Which of the following costs is least likely to be relevant in deciding whether to accept a special order?

	variable direct labor costs
	variable selling costs
	fixed manufacturing overhead
	variable packaging and shipping costs

Question 29

What steps should a manager take when dealing with a production bottleneck?

	a.	focusing time and resources on alleviating the bottleneck
	b.	focusing time and resources on elevating the bottleneck
	c.	focusing time and resources on improving the efficiency of the bottleneck process
	d.	both a and c

Question 30

Which of the following is a correct form of the break-even equation when using activity-based costing?

	BE ($) = (fixed costs + batch-level costs)/contribution margin per unit
	BE (units) = (fixed costs + facility-level costs)/contribution margin per unit
	BE ($) = (fixed costs + batch-level costs + product-level costs)/contribution margin per unit
	BE (units) = (fixed cost + batch-level costs + product-level costs)/contribution margin per unit

For financial statements reporting purposes

Why work with us?

How the Platform Works

Recent Posts