40 MCQ A cost that remains the same in total even when volum

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Question 1

A cost that remains the same in total even when volume of activity varies is a:

Answer

Fixed cost.

Curvilinear cost.

Variable cost.

Step-wise variable cost.

Standard cost.

10 points

Question 2

A cost that changes in proportion to changes in volume of activity is a(n):

Answer

Differential cost.

Fixed cost.

Incremental cost.

Variable cost.

Product cost.

10 points

Question 3

A cost that changes with volume, but not at a constant rate, is called a:

Answer

Variable cost.

Curvilinear cost.

Step-wise variable cost.

Fixed cost.

Differential cost.

10 points

Question 4

A cost that remains constant over a limited range of volume, but increases by a lump sum when volume increases beyond a maximum amount, is a(n):

Answer

Step-wise cost.

Fixed cost.

Curvilinear cost.

Incremental cost.

Opportunity cost.

10 points

Question 5

A cost that can be separated into fixed and variable components is called a:

Answer

Mixed cost.

Step-variable cost.

Composite cost.

Curvilinear cost.

Differential cost.

10 points

Question 6

Curvilinear costs always increase:

Answer

With decreases in volume.

In constant proportion to changes in production levels.

When management performs break-even analysis.

When volume increases, but not at a constant rate.

On a per unit basis when volume of activity goes down.

10 points

Question 7

Which one of the following statements is not true?

Answer

Total fixed costs remain the same regardless of volume within the relevant range.

Total variable costs change with volume.

Total variable costs decrease as the volume increases.

Fixed costs per unit increase as the volume decreases.

Variable costs per unit remain the same regardless of the volume.

10 points

Question 8

An important tool in predicting the volume of activity, the costs to be incurred, the sales to be earned, and the profit to be received is:

Answer

Target income analysis.

Cost-volume-profit analysis.

Least-squares regression of costs.

Variance analysis.

Process costing.

10 points

Question 9

Select cost information for Winfrey Enterprises is as follows:

Based on this information:

Answer

Both direct materials and rent expense are variable costs.

Utilities expense is a mixed cost and rent expense is a variable cost.

Utilities expense is a mixed cost and rent expense is a fixed cost.

Direct materials is a fixed cost and utilities expense is a mixed cost.

Both direct materials and utilities expense are mixed costs.

10 points

Question 10

A company’s normal operating range, which excludes extremely high and low volumes that are not likely to occur, is called the:

Answer

Margin of safety.

Contribution range.

Break-even point.

Relevant range.

High-low point.

10 points

Question 11

A formal statement of future plans, usually expressed in monetary terms, is a:

Answer

Variance report.

Position statement.

Budget.

Prospectus.

Variance analysis.

10 points

Question 12

The process of planning future business actions and expressing them as a formal plan is called:

Answer

Budgeting.

Cost accounting.

Managerial accounting.

Variance analysis.

Standard cost analysis.

10 points

Question 13

For budgets to be effective:

Answer

Goals should be attainable.

Employees affected by a budget should be consulted when it is prepared.

Evaluations should be made carefully with opportunities to explain any failures.

They should be properly applied to avoid negative effects.

All of these.

10 points

Question 14

Which of the following is not a result of following a well-designed budgeting process?

Answer

Improved decision-making processes.

Improved performance evaluations.

Improved coordination of business activities.

Assurance of future profits.

All of these are benefits of effective budgeting.

10 points

Question 15

Which of the following is a benefit derived from budgeting?

Answer

Budgeting focuses management’s attention on the future.

Budgeting provides coordination of departments.

Budgeting provides a basis for evaluating performance.

Budgeting provides motivation for managers and employees.

All of these.

10 points

Question 16

Which of the following statements about budgeting is false?

Answer

Budgeting is an aid to planning and control.

Budgets create standards for performance evaluation.

Budgets help coordinate the activities of the entire organization.

Budgeting forces managers to think ahead and formalize long-range objectives.

The master budget should only be prepared by top management.

10 points

Question 17

A budget is best described as:

Answer

A formal statement of a company’s future plans usually expressed in monetary terms.

A master control device.

An informal statement of company’s future plans usually expressed in monetary terms.

The most crucial component of a company’s evaluation process.

The minimum acceptable performance level.

10 points

Question 18

The overall coordinating activity of the budget process is the responsibility of the:

Answer

Chief Accounting Officer.

Chief Executive Officer (CEO).

Chief Financial Officer (CFO).

Budget Committee.

Board of Directors.

10 points

Question 19

The set of periodic budgets that are prepared and periodically revised in the practice of continuous budgeting are called:

Answer

Production budgets.

Sales budgets.

Cash budgets.

Rolling budgets.

Capital expenditures budgets.

10 points

Question 20

Guidance for preparing a master budget is usually the responsibility of:

Answer

The company CEO.

The marketing department.

A budget committee.

The chief financial officer.

Lower level management.

10 points

Question 21

A firm produces and sells two products, Mica and Plax. The following information is available relating to setup costs (a part of factory overhead):

With traditional two-stage allocation of overhead costs, using direct labor hours as the allocation base, the setup cost portion of overhead that is allocated to each unit of product for Mica and Plax, respectively is:

Answer

$80; $.80.

$3.20; $3.20.

$4.00; $4.00.

$160.00; $12,800.00.

$200.00; $16,000.00.

10 points

Question 22

A firm produces and sells two products, Mica and Plax. The following information is available relating to setup costs (a part of factory overhead):

Using number of setups as the activity base, the amount of setup cost allocated to each unit of product for Mica and Plax, respectively is:

Answer

$21.60; $.54.

$54.00; $27.00.

$60.00; $60.00.

$108.00; $2.70.

$200.00; $16,000.00

0 points

Question 23

Rent and maintenance expenses would most likely be allocated based on:

Answer

Sales volume by department.

Square feet of floor space occupied.

Number of hours worked.

Number of invoices processed.

Number of employees in each department.

10 points

Question 24

In the preparation of departmental income statements, the preparer completes the following steps in the following order:

Answer

Identify direct expenses; allocate indirect expenses; allocate service department expenses.

Identify indirect expenses; allocate direct expenses; allocate service department expenses.

Identify service department expenses; allocate direct expenses; allocate indirect expenses.

Identify direct expenses, allocate service department expenses, allocate indirect expenses.

Allocate all expenses.
10 points

Question 25

Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:

The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. Compute gross profit for the White and Grey Divisions, respectively.

Answer

$72,000; $193,000.

$172,000; $352,000.

$100,000; $241,000.

$52,000; $163,000.

$72,000; $163,000.

10 points

Question 26

Jamesway Corporation has two separate divisions that operate as profit centers. The following information is available for the most recent year:

The White Division occupies 20,000 square feet in the plant. The Grey Division occupies 30,000 square feet. Rent is an indirect expense and is allocated based on square footage. Rent expense for the year was $50,000. Compute departmental income for the White and Grey Divisions, respectively.

Answer

$52,000; $163,000.

$172,000; $352,000.

$72,000; $163,000.

$72,000; $193,000.

$100,000; $241,000.

10 points

Question 27

The amount by which a department’s revenues exceed its direct expenses is:

Answer

Net sales.

Gross profit.

Departmental profit.

Contribution margin.

Departmental contribution to overhead.

10 points

Question 28

Departmental contribution to overhead is calculated as revenues of the department less:

Answer

Controllable costs.

Product and period costs.

Direct expenses.

Direct and indirect costs.

Joint costs.

10 points

Question 29

The Footwear Department of Lee’s Department Store had sales of $188,000, cost of goods sold of $132,500, indirect expenses of $13,250, and direct expenses of $27,500 for the current period. The Footwear Department’s contribution to overhead as a percent of sales is:

Answer

7.8%.

14.9%.

29.5%.

66.7%.

85.4%.

10 points

Question 30

Mach Co. operates three production departments as profit centers. The following information is available for its most recent year. Department 1’s contribution to overhead as a percent of sales is:

Answer

8%.

40%.

20%.

30%.

12%.

10 points

Question 31

Static budget is another name for:

Answer

Standard budget.

Flexible budget.

Variable budget.

Fixed budget.

Master budget.

10 points

Question 32

Variable budget is another name for:

Answer

Cash budget.

Flexible budget.

Fixed budget.

Manufacturing budget.

Rolling budget.

10 points

Question 33

Identify the situation that will result in a favorable variance.

Answer

Actual revenue is higher than budgeted revenue.

Actual revenue is lower than budgeted revenue.

Actual income is lower than expected.

Actual costs are higher than budgeted costs.

Actual expenses are higher than budgeted expenses.

10 points

Question 34

A flexible budget performance report compares the differences between:

Answer

Actual performance and budgeted performance based on actual sales volume.

Actual performance over several periods.

Budgeted performance over several periods.

Actual performance and budgeted performance based on budgeted sales volume.

Actual performance and standard costs at the budgeted sales volume.

10 points
Question 35
Sales variance analysis is useful for:

Answer

Planning purposes only.

Budgeting purposes only.

Control purposes only.

Planning and control purposes.

Planning and budgeting purposes.

10 points

Question 36

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity), and which presents the differences between actual and budgeted amounts as variances, is called a(n):

Answer

Sales budget performance report.

Flexible budget performance report.

Master budget performance report.

Static budget performance report.

Operating budget performance report.

10 points

Question 37

A flexible budget is prepared:

Answer

Before the operating period only.

After the operating period only.

During the operating period only.

At any time in the planning period.

A flexible budget should never be prepared.

10 points

Question 38

A company’s flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:
Answer

$2,667.

$14,000.

$18,667.

$24,000.

$35,000.

10 points

Question 39
Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

Answer

$125,000 fixed and $102,500 variable.

$125,000 fixed and $123,000 variable.

$102,500 fixed and $150,000 variable.

$150,000 fixed and $123,000 variable.

$150,000 fixed and $102,500 variable.

10 points

Question 40

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

Answer

$12,500.

$25,000.

$20,000.

$30,000.

$35,000.

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