20 MCQ's

1. _____ refers to accounting information developed for managers
within an organization.
a. Internal auditing
b. Managerial accounting
c. Financial accounting
d. Tax accounting

2. Ethical accountants are important to society because _____.
a. they pay their taxes
b. the information produced is reliable
c. they will not go to prison and waste taxpayers’ money
d. none of these answers is correct

3. Performance reports _____.
 a. are quantitative expressions of action plans
b. provide feedback by comparing results with plans and by highlighting deviations from plans
c. are deviations from a plan
 d. ignore areas that are presumed to be running smoothly

4. Output measures of both resources and activities are _____.
 a. cost drivers
 b. stages of production
 c. fixed activities
d. variable activities

1. An accountant may have difficulty classifying costs as fixed or variable because _____.
 a. costs may behave in a nonlinear way
 b. costs may be affected by more than one cost driver
 c. the decision situation may cause the costs to be fixed in the short term
 d. all of these answers are correct

2.  If the proportions in a sales mix change, the _____.
 a. contribution margin per unit increases
 b. break even point will remain the same
 c. cost volume profit relationship also changes
 d. net income will not be altered

3.  _____ will decrease a company's break-even point.
 a. Reducing its total fixed costs
 b. Decreasing contribution margin per unit
 c. Increasing variable cost per unit
d. Decreasing the selling price per unit

4. Costs that change abruptly at intervals of activity because the resources and their costs come in indivisible chunks are called ¬¬¬¬¬_____.
 a. mixed costs
 b. variable costs
 c. fixed costs
 d. step costs

1.  _____ arise as a result of strategic decisions about the scale and scope of an organization's activities.
 a. Capacity costs
 b. Discretionary costs
 c. Mixed costs
 d. Engineered costs

2. _____ is the first step in estimating or predicting costs as a function of appropriate cost drivers.
 a. Cost measurement
 b. Cost determination
 c. Cost behavior investigation
d. Cost driver identification

3.  The process of identifying appropriate cost drivers and their effects on the costs of making a product or providing a service is called ¬¬¬¬¬_____.
 a. cost prediction
 b. cost measurement
 c. activity analysis
 d. budgeting

4.  _____ is not a primary purpose of a cost management system.
 a. Providing aggregate measures of inventory value and cost of goods sold
 b. Providing cost information for strategic management decisions
c. Providing cost information for operational control
d. All of these answers are correct

1. Where a specific product is the cost object, the materials used to manufacture the product  would probably be classified as a(n) _____.
a. direct, variable cost
b. direct, fixed cost
c.  indirect, variable cost
d. indirect, fixed cost

2.  _____ is a name for a system that first accumulates overhead  costs for each of the activities of an organization, and then assigns the costs of  activities to the products, services, or other cost objects that caused that activity.
 a. Activity based costing
 b. Cost driver accounting
 c. Transaction based accounting
 d. Transaction costing

3. _____ is the process of measuring products, services, and activities against the best levels  of performance.
a. Value-adding
b. Activity-based costing
c. Benchmarking
d. Continuous improvement

4. Couch Company can produce either product A or product B. If Couch Company produces  product A, expected direct material cost would be $24,000. If Couch Company produces product B, expected direct material cost would be $24,000. In choosing between these alternatives, the $24,000 direct material cost is _____.
a. relevant because it is an expected future cost
b. relevant because it is a product cost
c. irrelevant because it is an estimated cost
d. irrelevant because it does not differ between alternatives

1. The choice of the absorption or contribution approach affects the   manufacturing cost per unit because the manufacturing cost per unit is _____.
 a. higher if the absorption approach is used
 b. higher if the contribution approach is used
 c. the same regardless of the approach
 d. independent of the approach

2.  The product strategy in which companies first determine the price at which they can sell a new product and then design a product that can be produced at a low enough cost to provide an adequate profit margin is referred to as _____.
 a. full costing
 b. target costing
 c. predatory pricing
 d discriminatory pricing

3. Jack Bowers has paid off the mortgage on his house and continues to live in the house. The interest income forgone by not selling the house and investing the proceeds is an example of a(n) _____.
 a. sunk cost
 b. detrimental cost
 c. opportunity cost
 d. outlay cost

4.  _____ would be a consideration in a make-or-buy decision.
 a. Excess capacity
 b. Variable factory overhead
 c Rental income from unused facilities
d. All of these answers are correct

1.  In deciding whether to add or delete a product, service, or department, the salary of the plant manager is an _____. 
a. avoidable fixed cost
b. avoidable variable cost
c. unavoidable fixed cost
d. unavoidable variable cost
 
2.  Depreciation is _____.
a. the periodic cost of equipment spread over the future periods in which the equipment is expected to be used
b. the decline in equipment value due to obsolescence
c. the difference between the original cost and current market value
d. All of these answers are correct

3.Past costs that are unavoidable and unchangeable are known as _____ costs.
 a. fixed overhead
 b. operating
 c. product production
 d. sunk

4. A major benefit of effective budgeting is that _____.
a. it compels managers to think ahead
b. it aids managers in communicating objectives to units
c. it provides benchmarks to evaluate subsequent performance
d. all of these answers are correct