ACC 561 FINAL EXAM (SET-3) - 31220

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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 

 

5.     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 

 

6.      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 

 

7.      _____ 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 

 

8.     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 

 

9.                      _____ 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 

 

10.     _____ 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 

 

11.      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 

 

12.      _____ 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 

 

13.     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 

 

14.      _____ 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 

 

15.     _____ 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 

 

16.     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 

 

17.     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 

 

18.      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 

 

19.     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 

 

20.      _____ 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 

      

21.      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 

      

22.      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 

 

23.                    Past costs that are unavoidable and unchangeable are known as _____ costs. 

a.     fixed overhead 

b.     operating 

c.     product production 

d.     sunk 

 

24.     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 

 

25.     A sales forecast is _____. 

a.     a prediction of sales under a given set of conditions 

b.     the result of decisions to create conditions 

c.     the same as a sales budget that will generate a desired level of sales d.     all of these answers are correct 

 

26.     Which of the following is not a major benefit of budgeting? 

a.     Budgeting compels managers to think ahead. 

b.     Budgeting provides definite expectations that are the best framework for judging subsequent performance. 

c.     Budgeting aids managers in coordinating their efforts so the objectives of the organization as a whole match the objectives of its parts. 

d.     Budgeting allows managers to operate day-to-day, reacting to current events rather than planning for the future. 

 

27.     Preparing the master budget begins by establishing _____. 

a.     a targeted balance sheet 

b.     a targeted income statement 

c.     the expected cash 

d.     the expected sales 

 

28.     Financial planning models _____. 

 

a.     focus on the budgeted balance sheet 

b.     allow managers to assess the predicted impacts of various alternatives before final decisions are selected 

c.     attempt to answer “How come?” questions 

d.     are extremely accurate, thus lessening the need for management judgment 

 

29.     A variance is the difference between _____. 

a.     a budgeted amount and a benchmark amount 

b.     the required number of inputs for the number of outputs 

c.     an actual result and a budgeted amount 

d.     a budgeted amount and a stan¬dard amount 

 

30.     Efficiency is indicated by _____. 

a.      sales-activity variances 

b.     static-budget variances 

c.     flexible-budget variances 

d.     all of these answers are correct 

 

31.      Flexible budgets help to measure the _____. 

a.     differences between projected and actual activity levels 

b.     efficiency of operations at the actual activity level 

c.     amount by which standard quantity and expected prices differ 

d.     reasons why projected activity levels were not attained 

 

32.      Identify which of the following statements about "perfection standards" is true. 

a.     It is generally believed that they have a negative influence on employee morale. 

b.     They are expressions of the most efficient performance possible. 

c.     They usually result in unfavorable variances. 

d.     All of these answers are correct. 

 

33.     Identify which of the following is not a characteristic of a management control system. 

a.     A management control system aids and coordinates the process of making decisions. 

b.     A management control system encourages short term profitability. 

c.     A management control system motivates individuals throughout the organization to act in concert. 

d.     A management control system coordinates forecasting sales and cost driver activities, budgeting, and measuring and evaluating performance. 

 

34.      Identify which of the following statements regarding responsibility centers is false. 

a.     Responsibility centers usually have one objective. 

b.     Management control systems monitor responsibility center objectives. 

c.     Responsibility centers are usually classified according to their financial          responsibility. 

d.     Cost centers, profit centers, and investments centers are all examples of responsibility centers.           

 

35.     A management control system must _____ to achieve maximum benefits at minimum cost. 

a.     look at the short term only

b.     motivate managers with quarterly bonuses based on performance c.     foster goal congruence and managerial effort 

d.     be the same as the financial accounting system 

 

36.      An uncontrollable cost _____. 

a.     should be ignored in evaluating the responsibility center manager's performance 

b.     is influenced by a manager's decisions and actions 

c.     tells a great deal about a manager’s decision-making abilities 

d.     is the same as a sunk cost 

 

37.     Improvements in the production process are examples of _____cost. 

a.     prevention 

b.     appraisal 

c.     internal failure 

d.     external failure 

 

38.     Identify which of the following statements is a benefit of decentralization. 

a.     Top level managers have the best information concerning local conditions. 

b.     Managers acquire decision making ability and other management skills that help them move upward in the organization, assuring continuity of leadership. 

c.     Managers make decisions that enhance their segment’s performance. 

d.     Managers save time dealing with managers from other segments regarding transfer prices. 

 

39.     Reciprocal services are services provided by a service department to _____. 

a.     a producing department 

b.     another service department 

c.     external customers 

d.     all of these answers are correct. 

 

 

40.            Costs are accumulated in traditional and ABC systems by _____. 

a.     activities and organizational units, respectively 

b.     organizational units and activities, respectively 

c.     activities and activities, respectively 

d.     organizational units and organizational units, respectively 

 

41.               _____ is not a cost driver representing an “ability to bear” philosophy. 

a.      Revenue of each division 

b.     Cost of goods sold by each division 

c.     Total cost before central cost allocation in later division 

d.     Usage 

 

42.     _____ is least likely to be a cost driver as a basis for applying overhead costs. 

a.     Direct-labor cost      

b.     Indirect labor hours 

c.     Machine hours      

d.     Production setups 

 

43.      The excess of actual overhead over the overhead applied to products is called _____. 

a.     overapplied overhead 

b.     underapplied overhead 

c.     overestimated overhead 

d.     prorated overhead 

 

44.     _____ is (are) used for external reporting. 

 

a.     Absorption costing 

b.     Variable costing 

c.     Direct costing 

d.     Absorption costing and variable costing 

 

45.     The fixed overhead rate is computed as_____. 

a.     budgeted fixed manufacturing overhead / expected volume of production 

b.     actual fixed manufacturing overhead / actual volume of production c.     budgeted fixed manufacturing overhead / actual volume of production 

d.     actual fixed manufacturing overhead / expected volume of production 

 

46.          The _____ discloses the economic resources of the organization and the claims    

               against these resources. 

a.     balance sheet 

b.     income statement 

c.     statement of cash flows 

d.     statement of retained earnings 

 

47.            Identify which one of the following statements is false. 

a.     Owners’ equity solely represents the profits made by an organization in the current period. 

b.     Assets are economic resources that are expected to benefit future cash inflows or reduce future cash outflows. 

c.     Liabilities are economic obligations or claims against the assets of an organization by outsiders. 

d.     Assets must always equal the sum of liabilities and owners’ equity. 

 

48.     The accrual basis of accounting recognizes the impact of transactions on the financial statements in the period when _____. 

a.     revenues are earned and expenses are incurred 

b.     cash is received or disbursed 

c.     the transaction occurs 

d.     the accounting equation is decreased 

 

49.          Cash collected from the customers before goods are delivered is known as_____. 

a.     unearned revenue 

b.     deferred revenue 

c.     advances from customers 

d.     all of these answers are correct 

 

50.     The _____ is (are) largely responsible for developing generally accepted accounting principles in the United States. 

a.     FASB 

b.     IASC 

c.     SEC 

d.     FASB and IASC 

 

51.     The _____ would result in an increase in income under the cash basis but not an increase in income under the accrual basis. 

a.     credit sale of inventory at a sales price in excess of the inventory's cost 

b.     cash collection from a credit customer 

c.     cash sale of inventory at a sales price in excess of the inventory's cost 

d.     return of defective inventory purchased on account to a supplier where a full credit was given 

 

52.                        _____ is reported on the financial statements of publicly held companies in the 

United States. 

a.     The current ratio 

b.     Earnings per share 

c.     The price-earnings ratio 

d.     All of these answers are correct 

 

 

 

 

 

Solution Description

   credit sale of inventory at a sales price in excess of the inventory's cost 

b.     cash collection from a credit customer 

c. &n

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