Multiple Choice Questions

E. Organizing.
MULTIPLE CHOICE QUESTIONS

Answer: D LO: 2 Type: N
1. Which of the following statements about managerial accountants is false?
A. Managerial accountants more and more are considered "business partners." 7. Which of the following is not an objective of managerial accounting?
B. Managerial accountants often are part of cross-functional teams. A. Providing information for decision making and planning.
C. An increasing number of organizations are segregating managerial accountants in separate B. Assisting in directing and controlling operations.
managerial-accounting departments. C. Maximizing profits and minimizing costs.
D. In a number of companies, managerial accountants make significant business decisions D. Measuring the performance of managers and subunits.
and resolve operating problems. E. Motivating managers toward the organization's goals.
E. The role of managerial accountants has changed considerably over the past decade.
Answer: C LO: 3 Type: RC
8. The role of managerial accounting information in assisting management is a(n):
2. The day-to-day work of management teams will typically comprise all of the following activities A. financial-directing role.
except: B. attention-directing role.
A. decision making. C. planning and controlling role.
B. planning. D. organizational role.
C. cost minimizing. E. problem-solving role.
D. directing operational activities.
E. controlling. Answer: B LO: 3 Type: RC
Answer: C LO: 2 Type: RC 9. Employee empowerment involves encouraging and authorizing workers to take initiatives to:
A. improve operations.
3. Which of the following functions is best described as choosing among available alternatives? B. reduce costs.
A. Decision making. C. improve product quality.
B. Planning. D. improve customer service.
C. Directing operational activities. E. all of the above.
D. Controlling.
E. Budgeting. Answer: E LO: 3 Type: RC
10. The process of encouraging and authorizing workers to take appropriate initiatives to improve
Answer: A LO: 2 Type: RC the overall firm is commonly known as:
A. planning and control.
4. Which of the following managerial functions involves a detailed financial and operational B. employee empowerment.
description of anticipated operations? C. personnel aggressiveness.
A. Decision making. D. decision making.
B. Planning. E. problem recognition and solution.
C. Directing operational activities.
D. Controlling. Answer: B LO: 3 Type: RC
E. Measuring.
11. Which of the following business models considers financial, customer, internal operating, and
Answer: B LO: 2 Type: RC other measures in the evaluation of performance?
A. Deterministic simulation.
5.Which of the following involves the coordination of daily business functions within an organization? B. Balanced scorecard.
A. Decision making. C. Payoff matrix.
B. Planning. D. Decision tree.
C. Directing operational activities. E. Chart of operating performance (COP).
D. Controlling.
E. Motivating. Answer: B LO: 3 Type: RC
Answer: C LO: 2 Type: RC 12. Which of the following perspectives is normally absent in a balanced scorecard?
A. Financial.
6.Titan Company has set various goals, and management is now taking appropriate action to ensure that the B. Customer.
firm achieves these goals. One such action is to reduce outlays for overhead, which have C. Internal operations.
exceeded budgeted amounts. Which of the following functions best describes this process? D. Learning and innovation/growth.
A. Decision making. E. None of the above.
B. Planning.
C. Coordinating. Answer: E LO: 3 Type: RC
D. Controlling.
13. Managerial accounting:
A. focuses only on historical data. 19. Which of the following statements represents a similarity between financial and managerial
B. is governed by GAAP. accounting?
C. focuses primarily on the needs of personnel within the organization. A. Both are useful in providing information for external users.
D. provides information for parties external to the organization. B. Both are governed by GAAP.
E. focuses on financial statements and other financial reports. C. Both draw upon data from an organization's accounting system.
D. Both rely heavily on published financial statements.
Answer: C LO: 4 Type: RC E. Both are solely concerned with historical transactions.
14. Managerial accounting: Answer: C LO: 4 Type: N

A. is unregulated.
B. produces information that is useful only for manufacturing organizations. 20. Which of the following employees at American Airlines would not be considered as holding a
C. is based exclusively on historical data. line position?
D. is regulated by the Securities and Exchange Commission (SEC). A. Pilot.
E. generally focuses on reporting information about the enterprise in its entirety rather than B. Chief financial officer (CFO).
by subunits. C. Flight attendant.
D. Ticket agent.
Answer: A LO: 4 Type: N E. Baggage handler.
15. Which of the following would likely be considered an internal user of accounting information Answer: B LO: 5 Type: N
rather than an external user?
A. Stockholders. 21. Which of the following employees would be considered as holding a line position?
B. Consumer groups. A. The controller of Exxon Corporation.
C. Lenders. B. The vice-president for government relations of Microsoft.
D. Middle-level managers. C. The manager of food and beverage services at Disney's Magic Kingdom.
E. Government agencies. D. A secretary employed by Hewlett-Packard.
E. None of the above.
Answer: D LO: 4 Type: RC
Answer: C LO: 5 Type: N
16. All of the following entities would have a need for managerial accounting information except:
A. Dell Computer. 22. Which of the following employees at Starbucks would likely be considered as holding a staff
B. The Los Angeles Dodgers baseball club. position?
C. Office Depot. A. The company's chief operating officer (COO).
D. The Federal Bureau of Investigation (FBI). B. The manager of a store located in Kansas City, Missouri.
E. None of the above responses is correct, as all of these entities would use managerial C. The company's lead, in-house attorney.
accounting information. D. The company's chief financial officer (CFO).
E. Both the company's lead, in-house attorney and the chief financial officer.
Answer: E LO: 4 Type: N
17. Which of the following choices correctly depicts whether Bank of America, Microsoft, and
Florida State University would have a need for managerial accounting? 23. The chief managerial and financial accountant of an organization is the:
Bank Florida State A. chief executive officer (CEO).
of America Microsoft University B. treasurer.
A. Yes Yes No C. vice-president of accounting.
B. Yes No Yes D. internal auditor.
C. Yes Yes Yes E. chief financial officer (CFO).
D. No Yes No
E. No Yes Yes Answer: E LO: 5 Type: RC
Answer: C LO: 4 Type: N 24. Which of the following typically does not relate to the role of a controller?
A. A controller supervises the accounting department.
18. Financial accounting focuses primarily on reporting: B. A controller safeguards an organization's assets.
A. to parties outside of an organization. C. A controller oversees the preparation of reports required by governmental authorities.
B. to parties within an organization. D. A controller normally assumes a narrow role within the organization, often preventing the
C. to an organization's board of directors. individual's rise to top management ranks.
D. to financial institutions. E. Choices "B" and "D" above.
E. for financial institutions.
Answer: E LO: 6 Type: RC
Answer: A LO: 4 Type: RC
25. A controller is normally involved with:
A. preparing financial statements. Answer: E LO: 7 Type: RC
B. managing investments.
C. raising capital. 32. Managerial accounting has changed in recent years because of:
D. safeguarding assets. A. a growing service economy in the United States.
E. managing the firm's credit policy. B. the growing popularity of cross-functional teams.
C. computer-integrated manufacturing (CIM).
Answer: A LO: 6 Type: RC D. time-based competition.
E. all of the above factors.
26. Which of the following is not a function of the treasurer?
A. Safeguarding assets. Answer: E LO: 7 Type: RC
B. Managing investments.
C. Preparing financial statements. 33. Which of the following statement(s) about just-in-time (JIT) inventory management is (are)
D. Being responsible for an entity's credit policy. true?
E. Raising capital.
I. The emphasis of JIT is on "pull" manufacturing.
Answer: C LO: 6 Type: RC II. Raw materials are purchased just in time to be used in production.
III. JIT is an inventory technique that focuses on reduction of both inventory and related
27. Managerial accountants: inventory costs.
A. often work on cross-functional teams.
B. are located throughout an organization. A. I only.
C. are found throughout an organization and work on cross-functional teams. B. II only.
D. are found primarily at lower levels of the organizational hierarchy. C. III only.
E. are found primarily at higher levels of the organizational hierarchy. D. II and III.
E. I, II, and III.
28. The two dimensions of managerial accounting are: 34. Ohio Corporation recently implemented a just-in-time (JIT) production system along with a
A. a decision-facilitating dimension and a decision-influencing dimension. series of continuous improvement programs. If the firm is now considering adopting a total
B. a decision-facilitating dimension and a financial-influencing dimension. quality management (TQM) program, it would likely find that TQM:
C. a decision-influencing dimension and a cost-minimizing dimension. A. is consistent with both JIT and continuous improvement.
D. a cost-minimizing dimension and a profit-maximizing dimension. B. is consistent with JIT but inconsistent with continuous improvement.
E. a decision-influencing dimension and a profit-maximizing dimension. C. is consistent with continuous improvement but inconsistent with JIT.
D. is inconsistent with both JIT and continuous improvement.
Answer: A LO: 7 Type: RC E. is an antiquated management technique.
29. Much of managerial accounting information is based on: Answer: A LO: 7 Type: N
A. a cost-benefit theme.
B. profit maximization. 35. Cost management systems tend to focus on an organization's:
C. cost minimization. A. machines.
D. the generation of external information. B. employees.
E. effectiveness but not efficiency. C. activities.
D. customers.
Answer: A LO: 7 Type: N E. rules and regulations.
30. Which of the following is not normally considered to be an element of e-business?
A. E-budgeting. Answer: C LO: 7 Type: RC
B. Supply-chain management.
C. E-commerce. 36. The value chain of a manufacturer would tend to include activities related to:
D. Balanced scorecards. A. manufacturing.
E. Choices "B" and "D" above. B. research and development.
C. product design.
Answer: D LO: 7 Type: RC D. marketing.
E. all of the above.
31. Managerial accounting has changed in recent years because of:
A. the growth of e-business. Answer: E LO: 8 Type: RC
B. increased global competition.
C. the emergence of new industries. 37. Which of the following choices correctly depicts activities that would be included in a
D. an increased focus on the customer. manufacturer's value chain?
E. all of the above factors. Research and
Development Marketing Distribution E. Strategic path analysis (SPA).
A. Yes Yes No
B. Yes No Yes Answer: B LO: 8 Type: RC
C. Yes Yes Yes 43. Which of the following can be linked to the relatively recent wave of corporate scandals?
D. No Yes No A. Greedy corporate executives.
E. No Yes Yes B. Managers who make over-reaching business deals.
C. Lack of oversight by companies' audit boards and boards of directors.
Answer: C LO: 8 Type: RC D. Shoddy work by external auditors.
E. All of the above.
38. Which of the preceding activities would likely not be considered part of The Gap clothing
companys value chain? Answer: E LO: 9 Type: RC
A. Designing a new product line.
B. Locating and then negotiating terms with a clothing manufacturer. 44. Which of the following acts strives to improve corporate governance and the quality of
C. Marketing an existing product line. corporate accounting/reporting?
D. Distributing goods from regional warehouses to local stores. A. Robinson-Patman.
E. All of the above activities would be an element in the companys value chain. B. Taft-Hartley.
C. Sarbanes-Oxley.
Answer: E LO: 8 Type: RC D. Bush-Cheney.
E. Franks-Ashcroft.
39. The activities performed by a manufacturing organization could be categorized as pre-
production (such as research and development and product design), production-related, and post- Answer: C LO: 9 Type: RC
production (such as marketing and customer service). Which activities should the firm focus on if
management understands the value chain concept and desires to meet organizational goals? 45.Which of the following statements about the ethical climate of business is false?
A. Pre-production activities. A. Greedy corporate executives are, in part, to blame for the relatively recent rash of
B. Production-related activities. corporate scandals.
C. Post-production activities. B. Unethical business behavior can have a negative impact on our economy.
D. Pre-production, production-related, and post-production activities. C. The Sarbanes-Oxley Act strives to improve the overall quality of corporate reporting.
E. Pre-production and production-related activities. D. The Robinson-Patman Act strives to improve the overall quality of corporate reporting.
E. Corporate scandals have served as the accounting professions wake-up call to pay
Answer: D LO: 8 Type: N increased attention to ethical issues in the conduct of business.
40. In order for a company to achieve a sustainable competitive advantage, it must perform value Answer: D LO: 9 Type: RC
chain activities:
A. at the same quality level as competitors, at the same cost. 46. Which of the following is not an ethical standard of managerial accounting?
B. at the same quality level as competitors, but at a lower cost. A. Competence.
C. at a higher quality level than competitors, at a higher cost. B. Confidentiality.
D. at a higher quality level than competitors, but at no greater cost. C. Efficiency.
E. at either the same quality level as competitors, but at a lower cost, or at a higher quality D. Integrity.
level than competitors, but at no greater cost. E. Credibility.
Answer: E LO: 8 Type: RC Answer: C LO: 9 Type: RC
41. The process of managing the various activities in the value chain, along with the associated 47. Which of the following is not an element of competency?
costs, is commonly known as: A. To develop appropriate knowledge about a particular subject.
A. activity-based costing. B. To perform duties in accordance with relevant laws.
B. strategic cost management. C. To perform duties in accordance with relevant technical standards.
C. total quality management. D. To refrain from engaging in an activity that would discredit the accounting profession.
D. computer-integrated costing. E. To prepare clear reports after an analysis of relevant and reliable information.
E. sound management practices (SMP). 48. Assume that a managerial accountant regularly communicates with business associates to avoid
conflicts of interest and advises relevant parties of potential conflicts. In so doing, the
Answer: B LO: 8 Type: RC accountant will have applied the ethical standard of:
A. objectivity.
42. A company has a bottleneck operation that slows production. Which of the following tools or B. confidentiality.
approaches could the firm use to determine the most cost-effective ways to eliminate this C. integrity.
problem? D. credibility.
A. Linear programming. E. unified behavior.
B. Theory of constraints.
C. Decision-tree diagrams. Answer: C LO: 9 Type: RC
D. Payoff matrices.
Balanced Scorecard administrative expenses, $220,000. Tacoma's product costs total:
The balanced scorecard is a business model that helps to assess a firm's competitive position and ensures A. $520,000.
that the firm is progressing toward long-term survival. Balanced scorecards differ from organization to B. $750,000.
organization; however, in addition to customer-satisfaction measures, most have a combination of financial C. $920,000.
measures, internal operating measures, and measures of innovation/growth and learning. D. $1,140,000.
Managerial Accounting vs. Financial Accounting E. some other amount.
54. Briefly distinguish between managerial accounting and financial accounting. Be sure to Answer: C LO: 2 Type: A
comment on the general focus, users, and regulation related to the two fields.
6. Costs that are expensed when incurred are called:
LO: 4 Type: RC A. product costs.
B. direct costs.
Answer: C. inventoriable costs.
Managerial accounting is concerned with providing information to personnel within an D. period costs.
organization so that they can plan, make decisions, evaluate performance, and control E. indirect costs.
operations. There are no rules and regulations associated with this field since the information is
intended solely for use within the firm. Answer: D LO: 2 Type: RC
7. Which of the following is a period cost?

MULTIPLE CHOICE QUESTIONS A. Direct material.
B. Advertising expense.
1. Which of the following statements is true? C. Depreciation on cars driven by a firm's president and treasurer.
A. The word "cost" has the same meaning in all situations in which it is used. D. Miscellaneous supplies used in production activities.
B. Cost data, once classified and recorded for a specific application, are appropriate for use in E. Both "B" and "C."
any application.
C. Different cost concepts and classifications are used for different purposes. Answer: E LO: 2 Type: N
D. All organizations incur the same types of costs.
E. Costs incurred in one year are always meaningful in the following year. 8. Which of the following is not a period cost?
A. Legal costs.
Answer: C LO: 1 Type: RC B. Public relations costs.
C. Sales commissions.
2. Product costs are: D. Wages of assembly-line workers.
A. expensed when incurred. E. The salary of a company's chief financial officer (CFO).
B. inventoried.
C. treated in the same manner as period costs. Answer: D LO: 2 Type: RC, N
D. treated in the same manner as advertising costs.
E. subtracted from cost of goods sold. 9. The accounting records of Hill Corporation revealed the following selected costs: Sales
commissions, $40,000; plant supervision, $94,000; and administrative expenses, $185,000.
Answer: B LO: 2 Type: RC Hill's period costs total:
A. $40,000.
3. Which of the following is a product cost? B. $94,000.
A. Glass in an automobile. C. $185,000.
B. Advertising. D. $225,000.
C. The salary of the vice president-finance. E. $319,000.
D. Rent on a factory.
E. Both "A" and "D." Answer: D LO: 2 Type:
Answer: E LO: 2 Type: N 10. Which of the following entities would most likely have raw materials, work in
process, and finished goods?
4. Which of the following would not be classified as a product cost? A. Exxon Corporation.
A. Direct materials. B. Macy's Department Store.
B. Direct labor. C. Wendy's.
C. Indirect materials. D. Southwest Airlines.
D. Insurance on the manufacturing plant. E. Columbia University.
E. Sales commissions.
Answer: A LO: 3 Type: N
Answer: E LO: 2 Type: RC, N
5. The accounting records of Tacoma Company revealed the following costs: direct materials used, 11. Selling and administrative expenses would likely appear on the balance sheet of:
$170,000; direct labor, $350,000; manufacturing overhead, $400,000; and selling and A. The Gap.
B. Texas Instruments. direct labor?
C. Turner Broadcasting System. A. Book binder.
D. all of the above firms. B. Plant security guard.
E. none of the above firms. C. Sales representative.
D. Plant supervisor.
Answer: E LO: 3 Type: N E. Payroll supervisor.
12. Which of the following inventories would a discount retailer such as Wal-Mart report as an Answer: A LO: 5 Type: N
asset?
A. Raw materials. 18. Norwood Appliance produces washers and dryers in an assembly-line process. Labor costs
B. Work in process. incurred during a recent period were: corporate executives, $100,000; assembly-line workers,
C. Finished goods. $80,000; security guards, $18,000; and plant supervisor, $30,000. The total of Norwood's direct
D. Merchandise inventory. labor cost was:
E. All of the above. A. $80,000.
B. $98,000.
Answer: D LO: 3 Type: RC C. $110,000.
D. $128,000.
13. Which of the following inventories would a company ordinarily hold for sale? E. $228,000.
A. Raw materials.
B. Work in process. Answer: A LO: 5 Type: A
C. Finished goods. 19. Which of the following employees would not be classified as indirect labor?
D. Raw materials and finished goods. A. Custodian.
E. Work in process and finished goods. B. Salesperson.
C. Assembler of wooden furniture.
Answer: C LO: 3 Type: RC D. Plant security guard.
E. Choices "B" and "C."
14. Zeno Corporation engages in mass customization and direct sales, the latter by accepting
customer orders over the Internet. As a result, Zeno: Answer: E LO: 5 Type: RC, N
A. would probably begin the manufacturing process upon receipt of a customer's order.
B. would typically have fairly low inventory levels for the amount of sales revenue 20. Depreciation of factory equipment would be classified as:
generated. A. operating cost.
C. would typically have fairly high inventory levels for the amount of sales revenue B. "other" cost.
generated. C. manufacturing overhead.
D. would likely find choices "A" and "B" to be applicable. D. depreciation expense.
E. would likely find choices "A" and "C" to be applicable. E. administrative cost.
Answer: D LO: 4 Type: RC Answer: C LO: 5 Type: RC

15. Companies that engage in mass customization:
A. tend to have a relatively low production volume. 21. Which of the following costs is not a component of manufacturing overhead?
B. tend to have a high production volume that involves highly standardized end-products. A. Indirect materials.
C. tend to have a high production volume, many standardized components, and customer- B. Factory utilities.
specified combinations of components. C. Factory equipment.
D. tend to have a high production volume, many unique components, and customer-specified D. Indirect labor.
combinations of components. E. Property taxes on the manufacturing plant.
E. could be typified by the refining operations of Shell Oil.
22. The accounting records of Westcott Company revealed the following costs:
16. Midwest Motors manufactures automobiles. Which of the following would not be classified as
direct materials by the company?
Factory utilities $ 35,000
A. Sheet metal used in the automobile's body.
Wages of assembly-line personnel 170,000
B. Tires.
Customer entertainment 45,000
C. Interior leather.
Indirect materials used 19,000
D. CD player.
Depreciation on salespersons' cars 51,000
E. Wheel lubricant.
Production equipment rental costs 110,000
Costs that would be considered in the calculation of manufacturing overhead total:
A. $164,000.
17. Which of the following employees of a commercial printer/publisher would be classified as
B. $215,000.
C. $385,000. 29. Work-in-process inventory is composed of:
D. $430,000. A. direct material and direct labor.
E. some other amount. B. direct labor and manufacturing overhead.
C. direct material and manufacturing overhead.
Answer: A LO: 5 Type: A D. direct material only.
23. Which of the following statements is (are) correct? E. direct material, direct labor, and manufacturing overhead.
A. Overtime premiums should be treated as a component of manufacturing overhead.
B. Overtime premiums should be treated as a component of direct labor. Answer: E LO: 6 Type: RC
C. Idle time should be treated as a component of direct labor.
D. Idle time should be accounted for as a special type of loss. 30. Fort Walton Industries began July with a finished-goods inventory of $48,000. The finished-
E. Both "B" and "C" are correct. goods inventory at the end of July was $41,000 and the cost of goods sold during the month was
$125,000. The cost of goods manufactured during July was:
Answer: A LO: 5 Type: RC A. $77,000.
B. $84,000.
24. Conversion costs are: C. $118,000.
A. direct material, direct labor, and manufacturing overhead. D. $132,000.
B. direct material and direct labor. E. some other amount.
C. direct labor and manufacturing overhead.
D. prime costs. Answer: C LO: 6 Type: A
E. period costs.
31. Kansas Plating Company reported a cost of goods manufactured of $260,000, with the firm's
Answer: C LO: 5 Type: RC year-end balance sheet revealing work in process and finished goods of $35,000 and $67,000,
respectively. If supplemental information disclosed raw materials used in production of
25. Prime costs are comprised of: $40,000, direct labor of $70,000, and manufacturing overhead of $120,000, the company's
A. direct materials and manufacturing overhead. beginning work in process must have been:
B. direct labor and manufacturing overhead. A. $5,000.
C. direct materials, direct labor, and manufacturing overhead. B. $37,000.
D. direct materials and direct labor. C. $65,000.
E. direct materials and indirect materials. D. $97,000.
E. some other amount.
Answer: C LO: 6 Type: A
26. Which of the following statements is true? 32. The accounting records of Bronco Company revealed the following information:
A. Product costs affect only the balance sheet.
B. Product costs affect only the income statement.
Raw materials used $ 60,000
C. Period costs affect only the balance sheet.
Direct labor 125,000
D. Period costs affect both the balance sheet and the income statement.
Manufacturing overhead 360,000
E. Product costs eventually affect both the balance sheet and the income statement.
Work-in-process inventory, 1/1 50,000
Finished-goods inventory, 1/1 189,000
Work-in-process inventory, 12/31 76,000
Finished-goods inventory, 12/31 140,000
27. In a manufacturing company, the cost of goods completed during the period would include
which of the following elements?
A. Raw materials used. Bronco's cost of goods manufactured is:
B. Beginning finished goods inventory. A. $519,000.
C. Marketing costs. B. $522,000.
D. Depreciation of delivery trucks. C. $568,000.
E. More than one of the above. D. $571,000.
28. Which of the following equations is used to calculate cost of goods sold during the period? Answer: A LO: 6 Type: A
A. Beginning finished goods + cost of goods manufactured + ending finished goods.
B. Beginning finished goods - ending finished goods. 33. The accounting records of Dolphin Company revealed the following information:
C. Beginning finished goods + cost of goods manufactured.
D. Beginning finished goods + cost of goods manufactured - ending finished goods.
Total manufacturing costs $530,000
E. Beginning finished goods + ending finished goods - cost of goods manufactured.
Work-in-process inventory, Jan. 1 56,000
Work-in-process inventory, Dec. 31 78,000
Finished-goods inventory, Jan. 1 146,000
Finished-goods inventory, Dec. 31 123,000
38. Which of the following would likely be a cost driver for the amount of direct materials used?
Dolphin's cost of goods sold is:
A. The number of units sold.
A. $508,000.
B. The number of direct labor hours worked.
B. $529,000.
C. The number of machine hours worked.
C. $531,000.
D. The number of employees working in the factory.
D. $553,000.
E. The number of units produced.
39. The choices below depict five costs of Benton Corporation and a possible driver for each cost.
Which of these choices likely contains an inappropriate cost driver?
34. For the year just ended, Cole Corporation's manufacturing costs (raw materials used, direct
A. Gasoline consumed; number of miles driven.
labor, and manufacturing overhead) totaled $1,500,000. Beginning and ending work-in-process
B. Manufacturing overhead incurred in a heavily automated facility; direct labor hours.
inventories were $60,000 and $90,000, respectively. Cole's balance sheet also revealed
C. Sales commissions; gross sales revenue.
respective beginning and ending finished-goods inventories of $250,000 and $180,000. On the
D. Building maintenance cost; building square footage.
basis of this information, how much would the company report as cost of goods manufactured
E. Personnel department cost; number of employees.
(CGM) and cost of goods sold (CGS)?
A. CGM, $1,430,000; CGS, $1,460,000.
Answer: B LO: 7 Type: N
B. CGM, $1,470,000; CGS, $1,540,000.
C. CGM, $1,530,000; CGS, $1,460,000.
40. Variable costs are those costs that:
D. CGM, $1,570,000; CGS, $1,540,000.
A. vary inversely with changes in activity.
E. Some other amounts.
B. vary directly with changes in activity.
C. remain constant as activity changes.
Answer: B LO: 6 Type: A
D. decrease on a per-unit basis as activity increases.
E. increase on a per-unit basis as activity increases.
35. Leggio Industries reported the following data for the year just ended: sales revenue, $950,000;
cost of goods sold, $420,000; cost of goods manufactured, $330,000; and selling and
Answer: B LO: 8 Type: RC
administrative expenses, $170,000. Leggio's gross margin would be:
A. $30,000.
41. As activity decreases, unit variable cost:
B. $200,000.
A. increases proportionately with activity.
C. $360,000.
B. decreases proportionately with activity.
D. $530,000.
C. remains constant.
E. $620,000.
D. increases by a fixed amount.
E. decreases by a fixed amount.
Answer: D LO: 6 Type: A
36. Pumpkin Enterprises began operations on January 1, 20x1, with all of its activities conducted
from a single facility. The company's accountant concluded that the year's building depreciation
42. Which of the following is not an example of a variable cost?
should be allocated as follows: selling activities, 20%; administrative activities, 35%; and
A. Straight-line depreciation on a machine that has a five-year service life.
manufacturing activities, 45%. If Pumpkin sold 60% of 20x1 production during that year, what
B. Wages of manufacturing workers whose pay is based on hours worked.
percentage of the depreciation would appear (either directly or indirectly) on the 20x1 income
C. Tires used in the production of tractors.
statement?
D. Aluminum used to make patio furniture.
A. 27%.
E. Commissions paid to sales personnel.
B. 45%.
C. 55%.
D. 82%.
E. 100%.
43. Fixed costs are those costs that:
A. vary directly with changes in activity.
B. vary inversely with changes in activity.
C. remain constant on a per-unit basis.
37. An employee accidentally overstated the year's advertising expense by $50,000. Which of the
D. increase on a per-unit basis as activity increases.
following correctly depicts the effect of this error?
E. remain constant as activity changes.
A. Cost of goods manufactured will be overstated by $50,000.
B. Cost of goods sold will be overstated by $50,000.
C. Both cost of goods manufactured and cost of goods sold will be overstated by $50,000.
44. The fixed cost per unit:
D. Cost of goods sold will be overstated by $50,000, and cost of goods manufactured will be
A. will increase as activity increases.
understated by $50,000.
B. will increase as activity decreases.
C. will decrease as activity increases.
D. will remain constant.
Answer: E LO: 6 Type: A
E. will exhibit the behavior described in choices "B" and "C."
51. Costs that can be easily traced to a specific department are called:
45. Which of the following is an example of a fixed cost? A. direct costs.
A. Paper used in the manufacture of textbooks. B. indirect costs.
B. Property taxes paid by a firm to the City of Los Angeles. C. product costs.
C. The wages of part-time workers who are paid $8 per hour. D. manufacturing costs.
D. Gasoline consumed by salespersons' cars. E. processing costs.
E. Surgical supplies used in a hospital's operating room.
52. Which of the following would not be considered a direct cost with respect to the service
46. The variable costs per unit are $4 when a company produces 10,000 units of product. What are department of a new car dealership?
the variable costs per unit when 8,000 units are produced? A. Wages of repair techniques.
A. $4.00. B. Property taxes paid by the dealership.
B. $4.50. C. Repair parts consumed.
C. $5.00. D. Salary of the department manager.
D. $5.50. E. Depreciation on new equipment used to analyze engine problems.
E. Some other amount.
Answer: A LO: 8 Type: A
53. Indirect costs:
47. The fixed costs per unit are $10 when a company produces 10,000 units of product. What are A. can be traced to a cost object.
the fixed costs per unit when 12,500 units are produced? B. cannot be traced to a particular cost object.
A. $4. C. are not important.
B. $6. D. are always variable costs.
C. $8. E. may be indirect with respect to Disney World but direct with respect to one its major
D. $10. components, Epcot Center.
E. Some other amount.
Answer: B LO: 9 Type: RC, N
Answer: C LO: 8 Type: A 54. The salary that is sacrificed by a college student who pursues a degree full time is a(n):
A. sunk cost.
48. Total costs are $120,000 when 10,000 units are produced; of this amount, variable costs are B. out-of-pocket cost.
$48,000. What are the total costs when 12,000 units are produced? C. opportunity cost.
A. $57,600. D. differential cost.
B. $72,000. E. marginal cost.
C. $120,000.
D. $129,600. Answer: C LO: 10 Type: N
E. $144,000.
55. The tuition that will be paid next semester by a college student who pursues a degree is a(n):
Answer: D LO: 8 Type: A A. sunk cost.
49. Baxter Company, which pays a 10% commission to its salespeople, reported sales revenues of B. out-of-pocket cost.
$210,000 for the period just ended. If fixed and variable sales expenses totaled $56,000, what C. indirect cost.
would these expenses total at sales of $168,000? D. average cost.
A. $16,800. E. marginal cost.
B. $35,000.
C. $44,800. Answer: B LO: 10 Type: N
D. $51,800.
E. Some other amount. 56. Which of the following costs should be ignored when choosing among alternatives?
A. Opportunity costs.
Answer: D LO: 8 Type: A B. Sunk costs.
C. Out-of-pocket costs.
50. Which of the following would not be characterized as a cost object? D. Differential costs.
A. An automobile manufactured by General Motors. E. None of the above.
B. The New York Fire Department.
C. A Burger King restaurant located in Cleveland, Ohio. Answer: B LO: 10 Type: RC
D. A Delta Airlines flight from Atlanta to Miami.
E. All of the above are examples of cost objects. 57. If the total cost of alternative A is $50,000 and the total cost of alternative B is $34,000, then
$16,000 is termed the: C. cost behavior.
A. opportunity cost. D. cost analysis.
B. average cost. E. cost approximation.
C. sunk cost.
D. out-of-pocket cost.
E. differential cost. Answer: C LO: 1 Type: RC
Answer: E LO: 10 Type: N 2. Which of the following costs changes in direct proportion to a change in the activity
level?
Use the following to answer questions 58-59: A. Variable cost.
B. Fixed cost.
Wee Care is a nursery school for pre-kindergarten children. The school has determined that the following C. Semivariable cost.
biweekly revenues and costs occur at different levels of enrollment:
D. Step-variable cost.
Number of E. Step-fixed cost.
Students Enrolled Total Revenue Total Costs
10 $3,000 $2,100 Answer: A LO: 2 Type: RC
15 4,500 2,700
16 4,800 2,800 3. Montgomery Company has a variable selling cost. If sales volume increases, how
20 6,000 3,200 will the total variable cost and the variable cost per unit behave?
21 6,300 3,255 Total Variable Cost Variable Cost Per Unit
A. Increase Increase
58. The marginal cost when the twenty-first student enrolls in the school is:
A. $55.
B. Increase Remain constant
B. $155. C. Increase Decrease
C. $300. D. Remain constant Decrease
D. $3,045. E. Decrease Increase
E. $3,255.
4. What type of cost exhibits the behavior that follows?
59. The average cost per student when 16 students enroll in the school is:
A. $100.
B. $125. Manufacturing
C. $175. Volume (Units) Cost Per Unit
D. $300. 50,000 $1.95
E. $400. 70,000 1.95
A. Variable cost.
60. The costs that follow all have applicability for a manufacturing enterprise. Which of the choices B. Fixed cost.
listed correctly denotes the costs applicability for a service provider? C. Semivariable cost.
Period Cost Uncontrollable Cost Opportunity Cost D. Discretionary fixed cost.
Applicable Applicable Not applicable
Applicable Not applicable Applicable
E. Step-fixed cost.
Applicable Applicable Applicable
Not applicable Applicable Applicable Answer: A LO: 2 Type: N
Not applicable Applicable Not applicable 5. Plaza Corporation observed that when 25,000 units were sold, a particular cost
amounted to $70,000, or $2.80 per unit. When volume increased by 15%, the cost
Answer: C LO: 10 Type: RC totaled $80,500 (i.e., $2.80 per unit). The cost that Plaza is studying can best be
described as a:
A. variable cost.
B. fixed cost.
MULTIPLE CHOICE QUESTIONS C. semivariable cost.
D. discretionary fixed cost.
1. The relationship between cost and activity is termed: E. step-fixed cost.
A. cost estimation.
B. cost prediction. Answer: A LO: 2 Type: N
C. As a horizontal line.
6. A company observed a decrease in the cost per unit. All other things being equal, D. As a vertical line.
which of the following is probably true? E. As a curvilinear line.
A. The company is studying a variable cost, and total volume has increased.
B. The company is studying a variable cost, and total volume has decreased. Answer: C LO: 2 Type: N
C. The company is studying a fixed cost, and total volume has increased.
D. The company is studying a fixed cost, and total volume has decreased. 11. When graphed, a typical fixed cost appears as:
E. The company is studying a fixed cost, and total volume has remained constant. A. a horizontal line.
B. a vertical line.
Answer: C LO: 2 Type: N C. a u-shaped line.
D. a diagonal line that slopes downward to the right.
7. Webster has the following budgeted costs at its anticipated production level E. a diagonal line that slopes upward to the right.
(expressed in hours): variable overhead, $150,000; fixed overhead, $240,000. If
Webster now revises its anticipated production slightly downward, it would expect: Answer: A LO: 2 Type: RC
A. total fixed overhead of $240,000 and a lower hourly rate for variable overhead.
B. total fixed overhead of $240,000 and the same hourly rate for variable overhead. 12. Costs that remain the same over a wide range of activity, but jump to a different
C. total fixed overhead of $240,000 and a higher hourly rate for variable overhead. amount outside that range, are termed:
D. total variable overhead of less than $150,000 and a lower hourly rate for A. step-fixed costs.
variable overhead. B. step-variable costs.
E. total variable overhead of less than $150,000 and a higher hourly rate for C. semivariable costs.
variable overhead. D. curvilinear costs.
E. mixed costs.
8. What type of cost exhibits the behavior that follows?
13. Straight-line depreciation is a typical example of a:
Manufacturing Total Cost A. variable cost.
Volume (Units) Cost Per Unit B. step-variable cost.
50,000 $150,000 $3.00 C. fixed cost.
80,000 150,000 1.88 D. mixed cost.
E. curvilinear cost.
A. Variable cost.
B. Fixed cost. Answer: C LO: 2 Type: RC
C. Semivariable cost. 14. Which of the following choices denotes the typical cost behavior of advertising and
D. Step-variable cost. sales commissions?
E. Mixed cost. Advertising Sales Commissions
A. Variable Variable
Answer: B LO: 2 Type: N B. Variable Fixed
9. When graphed, a typical variable cost appears as: C. Fixed Variable
A. a horizontal line. D. Fixed Fixed
B. a vertical line. E. Semivariable Variable
C. a u-shaped line.
D. a diagonal line that slopes downward to the right. Answer: C LO: 2 Type: N
E. a diagonal line that slopes upward to the right.
15. Douglas Corporation recently produced and sold 100,000 units. Fixed costs at this
Answer: E LO: 2 Type: RC level of activity amounted to $50,000; variable costs were $100,000. How much cost
would the company anticipate if during the next period it produced and sold 102,000
10. Norman Company pays a sales commission of 5% on each unit sold. If a graph is units?
prepared, with the vertical axis representing per-unit cost and the horizontal axis A. $150,000.
representing units sold, how would a line that depicts sales commissions be drawn? B. $151,000.
A. As a straight diagonal line, sloping upward to the right. C. $152,000.
B. As a straight diagonal line, sloping downward to the right. D. $153,000.
E. Some other amount not listed above.
D. curvilinear cost.
Answer: C LO: 2 Type: A E. discretionary cost.
16. Extron, Inc., has only variable costs and fixed costs. A review of the company's Answer: A LO: 2 Type: RC
records disclosed that when 100,000 units were produced, fixed manufacturing costs
amounted to $200,000 and the cost per unit manufactured totaled $5. On the basis of 21. Richard Hamilton has a fast-food franchise and must pay a franchise fee of $35,000
this information, how much cost would the firm anticipate at an activity level of plus 3% of gross sales. In terms of cost behavior, the fee is a:
97,000 units? A. variable cost.
A. $485,000. B. fixed cost.
B. $491,000. C. step-fixed cost.
C. $494,000. D. semivariable cost.
D. $500,000. E. curvilinear cost.
E. Some other amount not listed above.
Answer: B LO: 2 Type: A 22. Which of the following are examples of a mixed cost?
17. A review of Parry Corporation's accounting records found that at a volume of 90,000 I. A building that is used for both manufacturing and sales activities.
units, the variable and fixed cost per unit amounted to $8 and $4, respectively. On the II. An employee's compensation, which consists of a flat salary plus a
basis of this information, what amount of total cost would Parry anticipate at a commission.
volume of 85,000 units? III. Depreciation that relates to five different machines.
A. $1,020,000. IV. Maintenance cost that must be split between sales and administrative offices.
B. $1,040,000.
C. $1,060,000. A. I only.
D. $1,080,000. B. II only.
E. Some other amount not listed above. C. I and III.
D. I, III, and IV.
Answer: B LO: 2 Type: A E. I, II, III, and IV.
18. Each of Davidson's production managers (annual salary cost, $45,000) can oversee
60,000 machine hours of manufacturing activity. Thus, if the company has 50,000 Answer: B LO: 2 Type: N
hours of manufacturing activity, one manager is needed; for 75,000 hours, two
managers are needed; for 125,000 hours, three managers are needed; and so forth. 23. Which of the following costs exhibits both decreasing and increasing marginal costs
Davidson's salary cost can best be described as a: over a specific range of activity?
A. variable cost. A. Semivariable cost.
B. semivariable cost. B. Curvilinear cost.
C. step-variable cost. C. Step-fixed cost.
D. fixed cost. D. Step-variable cost.
E. step-fixed cost. E. Fixed cost.
Answer: E LO: 2 Type: N Answer: B LO: 2 Type: RC
19. A cost that has both a fixed and variable component is termed a: 24. The relevant range is that range of activity:
A. step-fixed cost. A. where a company achieves its maximum efficiency.
B. step-variable cost. B. where units produced equal units sold.
C. semivariable cost. C. where management expects the firm to operate.
D. curvilinear cost. D. where the firm will earn a profit.
E. discretionary cost. E. where expected results are abnormally high.
Answer: C LO: 2 Type: RC Answer: C LO: 3 Type: RC
20. A mixed cost is often known as a: 25. Within the relevant range of activity, costs:
A. semivariable cost. A. can be estimated with reasonable accuracy.
B. step-fixed cost. B. can be expected to change radically.
C. variable cost.
C. exhibit decreasing marginal cost patterns. 31. Which of the following is not an example of a committed fixed cost?
D. exhibit increasing marginal cost patterns. A. Property taxes.
E. cannot be estimated satisfactorily. B. Depreciation on buildings.
C. Salaries of management personnel.
Answer: A LO: 3 Type: RC D. Outlays for advertising programs.
26. Within the relevant range, a curvilinear cost function can sometimes be graphed as a: E. Equipment rental costs.
A. straight line.
B. jagged line. Answer: D LO: 4 Type: RC
C. vertical line.
D. curved line. 32. Committed fixed costs would include:
E. horizontal line. A. advertising.
B. research and development.
Answer: A LO: 3 Type: RC C. depreciation on buildings and equipment.
D. contributions to charitable organizations.
27. As a firm begins to operate outside the relevant range, the accuracy of cost estimates E. expenditures for direct labor.
for fixed and variable costs:
Fixed Variable Answer: C LO: 4 Type: RC
A. increases increases
B. increases decreases 33. Amounts spent for charitable contributions are an example of a(n):
C. decreases increases A. committed fixed cost.
D. decreases decreases B. committed variable cost.
E. decreases remains unchanged C. discretionary fixed cost.
D. discretionary variable cost.
Answer: D LO: 3 Type: N E. engineered cost.
28. A variable cost that has a definitive physical relationship to the activity measure is Answer: C LO: 4 Type: RC
called a(n):
A. discretionary cost. 34. Which of the following would not typically be classified as a discretionary fixed cost?
B. engineered cost. A. Equipment depreciation.
C. managed cost. B. Employee development (education) programs.
D. programmed cost. C. Advertising.
E. committed cost. D. Outlays for research and development.
E. Charitable contributions.
29. Costs that result from an organization's ownership or use of facilities and its basic
organizational structure are termed: 35. Which of the following choices correctly classifies a committed fixed cost and a
A. discretionary fixed costs. discretionary fixed cost?
B. committed fixed costs. Committed Discretionary
C. discretionary variable costs. A. Promotion Management salaries
D. committed variable costs. B. Building depreciation Charitable contributions
E. engineered costs. C. Management training Property taxes
D. Equipment rentals Equipment depreciation
Answer: B LO: 4 Type: RC E. Research and development Advertising
30. Property taxes are an example of a(n): Answer: B LO: 4 Type: RC

A. committed fixed cost. 36. Which type of fixed cost (1) tends to be more long-term in nature and (2) can be cut
B. committed variable cost. back more easily in bad economic times without doing serious harm to organizational
C. discretionary fixed cost. goals and objectives?
D. discretionary variable cost. Long Term in Can be Cut Back More Easily In
E. engineered cost. Nature Bad Economic Times
A. Committed Committed
Answer: A LO: 4 Type: RC B. Committed Discretionary
C. Discretionary Committed B. high-low method.
D. Discretionary Discretionary C. visual-fit method.
E. Committed No difference between D. account analysis method.
committed and discretionary E. multiple regression method.
Answer: B LO: 4 Type: N Answer: C LO: 5 Type: RC
37. High-tech automation combined with a downsizing of a company's hourly labor force 42. Which of the following methods of cost estimation relies on only two data points?
often results in: A. Least-squares regression.
A. increased fixed costs and increased variable costs. B. The high-low method.
B. increased fixed costs and reduced variable costs. C. The visual-fit method.
C. reduced fixed costs and increased variable costs. D. Account analysis.
D. reduced fixed costs and reduced variable costs. E. Multiple regression.
E. increased discretionary fixed costs and reduced committed fixed costs.
Use the following to answer questions 43-44:
38. Which of the following techniques is not used to analyze cost behavior?
A. Least-squares regression. Swanson and Associates presently leases a copy machine under an agreement that calls for a
B. High-low method. fixed fee each month and a charge for each copy made. Swanson made 7,000 copies and paid a
C. Visual-fit method. total of $360 in March; in May, the firm paid $280 for 5,000 copies. The company uses the
D. Linear programming. high-low method to analyze costs.
E. Multiple regression.
43. Swanson's variable cost per copy is:
Answer: D LO: 5, 6 Type: RC A. $0.040.
B. $0.051.
39. The high-low method and least-squares regression are used by accountants to: C. $0.053.
A. evaluate divisional managers for purposes of raises and promotions. D. $0.056.
B. choose among alternative courses of action. E. an amount other than those given above.
C. maximize output.
D. estimate costs. Answer: A LO: 5 Type: A
E. control operations. 44. Swanson's monthly fixed fee is:
A. $80.
Answer: D LO: 5 Type: RC B. $102.
40. Which of the following statements about the visual-fit method is (are) true? C. $106.
D. $112.
I. The method results in the creation of a scatter diagram. E. an amount other than those given above.
II. The method is not totally objective because of the manner in which the cost
line is determined. Answer: A LO: 5 Type: A
III. The method is especially helpful in the determination of outliers.
A. I only.
B. II only. Atlanta, Inc., which uses the high-low method to analyze cost behavior, has determined that
C. I and II. machine hours best explain the company's utilities cost. The company's relevant range of
D. I and III. activity varies from a low of 600 machine hours to a high of 1,100 machine hours, with the
E. I, II, and III. following data being available for the first six months of the year:
Answer: E LO: 5 Type: RC Month Utilities Machine Hours

January $8,700 800
41. The nonstatistical method of cost estimation that calls for the creation of a scatter February 8,360 720
diagram is the: March 8,950 810
A. least-squares regression method. April 9,360 920
May 9,625 950
June 9,150 900 Answer: B LO: 5 Type: A
50. The following data relate to the Hodges Company for May and August of the current
45. The variable utilities cost per machine hour is: year:
A. $0.18.
B. $4.50. May August
C. $5.00. Maintenance hours 10,000 12,000
D. $5.50. Maintenance cost $260,000 $300,000
E. an amount other than those listed above.
Answer: D LO: 5 Type: A May and August were the lowest and highest activity levels, and Hodges uses the
high-low method to analyze cost behavior. Which of the following statements is true?
46. The fixed utilities cost per month is: A. The variable maintenance cost is $25 per hour.
A. $3,764. B. The variable maintenance cost is $25.50 per hour.
B. $4,400. C. The variable maintenance cost is $26 per hour.
C. $4,760. D. The fixed maintenance cost is $60,000 per month.
D. $5,100. E. More than one of the above statements is true.
47. Using the high-low method, the utilities cost associated with 980 machine hours Use the following to answer questions 51-53:
would be:
A. $9,510. Yang Manufacturing, which uses the high-low method, makes a product called Yin. The
B. $9,660. company incurs three different cost types (A, B, and C) and has a relevant range of operation
C. $9,700. between 2,500 units and 10,000 units per month. Per-unit costs at two different activity levels
D. $9,790. for each cost type are presented below.
Type A Type B Type C Total
Answer: D LO: 5 Type: A 5,000 units $4 $9 $4 $17
7,500 units $4 $6 $3 $13
48. Hitchcock, Inc., uses the high-low method to analyze cost behavior. The company
observed that at 12,000 machine hours of activity, total maintenance costs averaged 51. The cost types shown above are identified by behavior as:
$7.00 per hour. When activity jumped to 15,000 machine hours, which was still Type A Type B Type C
within the relevant range, the average cost per machine hour totaled $6.40. On the A. Fixed Variable Semivariable
basis of this information, the variable cost per machine hour was: B. Fixed Semivariable Variable
A. $4.00. C. Variable Semivariable Fixed
B. $6.40. D. Variable Fixed Semivariable
C. $6.70. E. Semivariable Variable Fixed
D. $7.00.
E. an amount other than those listed above. Answer: D LO: 2, 5 Type: A, N
Answer: A LO: 5 Type: A 52. If Yang produces 10,000 units, the total cost would be:
A. $90,000.
49. Northridge, Inc., uses the high-low method to analyze cost behavior. The company B. $100,000.
observed that at 20,000 machine hours of activity, total maintenance costs averaged C. $110,000.
$10.50 per hour. When activity jumped to 24,000 machine hours, which was still D. $125,000.
within the relevant range, the average cost per machine hour totaled $9.75. On the E. an amount other than those given above.
basis of this information, the company's fixed maintenance costs were:
A. $24,000. Answer: C LO: 5 Type: A,
B. $90,000. 53. The cost formula that expresses the behavior of Yang's total cost is:
C. $210,00. A. Y = $0 + $17X.
D. $234,000. B. Y = $20,000 + $13X.
E. an amount other than those listed above. C. Y = $40,000 + $9X.
D. Y = $45,000 + $4X.
E. Y = $60,000 + $5X. 58. Tempe, Inc., is studying marketing cost and sales volume, and has generated the
following information by use of a scatter diagram and a least-squares regression
Answer: E LO: 5 Type: A analysis:
54. In regression analysis, the variable that is being predicted is known as the: Scatter Diagram Regression An
A. independent variable. Variable cost per unit sold $6.50 $6.80
B. dependent variable. Total monthly fixed cost $45,000 $42,50
C. explanatory variable.
D. interdependent variable. Tempe is now preparing an estimate for monthly sales of 18,000 units. On the basis
E. functional variable. of the data presented, compute the most accurate sales forecast possible.
A. $159,500.
Answer: B LO: 5 Type: RC B. $162,000.
C. $164,900.
55. Mohawk Products has determined that the number of machine hours worked (MH) D. $167,400.
drives the amount of manufacturing overhead incurred (MOH). On the basis of this E. An amount other than those listed above.
relationship, a staff analyst has constructed the following regression equation:
Answer: C LO: 5 Type: A, N
MOH = 240,000 + 8MH
59. Waller Enterprises has determined that three variables play a key role in determining
company revenues. To arrive at an objective forecast of revenues for the next
Which of the choices correctly depicts the nature of Mohawk's variables? accounting period, Waller should use:
Dependent Independent A. simple regression.
A. MOH MOH B. multiple regression.
B. MOH MH C. a scatter diagram.
C. MH MOH D. complex regression.
D. MH MH E. the high-low method.
E. 8 240,000
60. Which of the following tools is not associated with cost estimation?
56. Checkers Corporation, which uses least-squares regression analysis, has derived the A. Least-squares regression.
following regression equation for estimates of manufacturing overhead: Y = 495,000 B. Multiple regression.
+ 5.65X. Which of the following statements is true if the primary cost driver is C. Inversion equations.
machine hours? D. Time and motion (engineering) studies.
A. Total manufacturing overhead is represented by the variable "X." E. Learning curves.
B. The company anticipates $495,000 of fixed manufacturing overhead.
C. "X" is commonly known as the dependent variable. Answer: C LO: 5, 6 Type: RC
D. "X" represents the number of machine hours. 61. A staff assistant at Washington Corporation recently determined that the first four
E. Both "B" and "D" are true. units completed in a new manufacturing process took 800 hours to complete, or an
average of 200 hours per unit. The assistant also found that when the cumulative
Answer: E LO: 5 Type: N output produced doubles, the average labor time declines by 20%. On the basis of
57. Boulder, Inc., recently conducted a least-squares regression analysis to predict selling this information, how many total hours would Washington use if it produces 16 units?
expenses. The company has constructed the following regression equation: Y = A. 128.
329,000 + 7.80X. Which of the following statements is false if the primary cost B. 160.
driver is number of units sold? C. 1,280.
A. The company anticipates $329,000 of fixed selling expenses. D. 2,048.
B. "Y" represents total selling expenses. E. An amount other than those listed above.
C. The company expects both variable and fixed selling expenses.
D. For each unit sold, total selling expenses will increase by $7.80. Answer: D LO: 6 Type: A
E. "X" represents the number of hours worked during the period.
62. Which of the following is not an issue in the collection of data for cost estimation?
Answer: E LO: 2, 5 Type: N A. Outliers.
B. Missing data.
C. Mismatched time periods. C. A 14% increase in variable cost.
D. Inflation. D. A 17% decrease in fixed cost.
E. All of the above are issues in data collection. E. A 23% increase in the number of units sold.
Answer: E LO: 7 Type: RC Answer: A LO: 1 Type: N

5. Which of the following would take place if a company were able to reduce its
63. A high R2 measure in regression analysis is preferred because: variable cost per unit?
A. it indicates a good fit of the regression line through the data points. Contribution Break-even
B. it shows that a great deal of the change in the dependent variable is explained by Margin Point
change in the independent variable. A. Increase Increase
C. it means that the independent variable is a good predictor of the dependent B. Increase Decrease
variable. C. Decrease Increase
D. it means that the cost analyst can be relatively confident in his or her cost D. Decrease Decrease
predictions. E. Increase No effect
E. all of the preceding statements are true.
6. Which of the following would take place if a company experienced an increase in
fixed costs?
A. Net income would increase.
MULTIPLE CHOICE QUESTIONS
B. The break-even point would increase.
C. The contribution margin would increase.
1. CVP analysis can be used to study the effect of:
D. The contribution margin would decrease.
A. changes in selling prices on a company's profitability.
E. More than one of the above events would occur.
B. changes in variable costs on a company's profitability.
C. changes in fixed costs on a company's profitability.
D. changes in product sales mix on a company's profitability.
E. all of the above.
7. Assuming no change in sales volume, an increase in a firm's per-unit contribution
margin would:
A. increase net income.
B. decrease net income.
2. The break-even point is that level of activity where:
C. have no effect on net income.
A. total revenue equals total cost.
D. increase fixed costs.
B. variable cost equals fixed cost.
E. decrease fixed costs.
C. total contribution margin equals the sum of variable cost plus fixed cost.
D. sales revenue equals total variable cost.
E. profit is greater than zero.
8. A company that desires to lower its break-even point should strive to:
A. decrease selling prices.
B. reduce variable costs.
3. The unit contribution margin is calculated as the difference between:
C. increase fixed costs.
A. selling price and fixed cost per unit.
D. sell more units.
B. selling price and variable cost per unit.
E. pursue more than one of the above actions.
C. selling price and product cost per unit.
D. fixed cost per unit and variable cost per unit.
E. fixed cost per unit and product cost per unit.
9. A company has fixed costs of $900 and a per-unit contribution margin of $3. Which
of the following statements is (are) true?
A. Each unit "contributes" $3 toward covering the fixed costs of $900.
4. Which of the following would produce the largest increase in the contribution margin
B. The situation described is not possible and there must be an error.
per unit?
C. Once the break-even point is reached, the company will make money at the rate
A. A 7% increase in selling price.
of $3 per unit.
B. A 15% decrease in selling price.
D. The firm will definitely lose money in this situation.
E. Statements "A" and "C" are true.

10. Sanderson sells a single product for $50 that has a variable cost of $30. Fixed costs
amount to $5 per unit when anticipated sales targets are met. If the company sells one 14. A recent income statement of Yale Corporation reported the following data:
unit in excess of its break-even volume, the bottom-line profit will be:
A. $15. Sales revenue $2,500,000
B. $20. Variable costs 1,500,000
C. $50. Fixed costs 800,000
D. an amount that cannot be derived based on the information presented.
E. an amount other than those in choices "A," "B," and "C" but one that can be
derived based on the information presented. If these data are based on the sale of 5,000 units, the break-even sales would be:
A. $2,000,000.
Answer: B LO: 1 Type: A B. $2,206,000.
C. $2,500,000.
11. At a volume of 15,000 units, Boston reported sales revenues of $600,000, variable D. $10,000,000.
costs of $225,000, and fixed costs of $120,000. The company's contribution margin E. an amount other than those above.
per unit is:
A. $17. Answer: A LO: 1 Type: A
B. $25.
C. $47. 15. Lawton, Inc., sells a single product for $12. Variable costs are $8 per unit and fixed
D. $55. costs total $360,000 at a volume level of 60,000 units. Assuming that fixed costs do
E. an amount other than those above. not change, Lawton's break-even point would be:
A. 30,000 units.
Answer: B LO: 1 Type: A B. 45,000 units.
C. 90,000 units.
12. A recent income statement of Banks Corporation reported the following data: D. negative because the company loses $2 on every unit sold.
E. a positive amount other than those given above.
Sales revenue $8,000,000
Variable costs 5,000,000 Answer: C LO: 1 Type: A
Fixed costs 2,200,000
16. Green, Inc., sells a single product for $20. Variable costs are $8
If these data are based on the sale of 20,000 units, the contribution margin per unit per unit and fixed costs total $120,000 at a volume level of 5,000 units. Assuming
would be: that fixed costs do not change, Green's break-even sales would be:
A. $40. A. $160,000.
B. $150. B. $200,000.
C. $290. C. $300,000.
D. $360. D. $480,000.
E. an amount other than those above. E. an amount other than those above.
Answer: B LO: 1 Type: A Answer: B LO: 1 Type: A

13. A recent income statement of Fox Corporation reported the following data:
17. Orion recently reported sales revenues of $800,000, a total contribution margin of
$300,000, and fixed costs of $180,000. If sales volume amounted to 10,000 units, the
Sales revenue $3,600,000 company's variable cost per unit must have been:
Variable costs 1,600,000 A. $12.
Fixed costs 1,000,000 B. $32.
C. $50.
If these data are based on the sale of 10,000 units, the break-even point would be: D. $92.
A. 2,000 units. E. an amount other than those above.
B. 2,778 units.
C. 3,600 units. Answer: C LO: 1 Type: A
D. 5,000 units.
E. an amount other than those above. 18. Strand has a break-even point of 120,000 units. If the firm's sole product sells for $40
and fixed costs total $480,000, the variable cost per unit must be:
Answer: D LO: 1 Type: A A. $4.
B. $36.
C. $44. C o s t- V o lu m e - P ro fi t G ra p h A
D. an amount that cannot be derived based on the information presented. $ 1 0 0 ,0 0 0
E. an amount other than those in choices "A," "B," and "C" but one that can be
derived based on the information presented.
H G
8 0 ,0 0 0 B
19. Ribco Co., makes and sells only one product. The unit contribution margin is $6 and
the break-even point in unit sales is 24,000. The company's fixed costs are: 6 0 ,0 0 0 E
A. $4,000.
B. $14,400. F
C. $40,000.
4 0 ,0 0 0 C
D. $144,000.
E. an amount other than those above.
Answer: D LO: 1 Type: D

2 0 ,0 0 0
20. The contribution-margin ratio is:

A. the difference between the selling price and the variable cost per unit.
B. fixed cost per unit divided by variable cost per unit.
0 1 ,0 0 0 2 ,0 0 0 3 ,0 0 0 4 ,0 0 0 5 ,0 0 0 U n its
C. variable cost per unit divided by the selling price.
D. unit contribution margin divided by the selling price. 23. Line A is the:
E. unit contribution margin divided by fixed cost per unit. A. total revenue line.
B. fixed cost line.
Answer: D LO: 2 Type: RC C. variable cost line.
D. total cost line.
21. At a volume level of 500,000 units, Sullivan reported the following information: E. profit line.
Sales price $60 Answer: A LO: 3 Type: RC

Variable cost per unit 20
Fixed cost per unit 4 24. Line C represents the level of:
A. fixed cost.
The company's contribution-margin ratio is: B. variable cost.
A. 0.33. C. semivariable cost.
B. 0.40. D. total cost.
C. 0.60. E. mixed cost.
D. 0.67.
E. an amount other than those above. Answer: A LO: 3 Type: RC
Answer: D LO: 2 Type: A 25. The slope of line A is equal to the:

A. fixed cost per unit.
22. Which of the following expressions can be used to calculate the break-even point B. selling price per unit.
with the contribution-margin ratio (CMR)? C. profit per unit.
A. CMR fixed costs. D. semivariable cost per unit.
B. CMR x fixed costs. E. unit contribution margin.
C. Fixed costs CMR.
D. (Fixed costs + variable costs) x CMR. Answer: B LO: 3 Type: RC
E. (Sales revenue - variable costs) CMR. 26. The slope of line B is equal to the:
A. fixed cost per unit.
Answer: C LO: 2 Type: B. selling price per unit.
Use the following to answer questions 23-30: C. variable cost per unit.
P ro fi t- V o lu m e G ra p h
D. profit per unit.
E. unit contribution margin. $ 4 0 ,0 0 0 A

2 0 ,0 0 0
27. The vertical distance between the total cost line and the total revenue line represents:
A. fixed cost.
B. variable cost.
0
C. profit or loss at that volume. 2 ,0 0 0 4 ,0 0 0 6 ,0 0 0 U n its
D. semivariable cost.
E. the safety margin.
2 0 ,0 0 0
28. Assume that the firm whose cost structure is depicted in the figure expects to produce
a loss for the upcoming period. The loss would be shown on the graph: 4 0 ,0 0 0
A. by the area immediately above the break-even point.
B. by the area immediately below the total cost line.
C. by the area diagonally to the right of the break-even point. 6 0 ,0 0 0
D. by the area diagonally to the left of the break-even point.
E. in some other area not mentioned above. 31. Line A is the:
A. fixed cost line.
Answer: D LO: 3 Type: RC B. variable cost line.
C. total cost line.
29. At a given sales volume, the vertical distance between the fixed cost line and the total D. total revenue line.
cost line represents: E. profit line.
A. fixed cost.
B. variable cost. Answer: E LO: 3 Type: N
C. profit or loss at that volume.
D. semivariable cost. 32. The triangular area between the horizontal axis and Line A, to the right of 4,000,
E. the safety margin. represents:
A. fixed cost.
Answer: B LO: 3 Type: RC B. variable cost.
C. profit.
30. Assume that the firm whose cost structure is depicted in the figure expects to produce D. loss.
a profit for the upcoming accounting period. The profit would be shown on the graph E. sales revenue.
by the letter:
A. D. Answer: C LO: 3 Type:
B. E.
C. F. 33. A recent income statement of Oslo Corporation reported the following data:
D. G.
E. H. Units sold 8,000
Answer: D LO: 3 Type: Variable costs 4,000,000
Use the following to answer questions 31-32: Fixed costs 1,600,000
If the company desired to earn a target net profit of $480,000, it would have to sell:
A. 1,200 units.
B. 2,800 units.
C. 4,000 units.
D. 5,200 units.
Answer: D LO: 4 Type: A 39. Maxie's budget for the upcoming year revealed the following figures:
34. Yellow, Inc., sells a single product for $10. Variable costs are $4 per unit and fixed Sales revenue $840,000
costs total $120,000 at a volume level of 10,000 units. What dollar sales level would Contribution margin 504,000
Yellow have to achieve to earn a target net profit of $240,000? Net income 54,000
A. $400,000.
B. $500,000. If the company's break-even sales total $750,000, Maxie's safety margin would be:
C. $600,000. A. $(90,000).
D. $750,000. B. $90,000.
E. $900,000. C. $246,000.
D. $336,000.
Answer: C LO: 4 Type: A E. $696,000.
Use the following to answer questions 35-37: Answer: B LO: 4 Type: A
Archie sells a single product for $50. Variable costs are 60% of the selling price, and the 40. If a company desires to increase its safety margin, it should:
company has fixed costs that amount to $400,000. Current sales total 16,000 units. A. increase fixed costs.
B. decrease the contribution margin.
35. Archie: C. decrease selling prices, assuming the price change will have no effect on
A. will break-even by selling 8,000 units. demand.
B. will break-even by selling 13,333 units. D. stimulate sales volume.
C. will break-even by selling 20,000 units. E. attempt to raise the break-even point.
D. will break-even by selling 1,000,000 units.
E. cannot break-even because it loses money on every unit sold. Answer: D LO: 4 Type: N
41. Dana sells a single product at $20 per unit. The firm's most recent income statement
Answer: C LO: 1 Type: A revealed unit sales of 100,000, variable costs of $800,000, and fixed costs of
$400,000. If a $4 drop in selling price will boost unit sales volume by 20%, the
36. Each unit that the company sells will: company will experience:
A. increase overall profitability by $20. A. no change in profit because a 20% drop in sales price is balanced by a 20%
B. increase overall profitability by $30. increase in volume.
C. increase overall profitability by $50. B. an $80,000 drop in profitability.
D. increase overall profitability by some other amount. C. a $240,000 drop in profitability.
E. decrease overall profitability by $5. D. a $400,000 drop in profitability.
E. a change in profitability other than those above.
37. In order to produce a target profit of $22,000, Archie's dollar sales must total: Answer: C LO: 4 Type: A
A. $8,440.
B. $21,100. 42. Grimes is studying the profitability of a change in operation and has gathered the
C. $1,000,000. following information:
D. $1,055,000.
Current Anticipated
Answer: D LO: 4 Type: A Operation Operation
Fixed costs $38,000 $48,000
38. The difference between budgeted sales revenue and break-even sales revenue is the: Selling price $16 $22
A. contribution margin. Variable cost $10 $12
B. contribution-margin ratio. Sales (units) 9,000 6,000
C. safety margin.
D. target net profit. Should Grimes make the change?
E. operating leverage. A. Yes, the company will be better off by $6,000.
B. No, because sales will drop by 3,000 units.
Answer: C LO: 4 Type: RC C. No, because the company will be worse off by $4,000.
D. No, because the company will be worse off by $22,000. D. An amount other than those above.
E. It is impossible to judge because additional information is needed. E. Cannot be determined based on the information presented.
Answer: C LO: 4 Type: A Answer: A LO: 5 Type: A

43. Gleason sells a single product at $14 per unit. The firm's most recent income
statement revealed unit sales of 80,000, variable costs of $800,000, and fixed costs of Lamar & Co., makes and sells two types of shoes, Plain and Fancy. Data concerning these
$560,000. Management believes that a $3 drop in selling price will boost unit sales products are as follows:
volume by 20%. Which of the following correctly depicts how these two changes
will affect the company's break-even point? Plain Fancy
Drop in Increase in Unit selling price $20.00 $35.00
Sales Price Sales Volume Variable cost per unit 12.00 24.50
A. Increase Increase
B. Increase Decrease Sixty percent of the unit sales are Plain, and annual fixed expenses are $45,000.
C. Increase No effect
D. Decrease Increase 47. The weighted-average unit contribution margin is:
E. Decrease Decrease A. $4.80.
B. $9.00.
Answer: C LO: 4 Type: A C. $9.25.
44. All other things being equal, a company that sells multiple products should attempt to D. $17.00.
structure its sales mix so the greatest portion of the mix is composed of those E. an amount other than those above.
products with the highest:
A. selling price. Answer: B LO: 5 Type: A
B. variable cost.
C. contribution margin. 48. Assuming that the sales mix remains constant, the total number of units that the
D. fixed cost. company must sell to break even is:
E. gross margin. A. 2,432.
B. 2,647.
Answer: C LO: 5 Type: N C. 4,737.
D. 5,000.
45. O'Dell sells three products: R, S, and T. Budgeted information for the upcoming E. an amount other than those above.
accounting period follows.
Product Sales Volume (Units) Selling Price Variable Cost
R 16,000 $14 $9 49. Assuming that the sales mix remains constant, the number of units of Plain that the
S 12,000 10 6 company must sell to break even is:
T 52,000 11 8 A. 2,000.
B. 3,000.
The company's weighted-average unit contribution margin is: C. 3,375.
A. $3.00. D. 5,000.
B. $3.55. E. 5,625.
C. $4.00.
D. $19.35. Answer: B LO: 5 Type: A
50. Assuming that the sales mix remains constant, the number of units of Fancy that the
Answer: B LO: 5 Type: A company must sell to break even is:
A. 2,000.
46. Wells Corporation has the following sales mix for its three products: A, 20%; B, 35%; B. 3,000.
and C, 45%. Fixed costs total $400,000 and the weighted-average contribution C. 3,375.
margin is $100. How many units of product A must be sold to break-even? D. 5,000.
A. 800. E. 5,625.
B. 4,000.
C. 20,000. Answer: A LO: 5 Type: A
51. Which of the following underlying assumptions form(s) the basis for cost-volume-
profit analysis? 56. Which of the following does not typically appear on an income statement prepared by
A. Revenues and costs behave in a linear manner. using a traditional format?
B. Costs can be categorized as variable, fixed, or semivariable. A. Cost of goods sold.
C. Worker efficiency and productivity remain constant. B. Contribution margin.
D. In multiproduct organizations, the sales mix remains constant. C. Gross margin.
E. All of the above are assumptions that underlie cost-volume-profit analysis. D. Selling expenses.
E. Administrative expenses.
52. Cost-volume-profit analysis is based on certain general assumptions. Which of the
following is not one of these assumptions? 57. The extent to which an organization uses fixed costs in its cost structure is measured
A. Product prices will remain constant as volume varies within the relevant range. by:
B. Costs can be categorized as fixed, variable, or semivariable. A. financial leverage.
C. The efficiency and productivity of the production process and workers will B. operating leverage.
change to reflect manufacturing advances. C. fixed cost leverage.
D. Total fixed costs remain constant as activity changes. D. contribution leverage.
E. Unit variable cost remains constant as activity changes. E. efficiency leverage.
Answer: C LO: 6 Type: RC Answer: B LO: 8 Type: RC
53. The assumptions on which cost-volume-profit analysis is based appear to be most 58. A manager who wants to determine the percentage impact on net income of a given
valid for businesses: percentage change in sales would multiply the percentage increase/decrease in sales
A. over the short run. revenue by the:
B. over the long run. A. contribution margin.
C. over both the short run and the long run. B. gross margin.
D. in periods of sustained profits. C. operating leverage factor.
E. in periods of increasing sales. D. safety margin.
E. contribution-margin ratio.
54. The contribution income statement differs from the traditional income statement in
which of the following ways? 59. Which of the following calculations can be used to measure a company's degree of
A. The traditional income statement separates costs into fixed and variable operating leverage?
components. A. Contribution margin sales.
B. The traditional income statement subtracts all variable costs from sales to obtain B. Contribution margin net income.
the contribution margin. C. Sales contribution margin.
C. Cost-volume-profit relationships can be analyzed more easily from the D. Sales net income.
contribution income statement. E. Sales fixed costs.
D. The effect of sales volume changes on profit is readily apparent on the
traditional income statement. Answer: B LO: 8 Type:
E. The contribution income statement separates costs into product and period 60. You are analyzing Becker Corporation and Newton Corporation and have concluded
categories. that Becker has a higher operating leverage factor than Newton. Which one of the
following choices correctly depicts (1) the relative use of fixed costs (as opposed to
Answer: C LO: 7 Type: RC variable costs) for the two companies and (2) the percentage change in income caused
55. Which of the following does not typically appear on a contribution income statement? by a change in sales?
A. Net income. Relative Use of Fixed Percentage Change in
B. Gross margin. Costs as Opposed to Income Caused by
C. Contribution margin. Variable Costs a Change in Sales
D. Total variable costs. A. Greater for Becker Greater for Becker
E. Total fixed costs. B. Greater for Becker Lower for Becker
C. Greater for Becker Equal for both
D. Lower for Becker Greater for Becker
E. Lower for Becker Lower for Becker 63. Edco's operating leverage factor was:
A. 4.
Answer: A LO: 8 Type: RC B. 5.
C. 6.
61. The following information relates to Day Company: D. 7.
E. 8.
Contribution margin 4,800,000 Answer: B LO: 8 Type: A
Net income 800,000
64. If Edco's sales revenues increase 15%, what will be the percentage increase in income
before income taxes?
Day's operating leverage factor is: A. 15%.
A. 0.067. B. 45%.
B. 0.167. C. 60%.
C. 0.400. D. 75%.
D. 2.500. E. An amount other than those above.
E. 6.000.
Answer: E LO: 8 Type: A
65. When advanced manufacturing systems are installed, what effect does such
62. The following information relates to Paterno Company: installation usually have on fixed costs and the break-even point?
Fixed Costs Break-even Point
Sales revenue $10,000,000 A. Increase Increase
Contribution margin 4,000,000 B. Increase Decrease
Net income 1,000,000 C. Decrease Increase
D. Decrease Decrease
If a manager at Paterno desired to determine the percentage impact on net income of a E. Do not change Does not change
given percentage change in sales, the manager would multiply the percentage
increase/decrease in sales revenue by: Answer: A LO: 8 Type: RC
A. 0.25. 66. Which of the following statements is (are) true regarding a company that has
B. 0.40. implemented flexible manufacturing systems and activity-based costing?
C. 2.50.
D. 4.00. I. The company has erred, as these two practices used in conjunction with one
E. 10.00. another will severely limit the firm's ability to analyze costs over the relevant
range.
Answer: D LO: 8 Type: A, N II. Costs formerly viewed as fixed under traditional-costing systems may now be
Use the following to answer questions 63-64: considered variable with respect to changes in cost drivers such as number of
setups, number of material moves, and so forth.
Edco Company produced and sold 45,000 units of a single product last year, with the following III. As compared with the results obtained under a traditional-costing system, the
results: concept of break-even analysis loses meaning.
Sales revenue $1,350,000 A. I only.

Manufacturing costs: B. II only.
Variable 585,000 C. III only.
Fixed 270,000 D. I and II.
Selling costs: E. II and III.
Variable 40,500
Fixed 54,000 Answer: B LO: 10 Type: N
Administrative costs:
Variable 184,500 67. A company, subject to a 40% tax rate, desires to earn $500,000 of after-tax income.
Fixed 108,000 How much should the firm add to fixed costs when figuring the sales revenues
necessary to produce this income level? D. Matrix application forms.
A. $200,000. E. Goal congruence.
B. $300,000.
C. $500,000. Answer: C LO: 2 Type: RC
D. $833,333.
E. $1,250,000. 6. Which of the following individuals is least likely to become involved in the setting of
either direct material standards or direct labor standards?
Answer: D LO: 11 Type: A A. The purchasing manager.
B. A production supervisor.
MULTIPLE CHOICE QUESTIONS C. An engineer.
D. A machine operator.
1. A standard cost: E. A company's president.
A. is the "true" cost of a unit of production.
B. is a budget for the production of one unit of a product or service. Answer: E LO: 2 Type: N
C. can be useful in calculating equivalent units.
D. is normally the average cost within an industry. 7. A perfection standard:
E. is almost always the actual cost from previous years. A. tends to motivate employees over a long period of time.
B. is attainable in an ideal operating environment.
Answer: B LO: 1 Type: RC C. would make allowances for normal amounts of scrap and waste.
D. is generally preferred by behavioral scientists.
2. Which of the following is a predetermined estimated cost that can be used in the E. will result in a number of favorable variances on a performance report.
calculation of a variance?
A. Product cost. Answer: B LO: 2 Type: RC, N
B. Actual cost.
C. Standard cost. 8. Consider the following statements:
D. Differential cost.
E. Marginal cost. I. Behavioral scientists find that perfection standards often discourage
employees and result in low worker morale.
Answer: C LO: 1 Type: RC II. Practical standards are also known as attainable standards.
III. Practical standards incorporate a certain amount of inefficiency such as that
3. Variances are computed by taking the difference between which of the following? caused by an occasional machine breakdown.
A. Product cost and period cost.
B. Actual cost and differential cost. Which of the above statements is (are) true?
C. Price factors and rate factors. A. I only.
D. Actual cost and standard cost. B. II only.
E. Product cost and standard cost. C. III only.
D. II and III.
Answer: D LO: 1 Type: RC E. I, II, and III.
4. The term "management by exception" is best defined as: Answer: E LO: 2 Type: RC
A. choosing exceptional managers. 9. Which of the following would be considered if a company desires to establish a series
B. controlling actions of subordinates through acceptance of management of practical manufacturing standards?
techniques. A. The productivity loss associated with a short-term worker slowdown.
C. investigating unfavorable variances. B. Normal defect rates in an assembly process.
D. devoting management time to investigate significant variances. C. Highly unusual spoilage rates with direct materials.
E. controlling costs so that non-zero variances are treated as "exceptional." D. Quantity discounts associated with purchases of direct materials.
E. Both "B" and "D"
Answer: D LO: 1 Type: RC, N
5. Which of the following are methods for setting standards? Answer: E LO: 2 Type: RC, N
A. Analysis of historical data.
B. Task analysis. 10. Which of the following would not be considered if a company desires to establish a
C. Task analysis and the analysis of historical data. series of practical manufacturing standards?
A. Production time lost during unusual machinery breakdowns. B. number of units spoiled.
B. Normal worker fatigue. C. number of units that should have been used.
C. Freight charges on incoming raw materials. D. number of units actually used.
D. Production time lost during setup procedures for new manufacturing runs. E. number of units to be purchased during the next accounting period.
E. The historical 2% defect rate associated with raw material inputs.
Answer: A LO: 2 Type: RC, N
15. Which of the following correctly lists all the information needed to calculate a labor
11. Which of the following choices correctly notes a characteristic associated with rate variance?
perfection standards and one associated with practical standards? A. Standard labor rate and actual hours worked.
Perfection Standards Practical Standards B. Actual hours worked and actual units produced.
A. Attainable in an ideal environment Incorporate abnormal occurrences when setting C. Standard labor rate, actual labor rate, and actual units produced.
quantity and efficiency targets D. Actual labor rate and actual hours worked.
B. Result in many unfavorable variances Are often attainable by workers E. Actual labor rate, standard labor rate, and actual hours worked.
C. Tend to boost worker morale Generally preferred by behavioral scientists
D. Generally, are easily achieved by Result in both favorable and unfavorable Answer: E LO: 3 Type: RC
workers variances
E. Generally preferred by behavioral scientists Are easier to achieve than perfection standards
16. Which of the following variances are most similar with respect to the manner in
which they are calculated?
Answer: B LO: 2 Type: RC, N A. Labor rate variance and labor efficiency variance.
B. Materials price variance and materials quantity variance.
12. Consider the following statements: C. Materials price variance, materials quantity variance, and total materials
variance.
I. The standard cost per unit of materials is used to calculate a materials price D. Materials price variance and labor efficiency variance.
variance. E. Materials quantity variance and labor efficiency variance.
II. The standard cost per unit of materials is used to calculate a materials quantity
variance. Answer: E LO: 3 Type: N
III. The standard cost per unit of materials cannot be determined until the end of
the period. 17. Which of the following variances cannot occur together during the same accounting
period?
Which of the above statements is (are) true? A. Unfavorable labor rate variance and favorable labor efficiency variance.
A. I only. B. Unfavorable labor efficiency variance and favorable materials quantity variance.
B. II only. C. Favorable labor rate variance and unfavorable total labor variance.
C. III only. D. Favorable labor efficiency variance and favorable materials quantity variance.
D. I and II. E. None of the above, as all of these variance combinations are possible.
E. I, II, and III.
Answer: D LO: 3 Type: RC 18. If a company has an unfavorable direct-material quantity variance, then:
13. Which of the following choices correctly notes the use of the standard price per unit A. the direct-material price variance is favorable.
of direct material when calculating the materials price variance and the materials quantity B. the total direct-material variance is unfavorable.
variance? C. the total direct-material variance is favorable.
Price Variance Quantity Variance D. the direct-labor efficiency variance is unfavorable.
A. Used Always used E. any of the above variances can occur.
B. Used Occasionally used
C. Used Not used Answer: E LO: 3 Type: N
D. Not used Always used
E. Not used Not used 19. A favorable labor efficiency variance is created when:
A. actual labor hours worked exceed standard hours allowed.
Answer: A LO: 3 Type: RC B. actual hours worked are less than the standard hours allowed.
C. actual wages paid are less than amounts that should have been paid.
14. Most companies base the calculation of the materials price variance on the: D. actual units produced exceed budgeted production levels.
A. number of units purchased. E. actual units produced exceed standard hours allowed.
Answer: B LO: 3 Type: N 24. Consider the following information:
20. Victoria, Inc., recently completed 52,000 units of a product that was expected to Direct material purchased and used, 80,000 gallons
consume five pounds of direct material per finished unit. The standard price of the Standard quantity of direct material allowed for May production, 76,000
direct material was $9 per pound. If the firm purchased and consumed 268,000 gallons
pounds in manufacturing (cost = $2,304,800), the direct-materials quantity variance Actual cost of direct materials purchased and used, $176,000
would be figured as: Unfavorable direct-material quantity variance, $9,400
A. $72,000F.
B. $72,000U.
C. $107,200F. The direct-material price variance is:
D. $107,200U. A. $11,400F.
E. none of the above. B. $11,400U.
C. $12,000F.
Answer: B LO: 3 Type: A D. $12,000U.
E. none of the above.
21. Solo Corporation recently purchased 25,000 gallons of direct material at $5.60 per
gallon. Usage by the end of the period amounted to 23,000 gallons. If the standard Answer: C LO: 3 Type: A, N
cost is $6.00 per gallon and the company believes in computing variances at the
earliest point possible, the direct-material price variance would be calculated as: 25. Courtney purchased and consumed 50,000 gallons of direct material that was used in
A. $800F. the production of 11,000 finished units of product. According to engineering
B. $9,200F. specifications, each finished unit had a manufacturing standard of five gallons. If a
C. $9,200U. review of Courtney's accounting records at the end of the period disclosed a material
D. $10,000F. price variance of $5,000U and a material quantity variance of $3,000F, determine the
E. $10,000U. actual price paid for a gallon of direct material.
A. $0.50.
Answer: D LO: 3 Type: A B. $0.60.
C. $0.70.
Use the following to answer questions 22-23: D. An amount other than those shown above.
E. Not enough information to judge.
The following data relate to product no. 89 of Des Moines Corporation:
Answer: C LO: 3 Type: A, N
Direct material standard: 3 square feet at $2.50 per square foot 26. Holland Enterprises recently used 20,000 labor hours to produce 8,300 completed
Direct material purchases: 30,000 square feet at $2.60 per square foot units. According to manufacturing specifications, each unit is anticipated to take 2.5
Direct material consumed: 29,200 square feet hours to complete. The company's actual payroll cost amounted to $370,000. If the
Manufacturing activity, product no. 89: 9,600 units completed standard labor cost per hour is $18, Holland's labor rate variance is:
22. The direct-material quantity variance is: A. $10,000F.
A. $1,000F. B. $10,000U.
B. $1,000U. C. $10,375F.
C. $1,040F. D. $10,375U.
D. $1,040U. E. none of the above.
E. $2,000F.
27. Denver Enterprises recently used 14,000 labor hours to produce 7,500 completed
23. The direct-material price variance is: units. According to manufacturing specifications, each unit is anticipated to take two
A. $2,880U. hours to complete. The company's actual payroll cost amounted to $158,200. If the
B. $2,920F. standard labor cost per hour is $11, Denver's labor efficiency variance is:
C. $2,920U. A. $11,000U.
D. $3,000F. B. $11,000F.
E. $3,000U. C. $11,300U.
D. $11,300F.
Answer: E LO: 3 Type: A E. none of the above.
Answer: B LO: 3 Type: A D. $21,000F.
28. Alex Company recently completed 10,600 units of its single product, consuming
32,000 labor hours that cost the firm $480,000. According to manufacturing Answer: B LO: 3 Type: A, N
specifications, each unit should have required 3 hours of labor time at $15.40 per
hour. On the basis of this information, determine Alexs labor rate variance and labor 32. Simms Corporation had a favorable direct-labor efficiency variance of $6,000 for the
efficiency variance. period just ended. The actual wage rate was $0.50 more than the standard rate of
Rate Efficiency $12.00. If the company's standard hours allowed for actual production totaled 9,500,
A. $12,720F $3,000F how many hours did the firm actually work?
B. $12,720F $3,000U A. 9,000.
C. $12,800F $3,080F B. 9,020.
D. $12,800F $3,080U C. 9,980.
E. $12,800U $3,080U D. 10,000.
Answer: A LO: 3 Type: A ,
Use the following to answer questions 29-30: Use the following to answer questions 33-37:
The following data relate to product no. 33 of La Quinta Corporation: Cost standards for product no. C77:
Direct material 3 pounds at $2.50 per pound $ 7.50
Direct labor standard: 5 hours at $14 per hour Direct labor 5 hours at $7.50 per hour 37.50
Direct labor used in production: 45,000 hours at a cost of $639,000
Manufacturing activity, product no. 33: 8,900 units completed Actual results:
29. The direct-labor rate variance is: Units produced 7,800 units
A. $8,900F. Direct material purchased 26,000 pounds at $2.70 $ 70,200
B. $8,900U. Direct material used 23,100 pounds at $2.70 62,370
C. $9,000F. Direct labor 40,100 hours at $7.30 292,730
D. $9,000U.
E. none of the above. 33. The direct-material quantity variance is:
A. $750F.
Answer: D LO: 3 Type: A B. $750U.
C. $6,500U.
30. The direct-labor efficiency variance is: D. $7,250U.
A. $7,000F. E. none of the above.
B. $7,000U.
C. $7,100F. Answer: A LO: 3 Type: A
D. $7,100U.
E. none of the above. 34. The direct-material price variance is:
A. $4,620F.
Answer: B LO: 3 Type: A B. $4,620U.
C. $5,200F.
31. Consider the following information: D. $5,200U.
Actual direct labor hours 34,500
Standard direct labor hours 35,000 Answer: D LO: 3 Type: A
Total actual direct labor cost $241,500
Direct-labor efficiency variance, favorable $3,200 35. The direct-labor rate variance is:
A. $7,800F.
The direct-labor rate variance is: B. $7,950F.
A. $17,250U. C. $8,020F.
B. $20,700U. D. $8,000U.
C. $20,700F. E. none of the above.
Answer: C LO: 3 Type: A E. I, II, and III.
36. The direct-labor efficiency variance is: Answer: D LO: 4 Type: RC

A. $8,000F. 41. A statistical control chart is best used for determining:
B. $8,000U. A. direct-material price variances.
C. $8,250F. B. direct-labor variances.
D. $8,250U. C. whether a variance is favorable or unfavorable.
E. none of the above. D. who should be held accountable for specific variances.
E. whether a particular variance should be investigated.
37. The standard hours allowed for the work performed are: Answer: E LO: 4 Type: RC
A. 5.
B. 5.14. 42. The individual generally responsible for the direct-material price variance is the:
C. 39,000. A. sales manager.
D. 40,100. B. production supervisor.
E. none of the above. C. purchasing manager.
D. finance manager.
Answer: C LO: 3 Type: A E. head of the human resources department.
38. When considering whether to investigate a variance, managers should consider all of Answer: C LO: 5 Type: RC
the following except the variance's:
A. size. 43. A production supervisor generally has little influence over the:
B. pattern of recurrence. A. direct-material quantity variance.
C. trends over time. B. direct-labor rate variance.
D. nature, namely, whether it is favorable or unfavorable. C. direct-labor efficiency variance.
E. controllability. D. direct-material price variance.
E. number of units produced.
39. Which of the following combinations of direct-material variances might prompt
management to undertake a detailed variance investigation? 44. In which department would an investigation normally begin regarding an unfavorable
A. Price, unfavorable; quantity, unfavorable. materials quantity variance?
B. Price, unfavorable; quantity, favorable. A. Quality control.
C. Price, favorable; quantity, unfavorable. B. Purchasing.
D. Price favorable; quantity, favorable. C. Engineering.
E. All of the above. D. Production.
E. Receiving.
40. Consider the following statements about variance investigation:
45. Cohen Corporation has a favorable materials quantity variance. Which department
I. Variance investigation involves a look at only unfavorable variances. would likely be asked to explain the cause of this variance?
II. Variance investigation is typically based on a cost-benefit analysis. A. Engineering.
III. Variance investigation is often performed by establishing guidelines similar to B. Purchasing.
the following: Investigate variances that are greater than $X or greater than Y C. Production.
% of standard cost. D. Marketing.
E. None, because the variance is favorable.
Which of the above statements is (are) true?
A. I only. Answer: C LO: 5 Type: N
B. II only. 46. Rogers, Inc., had an unfavorable labor efficiency variance and an unfavorable
C. III only. materials quantity variance. Which department might be held accountable for these
D. II and III. variances?
A. Purchasing, because bad materials can harm labor efficiency.
B. Production, because inefficient workers may use more materials than allowed. The alloy produced more waste than normal, as evidenced by a direct-material
C. Purchasing and/or production. quantity variance of $2,000U, and was also difficult to use. This slowed worker
D. Marketing. efficiency, generating a $2,500U labor efficiency variance. To help remedy the
E. Shipping. situation, the production manager used senior line employees, which gave rise to a
$900U labor rate variance. If overall product quality did not suffer, what variance
Answer: C LO: 5 Type: N amount is best used in judging the appropriateness of the purchasing manager's
decision to acquire substandard material?
47. A direct-material quantity variance can be caused by all of the following except: A. $4,100F.
A. improper employee training. B. $5,000F.
B. changes in sales volume. C. $7,000F.
C. acquisition of materials at a very attractive price. D. $7,500F.
D. adjustment problems with machines. E. $9,500F.
E. disgruntled workers.
Answer: A LO: 5 Type: A, N
52. Standard costs:
48. A direct-labor efficiency variance cannot be caused by: A. allow a manager to assess the efficiency of operations.
A. inexperienced employees. B. allow a company to practice management by exception.
B. poor quality raw materials. C. provide management with a basis for performance evaluations.
C. employee inefficiency. D. if set correctly, can provide a motivational tool for employees.
D. an out-of-date labor time standard. E. will provide all of the above benefits for a company.
E. producing fewer finished units than originally planned.
Answer: E LO: 7 Type: RC, N
Answer: E LO: 5 Type: N 53. Which of the following is a criticism of standard costing, as applied to today's
manufacturing environment?
49. Justin Company recently purchased materials from a new supplier at a very attractive A. Automated manufacturing processes are very consistent in meeting production
price. The materials were found to be of poor quality, and the company's laborers specifications, making variances very small and relatively unimportant.
struggled significantly as they shaped the materials into finished product. In a B. Variance information is usually aggregated (i.e., combined) rather than
desperation move to make up for some of the time lost, the manufacturing supervisor associated with a particular batch of goods or a specific product line.
brought in more-senior employees from another part of the plant. Which of the C. Traditional standard costing fails to focus on key business issues such as
following variances would have a high probability of arising from this situation? customer service and bringing products to market faster than the competition.
A. Material price variance, favorable. D. Standard costing pays considerable attention to labor cost and labor efficiency,
B. Material quantity variance, unfavorable. which are becoming a relatively unimportant factor of production.
C. Labor rate variance, unfavorable. E. All of the above are valid criticisms.
D. Labor efficiency variance, unfavorable.
E. All of the above. Answer: E LO: 8 Type: RC
Answer: E LO: 5 Type: N Listed below are five variances (and possible causes) 54. Which of the following is not a valid way to adapt standard cost systems to today's
that are under review by management of Knox Company. Which of the following is manufacturing environment?
least likely to cause the variance indicated? A. Emphasize material and overhead costs.
A. The need to ship goods acquired from a distant supplier via FedEx rather than B. Use more non-traditional cost drivers such as number of setups or number of
via truck; material price variance. engineering change orders.
B. The need to complete goods on a timely basis during a period of high C. Update standards more frequently to adjust for the elimination of non-value-
absenteeism; labor rate variance. added costs.
C. A work-team that is very unhappy with its supervisor; labor efficiency variance. D. Use additional nonfinancial measures for performance evaluation and control.
D. The need to close a plant for two days because of blizzard conditions; material E. Devote more resources to the tracking of direct labor cost.
quantity variance, part no. 542.
E. A malfunctioning piece of manufacturing equipment; labor efficiency variance. Answer: E LO: 8 Type: RC
Answer: D LO: 5 Type: N 55. To assess how customers perceive a company's products, management may study:
A. the number of customer complaints.
51. Lucky Corporation's purchasing manager obtained a special price on an aluminum B. the number of warranty claims.
alloy from a new supplier, resulting in a direct-material price variance of $9,500F. C. the number of products returned.
D. the cost of repairing returned products.
E. all of the above measures. Answer: B LO: 10 Type: RC
Answer: E LO: 9 Type: RC 61. The typical balanced scorecard is best described as containing:
A. financial performance measures.
56. To improve its manufacturing efficiency, companies should strive toward increasing B. nonfinancial performance measures.
__________ time as a percentage of processing time + inspection time + waiting time C. neither financial nor nonfinancial performance measures.
+ move time. The blank is: D. both financial and nonfinancial performance measures.
A. processing time. E. both financial and nonfinancial performance measures, the latter often covering
B. lead time. a broad range of perspectives such as customers, internal operations, and
C. waiting time. learning and growth.
D. move time.
E. inspection time. Answer: E LO: 10 Type: RC
62. Swedish Cruise Lines (SCL), which operates in a very competitive marketplace, is
Answer: A LO: 9 Type: RC considering four categories of performance measures: (1) profitability measures, (2)
57. In the calculation of manufacturing cycle efficiency, which of the following activities customer-satisfaction measures, (3) efficiency and quality measures, and (4) learning
results in value-added time? and growth measures. The company assigns one manger to each ship in its fleet to
A. Moving. oversee the ship's general operations. If SCL desired to adopt a balanced-scorecard
B. Processing. approach, which measures should the firm use in the evaluation of its managers?
C. Inspection. A. 1.
D. Waiting. B. 1, 2.
E. All of the above. C. 2, 3.
D. 1, 2, 4.
Answer: B LO: 9 Type: RC E. 1, 2, 3, 4.
58. The manufacturing cycle efficiency for PQR Company when the processing time is Answer: E LO: 10 Type: N
six hours and inspection, waiting, and move time are one hour each is:
A. 0.67. 63. Lead indicators guide management to:
B. 0.75. A. take actions now that will have positive effects on organizational performance
C. 0.78. now.
D. 0.88. B. take actions now that will have positive effects on organizational performance in
E. an amount other than those shown above. the future.
C. take actions in the future that will have positive effects on organizational
Answer: A LO: 9 Type: A performance now.
D. take actions in the past that will have positive effects on organizational
59. Which of the following would not be a concern of a company that desires to compete performance in the future.
in a global manufacturing arena? E. pursue identical strategies as those implemented with lag indicators.
A. Number of new products introduced.
B. Manufacturing cycle efficiency. Answer: B LO: 10 Type: RC
C. Number of customer complaints.
D. Number of on-time deliveries. 64. When using a balanced scorecard, a company's market share is typically classified as
E. All of the above would be concerns. an element of the firm's:
A. financial performance measures.
Answer: E LO: 9 Type: RC B. customer performance measures.
C. learning and growth performance measures.
60. An increasingly popular approach that integrates financial and customer performance D. internal-operations performance measures.
measures with measures in the areas of internal operations and learning and growth is E. interdisciplinary performance measures.
known as:
A. the integrated performance measurement tool (IPMT). Answer: B LO: 10 Type: RC
B. the balanced scorecard.
C. gain sharing. 65. When using a balanced scorecard, which of the following is typically classified as an
D. cycle efficiency. internal-operations performance measure?
E. overall quality assessment (OQA). A. Cash flow.
B. Number of customer complaints. On average, 20 good shelves are completed during each hour. Laborers who work on
C. Employee training hours. these units are paid $15 per hour.
D. Number of employee suggestions.
E. Number of suppliers used. Required:
A. Distinguish between perfection standards and practical standards.
Answer: E LO: 10 Type: RC B. Who within an organization would be in the best position to assist in setting:
66. Which of the following perspectives is influenced by a company's vision and 1. the direct-material price standard?
strategy? 2. the direct-material quantity standard?
A. Financial. 3. the direct-labor efficiency standard?
B. Customer. C. Calculate a practical direct-material and direct-labor standard for each good shelf
C. Internal operations.
produced.
D. Learning and growth.
E. All of the above.
LO: 2, 3, 5 Type: A, N
Answer:
A. Perfection standards, or those achieved under nearly perfect operating conditions,
67. Which of the following journal entries definitely contains an error?
assume peak efficiency at minimum cost. Employees are pushed to reach these ideal
A. Raw-Material Inventory 200,000
measures, often becoming discouraged. Practical standards, on the other hand, are
Direct-Material Price Variance 5,000
high but attainable, thus presenting a realistic target for personnel. Such standards
Accounts Payable incorporate allowances for normal downtime and other typical inefficiencies.
B. Raw-Material Inventory 38,000
Direct-Material Price Variance B. 1. The purchasing manager.
Accounts Payable 2. The production supervisor as well as production engineers.
C. Raw-Material Inventory 156,000 3. The production supervisor as well as industrial engineers.
Direct-Material Price Variance
Work-in-Process Inventory C. Direct materials: 4.5 pounds* x $2 per pound $9.00
D. Work-in-Process Inventory 67,000 Direct labor: 0.05 hours* x $15 0.75
Direct-Material Quantity Variance 3,000 Total $9.75
Raw-Material Inventory
E. Work-in-Process Inventory 79,000 *Direct materials: (3.6 x 5) 4 = 4.5; direct labor: 1 20 = 0.05
Direct-Material Quantity Variance Direct-Material Standards, Variance Data
Raw-Material Inventory
70. Diamond Corporation manufactures a variety of liquid lawn fertilizers, including a
Answer: C LO: 11 Type: N very popular product called Lush 'N Green. Data about Lush 'N Green and Proctol, a
major ingredient, follow.
68. At the end of the accounting period, most companies close variance accounts to:
A. Raw-Material Inventory.
B. Work-in-Process Inventory. Expected operations:
C. Finished-Goods Inventory. Proctol is purchased in 55-gallon drums at a cost of $45 per drum. A
D. Cost of Goods Sold. 2% cash discount is offered for prompt payment of invoices, and Diamond takes
E. Income Summary. advantage of all discounts offered.
Diamond normally purchases 200 drums of Proctol at a time, paying
Answer: D LO: 11 Type: RC shipping fees of $420 per shipment.
EXERCISES Each gallon of Lush 'N Green requires three quarts of Proctol;
however, because of evaporation and spills, Diamond loses 4% of all Proctol that
Setting a Standard enters production. (Recall that there are four quarts in a gallon.)
69. Cloverleaf, Inc., produces glass shelves that are used in furniture. Each shelf requires Actual operations:
3.6 pounds of raw material at a cost of $2 per pound. Unfortunately, given the nature For the period just ended, Diamond purchased 1,200 drums of Proctol
of the manufacturing process, one out of every five shelves is chipped, scratched, or at a total cost of $54,960. There was no beginning inventory, but an end-of-
broken at the beginning of production and has to be scrapped. period inventory revealed that 15 drums were still on hand.
Manufacturing activity output totaled 82,000 gallons of Lush 'N
Green.
Required:
A. Compute the standard purchase price for one
gallon of Proctol.
B. Compute the standard quantity of Proctol to be
used in producing one gallon of Lush 'N Green. Express your answer in quarts.
C. Compute the direct-material price variance for
Proctol.
D. How much Proctol was used in manufacturing
activity and how much should have been used? Express your answer in quarts.
LO: 2, 3 Type: A, N
Answer:
A. Purchase price per drum $45.00
Less: 2% discount (0.90)
$44.10
Shipping fee per drum ($420 200 drums) 2.10
Total $46.20
Total purchase price ($46.20) 55 gallons = $0.84 per gallon
B. Three quarts of Proctol are required for each gallon of Lush 'N Green; however, 4% of Proctol input is
lost through evaporation and spills. Thus, the standard input is 3.125 quarts (3 0.96).
C. Standard cost of purchases (1,200 drums x $46.20) $55,440

Actual cost of purchases 54,960
Direct-material price variance $ 480
D. Actual usage: (1,200 - 15) = 1,185 drums; 1,185 drums x 55 gallons x 4 quarts = 260,700 quarts
Standard usage: 82,000 gallons x 3.125 = 256,250 quarts

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E. Organizing.

14. Managerial accounting: Answer: C LO: 4 Type: N

Answer: E LO: 8 Type: RC Answer: C LO: 9 Type: RC

7. Which of the following is a period cost?

Answer: D LO: 4 Type: RC Answer: C LO: 5 Type: RC

30. Property taxes are an example of a(n): Answer: B LO: 4 Type: RC

Answer: B LO: 4 Type: N Answer: C LO: 5 Type: RC

Answer: E LO: 5 Type: RC Month Utilities Machine Hours

Answer: E LO: 7 Type: RC Answer: A LO: 1 Type: N

Answer: E LO: 1 Type: N

Answer: B LO: 1 Type: A Answer: B LO: 1 Type: A

Answer: D LO: 1 Type: D

20. The contribution-margin ratio is:

Sales price $60 Answer: A LO: 3 Type: RC

Answer: D LO: 2 Type: A 25. The slope of line A is equal to the:

Answer: C LO: 3 Type: RC

Answer: C LO: 4 Type: A Answer: A LO: 5 Type: A

Answer: C LO: 6 Type: RC Answer: B LO: 8 Type: RC

Sales revenue $1,350,000 A. I only.

36. The direct-labor efficiency variance is: Answer: D LO: 4 Type: RC

Total purchase price ($46.20) 55 gallons = $0.84 per gallon

C. Standard cost of purchases (1,200 drums x $46.20) $55,440

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