An internal audit is a review to determine whether the policies and procedures specified by top management have been implemented. Fuel for an airplane would be considered a variable cost. The key reasons that companies outsource are to improve the company's focus and reduce operating costs to meet efficiency levels.
Managerial Term
Managerial Accounting
FINAL EXAMINATION
Please complete the following by typing your answer letter next to "ANS" (example "ANS: c) and return to your Instructor via Blackboard by midnight, August 1, 2012:
A (n) ____ is a review to determine whether the policies and procedures specified by top management have been implemented.
A) management audit
B) internal audit
C) internal control
D) internal accounting control
2) Variances
A) are quantitative expressions of plans of action
B) ignore areas that are problem areas
C) are deviations from a plan
D) ignore areas that are presumed to be running smoothly
3) Which of the following costs is a variable cost?
A) rental expense for factory building for manufacturer of electronics
B) lease cost for factory machine for manufacturer of electronics
C) fuel for airplane for airline
D) depreciation expense of airplane for airline
ANS: C
4) On Fire Company, a producer of electronic devices, has the following information:
Selling price per unit $5.00
Variable cost per unit $3.00
Total fixed costs $90,000.00
The contribution-margin ratio is
A) 30%
B) 40%
C) 60%
D) 100%
ANS: B
5) In a small construction firm, a crew supervisor is added for every ten workers employed. The salaries of the crew supervisors are a
A) variable cost
B) mixed cost
C) step cost
D) fixed cost
ANS: A
6) Salaries of the telemarketers are set at $10,000 per month. The telemarketers also receive a commission for each donation they receive. They receive $5 per donation. The telemarketers salaries' and commission is a ____ cost.
A) fixed
B) variable
C) mixed
D) step
ANS: B
7) Accountants can specifically and exclusively identify indirect costs with a given cost object in an economically feasible way.
True or False?
ANS: True
8) When determining the product cost of a manufactured product,
A) direct material costs include minor items such as tacks or glue
B) direct labor costs may not include employee benefits
C) indirect production costs may include selling costs
D) there may be no direct labor costs
ANS: A
9) A company is trying to decide which product to manufacture. The following information is available:
Costs Product A Product B
Direct Materials 1 $2.00 per unit $2.00 per unit
Direct Materials 2 $1.25 per unit $1.25 per unit
Direct Materials 3 $0.50 per unit $0.80 per unit
Direct Labor $0.70 per unit $0.70 per unit
Which product cost is relevant to the decision?
A) Direct Materials 1
B) Direct Materials 2
C) Direct Materials 3
D) Direct Labor
ANS: C
10) In decision making, relevance is more crucial than
A) precision
B) predictability
C) variable costs
D) fixed costs
ANS: D
11) The salary foregone by a person who quits a job to start a business is an example of a (n)
A) sunk cost
B) opportunity cost
C) depreciable cost
D) outlay cost
ANS: A
12) The key reasons that companies outsource are to improve the company's focus and reduce operating costs.
True or False?
ANS: True
13) One way to reduce negative attitudes of managers toward budgets is by
A) zero-based budgeting
B) activities-based budgeting
C) long-range planning
D) participative budgeting
ANS: A
14) ____ set the overall goals and objectives of the organization.
A) Capital budgets
B) Cash budgets
C) Master budgets
D) Strategic plans
ANS: D
15) Farmers Insurance Company had a static budgeted operating income of $8.6 million. Actual operating income was $6.4 million. What is the static-budget variance of operating income?
A) $2.2 million Favorable
B) $2.2 million Unfavorable
C) $6.4 million Favorable
D) $8.6 million Unfavorable
ANS: B
16) Tomorrow Company has the following information available:
Budgeted cost of direct materials at 900,000 units $900,000
Budgeted cost of direct materials at 820,000 units $820,000
Actual cost of direct materials at 820,000 units $840,000
Actual level of output (units) 820,000
Planned level of output (units) 900,000
The cost driver of product costs is units of output. What is the static budget variance for direct material costs?
A) $20,000 Unfavorable
B) $20,000 Favorable
C) $60,000 Favorable
D) $60,000 Unfavorable
ANS: D
17) The following information is available for Half Price Books Inc. And its two divisions, Books and Periodicals:
Whole Books Periodicals
Company Division
Net Sales $100,000 $50,000 $50,000
Fixed Costs Controllable
By Division Manager 26,500 22,500 4,000
Fixed Costs Not Controlled
By Division Manager 18,000 15,000 3,000
Variable Costs:
Cost of Merchandise Sold 24,500 17,500 7,000
Operating Expenses 16,400 10,000 6,400
Unallocated Costs 4,000
What is the contribution margin for the Periodicals Division?
A) $29,600
B) $32,600
C) $36,600
D) $43,00
ANS: C
18) To evaluate the financial performance of a segment, and not the financial performance of the segment's manager, use
A) income before taxes
B) contribution by segment
C) contribution controllable by segment managers
D) contribution margin by segment
ANS: C
19) If the segments in a firm buy from the same outside suppliers all the time, they are good candidates for decentralization.
True or False?
ANS: False
20) Which of the following adjustments to after-tax operating income is used to approximate cash income for EVA?
A) expensing research and development costs
B) using LIFO inventory method
C) deducting interest payable
D) using taxes paid rather than tax expense
ANS: D
21) As the minimum required rate of return increases for an investment project, the net present value of the project
A) increases
B) does not change
C) decreases
D) becomes positive
ANS: C
22) U.S. corporations are required to use the same method of calculating depreciation on both their income tax return and their annual financial statements.
True or False?
ANS: False
23) The traditional approach to cost allocation focuses on accumulating and reporting costs by ____. The activity-based approach to cost allocation focuses on accumulating and reporting costs by
A) cost behavior; resources used
B) departments; activities
C) fixed costs; variable costs
D) product; customer
ANS: B
24) Assume the cost object is customers. It is important to directly trace or allocate costs associated with customer actions to ____ instead of
A) producing departments; service departments
B) service departments; producing departments
C) products; producing departments
D) customers; producing departments
ANS: C
25) Rocky Company had the following information:
Budgeted factory overhead $90,000
Actual factory overhead $80,000
Budgeted production setups 12,000
Actual production setups 11,500
Assume production setups are the cost driver for factory overhead costs. The budgeted factory overhead rate is
A) $6.25 per setup
B) $6.52 per setup
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