%.

* rg
rg aan
n iz
iz in
in g.
g.
MULTIPLE CHOICE QUESTIONS
Answer(  )*( , &'pe( 3
1. Which of the following
following statement
statementss about managerial
managerial accountants
accountants is false?
false?
A. Managerial
Managerial accountant
accountantss more and more
more are consider
considered
ed "business
"business partners
partners."
." 4. Which of the followin
followingg is not an ob5ecti$e
ob5ecti$e of managerial
managerial accountin
accounting?
g?
B. Managerial
Managerial account
accountants
ants often
often are part
part of cross-f
cross-functi
unctional
onal teams.
teams. A. /ro$iding
/ro$iding inform
information
ation for decisio
decisionn ma#ing
ma#ing and planning.
planning.
C. An increasing
increasing number
number of organizati
organizations
ons are segregatin
segregatingg managerial
managerial accountants
accountants in
in separate
separate B. Assisting
Assisting in direct
directing
ing and controllin
controlling
g operati
operations.
ons.
managerial-accounting departments. C. Maim
Maimiziizing
ng profit
profitss and minimi
minimizin
zingg costs.
costs.
. !n a number of companies
companies managerial
managerial accountan
accountantsts ma#e significa
significant
nt business
business decisions
decisions . Measuring
Measuring the perform
performance
ance of
of managers
managers and subuni
subunits.
ts.
and resol$e operating problems. %. Moti$atin
Moti$ating g managers
managers toward
toward the
the organiza
organization6
tion6s goals.
goals.
%. &he role of manageri
managerial
al accountant
accountantss has changed
changed considerab
considerabl'
l' o$er the
the past decade.
decade.
Answer( C )*(  &'pe( +C
Answer( C )*( 1 &'pe( +C
7. &he role of managerial
managerial accounting
accounting informati
information
on in assisting
assisting management
management is a8n9(
,. &he da'-to-da' wor# of management teams will t'picall'
t'picall' comprise all of the following acti$ities A. financ
financial
ial-di
-direct
recting
ing role.
role.
ecept( B. attent
attention
ion-di
-direct
recting
ing role.
role.
A. deci
decisision
on ma# ma#in
ing.
g. C. planni
planning
ng and contro
controllilling
ng role.
role.
B. planning. . orga
organi
nizat
zatio
iona
nall rol
role.
e.
C. cost
cost min
minim imiz
izin
ing.
g. %. prob
proble
lem-
m-sosol$
l$in
ingg rol
role.
e.
. direct
directing
ing oper operati
ationa
onall acti$i
acti$itie
ties.
s.
%. c on
ont ro
ro llll in
ing . Answer( B )*(  &'pe( +C

Answer( C )*( , &'pe( +C :. %mplo'ee empowerment

empowerment in$ol$esin$ol$es encouraging and authorizing
authorizing wor#ers to ta#e initiati$es to(
to(
A. impr
impro$
o$ee ope
operat
ratio
ions
ns..
. Which of the following functions is best described as choosing among a$ailable alternati$es? B . r ed
ed uc
uc e c os
ost s.
s.
A. eci
ecisision
on ma#
ma#in
ing.
g. C. impr
impro$o$ee produc
productt ;uali
;ualit'
t'..
B. /la n
nnning. . impr
impro$
o$ee custom
customer er ser$i
ser$ice
ce..
C. irect
irecting
ing oper
operati
ationa
onall acti$i
acti$itie
ties.
s. %. all
all of the
the abo$
abo$e.e.
. Cont
Controroll
llin
ing.
g.
%. Budgeting. Answer( % )*(  &'pe( +C
1<. &he process ofof encouraging and authorizing wor#ers to ta#e appropriate initiati$es to
to impro$e
Answer( A )*( , &'pe( +C the o$erall firm is commonl' #nown as(
A. plan
planni
ning
ng and
and con
contr
trol
ol..
0. Which of the following managerial functions in$ol$es a detailed financial and operational B. empl
emplo'o'ee
ee emp
empow
owerm
ermen ent.
t.
description of anticipated operations? C. pers
person
onne
nell aggres
aggressi
si$en
$enesess.
s.
A. eci
ecisision
on ma#
ma#in
ing.
g. . deci
decisi
sion
on ma#
ma#in
ing.
g.
B. /la n
nn
ning. %. proble
problem m recog
recognit
nition
ion and soluti
solution.
on.
C. irect
irecting
ing oper
operati
ationa
onall acti$i
acti$itie
ties.
s.
. Cont
Controroll
llin
ing.
g. Answer( B )*(  &'pe( +C
%. Measur in ing.
11. Which of the
the following business models considers financial customer internal operating and
Answer( B )*( , &'pe( +C other measures in the e$aluation of perf ormance?
A. eterm
etermini
inisti
sticc simula
simulatio
tion.
n.
.Which of the following in$ol$es the coordination of dail' business functions within an organization? B. Bala
Balanc
nced
ed scor
scoreca
ecard
rd..
A. eciecisi sion
on ma# ma#in
ing.
g. C. /a'o
/a'off
ff matr
matri
i..
B. /la n
nnning. . eci
ecisi
sion
on tree
tree..
C. irect
irectinging oper
operati
ationa
onall acti$i
acti$itie
ties.
s. %. Chart
Chart of oper
operati
ating
ng perfo
performa
rmance
nce 8C*
8C*/9.
/9.
. ContContro roll
llining.
g.
%. M ot
ot i$
i$a titi ng
ng. Answer( B )*(  &'pe( +C

Answer( C )*( , &'pe( +C 1,. Which of the following

following perspecti
perspecti$es
$es is normall'
normall' absent in a balanced
balanced scorecard?
scorecard?
A . = in
in aan
nc ia
ia l.l.
2.&itan Compan' has set $arious goals and management is now ta#ing appropriate action to ensure that the B. Customer.
firm achie$es these goals. *ne such action is to reduce outla's for o$erhead which ha$e C. !nte
!nterna
rnall oper
operat atio
ions
ns..
eceeded budgeted amounts. Which of the following functions best describes this process? . )earni
)earning ng and and inno
inno$at
$ation
ion>gr
>growt
owth.
h.
A. eci
ecisision
on ma#
ma#in ing.
g. %. 3one
3one of the the aabo
bo$e
$e..
B. /la n
nn
ning.
C. Coor
Coordidina
nati
ting
ng.. Answer( % )*(  &'pe( +C
. Cont
Controroll
llin
ing.
g.
1. Manager
Managerial
ial acco
account
unting
ing((
A. focuse
focusess onl'
onl' on
on histo
historic
rical
al data.
data. 1:. Which of the
the following statements represents a similarit' between financial and managerial
B. is go$e
go$ernrned
ed b' AA/
AA/. accounting?
C. focuses
focuses primaril'
primaril' onon the needs
needs of personn
personnelel within
within the
the organizati
organization.
on. A. Both are useful
useful in
in pro$iding
pro$iding informatio
information n for etern
eternal
al users.
users.
. pro$ides
pro$ides informati
informationon for parties
parties eternal
eternal to the
the organizati
organization.
on. B. Both
Both are
are go$e
go$ern
rned
ed b'
b' AA/
AA/.
%. focuses
focuses on financi
financialal statement
statementss and other
other financ
financial
ial reports.
reports. C. Both draw
draw upon
upon data from
from an organi
organizatio
zation6s
n6s accountin
accounting g s'stem.
s'stem.
. Both rel' hea$il'
hea$il' on published
published financial
financial statem
statements.
ents.
Answer( C )*( 0 &'pe( +C %. Both are solel'
solel' concerned
concerned with
with histo
historical
rical transaction
transactions.
s.

10. Manager
Managerial
ial acco
account
unting
ing(( Answer( C )*( 0 &'pe( 3
A. is unre
unregugula
late
ted.
d.
B. produces
produces informati
informationon that is useful
useful onl'
onl' for manufactu
manufacturing
ring organiza
organizations
tions.. ,<. Which of the following
following emplo'ees at American Airlines would not be considered as holding a
C. is based
based ecl
eclusi
usi$el
$el'' on histo
historic
rical
al data.
data. line position?
. is regulated
regulated b' b' the @ecurit
@ecurities
ies and %change
%change Commissi
Commissionon 8@%C9.
8@%C9. A. /ilot.
%. generall'
generall' focuses
focuses on reporting
reporting informati
information
on about the
the enterprise
enterprise in its entiret'
entiret' rather
rather than B. Chief
Chief finafinanci
ncialal office
officerr 8C=*9
8C=*9..
 b' subunits. C. =lig
=light
ht atte
attend
ndanant.
t.
 . &i c#c# eett a ge
ge nt
nt .
Answer( A )*( 0 &'pe( 3 %. Bagg
Baggag agee han
handl dler
er..

1. Which of the following would li#el' be considered an internal user of accounting
accounting information Answer( B )*(  &'pe( 3
rather than an eternal user?
A. @toc
@toc#h
#hol
olde
ders
rs.. ,1. Which of the
the following emplo'ees would be considered as holding a line position?
B. Cons
Consumumer
er gro
groupups.
s. A. &he cont
control
roller
ler of
of %on
%on Corpo
Corporat
ration
ion..
C. )enders. B. &he $ice-pres
$ice-president
ident for go$ernm
go$ernment
ent relation
relationss of Microsof
Microsoft.
t.
. Midd
Middlele-l
-le$
e$el
el manag
managers
ers.. C. &he manager
manager of food
food and be$erage
be$erage ser$ices
ser$ices at isne'6
isne'6s Magic ingdom.
ingdom.
%. o$e
o$ernrnme
mentnt agen
agenci
cies
es.. . A secret
secretar'
ar' emplo
emplo'ed
'ed b' Dewle
Dewlett-
tt-/ac
/ac#ar
#ard.
d.
%. 3one
3one of the
the aabo
bo$e
$e..
Answer(  )*( 0 &'pe( +C
Answer( C )*(  &'pe( 3
12. All of the following entities would ha$e a need for managerial accounting information information ecept(
A. ell
ell Comp
Comput uter
er.. ,,. Which of the following
following emplo'ees at @tarbuc#s would would li#el' be considered as holding
holding a staff
B. &he )os )os Ange
Angeles les odg
odgers
ers baseb
baseball
all club
club..  position?
C. * ff
ff ic
ic e e
e po
po t.t. A. &he compa
compan'6
n'6s chief
chief operati
operating
ng office
officerr 8C**9.
8C**9.
. &he =eder =ederalal Bureau
Bureau of !n$est
!n$estiga
igatio
tion
n 8=B!9.
8=B!9. B. &he manager
manager of a store
store located
located in
in ansas
ansas Cit'
Cit' Missouri.
Missouri.
%. 3one of the the abo$e response
responsess is correct
correct as all of
of these entities
entities would
would use
use managerial
managerial C. &he compa
compan'6
n'6s lead
lead in-hous
in-housee attorne'
attorne'.
accounting information. . &he compa
compan'6
n'6s chief
chief financia
financiall officer
officer 8C=*9.
8C=*9.
%. Both the
the compan'6s
compan'6s lead
lead in-house
in-house attorne'
attorne' and the
the chief financi
financial
al officer.
officer.
Answer( % )*( 0 &'pe( 3
Answer( % )*(  &'pe( 3
14. Which of the following
following choices correctl'
correctl' depicts
depicts whether Ban# of America
America Microsoft
Microsoft and
=lorida @tate ni$ersit' would ha$e a need for managerial accounting? ,. &he chief managerial
managerial and and financial
financial accountant
accountant of an organizat
organization
ion is the(
Ban#  =lorida @tate A. chief
chief eecut
eecuti$e i$e office
officerr 8C%*9
8C%*9..
of America Microsoft ni$ersit' B . tr ea
ea su
su re
re r.r.
A. es es 3o C. $ice-p
$ice-pres
reside ident
nt of accoun
accountinting.
g.
B. es 3o es . inte
intern
rnal
al audi
audito torr.
C. es es es %. chief
chief financ
financial ial office
officerr 8C=*
8C=*9.
9.
. 3o es 3o
%. 3o es es Answer( % )*(  &'pe( +C

Answer( C )*( 0 &'pe( 3 ,0. Which of the followin

followingg t'picall'
t'picall' does not relate
relate to the role of a controller
controller??
A. A contro
controller
ller super$ises
super$ises the account
accounting
ing departm
department.
ent.
17. =inancial
=inancial accounting
accounting focuses
focuses primaril
primaril'
' on reporting(
reporting( B. A controller
controller safeguards
safeguards an organi
organizatio
zation6s
n6s assets.
assets.
A. to parti
parties
es outsi
outside
de of an orga
organiz
nizati
ation.
on. C. A controller
controller o$ersees
o$ersees the preparat
preparation
ion of reports
reports re;uired
re;uired b' go$ernmental
go$ernmental authorit
authorities.
ies.
B. to parti
parties
es withi
within
n an organ
organiza
izatio
tion.
n. . A controller
controller normall'
normall' assumes
assumes a narrow
narrow role within
within the organizat
organization
ion often
often pre$enting
pre$enting the
C. to an orga
organiz
nizati
ation6
on6ss board
board of direct
directors
ors.. indi$idual6s rise to top management ran#s.
. to financ
financial
ial instit
instituti
utions
ons.. %. Choi
Choices
ces "B"
"B" and
and ""
"" abo$
abo$e.
e.
%. for financi
financial
al instit
instituti
utions
ons..
Answer( % )*( 2 &'pe( +C
Answer( A )*( 0 &'pe( +C
,. A controll
controller
er is normall'
normall' in$ol$ed
in$ol$ed with(
with(
A. prepari
preparingng finan
financia
ciall state
statemen
ments.
ts. Answer( % )*( 4 &'pe( +C
B. mana
managiging
ng in$
in$es
estm
tmenents
ts..
C. rais
raisin
ingg capi
capita
tal.
l. ,. Managerial
Managerial accountin
accounting g has changed
changed in recent 'ears
'ears because
because of(
. safeg
safegua
uard
rdin
ingg ass
asset
ets.
s. A. a growing
growing ser$ice
ser$ice econom'
econom' in the
the nited
nited @tates
@tates..
%. managi
managing ng the
the firm
firm6s6s credi
creditt polic
polic'.
'. B. the growing
growing popul
popularit'
arit' of cross-f
cross-functi
unctional
onal teams.
teams.
C. comput
computer-er-int
integr
egrate
atedd manufa
manufactu
cturin
ring
g 8C!M9.
8C!M9.
Answer( A )*( 2 &'pe( +C . time
time-b
-bas
ased
ed compet
competititio
ion.
n.
%. all
all of
of the
the abo$
abo$ee fact
factor
ors.
s.
,2. Which of
of the following
following is is not a function
function of the
the treasurer?
treasurer?
A. @afe
@afeguguar
ardi
ding
ng asse
assets ts.. Answer( % )*( 4 &'pe( +C
B. Mana
Managi ging
ng in$
in$es
estmtmenentsts..
C. /repar
/reparing
ing financ
financial ial statem
statement ents.
s. . Which of the
the following statement8s9 about 5ust-in-time 8E!&9
8E!&9 in$entor' management is 8are9
. Being responsible
responsible for an entit'6sentit'6s credit
credit polic'.
polic'. true?
%. +ais
+aisining
g cap
capit
ital
al..
I. &he emphasis of E!& is on "pull" manufacturing.
Answer( C )*( 2 &'pe( +C II. +aw materials are purchased 5ust in time to be used in production.
III. E!& is an in$entor' techni;ue that focuses on r eduction of both in$entor' and related
,4. Manager
Managerial
ial accou
accounta
ntants
nts(( in$entor' costs.
A. often
often wor#
wor# on cross
cross-fu
-funct
nction
ional
al teams.
teams.
B. are locat
located
ed throug
throughou
houtt an organi
organizat
zation
ion.. A. ! on
onl'.
C. are found throug
throughout
hout an organi
organizatio
zationn and wor# on cross-f
cross-functi
unctional
onal teams.
teams. B. !! onl'.
. are found primari
primaril'
l' at lower
lower le$els of
of the organizat
organizational
ional hierarch'
hierarch'.. C. !!! onl'.
%. are found
found primaril'
primaril' atat higher
higher le$els
le$els of the organ
organizatio
izational
nal hierarch'
hierarch'. . !! anand !!!.
%. !  ! !
! an
an d ! !!
!! .
Answer( C )*( 2 &'pe( +C
Answer( % )*( 4 &'pe( +C
,7. &he two dimensions
dimensions of managerial
managerial accounting
accounting are(
are( 0. *hio Corporation recentl' implemented
implemented a 5ust-in-time
5ust-in-time 8E!&9 production s'stem along with a
A. a decision-faci
decision-facilitat
litating
ing dimensio
dimensionn and a decision-infl
decision-influencin
uencingg dimension.
dimension. series of continuous impro$ement programs. !f the firm is now considering adopting a total
B. a decision-faci
decision-facilitat
litating
ing dimensio
dimensionn and a financial-infl
financial-influenci
uencing
ng dimension.
dimension. ;ualit' management 8&FM9 program it would li#el' find that &FM(
C. a decision-in
decision-influen
fluencing
cing dimensio
dimensionn and a cost-mini
cost-minimizin
mizingg dimension.
dimension. A. is consisten
consistentt with
with both
both E!& and continu
continuous
ous impro$
impro$ement.
ement.
. a cost-minim
cost-minimizing
izing dimensi
dimension
on and a profit-m
profit-maimi
aimizing
zing dimensio
dimension.
n. B. is consistent
consistent with E!& but inconsis
inconsistent
tent with
with continuou
continuouss impro$ement
impro$ement..
%. a decision-in
decision-influen
fluencing
cing dimensio
dimension n and a profit-ma
profit-maimiz
imizing
ing dimensio
dimension.
n. C. is consistent
consistent with continu
continuous
ous impro$emen
impro$ementt but inconsist
inconsistent
ent with E!&
E!&..
. is inconsis
inconsistent
tent with
with both
both E!& and
and continuou
continuouss impro$emen
impro$ement.t.
Answer( A )*( 4 &'pe( +C %. is an anti;
anti;uat
uated
ed managem
managementent tech
techni;
ni;ue.
ue.

,:. Much of manageri

managerialal accounting
accounting inform
information
ation is based
based on( Answer( A )*( 4 &'pe( 3
A. a cost
cost-b
-ben
enefi
efitt the
theme
me..
B. profi
profitt mai
maimi
mizat
zatio
ion.n. . Cost management
management s'stem s'stemss tend to focus
focus on an organization
organization6s(
6s(
C. cost
cost mini
minimi
miza
zatition
on.. A. ma ch
chines.
. the gener
generati
ation
on of eter
eternal
nal infor
informat
mation
ion.. B. emplo'ee ss..
%. effect
effecti$e
i$enes
nesss but
but not
not effic
efficien
ienc'
c'.. C . a ct
cti $i
$it ie
ie s.
s.
 . c us
us to
to me
me rsrs .
Answer( A )*( 4 &'pe( 3 %. rule
ruless and
and regul
regulat
atio
ions
ns..
<. Which of the following
following is not normall'
normall' considered
considered to be an element
element of e-business?
e-business?
A . % -b
-bu dg
dge titi ng
ng . Answer( C )*( 4 &'pe( +C
B. @upp
@uppl'l'-c
-cha hain
in manage
manageme ment
nt..
C. % -c
-co mm
mme rc rc e.
e. 2. &he $alue chain
chain of a manufacturer
manufacturer would
would tend to include
include acti$iti
acti$ities
es related to(
to(
. Bala
Balancnced
ed scor
scorececar
ards
ds.. A. manu
manufa fact ctur
urin
ing.
g.
%. Choi
Choicecess "B"
"B" and and ""
"" abo$
abo$e.
e. B. resea
research
rch and and de$e
de$elo
lopm
pmen
ent.
t.
C. prod
producuctt desdesig
ign.
n.
Answer(  )*( 4 &'pe( +C  . ma r#r#e titi ng
ng.
%. all
all of the
the abo$abo$e.
e.
1. Managerial
Managerial accounti
accounting
ng has changed
changed in recent 'ears
'ears because
because of(
A. the
the growt
growthh of e-bu
e-busi
sine
ness
ss.. Answer( % )*( 7 &'pe( +C
B. increas
increased
ed global
global compet
competiti
ition.
on.
C. the emerge
emergence
nce of new
new indu
industr
stries
ies.. 4. Which of the following
following choices
choices correctl'
correctl' depicts
depicts acti$ities
acti$ities that would
would be included in a
. an incre
increased
ased focus
focus on the cust
custome
omer. r. manufacturer6s $alue chain?
%. all
all of
of the
the abo
abo$e
$e fact
factor
ors.
s. +esearch and
 e$elopment Mar#eting istribution %. @trategic path anal'sis 8@/A9.
A. es es 3o
B. es 3o es Answer( B )*( 7 &'pe( +C
C. es es es 0. Which of the following can be lin#ed to the relati$el' recent wa$e of corporate scandals?
. 3o es 3o A. reed' corporate eecuti$es.
%. 3o es es B. Managers who ma#e o$er-reaching business deals.
C. )ac# of o$ersight b' companies6 audit boards and boards of directors.
Answer( C )*( 7 &'pe( +C . @hodd' wor# b' eternal auditors.
%. All of the abo$e.
7. Which of the preceding acti$ities would li#el' not be considered part of &he ap clothing
compan'Gs $alue chain? Answer( % )*( : &'pe( +C
A. esigning a new product line.
B. )ocating and then negotiating terms with a clothing manufacturer. 00. Which of the following acts stri$es to impro$e corporate go$ernance and the ;ualit' of
C. Mar#eting an eisting product line. corporate accounting>reporting?
. istributing goods from regional warehouses to local stores. A. +obinson-/atman.
%. All of the abo$e acti$ities would be an element in the compan'Gs $alue chain. B. &aft-Dartle'.
C. @arbanes-*le'.
Answer( % )*( 7 &'pe( +C . Bush-Chene'.
%. =ran#s-Ashcroft.
:. &he acti$ities performed b' a manufacturing organization could be categorized as pre-
 production 8such as research and de$elopment and product design9 production-related and post- Answer( C )*( : &'pe( +C
 production 8such as mar#eting and customer ser$ice9. Which acti$ities should the firm focus on if
management understands the $alue chain concept and desires to meet organizational goals? 0.Which of the following statements about the ethical climate of business is false?
A. /re-production acti$ities. A. reed' corporate eecuti$es are in part to blame for the relati$el' recent rash of
B. /roduction-related acti$ities. corporate scandals.
C. /ost-production acti$ities. B. nethical business beha$ior can ha$e a negati$e impact on our econom'.
. /re-production production-related and post-production acti$ities. C. &he @arbanes-*le' Act stri$es to impro$e the o$erall ;ualit' of corporate reporting.
%. /re-production and production-related acti$ities. . &he +obinson-/atman Act stri$es to impro$e the o$erall ;ualit' of corporate reporting.
%. Corporate scandals ha$e ser$ed as the accounting professionGs wa#e-up call to pa'
Answer(  )*( 7 &'pe( 3 increased attention to ethical issues in the conduct of business.

0<. !n order for a compan' to achie$e a sustainable competiti$e ad$antage it must perform $alue Answer(  )*( : &'pe( +C
chain acti$ities(
A. at the same ;ualit' le$el as competitors at the same cost. 02. Which of the following is not an ethical standard of managerial accounting?
B. at the same ;ualit' le$el as competitors but at a lower cost. A . Co mp et en ce .
C. at a higher ;ualit' le$el than competitors at a higher cost. B. Confidentialit'.
. at a higher ;ualit' le$el than competitors but at no greater cost. C . % ff ic ie nc '.
%. at either the same ;ualit' le$el as competitors but at a lower cost or at a higher ;ualit'  . ! nt egr it '.
le$el than competitors but at no greater c ost. %. Cr ed ib il it '.

Answer( % )*( 7 &'pe( +C Answer( C )*( : &'pe( +C

01. &he process of managing the $arious acti$ities in the $alue chain along with the associated 04. Which of the following is not an element of competenc'?
costs is commonl' #nown as( A. &o de$elop appropriate #nowledge about a particular sub5ect.
A. acti$it'-based costing. B. &o perform duties in accordance with rele$ant laws.
B. strategic cost management. C. &o perform duties in accordance with rele$ant technical standards.
C. total ;ualit' management. . &o refrain from engaging in an acti$it' that would discredit the accounting profession.
. computer-integrated costing. %. &o prepare clear reports after an anal'sis of rele$ant and reliable information.
%. sound management practices 8@M/9. 07. Assume that a managerial accountant regularl' communicates with business associates to a$oid
conflicts of interest and ad$ises rele$ant parties of potential conflicts. !n so doing the
Answer( B )*( 7 &'pe( +C accountant will ha$e applied the ethical standard of (
A. ob5ecti$it'.
0,. A compan' has a bottlenec# operation that slows production. Which of the following tools or B. confidentialit'.
approaches could the firm use to determine the most cost-effecti$e wa's to eliminate this C . in te gr it'.
 problem? . credibilit'.
A. )inear programming. %. unified beha$ior.
B. &heor' of constraints.
C. ecision-tree diagrams. Answer( C )*( : &'pe( +C
. /a'off matrices.
Balanced Scorecard administrati$e epenses I,,<<<<. &acoma6s product costs total(
&he balanced scorecard is a business model that helps to assess a firm6s competiti$e position and ensures A. I,<<<<.
that the firm is progressing toward long-term sur$i$al. Balanced scorecards differ from organization to B. I4<<<<.
organizationH howe$er in addition to customer-satisfaction measures most ha$e a combination of financial C. I:,<<<<.
measures internal operating measures and measures of inno$ation>growth and learning.  . I 1 10< << <.
Managerial Accounting vs. inancial Accounting %. some other amount.

0. Briefl' distinguish between managerial accounting and financial accounting. Be sure to Answer( C )*( , &'pe( A
comment on the general focus users and regulation related to the two fields.
2. Costs that are epensed when incurred are called(
)*( 0 &'pe( +C A. product costs.
B . d ir ec t c os ts .
Answer( C. in$entoriable costs.
Managerial accounting is concerned with pro$iding information to personnel within an  . p er io d co st s.
organization so that the' can plan ma#e decisions e$aluate performance and control %. indirect costs.
operations. &here are no rules and regulations associated with this field since the information is
intended solel' for use within the firm. Answer(  )*( , &'pe( +C

4. Which of the following is a period cost?

MULTIPLE CHOICE QUESTIONS A. irect material.
B. Ad$ertising epense.
1. Which of the following statements is true? C. epreciation on cars dri$en b' a firm6s president and treasurer.
A. &he word "cost" has the same meaning in all situations in which it is used. . Miscellaneous supplies used in production acti$ities.
B. Cost data once classified and recorded for a specific application are appropriate for use in %. Both "B" and "C."
an' application.
C. ifferent cost concepts and classifications are used for different purposes. Answer( % )*( , &'pe( 3
. All organizations incur the same t'pes of costs.
%. Costs incurred in one 'ear are alwa's meaningful in the following 'ear. 7. Which of the following is not a period cost?
A . ) ega l c os ts .
Answer( C )*( 1 &'pe( +C B. /ublic relations costs.
C. @ales commissions.
,. /roduct costs are( . Wages of assembl'-line wor#ers.
A. epensed when incurred. %. &he salar' of a compan'6s chief financial officer 8C=*9.
B. i n$e nto ri ed .
C. treated in the same manner as period costs. Answer(  )*( , &'pe( +C 3
. treated in the same manner as ad$ertising costs.
%. subtracted from cost of goods sold. :. &he accounting records of Dill Corporation re$ealed the following selected costs( @ales
commissions I0<<<<H plant super$ision I:0<<<H and administrati$e epenses I17<<<.
Answer( B )*( , &'pe( +C Dill6s period costs total(
A. I0<<<<.
. Which of the following is a product cost? B. I:0<<<.
A. lass in an automobile. C. I17<<<.
B. A d$ er tis in g. . I,,<<<.
C. &he salar' of the $ice president-finance. %. I1:<<<.
. +ent on a factor'.
%. Both "A" and "." Answer(  )*( , &'pe(

Answer( % )*( , &'pe( 3 1<. Which of the following entities would most li#el' ha$e raw materials wor# in
 process and finished goods?
0. Which of the following would not be classified as a product cost? A. %on Corporation.
A. irect materials. B. Mac'6s epartment @tore.
B.  ir ec t la bo r. C. We nd'6s.
C. !ndirect materials. . @outhwest Airlines.
. !nsurance on the manufacturing plant. %. Columbia ni$ersit'.
%. @ales commissions.
Answer( A )*(  &'pe( 3
Answer( % )*( , &'pe( +C 3
. &he accounting records of &acoma Compan' re$ealed the following costs( direct materials used 11. @elling and administrati$e epenses would li#el' appear on the balance sheet of(
I14<<<<H direct labor I<<<<H manufacturing o$erhead I0<<<<<H and selling and A. &he ap.
 B. &eas !nstruments. direct labor?
C. &urner Broadcasting @'stem. A . Bo o# bi nd er.
. all of the abo$e firms. B. /lant securit' guard.
%. none of the abo$e firms. C. @ales representati$e.
. /lant super$isor.
Answer( % )*(  &'pe( 3 %. /a'roll super$isor.

1,. Which of the following in$entories would a discount retailer such as Wal-Mart report as an Answer( A )*(  &'pe( 3
asset?
A. +aw materials. 17. 3orwood Appliance produces washers and dr'ers in an assembl'-line process. )abor costs
B. Wor# in process. incurred during a recent period were( corporate eecuti$es I1<<<<<H assembl'-line wor#ers
C. =inished goods. I7<<<<H securit' guards I17<<<H and plant super$isor I<<<<. &he total of 3orwood6s direct
. Merchandise in$entor'. labor cost was(
%. All of the abo$e. A. I7<<<<.
B. I:7<<<.
Answer(  )*(  &'pe( +C C. I11<<<<.
. I1,7<<<.
1. Which of the following in$entories would a compan' ordinaril' hold for sale? %. I,,7<<<.
A. +aw materials.
B. Wor# in process. Answer ( A )*(  &'pe( A
C. =inished goods. 1:. Which of the following emplo'ees would not be classified as indirect labor?
. +aw materials and finished goods. A . Cu st od ia n.
%. Wor# in process and finished goods. B . @ ale sp er son .
C. Assembler of wooden furniture.
Answer( C )*(  &'pe( +C . /lant securit' guard.
%. Choices "B" and "C."
10. Jeno Corporation engages in mass customization and direct sales the latter b' accepting
customer orders o$er the !nternet. As a result Jeno( Answer( % )*(  &'pe( +C 3
A. would probabl' begin the manufacturing process upon receipt of a customer6s order.
B. would t'picall' ha$e fairl' low in$entor' le$els for the amount of sales re$enue ,<. epreciation of factor' e;uipment would be classified as(
generated. A. operating cost.
C. would t'picall' ha$e fairl' high in$entor' le$els for the amount of sales re$enue B . " ot he r" c os t.
generated. C. manufacturing o$erhead.
. would li#el' find choices "A" and "B" to be applicable. . depreciation epense.
%. would li#el' find choices "A" and "C" to be applicable. %. administrati$e cost.

Answer(  )*( 0 &'pe( +C Answer( C )*(  &'pe( +C

1. Companies that engage in mass customization(
A. tend to ha$e a relati$el' low production $olume. ,1. Which of the following costs is not a component of manufacturing o$erhead?
B. tend to ha$e a high production $olume that in$ol$es highl' standardized end-products. A. !ndirect materials.
C. tend to ha$e a high production $olume man' standardized components and customer- B. =actor' utilities.
specified combinations of components. C. =actor' e;uipment.
. tend to ha$e a high production $olume man' uni;ue components and customer-specified . !ndirect labor.
combinations of components. %. /ropert' taes on the manufacturing plant.
%. could be t'pified b' the refining operations of @hell *il.
Answer( C )*(  &'pe( +C
Answer( C )*( 0 &'pe( +C
,,. &he accounting records of Westcott Compan' re$ealed the following costs(
12. Midwest Motors manufactures automobiles. Which of the following would not be classified as
direct materials b' the compan'?
=actor' utilities I <<<
A. @heet metal used in the automobile6s bod'.
Wages of assembl'-line personnel 14<<<<
B. &ires.
Customer entertainment 0<<<
C. !nterior leather.
!ndirect materials used 1:<<<
. C pla 'e r.
epreciation on salespersons6 cars 1<<<
%. Wheel lubricant.
/roduction e;uipment rental costs 11<<<<
Answer( % )*(  &'pe( 3
Costs that would be considered in the ca lculation of manufacturing o$erhead total(
A. I120<<<.
14. Which of the following emplo'ees of a commercial printer>publisher would be classified as
B. I,1<<<.
 C. I7<<<. ,:. Wor#-in-process in$entor' is composed of(
. I0<<<<. A. direct material and direct labor.
%. some other amount. B. direct labor and manufacturing o$erhead.
C. direct material and manufacturing o$erhead.
Answer( A )*(  &'pe( A . direct material onl'.
,. Which of the following statements is 8are9 correct? %. direct material direct labor and manufacturing o$erhead.
A. *$ertime premiums should be treated as a component of manufacturing o$erhead.
B. *$ertime premiums should be treated as a component of direct labor. Answer( % )*( 2 &'pe( +C
C. !dle time should be treated as a component of direct labor.
. !dle time should be accounted for as a special t'pe of loss. <. =ort Walton !ndustries began Eul' with a finished-goods in$entor' of I07<<<. &he finished-
%. Both "B" and "C" are correct. goods in$entor' at the end of Eul' was I01<<< and the cost of goods sold during the month was
I1,<<<. &he cost of goods manufactured during Eul' was(
Answer( A )*(  &'pe( +C A. I44<<<.
B. I70<<<.
,0. Con$ersion costs are( C. I117<<<.
A. direct material direct labor and manufacturing o$erhead. . I1,<<<.
B. direct material and direct labor. %. some other amount.
C. direct labor and manufacturing o$erhead.
 . p ri me co st s. Answer( C )*( 2 &'pe( A
%. p er io d c os ts .
1. ansas /lating Compan' reported a cost of goods manufactured of I,2<<<< with the firm6s
Answer( C )*(  &'pe( +C 'ear-end balance sheet re$ealing wor# in process and finished goods of I<<< and I24<<<
respecti$el'. !f supplemental information disclosed raw materials used in production of
,. /rime costs are comprised of( I0<<<< direct labor of I4<<<< and manufacturing o$erhead of I1,<<<< the compan'6s
A. direct materials and manufacturing o$erhead.  beginning wor# in process must ha$e been(
B. direct labor and manufacturing o$erhead. A. I<<<.
C. direct materials direct labor and manufacturing o$erhead. B. I4<<<.
. direct materials and direct labor. C. I2<<<.
%. direct materials and indirect materials. . I:4<<<.
%. some other amount.
Answer(  )*(  &'pe( +C
Answer( C )*( 2 &'pe( A
,2. Which of the following statements is true? ,. &he accounting records of Bronco Compan' re$ealed the following information(
A. /roduct costs affect onl' the balance sheet.
B. /roduct costs affect onl' the income statement.
+aw materials used I 2<<<<
C. /eriod costs affect onl' the balance sheet.
irect labor 1,<<<
. /eriod costs affect both the balance sheet and the income statement.
Manufacturing o$erhead 2<<<<
%. /roduct costs e$entuall' affect both the balance sheet and the income statement.
Wor#-in-process in$entor' 1>1 <<<<
=inished-goods in$entor' 1>1 17:<<<
Answer( % )*( 2 &'pe( 3
Wor#-in-process in$entor' 1,>1 42<<<
=inished-goods in$entor' 1,>1 10<<<<
,4. !n a manufacturing compan' the cost of goods completed during the period would include
which of the following elements?
A. +aw materials used. Bronco6s cost of goods manufactured is(
B. Beginning finished goods in$entor'. A. I1:<<<.
C. Mar#eting costs. B. I,,<<<.
. epreciation of deli$er' truc#s. C. I27<<<.
%. More than one of the abo$e. . I41<<<.
%. some other amount.
Answer( A )*( 2 &'pe( +C
,7. Which of the following e;uations is used to calculate cost of goods sold during the period? Answer ( A )*( 2 &'pe( A
A. Beginning finished goods K cost of goods manufactured K ending finished goods.
B. Beginning finished goods - ending finished goods. . &he accounting records of olphin Compan' re$ealed the following information(
C. Beginning finished goods K cost of goods manufactured.
. Beginning finished goods K cost of goods manufactured - ending finished goods.
&otal manufacturing costs I<<<<
%. Beginning finished goods K ending finished goods - cost of goods manufactured.
Wor#-in-process in$entor' Ean. 1 2<<<
Wor#-in-process in$entor' ec. 1 47<<<
Answer(  )*( 2 &'pe( +C
=inished-goods in$entor' Ean. 1 102<<<
=inished-goods in$entor' ec. 1 1,<<<
 7. Which of the following would li#el' be a cost dri$er for the amount of direct materials used?
olphin6s cost of goods sold is(
A. &he number of units sold.
A. I<7<<<.
B. &he number of direct labor hours wor#ed.
B. I,:<<<.
C. &he number of machine hours wor#ed.
C. I1<<<.
. &he number of emplo'ees wor#ing in the factor'.
. I<<<.
%. &he number of units produced.
%. some other amount.
Answer( % )*( 4 &'pe( 3
Answer( C )*( 2 &'pe( A
:. &he choices below depict fi$e costs of Benton Corporation and a possible dri$er for each cost.
Which of these choices li#el' contains an inappropriate cost dri$er?
0. =or the 'ear 5ust ended Cole Corporation6s manufacturing costs 8raw materials used direct
A. asoline consumedH number of miles dri$en.
labor and manufacturing o$erhead9 totaled I1<<<<<. Beginning and ending wor#-in-process
B. Manufacturing o$erhead incurred in a hea$il' automated facilit'H direct labor hours.
in$entories were I2<<<< and I:<<<< respecti$el'. Cole6s balance sheet also re$ealed
C. @ales commissionsH gross sales re$enue.
respecti$e beginning and ending finished-goods in$entories of I,<<<< and I17<<<<. *n the
. Building maintenance costH building s;uare footage.
 basis of this information how much would the compan' report as cost of goods manufactured
%. /ersonnel department costH number of emplo'ees.
8CM9 and cost of goods sold 8C@9?
A. CM I10<<<<H C@ I102<<<<.
Answer( B )*( 4 &'pe( 3
B. CM I104<<<<H C@ I10<<<<.
C. CM I1<<<<H C@ I102<<<<.
0<. ariable costs are those costs that(
. CM I14<<<<H C@ I10<<<<.
A. $ar' in$ersel' with changes in acti$it'.
%. @ome other amounts.
B. $ar' directl' with changes in acti$it'.
C. remain constant as acti$it' changes.
Answer( B )*( 2 &'pe( A
. decrease on a per-unit basis as acti$it' increases.
%. increase on a per-unit basis as acti$it' increases.
. )eggio !ndustries reported the following data for the 'ear 5ust ended( sales re$enue I:<<<<H
cost of goods sold I0,<<<<H cost of goods manufactured I<<<<H and selling and
Answer( B )*( 7 &'pe( +C
administrati$e epenses I14<<<<. )eggio6s gross margin would be(
A. I<<<<.
01. As acti$it' decreases unit $ariable cost(
B. I,<<<<<.
A. increases proportionatel' with acti$it'.
C. I2<<<<.
B. decreases proportionatel' with acti$it'.
. I<<<<.
C. remains constant.
%. I2,<<<<.
. increases b' a fied amount.
%. decreases b' a fied amount.
Answer(  )*( 2 &'pe( A
Answer( C )*( 7 &'pe( +C
2. /ump#in %nterprises began operations on Eanuar' 1 ,<1 with all of its acti$ities conducted
from a single facilit'. &he compan'6s accountant concluded that the 'ear6s building depreciation
0,. Which of the following is not an eample of a $ariable cost?
should be allocated as follows( selling acti$ities ,<LH administrati$e acti$ities LH and
A. @traight-line depreciation on a machine that has a fi$e-'ear ser$ice life.
manufacturing acti$ities 0L. !f /ump#in sold 2<L of ,<1 production during that 'ear what
B. Wages of manufacturing wor#ers whose pa' is based on hours wor#ed.
 percentage of the depreciation would appear 8either directl' or indirectl'9 on the ,<1 income
C. &ires used in the production of tractors.
statement?
. Aluminum used to ma#e patio furniture.
A. ,4L.
%. Commissions paid to sales personnel.
B. 0L.
C. L.
Answer( A )*( 7 &'pe( 3
. 7,L.
%. 1<<L.
0. =ied costs are those costs that(
A. $ar' directl' with changes in acti$it'.
Answer(  )*( 2 &'pe( A
B. $ar' in$ersel' with changes in acti$it'.
C. remain constant on a per-unit basis.
4. An emplo'ee accidentall' o$erstated the 'ear6s ad$ertising epense b' I<<<<. Which of the
. increase on a per-unit basis as acti$it' increases.
following correctl' depicts the effect of this error?
%. remain constant as acti$it' changes.
A. Cost of goods manufactured will be o$erstated b' I<<<<.
B. Cost of goods sold will be o$erstated b' I<<<<.
Answer( % )*( 7 &'pe( +C
C. Both cost of goods manufactured and cost of goods sold will be o$erstated b' I<<<<.
00. &he fied cost per unit(
. Cost of goods sold will be o$erstated b' I<<<< and cost of goods manufactured will be
A. will increase as acti$it' increases.
understated b' I<<<<.
B. will increase as acti$it' decreases.
%. 3one of the abo$e.
C. will decrease as acti$it' increases.
. will remain constant.
Answer( % )*( 2 &'pe( A
 %. will ehibit the beha$ior described in choices "B" and "C."
Answer( % )*( : &'pe( 3
Answer( % )*( 7 &'pe( 3
1. Costs that can be easil' traced to a specific department are called(
0. Which of the following is an eample of a fied cost? A . d ir ec t co sts .
A. /aper used in the manufacture of tetboo#s. B. indirect costs.
B. /ropert' taes paid b' a firm to the Cit' of )os Angeles. C. product costs.
C. &he wages of part-time wor#ers who are paid I7 per hour. . manufacturing costs.
. asoline consumed b' salespersons6 cars. %. processing costs.
%. @urgical supplies used in a hospital6s operating room.
Answer ( A )*( : &'pe( +C
Answer( B )*( 7 &'pe( 3
,. Which of the following would not be considered a direct cost with respect to the ser$ice
02. &he $ariable costs per unit are I0 when a compan' produces 1<<<< units of product. What are department of a new car dealership?
the $ariable costs per unit when 7<<< units are produced? A. Wages of repair techni;ues.
A. I0.<<. B. /ropert' taes paid b' the dealership.
B. I0.<. C. +epair parts consumed.
C. I.<<. . @alar' of the department manager.
. I.<. %. epreciation on new e;uipment used to anal'ze engine problems.
%. @ome other amount.
Answer( B )*( : &'pe( 3
Answer( A )*( 7 &'pe( A
. !ndirect costs(
04. &he fied costs per unit are I1< when a compan' produces 1<<<< units of product. What are A. can be traced to a cost ob5ect.
the fied costs per unit when 1,<< units are produced? B. cannot be traced to a particular cost ob5ect.
A. I0. C. are not important.
B. I2. . are alwa's $ariable costs.
C. I7. %. ma' be indirect with respect to isne' World but direct with respect to one its ma5or
. I1<. components %pcot Center.
%. @ome other amount.
Answer( B )*( : &'pe( +C 3
Answer( C )*( 7 &'pe( A 0. &he salar' that is sacrificed b' a college student who pursues a degree full time is a8n9(
A. sun# cost.
07. &otal costs are I1,<<<< when 1<<<< units are producedH of this amount $ariable costs are B. out-of-poc#et cost.
I07<<<. What are the total costs when 1,<<< units are produced? C. opportunit' cost.
A. I42<<. . differential cost.
B. I4,<<<. %. ma rg in al c ost .
C. I1,<<<<.
. I1,:2<<. Answer( C )*( 1< &'pe( 3
%. I100<<<.
. &he tuition that will be paid net semester b' a college student who pursues a degree is a8n9(
Answer(  )*( 7 &'pe( A A. sun# cost.
0:. Bater Compan' which pa's a 1<L commission to its salespeople reported sales re$enues of B. out-of-poc#et cost.
I,1<<<< for the period 5ust ended. !f fied and $ariable sales epenses totaled I2<<< what C. indirect cost.
would these epenses total at sales of I127<<<?  . a $e ra ge c ost .
A. I127<<. %. ma rg in al c ost .
B. I<<<.
C. I007<<. Answer( B )*( 1< &'pe( 3
. I17<<.
%. @ome other amount. 2. Which of the following costs should be ignored when choosing among alternati$es?
A. *pportunit' costs.
Answer(  )*( 7 &'pe( A B. @un# costs.
C. *ut-of-poc#et costs.
<. Which of the following would not be characterized as a cost ob5ect? . ifferential costs.
A. An automobile manufactured b' eneral Motors. %. 3one of the abo$e.
B. &he 3ew or# =ire epartment.
C. A Burger ing restaurant located in Cle$eland *hio. Answer( B )*( 1< &'pe( +C
. A elta Airlines flight from Atlanta to Miami.
%. All of the abo$e are eamples of cost ob5ects. 4. !f the total cost of alternati$e A is I<<<< and the total cost of alternati$e B is I0<<< then
 I12<<< is termed the( C. cost beha$ior.
A. opportunit' cost. . cost anal'sis.
B. a $e ra ge co st. %. cost approimation.
C. sun# cost.
. out-of-poc#et cost.
%. differential cost. Answer( C )*( 1 &'pe( +C

Answer( % )*( 1< &'pe( 3 ,. Which of the following costs changes in direct proportion to a change in the acti$it'
le$el?
se the following to answer ;uestions 7-:( A. ariable cost.
B . =i e d co st .
Wee Care is a nurser' school for pre-#indergarten children. &he school has determined that the following C. @emi$ariable cost.
 biwee#l' re$enues and costs occur at different le$els of enrollment(
. @tep-$ariable cost.
 3umber of  %. @tep-fied cost.
@tudents %nrolled &otal +e$enue &otal Costs
1< I<<<   $2,100 Answer( A )*( , &'pe( +C
1 0<<   2,700
12 07<<   2,800 . Montgomer' Compan' has a $ariable selling cost. !f sales $olume increases how
,< 2<<<   3,200 will the total $ariable cost and the $ariable cost per unit beha$e?
,1 2<<   3,255 &otal ari able Cost ari able Cost /er nit
A. !ncrease !ncrease
7. &he marginal cost when the twent'-first student enrolls in the school is(
B. !ncrease +emain constant
A. I.
B. I1. C. !ncrease ecrease
C. I<<. . +emain constant ecrease
. I<0. %. ecrease !ncrease
%. I,.
Answer( B )*( , &'pe( +C
Answer( A )*( 1< &'pe( A
0. What t'pe of cost ehibits the beha$ior that follows?
:. &he a$erage cost per student when 12 students enroll in the school is(
A. I1<<.
B. I1,. Manufacturing
C. I14. olume 8nits9 Cost /er nit
. I<<. <<<< I1.:
%. I0<<.
4<<<< 1.:
Answer( C )*( 1< &'pe( A
A. ariable cost.
2<. &he costs that follow all ha$e applicabilit' for a manufacturing enterprise. Which of the choices B. =i e d co st .
listed correctl' denotes the costsG applicabilit' for a ser$ice pro$ider? C. @emi$ariable cost.
  /eriod Cost ncontrollable Cost *pportunit' Cost
. iscretionar' fied cost.
Applicable Applicable 3ot applicable
%. @tep-fied cost.
Applicable 3ot applicable Applicable
Applicable Applicable Applicable
 3ot applicable Applicable Applicable Answer( A )*( , &'pe( 3
 3ot applicable Applicable 3ot applicable . /laza Corporation obser$ed that when ,<<< units were sold a particular cost
amounted to I4<<<< or I,.7< per unit. When $olume increased b' 1L the cost
Answer( C )*( 1< &'pe( +C totaled I7<<< 8i.e. I,.7< per unit9. &he cost that /laza is stud'ing can best be
described as a(
A. $ariable cost.
B . fied cost.
MULTIPLE CHOICE QUESTIONS C. semi$ariable cost.
. discretionar' fied cost.
1. &he relationship between cost and acti$it' is termed( %. step-fied cost.
A. cost estimation.
B. cost prediction. Answer( A )*( , &'pe( 3
 C. As a horizontal line.
2. A compan' obser$ed a decrease in the cost per unit. All other things being e;ual . As a $ertical line.
which of the following is probabl' true? %. As a cur$ilinear line.
A. &he compan' is stud'ing a $ariable cost and total $olume has increased.
B. &he compan' is stud'ing a $ariable cost and total $olume has decreased. Answer( C )*( , &'pe( 3
C. &he compan' is stud'ing a fied cost and total $olume has increased.
. &he compan' is stud'ing a fied cost and total $olume has decreased. 11. When graphed a t'pical fied cost appears as(
%. &he compan' is stud'ing a fied cost and total $olume has remained constant. A. a horizontal line.
B. a $ertical line.
Answer( C )*( , &'pe( 3 C. a u-shaped line.
. a diagonal line that slopes downward to the right.
4. Webster has the following budgeted costs at its anticipated production le$el %. a diagonal line that slopes upward to the right.
8epressed in hours9( $ariable o$erhead I1<<<<H fied o$erhead I,0<<<<. !f
Webster now re$ises its anticipated production slightl' downward it would epect( Answer( A )*( , &'pe( +C
A. total fied o$erhead of I,0<<<< and a lower hourl' rate for $ariable o$erhead.
B. total fied o$erhead of I,0<<<< and the same hourl' rate for $ariable o$erhead. 1,. Costs that remain the same o$er a wide range of acti$it' but 5ump to a different
C. total fied o$erhead of I,0<<<< and a higher hourl' rate for $ariable o$erhead. amount outside that range are termed(
. total $ariable o$erhead of less than I1<<<< and a lower hourl' rate for A. step-fied costs.
$ariable o$erhead. B. step-$ariable costs.
%. total $ariable o$erhead of less than I1<<<< and a higher hourl' rate for C. semi$ariable costs.
$ariable o$erhead. . cur$ilinear costs.
% . m i ed cos ts .
Answer( B )*( , &'pe( 3
Answer( A )*( , &'pe( +C
7. What t'pe of cost ehibits the beha$ior that follows?
1. @traight-line depreciation is a t'pical eample of a(
Manufacturing &otal Cost A. $ariable cost.
olume 8nits9 Cost /er nit B. step-$ariable cost.
<<<< I1<<<< I.<< C . f i ed c ost .
7<<<< 1<<<< 1.77  . m i ed cos t.
%. cur$ilinear cost.
A. ariable cost.
B. = i ed c os t. Answer( C )*( , &'pe( +C
C. @emi$ariable cost. 10. Which of the following choices denotes the t'pical cost beha$ior of ad$ertising and
. @tep-$ariable cost. sales commissions?
%. M i ed c os t. Ad$ertising @ales Commissions
A. ariable ariable
Answer( B )*( , &'pe( 3 B. ariable =ied
:. When graphed a t'pical $ariable cost appears as( C. =ied ariable
A. a horizontal line. . =ied =ied
B. a $ertical line. %. @emi$ariable ariable
C. a u-shaped line.
. a diagonal line that slopes downward to the right. Answer( C )*( , &'pe( 3
%. a diagonal line that slopes upward to the right.
1. ouglas Corporation recentl' produced and sold 1<<<<< units. =ied costs at this
Answer( % )*( , &'pe( +C le$el of acti$it' amounted to I<<<<H $ariable costs were I1<<<<<. Dow much cost
would the compan' anticipate if during t he net period it produced and sold 1<,<<<
1<. 3orman Compan' pa's a sales commission of L on each unit sold. !f a graph is units?
 prepared with the $ertical ais representing per-unit cost and the horizontal ais A . I 1 < << <.
representing units sold how would a li ne that depicts sales commissions be drawn? B . I11<<<.
A. As a straight diagonal line sloping upward to the right. C . I1,<<<.
B. As a straight diagonal line sloping downward to the right.  . I 1  << <.
%. @ome other amount not listed abo$e.
 . cur$ilinear cost.
Answer( C )*( , &'pe( A %. discretionar' cost.

12. %tron !nc. has onl' $ariable costs and fied costs. A re$iew of the compan'6s Answer( A )*( , &'pe( +C
records disclosed that when 1<<<<< units were produced fied manufacturing costs
amounted to I,<<<<< and the cost per unit manufactured totaled I. *n the basis of ,1. +ichard Damilton has a fast-food franchise and must pa' a franchise fee of I<<<
this information how much cost would the firm anticipate at an acti$it' le$el of  plus L of gross sales. !n terms of cost beha$ior the fee is a(
:4<<< units? A. $ariable cost.
A . I 07 << <. B . f i ed c ost .
B . I 0:1 << <. C. step-fied cost.
C . I 0:0 << <. . semi$ariable cost.
 . I << << <. %. cur$ilinear cost.
%. @ome other amount not listed abo$e.
Answer(  )*( , &'pe( 3
Answer( B )*( , &'pe( A ,,. Which of the following are eamples of a mied cost?

14. A re$iew of /arr' Corporation6s accounting records found that at a $olume of :<<<< I. A building that is used for both manufacturing and sales acti$ities.
units the $ariable and fied cost per unit amounted to I7 and I0 respecti$el'. *n the II. An emplo'ee6s compensation which consists of a fl at salar' plus a
 basis of this information what amount of total cost would /arr' anticipate at a commission.
$olume of 7<<< units? III. epreciation that relates to fi$e different machines.
A. I1<,<<<<. IV. Maintenance cost that must be split between sales and administrati$e offices.
B . I 1 <0 < <<< .
C . I 1 <2 < <<< . A. ! onl'.
. I1<7<<<<. B. !! onl'.
%. @ome other amount not listed abo$e. C. ! and !!!.
. ! !!! and !.
Answer( B )*( , &'pe( A %. ! !! !!! and !.
17. %ach of a$idson6s production managers 8annual salar' cost I0<<<9 can o$ersee
2<<<< machine hours of manufacturing acti$it'. &hus if the compan' has <<<< Answer( B )*( , &'pe( 3
hours of manufacturing acti$it' one manager is neededH for 4<<< hours two
managers are neededH for 1,<<< hours three managers are neededH and so forth.
,. Which of the following costs ehibits both decreasing and increasing marginal costs
a$idson6s salar' cost can best be described as a(
o$er a specific range of acti$it'?
A. $ariable cost.
A. @emi$ariable cost.
B. semi$ariable cost. B. Cur$ilinear cost.
C. step-$ariable cost.
C. @tep-fied cost.
 . f ie d co st . . @tep-$ariable cost.
%. step-fied cost.
% . =i e d co st .
Answer( % )*( , &'pe( 3 Answer( B )*( , &'pe( +C
1:. A cost that has both a fied and $ariable component is termed a( ,0. &he rele$ant range is that range of acti$it'(
A. step-fied cost. A. where a compan' achie$es its maimum efficienc'.
B. step-$ariable cost. B. where units produced e;ual units sold.
C. semi$ariable cost. C. where management epects the firm to operate.
. cur$ilinear cost. . where the firm will earn a profit.
%. discretionar' cost. %. where epected results are abnormall' high.
Answer( C )*( , &'pe( +C Answer( C )*(  &'pe( +C
,<. A mied cost is often #nown as a( ,. Within the rele$ant range of acti$it' costs(
A. semi$ariable cost.
A. can be estimated with reasonable accurac'.
B. step-fied cost. B. can be epected to change radicall'.
C. $ariable cost.
 C. ehibit decreasing marginal cost patterns. 1. Which of the following is not an eample of a committed fied cost?
. ehibit increasing marginal cost patterns. A. /ropert' taes.
%. cannot be estimated satisfactoril'. B. epreciation on buildings.
C. @alaries of management personnel.
Answer( A )*(  &'pe( +C . *utla's for ad$ertising programs.
,2. Within the rele$ant range a cur$ilinear cost function can sometimes be graphed as a( %. %;uipment rental costs.
A. straight line.
B . 5 ag ge d l in e. Answer(  )*( 0 &'pe( +C
C. $ertical line.
. cur$ed line. ,. Committed fied costs would include(
%. horizontal line. A. ad$ertising.
B. research and de$elopment.
Answer( A )*(  &'pe( +C C. depreciation on buildings and e;uipment.
. contributions to charitable organizations.
,4. As a firm begins to operate outside the rele$ant range the accurac' of cost estimates %. ependitures for direct labor.
for fied and $ariable costs(
=ied   Variable Answer( C )*( 0 &'pe( +C
A. increases increases
B. increases decreases . Amounts spent for charitable contributions are an eample of a8n9(
C. decreases increases A. committed fied cost.
. decreases decreases B. committed $ariable cost.
%. decreases remains unchanged C. discretionar' fied cost.
. discretionar' $ariable cost.
Answer(  )*(  &'pe( 3 %. engineered cost.

,7. A $ariable cost that has a definiti$e ph'sical relationship to the acti$it' measure is Answer( C )*( 0 &'pe( +C
called a8n9(
A. discretionar' cost. 0. Which of the following would not t'picall' be classified as a discretionar' fied cost?
B. engineered cost. A. %;uipment depreciation.
C. managed cost. B. %mplo'ee de$elopment 8education9 programs.
. programmed cost. C . A d$e rt is in g.
%. committed cost. . *utla's for research and de$elopment.
%. Charitable contributions.
Answer( B )*( 0 &'pe( +C
Answer( A )*( 0 &'pe( +C
,:. Costs that result from an organization6s ownership or use of facilities and its basic
organizational structure are termed( . Which of the following choices correctl' classifies a committed fied cost and a
A. discretionar' fied costs. discretionar' fied cost?
B. committed fied costs. Committed iscretionar'
C. discretionar' $ariable costs. A. /romotion Management salaries
. committed $ariable costs. B. Building depreciation Charitable contributions
%. engineered costs. C. Management training /ropert' taes
. %;uipment rentals %;uipment depreciation
Answer( B )*( 0 &'pe( +C %. +esearch and de$elopment Ad$ertising

<. /ropert' taes are an eample of a8n9( Answer( B )*( 0 &'pe( +C

A. committed fied cost. 2. Which t'pe of fied cost 819 tends to be more long-term in nature and 8,9 can be cut
B. committed $ariable cost.  bac# more easil' in bad economic times without doing serious harm to organizational
C. discretionar' fied cost. goals and ob5ecti$es?
. discretionar' $ariable cost. )ong &erm in Can be Cut Bac# More %asil' !n
%. engineered cost.  3ature Bad %conomic &imes
A. Committed Committed
Answer( A )*( 0 &'pe( +C B. Committed iscretionar'
 C. iscretionar' Committed B. high-low method.
. iscretionar' iscretionar' C. $isual-fit method.
%. Committed 3o difference between . account anal'sis method.
committed and discretionar' %. multiple regression method.

Answer( B )*( 0 &'pe( 3 Answer( C )*(  &'pe( +C

4. Digh-tech automation combined with a downsizing of a compan'6s hourl' labor force 0,. Which of the following methods of cost estimation relies on onl' two data points?
often results in( A. )east-s;uares regression.
A. increased fied costs and increased $ariable costs. B. &he high-low method.
B. increased fied costs and reduced $ariable costs. C. &he $isual-fit method.
C. reduced fied costs and increased $ariable costs. . Account anal'sis.
. reduced fied costs and reduced $ariable costs. %. Multiple regression.
%. increased discretionar' fied costs and reduced committed fied costs.
Answer( B )*(  &'pe( +C
Answer( B )*( 0 &'pe( +C
se the following to answer ;uestions 0-00(
7. Which of the following techni;ues is not used to anal'ze cost beha$ior?
A. )east-s;uares regression. @wanson and Associates presentl' leases a cop' machine under an agreement that calls for a
B. Digh-low method. fied fee each month and a charge for each cop' made. @wanson made 4<<< copies and paid a
C. isual-fit method. total of I2< in MarchH in Ma' the firm paid I,7< for <<< copies. &he compan' uses the
. )inear programming. high-low method to anal'ze costs.
%. Multiple regression.
0. @wanson6s $ariable cost per cop' is(
Answer(  )*(  2 &'pe( +C A. I<.<0<.
B. I<.<1.
:. &he high-low method and least-s;uares regression are used b' accountants to( C. I<.<.
A. e$aluate di$isional managers for purposes of raises and promotions. . I<.<2.
B. choose among alternati$e courses of action. %. an amount other than those gi$en abo$e.
C. maimize output.
. estimate costs. Answer( A )*(  &'pe( A
%. control operations. 00. @wanson6s monthl' fied fee is(
A. I7<.
Answer(  )*(  &'pe( +C B. I1<,.
0<. Which of the following statements about the $isual-fit method is 8are9 true? C. I1<2.
. I11,.
I. &he method results in the creation of a scatter diagram. %. an amount other than those gi$en abo$e.
II. &he method is not totall' ob5ecti$e because of the manner in which the cost
line is determined. Answer( A )*(  &'pe( A
III. &he method is especiall' helpful in the determination of outliers.
se the following to answer ;uestions 0-04(
A. ! onl'.
B. !! onl'. Atlanta !nc. which uses the high-low method to anal'ze cost beha$ior has determined that
C. ! and !!. machine hours best eplain the compan'6s utilities cost. &he compan'6s rele$ant range of
. ! and !!!. acti$it' $aries from a low of 2<< machine hours to a high of 11<< machine hours with the
%. !  ! ! an d ! !!. following data being a$ailable for the first si months of the 'ear(

Answer( % )*(  &'pe( +C Month tilities Machine Dours

Eanuar' I74<< 7<<
01. &he nonstatistical method of cost estimation that calls for the creation of a scatter =ebruar' 72< 4,<
diagram is the( March 7:< 71<
A. least-s;uares regression method. April :2< :,<
Ma' :2, :<
 Eune :1< :<< Answer( B )*(  &'pe( A
<. &he following data relate to the Dodges Compan' for Ma' and August of the current
0. &he $ariable utilities cost per machine hour is( 'ear(
A. I<.17.
B. I0.<. Ma' August
C. I.<<. Maintenance hours 1<<<< 1,<<<
. I.<. Maintenance cost I,2<<<< I<<<<<
%. an amount other than those listed abo$e.

Answer(  )*(  &'pe( A Ma' and August were the lowest and highest acti$it' le$els and Dodges uses the
high-low method to anal'ze cost beha$ior. Which of the following statements is true?
02. &he fied utilities cost per month is( A. &he $ariable maintenance cost is I, per hour.
A. I420. B. &he $ariable maintenance cost is I,.< per hour.
B. I00<<. C. &he $ariable maintenance cost is I,2 per hour.
C. I042<. . &he fied maintenance cost is I2<<<< per month.
. I1<<. %. More than one of the abo$e statements is true.
%. an amount other than those listed abo$e.
Answer(  )*(  &'pe( A
Answer( B )*(  &'pe( A
04. sing the high-low method the utilities cost associated with :7< machine hours se the following to answer ;uestions 1-(
would be(
A. I:1<. ang Manufacturing which uses the high-low method ma#es a product called in. &he
B. I:22<. compan' incurs three different cost t'pes 8A B and C9 and has a rele$ant range of operation
C. I:4<<.  between ,<< units and 1<<<< units per month. /er-unit costs at two different acti$it' le$els
. I:4:<. for each cost t'pe are presented below.
%. an amount other than those listed abo$e.
&'pe A &'pe B &'pe C &otal
Answer(  )*(  &'pe( A <<< units I0 I: I0 I14
4<< units I0 I2 I I1
07. Ditchcoc# !nc. uses the high-low method to anal'ze cost beha$ior. &he compan'
obser$ed that at 1,<<< machine hours of acti$it' total maintenance costs a$eraged 1. &he cost t'pes shown abo$e are identified b' beha$ior as(
I4.<< per hour. When acti$it' 5umped to 1<<< machine hours which was still &'pe A &'pe B &'pe C
within the rele$ant range the a$erage cost per machine hour totaled I2.0<. *n the A. =ied ariable @emi$ariable
 basis of this information the $ariable cost per machine hour was( B. =ied @emi$ariable ariable
A. I0.<<. C. ariable @emi$ariable =ied
B. I2.0<. . ariable =ied @emi$ariable
C. I2.4<. %. @emi$ariable ariable =ied
. I4.<<.
%. an amount other than those listed abo$e. Answer(  )*( ,  &'pe( A 3

Answer( A )*(  &'pe( A ,. !f ang produces 1<<<< units the total cost would be(
A. I:<<<<.
0:. 3orthridge !nc. uses the high-low method to anal'ze cost beha$ior. &he compan' B . I1<<<<<.
obser$ed that at ,<<<< machine hours of acti$it' total maintenance costs a$eraged C . I 11 < <<< .
I1<.< per hour. When acti$it' 5umped to ,0<<< machine hours which was still  . I 1,  << <.
within the rele$ant range the a$erage cost per machine hour totaled I:.4. *n the %. an amount other than those gi$en abo$e.
 basis of this information the compan'6s fied maintenance costs were(
A. I,0<<<. Answer( C )*(  &'pe( A
B. I:<<<<. . &he cost formula that epresses the beha$ior of ang6s total cost is(
C. I,1<<<. A .  N I< K I 14 O.
 . I ,0 << <. B.  N I,<<<< K I1O.
%. an amount other than those listed abo$e. C.  N I0<<<< K I:O.
.  N I0<<< K I0O.
 %.  N I2<<<< K IO. 7. &empe !nc. is stud'ing mar#eting cost and sales $olume and has generated the
following information b' use of a scatter diagram and a least-s;uares regression
Answer( % )*(  &'pe( A anal'sis(

0. !n regression anal'sis the $ariable that is being predicted is #nown as the( @catter iagram +egression A
A. independent $ariable. ariable cost per unit sold I2.< I2.7<
B. dependent $ariable. &otal monthl' fied cost I0<<< I0,
C. eplanator' $ariable.
. interdependent $ariable. &empe is now preparing an estimate for monthl' sales of 17<<< units. *n the basis
%. functional $ariable. of the data presented compute the most accurate sales forecast possible.
A . I 1 : < <.
Answer( B )*(  &'pe( +C B . I 12 , << <.
C . I 12 0 :< <.
. Mohaw# /roducts has determined that the number of machine hours wor#ed 8MD9  . I 12 4 0< <.
dri$es the amount of manufacturing o$erhead incurred 8M*D9. *n the basis of this %. An amount other than those listed abo$e.
relationship a staff anal'st has constructed the following regression e;uation(
Answer( C )*(  &'pe( A 3
M*D N ,0<<<< K 7MD
:. Waller %nterprises has determined that three $ariables pla' a #e' role in determining
compan' re$enues. &o arri$e at an ob5ecti$e forecast of re$enues for the net
Which of the choices correctl' depicts the nature of Mohaw#6s $ariables? accounting period Waller should use(
ependent !ndependent A. simple regression.
A. M*D M*D B. multiple regression.
B. M*D MD C. a scatter diagram.
C. MD M*D . comple regression.
. MD MD %. the high-low method.
%. 7 ,0<<<<
Answer( B )*( 2 &'pe( 3
Answer( B )*(  &'pe( 3
2<. Which of the following tools is not associated with cost estimation?
2. Chec#ers Corporation which uses least-s;uares regression anal'sis has deri$ed the A. )east-s;uares regression.
following regression e;uation for estimates of manufacturing o$erhead(  N 0:<<< B. Multiple regression.
K .2O. Which of the following statements is true if the primar' cost dri$er is C. !n$ersion e;uations.
machine hours? . &ime and motion 8engineering9 studies.
A. &otal manufacturing o$erhead is represented b' the $ariable "O." %. )earning cur$es.
B. &he compan' anticipates I0:<<< of fied manufacturing o$erhead.
C. "O" is commonl' #nown as the dependent $ariable. Answer( C )*(  2 &'pe( +C
. "O" represents the number of machine hours. 21. A staff assistant at Washington Corporation recentl' determined that the first four
%. Both "B" and "" are true. units completed in a new manufacturing process too# 7<< hours to complete or an
a$erage of ,<< hours per unit. &he assistant also found that when the cumulati$e
Answer( % )*(  &'pe( 3 output produced doubles the a$erage labor time declines b' ,<L. *n the basis of
4. Boulder !nc. recentl' conducted a least-s;uares regression anal'sis to predict selling this information how man' total hours would Washington use if it produces 12 units?
epenses. &he compan' has constructed the following regression e;uation(  N A. 1,7.
,:<<< K 4.7<O. Which of the following statements is false if the primar' cost B. 12<.
dri$er is number of units sold? C. 1,7<.
A. &he compan' anticipates I,:<<< of fied selling epenses. . ,<07.
B. "" represents total selling epenses. %. An amount other than those listed abo$e.
C. &he compan' epects both $ariable and fied selling epenses.
. =or each unit sold total selling epenses will increase b' I4.7<. Answer(  )*( 2 &'pe( A
%. "O" represents the number of hours wor#ed during the period.
2,. Which of the following is not an issue in the collection of data for cost estimation?
Answer( % )*( ,  &'pe( 3 A. *utliers.
B. Missing data.
 C. Mismatched time periods. C. A 10L increase in $ariable cost.
. ! nf la ti on . . A 14L decrease in fied cost.
%. All of the abo$e are issues in data collection. %. A ,L increase in the number of units sold.

Answer( % )*( 4 &'pe( +C Answer( A )*( 1 &'pe( 3

. Which of the following would ta#e place if a compan' were able to reduce its
2. A high +,   measure in regression anal'sis is preferred because( $ariable cost per unit?
A. it indicates a good fit of the regression line through the data points. Contribution Brea#-e$en
B. it shows that a great deal of the change in the dependent $ariable is eplained b' Margin /oint
change in the independent $ariable. A. !ncrease !ncrease
C. it means that the independent $ariable is a good predictor of the dependent B. !ncrease ecrease
$ariable. C. ecrease !ncrease
. it means that the cost anal'st can be relati$el' confident in his or her cost . ecrease ecrease
 predictions. %. !ncrease 3o effect
%. all of the preceding statements are true.
Answer( B )*( 1 &'pe( 3
Answer( % )*( 7 &'pe( +C
2. Which of the following would ta#e place if a compan' eperienced an increase in
fied costs?
A. 3et income would increase.
MULTIPLE CHOICE QUESTIONS
B. &he brea#-e$en point would increase.
C. &he contribution margin would increase.
1. C/ anal'sis can be used to stud' the effect of(
. &he contribution margin would decrease.
A. changes in selling prices on a compan'6s profitabilit'.
%. More than one of the abo$e e$ents would occur.
B. changes in $ariable costs on a compan'6s profitabilit'.
C. changes in fied costs on a compan'6s profitabilit'.
Answer( B )*( 1 &'pe( 3
. changes in product sales mi on a compan'6s profitabilit'.
%. all of the abo$e.
4. Assuming no change in sales $olume an increase in a firm6s per-unit contribution
margin would(
Answer( % )*( 1 &'pe( +C
A. increase net income.
B. decrease net income.
,. &he brea#-e$en point is that le$el of acti$it' where(
C. ha$e no effect on net income.
A. total re$enue e;uals total cost.
. increase fied costs.
B. $ariable cost e;uals fied cost.
%. decrease fied costs.
C. total contribution margin e;uals the sum of $ariable cost plus fied cost.
. sales re$enue e;uals total $ariable cost.
Answer( A )*( 1 &'pe( 3
%. profit is greater than zero.
7. A compan' that desires to lower its brea#-e$en point should stri$e to(
Answer( A )*( 1 &'pe( +C
A. decrease selling prices.
B. reduce $ariable costs.
. &he unit contribution margin is calculated as the difference between(
C. increase fied costs.
A. selling price and fied cost per unit.
. sell more units.
B. selling price and $ariable cost per unit.
%. pursue more than one of the abo$e actions.
C. selling price and product cost per unit.
. fied cost per unit and $ariable cost per unit.
Answer( B )*( 1 &'pe( 3
%. fied cost per unit and product cost per unit.
:. A compan' has fied costs of I:<< and a per-unit contribution margin of I. Which
Answer( B )*( 1 &'pe( +C
of the following statements is 8are9 true?
A. %ach unit "contributes" I toward co$ering the fied costs of I:<<.
0. Which of the following would produce the largest increase in the contribution margin
B. &he situation described is not possible and there must be an error.
 per unit?
C. *nce the brea#-e$en point is reached the compan' will ma#e mone' at the rate
A. A 4L increase in selling price.
of I per unit.
B. A 1L decrease in selling price.
. &he firm will definitel' lose mone' in this situation.
%. @tatements "A" and "C" are true.

Answer( % )*( 1 &'pe( 3

 1<. @anderson sells a single product for I< that has a $ariable cost of I<. =ied costs
amount to I per unit when anticipated sales targets are met. !f the compan' sells one 10. A recent income statement of ale Corporation reported the following data(
unit in ecess of its brea#-e$en $olume the bottom-line profit will be(
A. I1. Sales revenue !)#'$$#$$$
B. I,<. %aria&le costs ,#'$$#$$$
C. I<. i(ed costs "$$#$$$
. an amount that cannot be deri$ed based on the information presented.
%. an amount other than those in choices "A" "B" and "C" but one that can be
deri$ed based on the information presented. !f these data are based on the sale of <<< units the brea#-e$en sales would be(
A. I,<<<<<<.
Answer( B )*( 1 &'pe( A B . I , ,<2 << <.
C . I , << << <.
11. At a $olume of 1<<< units Boston reported sales re$enues of I2<<<<< $ariable . I1<<<<<<<.
costs of I,,<<< and fied costs of I1,<<<<. &he compan'6s contribution margin %. an amount other than those abo$e.
 per unit is(
A. I14. Answer( A )*( 1 &'pe( A
B. I,.
C. I04. 1. )awton !nc. sells a single product for I1,. ariable costs are I7 per unit and fied
. I. costs total I2<<<< at a $olume le$el of 2<<<< units. Assuming that fied costs do
%. an amount other than those abo$e. not change )awton6s brea#-e$en point would be(
A. <<<< units.
Answer( B )*( 1 &'pe( A B. 0<<< units.
C. :<<<< units.
1,. A recent income statement of Ban#s Corporation reported the following data( . negati$e because the compan' loses I, on e$er' unit sold.
%. a positi$e amount other than those gi$en abo$e.
Sales revenue !"#$$$#$$$
%aria&le costs '#$$$#$$$ Answer( C )*( 1 &'pe( A
i(ed costs )#)$$#$$$
12. reen !nc. sells a single product for I,<. ariable costs are I7
!f these data are based on the sale of ,<<<< units the contribution margin per unit  per unit and fied costs total I1,<<<< at a $olume le$el of <<< units. Assuming
would be( that fied costs do not change reen6s brea#-e$en sales would be(
A. I0<. A . I 12 < << <.
B. I1<. B . I,<<<<<.
C. I,:<. C . I<<<<<.
. I2<.  . I 07 < << <.
%. an amount other than those abo$e. %. an amount other than those abo$e.

Answer( B )*( 1 &'pe( A Answer( B )*( 1 &'pe( A

1. A recent income statement of =o Corporation reported the following data(
14. *rion recentl' reported sales re$enues of I7<<<<< a total contribution margin of
I<<<<< and fied costs of I17<<<<. !f sales $olume amounted to 1<<<< units the
Sales revenue !*#+$$#$$$ compan'6s $ariable cost per unit must ha$e been(
%aria&le costs ,#+$$#$$$ A. I1,.
i(ed costs ,#$$$#$$$ B. I,.
C. I<.
!f these data are based on the sale of 1<<<< units the brea#-e$en point would be( . I:,.
A . , < << u ni ts . %. an amount other than those abo$e.
B . , 4 47 un it s.
C .  2 << un it s. Answer( C )*( 1 &'pe( A
 .  < << u ni ts .
%. an amount other than those abo$e. 17. @trand has a brea#-e$en point of 1,<<<< units. !f the firm6s sole product sells for I0<
and fied costs total I07<<<< the $ariable cost per unit must be(
Answer(  )*( 1 &'pe( A A. I0.
 B. I2.
C. I00. C o s t- V o u m e - P ro t G ra p &
. an amount that cannot be deri$ed based on the information presented. $100,000
%. an amount other than those in choices "A" "B" and "C" but one that can be
deri$ed based on the information presented.
% G
80,000 '
Answer( B )*( 1 &'pe( A

1:. +ibco Co. ma#es and sells onl' one product. &he unit contribution margin is I2 and
the brea#-e$en point in unit sales is ,0<<<. &he compan'6s fied costs are( 0,000 (
A. I0<<<.
B. I100<<. 
C. I0<<<<.
!0,000 C
 . I 100 << <.
%. an amount other than those abo$e.

Answer(  )*( 1 &'pe( )

20,000

,<. &he contribution-margin ratio is(

A. the difference between the selling price and the $ariable cost per unit.
B. fied cost per unit di$ided b' $ariable cost per unit.
0 1,000 2 ,0 0 0 3,000 ! ,0 0 0 5,000 " # its
C. $ariable cost per unit di$ided b' the selling price.
. unit contribution margin di$ided b' the selling price. ,. )ine A is the(
%. unit contribution margin di$ided b' fied cost per unit. A. total re$enue line.
B. fied cost line.
Answer(  )*( , &'pe( +C C. $ariable cost line.
. total cost line.
,1. At a $olume le$el of <<<<< units @ulli$an reported the following information( % . p rof it li ne.

@ales price I2< Answer( A )*(  &'pe( +C

ariable cost per unit ,<
=ied cost per unit 0 ,0. )ine C represents the le$el of(
A . f i ed co st .
&he compan'6s contribution-margin ratio is( B. $ariable cost.
A. <.. C. semi$ariable cost.
B. <.0<.  . t ot al cos t.
C. <.2<. % . m i ed c os t.
. <.24.
%. an amount other than those abo$e. Answer( A )*(  &'pe( +C

Answer(  )*( , &'pe( A ,. &he slope of line A is e;ual to the(

A. fied cost per unit.
,,. Which of the following epressions can be used to calculate the brea#-e$en point B. selling price per unit.
with the contribution-margin ratio 8CM+9? C. profit per unit.
A. CM+ P fied costs. . semi$ariable cost per unit.
B. CM+  fied costs. %. unit contribution margin.
C. =ied costs P CM+.
. 8=ied costs K $ariable costs9  CM+. Answer( B )*(  &'pe( +C
%. 8@ales re$enue - $ariable costs9 P CM+. ,2. &he slope of line B is e;ual to the(
A. fied cost per unit.
Answer( C )*( , &'pe( B. selling price per unit.
se the following to answer ;uestions ,-<( C. $ariable cost per unit.
 . profit per unit. P ro f t- V o u m e G ra p

%. unit contribution margin. $!0,000 &

Answer( C )*(  &'pe( +C

20,000
,4. &he $ertical distance between the total cost line and the total re$enue line represents(
A. f ie d co st .
B. $ariable cost.
0
C. profit or loss at that $olume. 2,000 !,000 ,000 " # i ts
. semi$ariable cost.
%. the safet' margin.
20,000
Answer( C )*(  &'pe( +C

,7. Assume that the firm whose cost structure is depicted in the figure epects to produce
a loss for the upcoming period. &he loss would be shown on the graph( !0,000
A. b' the area immediatel' abo$e the brea#-e$en point.
B. b' the area immediatel' below the total cost line.
C. b' the area diagonall' to the right of the brea#-e$en point. 0,000
. b' the area diagonall' to the left of the brea#-e$en point.
%. in some other area not mentioned abo$e. 1. )ine A is the(
A. fied cost line.
Answer(  )*(  &'pe( +C B. $ariable cost line.
C. total cost line.
,:. At a gi$en sales $olume the $ertical distance between the fied cost line and the total . total re$enue line.
cost line represents( % . p rof it li ne.
A . f ie d co st .
B. $ariable cost. Answer( % )*(  &'pe( 3
C. profit or loss at that $olume.
. semi$ariable cost. ,. &he triangular area between the horizontal ais and )ine A to the right of 0<<<
%. the safet' margin. represents(
A . f i ed co st .
Answer( B )*(  &'pe( +C B. $ariable cost.
C. profit.
<. Assume that the firm whose cost structure is depicted in the figure epects to produce . loss.
a profit for the upcoming accounting period. &he profit would be shown on the graph %. sales re$enue.
 b' the letter(
A. . Answer( C )*(  &'pe(
B. %.
C. =. . A recent income statement of *slo Corporation reported the following data(
. .
%. D. Units sold "#$$$
Sales revenue !-#)$$#$$$
Answer(  )*(  &'pe( %aria&le costs #$$$#$$$
se the following to answer ;uestions 1-,( i(ed costs ,#+$$#$$$

!f the compan' desired to earn a target net profit of I07<<<< it would ha$e to sell(
A . 1 ,< < uni ts .
B . , 7< < u ni ts .
C . 0 << < u ni ts .
 .  ,< < uni ts .
%. an amount other than those abo$e.
 Answer(  )*( 0 &'pe( A :. Maie6s budget for the upcoming 'ear re$ealed the following figures(

0. ellow !nc. sells a single product for I1<. ariable costs are I0 per unit and fied @ales re$enue I70<<<<
costs total I1,<<<< at a $olume le$el of 1<<<< units. What dollar sales le$el would Contribution margin <0<<<
ellow ha$e to achie$e to earn a target net profit of I,0<<<<?  3et income 0<<<
A . I 0<< << <.
B . I << << <. !f the compan'6s brea#-e$en sales total I4<<<< Maie6s safet' margin would be(
C . I 2<< << <. A . I 8:< < << 9.
 . I 4< << <. B . I:<<<<.
%. I:<<<<<. C . I,02<<<.
 . I  2 << <.
Answer( C )*( 0 &'pe( A % . I2:2<<<.

se the following to answer ;uestions -4( Answer( B )*( 0 &'pe( A

Archie sells a single product for I<. ariable costs are 2<L of the selling price and the 0<. !f a compan' desires to increase its safet' margin it should(
compan' has fied costs that amount to I0<<<<<. Current sales total 12<<< units. A. increase fied costs.
B. decrease the contribution margin.
 . A rc hi e( C. decrease selling prices assuming the price change will ha$e no effect on
A. will brea#-e$en b' selling 7<<< units. demand.
B. will brea#-e$en b' selling 1 units. . stimulate sales $olume.
C. will brea#-e$en b' selling ,<<<< units. %. attempt to raise the brea#-e$en point.
. will brea#-e$en b' selling 1<<<<<< units.
%. cannot brea#-e$en because it loses mone' on e$er' unit sold. Answer(  )*( 0 &'pe( 3
01. ana sells a single product at I,< per unit. &he firm6s most recent income statement
Answer( C )*( 1 &'pe( A re$ealed unit sales of 1<<<<< $ariable costs of I7<<<<< and fied costs of
I0<<<<<. !f a I0 drop in selling price will boost unit sales $olume b' ,<L the
2. %ach unit that the compan' sells will( compan' will eperience(
A. increase o$erall profitabilit' b' I,<. A. no change in profit because a ,<L drop in sales price is balanced b' a ,<L
B. increase o$erall profitabilit' b' I<. increase in $olume.
C. increase o$erall profitabilit' b' I<. B. an I7<<<< drop in profitabilit'.
. increase o$erall profitabilit' b' some other amount. C. a I,0<<<< drop in profitabilit'.
%. decrease o$erall profitabilit' b' I. . a I0<<<<< drop in profitabilit'.
%. a change in profitabilit' other than those abo$e.
Answer( A )*( 1 &'pe( A
4. !n order to produce a target profit of I,,<<< Archie6s dollar sales must total( Answer( C )*( 0 &'pe( A
A. I700<.
B. I,11<<. 0,. rimes is stud'ing the profitabilit' of a change in operation and has gathered the
C . I 1 << < <<< . following information(
. I1<<<<.
%. an amount other than those abo$e.
Current Anticipated
Answer(  )*( 0 &'pe( A *peration *peration
=ied costs I7<<< I07<<<
7. &he difference between budgeted sales re$enue and brea#-e$en sales re$enue is the( @elling price I12 I,,
A. contribution margin. ariable cost I1< I1,
B. contribution-margin ratio. @ales 8units9 :<<< 2<<<
C. safet' margin.
. target net profit. @hould rimes ma#e the change?
%. operating le$erage. A. es the compan' will be better off b' I2<<<.
B. 3o because sales will drop b' <<< units.
Answer( C )*( 0 &'pe( +C C. 3o because the compan' will be worse off b' I0<<<.
 . 3o because the compan' will be worse off b' I,,<<<. . An amount other than those abo$e.
%. !t is impossible to 5udge because additional information is needed. %. Cannot be determined based on the information presented.

Answer( C )*( 0 &'pe( A Answer( A )*(  &'pe( A

se the following to answer ;uestions 04-<(
0. leason sells a single product at I10 per unit. &he firm6s most recent income
statement re$ealed unit sales of 7<<<< $ariable costs of I7<<<<< and fied costs of )amar Q Co. ma#es and sells two t'pes of shoes /lain and =anc'. ata concerning these
I2<<<<. Management belie$es that a I drop in selling price will boost unit sales  products are as follows(
$olume b' ,<L. Which of the following correctl' depicts how these two changes
will affect the compan'6s brea#-e$en point? /lain =anc'
rop in !ncrease in nit selling price I,<.<< I.<<
@ales /rice @ales olume ariable cost per unit 1,.<< ,0.<
A. !ncrease !ncrease
B. !ncrease ecrease @it' percent of the unit sales are /lain and annual fied epenses are I0<<<.
C. !ncrease 3o effect
. ecrease !ncrease 04. &he weighted-a$erage unit contribution margin is(
%. ecrease ecrease A. I0.7<.
B. I:.<<.
Answer( C )*( 0 &'pe( A C. I:.,.
00. All other things being e;ual a compan' that sells multiple products should attempt to . I14.<<.
structure its sales mi so the greatest portion of the mi is composed of those %. an amount other than those abo$e.
 products with the highest(
A. selling price. Answer( B )*(  &'pe( A
B. $ariable cost.
C. contribution margin. 07. Assuming that the sales mi remains constant the total number of units that the
 . f ie d co st . compan' must sell to brea# e$en is(
% . g ro ss m arg in. A. ,0,.
B. ,204.
Answer( C )*(  &'pe( 3 C. 044.
. <<<.
0. *6ell sells three products( + @ and &. Budgeted information for the upcoming %. an amount other than those abo$e.
accounting period follows.
Answer(  )*(  &'pe( A
/roduct @ales olume 8nits9 @elling /rice ariable Cost
+ 12<<< I10 I: 0:. Assuming that the sales mi remains constant the number of units of /lain that the
@ 1,<<< 1< 2 compan' must sell to brea# e$en is(
& ,<<< 11 7 A. ,<<<.
B. <<<.
&he compan'6s weighted-a$erage unit contribution margin is( C. 4.
A. I.<<. . <<<.
B. I.. %. 2,.
C. I0.<<.
. I1:.. Answer( B )*(  &'pe( A
%. an amount other than those abo$e.
<. Assuming that the sales mi remains constant the number of units of =anc' that the
Answer( B )*(  &'pe( A compan' must sell to brea# e$en is(
A. ,<<<.
02. Wells Corporation has the following sales mi for its three products( A ,<LH B LH B. <<<.
and C 0L. =ied costs total I0<<<<< and the weighted-a$erage contribution C. 4.
margin is I1<<. Dow man' units of product A must be sold to brea#-e$en? . <<<.
A. 7<<. %. 2,.
B. 0<<<.
C. ,<<<<. Answer( A )*(  &'pe( A
1. Which of the following underl'ing assumptions form8s9 the basis for cost-$olume-
 profit anal'sis? 2. Which of the following does not t'picall' appear on an income statement prepared b'
A. +e$enues and costs beha$e in a linear manner. using a traditional format?
B. Costs can be categorized as $ariable fied or semi$ariable. &. Cost of goods sold.
C. Wor#er efficienc' and producti$it' remain constant. '. Contribution margin.
. !n multiproduct organizations the sales mi remains constant. C. ross margin.
%. All of the abo$e are assumptions that underlie cost-$olume-profit anal'sis. ). @elling epenses.
(. Administrati$e epenses.
Answer( % )*( 2 &'pe( +C
Answer( B )*( 4 &'pe( +C
,. Cost-$olume-profit anal'sis is based on certain general assumptions. Which of the
following is not one of these assumptions? 4. &he etent to which an organization uses fied costs in its cost structure is measured
A. /roduct prices will remain constant as $olume $aries within the rele$ant range.  b'(
B. Costs can be categorized as fied $ariable or semi$ariable. A. financial le$erage.
C. &he efficienc' and producti$it' of the production process and wor#ers will B. operating le$erage.
change to reflect manufacturing ad$ances. C. fied cost le$erage.
. &otal fied costs remain constant as acti$it' changes. . contribution le$erage.
%. nit $ariable cost remains constant as acti$it' changes. %. efficienc' le$erage.

Answer( C )*( 2 &'pe( +C Answer( B )*( 7 &'pe( +C

. &he assumptions on which cost-$olume-profit anal'sis is based appear to be most 7. A manager who wants to determine the percentage impact on net income of a gi$en
$alid for businesses(  percentage change in sales would multipl' the percentage increase>decrease in sales
A. o$er the short run. re$enue b' the(
B. o$er the long run. A. contribution margin.
C. o$er both the short run and the long run. B. gross margin.
. in periods of sustained profits. C. operating le$erage factor.
%. in periods of increasing sales. . safet' margin.
%. contribution-margin ratio.
Answer( A )*( 2 &'pe( 3
Answer( C )*( 7 &'pe( +C
0. &he contribution income statement differs from the traditional income statement in
which of the following wa's? :. Which of the following calculations can be used to measure a compan'6s degree of
A. &he traditional income statement separates costs into fied and $ariable operating le$erage?
components. A. Contribution margin P sales.
B. &he traditional income statement subtracts all $ariable costs from sales to obtain B. Contribution margin P net income.
the contribution margin. C. @ales P contribution margin.
C. Cost-$olume-profit relationships can be anal'zed more easil' from the . @ales P net income.
contribution income statement. %. @ales P fied costs.
. &he effect of sales $olume changes on profit is readil' apparent on the
traditional income statement. Answer( B )*( 7 &'pe(
%. &he contribution income statement separates costs into product and period 2<. ou are anal'zing Bec#er Corporation and 3ewton Corporation and ha$e concluded
categories. that Bec#er has a higher operating le$erage factor than 3ewton. Which one of the
following choices correctl' depicts 819 the relati$e use of fied costs 8as opposed to
Answer( C )*( 4 &'pe( +C $ariable costs9 for the two companies and 8,9 the percentage change in income caused
. Which of the following does not t'picall' appear on a contribution income statement?  b' a change in sales?
A . 3 et in com e. +elati$e se of =ied /ercentage Change in
B. ross margin. Costs as *pposed to !ncome Caused b'
C. Contribution margin. ariable Costs a Change in @ales
. &otal $ariable costs. A. reater for Bec#er reater for Bec#er
%. &otal fied costs. B. reater for Bec#er )ower for Bec#er
C. reater for Bec#er %;ual for both
Answer( B )*( 4 &'pe( +C
 . )ower for Bec#er reater for Bec#er
%. )ower for Bec#er )ower for Bec#er 2. %dco6s operating le$erage factor was(
A. 0.
Answer( A )*( 7 &'pe( +C B. .
C. 2.
21. &he following information relates to a' Compan'( . 4.
%. 7.
@ales re$enue I1,<<<<<<
Contribution margin 07<<<<< Answer( B )*( 7 &'pe( A
 3et income 7<<<<<
20. !f %dco6s sales re$enues increase 1L what will be the percentage increase in income
 before income taes?
a'6s operating le$erage factor is( A. 1L.
A. <.<24. B. 0L.
B. <.124. C. 2<L.
C. <.0<<. . 4L.
. ,.<<. %. An amount other than those abo$e.
%. 2.<<<.
Answer(  )*( 7 &'pe( A
Answer( % )*( 7 &'pe( A
2. When ad$anced manufacturing s'stems are installed what effect does such
2,. &he following information relates to /aterno Compan'( installation usuall' ha$e on fied costs and the brea#-e$en point?
=ied Costs Brea#-e$en /oint
@ales re$enue I1<<<<<<< A. !ncrease !ncrease
Contribution margin 0<<<<<< B. !ncrease ecrease
 3et income 1<<<<<< C. ecrease !ncrease
. ecrease ecrease
!f a manager at /aterno desired to determine the percentage impact on net income of a %. o not change oes not change
gi$en percentage change in sales the manager would multipl' the percentage
increase>decrease in sales re$enue b'( Answer( A )*( 7 &'pe( +C
A. <.,. 22. Which of the following statements is 8are9 true regarding a compan' that has
B. <.0<. implemented fleible manufacturing s'stems and acti$it'-based costing?
C. ,.<.
. 0.<<. I. &he compan' has erred as these two practices used in con5unction with one
%. 1<.<<. another will se$erel' limit the firm6s abilit' to anal'ze costs o$er the rele$ant
range.
Answer(  )*( 7 &'pe( A 3 II. Costs formerl' $iewed as fied under traditional-costing s'stems ma' now be
se the following to answer ;uestions 2-20( considered $ariable with respect to changes in cost dri$ers such as number of
setups number of material mo$es and so forth.
%dco Compan' produced and sold 0<<< units of a single product last 'ear with the following III. As compared with the results obtained under a traditional-costing s'stem the
results( concept of brea#-e$en anal'sis loses meaning.

@ales re$enue I1<<<< A. ! onl'.

Manufacturing costs( B. !! onl'.
ariable 7<<< C. !!! onl '.
=ied ,4<<<< . ! and !!.
@elling costs( %. !! and !!!.
ariable 0<<<
=ied 0<<< Answer( B )*( 1< &'pe( 3
Administrati$e costs(
ariable 170<< 24. A compan' sub5ect to a 0<L ta rate desires to earn I<<<<< of after-ta income.
=ied 1<7<<< Dow much should the firm add to fied costs when fi guring the sales re$enues
 necessar' to produce this income le$el? . Matri application forms.
A . I ,<< << <. %. oal congruence.
B . I << << <.
C . I << << <. Answer( C )*( , &'pe( +C
 . I 7  .
% . I 1 , < <<< . 2. Which of the following indi$iduals is least li#el' to become in$ol$ed in the setting of
either direct material standards or direct labor standards?
Answer(  )*( 11 &'pe( A A. &he purchasing manager.
B. A production super$isor.
MULTIPLE CHOICE QUESTIONS C . A n en gi ne er.
. A machine operator.
1. A standard cost( %. A compan'6s president.
A. is the "true" cost of a unit of production.
B. is a budget for the production of one unit of a product or ser$ice. Answer( % )*( , &'pe( 3
C. can be useful in calculating e;ui$alent units.
. is normall' the a$erage cost within an industr'. 4. A perfection standard(
%. is almost alwa's the actual cost from pre$ious 'ears. A. tends to moti$ate emplo'ees o$er a long period of time.
B. is attainable in an ideal operating en$ironment.
Answer( B )*( 1 &'pe( +C C. would ma#e allowances for normal amounts of scrap and waste.
. is generall' preferred b' beha$ioral scientists.
,. Which of the following is a predetermined estimated cost that can be used in the %. will result in a number of fa$orable $ariances on a performance report.
calculation of a $ariance?
A. /roduct cost. Answer( B )*( , &'pe( +C 3
B . A ct ua l co st .
C. @tandard cost. 7. Consider the following statements(
. ifferential cost.
%. Marginal cost. I. Beha$ioral scientists find that perfection standards often discourage
emplo'ees and result in low wor#er morale.
Answer( C )*( 1 &'pe( +C II. /ractical standards are also #nown as attainable standards.
III. /ractical standards incorporate a certain amount of inefficienc' such as that
. ariances are computed b' ta#ing the difference between which of the following? caused b' an occasional machine brea#down.
A. /roduct cost and period cost.
B. Actual cost and differential cost. Which of the abo$e statements is 8are9 true?
C. /rice factors and rate factors. A. ! onl'.
. Actual cost and standard cost. B. !! onl'.
%. /roduct cost and standard cost. C . !!! onl '.
 . ! ! a nd ! !! .
Answer(  )*( 1 &'pe( +C % . !  ! ! an d ! !! .

0. &he term "management b' eception" is best defined as(
A. choosing eceptional managers.
B. controlling actions of subordinates through acceptance of management
techni;ues.
C. in$estigating unfa$orable $ariances.
. de$oting management time to in$estigate significant $ariances.
%. controlling costs so that non-zero $ariances are treated as "eceptional."
Answer(  )*( 1 &'pe( +C 3
. Which of the following are methods for setting standards?
A. Anal'sis of historical data.
B. &as# anal'sis.
C. &as# anal'sis and the anal'sis of historical data.
Answer( % )*( , &'pe( +C
:. Which of the following would be considered if a compan' desires to establish a series
of practical manufacturing standards?
A. &he producti$it' loss associated with a short-term wor#er slowdown.
B. 3ormal defect rates in an assembl' process.
C. Dighl' unusual spoilage rates with direct materials.
. Fuantit' discounts associated with purchases of direct materials.
%. Both "B" and ""
Answer( % )*( , &'pe( +C 3
1<. Which of the following would not be considered if a compan' desires to establish a
series of practical manufacturing standards?
 A. /roduction time lost during unusual machiner' brea#downs. B. number of units spoiled.
B. 3ormal wor#er fatigue. C. number of units that should ha$e been used.
C. =reight charges on incoming raw materials. . number of units actuall' used.
. /roduction time lost during setup procedures for new manufacturing runs. %. number of units to be purchased during the net accounting period.
%. &he historical ,L defect rate associated with raw material inputs.
Answer( A )*(  &'pe( +C
Answer( A )*( , &'pe( +C 3
1. Which of the following correctl' lists all the information needed to calculate a labor
11. Which of the following choices correctl' notes a characteristic associated with rate $ariance?
 perfection standards and one associated with practical standards? A. @tandard labor rate and actual hours wor#ed.
/erfection @tandards /ractical @tandards B. Actual hours wor#ed and actual units produced.
A. Attainable in an ideal en$ironment !ncorporate abnormal occurrences when setting C. @tandard labor rate actual labor rate and actual units produced.
;uantit' and efficienc' targets . Actual labor rate and actual hours wor#ed.
B. +esult in man' unfa$orable $ariances Are often attainable b' wor#ers %. Actual labor rate standard labor rate and actual hours wor#ed.
C. &end to boost wor#er morale enerall' preferred b' beha$ioral scientists
. enerall' are easil' achie$ed b' +esult in both fa$orable and unfa$orable Answer( % )*(  &'pe( +C
wor#ers $ariances
%. enerall' preferred b' beha$ioral scientists Are easier to achie$e than perfection standards
12. Which of the following $ariances are most similar with respect to the manner in
which the' are calculated?
Answer( B )*( , &'pe( +C 3 A. )abor rate $ariance and labor efficienc' $ariance.
B. Materials price $ariance and materials ;uantit' $ariance.
1,. Consider the following statements( C. Materials price $ariance materials ;uantit' $ariance and total materials
$ariance.
I. &he standard cost per unit of materials is used to calculate a materials price . Materials price $ariance and labor efficienc' $ariance.
$ariance. %. Materials ;uantit' $ariance and labor efficienc' $ariance.
II. &he standard cost per unit of materials is used to calculate a materials ;uantit'
$ariance. Answer( % )*(  &'pe( 3
III. &he standard cost per unit of materials cannot be determined until the end of
the period. 14. Which of the following $ariances cannot occur together during the same accounting
 period?
Which of the abo$e statements is 8are9 true? A. nfa$orable labor rate $ariance and fa$orable labor efficienc' $ariance.
A. ! onl'. B. nfa$orable labor efficienc' $ariance and fa$orable materials ;uantit' $ariance.
B. !! onl'. C. =a$orable labor rate $ariance and unfa$orable total labor $ariance.
C. !!! onl'. . =a$orable labor efficienc' $ariance and fa$orable materials ;uantit' $ariance.
. ! and !!. %. 3one of the abo$e as all of these $ariance combinations are possible.
% . !  ! ! an d ! !!.
Answer( % )*(  &'pe( 3
Answer(  )*(  &'pe( +C 17. !f a compan' has an unfa$orable direct-material ;uantit' $ariance then(
1. Which of the following choices correctl' notes the use of the standard price per unit A. the direct-material price $ariance is fa$orable.
of direct material when calculating the materials price $ariance and the materials ;uantit' B. the total direct-material $ariance is unfa$orable.
$ariance? C. the total direct-material $ariance is fa$orable.
/rice ariance Fuantit' ariance . the direct-labor efficienc' $ariance is unfa$orable.
A. sed Alwa's used %. an' of the abo$e $ariances can occur.
B. sed *ccasionall' used
C. sed 3ot used Answer( % )*(  &'pe( 3
. 3ot used Alwa's used
%. 3ot used 3ot used 1:. A fa$orable labor efficienc' $ariance is created when(
A. actual labor hours wor#ed eceed standard hours allowed.
Answer( A )*(  &'pe( +C B. actual hours wor#ed are less than the standard hours allowed.
C. actual wages paid are less than amounts that should ha$e been paid.
10. Most companies base the calculation of the materials price $ariance on the( . actual units produced eceed budgeted production le$els.
A. number of units purchased. %. actual units produced eceed standard hours allowed.
 Answer( B )*(  &'pe( 3 ,0. Consider the following information(

,<. ictoria !nc. recentl' completed ,<<< units of a product that was epected to irect material purchased and used 7<<<< gallons
consume fi$e pounds of direct material per finished unit. &he standard price of the @tandard ;uantit' of direct material allowed for Ma' production 42<<<
direct material was I: per pound. !f the firm purchased and consumed ,27<<< gallons
 pounds in manufacturing 8cost N I,<07<<9 the direct-materials ;uantit' $ariance Actual cost of direct materials purchased and used I142<<<
would be figured as( nfa$orable direct-material ;uantit' $ariance I:0<<
A . I 4, <<< =.
B. I4,<<<.
C . I 1<4 ,< <=. &he direct-material price $ariance is(
 . I 1<4 ,< <. A . I 11 0< <=.
%. none of the abo$e. B . I 11 0< < .
C . I 1, << <=.
Answer( B )*(  &'pe( A  . I 1, << <.
%. none of the abo$e.
,1. @olo Corporation recentl' purchased ,<<< gallons of direct material at I.2< per
gallon. sage b' the end of the period amounted to ,<<< gallons. !f the standard Answer( C )*(  &'pe( A 3
cost is I2.<< per gallon and t he compan' belie$es in computing $ariances at the
earliest point possible the direct-material price $ariance would be calculated as( ,. Courtne' purchased and consumed <<<< gallons of direct material that was used in
A. I7<<=. the production of 11<<< finished units of product. According to engineering
B. I:,<<=. specifications each finished unit had a manufacturing standard of fi$e gallons. !f a
C. I:,<<. re$iew of Courtne'6s accounting records at the end of the period disclosed a material
 . I 1< <<< =.  price $ariance of I<<< and a material ;uantit' $ariance of I<<<= determine the
%. I1<<<<. actual price paid for a gallon of direct material.
A. I<.<.
Answer(  )*(  &'pe( A B. I<.2<.
C. I<.4<.
se the following to answer ;uestions ,,-,( . An amount other than those shown abo$e.
%. 3ot enough information to 5udge.
&he following data relate to product no. 7: of es Moines Corporation(
Answer( C )*(  &'pe( A 3
irect material standard(  s;uare feet at I,.< per s;uare foot ,2. Dolland %nterprises recentl' used ,<<<< labor hours to produce 7<< completed
irect material purchases( <<<< s;uare feet at I,.2< per s;uare foot units. According to manufacturing specifications each unit is anticipated to ta#e ,.
irect material consumed( ,:,<< s;uare feet hours to complete. &he compan'6s actual pa'roll cost amounted to I4<<<<. !f the
Manufacturing acti$it' product no. 7:( :2<< units completed standard labor cost per hour is I17 Dolland6s labor rate $ariance is(
,,. &he direct-material ;uantit' $ariance is( A . I 1< << <=.
A . I 1 << <=. B . I1<<<<.
B. I1<<<. C . I 1< 4 =.
C. I1<0<=.  . I 1< 4 .
. I1<0<. %. none of the abo$e.
%. I,<<<=.
Answer( B )*(  &'pe( A
Answer( B )*(  &'pe( A
,4. en$er %nterprises recentl' used 10<<< labor hours to produce 4<< completed
,. &he direct-material price $ariance is( units. According to manufacturing specifications each unit is anticipated to ta#e two
A. I,77<. hours to complete. &he compan'6s actual pa'roll cost amounted to I17,<<. !f the
B. I,:,<=. standard labor cost per hour is I11 en$er6s labor efficienc' $ariance is(
C. I,:,<. A . I 11 << < .
. I  << <=. B . I 11 << <=.
%. I<<<. C . I 11 < < .
 . I 11 < <=.
Answer( % )*(  &'pe( A %. none of the abo$e.
 Answer( B )*(  &'pe( A . I ,1 << <=.
%. none of the abo$e.
,7. Ale Compan' recentl' completed 1<2<< units of its single product consuming
,<<< labor hours that cost the firm I07<<<<. According to manufacturing Answer( B )*(  &'pe( A 3
specifications each unit should ha$e re;uired  hours of labor time at I1.0< per
hour. *n the basis of this information determine AleGs labor rate $ariance and labor ,. @imms Corporation had a fa$orable direct-labor efficienc' $ariance of I2<<< for the
efficienc' $ariance.  period 5ust ended. &he actual wage rate was I<.< more than the standard rate of
+ate %fficienc' I1,.<<. !f the compan'6s standard hours allowed for actual production totaled :<<
A. I1,4,<= I<<<= how man' hours did the firm actuall' wor#?
B. I1,4,<= I<<< A. :<<<.
C. I1,7<<= I<7<= B. :<,<.
. I1,7<<= I<7< C. ::7<.
%. I1,7<< I<7< . 1<<<<.
%. 3one of the abo$e.
Answer(  )*(  &'pe( A
Answer( A )*(  &'pe( A 
se the following to answer ;uestions ,:-<( se the following to answer ;uestions -4(

&he following data relate to product no.  of )a Fuinta Corporation( Cost standards for product no. C44(
irect material  pounds at I,.< per pound I 4.<
irect labor standard(  hours at I10 per hour  irect labor  hours at I4.< per hour 4.<
irect labor used in production( 0<<< hours at a cost of I2:<<<
Manufacturing acti$it' product no. ( 7:<< units completed Actual results(
,:. &he direct-labor rate $ariance is( nits produced 47<< units
A . I 7 :< <=. irect material purchased ,2<<< pounds at I,.4< I 4<,<<
B. I7:<<. irect material used ,1<< pounds at I,.4< 2,4<
C. I:<<<=. irect labor 0<1<< hours at I4.< ,:,4<
. I:<<<.
%. none of the abo$e. . &he direct-material ;uantit' $ariance is(
A. I4<=.
Answer(  )*(  &'pe( A B. I4<.
C . I2<<.
<. &he direct-labor efficienc' $ariance is( . I4,<.
A . I 4 << <=. %. none of the abo$e.
B. I4<<<.
C. I41<<=. Answer( A )*(  &'pe( A
. I41<<.
%. none of the abo$e. 0. &he direct-material price $ariance is(
A. I 0 2,< =.
Answer( B )*(  &'pe( A B. I02,<.
C. I,<<=.
1. Consider the following information( . I,<<.
%. none of the abo$e.
Actual direct labor hours 0<<
@tandard direct labor hours <<< Answer(  )*(  &'pe( A
&otal actual direct labor cost I,01<<
irect-labor efficienc' $ariance fa$orable I,<< . &he direct-labor rate $ariance is(
A. I 4 7<< =.
&he direct-labor rate $ariance is( B. I4:<=.
A . I 14 ,< . C. I7<,<=.
B. I,<4<<. . I7<<<.
C . I ,< 4<< =. %. none of the abo$e.
 Answer( C )*(  &'pe( A %. !  ! ! an d ! !! .

2. &he direct-labor efficienc' $ariance is( Answer(  )*( 0 &'pe( +C

A . I 7 << <=. 01. A statistical control chart is best used for determining(
B. I7<<<. A. direct-material price $ariances.
C. I7,<=. B. direct-labor $ariances.
. I7,<. C. whether a $ariance is fa$orable or unfa$orable.
%. none of the abo$e. . who should be held accountable for specific $ariances.
%. whether a particular $ariance should be in$estigated.
Answer(  )*(  &'pe( A
4. &he standard hours allowed for the wor# performed are( Answer( % )*( 0 &'pe( +C
A. .
B. .10. 0,. &he indi$idual generall' responsible for the direct-material price $ariance is the(
C. :<<<. A. sales manager.
. 0<1<<. B. production super$isor.
%. none of the abo$e. C. purchasing manager.
. finance manager.
Answer( C )*(  &'pe( A %. head of the human resources department.

7. When considering whether to in$estigate a $ariance managers should consider all of Answer( C )*(  &'pe( +C
the following ecept the $ariance6s(
A. size. 0. A production super$isor generall' has little influence o$er the(
B. pattern of recurrence. A. direct-material ;uantit' $ariance.
C. trends o$er time. B. direct-labor rate $ariance.
. nature namel' whether it is fa$orable or unfa$orable. C. direct-labor efficienc' $ariance.
%. controllabilit'. . direct-material price $ariance.
%. number of units produced.
Answer(  )*( 0 &'pe( +C
Answer(  )*(  &'pe( 3
:. Which of the following combinations of direct-material $ariances might prompt
management to underta#e a detailed $ariance in$estigation? 00. !n which department would an in$estigation normall' begin regarding an unfa$orable
A. /rice unfa$orableH ;uantit' unfa$orable. materials ;uantit' $ariance?
B. /rice unfa$orableH ;uantit' fa$orable. A. Fualit' control.
C. /rice fa$orableH ;uantit' unfa$orable. B . /u rc ha si ng .
. /rice fa$orableH ;uantit' fa$orable. C. %ngineering.
%. All of the abo$e.  . /r od uc ti on .
% . + ece i$ in g.
Answer( % )*( 0 &'pe( 3
Answer(  )*(  &'pe( +C
0<. Consider the following statements about $ariance in$estigation(
0. Cohen Corporation has a fa$orable materials ;uantit' $ariance. Which department
I. ariance in$estigation in$ol$es a loo# at onl' unfa$orable $ariances. would li#el' be as#ed to eplain the cause of this $ariance?
II. ariance in$estigation is t'picall' based on a cost-benefit anal'sis. A. %ngineering.
III. ariance in$estigation is often performed b' establishing guidelines similar to B . /u rc ha si ng .
the following( !n$estigate $ariances that are greater than IO or greater than  C . /r od uc ti on .
L of standard cost.  . Ma r# et in g.
%. 3one because the $ariance is fa$orable.
Which of the abo$e statements is 8are9 true?
A. ! onl'. Answer( C )*(  &'pe( 3
B. !! onl'. 02. +ogers !nc. had an unfa$orable labor efficienc' $ariance and an unfa$orable
C. !!! onl'. materials ;uantit' $ariance. Which department might be held accountable for these
 . ! ! a nd ! !! . $ariances?
A. /urchasing because bad materials can harm labor efficienc'.
 B. /roduction because inefficient wor#ers ma' use more materials than allowed. &he allo' produced more waste than normal as e$idenced b' a direct-material
C. /urchasing and>or production. ;uantit' $ariance of I,<<< and was also difficult to use. &his slowed wor#er
. M ar #e ti ng . efficienc' generating a I,<< labor efficienc' $ariance. &o help remed' the
%. @hi pping. situation the production manager used senior line emplo'ees which ga$e rise to a
I:<< labor rate $ariance. !f o$erall product ;ualit' did not suffer what $ariance
Answer( C )*(  &'pe( 3 amount is best used in 5udging the appropriateness of the purchasing manager6s
decision to ac;uire substandard material?
04. A direct-material ;uantit' $ariance can be caused b' all of the following ecept( A . I 0 1<< =.
A. improper emplo'ee training. B . I<<<=.
B. changes in sales $olume. C . I4<<<=.
C. ac;uisition of materials at a $er' attracti$e price.  . I 4 << =.
. ad5ustment problems with machines. % . I:<<=.
%. disgruntled wor#ers.
Answer( A )*(  &'pe( A 3
Answer( B )*(  &'pe( 3
,. @tandard costs(
07. A direct-labor efficienc' $ariance cannot be caused b'( A. allow a manager to assess the efficienc' of operations.
A. ineperienced emplo'ees. B. allow a compan' to practice management b' eception.
B. poor ;ualit' raw materials. C. pro$ide management with a basis for performance e$aluations.
C. emplo'ee inefficienc'. . if set correctl' can pro$ide a moti$ational tool for emplo'ees.
. an out-of-date labor time standard. %. will pro$ide all of the abo$e benefits for a compan'.
%. producing fewer finished units than originall' planned.
Answer( % )*( 4 &'pe( +C 3
Answer( % )*(  &'pe( 3 . Which of the following is a criticism of standard costing as applied to toda'6s
manufacturing en$ironment?
0:. Eustin Compan' recentl' purchased materials from a new supplier at a $er' attracti$e A. Automated manufacturing processes are $er' consistent in meeting production
 price. &he materials were found to be of poor ;ualit' and the compan'6s laborers specifications ma#ing $ariances $er' small and relati$el' unimportant.
struggled significantl' as the' shaped the materials into finished product. !n a B. ariance information is usuall' aggregated 8i.e. combined9 rather than
desperation mo$e to ma#e up for some of the time l ost the manufacturing super$isor associated with a particular batch of goods or a specific product line.
 brought in more-senior emplo'ees from another part of the plant. Which of the C. &raditional standard costing fails to focus on #e' business issues such as
following $ariances would ha$e a high probabilit' of arising from this situation? customer ser$ice and bringing products to mar#et faster than the competition.
A. Material price $ariance fa$orable. . @tandard costing pa's considerable attention to labor cost and labor efficienc'
B. Material ;uantit' $ariance unfa$orable. which are becoming a relati$el' unimportant factor of production.
C. )abor rate $ariance unfa$orable. %. All of the abo$e are $alid criticisms.
. )abor efficienc' $ariance unfa$orable.
%. All of the abo$e. Answer( % )*( 7 &'pe( +C

Answer( % )*(  &'pe( 3 )isted below are fi$e $ariances 8and possible causes9
that are under re$iew b' management of no Compan'. Which of the following is
least li#el' to cause the $ariance indicated?
A. &he need to ship goods ac;uired from a distant supplier $ia =ed% rather than
$ia truc#H material price $ariance.
B. &he need to complete goods on a timel' basis during a period of high
absenteeismH labor rate $ariance.
C. A wor#-team that is $er' unhapp' with its super$isorH labor efficienc' $ariance.
. &he need to close a plant for two da's because of blizzard conditionsH material
;uantit' $ariance part no. 0,.
%. A malfunctioning piece of manufacturing e;uipmentH labor efficienc' $ariance.
0. Which of the following is not a $alid wa' to adapt standard cost s'stems to toda'6s
manufacturing en$ironment?
A. %mphasize material and o$erhead costs.
B. se more non-traditional cost dri$ers such as number of setups or number of
engineering change orders.
C. pdate standards more fre;uentl' to ad5ust for the elimination of non-$alue-
added costs.
. se additional nonfinancial measures for performance e$aluation and control.
%. e$ote more resources to the trac#ing of direct labor cost.
Answer( % )*( 7 &'pe( +C

Answer(  )*(  &'pe( 3 . &o assess how customers percei$e a compan'6s products management ma' stud'(
A. the number of customer complaints.
1. )uc#' Corporation6s purchasing manager obtained a special price on an aluminum B. the number of warrant' claims.
allo' from a new supplier resulting in a direct-material price $ariance of I:<<=. C. the number of products returned.
 . the cost of repairing returned products.
%. all of the abo$e measures. Answer( B )*( 1< &'pe( +C

Answer( % )*( : &'pe( +C 21. &he t'pical balanced scorecard is best described as containing(
A. financial performance measures.
2. &o impro$e its manufacturing efficienc' companies should stri$e toward increasing B. nonfinancial performance measures.
 RRRRRRRRRR time as a percentage of processing time K inspection time K waiting time C. neither financial nor nonfinancial performance measures.
K mo$e time. &he blan# is( . both financial and nonfinancial performance measures.
A. processing time. %. both financial and nonfinancial performance measures the latter often co$ering
B. lead time. a broad range of perspecti$es such as customers internal operations and
C. waiting time. learning and growth.
 . m o$e t ime .
%. inspection time. Answer( % )*( 1< &'pe( +C
2,. @wedish Cruise )ines 8@C)9 which operates in a $er' competiti$e mar#etplace is
Answer( A )*( : &'pe( +C considering four categories of performance measures( 819 profitabilit' measures 8,9
4. !n the calculation of manufacturing c'cle efficienc' which of the following acti$ities customer-satisfaction measures 89 efficienc' and ;ualit' measures and 809 learning
results in $alue-added time? and growth measures. &he compan' assigns one manger to each ship in its fleet to
A. Mo$ing. o$ersee the ship6s general operations. !f @C) desired to adopt a balanced-scorecard
B . / roc es si ng. approach which measures should the firm use in the e$aluation of its managers?
C . ! ns pec ti on . A. 1.
. Waiting. B. 1 ,.
%. All of the abo$e. C. , .
. 1 , 0.
Answer( B )*( : &'pe( +C %. 1 ,  0.

7. &he manufacturing c'cle efficienc' for /F+ Compan' when the processing time is Answer( % )*( 1< &'pe( 3
si hours and inspection waiting and mo$e time are one hour each is(
A. <.24. 2. )ead indicators guide management to(
B. <.4. A. ta#e actions now that will ha$e positi$e effects on organizational performance
C. <.47. now.
. <.77. B. ta#e actions now that will ha$e positi$e effects on organizational performance in
%. an amount other than those shown abo$e. the future.
C. ta#e actions in the future that will ha$e positi$e effects on organizational
Answer( A )*( : &'pe( A  performance now.
. ta#e actions in the past that will ha$e positi$e effects on organizational
:. Which of the following would not be a concern of a compan' that desires to compete  performance in the future.
in a global manufacturing arena? %. pursue identical strategies as those implemented with lag indicators.
A. 3umber of new products introduced.
B. Manufacturing c'cle efficienc'. Answer( B )*( 1< &'pe( +C
C. 3umber of customer complaints.
. 3umber of on-time deli$eries. 20. When using a balanced scorecard a compan'6s mar#et share is t'picall' classified as
%. All of the abo$e would be concerns. an element of the firm6s(
A. financial performance measures.
Answer( % )*( : &'pe( +C B. customer performance measures.
C. learning and growth performance measures.
2<. An increasingl' popular approach that integrates financial and customer performance . internal-operations performance measures.
measures with measures in the areas of internal operations and learning and growth is %. interdisciplinar' performance measures.
#nown as(
A. the integrated performance measurement tool 8!/M&9. Answer( B )*( 1< &'pe( +C
B. the balanced scorecard.
C. gain sharing. 2. When using a balanced scorecard which of the following is t'picall' classified as an
. c'cle efficienc'. internal-operations performance measure?
%. o$erall ;ualit' assessment 8*FA9. A. Cash fl ow.
 B. 3umber of customer complaints. *n a$erage ,< good shel$es are completed during each hour. )aborers who wor# on
C. %mplo'ee training hours. these units are paid I1 per hour.
. 3umber of emplo'ee suggestions.
%. 3umber of suppliers used. +e;uired(
&. istinguish between perfection standards and practical standards.
Answer( % )*( 1< &'pe( +C '. Who within an organization would be in the best position to assist in setting(
22. Which of the following perspecti$es is influenced b' a compan'6s $ision and 1. the direct-material price standard?
strateg'? 2. the direct-material ;uantit' standard?
A . = in an ci al .
3. the direct-labor efficienc' standard?
B. Customer.
C. Calculate a practical direct-material and direct-labor standard for each good shelf 
C. !nternal operations.
 produced.
. )earning and growth.
%. All of the abo$e.
)*( ,   &'pe( A 3
Answer( % )*( 1< &'pe( +C
Answer(
A. /erfection standards or those achie$ed under nearl' perfect operating conditions
24. Which of the following 5ournal entries definitel' contains an error?
assume pea# efficienc' at minimum cost. %mplo'ees are pushed to reach these ideal
A. +aw-Material !n$entor' ,<<<<<
measures often becoming discouraged. /ractical standards on the other hand are
irect-Material /rice ariance <<<
high but attainable thus presenting a realistic target for personnel. @uch standards
Accounts /a'able
incorporate allowances for normal downtime and other t'pical inefficiencies.
B. +aw-Material !n$entor' 7<<<
irect-Material /rice ariance
B. 1. &he purchasing manager.
Accounts /a'able
,. &he production super$isor as well as production engineers.
C. +aw-Material !n$entor' 12<<<
. &he production super$isor as well as industrial engineers.
irect-Material /rice ariance
Wor#-in-/rocess !n$entor'
C. irect materials( 0. poundsS  I, per pound I:.<<
. Wor#-in-/rocess !n$entor' 24<<<
irect labor( <.< hoursS  I1 <.4
irect-Material Fuantit' ariance <<<
&otal I:.4
+aw-Material !n$entor'
%. Wor#-in-/rocess !n$entor' 4:<<< Sirect materials( 8.2  9 P 0 N 0.H direct labor( 1 P ,< N <.<
irect-Material Fuantit' ariance 1irect2Material Standards# %ariance 1ata
+aw-Material !n$entor'
4<. iamond Corporation manufactures a $ariet' of li;uid lawn fertilizers including a
Answer( C )*( 11 &'pe( 3 $er' popular product called )ush 63 reen. ata about )ush 63 reen and /roctol a
ma5or ingredient follow.
27. At the end of the accounting period most companies close $ariance accounts to(
A. +aw-Material !n$entor'.
B. Wor#-in-/rocess !n$entor'.  Expected operations:
C. =inished-oods !n$entor'.  /roctol is purchased in -gallon drums at a cost of I0 per drum. A
. Cost of oods @old. ,L cash discount is offered for prompt pa'ment of in$oices and iamond ta#es
%. !ncome @ummar'. ad$antage of all discounts offered.
 iamond normall' purchases ,<< drums of /roctol at a time pa'ing
Answer(  )*( 11 &'pe( +C shipping fees of I0,< per shipment.
E/E0CISES  %ach gallon of )ush 63 reen re;uires three ;uarts of /roctolH
howe$er because of e$aporation and spills iamond loses 0L of all /roctol that
Setting a Standard enters production. 8+ecall that there are four ;uarts in a gallon.9

2:. Clo$erleaf !nc. produces glass shel$es that are used in furniture. %ach shelf re;uires  
.2 pounds of raw material at a cost of I, per pound. nfortunatel' gi$en the nature
of the manufacturing process one out of e$er' fi$e shel$es is chipped scratched or
 bro#en at the beginning of production and has to be scrapped.
Actual operations:
 =or the period 5ust ended iamond purchased 1,<< drums of /roctol
at a total cost of I0:2<. &here was no beginning in$entor' but an end-of-
 period in$entor' re$ealed that 1 drums were still on hand.
 Manufacturing acti$it' output totaled 7,<<< gallons of )ush 63
 reen.

+e;uired(
&. Compute the standard purchase price for one
gallon of /roctol.
'. Compute the standard ;uantit' of /roctol to be
used in producing one gallon of )ush 63 reen. %press 'our answer in ;uarts.
C. Compute the direct-material price $ariance for
/roctol.
). Dow much /roctol was used i n manufacturing
acti$it' and how much should ha$e been used? %press 'our answer in ;uarts.

)*( ,  &'pe( A 3