1. Managerial accounting applies to all forms of business organizations.

True
False
Score: of 1
Manufacturing costs that cannot be classified as direct materials or direct labor are
2.
classified as manufacturing overhead.
True
False
Score: of 1
Ending finished goods inventory appears on both the balance sheet and the income
3.
statement of a manufacturing company.
True
False
Score: of 1
4. Managerial accounting is primarily concerned with managers and external users.
True
False
Score: of 1
5. Internal reports are generally
aggregated.
detailed.
regulated.
unreliable.
Score: of 1
6. Which one of the following is not considered as material costs?

Partially completed motor engines for a motorcycle plant

Bolts used in manufacturing the compressor of an engine
Rivets for the wings of a new commercial jet aircraft
Lumber used to build tables
Score: of 1
Direct materials and direct labor of a company total $6,000,000. If manufacturing
7.
overhead is $3,000,000, what is direct labor cost?
 $3,000,000
$6,000,000
$0
Cannot be determined from the information provided
Score: of 1
8. Cost of goods sold
only appears on merchandising companies' income statements.
only appears on manufacturing companies' income statements.
appears on both manufacturing and merchandising companies' income
statements.
is calculated exactly the same for merchandising and manufacturing
companies.
Score: of 1
9. Cost of goods manufactured is calculated as follows:
Beginning WIP + direct materials used + direct labor + manufacturing
overhead + ending WIP.
Direct materials used + direct labor + manufacturing overhead –
beginning WIP + ending WIP.
Beginning WIP + direct materials used + direct labor + manufacturing
overhead – ending WIP.
Direct materials used + direct labor + manufacturing overhead – ending
WIP – beginning WIP.
Score: of 1
10. What is work in process inventory generally described as?
Costs applicable to units that have been started in production but are
only partially completed
Costs associated with the end stage of manufacturing that are almost
always complete and ready for customers
Costs strictly associated with direct labor
Beginning stage production costs associated with labor costs dealing
with bringing in raw materials from the shipping docks
Score: of 1
11. Hopkins Manufacturing Inc.'s accounting records reflect the following
inventories:
Dec. 31, 2009 Dec. 31, 2010
Raw materials inventory $ 80,000 $ 64,000
 Work in process inventory 104,000 116,000
Finished goods inventory 100,000 92,000

During 2010, Hopkins purchased $760,000 of raw materials, incurred direct labor
costs of $100,000, and incurred manufacturing overhead totaling $128,000. How
much is total manufacturing costs incurred during 2010 for Hopkins?
$992,000
$1,004,000
$988,000
$1,000,000
Score: of 1
Given the following information:
Raw materials inventory, January 1 $30,000
Raw materials inventory, December 31 60,000
Work in process, January 1 27,000
Work in process, December 31 18,000
Finished goods, January 1 60,000
Finished goods, December 31 48,000
12. Raw materials purchases 1,500,000
Direct labor 690,000
Factory utilities 225,000
Indirect labor 75,000
Factory depreciation 600,000
Selling and administrative expenses 630,000

Direct materials used is

$1,590,000.
$1,530,000.
$1,500,000.
$1,470,000.
Score: of 1
Which one of the following characteristics would likely be associated with a just-
13.
in-time inventory method?
Ending inventory of work in process that would allow several
production runs.
A backlog of inventory orders not yet shipped.
Minimal finished goods inventory on hand.
 An understanding with customers that they may come to the showroom
and select from inventory on hand.
Score: of 1
14. If the activity index decreases, total variable costs will decrease proportionately.

True
False
Score: of 1
The difference between the costs at the high and low levels of activity represents
15.
the fixed cost element of a mixed cost.
True
False
Score: of 1
16. The trend in most companies is to have more variable costs and fewer fixed costs.
True
False
Score: of 1
17. A cost which remains constant per unit at various levels of activity is a

variable cost.
fixed cost.
mixed cost.
manufacturing cost.
Score: of 1
18. Changes in activity have a(n) _________ effect on fixed costs per unit.
positive
negative
inverse
neutral
Score: of 1
Which one of the following is a name for the range over which a company
19.
expects to operate?
Mixed range.
Fixed range.
 Variable range.
Relevant range.
Score: of 1
20. CVP analysis is not important in

calculating depreciation expense.

setting selling prices.
determining the product mix.
utilizing production facilities.
Score: of 1
Select the correct statement concerning the cost-volume-profit graph:

21.

The point identified by "B" is the break-even point.

Line F is the variable cost line.
At point B, profits equal total costs.
Line E is the total cost line.
Score: of 1
Banachek, Inc. produces hair brushes. The selling price is $20 per unit and the
22. variable costs are $8 per brush. Fixed costs per month are $4,800. If Banachek
sells 15 more units beyond breakeven, how much does profit increase as a result?
$180.
$300.
$120.
$600.
Score: of 1
Tiny Tots Toys has actual sales of $400,000 and a break-even point of $260,000.
23.
How much is its margin of safety ratio?
35%.
 65%.
154%.
53.8%.
Score: of 1
24. Within the relevant range, the variable cost per unit
differs at each activity level.
remains constant at each activity level.
increases as production increases.
decreases as production increases.
Score: of 1
25. Contribution margin is
the amount of revenue remaining after deducting fixed costs.
available to cover fixed costs and contribute to income for the
company.
sales less fixed costs.
unit selling price less unit fixed costs.
Score: of 1
The break-even point in dollars is variable costs divided by the weighted-average
26.
contribution margin ratio.
True
False
Score: of 1
The degree of operating leverage provides a measure of a company’s earnings
27.
volatility.
True
False
Score: of 1
Vazquez Company’s cost of goods sold is $350,000 variable and $200,000 fixed.
28. The company’s selling and administrative expenses are $250,000 variable and
$300,000 fixed. If the company’s sales is $1,400,000, what is its net income?
$300,000
$800,000
$850,000
 $900,000
Score: of 1
Garland’s CVP income statement included sales of 3,000 units, a selling price of
29. $100, variable expenses of $60 per unit, and net income of $50,000. Fixed
expenses are
$70,000.
$120,000.
$180,000.
$300,000.
Score: of 1
In 2010, Masset sold 3,000 units at $500 each. Variable expenses were $350 per
unit, and fixed expenses were $200,000. The same selling price, variable
30.
expenses, and fixed expenses are expected for 2011. What is Masset’s break-even
point in sales dollars for 2011?
$666,667
$1,333,333
$1,500,000
$2,142,857
Score: of 1
For Bobby Company, sales is $1,000,000 (5,000 units), fixed expenses are
31. $300,000, and the contribution margin per unit is $80. What is the margin of
safety in dollars?
$50,000
$250,000
$450,000
$700,000
Score: of 1
In 2010, Thornton sold 3,000 units at $500 each. Variable expenses were $250
per unit, and fixed expenses were $150,000. The same selling price is expected
32. for 2011. Thornton is tentatively planning to invest in equipment that would
increase fixed costs by 20%, while decreasing variable costs per unit by 20%.
What is Thornton’s break-even point in units for 2011?
600
720
750
900
 Score: of 1
Konerko Company sells two types of computer chips. The sales mix is 30% (Q-
Chip) and 70% (Q-Chip Plus). Q-Chip has variable costs per unit of $30 and a
33. selling price of $50. Q-Chip Plus has variable costs per unit of $35 and a selling
price of $65. Konerko’s fixed costs are $540,000. How many units of Q-Chip
would be sold at the break-even point?
6,000
7,043
10,000
14,000
Score: of 1
Uribe Company has a weighted-average unit contribution margin of $30 for its
two products, Standard and Supreme. Expected sales for Uribe are 40,000
34.
Standard and 60,000 Supreme. Fixed expenses are $1,800,000. At the expected
sales level, Uribe’s net income will be
$(300,000).
$0.
$1,200,000.
$3,000,000.
Score: of 1
35. Cost structure
refers to the relative proportion of fixed versus variable costs that a
company incurs.
generally has little impact on profitability.
cannot be significantly changed by companies.
refers to the relative proportion of operating versus nonoperating costs
that a company incurs.
Score: of 1
Reducing reliance on human workers and instead investing heavily in computers
36.
and online technology will:
reduce fixed costs and increase variable costs.
reduce variable costs and increase fixed costs.
have no effect on the relative proportion of fixed and variable costs.
make the company less susceptible to economic swings.
Score: of 1
37. Cost structure refers to the relative proportion of:
selling expenses versus administrative expenses.
selling and administrative expenses versus cost of goods sold.
contribution margin versus sales.
none of the above.
Score: of 1
Small Fry Company has sales of $1,000,000, variable costs of $400,000, and
38.
fixed costs of $450,000. Small Fry’s degree of operating leverage is:
0.80.
1.50.
1.67
4.00.
Score: of 1
39. Decision-making involves choosing among alternative courses of action.

True
False
Score: of 1
A special one-time order should never be accepted if the unit sales price is less
40.
than the unit variable cost.
True
False
Score: of 1
In a decision concerning replacing old equipment with new equipment, the book
41.
value of the old equipment can be considered a sunk cost.
True
False
Score: of 1
From a quantitative standpoint, a segment should be eliminated if its contribution
42.
margin is less than the fixed costs that can be eliminated.
True
False
Score: of 1
43. The elimination of an unprofitable product line may adversely affect the
 remaining product lines.
True
False
Score: of 1
Which of the following stages of the management decision-making process is
44.
improperly sequenced?
Evaluate possible courses of action - Make decision.
Assign responsibility for the decision - Identify the problem.
Identify the problem - Determine possible courses of action.
Assign responsibility for decision - Determine possible courses of
action.
Score: of 1
Baden Company manufactures a product with a unit variable cost of $50 and a
unit sales price of $88. Fixed manufacturing costs were $240,000 when 10,000
units were produced and sold. The company has a one-time opportunity to sell an
45.
additional 1,000 units at $70 each in a foreign market which would not affect its
present sales. If the company has sufficient capacity to produce the additional
units, acceptance of the special order would affect net income as follows:
Income would decrease by $4,000.
Income would increase by $4,000.
Income would increase by $70,000.
Income would increase by $20,000.
Score: of 1
Each of the following is a disadvantage of buying rather than making a
46.
component of a company's product except that
quality control specifications may not be met.
the outside supplier could increase prices significantly in the future.
profitable product lines may be dropped.
the supplier may not deliver on time.
Score: of 1
47. Sala Co. is contemplating the replacement of an old machine with a new one. The
following information has been gathered:
Old Machine New Machine
Price $250,000 $500,000
Accumulated Depreciation 75,000 -0-
Remaining useful life 10 years -0-
 Useful life -0- 10 years
Annual operating costs $200,000 $150,500

If the old machine is replaced, it can be sold for $20,000. Which of the following
amounts is a sunk cost?
$200,000
$150,500
$500,000
$175,000
Score: of 1
If a company has limited resources, the key factor in performing incremental
48.
analysis is
contribution margin.
limited resources required.
contribution margin per unit of limited resource.
none of these.
Score: of 1
Ruiz Company’s contribution margin is $4 per unit for Product A and $5 for
Product B. Product A requires 2 machine hours and Product B requires 4 machine
49. hours. How much is the contribution margin per unit of limited resource for each
product?
Product A; Product B
$4.00; $5.00
$2.00; $1.25
$1.25; $2.00
$2.50; $1.00
Score: of 1
A company is considering purchasing factory equipment that costs $320,000 and
is estimated to have no salvage value at the end of its 8-year useful life. If the
equipment is purchased, annual revenues are expected to be $90,000 and annual
50.
operating expenses exclusive of depreciation expense are expected to be $38,000.
The straight-line method of depreciation would be used. The cash payback period
on the equipment is
13.3 years.
8.0 years.
6.2 years.
 3.1 years.
Score: of 1

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