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# Multiple Choice

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Stephanie must decide between two alternatives for the weekend: babysitting or yard work. If she baby sits, she will receive \$40 and will incur \$15 in food and snack costs. If she does yard work, she will receive \$40 and will incur \$3 in lawn mower gas and oil costs and \$5 in snack costs. The amount to be received is relevant for deciding which alternative to select.
True
False

The following information is provided by the Atlantic Company:

Actual direct material cost \$24,000
Standard direct material cost \$20,000
Direct material quantity variance \$1,000 unfavorable

What is the direct material price variance?
a. \$4,000 favorable.
b. \$5,000 favorable.
c. \$3,000 unfavorable.
d. Not enough information is provided.

A vertical analysis uses percentages to compare each of the parts of an individual statement to the whole. For example, on an income statement each item would be shown as a percentage of sales.
True
False

Denise was questioned recently about her department's spending in excess of the budget. This is an example of using the budget for coordination.
True
False

Volume based cost drivers (e.g., labor hours or machine hours) are most likely to serve as an effective allocation base for which of the following costs?
a. Setup costs.
b. The cost of the filing patent papers for a new product.
c. Research and development costs.
d. Maintenance costs.

Coffee Cafe operates a chain of coffee shops. The company pays rent of \$24,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The managers of each shop are paid a salary of \$3,000 per month and all other employees are paid on an hourly basis. Relative to the number of customers, the cost of rent is which kind of cost?
a. Fixed cost.
b. Variable cost.
c. Mixed cost.
d. Relevant cost.

Spring Company sets the selling price for its product by adding a markup to the product's variable manufacturing costs. This approach to pricing is referred to as:
a. Target pricing.
b. Cost-plus pricing.
c. Target costing.
d. Contribution margin pricing.

A budget prepared at a single volume of activity is referred to as a:
a. Strategic budget.
b. Static budget.
c. Standard budget.
d. Flexible budget

The area of business planning that is associated with financial matters is commonly called:
a. Master planning.
b. Strategic planning.
c. Budgeting.
d. Operational planning.

Performance evaluation should be based on the actual volume of activity rather than the planned volume of activity.
True
False

Baltazar Company reported revenue of \$1,000 on its income statement. During the same period its accounts receivable balance decreased by \$400. How much cash was collected during the period?
a. \$600.
b. \$1,000.
c. \$1,400.
d. None of the above.

Costs that are not related to any specific product, batch, or unit of production are referred to as facility-level costs.
True
False

Alan's Lawn Care incurs significant gasoline costs. This cost would be classified as a variable cost if the total cost:
a. Varies inversely with the number of hours the lawn equipment is operated.
b. Varies directly with the number of hours the lawn equipment is operated.
c. Is not affected by the number of hours the lawn equipment is operated.
d. Both A and B.

The managerial accounting system includes economic and non-financial data as well as financial statement data.
True
False

A process cost system would be appropriate for all of the following except:
a. Gasoline.
b. VCR machines.
c. G.E. light bulbs.
d. A law firm.

A cash flow that only occurs once is referred to as:
a. An annuity.
b. A lump sum.
c. A principal sum.
d. None of the above.

#### Solution Preview

Stephanie must decide between two alternatives for the weekend: babysitting or yard work. If she baby sits, she will receive \$40 and will incur \$15 in food and snack costs. If she does yard work, she will receive \$40 and will incur \$3 in lawn mower gas and oil costs and \$5 in snack costs. The amount to be received is relevant for deciding which alternative to select.
True
False

The amount received is not relevant in deciding which alternative to select since the amount is the same in both the alternatives.

The following information is provided by the Atlantic Company:

Actual direct material cost \$24,000
Standard direct material cost \$20,000
Direct material quantity variance \$1,000 unfavorable

What is the direct material price variance?
a. \$4,000 favorable.
b. \$5,000 favorable.
c. \$3,000 unfavorable.
d. Not enough information is provided.

Total material variance = 24,000-20,000=4,000 unfavorable
Since quantity variance is \$1,000 unfavorable, then price variance will be \$3,000 unfavorable

A vertical analysis uses percentages to compare each of the parts of an individual ...

#### Solution Summary

The solution explains various multiple choice questions in managerial accounting.

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