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    Managerial Accounting - Multiple Choice Questions

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    Question 1:
    What is the biggest disadvantage of ABC?

    a. It does not provide costing information needed for GAAP purposes.
    b. It causes management to make frivolous decisions.
    c. It often causes managers to argue about the best activity measure.
    d. It is expensive.

    Question 2:
    In performing a vertical analysis, the base for sales revenues on the income statement is

    a. net sales.
    b. sales.
    c. net income.
    d. cost of goods available for sale.

    Question 3:
    Rigsby Company had no beginning work in process. During the period, 5,000 units were completed, and there were 500 units of ending work in process. How many units were started in production?

    a. 5,500
    b. 5,000
    c. 4,500
    d. 500

    Question 4:
    Kaiser Inc. uses job order costing for its brand new line of homework machines. The cost incurred for production during 2006 totaled $6,000 of materials and $5,000 of conversion costs. The company ships all goods as soon as they are completed which results in no finished goods inventory on hand at the end of any year. Beginning work in process totaled $5,000, and the ending balance is $3,000. During the year, the company completed 40 machines. How much is the cost per machine?

    a. $275
    b. $400
    c. $225
    d. $325

    Question 5:
    Which of the following is a limitation of activity-based costing?

    a. Can only be used with process costing
    b. Managers realize that the nature of each product determines its profitability
    c. Some arbitrary allocations continue
    d. It increases product costs

    Question 6:
    A process with no beginning work in process, completed and transferred out 10,000 units during a period and had 5,000 units in the ending work in process that were 50% complete. How much is equivalent units of production for the period for conversion costs?

    a. 12,500 equivalent units
    b. 15,000 equivalent units
    c. 17,500 equivalent units
    d. 7,500 equivalent units

    Question 7:
    SO-3 The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.

    a. True
    b. False

    Question 8:
    Crater Go-carts produces two models: Model 24 has sales of 500 units with a contribution margin of $40 each; Model 26 has sales of 350 units with a contribution margin of $50 each. If sales of Model 26 increase by 100 units, how much will profit change?

    a. $5,000 increase
    b. $17,500 increase
    c. $22,500 increase
    d. $35,000 increase

    Question 9:
    Which one of the following is true of the CVP income statement?

    a. It is part of accounting information provided to all financial statement users.
    b. It is used by internally by management.
    c. It provides users the amount of gross profit of a company.
    d. It will reflect the same net income as that reported on the traditional income statement.

    Question 10:
    Faucet Company reported the following information for 2006:

    budgeted sales sept oct nov dec
    $240,000 $310,000 $290,000 360,000

    All sales are on credit
    Costumers amonts on account are collected 50% in the month of sale and 50% the following month.

    How much is the November 30, 2006 budgeted Accounts Receivable?

    a. $300,000
    b. $180,000
    c. $155,000
    d. $145,000

    Question 11:
    What sources of information does a manufacturing company use to determine cost of goods sold?

    a. Only the sales budget
    b. Only the cost of purchases budget
    c. The materials budget, the labor budgets and the overhead budgets
    d. The sales and the cost of purchases budget

    Question 12:
    What might an unfavorable price variance for direct materials indicate?

    a. That the purchasing manager purchased too much inventory
    b. That production scheduling problems were a problem
    c. That the purchasing manager was unable to negotiate better prices during the period
    d. That the supply in the market exceeded the demand of the materials

    Question 13:
    What does the controllable variance measure?

    a. Whether a company incurred more or less fixed overhead costs compared to the amount of overhead applied
    b. Whether a company incurred more or less overhead costs than allowed
    c. The efficiency of using variable overhead resources
    d. Whether the production manager is able to control the production facility

    Question 14:
    Choco Latte Shop can sell all the units it can produce of either Product A or Product B but not both. Product A has a unit contribution margin of $45 and takes three machine hours to make and Product B has a unit contribution margin of $32 and takes two machine hours to make. There are 1,200 machine hours available to manufacture a product. What should Choco Latte Shop do?

    a. Make Product A which creates $13 more profit per unit than Product B does
    b. Make Product B which creates $1 more profit per constraint than Product A does
    c. Make Product B because more units can be made and sold than product A
    d. The same total profits exists regardless of which product is made.

    Question 15:
    Project A has a higher rate of return than Project B. Which statement is true about Project A?

    a. It is more attractive than Project B.
    b. It is less attractive than Project B.
    c. It is less than the cost of capital.
    d. It is higher than the hurdle rate.

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