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What term is used to describe factors in a decision problem that cannot be expressed effectively in numerical terms?
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Qualitative
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Quantitative
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Sensitive
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Uncertain
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Created for Anoush!
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- 2.
For a firm that currently makes particular component, which of the following are qualitative factors that would be considered following a quantitative analysis in favour of buying?
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Buying increases uncertainty, in particular with respect to timely availability of the component
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Buying surrenders control over the product design and quality
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Employee morale would be affected if a decision to buy means dismissing staff
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All the above
Correct Answer
A. All the aboveExplanation
The given answer is "All the above". This is because all three factors mentioned in the question - increased uncertainty, surrendering control over product design and quality, and the potential impact on employee morale - are qualitative factors that would be considered after conducting a quantitative analysis in favor of buying. These factors cannot be measured in numbers or monetary terms, but they are important considerations in the decision-making process.Rate this question:
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- 3.
If a management accountant is trying to decide whether a cost is relevant to a decision, he or she should consider the cost relevant if:
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It is a historical cost precise in nature.
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It is a historical cost that is the same among all alternatives.
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It is an expected future cost that is the same for each alternative.
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It is an expected future cost that is different for each alternative.
Correct Answer
A. It is an expected future cost that is different for each alternative.Explanation
The correct answer is "it is an expected future cost that is different for each alternative." This is because when making a decision, management accountants should focus on costs that will vary depending on the different alternatives being considered. Expected future costs that are the same for each alternative would not impact the decision-making process, as they would not differentiate between the options. Therefore, the relevant cost in this scenario is the one that is expected to change based on the different alternatives.Rate this question:
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- 4.
Generally, joint costs are not relevant in decision making after split-off because:
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They do not help increase the sales.
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They increase the sales margin only marginally.
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They do not change regardless of any decision.
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Joint costs reflect opportunity costs.
Correct Answer
A. They do not change regardless of any decision.Explanation
Joint costs are costs incurred in the production of multiple products up to the split-off point. After the split-off point, the products become separate and independent. The reason joint costs are not relevant in decision making after split-off is that they do not change regardless of any decision made. These costs have already been incurred and cannot be changed or avoided. Therefore, decision makers should focus on the costs and revenues that can be influenced by their decisions rather than the sunk costs of joint costs.Rate this question:
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- 5.
Opportunity cost is best defined as:
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The amount of money that is paid for something.
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The amount of money that is paid for something, considering inflation.
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The highest valued benefit given up in making a choice.
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All of the benefits that are given up in making a choice.
Correct Answer
A. The highest valued benefit given up in making a choice.Explanation
Opportunity cost refers to the highest valued benefit that is given up when making a choice. It represents the value of the next best alternative that is foregone in order to choose a particular option. It is not necessarily related to the amount of money paid for something or considering inflation. Instead, it focuses on the value of the benefits that are sacrificed when making a decision.Rate this question:
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- 6.
The book value of an asset such as equipment is an example of:
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A future cost.
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A differential cost.
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An opportunity cost.
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A sunk cost.
Correct Answer
A. A sunk cost.Explanation
The book value of an asset, such as equipment, refers to the value of the asset as recorded in the company's accounting books. It represents the historical cost of acquiring the asset minus any accumulated depreciation. A sunk cost is a cost that has already been incurred and cannot be recovered, regardless of any future decisions. In this case, the book value of the equipment is a sunk cost because it has already been paid for and cannot be recovered, regardless of any future use or disposal of the equipment.Rate this question:
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- 7.
Manufacturers sometimes sell products at less than full price for a special order. The analysis of such decisions focuses on:
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Relevant benefits.
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both relevant benefits and relevant costs.
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Fixed cost.
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Relevant costs.
Correct Answer
A. both relevant benefits and relevant costs.Explanation
The analysis of selling products at less than full price for a special order involves considering both the relevant benefits and relevant costs. This means evaluating the potential benefits that can be gained from the special order, such as increased sales volume or customer loyalty, as well as the costs associated with fulfilling the order, such as production costs or any discounts offered. By considering both the benefits and costs, manufacturers can make informed decisions about whether selling at a reduced price for a special order is financially viable and beneficial for their business.Rate this question:
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- 8.
Which of the following is not an advantage of the variable cost pricing formula?
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Variable cost analysis is consistent with cost volume profit analysis.
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Variable cost data does not require the allocation of common fixed costs to individual product lines.
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Variable costs help managers understand the profit implications of changes in price.
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It is cost effective to use because it is required for external reporting.
Correct Answer
A. It is cost effective to use because it is required for external reporting.Explanation
The given statement suggests that the variable cost pricing formula is cost effective because it is required for external reporting. However, this is not an advantage of the variable cost pricing formula. The advantages mentioned in the other options include consistency with cost volume profit analysis, not requiring the allocation of common fixed costs, and helping managers understand the profit implications of price changes. Therefore, the statement in the answer is incorrect and does not provide an advantage of the variable cost pricing formula.Rate this question:
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- 9.
In linear programming, a constraint represents:
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the objective function.
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The contribution margin per unit.
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The limitations faced by the firm.
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the break-even level of activity.
Correct Answer
A. The limitations faced by the firm.Explanation
In linear programming, a constraint represents the limitations faced by the firm. Constraints are restrictions or conditions that must be satisfied in order to find the optimal solution to a linear programming problem. These limitations can include factors such as resource availability, capacity constraints, budget constraints, and other restrictions that the firm must adhere to in order to achieve their goals. The objective function, contribution margin per unit, and break-even level of activity are all different concepts that are not directly related to constraints in linear programming.Rate this question:
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- 10.
Linear programming is useful:
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When there is only one product.
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When there are many products.
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Only when an activity-based costing system is in use.
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When there is only one constraint.
Correct Answer
A. When there are many products.Explanation
Linear programming is a mathematical technique used to optimize the allocation of limited resources to achieve the best possible outcome. It is particularly useful when there are many products because it allows for the simultaneous consideration of multiple variables and constraints. By formulating the problem as a linear programming model, decision-makers can determine the optimal production levels for each product, taking into account factors such as demand, costs, and available resources. This helps in maximizing profits or minimizing costs, making it an effective tool for businesses with a wide range of products.Rate this question:
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- 11.
In linear programming, the objective function is typically based on:
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The selling price of the products.
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the variable cost of the products
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The full cost of the products.
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The contribution margin of the products.
Correct Answer
A. The contribution margin of the products.Explanation
The objective function in linear programming is a mathematical representation of the goal or objective of the problem. It is typically based on the contribution margin of the products, which is the difference between the selling price and the variable cost of the products. The contribution margin represents the amount of money that is available to cover fixed costs and generate profit. Therefore, maximizing the contribution margin would lead to maximizing profit in linear programming.Rate this question:
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- 12.
The benefits of management accounting information include:
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Improved decisions.
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More effective planning.
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Greater efficiency of operations.
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All of the given answers
Correct Answer
A. All of the given answersExplanation
The correct answer is "All of the given answers" because management accounting information provides various benefits such as improved decision-making, more effective planning, and greater efficiency of operations. By utilizing this information, managers can make informed decisions, set realistic goals, and optimize resource allocation, leading to improved overall performance and productivity. Therefore, all the mentioned benefits contribute to the effectiveness and success of an organization.Rate this question:
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- 13.
Costs that can be significantly influenced by a particular manager are:
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Product costs.
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Period costs.
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Controllable costs.
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Administrative costs.
Correct Answer
A. Controllable costs.Explanation
Controllable costs are the costs that a particular manager has the authority to influence and manage. This means that the manager can make decisions and take actions that directly impact the level of these costs. In contrast, product costs are the costs associated with producing a product, period costs are the costs incurred over a specific period of time, and administrative costs are the costs related to the management and administration of a business. While these costs may also be managed by a manager to some extent, controllable costs specifically refer to the costs that a manager has a significant influence over.Rate this question:
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- 14.
Unless overtime and idle time are caused by a particular job, they are treated as:
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A part of direct labour expense.
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A part of manufacturing overhead.
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Associated with a particular product.
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A part of manufacturing overhead AND associated with a particular product.
Correct Answer
A. A part of manufacturing overhead.Explanation
Overtime and idle time are not directly attributable to a specific job, but rather are general costs incurred in the manufacturing process. As such, they are considered part of manufacturing overhead, which includes all indirect costs associated with production. These costs are not directly tied to a particular product, but are necessary for the overall manufacturing operations.Rate this question:
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- 15.
Idle time is:
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Frequently an avoidable cost.
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Classified as overhead.
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Caused by events such as equipment breakdown and new set-ups of production runs.
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All of the given answers
Correct Answer
A. All of the given answersExplanation
Idle time refers to the time when employees or equipment are not engaged in productive activities. It is frequently an avoidable cost because it can be minimized or eliminated through proper planning and management. Idle time is classified as overhead because it is not directly attributable to a specific product or service. It is caused by events such as equipment breakdown and new set-ups of production runs, which further supports the idea that all of the given answers are correct.Rate this question:
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- 16.
Select the correct statement regarding fixed costs.
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Because they do not change, fixed costs should be ignored in decision making.
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The fixed cost per unit increases when volume increases
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The fixed cost per unit decreases when volume increases.
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The fixed cost per unit does not change when volume decreases.
Correct Answer
A. The fixed cost per unit decreases when volume increases.Explanation
Fixed costs are costs that do not change regardless of the volume of production or sales. These costs include expenses like rent, salaries, and insurance. The statement that the fixed cost per unit decreases when volume increases is incorrect. Fixed costs remain constant regardless of the volume of production. Therefore, this statement is not correct.Rate this question:
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- 17.
A clothing manufacturer incurred the following factory maintenance costs: 2,100 units produced with maintenance cost of $61,500, and 750 units produced with maintenance cost of $41,250. How much of the maintenance cost is made up of fixed cost?
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$11,181
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$20,125
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$30,000
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$50,319
Correct Answer
A. $30,000Explanation
The question provides information about the number of units produced and the corresponding maintenance costs. To determine the fixed cost component, we need to identify the portion of the maintenance cost that does not change with the number of units produced. In this case, the maintenance cost of $30,000 is the fixed cost component because it remains the same regardless of the number of units produced. Therefore, the correct answer is $30,000.Rate this question:
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- 18.
Java Joe's operates a chain of coffee shops. The company pays rent of $12,000 per year for each shop. Supplies (napkins, bags and condiments) are purchased as needed. The manager of each shop is paid a salary of $2,000 per month, and all other employees are paid on an hourly basis. Java Joe’s cost is which kind of cost?
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Fixed cost
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Variable cost
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Semi-variable cost
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Step-Fixed cost
Correct Answer
A. Semi-variable costExplanation
The cost of Java Joe's can be classified as a semi-variable cost because it includes both fixed and variable components. The fixed cost component is the annual rent of $12,000 per shop, which remains constant regardless of the level of activity. The variable cost component includes the salaries of hourly employees, which vary based on the number of hours worked. The manager's salary of $2,000 per month is also considered a fixed cost, but since it is not specified whether there is one manager per shop or multiple managers overseeing multiple shops, it is not included in the semi-variable cost calculation.Rate this question:
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- 19.
Nellibell's Café bakes croissants that are sold to local restaurants and grocery stores in the Columbia, South Carolina area. When 600 croissants are baked, the average cost is $0.70. When 720 croissants are baked, the average cost is $0.65. What is the total cost when 670 croissants are baked?
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$568.
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$588.
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$448.
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$532.
Correct Answer
A. $448.Explanation
The average cost of baking 600 croissants is $0.70, and the average cost of baking 720 croissants is $0.65. This means that for every additional 120 croissants baked, the cost decreases by $0.05. To find the total cost of baking 670 croissants, we need to calculate the cost difference between baking 600 and 720 croissants, which is $0.05 * 2 = $0.10. Then, we subtract this cost difference from the average cost of baking 600 croissants, which is $0.70 - $0.10 = $0.60. Finally, we multiply the average cost of baking 670 croissants by the number of croissants, which is $0.60 * 670 = $402. Therefore, the total cost when 670 croissants are baked is $402, which is closest to $448.Rate this question:
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- 20.
Technical Engineering presently leases a copying machine on a monthly basis. The lease agreement requires a fixed fee each month in addition to a charge per copy. Technical Engineering made 2 400 copies and paid a total of $162 in rent in September and in October they paid $195 for 3 500 copies. Determine Technical’s monthly fixed fee.
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$138
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$ 90
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$ 66
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$ 55
Correct Answer
A. $ 90Explanation
To determine the monthly fixed fee, we need to find the difference between the total amount paid and the charge per copy for each month. In September, Technical Engineering paid a total of $162 for 2,400 copies. Let's assume the charge per copy is x. Therefore, the equation becomes 2400x + fixed fee = $162. Similarly, in October, they paid $195 for 3,500 copies, giving us the equation 3500x + fixed fee = $195. By subtracting the first equation from the second equation, we can eliminate the fixed fee and solve for x. The result is x = $0.05. Substituting this value into the first equation, we find that the monthly fixed fee is $90.Rate this question:
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- 21.
Oregon Manufacturing incurred $106,000 of direct labor and $11,000 of indirect labor. The proper journal entry to record these events would include a debit to Work in Process for:
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$0 because Work in Process should be credited.
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$0 because Work in Process is not affected
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$117,000.
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$106,000.
Correct Answer
A. $106,000.Explanation
The correct answer is $106,000. This is because direct labor costs are directly associated with the production of goods and should be debited to the Work in Process account. Indirect labor costs, on the other hand, are not directly related to production and should not be recorded in the Work in Process account.Rate this question:
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- 22.
Media, Inc., an advertising agency, applies overhead to jobs on the basis of direct professional labor hours. Overhead was estimated to be $150,000, direct professional labor hours were estimated to be 15,000, and direct professional labor cost was projected to be $225,000. During the year, Media incurred actual overhead costs of $146,000, actual direct professional labor hours of 14,500, and actual direct labor cost of $222,000. By year-end, the firm's overhead was:
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$1,000 underapplied.
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$1,000 overapplied.
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$4,000 underapplied.
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$5,000 overapplied.
Correct Answer
A. $1,000 underapplied.Explanation
To determine if overhead is underapplied or overapplied, we need to compare the estimated overhead with the actual overhead. The estimated overhead was $150,000, and the actual overhead was $146,000. Since the actual overhead is less than the estimated overhead, the overhead is underapplied. The difference between the estimated and actual overhead is $4,000, which means the overhead is underapplied by $4,000. Therefore, the correct answer is $1,000 underapplied.Rate this question:
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- 23.
Hamilton, which uses a process-costing system, had a balance in its Work-in-Process account of $68,000 on January 1. The account was charged with direct materials, direct labor, and manufacturing overhead of $450,000 throughout the year. If a review of the accounting records determined that $86,000 of goods were still in production at year-end, Hamilton should make a journal entry on December 31 that includes:
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A debit to Cost of Goods Sold for $432,000.
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A credit to Finished-Goods Inventory for $432,000.
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A credit to Work-in-Process Inventory for $432,000.
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A credit to Work-in-Process Inventory for $86,000.
Correct Answer
A. A credit to Work-in-Process Inventory for $432,000. -
- 24.
Process costing would be used in all of the following industries except: A. petroleum refining
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Petroleum refining.
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Truck tire manufacturing.
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Wood pulp production.
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Automobile repair.
Correct Answer
A. Automobile repair.Explanation
Process costing is a method of costing used in industries where products are produced in a continuous process, such as petroleum refining, truck tire manufacturing, and wood pulp production. In these industries, costs are accumulated by process or department, and the average cost per unit is determined. However, automobile repair is a service industry where costs are not accumulated by process or department, but rather by individual jobs or projects. Therefore, process costing would not be applicable in the automobile repair industry.Rate this question:
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- 25.
Morrison, Inc., which uses a process-cost accounting system, passes completed production from Department A to Department B for further manufacturing. The journal entry to record completed production in Department A requires:
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A debit to Work-in-Process Inventory and a credit to Finished-Goods Inventory.
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A debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory.
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A debit to Finished-Goods Inventory and a credit to Work-in-Process Inventory: Department A.
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D. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory: Department A.
Correct Answer
A. D. a debit to Work-in-Process Inventory: Department B and a credit to Work-in-Process Inventory: Department A.Explanation
The correct answer is D because when completed production is passed from Department A to Department B, it is necessary to transfer the cost of the production from Department A to Department B. This transfer is recorded by debiting the Work-in-Process Inventory: Department B account, which represents the cost of production in Department B, and crediting the Work-in-Process Inventory: Department A account, which represents the cost of production in Department A.Rate this question:
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