An Advanced Level Managerial Accounting Test!

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  • 1/110 Questions

    What is the break even point?

    • Number of units sold that allow the company to neither earn a profit nor incur a loss
    • The point where company's lose money
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About This Quiz

Below is an advanced level Test on Managerial Accounting! Managerial Accounting helps managers to pursue the organization's various goals. It's a general practice that includes identifying, measuring, analyzing, interpreting, and communicating financial information to managers of an organization in their daily duties. The purpose of this quiz is to test your knowledge on the same, so you could practice and prepare well.

An Advanced Level Managerial Accounting Test! - Quiz

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  • 2. 

    Opportunity Costs are the values of benefits foregone when selecting one alternative over another.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Opportunity costs refer to the benefits that are sacrificed or given up when choosing one option over another. This means that when you choose a particular alternative, you are also giving up the potential benefits that could have been gained from the alternative option. Therefore, the statement that opportunity costs are the values of benefits foregone when selecting one alternative over another is true.

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  • 3. 

    Costs incurred in the past are:

    • Opportunity Costs

    • Sunk Costs

    • Direct Costs

    • Variable Costs

    Correct Answer
    A. Sunk Costs
    Explanation
    Sunk costs refer to costs that have already been incurred and cannot be recovered. These costs are irrelevant to decision making because they are in the past and cannot be changed. Therefore, when considering future actions or investments, sunk costs should not be taken into account as they have no impact on the potential benefits or costs of a decision.

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  • 4. 

    Direct costs are directly traceable to a product, activity, or department, while indirect costs are not.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Direct costs are costs that can be easily and specifically attributed to a particular product, activity, or department. These costs can be directly traced to the specific item or process they are associated with. On the other hand, indirect costs are costs that cannot be easily or specifically traced to a particular product, activity, or department. They are costs that are incurred for the overall functioning of the organization and are not directly linked to a specific item or process. Therefore, the statement that direct costs are directly traceable while indirect costs are not is true.

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  • 5. 

    Managerial accounting is designed for use by:

    • Internal users

    • Stockbrokers

    • External users

    • Clients

    Correct Answer
    A. Internal users
    Explanation
    Managerial accounting is a branch of accounting that focuses on providing financial information and analysis to internal users within an organization. These internal users include managers, executives, and other decision-makers who need financial information to make informed business decisions. Managerial accounting helps these internal users in planning, controlling, and evaluating the performance of the organization. Therefore, the correct answer is internal users.

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  • 6. 

    Decision making relies on incremental analysis - an analysis of the revenues that increase (decrease) and the costs that increase (decrease) if a decision alternative is selected.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Decision making relies on incremental analysis because it involves evaluating the potential changes in revenues and costs that would result from selecting a particular decision alternative. This analysis helps in determining the impact of the decision on the overall profitability and feasibility of the alternative. By comparing the incremental changes in revenues and costs, decision makers can make informed choices and select the alternative that maximizes benefits and minimizes risks. Therefore, the statement is true.

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  • 7. 

    Which of the following is NOT a goal of managerial accounting?

    • Provide information needed for decision making

    • Provide information needed for creditors

    • Provide information needed for planning

    • Provide information needed for control

    Correct Answer
    A. Provide information needed for creditors
    Explanation
    The goal of managerial accounting is to provide information needed for decision making, planning, and control. However, providing information needed for creditors is not a goal of managerial accounting. Managerial accounting focuses on internal decision making and providing information to managers within an organization, rather than external stakeholders like creditors.

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  • 8. 

    Manufacturing overhead is the cost of manufacturing activities other than direct materials and direct labor (all indirect costs).

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The statement is true because manufacturing overhead includes all indirect costs associated with manufacturing activities, such as factory rent, utilities, depreciation of equipment, and indirect labor costs. These costs cannot be directly traced to a specific product but are necessary for the overall manufacturing process. Therefore, manufacturing overhead is considered a separate category of costs apart from direct materials and direct labor.

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  • 9. 

    What are mixed costs?

    • Costs that have both variable and fixed elements

    • Do not change

    • Vary depending on units

    • Fixed for a certain range

    Correct Answer
    A. Costs that have both variable and fixed elements
    Explanation
    Mixed costs refer to costs that have both variable and fixed elements. This means that these costs contain components that do not change regardless of the level of production or units produced, as well as components that vary depending on the number of units produced. In other words, mixed costs have a fixed portion that remains constant within a certain range, and a variable portion that fluctuates with the level of activity. This combination of fixed and variable elements makes mixed costs more complex to analyze and allocate compared to purely fixed or variable costs.

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  • 10. 

    Which of the following is most likely to be a fixed cost?

    • Cost of Materials

    • Rent

    • Assembly Labor Cost

    • Commissions

    Correct Answer
    A. Rent
    Explanation
    Rent is most likely to be a fixed cost because it remains constant regardless of the level of production or sales. Whether the business produces more or less, the rent expense remains the same. This is in contrast to the cost of materials, assembly labor cost, and commissions, which are variable costs that fluctuate based on the level of production or sales.

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  • 11. 

    What type of cost is rent?

    • Variable

    • Fixed

    • Mixed

    • Step-variable

    Correct Answer
    A. Fixed
    Explanation
    Rent is considered a fixed cost because it remains constant regardless of the level of production or sales. It does not vary with changes in the volume of output or sales revenue. Therefore, the cost of rent remains the same whether the business is operating at full capacity or experiencing a decrease in production. Fixed costs are incurred regularly and are necessary for the basic operation of the business, such as rent for office or retail space.

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  • 12. 

    What is the relevant range?

    • Range of activity for which assumptions as to how costs behave are reasonably valid

    • Range of money available

    • Range of units available to be shipped

    Correct Answer
    A. Range of activity for which assumptions as to how costs behave are reasonably valid
    Explanation
    The relevant range refers to the range of activity or level of production within which the assumptions about cost behavior are reasonably valid. In other words, it is the range of activity where the relationship between costs and the level of production remains consistent. Costs may behave differently at different levels of production, and the relevant range helps to identify the range within which the assumptions about cost behavior hold true. This allows managers to make accurate cost estimates and predictions within this range.

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  • 13. 

    Incremental Analysis: -Differences in revenues and costs between alternatives are incremental. -Incremental revenue minus incremental cost equals incremental profit.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Incremental analysis involves comparing the differences in revenues and costs between different alternatives. This means that only the additional or incremental revenues and costs are taken into consideration when making decisions. The formula for calculating incremental profit is by subtracting the incremental cost from the incremental revenue. Therefore, the statement that incremental revenue minus incremental cost equals incremental profit is true.

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  • 14. 

     Which of the following is a characteristic of managerial accounting?

    • Must comply with GAAP

    • Generates reports primarily for internal users

    • Contains monetary information only

    • Emphasizes historical transactions

    Correct Answer
    A. Generates reports primarily for internal users
    Explanation
    Managerial accounting is a branch of accounting that focuses on providing financial information and reports to internal users within an organization. Unlike financial accounting, which must comply with Generally Accepted Accounting Principles (GAAP) and is primarily concerned with external reporting, managerial accounting is not bound by GAAP and is more concerned with providing relevant and timely information to help managers make informed decisions. Therefore, the characteristic of managerial accounting being the generation of reports primarily for internal users is correct.

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  • 15. 

    Cost of Goods Manufactured = Beginning Work In Progress + Current Manufacturing Cost - Ending Work In Progress

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The given statement is true. The Cost of Goods Manufactured is calculated by adding the beginning work in progress (the value of partially completed goods at the beginning of the period) to the current manufacturing cost (the cost of materials, labor, and overhead incurred during the period) and then subtracting the ending work in progress (the value of partially completed goods at the end of the period). This formula is commonly used in managerial accounting to determine the total cost of goods produced during a specific period.

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  • 16. 

    Operating Leverage: §Level of fixed versus variable costs in a company § A company with a high level of fixed costs has a high operating leverage § Companies with high operating leverage have large fluctuations in profit when sales increase or decrease §These companies are seen as more risky §High operating leverage is better when sales are expected to increase

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Operating leverage refers to the level of fixed versus variable costs in a company. A company with a high level of fixed costs has a high operating leverage. This means that a larger portion of their costs are fixed, such as rent, salaries, and depreciation, which do not change with the level of sales. As a result, when sales increase or decrease, the company's profit fluctuates significantly. This makes the company more risky, as it is more exposed to changes in sales. However, high operating leverage can be advantageous when sales are expected to increase, as it allows the company to benefit from economies of scale and generate higher profits. Therefore, the statement that a company with a high level of fixed costs has a high operating leverage is true.

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  • 17. 

    Constraints §Due to shortages of space, equipment or labor there can be constraints on how many items can be produced §Utilize contribution margin per unit to analyze situations §Calculate contribution margin per unit of constraint §Produce product with highest contribution margin per unit of constraint §Linear programming can solve multiple constraints

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The explanation for the correct answer, which is True, is that the given constraints suggest that there can be limitations on the production of items due to shortages in space, equipment, or labor. To analyze situations, the contribution margin per unit is utilized, and the contribution margin per unit of constraint is calculated. The strategy is to produce the product with the highest contribution margin per unit of constraint. Additionally, linear programming can be used to solve multiple constraints. Therefore, all of these statements support the correctness of the answer being True.

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  • 18. 

    The wages lost when you give up your job to attend school full-time is an example of a(n):

    • Fixed costs.

    • Opportunity cost.

    • Direct cost.

    • Sunk cost.

    Correct Answer
    A. Opportunity cost.
    Explanation
    The wages lost when you give up your job to attend school full-time represents the value of the next best alternative foregone, which is the opportunity cost. By choosing to attend school full-time, you are sacrificing the income you could have earned by working. This cost is not fixed because it varies depending on the individual's job and salary. It is also not a direct cost as it does not directly contribute to the production of goods or services. Finally, it is not a sunk cost as it is a future cost that can be avoided by not giving up the job.

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  • 19. 

    Cost of Goods Sold = Beginning Finished Goods + Cost of Goods Manufactured - Ending Finished Goods

    • True

    • False

    Correct Answer
    A. True
    Explanation
    This statement is true because the formula for calculating the Cost of Goods Sold (COGS) includes the Beginning Finished Goods inventory, the Cost of Goods Manufactured, and subtracts the Ending Finished Goods inventory. This formula is commonly used in accounting to determine the cost of producing goods that were sold during a specific period. By including both the beginning and ending inventory, it ensures that the cost of goods sold accurately reflects the cost of producing the goods that were actually sold.

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  • 20. 

    Budgets for Planning: Which is Production Budget?

    • Indicates planned income

    • Indicates planned cash inflows and outflows

    • Indicates the planned quantity of production and expected costs

    Correct Answer
    A. Indicates the planned quantity of production and expected costs
    Explanation
    The production budget is a financial plan that indicates the planned quantity of production and the expected costs associated with it. It helps in determining the resources needed for production, such as raw materials, labor, and overhead expenses. By estimating the quantity of production and the costs involved, the company can make informed decisions regarding pricing, resource allocation, and overall profitability. Therefore, the production budget plays a crucial role in the planning and control of production activities.

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  • 21. 

    The cost of a machine purchased last year is an example of a(n):

    • Opportunity cost.

    • Variable cost.

    • Fixed cost.

    • Sunk cost.

    Correct Answer
    A. Sunk cost.
    Explanation
    A sunk cost refers to a cost that has already been incurred and cannot be recovered. In this case, the cost of the machine purchased last year falls under this category as it was already paid for and cannot be reversed or recovered. It is important to consider sunk costs when making decisions, as they should not influence future choices since they are irretrievable.

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  • 22. 

    The goal of managerial accounting is to provide the information that managers need for all of the following EXCEPT:

    • Planning

    • Control

    • Decision Making

    • Review

    Correct Answer
    A. Review
    Explanation
    Managerial accounting provides information to managers for planning, control, and decision making. However, it does not specifically aim to provide information for the purpose of review. Reviewing performance and outcomes is typically the responsibility of financial accounting, which focuses on providing information for external stakeholders such as investors, creditors, and regulators.

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  • 23. 

    Which is Product Costs?

    • Costs associated with securing and filling customer orders ex. advertising, sales salaries, depreciation of sales equipment

    • Costs associated with the firm's general management ex. HR, accounting, corporate headquarters, and other support costs

    • Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overhead

    • Costs expensed in period incurred identified with accounting periods ex. selling and administrative expenses

    Correct Answer
    A. Costs assigned to goods produced ex direct materials, direct labor, and manufacturing overhead
    Explanation
    The correct answer is costs assigned to goods produced, which includes direct materials, direct labor, and manufacturing overhead. These costs are directly associated with the production of goods and are necessary for the creation of the product. This category does not include costs related to securing and filling customer orders, general management, or selling and administrative expenses.

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  • 24. 

    Cost of Goods Available for Sale = Beginning Finished Goods + Cost of Goods Manufactured

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The given statement is true. The formula for calculating the Cost of Goods Available for Sale is by adding the Beginning Finished Goods with the Cost of Goods Manufactured. This formula helps to determine the total value of goods that are available for sale during a specific period. By adding the beginning inventory with the cost of goods produced, the total cost of goods available for sale can be determined accurately.

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  • 25. 

    A form used to accumulate the cost of producing products is called a(n)

    • A. job cost sheet.

    • B. material requisition.

    • C. time sheet.

    • D. purchase order.

    Correct Answer
    A. A. job cost sheet.
    Explanation
    A job cost sheet is a form that is used to accumulate the cost of producing products. It is commonly used in manufacturing or construction industries to track the direct and indirect costs associated with a specific job or project. The job cost sheet includes information such as labor costs, material costs, overhead costs, and any other expenses related to the production process. This form helps businesses to accurately calculate the total cost of producing a product and determine the profitability of each job or project.

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  • 26. 

    Which of the following companies would use a job-order costing system?

    • Construction

    • Metal producer

    • Chemical producer

    • Plastic producer

    Correct Answer
    A. Construction
    Explanation
    Construction companies would use a job-order costing system because they typically work on individual projects or contracts that are unique and have specific requirements. Job-order costing allows them to track the costs associated with each project separately, including direct materials, direct labor, and overhead costs. This system helps construction companies accurately determine the profitability of each project and make informed decisions regarding pricing, resource allocation, and project management.

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  • 27. 

    Budgets for Planning: Which is Cash Flow Budget?

    • Indicates planned income

    • Indicates planned cash inflows and outflows

    • Indicates the planned quantity of production and expected costs

    Correct Answer
    A. Indicates planned cash inflows and outflows
    Explanation
    A cash flow budget is a financial tool that outlines the expected cash inflows and outflows for a specific period. It helps in forecasting and managing the cash flow of a business by estimating the timing and amount of cash that will be received and spent. This budget is essential for planning and ensuring that there is enough cash available to cover expenses and meet financial obligations. It provides a clear picture of the company's financial health and helps in making informed decisions regarding investments, expenses, and financing options.

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  • 28. 

    Which is Variable Cost?

    • Changes in proportion to changes in volume or activity (no change per unit)

    • Changes per unit (no changes in proportion to changes in volume or activity)

    Correct Answer
    A. Changes in proportion to changes in volume or activity (no change per unit)
    Explanation
    Variable costs are costs that change in proportion to changes in volume or activity. This means that as the volume or activity increases or decreases, the variable cost will also increase or decrease accordingly. However, the variable cost per unit remains constant, meaning that there is no change in cost per unit regardless of the volume or activity level.

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  • 29. 

    Multiproduct Analysis Break-Even Sales in units: (Profit+Total Fixed Costs)/(Weighted average contribution margin per unit)

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The formula provided for break-even sales in units is correct. To calculate the break-even sales in units, one needs to divide the sum of profit and total fixed costs by the weighted average contribution margin per unit. This formula helps in determining the number of units that need to be sold in order to cover all fixed costs and achieve a break-even point. Therefore, the given answer, "True," is correct.

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  • 30. 

    Which of the following is most likely to be a variable cost?

    • Depreciation

    • Cost of Materials

    • Rent

    • Advertising

    Correct Answer
    A. Cost of Materials
    Explanation
    Cost of materials is most likely to be a variable cost because it varies directly with the level of production. As the production increases, the cost of materials will also increase proportionally. This cost is directly related to the quantity of materials required to produce a unit of product. Unlike fixed costs such as depreciation, rent, and advertising, the cost of materials can be easily adjusted and controlled based on the production needs. Therefore, it is considered a variable cost in most cases.

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  • 31. 

    Sunks Costs are costs to be incurred in near future that are impossible to avoid.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Sunk Costs are costs incurred in the past that are not relevant to present decisions.

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  • 32. 

    What are step costs?

    • Fixed for a range of output, but increase when upper bound of range is exceeded

    • Variable for a certain range

    • Both fixed and variable

    Correct Answer
    A. Fixed for a range of output, but increase when upper bound of range is exceeded
    Explanation
    Step costs are costs that remain fixed within a certain range of output, but increase when the upper bound of that range is exceeded. In other words, the cost remains constant until a certain level of output is reached, and then it jumps up to a higher level once that threshold is surpassed. This type of cost structure is often seen in situations where additional resources or capacity must be added to accommodate higher levels of production or activity.

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  • 33. 

    Which of the following is an example of a variable cost?

    • Direct labor (labor cost that are directly traceable to a product)

    • Depreciation

    • Rent

    • Salaries

    Correct Answer
    A. Direct labor (labor cost that are directly traceable to a product)
    Explanation
    Direct labor is an example of a variable cost because it directly varies with the level of production. As more units of a product are produced, the direct labor cost will increase proportionally. This cost includes wages, benefits, and other expenses associated with the workers directly involved in the production process. Depreciation, rent, and salaries are not examples of variable costs as they do not directly vary with the level of production.

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  • 34. 

    Which is Fixed Cost?

    • Changes in proportion to changes in volume or activity (no change per unit)

    • Changes per unit (no changes in proportion to changes in volume or activity)

    Correct Answer
    A. Changes per unit (no changes in proportion to changes in volume or activity)
    Explanation
    The correct answer is "Changes per unit (no changes in proportion to changes in volume or activity)". This is because fixed costs remain constant regardless of the volume or activity level. They do not change in proportion to changes in volume or activity. Instead, fixed costs are incurred at a fixed amount per unit, meaning that the cost per unit remains the same regardless of the volume or activity level.

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  • 35. 

    Which of the following is not a reason that current period performance results may differ from the company’s budget for that period?

    • The plan may not have been followed properly.

    • The plan may not have been well thought-out.

    • Changing circumstances may have made the plan out of date.

    • All of the above are reasons that actual results may differ from the company’s plan.

    Correct Answer
    A. All of the above are reasons that actual results may differ from the company’s plan.
    Explanation
    The given answer states that all of the options provided are reasons that actual results may differ from the company's plan. This means that if the plan was not followed properly, if it was not well thought-out, or if changing circumstances made the plan out of date, it can lead to differences between the actual results and the budgeted plan. Therefore, all of these factors can contribute to the variance between the company's budget and the actual performance results.

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  • 36. 

    What is the contribution margin?

    • Total revenue-total variable costs

    • Total revenue-total fixed costs

    • Total revenue-finished goods

    Correct Answer
    A. Total revenue-total variable costs
    Explanation
    The contribution margin is the difference between total revenue and total variable costs. This calculation helps determine how much revenue is available to cover fixed costs and contribute to profit. By subtracting the variable costs from the total revenue, the contribution margin shows the amount of revenue that remains after covering the variable costs associated with producing or delivering a product or service. This metric is important for businesses to understand their profitability and make informed decisions regarding pricing, cost management, and resource allocation.

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  • 37. 

    Cost of Goods Manufactured is $200,000, beginning Finished Goods is $50,000, ending Finished Goods is $100,000, and ending Work In Process is $10,000.  What is the Cost of Goods Sold?

    • $100,000

    • $250,000

    • $50,000

    • $150,000

    Correct Answer
    A. $150,000
    Explanation
    The Cost of Goods Sold can be calculated by adding the beginning Finished Goods inventory to the Cost of Goods Manufactured and subtracting the ending Finished Goods inventory. In this case, the beginning Finished Goods inventory is $50,000, the Cost of Goods Manufactured is $200,000, and the ending Finished Goods inventory is $100,000. Therefore, the Cost of Goods Sold is $150,000.

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  • 38. 

    Work in Process Inventory includes the cost of

    • Goods which are only partially completed.

    • All goods sold during the period.

    • All materials purchased during the last period.

    • All goods which are completed and ready to sell.

    Correct Answer
    A. Goods which are only partially completed.
    Explanation
    Work in Process Inventory includes the cost of goods which are only partially completed. This means that it includes the cost of materials, labor, and overhead that have been incurred on products that are still in the process of being manufactured. These goods have not yet been completed and are not ready to be sold. The cost of these partially completed goods is accounted for in the Work in Process Inventory account until they are finished and transferred to the Finished Goods Inventory.

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  • 39. 

    Which of the following is an example of a fixed cost?

    • Materials

    • Commissions

    • Depreciation

    • Direct Labor

    Correct Answer
    A. Depreciation
    Explanation
    Depreciation is an example of a fixed cost because it refers to the decrease in value of an asset over time. It is a non-cash expense that is incurred regularly regardless of the level of production or sales. Unlike variable costs, such as materials and commissions, which fluctuate with the level of production, depreciation remains constant. Therefore, it is considered a fixed cost as it does not change with the volume of output.

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  • 40. 

    What is overapplied overhead and how is it eliminated?

    • Applied overhead>actual overhead; if small amount=debit manufacturing overhead and credit cost of goods sold; if large amount=apportion and close work in process, finished goods, and cost of goods sold

    • Applied overhead

    • Applied overhead>estimated overhead;if small amount=debit manufacturing overhead and credit cost of goods sold; if large amount=apportion cost of goods sold

    • Applied overhead

    Correct Answer
    A. Applied overhead>actual overhead; if small amount=debit manufacturing overhead and credit cost of goods sold; if large amount=apportion and close work in process, finished goods, and cost of goods sold
    Explanation
    Overapplied overhead refers to a situation where the amount of overhead applied to a job or process is greater than the actual overhead incurred. To eliminate overapplied overhead, if the amount is small, the manufacturing overhead account is debited and the cost of goods sold account is credited. This reduces the overapplied amount and adjusts the cost of goods sold. If the overapplied amount is large, it is apportioned and closed by adjusting the work in process, finished goods, and cost of goods sold accounts. This ensures that the overapplied overhead is properly allocated and accounted for in the financial statements.

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  • 41. 

    Which of the following is added directly to work in process?

    • Indirect labor

    • Indirect materials

    • Factory depreciation

    • Direct labor

    Correct Answer
    A. Direct labor
    Explanation
    Direct labor is added directly to work in process because it refers to the cost of labor that can be easily traced to the production of goods or services. It includes the wages, salaries, and benefits of employees who are directly involved in the manufacturing process. Unlike indirect labor, which refers to the cost of labor that cannot be easily traced to specific products or services, direct labor is a direct cost and is directly allocated to the work in process.

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  • 42. 

    Which of the following is a direct cost in relation to the cost of teaching the managerial accounting course in a college?

    • The cost of the paper that is given as handouts in the class

    • The cost of the electricity to light the classroom

    • The cost of the registration system

    • The cost of the financial aid department of the college

    Correct Answer
    A. The cost of the paper that is given as handouts in the class
    Explanation
    The cost of the paper that is given as handouts in the class is a direct cost in relation to the cost of teaching the managerial accounting course in a college because it is specifically related to the instructional materials used in the class. It is a cost that can be directly attributed to the course and is necessary for delivering the educational content to the students.

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  • 43. 

    What is the cost-volume-profit equation?

    • Profit=SP(selling price)x-VC(variable cost)x-TFC(total fixed cost)

    • Profit=SP(selling price)x+VC(variable cost)x-TFC(total fixed cost)

    • Profit=SP(selling price)x+VC(variable cost)x+TFC(total fixed cost)

    Correct Answer
    A. Profit=SP(selling price)x-VC(variable cost)x-TFC(total fixed cost)
    Explanation
    The correct equation for cost-volume-profit is profit = SP (selling price) x -VC (variable cost) x -TFC (total fixed cost). This equation takes into account the selling price, variable cost, and total fixed cost to calculate the profit. By subtracting the variable cost and total fixed cost from the selling price, we can determine the profit generated.

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  • 44. 

    What are discretionary fixed costs? committed fixed costs?

    • Management can easily change them (research and development); cannot easily be changed (rent, insurance)

    • Management can't easily change them (research and development); can easily be changed (rent, insurance)

    • Management can't easily change them (research and development); cannot easily be changed

    Correct Answer
    A. Management can easily change them (research and development); cannot easily be changed (rent, insurance)
    Explanation
    Discretionary fixed costs refer to expenses that management has control over and can easily change, such as research and development costs. Committed fixed costs, on the other hand, are expenses that management cannot easily change, such as rent and insurance. The correct answer states that research and development costs can be easily changed by management, while rent and insurance costs cannot be easily changed.

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  • 45. 

    What are the two ways  to calculate contribution margin ratio?

    • (sales-TVC)/sales or (SP-VC)/SP

    • (sales+TVC)/sales or (SP+VC)/SP

    • (sales+TVC)/sales or (SP-VC)/SP

    Correct Answer
    A. (sales-TVC)/sales or (SP-VC)/SP
    Explanation
    The correct answer is (sales-TVC)/sales or (SP-VC)/SP. The contribution margin ratio is calculated by subtracting the total variable costs (TVC) from the total sales and dividing it by the total sales. Alternatively, it can be calculated by subtracting the variable costs per unit (VC) from the selling price per unit (SP) and dividing it by the selling price per unit. These formulas help determine the percentage of each sales dollar that contributes to covering the fixed costs and generating profit.

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  • 46. 

    Which of the following is a manufacturing cost?

    • Indirect materials

    • Advertising expense

    • Depreciation of the office equipment used by the sales staff

    • Salary of clerical workers

    Correct Answer
    A. Indirect materials
    Explanation
    Indirect materials are considered a manufacturing cost because they are materials that are used in the production process but are not directly traceable to a specific product. These materials are necessary for the manufacturing process and are included in the cost of producing goods. Advertising expense, depreciation of office equipment used by the sales staff, and salary of clerical workers are not directly related to the manufacturing process and would typically be categorized as non-manufacturing costs.

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  • 47. 

    GAAP requires that inventories and cost of goods sold be reported at full cost. Which of the following is defined as full cost?

    • Direct materials, direct labor, and variable overhead

    • Direct materials, direct labor, and fixed overhead

    • Direct materials, direct labor, and other variable costs

    • Direct materials, direct labor, and total overhead

    Correct Answer
    A. Direct materials, direct labor, and total overhead
    Explanation
    Full cost refers to the total cost incurred in the production of goods or services. It includes direct materials, which are the raw materials used in the production process, direct labor, which is the cost of the labor directly involved in the production process, and total overhead, which includes both variable and fixed overhead costs. Therefore, the correct answer is direct materials, direct labor, and total overhead.

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  • 48. 

    A cost which is directly traceable to a product, activity, or department is a(n)

    • The cost of the paper that is given as handouts in the class

    • The cost of the electricity to light the classroom

    • The cost of the registration system

    • The cost of the financial aid department of the college

    Correct Answer
    A. The cost of the paper that is given as handouts in the class
    Explanation
    The cost of the paper that is given as handouts in the class is directly traceable to the activity of providing handouts in the class. It is a cost that can be specifically attributed to this particular product or activity.

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  • 49. 

    Hurricane Wings has budgeted the following costs for a month in which 24,000 wings will be cooked and sold. Wings, breading, and sauce $4,900 Direct labor (Variable) 3,500 Rent 1,100 Depreciation 900 Other fixed costs 400     Each wing sells for $0.80 each. What is the budgeted total fixed cost?

    • $7,300

    • $2,400

    • $8,400

    • $10,800

    Correct Answer
    A. $2,400
    Explanation
    The budgeted total fixed cost can be found by adding up the fixed costs, which include rent, depreciation, and other fixed costs. In this case, the fixed costs amount to $1,100 + $900 + $400 = $2,400.

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Quiz Review Timeline (Updated): Mar 21, 2023 +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jan 28, 2013
    Quiz Created by
    Rmerklen3
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