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Principles of Accounting, Volume 2: Managerial Accounting

Multiple Choice

Principles of Accounting, Volume 2: Managerial AccountingMultiple Choice
Table of contents
  1. Preface
  2. 1 Accounting as a Tool for Managers
    1. Why It Matters
    2. 1.1 Define Managerial Accounting and Identify the Three Primary Responsibilities of Management
    3. 1.2 Distinguish between Financial and Managerial Accounting
    4. 1.3 Explain the Primary Roles and Skills Required of Managerial Accountants
    5. 1.4 Describe the Role of the Institute of Management Accountants and the Use of Ethical Standards
    6. 1.5 Describe Trends in Today’s Business Environment and Analyze Their Impact on Accounting
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Thought Provokers
  3. 2 Building Blocks of Managerial Accounting
    1. Why It Matters
    2. 2.1 Distinguish between Merchandising, Manufacturing, and Service Organizations
    3. 2.2 Identify and Apply Basic Cost Behavior Patterns
    4. 2.3 Estimate a Variable and Fixed Cost Equation and Predict Future Costs
    5. Key Terms
    6. Summary
    7. Multiple Choice
    8. Questions
    9. Exercise Set A
    10. Exercise Set B
    11. Problem Set A
    12. Problem Set B
    13. Thought Provokers
  4. 3 Cost-Volume-Profit Analysis
    1. Why It Matters
    2. 3.1 Explain Contribution Margin and Calculate Contribution Margin per Unit, Contribution Margin Ratio, and Total Contribution Margin
    3. 3.2 Calculate a Break-Even Point in Units and Dollars
    4. 3.3 Perform Break-Even Sensitivity Analysis for a Single Product Under Changing Business Situations
    5. 3.4 Perform Break-Even Sensitivity Analysis for a Multi-Product Environment Under Changing Business Situations
    6. 3.5 Calculate and Interpret a Company’s Margin of Safety and Operating Leverage
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  5. 4 Job Order Costing
    1. Why It Matters
    2. 4.1 Distinguish between Job Order Costing and Process Costing
    3. 4.2 Describe and Identify the Three Major Components of Product Costs under Job Order Costing
    4. 4.3 Use the Job Order Costing Method to Trace the Flow of Product Costs through the Inventory Accounts
    5. 4.4 Compute a Predetermined Overhead Rate and Apply Overhead to Production
    6. 4.5 Compute the Cost of a Job Using Job Order Costing
    7. 4.6 Determine and Dispose of Underapplied or Overapplied Overhead
    8. 4.7 Prepare Journal Entries for a Job Order Cost System
    9. 4.8 Explain How a Job Order Cost System Applies to a Nonmanufacturing Environment
    10. Key Terms
    11. Summary
    12. Multiple Choice
    13. Questions
    14. Exercise Set A
    15. Exercise Set B
    16. Problem Set A
    17. Problem Set B
    18. Thought Provokers
  6. 5 Process Costing
    1. Why It Matters
    2. 5.1 Compare and Contrast Job Order Costing and Process Costing
    3. 5.2 Explain and Identify Conversion Costs
    4. 5.3 Explain and Compute Equivalent Units and Total Cost of Production in an Initial Processing Stage
    5. 5.4 Explain and Compute Equivalent Units and Total Cost of Production in a Subsequent Processing Stage
    6. 5.5 Prepare Journal Entries for a Process Costing System
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  7. 6 Activity-Based, Variable, and Absorption Costing
    1. Why It Matters
    2. 6.1 Calculate Predetermined Overhead and Total Cost under the Traditional Allocation Method
    3. 6.2 Describe and Identify Cost Drivers
    4. 6.3 Calculate Activity-Based Product Costs
    5. 6.4 Compare and Contrast Traditional and Activity-Based Costing Systems
    6. 6.5 Compare and Contrast Variable and Absorption Costing
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  8. 7 Budgeting
    1. Why It Matters
    2. 7.1 Describe How and Why Managers Use Budgets
    3. 7.2 Prepare Operating Budgets
    4. 7.3 Prepare Financial Budgets
    5. 7.4 Prepare Flexible Budgets
    6. 7.5 Explain How Budgets Are Used to Evaluate Goals
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  9. 8 Standard Costs and Variances
    1. Why It Matters
    2. 8.1 Explain How and Why a Standard Cost Is Developed
    3. 8.2 Compute and Evaluate Materials Variances
    4. 8.3 Compute and Evaluate Labor Variances
    5. 8.4 Compute and Evaluate Overhead Variances
    6. 8.5 Describe How Companies Use Variance Analysis
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  10. 9 Responsibility Accounting and Decentralization
    1. Why It Matters
    2. 9.1 Differentiate between Centralized and Decentralized Management
    3. 9.2 Describe How Decision-Making Differs between Centralized and Decentralized Environments
    4. 9.3 Describe the Types of Responsibility Centers
    5. 9.4 Describe the Effects of Various Decisions on Performance Evaluation of Responsibility Centers
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  11. 10 Short-Term Decision Making
    1. Why It Matters
    2. 10.1 Identify Relevant Information for Decision-Making
    3. 10.2 Evaluate and Determine Whether to Accept or Reject a Special Order
    4. 10.3 Evaluate and Determine Whether to Make or Buy a Component
    5. 10.4 Evaluate and Determine Whether to Keep or Discontinue a Segment or Product
    6. 10.5 Evaluate and Determine Whether to Sell or Process Further
    7. 10.6 Evaluate and Determine How to Make Decisions When Resources Are Constrained
    8. Key Terms
    9. Summary
    10. Multiple Choice
    11. Questions
    12. Exercise Set A
    13. Exercise Set B
    14. Problem Set A
    15. Problem Set B
    16. Thought Provokers
  12. 11 Capital Budgeting Decisions
    1. Why It Matters
    2. 11.1 Describe Capital Investment Decisions and How They Are Applied
    3. 11.2 Evaluate the Payback and Accounting Rate of Return in Capital Investment Decisions
    4. 11.3 Explain the Time Value of Money and Calculate Present and Future Values of Lump Sums and Annuities
    5. 11.4 Use Discounted Cash Flow Models to Make Capital Investment Decisions
    6. 11.5 Compare and Contrast Non-Time Value-Based Methods and Time Value-Based Methods in Capital Investment Decisions
    7. Key Terms
    8. Summary
    9. Multiple Choice
    10. Questions
    11. Exercise Set A
    12. Exercise Set B
    13. Problem Set A
    14. Problem Set B
    15. Thought Provokers
  13. 12 Balanced Scorecard and Other Performance Measures
    1. Why It Matters
    2. 12.1 Explain the Importance of Performance Measurement
    3. 12.2 Identify the Characteristics of an Effective Performance Measure
    4. 12.3 Evaluate an Operating Segment or a Project Using Return on Investment, Residual Income, and Economic Value Added
    5. 12.4 Describe the Balanced Scorecard and Explain How It Is Used
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Exercise Set A
    11. Exercise Set B
    12. Problem Set A
    13. Problem Set B
    14. Thought Provokers
  14. 13 Sustainability Reporting
    1. Why It Matters
    2. 13.1 Describe Sustainability and the Way It Creates Business Value
    3. 13.2 Identify User Needs for Information
    4. 13.3 Discuss Examples of Major Sustainability Initiatives
    5. 13.4 Future Issues in Sustainability
    6. Key Terms
    7. Summary
    8. Multiple Choice
    9. Questions
    10. Thought Provokers
  15. A | Financial Statement Analysis
  16. B | Time Value of Money
  17. C | Suggested Resources
  18. Answer Key
    1. Chapter 1
    2. Chapter 2
    3. Chapter 3
    4. Chapter 4
    5. Chapter 5
    6. Chapter 6
    7. Chapter 7
    8. Chapter 8
    9. Chapter 9
    10. Chapter 10
    11. Chapter 11
    12. Chapter 12
    13. Chapter 13
  19. Index
1.

LO 3.1The amount of a unit’s sales price that helps to cover fixed expenses is its ________.

  1. contribution margin
  2. profit
  3. variable cost
  4. stepped cost
2.

LO 3.1A company’s product sells for $150 and has variable costs of $60 associated with the product. What is its contribution margin per unit?

  1. $40
  2. $60
  3. $90
  4. $150
3.

LO 3.1A company’s product sells for $150 and has variable costs of $60 associated with the product. What is its contribution margin ratio?

  1. 10%
  2. 40%
  3. 60%
  4. 90%
4.

LO 3.1A company’s contribution margin per unit is $25. If the company increases its activity level from 200 units to 350 units, how much will its total contribution margin increase?

  1. $1,250
  2. $3,750
  3. $5,000
  4. $8,750
5.

LO 3.2A company sells its products for $80 per unit and has per-unit variable costs of $30. What is the contribution margin per unit?

  1. $30
  2. $50
  3. $80
  4. $110
6.

LO 3.2If a company has fixed costs of $6,000 per month and their product that sells for $200 has a contribution margin ratio of 30%, how many units must they sell in order to break even?

  1. 100
  2. 180
  3. 200
  4. 2,000
7.

LO 3.2Company A wants to earn $5,000 profit in the month of January. If their fixed costs are $10,000 and their product has a per-unit contribution margin of $250, how many units must they sell to reach their target income?

  1. 20
  2. 40
  3. 60
  4. 120
8.

LO 3.2A company wants to earn an income of $60,000 after-taxes. If the tax rate is 32%, what must be the company’s pre-tax income in order to have $60,000 after-taxes?

  1. $88,235
  2. $19,200
  3. $79,200
  4. $143,000
9.

LO 3.2A company has pre-tax or operating income of $120,000. If the tax rate is 40%, what is the company’s after-tax income?

  1. $300,000
  2. $240,000
  3. $48,000
  4. $72,000
10.

LO 3.3When sales price increases and all other variables are held constant, the break-even point will ________.

  1. remain unchanged
  2. increase
  3. decrease
  4. produce a lower contribution margin
11.

LO 3.3When sales price decreases and all other variables are held constant, the break-even point will ________.

  1. remain unchanged
  2. increase
  3. decrease
  4. produce a higher contribution margin
12.

LO 3.3When variable costs increase and all other variables remain unchanged, the break-even point will ________.

  1. remain unchanged
  2. increase
  3. decrease
  4. produce a higher contribution margin
13.

LO 3.3When fixed costs decrease and all other variables remain unchanged, the break-even point will ________.

  1. remain unchanged
  2. increase
  3. decrease
  4. produce a lower contribution margin
14.

LO 3.3When fixed costs increase and all other variables remain unchanged, the contribution margin will ________.

  1. remain unchanged
  2. increase
  3. decrease
  4. increase variable costs per unit
15.

LO 3.4If the sales mix in a multi-product environment shifts to a higher volume in low contribution margin products, the break-even point will ________.

  1. remain unchanged because all products are included in the calculation of break-even
  2. increase because the low contribution margin products have little effect on break-even
  3. increase because the per composite unit contribution margin will decrease
  4. decrease because the per composite unit contribution margin will increase
16.

LO 3.4Break-even for a multiple product firm ________.

  1. can be calculated by dividing total fixed costs by the contribution margin of a composite unit
  2. can be calculated by multiplying fixed costs by the contribution margin ratio of a composite unit
  3. can only be calculated when the proportion of products sold is the same for all products
  4. can be calculated by multiplying fixed costs by the contribution margin ratio of the most common product in the sales mix
17.

LO 3.4Waskowski Company sells three products (A, B, and C) with a sales mix of 3:2:1. Unit sales price are shown. What is the sales price per composite unit?

Product A $7, Product B $4, Product C $6.
  1. $17.00
  2. $25.00
  3. $35.00
  4. $20.00
18.

LO 3.4Beaucheau Farms sells three products (E, F, and G) with a sale mix ratio of 3:1:2. Unit sales price are shown. What is the sales price per composite unit?

Product E $11, Product F $8, Product G $9.
  1. $28.00
  2. $20.00
  3. $59.00
  4. $41.00
19.

LO 3.4A company sells two products, Model 101 and Model 202. For every one unit of Model 101, they sell they sell two units of Model 202. Sales and cost information for the two products is shown. What is the contribution margin for a composite unit based on the sales mix?

Sales Price, Variable Cost respectively: Model 101 $25, 11; Model 202 28, 7.
  1. $14
  2. $21
  3. $35
  4. $56
20.

LO 3.5Wallace Industries has total contribution margin of $58,560 and net income of $24,400 for the month of April. Wallace expects sales volume to increase by 5% in May. What are the degree of operating leverage and the expected percent change in income for Wallace Industries?

  1. 0.42 and 2.2%
  2. 0.42 and 5%
  3. 2.4 and 12%
  4. 2.5 and 13%
21.

LO 3.5Macom Manufacturing has total contribution margin of $61,250 and net income of $24,500 for the month of June. Marcus expects sales volume to increase by 10% in July. What are the degree of operating leverage and the expected percent change in income for Macom Manufacturing?

  1. 0.4 and 10%
  2. 2.5 and 10%
  3. 2.5 and 25%
  4. 5.0 and 50%
22.

LO 3.5If a firm has a contribution margin of $59,690 and a net income of $12,700 for the current month, what is their degree of operating leverage?

  1. 0.18
  2. 1.18
  3. 2.4
  4. 4.7
23.

LO 3.5If a firm has a contribution margin of $78,090 and a net income of $13,700 for the current month, what is their degree of operating leverage?

  1. 0.21
  2. 1.21
  3. 2.4
  4. 5.7
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