Managerial Accounting Exam Questions and Correct Answers Latest Update 2024 (Rated A+)
What is the first step in the decision-making process? - Answers Specify the problem and goals.
A sunk cost is: - Answers A past expenditure that cannot be changed.
A decision maker's control over costs and benefits decreases as the time horizon increases. - Answers
False
It is important to keep the time horizon in mind when making decisions because: - Answers The horizon
affects whether a cost or benefit is controllable for the decision.
The primary role of accounting is to: - Answers Measure the costs and benefits of decision options.
In the short-run, organizations often are not able to substantially alter their abilities to deliver products
or services, making levels of capacity resources non-controllable. - Answers True
The Criders Company has 12,000 units of obsolete inventory. The units originally cost $6,000. The
company can either sell them for scrap at $.20 per unit or they can invest $2,000 to be able to sell them
at a price of $.60 per unit. With regard to this decision, relevant costs or benefits include: - Answers $.20
per unit, $.60 per unit, and $2,000.
If only a portion of the cost or revenue pertains to a particular decision option, then it is referred to as a
traceable cost or traceable revenue. - Answers False
Which of the following will least likely be a variable cost for Pizza Hut? - Answers Cooking ovens.
A fixed cost does not change as the volume of activity changes. - Answers True
The opportunity cost of any decision option is: - Answers The value to the decision maker of the next
best option.
Variability deals with: - Answers How activities influence costs and benefits.
Which of the following is not one of the four steps in the decision making process? - Answers Separate
routine decision problems from non-routine decision problems.
TRUE
Specify the decision problem, including the decision maker's goals.
Identify options.
,Measure benefits and costs to determine the value of each option.
Make the decision, choosing the option with the highest value.
In June, Ace Manufacturing Plant produced 100 units of propane canisters for sale. The total variable
costs were $5,000 and the fixed costs for the plant amounted to $3,000. How much is the unit variable
cost for canisters if 120 canisters are produced? - Answers $50.00
Step costs change in direct proportion to the volume of activity. - Answers False
Step costs stay at the same level for a certain activity range, but jump to a higher amount if the volume
of activity increases beyond the range.
Bill and Ted recently opened a plumbing business. The business currently has $500 monthly depreciation
for its two trucks as its only fixed costs. During the first month, the company had 10 service calls each
earning $99 revenue per call and variable costs amounting to $20 per call for plumbing supplies and gas.
How much is Bill and Ted's contribution margin for its first month? - Answers $790
If selling price is $25, unit contribution margin equals $15 and fixed costs are $12,000, then breakeven
volume is:If selling price is $25, unit contribution margin equals $15 and fixed costs are $12,000, then
breakeven volume is: - Answers 800 units.
Bill's Tires produces specialty tires for the lawn mower industry. Bill is trying to evaluate his current
month's profit for his 6-inch tire. The tire's unit selling price is $5.00, the variable cost per unit is $3,
sales volume is 260 units, and fixed costs are $120 for the period. Which of the following is the amount
of profit before taxes on the 6-inch tire product line? - Answers $400
Which of the following is a drawback of using regression analysis? - Answers It makes a number of
assumptions about the data, and accounting data sometimes do not satisfy these assumptions.
True. For example, the regression analysis may make an assumption that the relationship between the
sales volume and profit is linear. But in the reality, it might not be case.
If fixed costs are $15,000, profit before income taxes is $55,000, revenues are $160,000, variable costs
are $90,000, contribution margin is: - Answers $70,000
,Reasoning:
Contribution Margin = Revenues - Variable Costs
Contribution Margin = $160,000 - $90,000
Contribution Margin = $70,000
Assume University T-Shirt Shop has a selling price of $25 and unit variable cost of $10 for its long-sleeve
cotton shirts. Fixed costs total $1,000. University believes increasing its price to $27 will cause its sales
volume to drop by 5 percent. If University's sales volume for the month was estimated to be 300 shirts
before the price increase, how will net profit be affected by the change in selling price? - Answers $345
increase.
Contribution margin equals revenues less variable costs. - Answers True
When all other factors remain the same, if a firm decides to decrease the selling price of its product, its
unit contribution margin also decreases. - Answers True
Which one of the following correctly indicates how to calculate breakeven volume? - Answers Fixed
costs divided by unit contribution margin.
Over the short-term, fixed costs do not change with the number of units sold. - Answers True
Even when there are no sales, total costs include only variable costs. - Answers False
When there are no sales, revenues are zero and total costs equal fixed costs.
Regression analysis is: - Answers A statistical method for estimating fixed and variable costs.
In addition to planning profits, the CVP relation helps organizations make short-term decisions. -
Answers True
Spudz Toys estimated production of 2,000 stuffed dogs each with a selling price of $8.00. If the variable
cost per stuffed dog is $2.00 and fixed costs are $5,000, what is estimated profit? - Answers $7,000
Which of the following equations highlights the cost-volume-profit relation? - Answers Profit before
taxes = [(Price - Unit variable cost) x Sales volume in units] - Fixed costs.
Quantifying the longer-term implications of short-term actions is difficult. Consequently: - Answers
Frequently, only qualitative assessments are possible.
The Owens Company budgeted sales of 20,000 printers at $90 per unit last year. Variable manufacturing
costs were budgeted at $46 per unit, and fixed manufacturing costs at $12 per unit. A special order for
1,000 printers at $72 each was received by Owens in April. There is enough plant capacity to meet these
additional units without incurring any additional fixed manufacturing costs; however, the production
, would have to be done on an overtime basis at an estimated additional cost of $5 per printer.
Acceptance of the special order would not affect Owens' normal sales and no selling expenses would be
incurred. What would be increase to net operating income if the special order were accepted? - Answers
$21,000
When demand is high and a scarce resource is in short supply, a company should decide how much of
each product to produce by ranking products by the contribution margin per unit of the product. -
Answers False
When demand is high and a resource is in short supply, a company should decide how much of each
product to produce by ranking products by the contribution margin per unit of the resource
Which of the following short-term decisions deal with excess capacity? - Answers Special order.
The Southeast Company makes three products in one manufacturing facility. Data regarding these
products are as follows:
A
B
C
Direct Materials
$5.70
$6.20
$8.90
