conduct for managerial accounting

Which of the following is NOT one of the standards of conduct for managerial accounting?

  • Confidentiality
  • Integrity
  • Competence
  • Independence


Direct materials are classified as product costs, whereas indirect materials are classified as period costs.

TRUE  – or –      FALSE


Which of the following is neither a prime cost nor a conversion cost?

  • Direct Labor
  • Direct Materials
  • Manufacturing Overhead
  • None of the Above

Information for Questions 4 & 5: Below is an illustration of an activity-based costing (ABC) system for a company that manufactures computers and related equipment.

Overhead costs incurred during the period were $41,340 for utilities; $121,750 for executive administration; $72,050 for plant maintenance; and $57,024 for purchasing. Five possible cost drivers are available: machine hours (MHs), direct labor hours (DLHs), square footage occupied (SF), units produced (UNITS), and direct materials quantity (DMQ, in pounds); equal allocation (EQL) to activities or products is also allowable. The space occupied was 1,400 SF for design; 3,000 SF for assembly; and 1,800 SF for packaging.


Which of the following would be the most appropriate cost driver to use for allocating the utilities overhead pool in this ABC system?

  • Direct Materials Quantity (DMQ)
  • Equal Allocation (EQL)
  • Machine Hours (MHs)
  • Square Footage Occupied (SF)


Assuming that square footage occupied (SF) is used as the cost driver for allocating the plant maintenance overhead pool in this ABC system, what allocation rate (per SF) would be used? (Round to the nearest penny.)


When there is a small change in the volume of units manufactured, which of the following would be expected to change?

  • Variable Costs Only
  • Variable Costs and Fixed Costs
  • Variable Costs and Total Costs
  • Variable Costs, Fixed Costs, and Total Costs


Product costs generally include both variable costs and fixed costs, as do period costs.



Which of the following is the correct formula for computing the contribution margin ratio?

  • (Net Sales – Variable Costs) / Net Sales
  • (Net Sales – Cost of Goods Sold) / Net Sales
  • (Contribution Margin – Variable Costs) / Net Income
  • (Gross Profit – Period Costs) / Net Income

Information for Questions 9 & 10: Following is information for quantity produced / sold and total costs for a manufacturing company for five recent periods:

  • Period 1: 860 units; $41,340 total costs
  • Period 2: 830 units; $41,800 total costs
  • Period 3: 910 units; $43,510 total costs
  • Period 4: 920 units; $43,100 total costs
  • Period 5: 990 units; $47,450 total costs


Using the high-low method based on this data, what is the estimate of fixed costs for this company? (Round to the nearest dollar.)


Following are the results of regression analysis of this data, using Microsoft Excel:

CoefficientsStandard Errort StatP-valueLower 95%Upper 95%
X Variable 136.71087538.1120842614.5254553760.02018190910.8946027562.52714792

Based on these regression results, what is the estimate of variable costs (per unit) for this company? (Round to the nearest penny.)


Which of the following is NOT a common consideration in a make-or-buy (outsourcing) decision?

  • Economies of Scale
  • Manufacturer Currency
  • Product Quality
  • Source Reliability


Which of the following would NOT generally be considered relevant information for a business decision?

  • Avoidable Costs
  • Differential Revenues
  • Opportunity Costs
  • Sunk Costs


In a segment elimination decision, the existence of complementary revenues will generally discourage elimination whereas the existence of substitute revenues will generally encourage elimination.



Which of the following is a common cost savings strategy that a company in a target pricing scenario might pursue

  • Eliminating Waste
  • Reducing Direct Materials Quality
  • Simplifying Product Design
  • All of the Above


Which of the following is NOT one of the common bases used in cost-plus pricing (where a markup percentage is added to the cost basis)?

  • Fixed Costs
  • Product Costs
  • Variable Costs
  • Total Costs


When preparing a sales budget, it is not necessary to differentiate between estimated cash sales and estimated sales on account.



The desired ending balance for which of the following is considered in the cost of goods sold budget?

  • Direct (Raw) Materials
  • Finished Goods
  • Work in Process
  • All of the Above


Which of the following variances represents a difference between the flexible budget and the actual results?

  • Direct Labor Rate Variance
  • Direct Materials Usage Variance
  • Sales Price Variance
  • All of the Above


Which of the following budget attributes can lead to undesirable behaviors?

  • Baseline Budgets
  • Conflicting Budgets
  • Overly Strict Budgets
  • All of the Above


To be most effective, cost standards established for a manufacturing environment should be based on realistic scenarios. TRUE – or – FALSE


The critical consideration in responsibility accounting is that managers should only be held responsible for what they can control. TRUE – or – FALSE


What term(s) describe(s) a process for evaluating the performance of a company or responsibility center based on numerous measures, many of which are not financial in nature?


Which of the following measures for an investment center is computed as (operating income) ÷ (operating assets)?

  • Operating Coverage
  • Return on Investment
  • Residual Income
  • Profit Margin


Assuming sufficient funds are available, a company should pursue all investment opportunities for which residual income is negative. TRUE – or – FALSE


Which type of responsibility center would be most likely appropriate for the copy center of a large company?

Information for Questions 26, 27, & 28: Following is information for a capital investment opportunity being considered:

•  Initial Cost / Investment Amount:$46,000
•  Annual Net Cash Flows / Incremental Income:$10,000
•Estimated Salvage Value of Capital Asset:$7,000
•Project Duration:6 years

Assume straight-line depreciation and a required annual rate of return of 8%. Following are time-value-of-money (TVM) factors for an 8% discount rate and 6 periods:

TVM: 8%, 6 perPresent ValueFuture Value
Lump Sum0.63021.5869
(Ordinary) Annuity4.62297.3359


What is the average rate of return for this opportunity?

  • 8.0%
  • 21.7%
  • 18.9%
  • 37.7%


What is the payback period for this opportunity?


What is the net present value (NPV) for this opportunity? (Round amounts to the nearest dollar.)


Which of the following correctly describes a commonly overlooked complication associated with analyzing capital investment opportunities?

  • Different opportunities often generate incremental cash flows for a different number of periods.
  • Certain incremental cash flows associated with different opportunities will have tax implications.
  • Most methods for analyzing capital investment opportunities ignore qualitative considerations.
  • All of the Above


The present value index is useful for comparing capital investment opportunities that have desirable NPVs but that require substantially different initial investment amounts. TRUE – or – FALSE

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