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Week 9: ● When a cost formula is used to describe a mixed (semi-variable) cost behavior pattern, total costs are expected to increase and per unit variable costs are expected to: ○ remain constant as the level of activity increases. ● Which of the following statements does not describe a characteristic of management accounting? ○ Management accounting must conform to GAAP. ● A management decision that would have a long term influence on the operating leverage of a firm would be: ○ substituting robots for hourly paid production workers. ● When the firm's activity requires it to operate at a level above the upper boundary of the relevant range, fixed expenses are likely to: ○ Increase ● The term "relevant range" refers to: ○ the range of activity where cost relationships are valid. ● ABU Co. has several products, each with a different contribution margin ratio. If the same number of units were sold in July as in June, but the sales mix changed: ○ total contribution margin in July would be different from that in June. ● Which of the following terms do not appear on the contribution margin format income statement? ○ gross profit ● Knowledge about the behavior pattern of a cost is important to understanding the effect on net income of a change in sales volume because as sales volume changes: ○ the effect on net income will depend on the behavior pattern of various costs. ● The concept of operating leverage refers to which of the following? ○ Operating income changes proportionately more than revenues for any given change in activity level. ● Performance analysis in the planning and control cycle relates to the act of: ○ Controlling. ● Expressing fixed costs on a per unit basis of activity is misleading because: ○ fixed cost per unit decrease as activity increases. ● A sunk cost is a cost that: ○ all of the above.

● _____________ costs between two alternative projects are those that would result from selecting one alternative instead of the other. ○ Differential

CQ Week 11: ● The three components of product costs are: ○ direct material, direct labor, manufacturing overhead ● In the T-account cost flow diagram of balance sheet inventory accounts and the income statement cost of goods sold account: TGMD ○ Cost of goods manufactured is debited to finished goods inventory. ● Which of the following is NOT an account that over/under applied overhead is transferred to at the end of an accounting period? ○ Raw Materials. ● In order to achieve higher quality cost information from the assignment of overhead costs to products manufactured, the use of a predetermined overhead rate is being replaced by: ○ activity-based costing. ● An excess of cost of goods manufactured over cost of goods sold for the period represents: ○ an increase in finished goods inventory. ● If all units produced during the month of September are sold, and no additional units are sold from the beginning finished goods inventory, then: ○ income determined with absorption costing will equal income determined with direct costing. ● Which of the following is NOT an inventory account for a manufacturing company? ○ Cost of goods sold. ● A predetermined overhead rate is used to: ○ assign indirect costs to cost objects. ● Which of the following costs are included in the "for cost accounting purposes" classification? ○ Product cost and period cost. ● Budget slack is: ○ all of the above. (sometimes called padding or cushion, the result of budget estimates submitted that are slightly higher than what the costs are really expected to be, an allowance for contingencies built into a budget) ● Cost accounting is a subset of:

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○ managerial accounting. Which of the following costs would be classified as a period cost? ○ advertising expense for the product. Which of the following items would not be reported on the statement of cost of goods manufactured? ○ contribution margin. Cost of Goods Manufactured can be computed as: ○ beginning balance of work in process + raw materials used + direct labor costs incurred + manufacturing overhead costs applied - ending balance of work in process. Product costs are inventoried and treated as assets until: ○ the period in which the products they relate to are sold. The raw materials budgeted to be purchased for the period is equal to: ○ ending inventory + raw material used – beginning inventory.

CQ Week 12 ● ________________ is a technique used to filter cost information contained in performance reports to each manager within the organization at an appropriate level of detail or summarization. ○ Responsibility reporting ● For performance reports to be most effective for management by exception, they should: ○ be issued as soon as possible after the activity or period covered. ● The total variance for any particular cost component is referred to as the: ○ Budget variance ● If the actual level of activity is different from the budgeted level, a _________ budget is prepared for the actual level of activity: ○ flexible ● If the net of all variances is immaterial relative to the total production costs incurred during the period, the net variance is: ○ treated as an adjustment to cost of goods sold ● How is performance evaluated for an investment center? ○ Comparison of actual and budgeted return on investment (ROI) based on segment margin and assets controlled by the segment. ● The difference between standard and actual cost per unit of input is measured by: ○ All of the above (raw materials price variance, direct labor rate variance, variable overhead spending variance) ● The principal objective of a performance report is to:

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○ highlight activities that need management attention The purchasing agent of an organization acquired some raw materials at a bargain price, even though she knew that their quality was lower than that of the materials customarily used. This action resulted in a favorable raw materials purchase price variance that might very well have been more than offset by: ○ an unfavorable raw materials usage variance. Which of the following variances is not determined during an overhead variance analysis? ○ Price variance A set of integrated financial and operating performance measures that communicate an organization's priorities associated with achieving strategic goals is known as a: ○ balanced scorecard. A favorable materials quantity variance would occur if: ○ actual pounds of materials used were less than the standard pounds allowed. The part of the variable overhead budget variance due to the difference between actual hours required and standard hours allowed for the work done is called the: ○ variable overhead spending variance. When an income statement shows data for segments of the organization, and data for each segment are added together to get totals for the whole organization: ○ only direct revenues and direct expenses should be assigned to segments

Week 13: ● In the statement of cash flows, an increase in the accounts receivable balance from the beginning of the period to the end of the period would: ○ be subtracted from net income because this represents earned revenue provided by operating earnings. ● Which of the following is an accurate statement regarding a statement of cash flows? ○ All material operating, investing, and financing activities are included. ● Most entities satisfy the accounting criteria for recognizing revenue when: ○ a product is delivered or a service is provided. ● The concept of matching revenue and expense refers to the fact that: ○ all costs incurred in the process of earning revenues during a period are recorded as expenses in that period.

● Gains differ from revenues because gains: ○ are not a result of the entity's ongoing, central operations. ● Revenue may be recognized: ○ if a company trades inventory at its usual selling price for newspaper advertising. ● When the periodic inventory system is used: ○ cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and net purchases. ● In the statement of cash flows, depreciation and amortization expense is added back to net income because: ○ these expenses do not affect cash, but were subtracted in the determination of net income. ● The major difference between the indirect and the direct method of a statement of cash flows appears in which of the following activities section(s)? ○ The operating activities section only. Week 14: ● Most entities satisfy the accounting criteria for recognizing an expense when: ○ a cost is incurred in the revenue generating process. ● The term, "realization," in revenue recognition refers to which of the following? ○ The product or service has been exchanged for cash, claims to cash, or an asset that is readily convertible to a known amount of cash or claims to cash. ● Under most circumstances, in order to recognize revenue: ○ the revenue must be realized or realizable, and earned. ● The gross profit ratio is useful to the manager for each of the following purposes except that: ○ it can be used to estimate the amount of operating expenses for a period. ● The term, "earned," in revenue recognition refers to which of the following? ○ The entity has completed, or substantially completed, the activities it must perform to be entitled to the revenue benefits. ● Income from operations is: ○ sometimes used in the ROI calculation. ● Which of the following accounts/captions are not ever included in the calculation for Gross Profit? ○ General and Selling Expenses.

Week 15: ● If a firm borrowed money on a six-month bank loan, the firm's working capital immediately after obtaining the loan, relative to its working capital just prior to the loan, would be: ○ The same. ● Which of the following accounts is part of working capital? ○ Merchandise Inventory ● Another term for return on equity is: ○ None of these ● Another term for the price/earnings ratio is: ○ earnings multiple. ● A higher P/E ratio means that: ○ the stock is relatively expensive. ● An entity's current ratio will be influenced by: ○ the inventory cost flow assumption used. ● Management's use of resources can best be evaluated by focusing on measures of: ○ activity. ● The inventory turnover calculation: ○ is an alternative way of expressing the number of days' sales in inventory. ● Financial leverage: ○ arises because most borrowed funds have a fixed interest rate. ● The comparison of activity measures of different companies is complicated by the fact that: ○ different inventory cost flow assumptions may be used. ● Return on equity: ○ Relates net income and stockholders’ equity ● Which of the following is not usually considered a measure of an entity's liquidity? ○ Cash ratio ● The price/earnings ratio: ○ is a measure of the relative expensiveness of a firm's common stock. ● Asset turnover calculations ○ should be evaluated by observing the turnover trend over a period of time ● A common size income statement: ○ expresses items as a percentage of revenues.

M-H QUIZZES CHAPTER 3 ● Return on Investment (ROI) can be described or computed in each of the following ways, except: ○ Amount Invested / Amount of Return = ROI ● Working capital includes all of the following accounts except: ○ Retained earnings ● Which of the following would not decrease working capital? ○ An increase in merchandise inventory ● Assume that the Kulpa Company has a current ratio of 0.7. Which of the following transactions would increase this ratio? ○ Purchasing merchandise inventory on credit ● Financial statement ratios support informed judgements and decision making most effectively when: ○ The trend of entity data is compared to the trend of industry data ● The return on investment measure of performance is: ○ Used by individuals to compare investment performance ● An advantage of the DuPont model for calculating ROI is that it: ○ Focuses on asset utilization as well as net income ● Return on equity: ○ Relates net income and stockholders’ equity ● Which of the following accounts is part of working capital? ○ Merchandise inventory ● For a firm that presently has a current ratio of 2.0, the effect on this ratio of paying a current liability is: ○ Raises the current ratio CHAPTER 9 ● The first caption in most income statements in annual reports is: ○ Net sales ● Gains differ from revenues because gains: ○ Are not a result of the entity’s ongoing, central operations ● Under most circumstances, in order to recognize revenue: ○ The revenue must be realized or realizable, and earned ● The gross profit ratio is useful to the manager for each of the following purposes except that: ○ It can be used to estimate the amount of operating expenses for a period ● Because of their importance to financial statement users, certain items are normally ported as separate items on the income statement (especially when significant in amount). Which of the following is not normally reported as a separate item?

○ Advertising expense When the periodic inventory system is used: ○ Cost of goods sold can be calculated by subtracting the ending inventory amount from the sum of beginning inventory and purchases ● Income from operations is: ○ Sometimes used in the ROI calculation ● Earnings per share calculations are required on the income statement for: ○ Discontinued operations, extraordinary items, and net income ● The major difference between the indirect and the direct method of a statement of cash flows appears in which of the following activities section(s)? ○ The operating activities section only ● Which of the following transactions would not be shown under the operating activities category of the statement of cash flows (using the direct method): ○ Cash paid to purchase land CHAPTER 11 ● Many financial analysts substitute one amount for another in making ratio analysis comparisons in order to better achieve inter-company or company-to-industry data comparability. Which of the substitutions described below would not achieve better data comparability (for the ratio indicated) under any situation? ○ Average net assets for average total assets - in the denominator of the return on investments ratio ● If this trend of the current ratio is increasing, while the trend of the acid-test ratio is decreasing over a period of time, this could be a warning that the firm is: ○ Carrying excess inventories ● Return on Investment (ROI) is computed as: ○ Net income divided by average total assets ● Which of the following is not a category of financial statement ratios? ○ Reliability ● An individual interested in making a judgement about the profitability of a company should: ○ Review the trend of the company’s ROI relative to the trend of the industry average ROI for several years ● A potential creditor’s judgement about granting credit would be most influenced by the potential customer’s: ○ Practice with respect to taking cash discounts offered by different suppliers ●

The comparison of activity measures (such as turnover ratios) of different companies is complicated by the fact that: ○ Different inventory cost flow assumptions may be used ● The dividend payout ratio describes: ○ The proportion of earnings paid as dividends ● If management wanted to increase the financial leverage of the firm, it would: ○ Raise additional capital by selling fixed interest rate long-term bonds ● A vertical common size income statement: ○ Expresses all items within any given year’s income statement as a percentage of net sales for that given year CHAPTER 12 ● Managerial accounting, as opposed to financial accounting, is primarily concerned with: ○ Emphasizing the future ● Activities included in a generally accepted definition of the management process include: ○ Planning, organizing, controlling ● Contribution margin can be expressed as: ○ Sales minus variable expenses ● The contribution margin income statement: ○ Reports expenses based upon cost behavior pattern rather than cost function ● The relevant range concept refers to: ○ A firm’s range of activity ● Cost behavior refers to: ○ Costs that are variable or fixed ● Which of the following is the correct calculation for the contribution margin ratio? ○ Contribution margin divided by revenue ● Cost-volume-profit analysis assumes fixed costs: ○ Remains constant as activity changes ● At the break-even point: ○ Fixed cost is always equal to the contribution margin ● Which of the following will increase a company’s break-even point? ○ Increasing variable cost per unit CHAPTER 13 ● A job order costing system would probably be appropriate for a firm that produces: ○ Stained glass windows ● Suppose your accounting textbook is the cost object of concern. The paper used to print the textbook is a(n): ●

○ Direct cost An example of a period cost is: ○ Advertising and promotion expenditures ● An example of a product cost is: ○ Production equipment maintenance costs ● Costs may be allocated to a product or activity for many purposes, but care must be exercised when using allocated costs because: ○ Arbitrarily allocated costs may not behave in the way assumed in the allocation method ● Common costs pertain to costs that: ○ Are not directly traceable to a cost object ● Which of the following best describes the correct sequence of the flow of costs for a manufacturing firm? ○ Raw materials, work-in-progress, finished goods, cost of goods sold (RWFC) ● An industry most likely to use process costing is: ○ Coal mining ● When a manufacturing firm has a highly automated plant, the most profitable basis for applying manufacturing overhead costs to units produced would be: ○ Machine hours ● Overapplied overhead would result when: ○ Overhead applied to production exceeds actual overhead costs incurred CHAPTER 15 ● To be most effective, performance reports should be: ○ All of the above ● The principle objective of a performance report is to: ○ Highlight activities that need management attention ● The best reason for flexing a budget is to: ○ Permit a more accurate determination of variances ● If they are to be useful to managers, variances should be reported: ○ In physical terms or dollar amounts as promptly as feasible ● A favorable materials quantity variance would occur if: ○ Actual pounds of material used were less than the standard pounds allowed ● How is performance evaluated for an investment center? ○ Comparison of actual and budgeted ROI based on segment margin and assets controlled by the segment ● In a standard cost system, which of the following statements is true? ○ Favorable variances are not always good variances ● For control purposes, the material price variance should be isolated when: ●

○ Material is purchased If the actual number of labor hours used exceeds standard labor hours allowed for the actual number of units produced but actual labor cost is less than standard labor cost, the labor rate and efficiency variances are: ○ Favorable, unfavorable ● The difference between the fixed manufacturing overhead budgeted for the period and the fixed manufacturing overhead applied to the production for the period is called: ○ A volume variance CHAPTER 16 ● An opportunity cost is: ○ Income forgone because an opportunity to earn income was not pursued ● Which of the following cost classifications would not be considered relevant in comparing decision alternatives? ○ Sunk cost ● In considering whether to accept a special order at a price less than the normal selling price of the product, but the additional sales will make use of presently idle capacity, which of the following costs will not be relevant? ○ Depreciation of the manufacturing plant ● The cost of capital used in the capital budgeting process is primarily a function of: ○ ROI ● Chuck’s investment proposal would be inferior to Edna’s proposal if it was expected to have a: ○ Longer payback period ● If the net present value of a proposed investment is positive: ○ The cost of capital is lower than the internal rate of return ● If an asset costs $32,000, has an expected useful life of 10 years, is expected to have a $4,000 salvage value, and generates net annual cash inflows of $8,000 a year, the cash payback period is: ○ 4 years ● The type of costs included in...