Management Accounting

Front 1

A cost that is useful for one decision may not be useful information for another decision.

Back 1

True

Front 2

A company with sales of $100,000, variable costs of $70,000, and fixed costs of $50,000 will reach its break-even point if sales are increased by $20,000.

Back 2

False

Front 3

A cost may be relevant for one decision, but not relevant for a different decision.

Back 3

True

Front 4

A direct cost will be allocated to the cost object.

Back 4

False

Front 5

A good management accounting system is intended to meet specific decision-making needs at all levels in the organization.

Back 5

True

Front 6

A key element in any organization’s strategy is to identify its target customers and to deliver what those target customers want.

Back 6

True

Front 7

ABC systems seek an activity cost allocation driver that has a cause-and-effect relationship with costs in the cost pool.

Back 7

True

Front 8

Activity -based pricing prices orders, not products.

Back 8

True

Front 9

Activity-based cost systems use cost centers to accumulate costs.

Back 9

False

Front 10

An activity-based costing system is meant to perform the role of operational control as well as to provide the basis for costing inventory for financial reporting.

Back 10

False

Front 11

An easy way to implement a cost-effective activity-based costing system is to buy a prepackaged ABC software package.

Back 11

False

Front 12

An example of a sunk cost is the amount of a guaranteed contract that has not yet been paid.

Back 12

True

Front 13

Assigning selling and distribution costs to product lines is becoming more important because of customer requests for customized services.

Back 13

True

Front 14

Avoidable costs are eliminated when a product is outsourced.

Back 14

True

Front 15

Sunk costs

Back 15

:(letterlijk vertaald: gezonken kosten), ook wel sunk expenditures genoemd, zijn in de economie kosten die al gemaakt zijn en niet meer ongedaan te maken zijn. Bij het nemen van operationele economische beslissingen dient men geen rekening te houden met deze sunk costs.

Front 16

Boundary systems are always stated in positive terms that outline maximum standards of behavior.

Back 16

False

Front 17

Break-even point is NOT an important concept since the goal of business is to make a profit.

Back 17

False

Front 18

By comparing the job bid sheet with the job cost sheet, differences between actual support costs and estimated support costs can be compared.

Back 18

False

Front 19

Controlling activities focus on projecting product or service cost.

Back 19

False

Front 20

Conventional product-costing systems assign indirect costs to products in two stages. In the first stage, production department costs are allocated to the service departments.

Back 20

True

Front 21

Conventional two-stage costing systems for service department’s cost allocations are likely to undercost low-volume products.

Back 21

True

Front 22

Corporations may try to project a favorable image by adopting a Code of Ethics.

Back 22

True

Front 23

Cost driver rates calculated using actual work performed include an allocation for the cost of resources used and for unused capacity.

Back 23

True

Front 24

Cost-volume-profit analysis may be used for single-product and multiproduct analysis but not in a service environment.

Back 24

False

Front 25

Currently, most personnel costs are classified as fixed costs.

Back 25

True

Front 26

Customer-sustaining costs are independent of the volume of products or services sold to the customer.

Back 26

True

Front 27

Depreciation expenses allocated to a product line is a relevant cost when deciding to discontinue that product.

Back 27

False

Front 28

Determining cost pools and realistic cost driver rates is a relatively simple process.

Back 28

False

Front 29

Direct materials and direct labor are referred to as conversion costs because these costs are consumed when manufacturing a product.

Back 29

False

Front 30

During the history of management accounting, innovations were developed to address the decision-making needs of managers.

Back 30

True

Front 31

Even when the ABC project is initiated from the finance group, a multifunctional project team should be formed.

Back 31

True

Front 32

Even when the only constraint limiting production is machine time, a company should be most concerned with maximizing contribution margin per unit.

Back 32

False

Front 33

Fixed costs depend on the resources used, not the resources acquired.

Back 33

False

Front 34

Fixed costs vary with the level of production or sales volume.

Back 34

False

Front 35

For a particular decision, differential revenues and costs are always relevant.

Back 35

True

Front 36

For activity-based cost systems, activity costs are assigned to products in the proportion of the demand they place on activity resources.

Back 36

True

Front 37

For decision-making, differential costs assist in choosing between alternatives.

Back 37

True

Front 38

For external reporting, generally accepted accounting principles require that costs be classified as either variable or fixed costs.

Back 38

False

Front 39

For general customers, the price charged for a product must cover its long-run cost to the organization.

Back 39

True

Front 40

For one-time-only special orders, variable costs may be relevant but not fixed costs.

Back 40

False

Front 41

For service organizations, activity-based cost systems clarify appropriate cost assignments to products and customers and help to identify the profitability of various products and customers.

Back 41

True

Front 42

Functionality refers to the performance of a product or service.

Back 42

True

Front 43

Global competition led to the development of international quality standards such as ISO 9000: 2000 Standards.

Back 43

True

Front 44

Government and nonprofit organizations, as well as profit-seeking enterprises, are feeling the pressures for improved performance.

Back 44

True

Front 45

If a company is deciding whether to outsource a part, the reliability of the supplier is an important factor to consider.

Back 45

False

Front 46

If cost driver rates were based on actual short-term usage, periods of lower demand would result in higher cost driver rates.

Back 46

True

Front 47

Implementing a just-in-time manufacturing system requires a major cultural change for an organization.

Back 47

true

Front 48

In a multistage-process costing system, the first step is to determine the costs for each stage of the process.

Back 48

True

Front 49

In a normal job order costing system even though the cost driver rate is based on estimates, support costs are applied to products based on actual levels of activity.

Back 49

True

Front 50

In a whale curve portraying an ABC customer analysis of customer profitability, the largest customers are typically in the middle.

Back 50

False

Front 51

In general, service companies are ideal candidates for activity-based costing.

Back 51

True

Front 52

In general, the selection of activity cost drivers requires making trade-offs between accuracy and the cost of measurement.

Back 52

True

Front 53

In job order costing, individual jobs and products will be allocated the same amount of support costs whether a single cost pool or multiple cost pools is used.

Back 53

False

Front 54

In job order costing, only direct costs are used to determine the cost of a job.

Back 54

False

Front 55

In make-or-buy decisions, the suppliers’ reputation for quality and service is not a relevant quantitative factor.

Back 55

True

Front 56

In most organizations, managing selling, general and administrative costs as well as manufacturing costs are important for financial success.

Back 56

True

Front 57

In multiproduct situations when the sales mix shifts toward the product with the lowest contribution margin per unit, the break-even quantity will decrease.

Back 57

False

Front 58

In recent years, fixed costs have increased as a proportion of total manufacturing costs.

Back 58

True

Front 59

Information about customer satisfaction is an example of financial information.

Back 59

False

Front 60

Information is never neutral; just the act of measuring and reporting information affects the individuals involved.

Back 60

True

Front 61

Job order and multistage-process costing systems all use predetermined cost driver rates to assign costs to jobs or products.

Back 61

False

Front 62

Job order costing would be appropriate in a shipyard.

Back 62

True

Front 63

Knowing whether a cost is a period or a product cost helps to estimate total cost at a new level of activity.

Back 63

False

Front 64

Machine hours is always an appropriate cost driver in a manufacturing environment.

Back 64

False

Front 65

Management accountants focus on historical cost.

Back 65

False

Front 66

Management accounting can provide information on customer satisfaction.

Back 66

True

Front 67

Management accounting information allows managers to compare actual and planned costs and to identify areas and opportunities for process improvement.

Back 67

True

Front 68

Management accounting information generally reports on the organization as a whole.

Back 68

False

Front 69

Management accounting information is sometimes predictive and forward looking.

Back 69

True

Front 70

Management accounting innovations are usually developed by academics.

Back 70

False

Front 71

Management accounting measures can provide advance warnings of problems.

Back 71

True

Front 72

Many costs of marketing, selling, and distribution expenses are incurred not to support individual products or product lines, but rather to support customers, market segments or distribution channels.

Back 72

True

Front 73

Multistage-process costing is used to allocate manufacturing costs to products such as pharmaceuticals.

Back 73

True

Front 74

Multistage-process costing systems are used when products manufactured are relatively homogeneous and there are few and relatively small differences in the production requirements for different products.

Back 74

True

Front 75

Operating profit is an example of nonfinancial information.

Back 75

True

Front 76

Opportunity costs are implicit costs.

Back 76

True

Front 77

Organizational leadership plays a critical role in fostering an organization’s culture of high ethical standards.

Back 77

True

Front 78

Outsourcing is risk-free to the purchaser of a part because the supplier now has the responsibility of producing the part.

Back 78

False

Front 79

Overhead costs such as utilities and supervisory labor are allocated to cost objects in a multi-product facility.

Back 79

True

Front 80

Personal employee responses are not critical considerations for the business decision maker.

Back 80

False

Front 81

Practical capacity is generally greater than theoretical capacity.

Back 81

False

Front 82

Practical capacity is used as the denominator for activity cost driver calculations to avoid distortions caused by the assignment of excess capacity costs to the products.

Back 82

True

Front 83

Prevention costs are costs incurred to ensure that products are produced according to quality standards.

Back 83

True

Front 84

Process layouts are characterized by long production paths, high inventory levels and small batches of unique products.

Back 84

True

Front 85

Product lines that produce different variations (models, styles, or colors) often require specialized activities that translate into lower support costs for each product line.

Back 85

False

Front 86

Quality is the degree of conformance between what the customer is promised and what the customer receives.

Back 86

True

Front 87

Reducing the number of production runs provides an economic benefit even though resources remain at the same level.

Back 87

False

Front 88

Selling price per unit is $30, variable cost per unit is $15, and fixed cost per unit is $10. When this company operates above the break-even point, the sale of one more unit will increase net income by $5.

Back 88

False

Front 89

Sensitivity to timeliness and quality of service is especially important to service organizations.

Back 89

True

Front 90

Some fixed costs might be classified as direct manufacturing costs.

Back 90

True

Front 91

Sometimes qualitative factors are the most important factors in make-or-buy decisions.

Back 91

True

Front 92

Specialized engineering drawings of products, product quality specifications and quality control testing, inventoried raw materials, and material control systems are examples of activities that equate to greater support costs.

Back 92

True

Front 93

Sunk costs are usually relevant costs for decision making.

Back 93

False

Front 94

The benefits of classifying activities using the broader framework of unit-related, batch-related, product-sustaining, customer-sustaining, and business-sustaining activities are there are generally more costs that are directly traceable to cost objects.

Back 94

True

Front 95

The buildup of inventories decreases the cycle time of production.

Back 95

True

Front 96

The cost of a customized machine only used in the production of a single product would be classified as a product cost.

Back 96

True

Front 97

The cost of utilities for the factory building would be classified as a period cost.

Back 97

False

Front 98

The costs grouped in a cost pool Should be driven by the same activity.

Back 98

True

Front 99

The direct allocation method recognizes possible interactions between service departments when allocating service department’s costs to production departments.

Back 99

True

Front 100

The Ericson’s Ice Cream Company case in the text provides an illustration of why factories producing a more varied mix of products have higher costs than factories producing only a narrow range of products.

Back 100

True

Front 101

The Federal Accounting Standards Advisory Board sets cost accounting standards for all federal government activities.

Back 101

True

Front 102

The first step in designing an activity-based cost system is to develop an activity dictionary.

Back 102

True

Front 103

The goal of both order costing and multistage-process costing is accurate product cost.

Back 103

True

Front 104

The International Accounting Standards Board sets the guidelines used for management accounting.

Back 104

False

Front 105

The most successful ABC projects occur when a clear business purpose exists for building the ABC model.

Back 105

True

Front 106

The operating costs considered by the theory of constraints are all direct manufacturing costs, including direct materials and direct labor.

Back 106

True

Front 107

The over-allocation of overhead to a product distorts the product’s cost and therefore the evaluation of the product’s profitability.

Back 107

True

Front 108

The primary objective of governmental and not-for-profit organizations is to provide services to the citizens or clients.

Back 108

True

Front 109

The raw material used in a product that can be easily traced to the product is generally classified as an indirect cost.

Back 109

False

Front 110

The role of the management accountant is to determine the cost of a product based on the current decision situation.

Back 110

True

Front 111

The salary of the company president is a fixed manufacturing cost.

Back 111

False

Front 112

The selection of activity cost drivers requires making choices related to the usage of transaction drivers, duration drivers, and intensity drivers.

Back 112

True

Front 113

The theory of constraints focuses on long-term initiatives to increase operating income.

Back 113

False

Front 114

The time over which a decision maker can adjust capacity is referred to as the short run.

Back 114

False

Front 115

The value proposition has only two elements: price and quality.

Back 115

False

Front 116

There are two general types of facility designs: process layouts and product layouts.

Back 116

True

Front 117

Time-driven activity based cost systems are an improvement over traditional activity-based cost systems because they are less time-consuming to implement and easier to update.

Back 117

True

Front 118

To perform cost-volume-profit analysis, a company must be able to separate costs into fixed and variable components.

Back 118

True

Front 119

Traditional cost systems use actual departments or cost centers for defining cost pools to accumulate and redistribute costs.

Back 119

True

Front 120

Unused capacity should be treated as a general cost to be shared across all product lines.

Back 120

False

Front 121

Updates to time-driven ABC models are triggered by events that require the estimates in the model to be modified, such as a significant change in costs of resources supplied.

Back 121

True

Front 122

Utilities expense is generally a unit-level cost electricity used for machines is unit-level water-use is unit-level.

Back 122

True

Front 123

Variable costs are always direct costs.

Back 123

False

Front 124

When a firm maximizes profits it will simultaneously minimize opportunity costs.

Back 124

True

Front 125

When demand for a product is low, a higher markup should be used since a larger share of the fixed costs needs to be allocated to each product.

Back 125

False

Front 126

When opportunity costs exist, they are always relevant.

Back 126

True

Front 127

When replacing an old machine with a new machine, the book value of the old machine is a relevant cost.

Back 127

False

Front 128

When the ABC system has a poor model design, ABC can still overcome the barriers to implementation and provide an effective system.

Back 128

False

Front 129

When using a just-in-time manufacturing, a problem anywhere in the system can stop all production.

Back 129

True

Front 130

While costs are measured for individual jobs in a job order costing system, they are measured for individual process stages in a multistage-process costing system.

Back 130

True

Front 131

Experience shows that it is more expensive to prevent defects than to detect and repair them.

Back 131

False

Front 132

Use of a single cost driver rate will always distort product costs.

Back 132

False