Managerial Accounting T/f

Front 1

A company can have a net loss and still generate positive income

Back 1

True

Front 2

If two projects require the same amount of investment then the preference ranking computed using either the project profitability index of the net present value will be the same.

Back 2

True

Front 3

The project profitability index is used to compare the internal rates of return of two companies with different investment amounts.

Back 3

False

Front 4

The simple rate of return focuses on accounting net operating income rather than on cash flows.

Back 4

True

Front 5

If new equipment is replacing old equipment, any salvage received from sale of the old equipment should not be considered in computing the payback period of the new equipment.

Back 5

False

Front 6

One criticism of the payback method is that it ignores cash flows that occur after the payback point has been reached.

Back 6

True

Front 7

For liability accounts, debits are added to the beginning balance on the statement of cash flows.

Back 7

False

Front 8

For contra-assets accounts, debits are added to the beginning balance on the statement of cash flows.

Back 8

False

Front 9

The sale of a long-term investment for cash would be classified as an investing activity in the statement of cash flows.

Back 9

True

Front 10

Free cash flow increases when a company issues common stock for cash.

Back 10

False

Front 11

A gain on the sale of equipment would be included as part of a company's financing activities on the statement of cash flows.

Back 11

False

Front 12

Direct Material costs are generally variable costs.

Back 12

True

Front 13

Property taxes and insurance premiums paid on a factory building are examples of manufacturing overhead.

Back 13

True

Front 14

Lean Production is a management approach that organizes work departmentally and encourages departments to maximize output.

Back 14

False

Front 15

The concepts of the relevant range does not apply to fix costs.

Back 15

False

Front 16

In a contribution format income statement, sales minus cost of good sold equals the gross margin.

Back 16

False

Front 17

Managerial Accounting is more likely than Financial Accounting to emphasize the business decisions affecting the future.

Back 17

True

Front 18

Discretionary fixed cost arise from annual decisions by management to spend in certain fixed cost areas.

Back 18

True

Front 19

Committed fixed costs are fixed costs that are not controllable.

Back 19

False

Front 20

The control function involves overseeing the day to day activities and trying to keep the organization running smoothly.

Back 20

False

Front 21

A performance report is prepared as part of the decision making process.

Back 21

False

Front 22

Period costs are expensed as incurred, rather than going into Work in Process account.

Back 22

True

Front 23

One benefit of budgeting is that is coordinates the activities of the entire organization

Back 23

True

Front 24

On a CVP graph for a profitable company, the total revenue line will be steeper than the total expense line.

Back 24

True

Front 25

The impact on net operating income of a given dollar change in sales can be computed by applying the contribution margin ratio to each dollar in sales

Back 25

True

Front 26

Incremental analysis is an analytical approach that focuses on those revenues and costs that will change as a result of a decision.

Back 26

True

Front 27

The salary of the treasurer of a corporation is an example of a common cost which normally cannot be traced to product segments

Back 27

True

Front 28

The production budget is typically prepared prior to the sales budget.

Back 28

False

Front 29

The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars

Back 29

True

Front 30

Both planning and control are needed for an effective budgeting system

Back 30

True

Front 31

The master budget is a network consisting of many separate budgets that are interdependent

Back 31

True

Front 32

Only those costs that would disappear over time if a segment were eliminated should be considered traceable costs of the segment.

Back 32

True

Front 33

The contribution margin is viewed as a better gauge of the long run profitability of a segment than the segment margin.

Back 33

False

Front 34

Both variable and fixed manufacturing overhead costs are included in the manufacturing overhead budget.

Back 34

True

Front 35

If two companies produce the same product and have the same total sales and the same total expenses, operating leverage will be lower in the company with a higher proportion of fixed expenses in its cost structure.

Back 35

False

Front 36

Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known.

Back 36

False

Front 37

A segment is any portion or activity of an organization about which a manager seeks revenue, cost, or profit data.

Back 37

True

Front 38

A shift in sales mix from products with a low contribution margin toward products with a high contribution margin ratio will lower the break-even point in the company as a whole.

Back 38

True

Front 39

Segmented statements for internal use should be prepared in the contribution margin format

Back 39

True

Front 40

Variable manufacturing overhead costs are treated as period costs under both absorption and variable costing

Back 40

False

Front 41

Planning and control are essentially the same thing

Back 41

False

Front 42

In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses.

Back 42

False

Front 43

When a flexible budget is used in performance evaluation, actual costs are compared to what the costs should have been for the actual level of activity during the period rather than to the static planning budget.

Back 43

True

Front 44

Residual income is superior to return on investment as a means of measuring performance because it encourages managers to make investment decisions that are more consistent with the interest of the company as a whole

Back 44

True

Front 45

If activity is higher than expected, total variable costs should be higher than expected. If activity is lower than expected, total variable costs should be lower than expected

Back 45

True

Front 46

The performance measures on an individual scorecard should not be overly influenced by actions taken by others in the company or by events that are outside of the individual's control.

Back 46

True

Front 47

A balanced scorecard should contain every performance measure that can be expected to influence a company's profits.

Back 47

False

Front 48

The revenue and spending differences between the static planning budget and the actual result for the period.

Back 48

False

Front 49

A spending variance is the difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost for the period.

Back 49

True

Front 50

Managers should not authorize working overtime at a work station that contains a bottleneck

Back 50

False

Front 51

Joint production costs are relevant cost in decisions about what to do with a product from the split-off point onward in the production process.

Back 51

False

Front 52

An avoidable cost is a cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another.

Back 52

True

Front 53

Flexible budgets cannot be used when there is more than one cost driver (i.e. measure of activity).

Back 53

False

Front 54

The book value of a machine, as shown on the balance sheet, is relevant in a decision concerning the replacement of that machine by another machine.

Back 54

False

Front 55

Depreciation expense on existing factory equipment is generally relevant to a decision of whether to accept or reject a special offer for a company's product

Back 55

False

Front 56

Consider a company that has only variable costs. All other things the same, an increase in units sales will result in no change in the return on investment.

Back 56

False

Front 57

Sunk costs are considered avoidable costs.

Back 57

False

Front 58

When more hours of labor time are necessary to complete a job than the standard allows, the labor rate variance is unfavorable.

Back 58

False

Front 59

When a company has a production constraint, the product with the highest contribution margin per unit of the constrained resource should be given highest priority.

Back 59

True

Front 60

The standard cost per unit is computed by multiplying the standard quantity of hours by the standard quantity or hours by the standard price or rate.

Back 60

True

Front 61

Generally, a product line should be dropped when the fixed costs that can be avoided by dropping the product line are less than the contribution margin that will be lost.

Back 61

False