PINNACLE MS

The kind of accounting concerned with providing information to management in making decisions about the operations of the business

a. Responsibility accounting

b. Cost accounting

c. Management accounting

d. None of the above

C

Which of the following is not a characteristic of Management Services?

a. MS is broad in scope

b. MS involves problem-solving affecting the future operations of the client

c. Beneficiary of service is management

d. MS is repetitive as far as the same client is concerned

D

A person who is qualified by education, experience, technical ability, and temperament to advise or assist businessmen on a professional basis in identifying, defining, and solving specific management problems involving the organization, planning, direction, control, and operation of a firm is called a

a. Management Consultant

b. Certified Public Accountant

c. Accounting Technician

d. Management Accountant

A

Management accounting is considered successful when it

a. Helps managers improve their decision

b. Is in accordance with GAAP

c. Is relevant

d. Is accurate

A

The major difference(s) between financial and management accounting is that

a. Financial accounting reports are prepared primarily for users external to the company

b. Management accounting is not under the jurisdiction of the Securities and Exchange Commission

c. Government regulations do not apply to management accounting

d. All of the above are differences between financial and management accounting

D

The following characteristics refer to Financial Accounting except

a. Provides information to external users

b. Emphasizes on objective data

c. Has no externally imposed standards

d. Generates general purpose financial statements

C

Managerial accounting information is generally prepared for

a. Stockholders

b. Creditors

c. Managers

d. Regulatory agencies

C

Which of the following is not an internal user?

a. Creditor

b. Department manager

c. Controller

d. Treasurer

A

The major reporting standard for presenting managerial accounting information is

a. Relevance

b. Generally accepted accounting principles

c. The cost principle

d. The current tax law

A

The term "prime costs" refers to

a. The sum of direct labor costs and all factory overhead costs

b. The sum of direct materials costs and direct labor costs

c. Manufacturing costs incurred to produce units of output

d. All costs associated with manufacturing other than direct labor and direct materials costs

B

The term "conversion costs" refers to

a. Costs that are associated with marketing, shipping, warehousing, and billing activities

b. The sum of direct labor costs and all factory overhead costs

c. The sum of direct materials costs and direct labor costs

d. Manufacturing costs incurred to produce units of output

B

The sum of the direct materials costs, direct labor costs, and manufacturing overhead incurred in the current year is the

a. Cost of goods manufactured

b. Cost of goods available for sale

c. Total cost of work in process

d. Total manufacturing cost

D

Which one of the following does not appear on the balance sheet of a manufacturing company?

a. Finished goods inventory

b. Work in process inventory

c. Cost of goods manufactured

d. Raw materials inventory

C

Cost of goods manufactured is calculated as follows

a. Beginning WIP + direct materials used + direct labor + manufacturing overhead + ending WIP

b. Direct materials used + direct labor + manufacturing overhead – beginning WIP + ending WIP

c. Beginning WIP + direct materials used + direct labor + manufacturing overhead – ending WIP

d. Direct materials used + direct labor + manufacturing overhead – ending WIP – beginning WIP

C

Which one of the following would not be classified as manufacturing overhead?

a. Indirect labor

b. Direct materials

c. Insurance on factory building

d. Indirect materials

B

The wages of a timekeeper in the factory would be classified as

a. A prime cost

b. Direct labor

c. Indirect labor

d. Compliance costs

C

The product cost that is most difficult to associate with a product is

a. Direct materials

b. Direct labor

c. Manufacturing overhead

d. Advertising

C

Product costs consist of

a. Conversion costs and unexpired expense

b. Prime costs and manufacturing overhead

c. Selling and administrative expenses
d. Period costs

B

Costs that are expensed when incurred are called

a. Product costs

b. Direct costs

c. Inventoriable costs

d. Period costs

D

Which of the following are period costs?

a. Raw materials

b. Prime costs

c. Conversion costs

d. Selling expenses

D

Costs that can be easily traced to a specific department are called

a. Direct costs

b. Indirect costs

c. Product costs

d. Manufacturing costs

A

Indirect costs

a. Can be traced to a cost object

b. Cannot be traced to a particular cost object

c. Are not important

d. Are always variable costs

B

Variable costs are those costs that

a. Vary inversely with changes in activity

b. Vary directly with changes in activity

c. Decrease on a per-unit basis as activity increases

d. Increase on a per-unit basis as activity increases

b

As activity decreases, unit variable cost

a. Increases proportionately with activity

b. Decreases proportionately with activity

c. Remains constant

d. Increases by a fixed amount

C

Fixed costs are those costs that

a. Vary directly with changes in activity

b. Vary inversely with changes in activity

c. Increase on a per-unit basis as activity increases

d. Remain constant as activity changes

D

The fixed cost per unit

a. Will increase as activity increases

b. Will increase as activity decreases

c. Will decrease as activity increases
d. Will exhibit the behavior described in choices "b" and "c"

D

Which of the following statements is false?

a. At zero production level, fixed costs are also zero

b. At zero production level, fixed costs are usually positive

c. At zero production level, variable costs are usually zero

d. At zero production level, total costs equal total fixed costs

A

The term "relevant range" as used in cost accounting means the range over which

a. Cost relationships are valid

b. Production may vary

c. Relevant costs are incurred

d. Costs may fluctuate

A

The salaries you could be earning by working rather than attending college are an example of

a. Misplaced Cost

b. Opportunity Cost

c. Sunk Cost

d. Outlay Cost

B

Sunk costs

a. Are relevant to long-term decisions but not to short-term decisions

b. Are relevant to decision making

c. Are subtitles for opportunity costs

d. In themselves are not relevant to decision making

D

If the total cost of alternative A is P50,000 and the total cost of alternative B is P34,000, then P16,000 is termed the:

a. Opportunity cost

b. Sunk cost

c. Out-of-pocket cost

d. Differential cost

D

The term incremental cost refers to

a. The profit foregone by selecting one choice instead of another

b. The additional cost of producing or selling another product or service

c. A cost that continues to be incurred in the absence of activity

d. A cost common to all choices in question and not clearly or feasibly allocable to any of them

B

These are among the methods of segregating fixed cost and variable costs except

a. Simple regression analysis

b. Scattergraph

c. Breakeven method

d. High-low method

C

The principal advantage of the scatter-diagram method over the high-low method of cost estimation is that the scatter-diagram method

a. Includes costs outside the relevant range.

b. Considers more than two points.

c. Can be used with more types of costs than the high-low method.

d. Gives a precise mathematical fit of the points to the line.

B

Which of the following statements is true when referring to the high-low method of cost analysis?

a. The high-low method has no major weaknesses

b. The high-low method is very hard to apply

c. In essence, the high-low method draws a straight line through two data points

d. None of the above is true

C

The quantitative method that will separate a semi-variable cost into its fixed and variable components with the highest degree of precision is

a. Simplex method

b. Least squares method/Regression Analysis

c. Scattergraph method

d. High-low method

B

Simple regression analysis involves the use of

Dependent variables Independent variables

a. One None

b. One One

c. One Two

d. None Two

B

A measure of the extent to which two variables are related linearly is referred to as

a. Sensitivity analysis

b. Input-output analysis

c. Coefficient of correlation

d. Cause-effect ratio

C

In regression analysis, which of the following correlation coefficients represents the strongest relationship between the independent and dependent variable?

a. 1.03

b. - .02

c. - .89

d. .75

C

In regression analysis, coefficient of determination is a measure of

a. The amount of variation in the dependent variable explained by the independent variables

b. The amount of variation in the dependent variable unexplained by the independent variables

c. The slope of the regression line

d. The predicted value of the independent variable

A

Cost-volume-profit analysis can be used to study the effect of

a. Changes in selling prices on a company's profitability

b. Changes in fixed and variable costs on a company's profitability

c. Changes in product sales mix on a company's profitability

d. All of the above

D

CVP analysis requires costs to be categorized as

a. Either fixed or variable

b. Fixed, mixed, or variable

c. Product or period

d. Standard or actual

A

Which of the following is not a major assumption underlying CVP analysis?

a. All costs incurred by a firm can be separated into their fixed and variable components

b. The product selling price per unit is constant at all volume levels

c. Operating efficiency and employee productivity are constant at all volume levels

d. For multi-product situations, the sales mix can vary at all volume levels

D

Contribution margin can be defined as

a. The amount of sales revenue necessary to cover variable expenses

b. Sales revenue minus fixed expenses

c. The amount of sales revenue necessary to cover fixed and variable expenses

d. Sales revenue minus variable expenses

D

After the level of volume exceeds the break-even point

a. The contribution margin ratio increases

b. The total contribution margin exceeds the total fixed costs

c. Total fixed costs per unit will remain constant

d. The total contribution margin will turn from negative to positive

B

At the break-even point

a. Sales would be equal to contribution margin

b. Contribution margin would be equal to fixed expenses

c. Contribution margin would be equal to net operating income

d. Sales would be equal to fixed expenses

B

The break-even point would be increased by

a. A decrease in total fixed expenses

b. A decrease in the ratio of variable expenses to sales

c. An increase in the contribution margin ratio

d. None of these

D

Which of the following strategies could be used to reduce the break-even point?

Fixed expenses Contribution margin

a. Increase Increase

b. Decrease Decrease

c. Decrease Increase

d. Increase Decrease

C

According to CVP analysis, a company could never incur a loss that exceeded its total

a. Variable costs

b. Fixed costs

c. Costs

d. Contribution margin

C

Introducing income taxes into cost-volume-profit analysis

a. Raises the break-even point

b. Lowers the break-even point

c. Increases unit sales needed to earn a particular target profit

d. Decreases the contribution margin percentage

C

If the sales mix shifts toward higher contribution margin products, the break-even point

a. Decreases

b. Increases

c. Remains constant

d. It is impossible to tell without more information

A

The break-even point is that level of activity where:

a. Total revenue equals total cost

b. Total contribution margin equals the sum of variable cost-plus fixed cost

c. Sales revenue equals total variable cost

d. Profit is greater than zero

A

A company that desires to lower its break-even point should strive to

a. Decrease selling prices

b. Reduce variable costs

c. Increase fixed costs

d. Sell more units

B

If a firm's net income does not change as its volume changes, the firm('s)

a. Must be in the service industry

b. Must have no fixed costs

c. Sales price must equal zero

d. Sales price must equal its variable costs

D

The contribution margin ratio always increases when the

a. Variable costs as a percentage of net sales increase

b. Variable costs as a percentage of net sales decrease

c. Break-even point increases

d. Break-even point decreases

B

A company’s break-even point in pesos of revenue may be affected by equal percentage increase in both selling price and variable cost per unit. The equal percentage changes in selling price and variable cost per unit will cause the break-even point in pesos to

a. Decrease by less than the percentage increase in selling price

b. Decrease by more than the percentage increase in the selling price

c. Increase by the percentage change in variable cost per unit

d. Remain unchanged

D

In a multiple-product firm, the product that has the highest contribution margin per unit will

a. Generate more profit for each P1 of sales than the other products

b. Have the highest contribution margin ratio

c. Generate the most profit for each unit sold

d. Have the lowest variable costs per unit

C

The margin of safety would be negative if a company('s)

a. Was presently operating at a volume that is below the break-even point

b. Present fixed costs were less than its contribution margin

c. Variable costs exceeded its fixed costs

d. Degree of operating leverage is greater than 100

A

The margin of safety is a key concept of CVP analysis. The margin of safety is the

a. Contribution margin rate

b. Difference between budgeted contribution margin and actual contribution margin

c. Difference between budgeted contribution margin and break-even contribution margin

d. Difference between budgeted sales and break-even sales

D

If a company is operating at the break-even point

a. Its contribution margin will be equal to its variable expenses

b. Its margin of safety will be equal to zero

c. Its fixed expenses will be equal to its variable expenses

d. Its selling price will be equal to its variable expense per unit

B

If the degree of operating leverage is 4, then a 1% change in quantity sold should result in a 4% change in

a. Unit contribution margin

b. Revenue

c. Variable expense

d. Net operating income

D

Which of the following is the correct calculation for the degree of operating leverage?

a. Net operating income divided by total expenses

b. Net operating income divided by total contribution margin

c. Total contribution margin divided by net operating income

d. Variable expense divided by total contribution margin

C

The costing procedure that treats fixed manufacturing costs as period costs is

a. Full costing

b. Absorption costing0

c. Variable costing

d. Conventional costing

C

Another name for variable costing is

a. Full costing

b. Direct costing

c. Job order costing

d. Fixed costing

B

Under variable costing, which of the following are costs that can be inventoried?

a. Variable selling and administrative expense

b. Variable manufacturing overhead

c. Fixed manufacturing overhead

d. Fixed selling and administrative expense

B

If a firm uses variable costing, fixed manufacturing overhead will be included

a. Only on the balance sheet

b. Only on the income statement

c. On both the balance sheet and income statement

d. On neither the balance sheet nor income statement

B

Under variable costing

a. All product costs are variable

b. All period costs are variable

c. All product costs are fixed

d. Product costs are both fixed and variable

A

A basic tenet of variable costing is that period costs should be currently expensed. What is the rationale behind this procedure?

a. Period costs are uncontrollable and should not be charged to a specific product

b. Period costs are generally immaterial in amount and the cost of assigning the amounts to specific products would outweigh the benefits

c. Allocation of period costs is arbitrary at best and could lead to erroneous decision by management

d. Because period costs will occur whether or not production occurs, it is improper to allocate these costs To production and defer a current cost of doing business

D

In an income statement prepared as an internal report using the variable costing method, fixed manufacturing overhead would

a. Not be used

b. Be used in the computation of operating income but not in the computation of the contribution margin

c. Be used in the computation of the contribution margin

d. Be treated the same as variable manufacturing overhead

B

The FASB requires which of the following to be used in preparation of external financial statements?

a. Variable costing

b. Standard costing

c. Activity-based costing

d. Absorption costing

D

Another name for absorption costing is

a. Full or conventional costing

b. Direct costing

c. Job order costing

d. Fixed costing

A

If a firm uses absorption costing, fixed manufacturing overhead will be included

a. Only on the balance sheet

b. Only on the income statement

c. On both the balance sheet and income statement

d. On neither the balance sheet nor income statement

C

If a firm produces more units than it sells, absorption costing, relative to variable costing, will result in

a. Higher income and assets

b. Higher income but lower assets

c. Lower income but higher assets

d. Lower income and assets

A

An ending inventory valuation on an absorption costing balance sheet would

a. Sometimes be less than the ending inventory valuation under variable costing

b. Always be less than the ending inventory valuation under variable costing

c. Always be the same as the ending inventory valuation under variable costing

d. Always be greater than or equal to the ending inventory valuation under variable costing

D

Profit under absorption costing may differ from profit determined under variable costing. How is this difference calculated?

a. Change in the quantity of all units in inventory times the relevant fixed costs per unit

b. Change in the quantity of all units produced times the relevant fixed costs per unit

c. Change in the quantity of all units in inventory times the relevant variable cost per unit

d. Change in the quantity of all units produced times the relevant variable cost per unit

A

What factor, related to manufacturing costs, causes the difference in net earnings computed using absorption costing and net earnings computed using variable costing?

a. Absorption costing considers all costs in the determination of net earnings, whereas variable costing considers fixed costs to be period costs

b. Absorption costing allocates fixed overhead costs between cost of goods sold and inventories, and variable costing considers all fixed costs to be period costs

c. Absorption costing "inventories" all direct costs, but variable costing considers direct costs to be period costs

d. Absorption costing "inventories" all fixed costs for the period in ending finished goods inventory, but variable costing expenses all fixed costs

B

The difference between the reported income under absorption and variable costing is attributable to the difference in the

a. Income statement formats

b. Treatment of fixed manufacturing overhead

c. Treatment of variable manufacturing overhead

d. Treatment of variable selling, general, and administrative expenses

B

Absorption costing differs from variable costing in all of the following except

a. Treatment of fixed manufacturing overhead

b. Treatment of variable production costs

c. Acceptability for external reporting

d. Arrangement of the income statement

B

Under absorption costing, if sales remain constant from period 1 to period 2, the company will report a larger income in period 2 when

a. Period 2 production exceeds period 1 production

b. Period 1 production exceeds period 2 production

c. Variable production costs are larger in period 2 than period 1

d. Fixed production costs are larger in period 2 than period 1

A

When inventories increase from one period to the next and all other factors remain constant, income under direct costing:

a. Will be irrelevant for decision making

b. Will be smaller than under absorption costing

c. Leads to smaller federal income tax payments

d. Will be greater than under absorption costing

B

A company controls its production costs by comparing its actual monthly production costs with the expected levels. Any significant deviations from expected levels are investigated and evaluated as a basis for corrective actions. The quantitative technique that is most probably being used is

a. Time-series or trend regression analysis

b. Correlation analysis

c. Differential calculus

d. Standard cost variance analysis

D

A primary purpose of using a standard cost system is

a. To make things easier for managers in the production facility

b. To provide a distinct measure of cost control

c. To minimize the cost per unit of production

d. b and c are correct

B

A purpose of standard costing is to

a. Replace budgets and budgeting

b. Simplify costing procedures

c. Eliminate the need for actual costing for external reporting purposes

d. Eliminate the need to account for year-end underapplied or overapplied manufacturing overhead

B

Standard costs may be used for

a. Product costing

b. Planning

c. Controlling

d. All of the above

D

The standard cost card contains quantities and costs for

a. Direct material only

b. Direct labor only

c. Direct material and direct labor only

d. Direct material, direct labor, and overhead

D

A company using very tight (high) standards in a standard cost system should expect that

a. No incentive bonus will be paid

b. Most variances will be unfavorable

c. Employees will be strongly motivated to attain the standards

d. Costs will be controlled better than if lower standards were used

B

The type of standard that is intended to represent challenging, yet attainable results is

a. Theoretical standard

b. Flexible budget standard

c. Normal standard

d. Expected actual standard

C

Of the following variances, the one that is most useful in assessing the performance of the Purchasing Department is the

a. Idle capacity variance

b. Materials purchase price variance

c. Labor rate variance

d. Materials price usage variance

B

Materials usage variances are normally chargeable to the

a. Production Department

b. Purchasing Department

c. Finished Goods Department

d. Materials Storage Department

A

When a change in the manufacturing process reduces the number of direct labor hours and standards are unchanged, the resulting variance will be:

a. An unfavorable labor usage variance

b. An unfavorable labor rate variance

c. A favorable labor rate variance

d. A favorable labor usage variance

D

The most probable reason a company would experience a favorable labor rate variance and an unfavorable labor efficiency variance is that

a. The mix of workers assigned to the particular job was heavily weighted toward the use of higher paid, experienced individuals

b. The mix of workers assigned to the particular job was heavily weighted toward the use of new, relatively low-paid, unskilled workers

c. Because of the production schedule, workers from other production areas were assigned to assist in this particular process

d. Defective materials caused more labor to be used in order to produce a standard unit

B

Which of the following would least likely cause an unfavorable materials quantity (usage) variance?

a. Labor that possesses skills equal to those required by the standards

b. Scheduling of substantial overtime

c. A mix of direct materials that does not conform to plan

d. Materials that do not meet specifications

A

The sum of the material price variance (calculated at point of purchase) and material quantity variance equals

a. The total cost variance

b. The material mix variance

c. The material yield variance

d. No meaningful number

D

The sum of the material mix and material yield variances equals

a. The material purchase price variance

b. The material quantity variance

c. The total material variance

d. None of the above

B

The sum of the labor mix and labor yield variances equals

a. The labor efficiency variance

b. The total labor variance

c. The labor rate variance

d. Nothing because these two variances cannot be added since they use different costs

A

A variable overhead spending variance is caused by

a. Using more or fewer actual hours than the standard hours allowed for the production achieved

b. Paying a higher/lower average actual overhead price per unit of the activity base than the standard price allowed per unit of the activity base

c. Larger/smaller waste and shrinkage associated with the resources involved than expected

d. Both b and c are causes

D

A favorable fixed overhead spending variance indicates that

a. Budgeted fixed overhead is less than actual fixed overhead

b. Budgeted fixed overhead is greater than applied fixed overhead

c. Applied fixed overhead is greater than budgeted fixed overhead

d. Actual fixed overhead is less than budgeted fixed overhead

D

The variance least significant for purposes of controlling costs is the

a. Material quantity variance

b. Variable overhead efficiency variance

c. Fixed overhead spending variance

d. Fixed overhead volume variance

D

The variance most useful in evaluating plant utilization is the

a. Variable overhead spending variance

b. Fixed overhead spending variance

c. Variable overhead efficiency variance

d. Fixed overhead volume variance

D

An unfavorable fixed overhead volume variance is most often caused by

a. Actual fixed overhead incurred exceeding budgeted fixed overhead

b. An over-application of fixed overhead to production

c. An increase in the level of the finished inventory

d. Normal capacity exceeding actual production levels

D