Cost Accounting Exam 1

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The set of activities that transforms raw resources into the goods and services of an organization is called:

Value Chain

Managers do not make decisions about future events based on

Perfect Information

Which of the following is a non value-added activity?

Rework of Defective items.

(CMA Adapted) An accounting system that collects financial and operating data on the basis of the underlying nature and extent of cost drivers is

activity-based costing

(CMA Adapted) Cost drivers are

activities that cause costs to increase as the activity increases.

(CMA Adapted) The process of creating a formal plan and translating goals into a quantitative format is referred to as

budgeting

Which field of accounting emphasizes relevancy over comparability

cost accounting

The just-in-time method of production focuses on

reducing inventories

(CIA Adapted) The primary reason for adopting total quality management (TQM) is to achieve

greater customer satisfaction

According to the Institute of Management Accountants, the first step in resolving an ethical dilemma is to

discuss the situation with an immediate supervisor.

THe cost accounting system that minimizes wasteful or unnecessary transaction processes is

lean accounting

Continual process of measuring a company's own products, services, or activities against competitors'performance is

benchmarking

Having one or more of the firms' activities performed by another firm or individual in the supply or distribution chain is called

outsourcing

the system that allows firms to target profitable customers by assessing customer revenue and costs is called

customer relationship management

Information technology that links the various processes of the company into a single comprehensive information system is called

enterprise resource planning

Which of the following best distinguishes an opportunity cost from an outlay cost?

Opportunity costs are sacrifices from foregone alternative uses of resources, whereas outlay costs are cash outflows

Which of the following accounts would be a period cost rather than a product cost?

Freight out

A company which manufactures custom-made machinery routinely incurs sizable telephone costs in the process of taking sales orders from customers. Which of the following is a proper classification of this cost

Period Cost

XYZ Company manufactures a single product. The product's prime costs consist of

direct material and direct labor

Which of the following costs is both a prime cost and a conversion cost?

direct labor

Marketing costs include all of the following except:

Legal and accounting fees.

Classifying a cost as either direct or indirect depends upon

the cost object to which the cost is being related.

The cost of the direct labor will be treated as an expense on the income statement when the resulting:

products are sold.

Inventoriable costs:

are regarded as assets until the units are sold

A product cost is deducted from revenue when

the finished goods are sold

Which of the following is not a product cost under full-absorption costing?

Salaries paid to the top management in the company

The term gross margin for a manufacturing firm refers to the excess of sales over:

cost of goods sold, including fixed indirect manufacturing costs

How would miscellaneous supplies used in assembling a product be classified for a manufacturing company?

variable, product cost

The difference between variable costs and fixed costs is (CMA adapted)

Unit variable costs are fixed over the relevant range and unit fixed costs are variable

Which one of the following costs is classified as a period cost?

The wages of the workers on the shipping docks who load completed products onto outgoing trucks.

Cost-volume-profit (CVP) analysis is a simple but powerful tool to assist management make operating decisions. Which of the following does not represent a potential use of CVP analysis?

Aids in evaluating tax planning alternatives.

A company's break-even point will not be increased by:

an increase in the number of units produced and sold.

Operating leverage refers to the extent to which an organization's cost structure is made up of:

fixed costs.

A decrease in the margin of safety would be caused by a

increase in the total fixed costs

Break-even analysis assumes that over the relevant rage:

unit variable costs are unchanged

at the break-even point, the total contribution margin equals total:

fixed costs

Which of the following would not cause the break-even point to change?

Sales volume increases

If both the variable cost per unit and the selling price per unit increase, the new contribution margin ratio in relation to the old contribution margin ratio will be:

cannot determine with the information given

The difference between total sales in dollars and total variable costs is called:

the contribution margin

With regard to the CVP graph,which of the following is not correct?

The CVP graph assumes that variable costs go down as volume goes up.

Which of the following formulas is used to calculate the contribution margin ratio?

(Sales- Variable Costs) / Sales

Break-even analysis assumes that:

the average variable cost per unit is constant.

The degree of Operating leverage con be calculated as:

contribution margin divided by operating profit

The relevance of a particular cost to a decision is determined by the

potential effect on the decision

in a decision analysis situation, which one of the following costs is not likely to contain a variable cost component?

Strait-line depreciation

Which of the following costs are irrelevant for a special order that will allow an organization to utilize some of its present idle capacity

unavoidable fixed overhead

differential costs are

the difference in total costs that result from selecting one choice instead of another

THe period of time over which capacity will be unchanged is

short run

the price based on a customers' perceived value for the product and the price that competitors charge

target price

the practice of setting price below cost with the intent to drive competitors out of business

predatory pricing

agreement among business competitors to set prices at a particular level

price fixing

Which of the following costs would continue to be incurred even if a segment is eliminated?

common fixed costs

If there is excess capacity, the minimum acceptable price for a special order must cover

variable and incremental fixed costs associated with the special order

The opportunity cost of making a component part in a factory with no excess capacity is th

net benefit foregone from the best alternative use of the capacity required

When there is a production constraint a company should emphasize the products with

the highest contribution margin per unit of the constrained resource

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