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ACCT Quiz 1 Vocab Questions

Terms in this set (19)

Moving of inventory is an example of a(n)

a. cost-benefit analysis
b. value-added activity
c. activity-based cost
d. nonvalue-added activity
d. Nonvalue added activity

Reason: Producing product adds value, moving it around does not add value
Place the four components in the order they appear along the value chain: A = Customer Service; B = Design; C = Distribution; and D = Production

a. ABDC
b. ACDB
c. BDCA
d. BADC
c. BDCA
The difference between variable costs and fixed costs is

a. Unit variable costs fluctuate and unit fixed costs remain constant
b. Unit variable costs are fixed over the relevant range and unit fixed costs are variable as production changes
c. Total variable costs are constant over the relevant range, while fixed costs change in the long-term
d. Total variable costs are variable over the relevant range but fixed in the long-term, while fixed costs never change
b. Unit variable costs are fixed over the relevant range and unit fixed costs are variable as production changes


Reason: Unit variable costs are constant, total variable costs fluctuate; unit fixed costs fluctuate, total fixed costs are constant
The individual who would most likely use only financial accounting information in making decisions is a

a. vice president of marketing
b. factory supervisor
c. department manager
d. company stockholder
d. company stockholder


Reason: Financial accounting information only is most likely used by company stockholders, while the other answer choices are internal users, who focus primarily on managerial or cost accounting information
The Sarbanes Oxley Act of 2002 requires an effective internal control system for publicly owned firms. Therefore, with regards to strategic investment decisions, it is important that management consider including

a. internal audits of strategic decisions
b. a code of ethics
c. a system of preparing and reporting on investment decisions
d. All of the above
d. All of the above

Reason: All of the items listed here should be included in an effective internal control system
A cost allocation rule is the method or process used to assign the costs in the ________ to the ________

a. cost allocation; cost pool
b. cost pool; opportunity cost
c. cost object; cost pool
d. cost pool; cost object
d. cost pool; cost object

Reason: Definition of a cost allocation rule
For a manufacturing company, which of the following is an example of a period cost rather than a product cost?

a. Salaries of salespersons
b. Wages of machine operators
c. Insurance on factory equipment
d. Depreciation of factory equipment
a. Salaries of salespersons

Reason: Salaries of salespeople would be a selling cost which is a period cost
Under full absorption costing, which of the following are included in product costs

a. Only direct materials and direct labor
b. Only variable manufacturing costs
c. Only conversion costs
d. All fixed and variable manufacturing costs
d. All fixed and variable manufacturing costs

Reason: Full absorption includes all fixed and variable manufacturing costs
The amount of direct materials issued to production is found by

a. subtracting ending work in process from total work in process during the period
b. adding beginning direct materials inventory and the delivered cost of direct materials
c. subtracting ending direct materials from the combination of beginning direct materials inventory and the delivered cost of direct materials
d. adding delivered cost of materials, labor, and manufacturing overhead
c. subtracting ending direct materials from the combination of beginning direct materials inventory and the delivered cost of direct materials

Reason: This statements describes the flow of cost through the inventory account
The difference between the $100 estimated selling price for Mountainburg's Product W and its total cost of $88 represents

a. Contribution margin per unit
b. Gross margin per unit
c. Variable cost per unit
d. Operating profit per unit
b. Gross margin per unit

Reason: Definition of gross margin
The difference between total sales in dollars and total variable costs is called

a. contribution margin
b. operating profit
c. net profit
d. the gross margin
a. Contribution margin

Reason: Contribution margin = Total Sales - Total variable costs
Operating leverage refers to the extent to which an organization's cost structure is made up of:

a. fixed costs
b. differential costs
c. opportunity costs
d. relevant costs
a. fixed costs

Reason: Operating leverage is determined by the cost structure of the organization, the amount of fixed versus variable costs
Cost-volume profit (CVP) analysis is a simple but powerful tool to assist management in making operating decisions. Which of the following does NOT represents a potential use of CVP analysis

a. Ability to compute the break-even point
b. Ability to determine optimal sales volumes
c. Aids in evaluating tax planning alternatives
d. Aids in determining optimal pricing policies
c. Aids in evaluating tax planning alternatives

Reason: CVP analysis addresses pricing and volume, but it does not address tax planning
Differential costs are:

a. the difference in total costs that result from selecting one choice instead of another
b. the profit foregone by selecting one choice instead of another
c. a cost that continues to be incurred int eh absence of activity
d. a cost common to all choices in questions and not clearly allocable to any of them
a. the difference in total costs that result from selecting one choice instead of another

Reason: Definition of differential costs
The period of time over which capacity will be unchanged is

a. long run
b. short run
c. sunk costs
d. product life cycle
b. short run

Reason: In the long run capacity can be adjusted, in the short run it cannot
Agreement among business competitors to set prices at a particular level:

a. price fixing
b. predatory pricing
c. target pricing
d. peak-load pricing
a. price fixing

Reason: Definition of price fixing
The time from initial research and development to the time that support to the customer ens is the:

a. product life cycle
b. short run
c. target time
d. predatory price
a. product life cycle

Reason: Definition of product life cycle
A target cost is computed as:

a. cost to manufacture plus a desired markup
b. cost to manufacture plus designated selling expenses
c. market willingness to pay - cost to manufacture
d. market willingness to pay - desired profit
d. market willingness to pay - desired profit

Reason: Target cost is based on external market prices and desired profit. In essence, how much can a product cost
When there is a production constraint, a company should emphasize the product with:

a. the highest unit contribution margins
b. the highest contribution margin per unit of the constrained resource
c. the highest contribution margin raitos
d. the highest contribution margins and contribution margin ratio
b. the highest contribution margin per unit of the constrained resource

Reason: To maximize profits the alternatives must be selected in order of the highest contribution margin per unit of the constrained resource
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