ACC 312 EXAM 1 QUESTIONS AND CORRECT
ANSWERS
What are the four basic management activities which managerial accounting data and
tools are intended to support? - Answers - planning, decision making, controlling,
directing operational acticities
What is likely to be treated as a variable period cost? - Answers - sales commissions
paid to employees in the Apple Store in Austin
What describes a company's relevant range - Answers - The range between the lowest
and highest in a series of historical production volumes
Which of the following statements is not true about using least-squares regression for
cost estimation? - Answers - The resulting estimate of the cost line usually takes the
form Y=bX where b is an estimate of variable cost
In a typical CVP graph if we draw a vertical line that intersects the horizontal axis at a
point lower than the break even quantity, which of the following is a correct
interpretation of the vertical distance between the Total Cost line and the Total Revenue
line at that point? - Answers - Total loss
Under our normal sampling assumptions about cost behavior, as production increases
what happens to variable cost per unit - Answers - it stays the same
We are preparing a business plan and want to know sales revenue required to reach a
particular level of pre-tax profit. What would we use and what would we not use in the
CVP equation - Answers - USE- price per unit, total fixed costs, variable cost per unit,
target level of pre tax profit
DONT USE- tax rate
What is not true about relevant costs? - Answers - they exclude all fixed expenses
T/F: "Opportunity costs are just as relevant as out of pocket costs in evaluating decision
alternatives" - Answers - True
Which of the following statements is true?
Product costs affect only the balance sheet
product costs affect only the income statement
period costs affect only the balance sheet
period costs affect only cost of goods sold
, product costs affect both the balance sheet and income statement - Answers - product
costs affect both the balance sheet and income statmeent
If a company were able to reduce its variable cost per unit how would the contribution
margin and break even point react? - Answers - contribution margin would increase
break even point would decrease
T/F: quantitative measures should outweigh qualitative measures in decision making -
Answers - false
Assuming no change in sales volume, an increase in a firm's per unit CM would have
what affect on net income? - Answers - increase
T/F: fixed costs are not relevant in decision making - Answers - false
Clucky Chicken CO. operates a chain of fast food restaurants. They are considering
closing one of their restaurants due to its poor financial performance. What financial
data is not relevant in their decision making?
Lost sales
Variable cost savings
advertising costs for the restaurant chain in the newspaper
monthly rental for the building space (lease is cancellable) - Answers - advertising costs
for the restaurant chain in the Orlando newspaper
The true statement about cost behavior is that within the relevant range... - Answers -
fixed costs change on a per unit basis and are constant in total as activity changes
Which of the following costs should be ignored when making a decision?
opportunity costs
sunk costs
future costs
relevant costs
differential costs - Answers - sunk costs
Which of the following is not classified as a discretionary cost?
advertising costs
r+d costs
charitable contributions
employee travel and entertainment costs
depreciation on manufacturing facility - Answers - depreciation on manufacturing facility
Depreciation expense for equipment used in manufacturing is an example of? -
Answers - manufacturing overhead
T/F: the contribution margin declines as fixed costs increase - Answers - false
ANSWERS
What are the four basic management activities which managerial accounting data and
tools are intended to support? - Answers - planning, decision making, controlling,
directing operational acticities
What is likely to be treated as a variable period cost? - Answers - sales commissions
paid to employees in the Apple Store in Austin
What describes a company's relevant range - Answers - The range between the lowest
and highest in a series of historical production volumes
Which of the following statements is not true about using least-squares regression for
cost estimation? - Answers - The resulting estimate of the cost line usually takes the
form Y=bX where b is an estimate of variable cost
In a typical CVP graph if we draw a vertical line that intersects the horizontal axis at a
point lower than the break even quantity, which of the following is a correct
interpretation of the vertical distance between the Total Cost line and the Total Revenue
line at that point? - Answers - Total loss
Under our normal sampling assumptions about cost behavior, as production increases
what happens to variable cost per unit - Answers - it stays the same
We are preparing a business plan and want to know sales revenue required to reach a
particular level of pre-tax profit. What would we use and what would we not use in the
CVP equation - Answers - USE- price per unit, total fixed costs, variable cost per unit,
target level of pre tax profit
DONT USE- tax rate
What is not true about relevant costs? - Answers - they exclude all fixed expenses
T/F: "Opportunity costs are just as relevant as out of pocket costs in evaluating decision
alternatives" - Answers - True
Which of the following statements is true?
Product costs affect only the balance sheet
product costs affect only the income statement
period costs affect only the balance sheet
period costs affect only cost of goods sold
, product costs affect both the balance sheet and income statement - Answers - product
costs affect both the balance sheet and income statmeent
If a company were able to reduce its variable cost per unit how would the contribution
margin and break even point react? - Answers - contribution margin would increase
break even point would decrease
T/F: quantitative measures should outweigh qualitative measures in decision making -
Answers - false
Assuming no change in sales volume, an increase in a firm's per unit CM would have
what affect on net income? - Answers - increase
T/F: fixed costs are not relevant in decision making - Answers - false
Clucky Chicken CO. operates a chain of fast food restaurants. They are considering
closing one of their restaurants due to its poor financial performance. What financial
data is not relevant in their decision making?
Lost sales
Variable cost savings
advertising costs for the restaurant chain in the newspaper
monthly rental for the building space (lease is cancellable) - Answers - advertising costs
for the restaurant chain in the Orlando newspaper
The true statement about cost behavior is that within the relevant range... - Answers -
fixed costs change on a per unit basis and are constant in total as activity changes
Which of the following costs should be ignored when making a decision?
opportunity costs
sunk costs
future costs
relevant costs
differential costs - Answers - sunk costs
Which of the following is not classified as a discretionary cost?
advertising costs
r+d costs
charitable contributions
employee travel and entertainment costs
depreciation on manufacturing facility - Answers - depreciation on manufacturing facility
Depreciation expense for equipment used in manufacturing is an example of? -
Answers - manufacturing overhead
T/F: the contribution margin declines as fixed costs increase - Answers - false
