Managerial Accounting
comprehensive questions and answer latest upload
2024/ 2025 with 100% verified solutions
Tomba Civil Engineers' manager is attempting to calculate its cost of providing services to
clients. Its profit before taxes for January is $4,000, and it's selling and administration costs
are $8,000, service revenue is $20,000. How much is its cost of providing service? -
ANSWER-$8,000
Which of the following statements is not true?
A. Overhead costs are direct and, as such, are traceable to each product.
B. The overhead allocated to an individual unit or product line is the number of driver units
contained in that unit or product line times the overhead rate per driver unit. - ANSWER-A is
not true
Overhead costs are indirect and, as such, are not traceable to each product.
Which of the following statement is not true? - ANSWER-Period costs contain controllable,
but not non-controllable costs.
TRUE
Period costs are all costs that are not product costs.
Service firms are distinguished from other firms in that the products service firms offer are
not tangible or storable.
The GAAP income statement combines controllable with non-controllable costs and fixed
costs with variable costs.
The cost of providing services might include depreciation on equipment.
Which of the following inventory equations produces the Cost of Goods Sold? - ANSWER-
Cost of beginning inventory + cost of goods purchased during period - cost of ending
inventor
1|Page
,The income statement for a service firm distinguishes between which of the following costs?
- ANSWER-Cost of providing service and selling and administrative costs.
What is the first step in the decision-making process? - ANSWER-Specify the problem and
goals.
A sunk cost is: - ANSWER-A past expenditure that cannot be changed.
A decision maker's control over costs and benefits decreases as the time horizon increases. -
ANSWER-False
It is important to keep the time horizon in mind when making decisions because: -
ANSWER-The horizon affects whether a cost or benefit is controllable for the decision.
The primary role of accounting is to: - ANSWER-Measure the costs and benefits of decision
options.
In the short-run, organizations often are not able to substantially alter their abilities to deliver
products or services, making levels of capacity resources non-controllable. - ANSWER-True
The Criders Company has 12,000 units of obsolete inventory. The units originally cost
$6,000. The company can either sell them for scrap at $.20 per unit or they can invest $2,000
to be able to sell them at a price of $.60 per unit. With regard to this decision, relevant costs
or benefits include: - ANSWER-$.20 per unit, $.60 per unit, and $2,000.
If only a portion of the cost or revenue pertains to a particular decision option, then it is
referred to as a traceable cost or traceable revenue. - ANSWER-False
Which of the following will least likely be a variable cost for Pizza Hut? - ANSWER-
Cooking ovens.
A fixed cost does not change as the volume of activity changes. - ANSWER-True
2|Page
,The opportunity cost of any decision option is: - ANSWER-The value to the decision maker
of the next best option.
Variability deals with: - ANSWER-How activities influence costs and benefits.
Which of the following is not one of the four steps in the decision making process? -
ANSWER-Separate routine decision problems from non-routine decision problems.
TRUE
Specify the decision problem, including the decision maker's goals.
Identify options.
Measure benefits and costs to determine the value of each option.
Make the decision, choosing the option with the highest value.
In June, Ace Manufacturing Plant produced 100 units of propane canisters for sale. The total
variable costs were $5,000 and the fixed costs for the plant amounted to $3,000. How much is
the unit variable cost for canisters if 120 canisters are produced? - ANSWER-$50.00
Step costs change in direct proportion to the volume of activity. - ANSWER-False
Step costs stay at the same level for a certain activity range, but jump to a higher amount if
the volume of activity increases beyond the range.
Bill and Ted recently opened a plumbing business. The business currently has $500 monthly
depreciation for its two trucks as its only fixed costs. During the first month, the company
had 10 service calls each earning $99 revenue per call and variable costs amounting to $20
per call for plumbing supplies and gas. How much is Bill and Ted's contribution margin for
its first month? - ANSWER-$790
3|Page
, If selling price is $25, unit contribution margin equals $15 and fixed costs are $12,000, then
breakeven volume is:If selling price is $25, unit contribution margin equals $15 and fixed
costs are $12,000, then breakeven volume is: - ANSWER-800 units.
Bill's Tires produces specialty tires for the lawn mower industry. Bill is trying to evaluate his
current month's profit for his 6-inch tire. The tire's unit selling price is $5.00, the variable cost
per unit is $3, sales volume is 260 units, and fixed costs are $120 for the period. Which of the
following is the amount of profit before taxes on the 6-inch tire product line? - ANSWER-
$400
Which of the following is a drawback of using regression analysis? - ANSWER-It makes a
number of assumptions about the data, and accounting data sometimes do not satisfy these
assumptions.
True. For example, the regression analysis may make an assumption that the relationship
between the sales volume and profit is linear. But in the reality, it might not be case.
If fixed costs are $15,000, profit before income taxes is $55,000, revenues are $160,000,
variable costs are $90,000, contribution margin is: - ANSWER-$70,000
Reasoning:
Contribution Margin = Revenues - Variable Costs
Contribution Margin = $160,000 - $90,000
Contribution Margin = $70,000
Assume University T-Shirt Shop has a selling price of $25 and unit variable cost of $10 for its
long-sleeve cotton shirts. Fixed costs total $1,000. University believes increasing its price to
$27 will cause its sales volume to drop by 5 percent. If University's sales volume for the
month was estimated to be 300 shirts before the price increase, how will net profit be affected
by the change in selling price? - ANSWER-$345 increase.
Contribution margin equals revenues less variable costs. - ANSWER-True
When all other factors remain the same, if a firm decides to decrease the selling price of its
product, its unit contribution margin also decreases. - ANSWER-True
4|Page
comprehensive questions and answer latest upload
2024/ 2025 with 100% verified solutions
Tomba Civil Engineers' manager is attempting to calculate its cost of providing services to
clients. Its profit before taxes for January is $4,000, and it's selling and administration costs
are $8,000, service revenue is $20,000. How much is its cost of providing service? -
ANSWER-$8,000
Which of the following statements is not true?
A. Overhead costs are direct and, as such, are traceable to each product.
B. The overhead allocated to an individual unit or product line is the number of driver units
contained in that unit or product line times the overhead rate per driver unit. - ANSWER-A is
not true
Overhead costs are indirect and, as such, are not traceable to each product.
Which of the following statement is not true? - ANSWER-Period costs contain controllable,
but not non-controllable costs.
TRUE
Period costs are all costs that are not product costs.
Service firms are distinguished from other firms in that the products service firms offer are
not tangible or storable.
The GAAP income statement combines controllable with non-controllable costs and fixed
costs with variable costs.
The cost of providing services might include depreciation on equipment.
Which of the following inventory equations produces the Cost of Goods Sold? - ANSWER-
Cost of beginning inventory + cost of goods purchased during period - cost of ending
inventor
1|Page
,The income statement for a service firm distinguishes between which of the following costs?
- ANSWER-Cost of providing service and selling and administrative costs.
What is the first step in the decision-making process? - ANSWER-Specify the problem and
goals.
A sunk cost is: - ANSWER-A past expenditure that cannot be changed.
A decision maker's control over costs and benefits decreases as the time horizon increases. -
ANSWER-False
It is important to keep the time horizon in mind when making decisions because: -
ANSWER-The horizon affects whether a cost or benefit is controllable for the decision.
The primary role of accounting is to: - ANSWER-Measure the costs and benefits of decision
options.
In the short-run, organizations often are not able to substantially alter their abilities to deliver
products or services, making levels of capacity resources non-controllable. - ANSWER-True
The Criders Company has 12,000 units of obsolete inventory. The units originally cost
$6,000. The company can either sell them for scrap at $.20 per unit or they can invest $2,000
to be able to sell them at a price of $.60 per unit. With regard to this decision, relevant costs
or benefits include: - ANSWER-$.20 per unit, $.60 per unit, and $2,000.
If only a portion of the cost or revenue pertains to a particular decision option, then it is
referred to as a traceable cost or traceable revenue. - ANSWER-False
Which of the following will least likely be a variable cost for Pizza Hut? - ANSWER-
Cooking ovens.
A fixed cost does not change as the volume of activity changes. - ANSWER-True
2|Page
,The opportunity cost of any decision option is: - ANSWER-The value to the decision maker
of the next best option.
Variability deals with: - ANSWER-How activities influence costs and benefits.
Which of the following is not one of the four steps in the decision making process? -
ANSWER-Separate routine decision problems from non-routine decision problems.
TRUE
Specify the decision problem, including the decision maker's goals.
Identify options.
Measure benefits and costs to determine the value of each option.
Make the decision, choosing the option with the highest value.
In June, Ace Manufacturing Plant produced 100 units of propane canisters for sale. The total
variable costs were $5,000 and the fixed costs for the plant amounted to $3,000. How much is
the unit variable cost for canisters if 120 canisters are produced? - ANSWER-$50.00
Step costs change in direct proportion to the volume of activity. - ANSWER-False
Step costs stay at the same level for a certain activity range, but jump to a higher amount if
the volume of activity increases beyond the range.
Bill and Ted recently opened a plumbing business. The business currently has $500 monthly
depreciation for its two trucks as its only fixed costs. During the first month, the company
had 10 service calls each earning $99 revenue per call and variable costs amounting to $20
per call for plumbing supplies and gas. How much is Bill and Ted's contribution margin for
its first month? - ANSWER-$790
3|Page
, If selling price is $25, unit contribution margin equals $15 and fixed costs are $12,000, then
breakeven volume is:If selling price is $25, unit contribution margin equals $15 and fixed
costs are $12,000, then breakeven volume is: - ANSWER-800 units.
Bill's Tires produces specialty tires for the lawn mower industry. Bill is trying to evaluate his
current month's profit for his 6-inch tire. The tire's unit selling price is $5.00, the variable cost
per unit is $3, sales volume is 260 units, and fixed costs are $120 for the period. Which of the
following is the amount of profit before taxes on the 6-inch tire product line? - ANSWER-
$400
Which of the following is a drawback of using regression analysis? - ANSWER-It makes a
number of assumptions about the data, and accounting data sometimes do not satisfy these
assumptions.
True. For example, the regression analysis may make an assumption that the relationship
between the sales volume and profit is linear. But in the reality, it might not be case.
If fixed costs are $15,000, profit before income taxes is $55,000, revenues are $160,000,
variable costs are $90,000, contribution margin is: - ANSWER-$70,000
Reasoning:
Contribution Margin = Revenues - Variable Costs
Contribution Margin = $160,000 - $90,000
Contribution Margin = $70,000
Assume University T-Shirt Shop has a selling price of $25 and unit variable cost of $10 for its
long-sleeve cotton shirts. Fixed costs total $1,000. University believes increasing its price to
$27 will cause its sales volume to drop by 5 percent. If University's sales volume for the
month was estimated to be 300 shirts before the price increase, how will net profit be affected
by the change in selling price? - ANSWER-$345 increase.
Contribution margin equals revenues less variable costs. - ANSWER-True
When all other factors remain the same, if a firm decides to decrease the selling price of its
product, its unit contribution margin also decreases. - ANSWER-True
4|Page
