Multiple choice questions book
1-16 Which of the following is not a primary function of the management accountant?
1. Communicates financial results and position to external parties.
2. Uses information to develop and implement business strategy.
3. Aids in the decision making to help an organization meet its goals.
4. Provides input into an entity’s production and marketing decisions.
2-16 Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project
to achieve some cost savings. Which of the following statements is/are correct?
I. The cost of the direct materials in Applewhite’s products is considered a variable cost.
II. The cost of the depreciation of Applewhite’s plant machinery is considered a variable cost
because Applewhite uses an accelerated depreciation method for both book and income
tax purposes.
III. The cost of electricity for Applewhite’s manufacturing facility is considered a fixed cost,
even if the cost of the electricity has both variable and fixed components.
1. I, II, and III are correct.
2. I only is correct.
3. II and III only are correct.
4. None of the listed choices is correct.
2-17 Comprehensive Care Nursing Home is required by statute and regulation to maintain a
minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with
the Nursing Home beds. The salary expense associated with direct service staff for the
Comprehensive Care Nursing Home would most likely be classified as:
1. Variable cost.
2. Fixed cost.
3. Overhead costs.
4. Inventoriable costs.
2-18 Frisco Corporation is analyzing its fixed and variable costs within its current relevant range.
As its cost driver activity changes within the relevant range, which of the following statements
is/are correct?
I. As the cost driver level increases, total fixed cost remains unchanged.
II. As the cost driver level increases, unit fixed cost increases.
III. As the cost driver level decreases, unit variable cost decreases.
1. I, II, and III are correct.
2. I and II only are correct.
3. I only is correct.
4. II and III only are correct.
2-19 Year 1 financial data for the ABC Company is as follows:
, Under the absorption method, Year 1 Cost of Goods sold will be:
a. $2,550,000 c. $3,100,000 b. $2,950,000 d. $3,700,000
2-20 The following information was extracted from the accounting records of Roosevelt
Manufacturing Company:
What was the cost of goods manufactured?
1. $124,000 3. $154,000 2. $120,000 4. $170,000
3-16 Jack’s Jax has total fixed costs of $25,000. If the company’s contribution margin is 60%, the
income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would
the company need to sell to produce a net income of $15,000?
a. 5,625 b. 4,445 c. 3,750 d. 3,333
3-17 Duringthecurrentyear,XYZCompanyincreaseditsvariableSG&Aexpenseswhilekeepingfixed
SG&A expenses the same. As a result, XYZ’s:
1. Contribution margin and gross margin will be lower.
2. Contribution margin will be higher, while its gross margin will remain the same.
3. Operating income will be the same under both the financial accounting income
statement and contribution income statement.
4. Inventory amounts booked under the financial accounting income statement will
be lower than under the contribution income statement.
3-18 Under the contribution income statement, a company’s contribution margin will be:
1. Higher if fixed SG&A costs decrease.
2. Higher if variable SG&A costs increase.
3. Lower if fixed manufacturing overhead costs decrease.
4. Lower if variable manufacturing overhead costs increase.
1-16 Which of the following is not a primary function of the management accountant?
1. Communicates financial results and position to external parties.
2. Uses information to develop and implement business strategy.
3. Aids in the decision making to help an organization meet its goals.
4. Provides input into an entity’s production and marketing decisions.
2-16 Applewhite Corporation, a manufacturing company, is analyzing its cost structure in a project
to achieve some cost savings. Which of the following statements is/are correct?
I. The cost of the direct materials in Applewhite’s products is considered a variable cost.
II. The cost of the depreciation of Applewhite’s plant machinery is considered a variable cost
because Applewhite uses an accelerated depreciation method for both book and income
tax purposes.
III. The cost of electricity for Applewhite’s manufacturing facility is considered a fixed cost,
even if the cost of the electricity has both variable and fixed components.
1. I, II, and III are correct.
2. I only is correct.
3. II and III only are correct.
4. None of the listed choices is correct.
2-17 Comprehensive Care Nursing Home is required by statute and regulation to maintain a
minimum 3 to 1 ratio of direct service staff to residents to maintain the licensure associated with
the Nursing Home beds. The salary expense associated with direct service staff for the
Comprehensive Care Nursing Home would most likely be classified as:
1. Variable cost.
2. Fixed cost.
3. Overhead costs.
4. Inventoriable costs.
2-18 Frisco Corporation is analyzing its fixed and variable costs within its current relevant range.
As its cost driver activity changes within the relevant range, which of the following statements
is/are correct?
I. As the cost driver level increases, total fixed cost remains unchanged.
II. As the cost driver level increases, unit fixed cost increases.
III. As the cost driver level decreases, unit variable cost decreases.
1. I, II, and III are correct.
2. I and II only are correct.
3. I only is correct.
4. II and III only are correct.
2-19 Year 1 financial data for the ABC Company is as follows:
, Under the absorption method, Year 1 Cost of Goods sold will be:
a. $2,550,000 c. $3,100,000 b. $2,950,000 d. $3,700,000
2-20 The following information was extracted from the accounting records of Roosevelt
Manufacturing Company:
What was the cost of goods manufactured?
1. $124,000 3. $154,000 2. $120,000 4. $170,000
3-16 Jack’s Jax has total fixed costs of $25,000. If the company’s contribution margin is 60%, the
income tax rate is 25% and the selling price of a box of Jax is $20, how many boxes of Jax would
the company need to sell to produce a net income of $15,000?
a. 5,625 b. 4,445 c. 3,750 d. 3,333
3-17 Duringthecurrentyear,XYZCompanyincreaseditsvariableSG&Aexpenseswhilekeepingfixed
SG&A expenses the same. As a result, XYZ’s:
1. Contribution margin and gross margin will be lower.
2. Contribution margin will be higher, while its gross margin will remain the same.
3. Operating income will be the same under both the financial accounting income
statement and contribution income statement.
4. Inventory amounts booked under the financial accounting income statement will
be lower than under the contribution income statement.
3-18 Under the contribution income statement, a company’s contribution margin will be:
1. Higher if fixed SG&A costs decrease.
2. Higher if variable SG&A costs increase.
3. Lower if fixed manufacturing overhead costs decrease.
4. Lower if variable manufacturing overhead costs increase.
