Accounting for Planning and Control Test 1 Practice

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• In evaluating a special order, the difference between incremental revenue and incremental cost equals:
• Which statement about variable and marginal costs is correct?
• Which concept is crucial in managerial decision making?
• Using an 8% rate, the present value today of receiving payments of 500, 600, and 700 at year 1, year 2, and year 3 respectively is closest to which amount?
• Which of the following is NOT typically considered a component of organizational architecture?
• Budgets, cost and inventory data and periodic financial reports are included in an organization's _______ system.
• When a company has excess capacity, considerations in accepting a special order include ______?
• In deciding whether to stay in school and earn a degree or work full time, the wages lost by staying in school is a(n) ______ cost of earning the degree.
• Which expression represents the contribution margin per unit?
• A job description primarily specifies the decision rights assigned to that person.
• Which statement about accepting a special order is true in decision-making terms?
• A firm with market power faces:
• Which term describes the cost of the next best alternative forgone when increasing production?
• If revenue increases and average cost per unit decreases, profit ______ be maximized.
• If a perpetuity pays $500 per year, what interest rate yields a price of 6250?
• Taxes are typically based on taxable income, which can differ from cash flow because of non-cash items like depreciation.
• Giving a division manager the ability to set product prices is one component of his or her ______.
• Performance measures, incentive compensation systems, security guards and internal auditors are all part of the firm's
• Which act may apply to special orders?
• For every case of candy bars with nuts, two cases of plain bars are produced. If total fixed costs are $247,500, how many cases of plain candy bars are required to break-even?
• The marmot-and-bear parable is an extremely important proposition in the social sciences known as
• Intentional (or accidental) financial misrepresentation by managers should be prevented by a company's
• The break-even equation is ______.
• Which statement about the controllership function is true?
• Which of the following is an example of nonfinancial information that forms part of an organization's information system?
• Which statement best describes the relevant range in cost behavior?
• Using internal accounting systems for both decision making and control gives rise to fundamental trade-offs.
• If a bond pays $500 per year in perpetuity and the market rate is 8%, what is its price?
• Which action would increase after-tax cash flow for a project, assuming other factors constant?
• At an 8% annual rate, what is the future value after 10 years of a $100 investment?
• Motion and time studies ______.
• Total opportunity cost of the new motorcycle model is calculated as: average inventory of materials, work in process and finished motorcycles - $2,500,000; payments for labor, promotion and administration - $750,000; the market rate of interest for this investment is 10%.
• Which term is used to describe performance measurement systems that align with strategy by focusing on long-term value?
• Which statement best describes the role of information systems in organizations?
• Break-even point for a single product may be computed if ______.
• Since 2002, federal regulation increased the CFO's role by requiring
• Which statement about net income and cash flow is true?
• To compare cash flows across time, you must adjust them to the same point in time using present value. Is it always necessary to convert all cash flows to beginning-of-year dollars?
• Which of the following statements is true?
• Information systems ______.
• The firm's chief management accountant holds the title of what position?
• Revenue of $100,000, expenses of $50,000 (including $5,000 of depreciation) and a tax rate of 30%. The cash flow after taxes equals $______.
• In the United States, financial statements issued to shareholders are regulated by the ______.
• The firm's control system includes __.
• Which statement about capacity utilization is commonly true in production planning?
• The most basic control use of accounting is to
• Under federal laws and regulations, the responsibility for overseeing compliance with the company's code of conduct rests with the ______.
• Direct material, direct labor, and factory overhead are the components of ______ costs.
• Accountants are not charged with ______ the firm's accounting system.
• Depreciation is a non-cash expense that reduces taxes and increases cash flow via tax shield.
• Fixed costs generally do not impact a pricing decision.
• Which of the following statements is true about depreciation?
• If a firm has market power, profit is maximized by maximizing revenue.
• In the travel bag problem, which bag type yields the highest contribution per machine hour?
• If a special order increases total revenue and reduces average cost, which response is most consistent with typical decision-making guidance?
• A mixed cost includes a fixed component and a variable component.
• Costs that cannot be identified as purely fixed or variable are ______ costs.
• Direct labor and factory overhead are product costs that are also referred to as
• The internal audit department ______.
• Fixed costs are relevant when determining if a firm should produce.
• When an investment is considered risky ______.
• Which of the following is NOT a potential alternative to a firm's internal accounting system?
• True or false: If the annual interest rate is 18%, the monthly interest rate is 1.5%.
• If you invest $1,000 per year for 10 years at 8% interest, how much money will you have at the end of year 10?
• When making decisions, accounting data should be supplemented with other information.
• In Quinn Industries, which bag type has the highest contribution per machine hour?
• Maintaining multiple accounting systems ______.
• The additional cost incurred to produce an additional unit is called which cost?
• If revenue is $120,000, expenses $70,000 including $10,000 depreciation, and the tax rate is 30%, the cash flow after taxes equals $______.
• What is the typical effect on base unit cost when adding small production beyond the initial base?
• Compared with external reports, internal reports typically ______.
• Resources expended for actions actually undertaken are:
• When a firm has market power ______.
• When price is based on average total cost plus a markup, the method is called
• Assuming you retire 35 years from now, the net present value of the decision to stay in school is $
• What is the present value today of receiving $700 in 3 years if the annual discount rate is 8%?
• A company produces 50,000 units; variable cost per unit is $75; fixed costs total $800,000. With a markup of 35%, what is the selling price per unit (rounded to the two decimals)?
• If production increases from 800 to 850 units (80% to 85%), and the average cost of the base 800 units rises from $5.90 to $5.93, the opportunity cost of the additional 50 units is which value?
• Given an 8% rate, the value of a perpetuity paying $200 per year is
• Which statement about regulation of financial statements issued to shareholders is true?
• Most of today's modern management accounting techniques developed within the last 20 years.
• Which organization sets the accounting standards used in US financial reporting?
• Which statement best describes the primary purpose of an internal control system?
• A firm's accountant is often called the
• Economic profit equals accounting profit minus opportunity costs.
• An internal accounting system ______.
• From 1925 to 1975, management accounting was heavily influenced by ______.
• The growth of large organizations led to the development of modern management accounting techniques.
• A company has fixed costs of $250,000 per year. They sell a single product for $25 per unit. Variable costs are $7 per unit. Given a combined state and local tax rate of 40%, how many units must be sold to earn an after-tax profit of $120,000?
• The internal accounting system: Which of the following is true?
• Formal records such as payroll documents, intangible data such as memos, and nonfinancial information such as customer satisfaction surveys are all part of an organization's ______.
• A farmer leased land and equipment for $500,000 and expected to produce 400,000 bushels of wheat. The variable cost of production is $1.50 per bushel. After the land and equipment had been paid for, the farmer discovered the selling price of wheat was $2.25. Using this scenario, what is the contribution margin from selling the wheat?
• Which of the following best describes organizational architecture components?
• Cost-plus pricing is based on which concept?
• An internal accounting system
• What discount rate was used for risky investments in the example?
• When determining which product(s) to produce to maximize profits, fixed costs are ______.
• The practice of imitating successful business practices is ______.
• The slope of the total cost line represents which cost per unit?
• Internal audit reporting lines are fixed and must report to the board.
• Components of organizational architecture include ______.
• Opportunity cost represents the value of the best alternative foregone.
• Motion studies are used to determine improvements in work methods. The statement that is most accurate is that they:
• Internal reports often include product-level cost data because they are used for
• In deciding whether to purchase a new car and give your old car to your younger brother, the original cost of your old car is a(n) ______ cost.
• Which statement best describes the role of the internal accounting system in production efficiency?
• What is the accumulation factor (1.08)^10 approximately?
• Which of the following is a plausible way to account for risk in project evaluation?
• Which statement is true?
• Which statement describes the calculation for after-tax cash flow (Revenue - Expenses) * (1 - tax rate) + Depreciation?
• Which statement about capacity utilization is correct?
• The real interest rate is defined as the interest rate adjusted for inflation.
• Given revenue of $150,000, expenses of $80,000 (including $15,000 of depreciation) and a tax rate of 40%, the cash flow after taxes equals $ ______.
• With an 8% interest rate, what is the present value today of receiving $100 one year from now?
• When making a decision, price takers ______.
• A plant at 80% capacity increases to 216 units (90%), the opportunity cost is which value?
• Which of the following is NOT typically considered part of a firm's internal control system?
• Economic profit equals accounting profit minus opportunity costs.
• A company needs one supervisor for every 40 employees. In this case, supervision is a ______ cost.
• If price is set as average total cost plus a markup, the price will be above the average total cost.
• Price takers ______.
• Internal accounting systems ______.
• Using a single accounting system for decision making, performance evaluation and external reporting ______.
• Economic value added is a measure of value created after deducting the cost of capital.
• A single accounting system usually offers enough flexibility for managers to reclassify, recombine, and reorganize data for multiple purposes.
• If a hospital schedules one nurse for each 10 patients, nursing salaries and wages is a(n)
• The controller is responsible for both internal and external financial reports.
• Unit cost figures typically refer to
• Internal accounting systems ______.
• To earn the highest effective interest rate, which compounding frequency should be chosen?
• If the annual interest rate is 15%, the monthly interest rate is ______%.
• The rate of interest that would occur if there were no inflation is the
• Which statement about the relationship between job descriptions and decision rights is correct?
• The original cost of your old car is a sunk cost; in decision making, you should
• If a project has cash flows of 150 or 300 with equal probability, the expected cash flow per year is 225.
• The internal audit department may report to which of the following?
• Which cost concept is exemplified by costs that stay constant within a range and jump to a higher level when capacity is exceeded?
• How much does $500 grow to in 4 years at 6% annual interest, rounded to the nearest dollar?
• Depreciation affects accounting earnings but does not directly affect cash flows.
• A security purchased today for $200 will pay $1,400 in 20 years. The return on investment (ROI) for this security is
• One of the primary benefits of a single accounting system is
• The present value of receiving $1,000 at year 1, $2,000 at year 2, and $3,000 at year 3 when the discount rate is 7% is approximately:
• The opportunity cost of accepting Job 2 is based on comparing the offered job with the best alternative. Given the following offers: Job 1 salary 94,000 with intangible 3,000; Job 2 salary 92,000 with intangible 7,000; Job 3 salary 95,000 with intangible 1,000. What is the opportunity cost of accepting Job 2?
• What is the price of a perpetuity that pays $150 per year if the yield is 6%?
• What exists in most organizations due to differing goals of owners and employees?
• If you invest $500 at the end of each year for 18 years at 6% interest, the value at the end of year 18 is closest to which amount?
• Economic value added focuses on whether a project creates value above the opportunity cost of capital.
• What is the present value today of $600 due in 2 years at an 8% discount rate?
• Cash flows differ from accounting earnings because ______.
• Direct labor and factory overhead are product costs that are also referred to as
• Current assets less current liabilities equals
• A feature of an effective control system is that it
• Internal accounting systems are designed to support which functions?
• At an annual interest rate of 6%, what is the present value today of receiving $1 one year from now?
• Which of the following is not a limitation of the internal rate of return (IRR) method?
• In a typical firm, which role is commonly associated with monitoring compliance and detecting fraud as part of the control system?
• The amount of the loan today if a borrower can make annual payments of $500 for 10 years and the interest rate is 9% is approximately:
• Inventoriable costs that are incurred to manufacture a good are ______ costs whereas costs that are expensed as incurred are ______ costs.
• A company considers an investment with cash flows for the next 5 years that are equally likely to be 150 or 300 per year. The project is considered risky, and the appropriate discount rate is 20%. What is the present value of this investment (rounded to the nearest dollar)?
• At an interest rate of 9%, what is the present value today of receiving $5,000 in 6 years?
• Break-even occurs when total revenue equals total costs.
• A company has 10 employees who are paid for a 40 hour work week. For the upcoming week, scheduled production requires 37 hours of work per employee. Which of the following statements is true?
• Sunk costs should be ignored in decision making.
• For a typical corporation, controllership and treasury are functions of the
• Which term describes the current worth of a future cash flow discounted at a given rate?
• In the last two years, what percent of the data in the world was generated?
• What is the approximate future value of $500 invested today for 18 years at 6%?
• If a product sells for $25 per unit and variable costs are $7 per unit, what is the contribution margin per unit?
• Price takers ______.
• If materials have no other use or value but could be used for a special order, what is their opportunity cost?
• Present value measures: The amount today that would grow to the future amount.
• Variable cost is a close approximation of marginal cost within the relevant range.
• What does markup refer to in cost-plus pricing?
• Which statement about paying hours in excess of guaranteed work hours is true?
• A company has materials in inventory that cost $1,500 and have no current use. In determining what to do with the materials, the $1,500 is a:
• Problems with the internal rate of return include ______.
• For a plant moving from 70% capacity to 85% capacity, the opportunity cost is which of the following?
• Procedures, codes of conduct, and policies that prohibit corruption, bribery and kickbacks are all components of a company's ______.
• A company is charged $50 per month plus $2.10 per kilowatt hour for electricity. In this case, electricity is a(n)
• True or false: A cost may be fixed for one decision and variable for another