1.Which of the following is NOT a step in the decision makingprocess?
a)Explore workable alternatives
b)Determine relevant cost and revenue data
c)Consider appropriate non-financial factors
d)Make decision
2.Which of the following is NOT a consideration when determiningwhether to continue making a part or to buy that part?
a)Timing of the cash receipts and expenditures
b)Opportunity cost
c)Impact on employees
d)Sunk cost
3.Contribution margin is calculated by deducting:
a)variable costs from revenue
b)variable costs and controllable fixed costs from revenue
c)variable costs and common costs from revenue
d)fixed costs from revenue
4.A segment of a business probably should be discontinued if:
a)its common costs exceed its contribution margin
b)its contribution margin exceeds its controllable fixed costs andits common costs
c)if cannot produce a contribution margin
d)it has a net loss
5.When direct costing is used, cost of goods sold reflects:
a)both variable and fixed manufacturing costs
b)variable manufacturing costs and variable selling andadministrative expenses
c)variable manufacturing costs only
d)fixed manufacturing costs only
6.On an income statement prepared with a direct costing approach,the excess of sales over the cost of goods sold, based on variablecosts only, is referred to as the:
a)marginal gross profit on sales
b)manufacturing margin
c)marginal income on sales
d)contribution margin
7.Fixed manufacturing costs are written off as current expenses ofthe period in which they occurred when using_____costs.
a)direct
b)standard
c)absorption
d)differential
8.Which inventory costing system is NOT acceptable for financialreporting purposes?
a)Absorption costing
b)Direct costing
c)Standard costing
d)Variable costing
9.Which of the following would NOT be relevant to a decision aboutwhether to continue making a part or whether to buy it from anoutside supplier?
a)Alternative uses for the plant where the part was produced if thepart is purchased
b)A fee previously spent for design of the part
c)The variable costs of making the part
d)The number of additional employees needed to make the part
10.A company has sales of $100,000, ending finished goods inventoryof $9,000, variable manufacturing costs of $50,000, and fixedmanufacturing costs of $28,000 for the year. Assuming the companyuses direct costing, the manufacturing margin for the year is:
a)$22,000
b)$31,000
c)$59,000
d)$13,000
11.A segment of a business reported a contribution margin of$36,000 and controllable fixed costs of $12,000. If the segment hadbeen eliminated, the company-wide net income would have been:
a)$12,000 higher
b)$24,000 lower
c)$36,000 lower
d)$24,000 higher
12.If a decision must be made to close a warehouse, non-refundableprepaid rent on the warehouse is a(n)________cost.
a)opportunity
b)common
c)sunk
d)variable
13.When the balance in ending finished goods inventory increases,net income under absorption costing is:
a)lower than under direct costing
b)higher than under direct costing
c)the same under direct costing
d)unaffected by the increase
14.Which of the following is the first step in the decision-makingprocess?
a)Evaluate the cost and revenue data
b)Identify workable alternatives
c)Define the problem
d)Consider appropriate nonfinancial factors
15.Which of the following is NOT a consideration regarding aspecial order?
a)If the company has sufficient capacity
b)If the special order jeopardized sales to existing customers
c)Federal laws regarding the price
d)whether employee morale would be affected
16.Which of the following cost amounts can be found in a firmsaccounting records?
a)Opportunity costs
b)Differential costs
c)Incremental costs
d)Sunk costs
17.Costs that are not directly traceable to a specific segment of abusiness are called_________costs.
a)sunk
b)common
c)fixed
d)incremental
18.Which of the following is NOT true of the direct costingrocedure?
a)Variable and fixed costs are considered as part of the cost ofgoods manufactured
b)The cost of goods sold, based solely on variable costs, issubtracted from net sales to arrive at the manufacturingmargin.
c)Variable selling expenses are deducted from manufacturingmargin
d)Variable administrative expenses are deducted from themanufacturing margin
19.Data for a firms first year of operation is given below. Thefirm uses absorption costing.
Units produced (no work inprocess) 6,000
Unitssold 5,000
Units in ending inventory of finishedgoods 1,000
Sales price for eachunit $75
Variable manufacturing costs for each unitmnfctrd $30
Variable selling and admin. Exp. For ea unitsold $16
Fixed manfctg costs for theyear $90,000
Fixed selling and admin. Exp. For theyear $65,000
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