Which of the following situations always results in underapplied overhead

Business MCQ Answer

Question 1

Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?

A reduction in expenses.

An increase in net operating income.

An increase in operating assets.

An increase in sales.

Question 2 1 points Save

Assume there was no beginning work in process inventory and the ending work in process inventory is 70% complete with respect to conversion costs. Under the weighted-average method, the number of equivalent units of production with respect to conversion costs would be:

the same as the units completed.

less than the units completed.

the same as the units started during the period.

less than the units started during the period.

Question 3 1 points Save

The cash budget must be prepared before you can complete the:

production budget.

budgeted balance sheet.

raw materials purchases budget.

schedule of cash disbursements.

Question 4 1 points Save

Which product would be selected in a decision that involves the utilization of a constrained resource?

the product with the lowest total cost per unit.

the product with the lowest variable cost per unit.

the product that uses the least amount of constrained resource per unit.

the product with the highest contribution margin per unit.

the product with the highest contribution margin per unit of the constrained resource.

Question 5 1 points Save

Managerial accounting:

has its primary emphasis on the future.

is required by regulatory bodies such as the SEC.

focuses on the organization as a whole, rather than on the organization's segments.

Responses a, b, and c are all correct.

Question 6 1 points Save

Setting up equipment is an example of a:

Unit-level activity.

Batch-level activity.

Product-level activity.

Facility-level activity.

Question 7 1 points Save

Which of the following should be classified as an investing activity on a statement of cash flows?

cash used to purchase land.

cash collected on a loan made to a supplier.

cash received from the sale of a stock investment.

all of the above

Question 8 1 points Save

Higado Confectionery Corporation has a number of store locations throughout North America. In income statements segmented by store, which of the following would be considered a common fixed cost?

store manager salaries

store building depreciation expense

the cost of corporate advertising aired during the Super Bowl

all of the above

Question 9 1 points Save

In a statement of cash flows, a change in prepaid expenses would be classified as:

an operating activity.

a financing activity.

an investing activity.

a noncash item that need not appear on the statement of cash flows.

Question 10 1 points Save

When using the indirect method to prepare the statement of cash flows, depreciation should be presented as a(n):

cash flow from investing activities.

cash flow from financing activities.

deduction from net income.

addition to net income.

Question 11 1 points Save

Assuming that the unit sales are unchanged, the total contribution margin will decrease if:

fixed expenses increase.

fixed expenses decrease.

variable expense per unit increases.

variable expense per unit decreases.

Question 12 1 points Save

Which of the following companies would be most likely to use a job-order costing system rather than a process costing system?

fast food restaurant

shipbuilding

crude oil refining

candy making

Question 13 1 points Save

Which of the following situations always results in underapplied overhead?

actual overhead is greater than applied overhead

actual overhead is less than applied overhead

estimated overhead is greater than actual overhead

estimated overhead is less than actual overhead

Question 14 1 points Save

The concept of responsibility accounting means that:

Budgetary data should be reviewed and approved by the budget committee.

Budgetary data should be reviewed and approved by all levels of management.

An employee's performance should be evaluated only on those items under his or her control.

An employee's performance should be evaluated only by his or her immediate supervisor.

Question 15 1 points Save

In a job-order costing system, direct labor costs usually are recorded initially with a debit to:

Manufacturing Overhead.

Finished Goods inventory.

Direct Labor Expense.

Work in Process.

Question 16 1 points Save

Which of the following costs are always irrelevant in decision making?

avoidable costs

sunk costs

opportunity costs

fixed costs

Question 17 1 points Save

In the preparation of a statement of cash flows, all of the following would be classified as financing activities except:

the conversion of the company's own preferred stock into common stock.

the declaration and payment of a cash dividend on the company's own common stock.

the repayment of principal on a mortgage.

the sale of the company's own preferred stock for cash.

Question 18 1 points Save

The master budget process usually begins with the:

production budget.

operating budget.

sales budget.

cash budget.

Question 19 1 points Save

Once the break-even point is reached:

the total contribution margin changes from negative to positive.

net operating income will increase by the unit contribution margin for each additional item sold.

variable expenses will remain constant in total.

the contribution margin ratio begins to decrease.

Question 20 1 points Save

The linear equation Y = a + bX is often used to express cost formulas. In this equation:

the b term represents variable cost per unit of activity.

the a term represents variable cost in total.

the X term represents total cost.

the Y term represents total fixed cost.

Question 21 1 points Save

Assume there is no beginning work in process inventory and the ending work in process inventory is 100% complete with respect to materials costs. The number of equivalent units with respect to materials costs under the weighted-average method is:

the same as the number of units put into production.

less than the number of units put into production.

the same as the number of units completed.

less than the number of units completed.

Question 22 1 points Save

A disadvantage of the high-low method of cost analysis is that:

it cannot be used when there are a very large number of observations.

it is too time consuming to apply.

it uses two extreme data points, which may not be representative of normal conditions.

it relies totally on the judgment of the person performing the cost analysis.

Question 23 1 points Save

The following costs were incurred in August:

Conversion costs during the month totaled:

$127,000

$51,000

$52,000

$75,000

Question 24 1 points Save

Consider a decision facing a company of either accepting or rejecting a special offer for one of its products. A cost that is not relevant is:

direct materials.

variable overhead.

fixed overhead that will be avoided if the special offer is accepted.

common fixed overhead that will continue if the special offer is not accepted.

Question 25 1 points Save

In activity-based costing, unit product costs computed for external financial reports include only:

direct materials and manufacturing overhead.

direct labor and manufacturing overhead.

direct materials, direct labor, and manufacturing overhead.

direct materials and direct labor.

Question 26 1 points Save

Property taxes and insurance are examples of costs that would be considered to be:

Unit-level.

Batch-level.

Product-level.

Facility-level.

Question 27 1 points Save

An example of a cost that is variable with respect to the number of units produced and sold is:

insurance on the headquarters building.

power to run production equipment.

supervisory salaries.

depreciation of factory facilities.

Question 28 1 points Save

On a cost-volume-profit graph, the break-even point is located:

at the origin.

where the total revenue line intersects the volume axis.

where the total expenses line intersects the dollars axis.

where the total revenue line intersects the total expenses line.

Question 29 1 points Save

The cost of fire insurance for a manufacturing plant is generally considered to be a:

product cost.

period cost.

variable cost.

all of the above.

Question 30 1 points Save

Return on investment (ROI) is equal to the margin multiplied by:

sales.

turnover.

average operating assets.

residual income.

Question 31 1 points Save

The cost of goods sold in a merchandising company typically would be classified as a:

fixed cost.

variable cost.

step-variable cost.

mixed cost.

Question 32 1 points Save

In a statement of cash flows, a change in the inventories account would be classified as:

an operating activity.

a financing activity.

an investing activity.

a noncash item that need not appear on the statement of cash flows.

Question 33 1 points Save

To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following?

Variable expense per unit.

Variable expense per unit/Selling price per unit.

Fixed expense per unit.

(Selling price per unit - Variable expense per unit)/Selling price per unit.

Question 34 1 points Save

Purchase order processing is an example of a:

Unit-level activity.

Batch-level activity.

Product-level activity.

Facility-level activity.

Question 35 1 points Save

Parts administration is an example of a:

Unit-level activity.

Batch-level activity.

Product-level activity.

Facility-level activity.

Question 36 1 points Save

An example of a period cost is:

fire insurance on a factory building.

salary of a factory supervisor.

direct materials.

rent on a headquarters building.

Question 37 1 points Save

Which of the following is not a benefit of budgeting?

It uncovers potential bottlenecks before they occur.

It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts.

It ensures that accounting records comply with generally accepted accounting principles.

It provides benchmarks for evaluating subsequent performance.

Question 38 1 points Save

The statement of cash flows:

serves as a replacement for the income statement and balance sheet.

shows the sources and uses of cash at one point in time.

shows the sources and uses of cash for one period of time.

is both A and B above.

Question 39 1 points Save

Which of the following would be classified as a financing activity on the statement of cash flows?

Interest paid on bonds issued by the reporting company.

Dividends paid to shareholders of the company on the company's common stock.

Interest received on investments in another company's bonds.

Dividends received on investments in another company's common stock.

Question 40 1 points Save

Allocated common fixed costs:

can make a product line appear to be unprofitable.

are always incremental costs.

are always relevant in decisions involving dropping a product line.

responses A, B, and C are all correct.

Question 41 1 points Save

Process costing would be appropriate for each of the following except:

custom furniture manufacturing.

oil refining.

grain milling.

newsprint production.

Question 42 1 points Save

The three basic elements of manufacturing cost are direct materials, direct labor, and:

cost of goods manufactured.

cost of goods sold.

work in process.

manufacturing overhead.

Question 43 1 points Save

Which of the following would be considered a "use" of cash for purpose of constructing a statement of cash flows?

selling the company's own common stock to investors.

issuing long-term debt.

purchasing equipment.

amortizing a patent.

Question 44 1 points Save

In a plant operating at capacity:

every machine and person in the plant is working at the maximum possible rate.

only some specific machines or processes are operating at the maximum rate possible.

profits are maximized.

managers should produce those products with the highest contribution margin in order to deal with the constrained resource.

Question 45 1 points Save

A segment of a business responsible for both revenues and expenses would be called:

a cost center.

an investment center.

a profit center.

residual income.

Question 46 1 points Save

United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their:

gross margin

contribution margin

selling price

contribution margin per unit of the constrained resource

Question 47 1 points Save

When closing overapplied manufacturing overhead to cost of goods sold, which of the following would be true?

Work in process will decrease.

Cost of goods sold will increase.

Net income will decrease.

Gross profit will increase.

Question 48 1 points Save

In the preparation of a statement of cash flows all of the following would be classified as investing activities except:

collection of a loan from a subsidiary.

purchase of a patent from an inventor.

sale of plant assets.

dividends received on stock held as an investment.

Question 49 1 points Save

In a job-order costing system, the use of indirect materials would usually be recorded as a debit to:

Raw Materials.

Work in Process.

Manufacturing Overhead.

Finished Goods.

Question 50 1 points Save

Within the relevant range, the variable cost per unit:

remains constant as activity changes.

increases as activity increases.

decreases as activity increases.

can increase or decrease as the activity changes.