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Search Explore Download 1 Comment Link Embed Save for later of 860 Readcast 0inShare Chapter 1 Managerial Accounting and the Business Environment Garrison, Managerial Accounting, 12th Edition 9 34. According to the Theory of Constraints, improvement efforts should usually befocused on:A) work centers that are not constraints.B) the work center that is the constraint.C) the work center with the highest total cost.D) the work center with the most obsolete equipment.Answer: B Level: Medium LO: 335. Which of the following is true regarding the theory of constraints?A) The theory of constraints does not apply to companies with multiple productsbecause of capacity measurement difficulties.B) In any profit-seeking company, there must be at least one constraint.C) Constraints or bottlenecks stop organizations from selling an infinite number of units or services.D) both B and C above.Answer: D Level: Medium LO: 336. Pizza World makes forty-three kinds of pizza for takeout and delivery. Which of thefollowing could be the constraint at Pizza World?A) the person who makes the pizza crust.B) the person who puts toppings on the pizzas.C) the pizza oven.D) any of the above could be the constraint.Answer: D Level: Medium LO: 337. The Standards of Ethical Conduct for Management Accountants developed by theInstitute of Management Accountants contain a policy regarding confidentiality thatrequires management accountants to refrain from disclosing confidential informationacquired in the course of their work:A) except when authorized by management.B) in all situations.C) except when authorized by management, unless legally obligated to do so.D) in all cases not prohibited by law.Answer: C Level: Hard LO: 4 Chapter 1 Managerial Accounting and the Business Environment 10 Garrison, Managerial Accounting, 12th Edition

38. Wide-spread adherence to ethical standards in an advanced market economy tends toresult in all of the following except:A) higher prices.B) higher quality goods and services.C) greater variety of goods and services available for sale.D) safer products.Answer: A Level: Medium LO: 439. The Institute of Management Accountants (IMA) has developed ethical standards formanagement accountants. What four categories has the IMA classified these standardsinto?A) Reliability, Objectivity, Commitment, and CompetenceB) Objectivity, Integrity, Commitment, and ConfidentialityC) Observation, Integrity, Closure, and CompetenceD) Competence, Objectivity, Integrity, and ConfidentialityE) Reliability, Understandability, Flexibility, and IntegrityAnswer: D Level: Medium LO: 440. Sa mantha Galloway is a managerial accountant in the accounting department of Mustang Industries, Inc. Samantha has just discovered evidence that some of thecorporation's marketing managers have been wrongfully inflating their expense reportsin order to obtain higher reimbursements from the firm. According to the Institute of Management Accountants' Standards of Ethical Conduct, what should Samantha doupon discovering this evidence?A) notify the controller.B) notify the marketing managers involved.C) notify the president of the corporation.D) ignore the evidence because she is not part of the Marketing Department.Answer: A Level: Hard LO: 4 Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 15 True/False Questions 1. Manufacturing overhead is an indirect cost with respect to units of product.Answer: True Level: Medium LO: 12. Depreciation on office equipment would not be included in the cost of goodsmanufactured.Answer: True Level: Easy LO: 2,43. Rent on a factory building used in the production process would be classified as aperiod cost and as a fixed cost.Answer: False Level: Medium LO: 2,54. Period costs are found only in manufacturing companies, not in merchandisingcompanies.Answer: False Level: Medium LO: 25. Depreciation on equipment a company uses in its selling and administrative activitieswould be classified as a product cost.Answer: False Level: Medium LO: 26. If the finished goods inventory increases between the beginning and the end of aperiod, then the cost of goods manufactured is smaller than the cost of goods sold.Answer: False Level: Hard LO: 3,47. The cost of goods manufactured is calculated by adding the amount of work in processat the end of the year to the cost of raw materials used, direct labor worked, andmanufacturing overhead incurred for the year and then subtracting work in process atthe beginning of the year.Answer: False Level: Medium LO: 48. A publisher that sells its books through agents who are paid a constant percentagecommission on each book sold would classify the commissions as a fixed cost.Answer: False Level: Medium LO: 5 Chapter 2 Cost Terms, Concepts, and Classifications 16 Garrison, Managerial Accounting, 12th Edition 9. Variable costs per unit are affected by changes in activity.Answer: False Level: Easy LO: 510. A cost is either direct or indirect. The classification will not change if the cost objectchanges.Answer: False Level: Medium LO: 6 11. The amount that a manufacturing company could earn by renting unused portions of its warehouse is an example of an opportunity cost.Answer: True Level: Easy LO: 7 12. Labor fringe benefits may be charged to direct labor or manufacturing overhead whileovertime premiums paid usually are considered a part of manufacturing overhead.Answer: True Level: Easy LO: 8 Appendix: 2A

13. The cost of idle time should be charged as direct labor of the job that is in processwhen the breakdown occurs.Answer: False Level: Medium LO: 8 Appendix: 2A14. Internal failure costs result from identification of defects during the appraisal process.Such costs may include scrap, rejected products, rework, and downtime.Answer: True Level: Easy LO: 9 Appendix: 2B15. ISO 9000 certification is relatively easy to achieve because little documentation onquality control procedures is needed.Answer: False Level: Easy LO: 11 Appendix: 2B Chapter 2 Cost Terms, Concepts, and Classifications Garrison, Managerial Accounting, 12th Edition 17 Multiple Choice Questions 16. Indirect labor is a part of:A) Prime cost.B) Conversion cost.C) Period cost.D) Nonmanufacturing cost.Answer: B Level: Medium LO: 1,2 Source: CPA, adapted17. The cost of lubricants used to grease a production machine in a manufacturingcompany is an example of a(n):A) period cost.B) direct material cost.C) indirect material cost.D) none of the above.Ans wer: C Level: Easy LO: 1,218. The salary paid to the president of King Company would be classified on the incomestatement as a(n):A) administrative expense.B) direct labor cost.C) manufacturing overhead cost.D) sellin g expense.Answer: A Level: Easy LO: 119. Direct labor cost is a part of:Conversion cost Prime costA) No NoB) No YesC) Yes YesD) Yes NoAnswer: C Lev el: Easy LO: 1 Source: CPA, adapted Chapter 2 Cost Terms, Concepts, and Classifications 18 Garrison, Managerial Accounting, 12th Edition 20. Direct material cost is a:Conversion cost Prime costA) No NoB) No YesC) Yes YesD) Ye s NoAnswer: B Level: Medium LO: 1 Source: CPA, adapted21. Prime cost and conversion cost share what common element of total cost?A) Direct materials.B) Direct labor.C) Variable overhead.D) Fixed overhead.Answ er: B Level: Easy LO: 1 Source: CPA, adapted22. Prime cost consists of:A) direct labor and manufacturing overhead.B) direct materials and manufacturing overhead.C) direct materials and direct labor.D) direct materials, direct labor and manufacturing overhead.Answer: C Level: Easy LO: 123. Wages paid to a timekeeper in a factory are a:Prime cost Conversion costA) Yes NoB) Yes YesC) No NoD) No YesAnswer: D Level: M edium LO: 1 Source: CPA, adapted24. Property taxes on a company's factory building would be classified as a(n):A) product cost.B) opportunity cost.C) period cost.D) variable cost.Answer: A Level: Easy LO: 2,5,7 Managerial Accounting Edition 12 Garrison Noreen Brewer Test Bank

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