True/False
Indicate whether the
statement is true or false.
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1.
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Solvency analysis focuses on the ability of a business to make a profit.
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2.
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The percentage analysis of increases and decreases in corresponding items in
comparative financial statements is referred to as horizontal analysis.
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3.
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The percentage analysis of the relationship of each component in a financial
statement to a total within the statement is referred as vertical analysis.
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4.
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The relationship of each asset item as a percentage of total assets is an
example of horizontal analysis.
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5.
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Managerial accounting reports information primarily for stakeholders that are
external to the company.
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6.
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Reporting under managerial accounting is not restricted by specific rules such
as generally accepted accounting principles (GAAP).
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7.
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A manufacturing business converts materials into finished products through the
use of machinery and labor.
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8.
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Inventories of finished products are reported as current assets on a
manufacturer's balance sheet.
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9.
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The cost of a manufactured product generally consists of direct materials cost,
direct labor cost, and factory overhead cost.
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10.
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The cost of materials entering directly into the manufacturing process is
classified as factory overhead cost.
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11.
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Cost behavior refers to the manner in which a cost changes as a related activity
changes.
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12.
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Activities that cause costs to change are called activity bases.
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13.
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The variable cost per unit remains constant with changes in the level of
activity.
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14.
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Monthly rent on a factory building is an example of a fixed cost.
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15.
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Direct materials cost is an example of a fixed cost of production.
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16.
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If the total unit cost of manufacturing Product Y is currently $40 and the
total unit cost after modifying the style is estimated to be $48, the differential cost for this
situation is $8.
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17.
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If the total unit cost of manufacturing Product Y is currently $40 and the
total unit cost after modifying the style is estimated to be $48, the differential cost for this
situation is $48.
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18.
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A cost that will not be affected by later decisions is termed as sunk
cost.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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19.
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Red Co. uses the product cost concept of applying the cost-plus approach to
product pricing. The following is cost
information for the production and sale of 40,000 units of
its sole product. Red Co. desires a profit equal to a 15% rate of
return on invested assets of
$1,200,000.
Fixed factory overhead cost $80,000.00
Fixed selling and administrative costs
140,000.00
Variable direct materials cost per unit 7.00
Variable direct labor cost per unit
11.00
Variable factory overhead cost per unit 3.00
Variable selling and administrative cost per
unit 2.00
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20.
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What is a production constraint?
a. | The point in the manufacturing process where the demand for the company's
products exceeds its ability to produce the products | c. | A manufacturing strategy that
focuses on increasing the influence of constraints on production processes
| b. | A manufacturing
strategy used to reduce production cost by eliminating waste of inventory | d. | The point in the manufacturing process where
total variable costs and total fixed costs equals total revenues |
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