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Exam 1: Cost Accounting: Information for Decision Making

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Question 41

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Having one or more of the firms' activities performed by another firm or individual in the supply or distribution chain is called

A) lean accounting.
B) responsibility centers.
C) activity-based costing.
D) outsourcing.

E) None of the above
F) A) and B)

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Question 42

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In general,if activities that do not add value to the company can be eliminated,then costs associated with them will also be eliminated.

A) True
B) False

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Question 43

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The owner of a small retail business asks,"Why do I need cost accountants? My CPA produces financial statements,which are sufficient for me to discover my costs.Look at my Income Statement.I expect sales to increase by 10% next year,so I am planning on a 10% increase in profits.I don't need a cost accountant to tell me that." $\begin{array}{c}\text {Income Statement for the Year}\\\text {Ending December 31}\\\begin{array}{|l|}\hline \text {Sales Revenue}\\\hline \text {Cost of Goods Sold}\\\hline \text {Gross Margin}\\\hline \text {Selling Costs}\\\hline \text {Administrative Costs}\\\hline \text {Profit betore Taxes}\\\hline \end{array}\begin{array}{l|}\hline \$ 457,234 \\\hline\underline{296,348}\\\hline160,886\\\hline (76,234) \\\hline\underline{(62,350) }\\\hline\underline{\$ 22,302} \\\hline\end{array}\end{array}$ Use your knowledge of the concept of differential costs and explain why a cost accountant would question the conclusion that a 10% increase in sales would yield a 10% increase in profit.

Systems that allow firms to target profitable customers by assessing customer revenue and costs are called

With the enactment of the Sarbanes-Oxley Act of 2002,all public companies are now required by the SEC to disclose whether or not the company has

Which of the following could be considered part of the value chain in a service firm?

During 2016,the Beach Restaurant had sales revenues and food costs of $800,000 and $600,000,respectively.During 2017,Beach plans to introduce a new menu item that is expected to increase sales revenues by $100,000 and food costs by $40,000.Assuming no changes are expected for the other food items,operating profits for 2017 are expected to increase by

The boundary between what is cost accounting and what belongs in another discipline is often blurred.

Examples of the controller's functions include all except:

In 2016,the TransUnion Company had consulting revenues of $1,000,000 while costs were $750,000.In 2017,TransUnion will be introducing a new service that will generate $150,000 in sales revenues and $60,000 in costs.Assuming no changes are expected for the other services,operating profits are expected to increase between 2016 and 2017 by:

The management of Parachute Corporation is considering dropping product ABC123.Data from the company's accounting system appear below: $\begin{array} { | l | r | } \hline \text { Sales } & \$ 260,000 \\\hline \text { Cost of goods sold } & 125,000 \\\hline \text { Building expenses } & 88,000 \\\hline \text { Selling and administrative expenses } & 75,000 \\\hline\end{array}$ All building expenses of the company are fully allocated to products in the company's accounting system.Further investigation has revealed that $42,000 of the building expenses and $48,000 of the selling and administrative expenses will not be incurred if product ABC123 is discontinued. a.According to the company's accounting system,what are the operating profits earned by product ABC123? b.What would be the impact on the company's overall operating profits if product ABC123 is dropped? Should the product be dropped?

According to the IMA Code of Ethics,what should a management accountant do if a significant ethical situation can't be resolved?

A cost driver is a factor that causes costs.

All of the following are examples of total quality management practices except:

Snuggle Toys,Inc.had the following summarized results for the month ending July 31: $\begin{array} { | l | r | r | } \hline & \text { Actual } & \text { Budget } \\\hline \text { Revenues } & \$ 60,000 & \$ 52,000 \\\hline \text { Costs } & 53,600 & 45,600 \\\hline \text { Operating profits } & \$ 6,400 & \$ 6,400 \\\hline\end{array}$ As the cost accountant,which single note to the above financial results is most appropriate in the report to management?

Two alternatives,identified X and Y,are under consideration at Hayden Corporation.Costs associated with the alternatives are listed below. $\begin{array} { | l | r | r | } \hline & \text { Altemative } \times & \text { Altemative } \mathrm { Y } \\\hline \text { Material costs } & \$ 44,000 & \$ 56,000 \\\hline \text { Processing costs } & 37,000 & 59,000 \\\hline \text { Building costs } & 14,000 & 14,000 \\\hline \text { Equipment rental } & 11,000 & 11,000 \\\hline\end{array}$ What is the differential cost of Alternative Y over Alternative X?

The IMA Code of Ethics describes three basic steps a cost accountant should take when faced with an ethical conflict: Discuss,clarify,and consult.Describe each of these three steps.

Where there is a lack of good performance measures,it is difficult to motivate managers by using

Managerial decisions using cost accounting are more appropriate for which types of costs?

Old-Fashion Flavors is a local ice cream shop.The company currently is showing an operating loss,as evidenced by the income statement below: $\begin{array} { | c | r | } \hline \text { Sales } & \$ 75,000 \\\hline \text { Costs: } & \\\hline \text { Food supplies } & 20,000 \\\hline \text { Labor } & 16,000 \\\hline \text { Utilities } & 4,000 \\\hline \text { Rent } & 12,000 \\\hline \text { Other } & 4,000 \\\hline \text { Manager's salary } & \underline{25,000} \\\hline \text { Total Costs } & 81,000 \\\hline \text { Operating Profits (Losses) } & \underline { ( \$ 6,000 ) } \\\hline\end{array}$ The President of the company is considering adding sandwiches to the menu.Sales will be expected to increase by $60,000.The cost of sandwich supplies would be $30,000.Labor costs would increase 40% and other costs 10%.The current manager will continue to manage the operation. a.Prepare a quantitative analysis of the decision to add sandwiches to the menu. b.What qualitative considerations should the company consider in this decision?