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Green: Quiz 1 - Answers Are in Fonts

1. Job costing is appropriate when it provides information to internal managers for decision making, not external stakeholders. 2. Management accountants can increase their value by adopting a cost-benefit approach and incorporating direct and indirect cost allocation, behavioral and technical considerations. 3. The classification of a cost as direct or indirect is not influenced by the supplier of the cost object.

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29 views3 pages

Green: Quiz 1 - Answers Are in Fonts

1. Job costing is appropriate when it provides information to internal managers for decision making, not external stakeholders. 2. Management accountants can increase their value by adopting a cost-benefit approach and incorporating direct and indirect cost allocation, behavioral and technical considerations. 3. The classification of a cost as direct or indirect is not influenced by the supplier of the cost object.

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© © All Rights Reserved
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Quiz 1 –

Answers are in green fonts


1. Which of the following statement or statements describes or describe the key considerations when job
costing is appropriate?

a. It is used by external stakeholders such as b. It is future oriented, for example 2020 budget
investors, banks and supplier. prepared in last quarter 2019.
c. Communicates a company financial position, d. It is prepared in accordance with international
performance and cash-flows to regulators. financial reporting standards.

On page 10 of the slide deck of lecture 1, you will find information from which the answer can be deduced.
Essentially, all the other options given in this question are related to financial accounting.

2. Management accountants can increase their value to the strategic and operational decision-making of
their company by;

a. Use appropriate costs for different purposes b. Give full recognition to behavioral and
technical considerations
c. Adopting a cost-benefit approach d. Incorporating all of the above

On page 12 of the slide deck of lecture 2, you will find the methods of allocating indirect costs.

3. Which of the following is not a factor affecting the classification of cost as direct or indirect?

a. The design of the operations of the company. b. The availability of information-gathering


technology.
c. The supplier of the cost object. d. The materiality of the cost in question.

The classification of cost is specific to a company’s operation and is generally not influenced by external
forces.

4. Which of the following statements are true?

(i) Cost are defined as fixed or variable for a specific activity and are time-bounded.
(ii) Variable costs have a positive correlation with the level of activity
(iii) A cost driver is a variable, such as the level of activity or volume, that causally affects costs over a
given time period
(iv) Direct material plus direct labor costs are also referred to as prime cost.
a. i, ii, iii and iv b. i, ii and iii
c. ii, iii and iv d. ii and iii

5. One of UG's course offering is cost accounting. Even without one student enrolled for the course,
$9,000 in cost is incurred monthly. For each enrolled student UG incurs an additional monthly cost of
$500. Enrollment for the course is expected to be 50 students who will pay a monthly tuition of $1,000.
What is the monthly contribution per student?

a. $1,500 b. $8,500
c. $500 d. $1,000

Monthly contribution per student = monthly tuition per student – monthly variable cost per student
Monthly contribution per student = $1,000 - $500 = $500

6. One of UG's course offering is cost accounting. Even without one student enrolled for the course,
$9,000 in cost is incurred monthly. For each enrolled student UG incurs an additional monthly cost of
$500. Enrollment for the course is expected to be 50 students who will pay a monthly tuition of $1,000.
What are the budgeted monthly profits?

a. $50,000 b. $25,000
c. $41,000 d. $16,000

Monthly revenue – fixed cost – variable cost


$50,000 - $9,000 - $25,000 = $16,000
7. One of UG's course offering is cost accounting. Even without one student enrolled for the course,
$9,000 in cost is incurred monthly. For each enrolled student UG incurs an additional monthly cost of
$500. Enrollment for the course is expected to be 50 students who will pay a monthly tuition of $1,000.
How many students must enroll for the course to achieve breakeven point?

a. 18 b. 25
c. 32 d. 10

Breakeven number of students = fixed cost ÷ contribution margin per unit

Breakeven number of students = $9,000 ÷ $500 = 18 students


8. One of UG's course offering is cost accounting. Even without one student enrolled for the course,
$9,000 in cost is incurred monthly. For each enrolled student UG incurs an additional monthly cost of
$500. Enrollment for the course is expected to be 50 students who will pay a monthly tuition of $1,000.
How many students must enroll for the course to achieve a monthly profit of $25,000?

a. 40 b. 32
c. 68 d. 50

# of students who must enroll = (fixed cost + target income) ÷ contribution per student
# of students who must enroll = ($9,000 + 25,000) ÷ $500 = 68 students

9. Which of the following is not a major assumption of breakeven analysis?

a. It can only apply to one product or a constant b. Fixed costs are the same in total and unit
sales mix variable costs are the same at all levels of
output.
c. Production level is equal to sales level d. Sales prices vary in line with levels of activity

On page 21 of the slide deck of lecture 2, you will find the assumptions expressed as limitations

10. From which of the following can you ascertain the margin of safety percentage?

a. (unit selling price - unit variable costs) x 100% b. [(bud. sales - breakeven sales) ÷ bud. Sales] x
100%
c. fixed costs ÷ contribution sales ratio d. (contribution ÷ revenue) x 100%

Formula can be found on page 19 of the slide deck of lecture 2.

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