Exam 5: Accounting for Inventory

When a law firm sends bills to its clients, it is able to list on its bills the amounts of hours worked by each particular lawyer on that case, and the billing rates of these lawyers. This ability to associate the particular lawyers' work with the bill is an example of

A disadvantage of the payback method of evaluating capital investments is that it ignores information about returns after the payback period.

According to the IMA, the concept of "interchangeability" applies to situations where a decision to pursue one managerial objective affects the resources available to pursue other managerial objectives.

Allen Corp. uses the high-low method to estimate how its costs vary with levels of production. For the year, its high production was 10,000 units in a day, at a cost of $80,000, and its low production was 3,000 units, at a cost of $38,000. The equation that best describes this relation is

When a company is considering outsourcing production of a component of its product, all nonfinancial considerations are irrelevant.

A graph showing the relation between the costs of outputs and the amount of a cost driver would be a straight line, starting at the origin, for a semi-variable cost relation.

The Han Corp. plans to sell its products for $100 each. Its variable cost per unit = $90, and its fixed costs for the year = $200,000. What level of sales will Han need to break even?

The level of production at which costs exactly equal revenues is called the "break-even point."

"Sunk costs" are usually relevant costs to short-term decisions.

A company is considering whether to continue to make a product itself, or whether to buy it from another company. If it stops making the product, it will sell its existing factory and fire the workers who now make the product. Which of the following is usually not a "relevant" factor in making this decision?

The type of cost relationship that exists when costs remain the same at certain levels of output, and then jump to higher levels when the level of a cost driver increases past certain points, is

"A monetary measure of consuming a resource or its output to achieve a specific managerial objective or making a resource or its output available and not using it" is a definition of which of the following terms?

An outlay cost is not relevant if it

According to the IMA, "variability" and "responsiveness" are equivalent terms, meaning the same thing.

A company is more likely to set unreachably ambitious budgets when it uses top-down budgeting than when it uses participatory budgeting processes.

The variable overhead spending variance = actual labor hours × (actual price - standard price)

The variable overhead efficiency variance = actual price × (actual labor hours - standard labor hours)

Alpert Corp. uses the high-low method to estimate how its costs vary with levels of production. For the year, its high production was 100,000 units in a day, at a cost of $900,000, and its low production was 25,000 units, at a cost of $525,000. The equation that best describes this relation is

Let AP = actual price the company pays for variable overhead costs per direct labor hour, SP = the standard price the company planned to pay for variable overhead per direct labor hour, AH = the actual direct labor hours used, and SH = the standard direct labor hours for a given level of production. The variable overhead spending variance equals

The materials usage variance = standard price × (actual quantity - standard quantity)