Exam 5: Accounting for Inventory

A possible disadvantage of "achievable" standards, compared to "tight standards," is that managers may be more likely to perform at less than their peak efficiency.

The method of evaluating long-term investment decisions that involves dividing the average earnings from the investment by the amount of the investment is called the

Typically, a manufacturing company's accounting department sets standard costs without consulting production or purchasing personnel.

A graph with the amount of some cost driver on the "x" axis and the cost of production on the "y" axis that is a straight horizontal, with $5,000 of costs at all levels of production, including zero production, would indicate which type of cost relationship?

Freire Corp. produced 200,000 units this year, at a variable cost of $3 per unit. Its fixed costs are $120,000 per year. It sold all 200,000 units produced at $5 per unit. Its profits for the year were

Which of the following is typically not considered relevant to short-term managerial decisions?

The Hancock Corp. plans to sell its products for $100 each. Its variable cost per unit = $80, and its fixed costs for the year = $100,000. What level of sales will Hancock need to break even?

The type of cost relationship that exists when costs include both a fixed portion and a portion that varies in a straight-line manner with the level of a cost driver (within some relevant range of output) is:

The method of evaluating long-term investment decisions that involves computing the interest rate at which the present value of future inflows exactly equals the cost of making the investment is called the

The Gregor Corp. is considering making an investment of $100 million. It expects that at the end of two years, it will sell the investment for $121 million. There will be no other inflows or outflows. The internal rate of return on this investment would be

Ralph Corp. is considering whether to invest $10 million in the jam business or in the peanut butter business. If Ralph invests in jam, it will receive inflows for six different years of $2.5 million each. If it invests in peanut butter, it will receive inflows of $3 million each in years 1, 2, and 3, and $1 million each in years 4, 5, and 6. Which method of evaluating investments will consider the two different investment possibilities to be equally attractive?

The IMA's term to describe a situation where one resource can be substituted for another in production, without affecting the costs of the other resources used in production of the outputs, is

One reason companies use standard costs is to serve as a standard for judging performance.

The term for the cost relationship where costs remain the same for certain levels of output, and then jump to higher levels at higher levels of output, is a "semi-variable cost."

A graph showing the relation between the costs of outputs and the amount of a cost driver would resemble the steps of a staircase for a semi-variable cost relation.

Coda Corp. uses the high-low method to estimate how its costs vary with levels of production. For the year, its high production was 5,000 units in a day, at a cost of $180,000, and its low production was 4,000 units, at a cost of $160,000. Its variable cost per unit is

In general, when a company has high operating leverage, and its sales increase, profits increase proportionally faster than sales.

One advantage of the "top-down" method of budgeting is that it is often faster than participatory budgeting.

When a company is considering dropping a product line, it should consider such factors as externalities and reputational impacts, as well as directly measurable avoidable costs and revenues.

According to the IMA, managerial costing systems should help management to evaluate performance and learn from the results of operations.