Question 1

1. Relevant costs are:

   	A.	all future costs.
   	B.	all future costs that differ between alternatives.
   	C.	all past cost.
   	D.	all costs.

2 points

Question 2

1. When deciding to make or buy a product, the only relevant costs are differential costs.

   True

   False

2 points

Question 3

1. Future costs and revenues that differ between alternatives are relevant to a decision regarding those alternatives.

   True

   False

2 points

Question 4

1. In the contribution margin income statement, contribution margin is equal to net revenues less variable costs of the units sold.

   True

   False

2 points

Question 5

1. The Casey Company produces two joint products. At the split-off point, product A has a sales value of $8 per unit, while product B can be sold for $10 per unit. After further processing, which costs $5 and $9, respectively, product A can be sold for $12 and product B for $22 per unit. Which, if any, of the two products should be processed further?

   	A.	Product B
   	B.	Product A
   	C.	Product A and B
   	D.	Neither product A or B

2 points

Question 6

1. Discretionary fixed costs are subject to management control from year to year.

   True

   False

2 points

Question 7

1. When using differential analysis to decide whether to eliminate certain products, segments, or customers, costs must be reclassified into those that would be eliminated or changed by the elimination and those that would not.

   True

   False

2 points

Question 8

1. Many managers prefer a contribution margin income statement for management reporting purposes.

   True

   False

2 points

Question 9

1. The Sidney Company faces a make-or-buy decision concerning a part it manufactures in-house. The product can be manufactured internally with materials costs of $24 per unit, labor of $9, fixed overhead of $6.50, and variable overhead of $6. At what dollar amount would Sidney be indifferent to making or buying this part if the fixed overhead costs would be unaffected?

   	A.	$33.00
   	B.	$43.50
   	C.	$24.00
   	D.	$39.00

2 points

Question 10

1. Variable costs are relevant in deciding whether or not to drop a product.

   True

   False

2 points

Question 11

1. A company normally will not add a product with a negative contribution margin.

   True

   False

2 points

Question 12

1. When differential analysis is applied to pricing decisions, the price selected should be the price that will result in the greatest TOTAL contribution margin.

   True

   False

2 points

Question 13

1. Joint costs are:

   	A.	costs incurred after the point where joint products split off from each other.
   	B.	sunk costs in deciding whether to process a joint product further.
   	C.	Two of the other answers are correct.
   	D.	All of the other answers are incorrect.

2 points

Question 14

1. Future costs that do not differ between alternatives do not need to be included in the analysis for proper decisions to be made.

   True

   False

2 points

Question 15

1. In the contribution margin statement:

   	A.	fixed costs are deducted to determine contribution margin.
   	B.	fixed costs are deducted to determine gross margin.
   	C.	variable selling costs are deducted to determine contribution margin.
   	D.	All of the other answers are correct.

2 points

Question 16

1. The goal sought in the preparation of a flexible budget is to indicate the costs expected to be incurred at varying levels of output.

   True

   False

2 points

Question 17

1. Financial budgets do not aid management in planning.

   True

   False

2 points

Question 18

1. Accounting data related to the past are often used in the preparation of budgets, which are plans for the future.

   True

   False

2 points

Question 19

1. Participatory budgeting allows employees to feel that they helped prepare the budget, thus providing more incentive for them to use it effectively.

   True

   False

2 points

Question 20

1. Budgets are:

   	A.	usually not very reliable for evaluation purposes.
   	B.	usually not adjusted for future economic conditions.
   	C.	based only on the future, ignoring past experience.
   	D.	based on past experience adjusted for future expectations.

2 points

Question 21

1. The use of the master budget allows management to appraise new policies before they are put into effect.

   True

   False

2 points

Question 22

1. Sales for next quarter are budgeted at 100,000 units. Finished goods inventory at the end of this quarter is 20,000 units. Planned production for next quarter is 140,000 units. What will be the budgeted finished goods inventory at the end of the next quarter?

   	A.	50,000 units
   	B.	20,000 units
   	C.	40,000 units
   	D.	60,000 units

2 points

Question 23

1. The more uncertain the future, the less the desirability of budgeting.

   True

   False

2 points

Question 24

1. The cornerstone of the budgeting process is the sales budget because:

   	A.	information about future sales is the most readily available.
   	B.	it is the most complex.
   	C.	all other budgets flow from the determination of future sales units and dollars.
   	D.	the sales force must gather their budget's data from their customers.

2 points

Question 25

1. Budgets are used in performance evaluation.

   True

   False

2 points

Question 26

1. Zero-based budgeting requires that managers start budgeting at point zero and:

   	A.	budget only for changes from the past period's budget.
   	B.	justify every dollar that will appear in the budget.
   	C.	budget only for major items of expense.
   	D.	All of the other answers are incorrect.

2 points

Question 27

1. Zero-based budgeting requires that managers start budgeting at point zero.

   True

   False

2 points

Question 28

1. The projected income statement is typically:

   	A.	not prepared.
   	B.	prepared after the projected balance sheet.
   	C.	prepared prior to the projected balance sheet.
   	D.	All of the other answers are incorrect.

2 points

Question 29

1. Periodic budget reports generally compare actual data with budgeted data.

   True

   False

2 points

Question 30

1. Participatory budgeting:

   	A.	involves employees at various levels in the organization.
   	B.	uses information provided by employees.
   	C.	can help motivate employees to achieve the organization's goals.
   	D.	All of the other answers are correct.