Introduction To Management Accounting 16th Edition By Horngren-Test Bank

Test Bank For Guide To Management Accounting Sixteenth Edition By Horngren

ISBN-10: 013305974X , ISBN-13: 9780133059748

Chapter 3 Assessment of Value Behavior

3.1 Interrogations

1) Executives can influence the level of fixed and variable expenses in a corporation through determinations concerning ________.

A) product characteristics

B) operational extent

C) quantity of sophisticated technology equipment utilized for manufacturing products

D) all of the above

Response: D

Difficulty: 1

LO: 3-1

AACSB: Reflective thinking skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

2) The use of sophisticated technology equipment to produce goods instead of highly skilled labor usually leads to ________.

A) increased discretionary fixed expenses

B) increased discretionary variable expenses

C) lower risk

D) increased operating leverage

Response: D

Difficulty: 2

LO: 3-1

AACSB: Reflective thinking skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

3) Which of the subsequent expenses could be terminated in the short run?

A) salary of CEO of firm

B) mortgage payment on factory building

C) lease payments on two-year lease for rented equipment in factory

D) management consulting services engaged to change firm logo

Response: D

Difficulty: 2

LO: 3-1

AACSB: Reflective thinking skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

4) A clinic introduces a new extension and necessitates to acquire some new equipment for the extension. The cost driver for the equipment is patient-days per month. The new extension will raise the patient-days per month beyond the relevant range. What kind of equipment expenses will alter due to the extension?

A) discretionary fixed expenses

B) discretionary variable expenses

C) committed fixed expenses

D) committed variable expenses

Response: C

Difficulty: 2

LO: 3-1

AACSB: Reflective thinking skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

5) Executives can remove ________ expenses solely for a given year in dire circumstances such as a severe recession. Nevertheless, executives cannot eliminate ________ expenses.

A) discretionary variable expenses; committed variable expenses

B) discretionary fixed expenses; committed fixed expenses

C) discretionary variable expenses; committed fixed expenses

D) committed fixed expenses; committed variable expenses

Response: B

Difficulty: 2

LO: 3-1

AACSB: Reflective thinking skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

6) If a business eradicates all discretionary expenses due to a severe recession, this could ________.

A) ensure that the company records a net loss

B) ensure that the company records a net profit

C) reestablish a corporation’s competitive position in an industry

D) impair a corporation’s competitive position in an industry

Response: D

Difficulty: 2

LO: 3-1

AACSB: Reflective thinking skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

7) Many organizations utilize a linear association with a single cost driver to explain a cost even though the cost may have multiple cost drivers. Why?

A) This method is simpler and more economical.

B) The cost of creating a more complicated function is higher than the benefit.

C) Cost estimates from the simple function are accurate enough for most decisions.

D) All of the above

Response: D

Difficulty: 2

LO: 3-1

AACSB: Analytical skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

8) It may be challenging to trace costs to services or products if the costs are ________.

A) volume-driven

B) driven by activities directly linked to quantity

C) driven by multiple cost drivers

D) none of the above

Response: C

Difficulty: 2

LO: 3-1

AACSB: Analytical skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

9) Simon Inc. currently produces 110,000 units at a cost of $440,000. The cost is variable. Next year Simon Inc. anticipates producing 115,000 units. Simon’s relevant range for production is 100,000 to 120,000 units. If 115,000 units are produced next year, what is the expected variable cost?

A) $420,000

B) $430,000

C) $440,000

D) $460,000

Response: D

Difficulty: 1

LO: 3-1

AACSB: Analytical skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses

10) Donahue currently produces 120,000 units at a cost of $400,000. Of the $400,000 cost, $200,000 is a fixed cost. Next year Donahue anticipates producing 145,000 units. Donahue’s relevant range for production activities is 100,000 to 150,000 units. If 145,000 units are produced next year, what is the expected fixed cost for next year?

A) $200,000

B) $241,667

C) $441,667

D) $483,333

Response: A

Difficulty: 2

LO: 3-1

AACSB: Analytical skills

Learning Outcome: Define and differentiate between variable, fixed and mixed expenses