CHAPTER 1: INTRODUCTION TO COST ACCOUNTING

Test Bank for Principles of Cost Accounting 17e Edward Vanderbeck

CHAPTER 1: INTRODUCTION TO COST ACCOUNTING

• The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities

is a:

• Manufacturer.
• Merchandiser.
• Service business.
• Not-for-profit service agency.

ANSWER: a

RATIONALE: The business entity that converts purchased raw materials into finished goods by using labor, technology, and facilities is a manufacturer.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Business Applications OTHER: Bloom's: Remembering

2. The business entity that purchases finished goods for resale is a:

• Manufacturer.
• Merchandiser.
• Service business.
• Wholesaler.

ANSWER: b

RATIONALE: The business entity that purchases finished goods for resale is a merchandiser.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Business Applications OTHER: Bloom's: Remembering

• The type of merchandiser who purchases goods from the producer and sells them to retailers that sell them to the

consumer is a:

• Manufacturer.
• Retailer.
• Wholesaler.
• Service business.

ANSWER: c

RATIONALE: A wholesaler purchases goods from the producer and sells them to the retailer. 1 / 4

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Business Applications OTHER: Bloom's: Remembering

4. Examples of service businesses include:

• Airlines, accountants, and hair stylists.
• Department stores, poster shops, and wholesalers.
• Aircraft producers, home builders, and machine tool makers.
• None of these are correct.

ANSWER: a

RATIONALE: Examples of service businesses include airlines, architects, and hair stylists.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS: AACSB Reflective Thinking

ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA-Business Applications OTHER: Bloom's: Understanding

5. ISO 9000 is a set of international standards for:

• determining the selling price of a product.
• cost control.
• quality management.
• delivering product,

ANSWER: c

RATIONALE: ISO 9000 is a set of international standards for quality management.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: PRIN.EDWA.16.1 - Introduction

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Strategic Planning OTHER: Bloom's: Remembering

• Unit cost information is important for making all of the following marketing decisions except:
• Determining the selling price of a product.
• Bidding on contracts.
• Determining the amount to spend on social media to promote the product.
• Determining the amount of profit that each product earns.

ANSWER: c

RATIONALE: Unit cost information is used in determining selling price, bidding on contracts and determining product profitability, but would not have a bearing on determining how 2 / 4

much the product would need to be advertised.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Strategic Marketing

TOPICS: Uses of Cost Accounting Information

OTHER: Bloom's: Remembering

• The process of establishing objectives or goals for the firm and determining the means by which they will be met is:
• controlling.
• analyzing profitability.
• planning.
• assigning responsibility.

ANSWER: c

RATIONALE: The process of establishing goals and objectives for a firm is planning. Controlling, analyzing profitability and assigning responsibility are functions that take place after the planning process to determine whether or how successfully goals have been obtained.

POINTS: 1

DIFFICULTY: Easy

LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Budget Preparation

TOPICS: Uses of Cost Accounting Information

OTHER: Bloom's: Remembering

• Effective control of a company's operations is achieved through all of the following except:
• periodically measuring and comparing company results.
• assigning responsibility for costs to employees responsible for those costs.
• constantly monitoring employees to ensure they do exactly as they are told.
• taking necessary corrective action when variances suggest it is needed.

ANSWER: c

RATIONALE: While periodically measuring and comparing company results, assigning responsibility for those results to employees and taking necessary corrective action are all part of control; it does not include constantly monitoring employees to make sure they are following directions.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS: AACSB Analytic

ACCT.AICPA.FN.03 - Measurement BUSPROG.03 - Analytic IMA-Performance Measurement

TOPICS: Uses of Cost Accounting Information

OTHER: Bloom's: Remembering

• / 4

• Dan Louis is the supervisor of the Assembly Department of Wiggerman Corporation. He has control over and is

responsible for manufacturing costs traced to the department. The Assembly Department is an example of a(n):

• cost center.
• inventory center.
• supervised work center.
• worker’s center.

ANSWER: a

RATIONALE: The criteria for a cost center are 1) a reasonable basis on which manufacturing costs may be traced and 2) a person who has control over and is accountable for many of the costs charged to that center.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS: AACSB Reflective Thinking

ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA-Performance Measurement

TOPICS: Uses of Cost Accounting Information

OTHER: Bloom's: Understanding

• Which of the following costs would be least likely to appear on a responsibility accounting report for the supervisor of

an assembly line in a large manufacturing situation?

• Direct labor
• Indirect materials
• Selling expenses
• Repairs and maintenance

ANSWER: c

RATIONALE: Selling expenses would be least likely to appear on a performance report, because the supervisor would not have responsibility for the sales function.

POINTS: 1

DIFFICULTY: Moderate

LEARNING OBJECTIVES: PRIN.EDWA.16.2 - LO1: Explain the uses of cost accounting information

ACCREDITING STANDARDS: AACSB Reflective Thinking

ACCT.AICPA.FN.03 - Measurement BUSPROG.06 - Reflective Thinking IMA-Performance Measurement

TOPICS: Uses of Cost Accounting Information

OTHER: Bloom's: Understanding

• Which of the following costs would be least likely to appear on a responsibility accounting report for the supervisor of

an assembly line in a large manufacturing situation?

• Direct labor
• Supervisor's salary
• Materials
• Repairs and maintenance

ANSWER: b

RATIONALE: A supervisor's salary would be least likely to appear on a performance report, because that person's salary is determined by the company and is not controllable by the supervisor.

POINTS: 1

• / 4