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Management Accounting: Concepts, Techniques & Controversial Issues
Chapter 2 Extra MC Solution

James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Chapter 2 | MAAW's Textbook Table of Contents

1. The traditional inventory valuation methods include

e. absorption costing and direct costing.

2. The traditional cost accumulation methods include

d. job order costing and process costing.

3. Normal historical costing must include

a. overhead allocations.

4. In direct or variable costing,

b. all variable manufacturing costs are assigned to product inventories.

5. Contribution margin is equal to

c. Sales less variable cost of goods sold and variable selling & administrative expenses.

6. Which of the following does not represent a product cost?

d. Abnormal spoilage.

7. Four types of inventory valuation methods include

b. Full absorption, direct, throughput and activity based.

8. Three types of input measurement bases for a cost accounting system include

d. Pure historical, normal historical, and standard.

9. Which of the following groups include only cost accumulation methods?

c. Process, backflush and job order.

10. Full Absorption costing is

c. an inventory valuation method.

11. A manufacturing plant where orders are processed to customer specifications would most likely use

b. Job order costing.

12. If cost of goods sold can be recorded at the time of sale, then the firm must be using

e. Either a or d.

13. Activity costing refers to a product costing method that

b. treats all costs as variable and allocates them to products on the basis of the transactions that drive the costs.

14. Which of the following methods indicate whether both fixed and variable manufacturing costs are capitalized in the inventory?

b. Either absorption costing or direct (or variable) costing.

15. Which of the following methods indicate whether manufacturing costs are accumulated by department or by customer?

c. Either job order costing or process costing.

16. Which of the following methods represent cost flow assumptions?

e. FIFO and weighted average.

17. Which of the groups below tend to need information on a more timely basis, i.e., more often?

b. Plant, production and operating managers.

18. If the dollar amount of work in process inventory increases during a period, then total manufacturing costs will be

a. greater than cost of goods manufactured.

19. If the dollar amounts of the work in process and finished goods inventories do not change during a period, we would expect total manufacturing cost to be

c. equal to cost of goods sold.

20. Cost of goods manufactured based on absorption costing is

d. 480

21. Cost of goods sold based on absorption costing is

c. 500

22. Gross profit is

a. 250

23. Net income before tax based on absorption costing is

a. 25

24. Cost of goods manufactured based on direct costing is

a. 360

25. Cost of goods sold based on direct costing is

b. 375

26. Manufacturing margin is

b. 375

27. Contribution margin is

d. 250

28. Net income before tax based on direct costing is

c. 32

29. Based on the information given in this problem, the following appears to have occurred.

b. The company produced less than it sold.

30. Gulf Company’s Gross profit is

d. 220

31. The Company’s Net income based on absorption costing is

d. -80

32. Gulf Company’s total Contribution margin is

c. 310

33. The Company’s Net income based on direct or variable costing is

a. -90

34. Based on the three generalizations associated with direct and absorption costing net income comparisons,

b. Gulf Company appears to have sold less output than it produced.

35. Max Company's gross profit is

d. 305,000

36. Max Company's contribution margin is

e. 250,000

37. Max Company's Net income under direct costing is

b. $5,000 < net income under absorption costing.

38. Max Company's financial results tend to indicate that

a. Max Company produced more products than it sold.

39. Proper matching is not obtained with direct costing because

a. fixed manufacturing costs are not accounted for in accordance with GAAP.

40. When using absorption costing, product costs are the same as

d. a and b.

41. Which of the following statements is conceptually incorrect?

d. All assets represent unexpired costs.

42. When total manufacturing costs are greater than the cost of goods manufactured

c. the inventory of work in process increases.

43. If total manufacturing costs are equal to the cost of goods manufactured and greater than cost of goods sold

a. the inventory of finished goods increases.

44. Which of the following methods provides the greatest amount of incentive for management to produce more inventory than required to satisfy customer demand.

b. absorption costing.

45. The cost of goods manufactured based on absorption costing is

c. 1,420

46. The cost of goods sold for absorption costing is

b. 1,560

47. Before tax net income for absorption costing is

d. 1,040

48. The cost of goods sold based on direct costing is

d. 1,330

49. Contribution margin is

c. 1,370

50. Before tax net income for direct costing is

b. 1,070

51. Based on the information given in this problem, the following appears to have occurred.

b. The company produced less than it sold.

Chapter 2 Extra MC Questions