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Pre-Test Questions
Pre-Test Questions
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Question 1
Since indirect cost cannot be conveniently or economically traced directly to a cost pool or
cost objective, the management accountant will:
Selected Answer:
Question 2
Cantrell Company has a product which it currently sells in the market for $50 per unit.
Cantrell has developed a new feature which, if added to the existing product, will allow
Cantrell to receive a price of $65 per unit. The cost of adding this new feature is $26,000 and
Cantrell expects to sell 1,600 unites over the next year. What is the effect on operating
income of adding the feature to the product?
Selected Answer:
Question 3
A manufacurer planned to use $82 of materials per unit produced, but in the most recent
period it actually used $80 of material per unit produced. During this same period, the
company planned to produce 1,200 units, but actually produced only 1,000 units. The
flexible-budget variance for materials is:
Selected Answer:
a. Impossible to determine
Question 4
Henry Ford was an early pioneer in the use of:
Selected Answer:
Question 5
b. target costing
The major problem with relevant cost determination is that it fails to recognize the:
Selected Answer:
B. Long-term
nature of
most productrelated
decisions.
Question 6
Electronic Component Company (ECC) is a producer of high-end video and music
equipment. ECC currently sells its top of the line "ECC" DVD player for a price of $250. It
costs ECC $210 to make the player. ECC's main competitor is coming to market with a new
DVD player that will sell for a price of $220. ECC feels that it must reduce its price to $220
in order to compete. The sales and marketing department of ECC believes the reduced price
will cause sales to increase by 15%. ECC currently sells 200,000 DVD players per year.
Irrespective of te competitor's price, what is ECC's required selling price if the target profit is
25% of sales and current costs cannot be reduced?
Selected Answer:
a. $280
Question 7
Which of the following does not represent a main focus of cost management information?
Selected Answer:
Question 8
Which of the four types of cost drivers - activity-based, volume-based, structural and
executional - are often best related to linear cost estimation methods?
Selected Answer:
Question 9
Data collected on the cost objects and cost drives for cost estimation must be:
Selected Answer:
Question 10
The following information pertains to Lee Corporation:
Sales (22,500 units)
$900,000
Fixed costs
$350,000