Name:______________________ACC202 – Management Accounting FundamentalsTest No. 3 – Chapter 7 & 8 (December - 2016)Multiple Choice Questions & Problem: (100 Points Total)Part I - Instructions: Circle the letter that corresponds to the correct answer for each of thefollowing multiple-choice questions. Show all calculationswhere required in order to receive credit for your answers.1.Which of the following is a drawback to absorption costing as opposed to variable costing?A)Management cannot accurately price products because non-manufacturing overhead is not applied to inventoryB)Managers can manipulate earnings by simply producing more than is sold in a periodC)Fixed overhead is simply expensed as a period cost without being properly considered as a cost of inventoryD)Absorption costing is not allowed for GAAP purposesE)There is no drawback: absorption costing is always preferable to variable costing2.Which of the following is a disadvantage of using variable costing?A)Inventory values tend to be overstated.B)Two sets of accounting records must be maintained.C)CVP relationships are more difficult to determine than under absorption costing.D)Per-customer or per-product contribution margin is obscured.E)All of the above3.The idea that a company will forego some benefit by choosing one option over another is called:A)Relevant CostsB)Sunk CostsC)Opportunity CostsD)Decision CostsE)None of the above4.Which of the following costs would be considered relevant when deciding between two products to produce?A)Level of direct materials requiredB)Additional investment in factory equipment for one productC)Amount of additional direct and indirect laborD)The opportunity cost associated with one or the other productE)All of the above1
