Task Team of FUNdaMENTAL aCCOUNtIng School of Business. Sun Yat-sen University Lesson 14 Managerial Accounting Il: Application Self-Test . True and false Questions 1. Decision making is a distinct management activity that should be separated from budgeting, directing, and controlling activities. (F) 2. The concept of the relevant range does not apply to fixed costs. (F) 3. A cost formula may not be valid outside the relevant range of activity (T) 4. The high-low method is generally less accurate than the least-squares regression method for nalyzing the behaviour of mixed costs. ( T) 5. The high-low method should be preceded by a scatter graph plot. T) 6. Because the least-squares regression method is more accurate, a scattergraph plot is 7. The break-even point in units can be obtained by dividing total fixed expenses by the contribution margin ratio. (F) 8. For a given level of sales, a low contribution margin ratio will produce less net income than a high contribution margin ratio (T 9. The formula for the break-even point is the same as the formula to attain a given target profit for the special case where the target profit is zero. 10. The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars. (T) 11. The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements. (F 12. Budgets are used for planning rather than for control of operations. (F) 13. A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm. (D) 14. Zero-based budgeting requires managers to justify all costs of programs as if these programs were being proposed for the first time (T) 15. The material quantity variance is computed based on the quantity of all materials purchased during the period. (F) 16. Standard costs should generally be based on the actual costs of prior periods. (F) 17. Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance. ( F) 18. A flexible budget is"flexible"in the sense that a budget can be prepared for any level of activity, but once a budget is set the budget figures are not changed if actual activity later proves to be different than budgeted activity. (F) 19. In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common Il. Multiple Choice Questions 1. Management plans are expressed formally in which of the following documents?(C) A. Performance reportsTask Team of FUNDAMENTAL ACCOUNTING School of Business, Sun Yat-sen University Lesson 14 Managerial Accounting II: Application Self-Test I. True and False Questions 1. Decision making is a distinct management activity that should be separated from budgeting, directing, and controlling activities. (F) 2. The concept of the relevant range does not apply to fixed costs. (F) 3. A cost formula may not be valid outside the relevant range of activity. (T) 4. The high-low method is generally less accurate than the least-squares regression method for analyzing the behaviour of mixed costs. (T) 5. The high-low method should be preceded by a scatter graph plot. (T) 6. Because the least-squares regression method is more accurate, a scattergraph plot is unnecessary. (F) 7. The break-even point in units can be obtained by dividing total fixed expenses by the contribution margin ratio. (F) 8. For a given level of sales, a low contribution margin ratio will produce less net income than a high contribution margin ratio. (T) 9. The formula for the break-even point is the same as the formula to attain a given target profit for the special case where the target profit is zero. (T) 10. The margin of safety percentage is equal to the margin of safety in dollars divided by total sales in dollars. (T) 11. The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements. (F) 12. Budgets are used for planning rather than for control of operations. (F) 13. A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm. (T) 14. Zero-based budgeting requires managers to justify all costs of programs as if these programs were being proposed for the first time. (T) 15. The material quantity variance is computed based on the quantity of all materials purchased during the period. (F) 16. Standard costs should generally be based on the actual costs of prior periods. (F) 17. Purchase of poor quality materials will generally result in a favourable materials price variance and an unfavourable labour rate variance. (F) 18. A flexible budget is "flexible" in the sense that a budget can be prepared for any level of activity, but once a budget is set the budget figures are not changed if actual activity later proves to be different than budgeted activity. (F) 19. In responsibility accounting, each segment in an organization should be charged with the costs for which it is responsible and over which it has control plus its share of common organizational costs. (F) II. Multiple Choice Questions 1. Management plans are expressed formally in which of the following documents? (C) A. Performance reports