Finance for Non-Finance Managers Cost Management 5

Question 1

Which inventory costing method typically results in the highest net income during a period of rising prices?

Accepted Answer

FIFO

Answer

FIFO assigns older (lower) costs to cost of goods sold during inflation, leaving newer higher-cost inventory on the balance sheet and reporting higher income.

Question 2

A company has sales of $500,000, variable costs of $300,000, and fixed costs of $120,000. What is the contribution margin ratio?

Accepted Answer

40%

Answer

Contribution margin = $500,000 - $300,000 = $200,000; CM ratio = $200,000 / $500,000 = 40%.

Question 3

Life-cycle costing considers costs:

Accepted Answer

From product design through disposal

Answer

Life-cycle costing tracks all costs a product incurs from initial R&D and design through end-of-life disposal.

Question 4

Which variance would alert a manager that workers took longer than standard to complete production?

Accepted Answer

Labor efficiency variance

Answer

The labor efficiency variance compares actual hours worked to standard hours allowed, highlighting time overruns.

Question 5

Joint costs in a manufacturing process are costs incurred:

Accepted Answer

Before multiple products separate at the split-off point

Answer

Joint costs are shared production costs incurred up to the split-off point where distinct products first become identifiable.

Finance for Non-Finance Managers Practice Test

Finance for Non-Finance Managers Practice Test

Finance for Non-Finance Managers Cost Management 5