A disadvantage of decentralization is that decision making is spread throughout the
organization. This is a disadvantage because
a. Managers tend to focus on their own units and lose contact with others in the
organization.
b. When communication is reduced, the potential for sharing ideas throughout the
organization is reduced with it.
c. Lower-level managers may not fully understand the ramifications of their localized
decisions on the organization as a whole.
d. All of these answer choices are correct.
For each of the following measures that could be incorporated into a balanced
scorecard, identify which of the four balanced scorecard perspectives it would most
likely belong to.
a.New employee training session
b.Number of positive responses received from customer surveys
c.Number of customer complaints handled by phone during month
d.Gross profit
e.Number of new products introduced during past year
f.Number of defective units identified in quality control division
g.Training on new equipment purchased
h.Number of deliveries made within proscribed time frame
i.Professional development seminars conducted for sales staff
j.Recognized by major supplier as Customer of the Year
The segment margin income statement excludes
a. All allocated costs in the calculation of the segment margin.
b. All fixed costs.
c. All period costs.
d. Manufacturing overhead.
Before a balanced scorecard can be developed, managers must
a. Be clear about the strategy they are trying to achieve.
b. Understand the cause-and-effect relationship between various measures.
c. Both Be clear about the strategy they are trying to achieve and Understand the
cause-and-effect relationship between various measures.
d. Neither Be clear about the strategy they are trying to achieve nor Understand the
cause-and-effect relationship between various measures.
The income statement for Otto Construction Company appear below:
Average total assets total $240,000. Otto’s income tax rate is 25%.
What is the times interest earned ratio?
a. 2.38
b. 3.13
c. 3.16
d. 4.17
Trail Industries is preparing its cash budget for the third quarter of the current year.
Sales for the third quarter are budgeted at $870,000 ($290,000 per month). Sales are
80% cash, with the remaining 20% on credit which is collected in the month following
the month of sale. On June 30, the cash balance is $48,000, and the Accounts
Receivable (all related to June sales) balance is $51,000. Operating expenses for the
quarter are budgeted at $464,000, which includes $18,000 of depreciation. Cash
expenses are paid in the month incurred. Cash purchases for merchandise inventory are
budgeted at $392,000 for the quarter. What is the projected cash balance at the end of
the third quarter?
a. $113,000
b. $73,000
c. $4,000
d. $131,000
If the direct materials purchased is $200 per unit while the standard price for direct
materials is $180, and the total direct material used is 1,000 units while the standard
direct materials allowed for actual production is 980 units,
a. The direct materials quantity variance will be favorable
b. The direct materials quantity variance will be unfavorable
c. The direct materials price variance will be favorable
d. There will be no direct materials price variance
A disadvantage of evaluating managers ‘ performance based on ROI is that it can lead to
undesirable managerial actions. Residual income can overcome many of the problems
of ROI.
Required:
a. Define residual income and explain how it is calculated.
b. What are the shortcomings of residual income? Give an example of when ROI is a
better measure than residual income.
Which of the following is not another term companies use to refer to manufacturing
overhead?
a. Factory overhead
b. Manufacturing administration
c. Factory burden
d. Manufacturing burden
Which of the following would be considered a use of cash on the statement of cash
flows?
a. Purchase of equipment
b. Sale of Dillard’s stock held as an investment
c. Issuance of corporate stock
d. Receipt of interest on savings account
Knowing the breakeven point helps managers evaluate
a. The profitability of various business opportunities.
b. The desirability of various business opportunities.
c. The profitability and desirability of various business opportunities.
d. Neither the profitability nor the desirability of various business opportunities.
Brandi’s Bakery sells strawberry cakes for $15 each. Last month Brandi sold 1,200
cakes. Variable costs were $5 per cake and fixed costs totaled $3,000. This month,
Brandi has decided to spend $1,000 to sponsor a team for a Relay for Life golf
tournament. She believes that the additional advertising from the sponsorship will
generate 10% more sales than last month. What will be this month’s operating income?
a. $8,000
b. $9,000
c. $9,200
d. $10,200
All public companies that are traded on a stock exchange and governed by the
Securities and Exchange Commission must prepare financial statements following
a.Accounting principles set by the Federal Trade Commission.
b.Generally accepted accounting principles.
c.Generally appropriate accounting standards.
d.Standards set by the Accounting Principles Board.
Which of the following is not a step in the supply chain?
a.Put inventory into production as soon as it arrives
b.Deliver the final products to customers through a distribution system
c.Procure raw materials
d.Transform raw materials into intermediate goods and then into final products
Which of the following is not a characteristic of a top-down budget environment?
a. Executive management creates the budget.
b. This approach is referred to as participative budgeting.
c. The budget is pushed down through the organization.
d. All of these answer choices are characteristics of a top-down budget environment.
Gross profit on a pro-forma income statement is calculated as
a. Budgeted sales revenue minus contribution margin.
b. Budgeted sales revenue minus budgeted cost of goods sold.
c. Budgeted sales revenue minus product cost and period cost.
d. None of these answer choices are correct.