1) Cost bases that include fewer costs also have lower markups.
2) If U.S dollar strengthens against the Japanese Yen, Japanese producers selling goods
in U.S markets will have to increase the prices of products to recover the extra cost
arising from currency fluctuation.
3) The human resources systems is a part of the formal management control systems of
an organization.
4) Performance reports for responsibility centers are sometimes designed to change
managers’ behavior in the direction top managers desire, even if the reports decrease
controllability.
5) The customer perspective under the balanced scorecard approach would include
measures on cost reduction.
6) Relevant cash flows are expected future cash flows that differ among the alternative
uses of investment funds.
7) Fixed costs automatically increase or decrease with the level of activity within a
relevant range of activity.
8) An additional criticism of team-based compensation is that there can be problems
managing team members who are not productive contributors to a team’s success but
who, nevertheless, share in the team’s rewards.
9) The following information is for the Jeffries Corporation:
If the sales mix shifts to four units of Product A and one unit of Product B, then the
weighted-average contribution margin will ________.
A) increase per unit
B) stay the same
C) decrease per unit
D) either increase or stay the same
10) Wages paid to machine operators on an assembly line are classified as a ________.
A) direct material cost
B) direct manufacturing labor cost
C) manufacturing overhead cost
D) period cost
11) A $5,000 unfavorable flexible-budget variance indicates that ________.
A) the flexible-budget amount exceeded actual variable manufacturing overhead by
$5,000
B) the actual variable manufacturing overhead exceeded the flexible-budget amount by
$5,000
C) the flexible-budget amount exceeded standard variable manufacturing overhead by
$5,000
D) the standard variable manufacturing overhead exceeded the flexible-budget amount
by $5,000
12) Skizone Company’s 4-Variance Analysis:
Which of the following statements is true of Skizone’s overhead variances?
A) Budgeted variable overhead rate is higher than actual variable overhead rate.
B) Static fixed overhead amount is higher than flexible fixed overhead amount.
C) Budgeted variable overhead rate is lower than actual variable overhead rate.
D) Static fixed overhead amount is lower than flexible fixed overhead amount.
13) Which of the following journal entries can happen only under the production
method of recording byproducts?
A) Work in Process
Finished Goods – Byproduct
Accounts Payable
B) Cash or Accounts Receivable
Revenues – Main product
C) Byproduct Inventory
Finished Goods – Main product
Work in Process
D) Cash or Accounts Receivable
Revenues – Byproduct
14) LaCrosse Products has a budget of $900,000 in 2015 for prevention costs. If it
decides to automate a portion of its prevention activities, it will save $80,000 in
variable costs. The new method will require $40,000 in training costs and $100,000 in
annual equipment costs. Management is willing to adjust the budget for an amount up
to the cost of the new equipment. The budgeted production level is 150,000 units.
Appraisal costs for the year are budgeted at $600,000. The new prevention procedures
will save appraisal costs of $50,000. Internal failure costs average $15 per failed unit of
finished goods. The internal failure rate is expected to be 3% of all completed items.
The proposed changes will cut the internal failure rate by one-third. Internal failure
units are destroyed. External failure costs average $54 per failed unit. The company’s
average external failures average 3% of units sold. The new proposal will reduce this
rate by 50%. Assume all units produced are sold and there are no ending inventories.
How much will appraisal costs change assuming the new prevention methods reduce
material failures by 40% in the appraisal phase?
A) $140,000 decrease
B) $60,000 increase
C) $50,000 decrease
D) $22,500 decrease
15) Which item is an indication of competence under the Standards of Ethical Conduct?
A) Maintain an appropriate level of professional expertise by continually developing
knowledge and skills.
B) Keep information confidential except when disclosure is authorized or legally
required.
C) Abstain from engaging in or supporting any activity that might discredit the
profession.
D) Refrain from engaging in any conduct that would prejudice carrying out duties
ethically.
16) Alex is injured and rushed to Care Hospitals for treatment. He spent 45 minutes at
the hospital out of which he filled a form for 15 minutes, stood in the queue for 10
minutes, doctor treated him for 15 minutes, and payment time was 5 minutes. What is
the service cycle efficiency for his visit?
A) 18.50%
B) 11.11%
C) 66.67%
D) 33.33%
17) ________ is a philosophy in which management improves operations throughout
the value chain to deliver products and services that exceed customer expectations.
A) Cost-benefit approach
B) Customer focus
C) Customer relationship management
D) Total quality management
18) For 2011, Nichols, Inc., had sales of 150,000 units and production of 200,000 units.
Other information for the year included:
There was no beginning inventory.
Required:
a.Compute the ending finished goods inventory under both absorption and variable
costing.
b.Compute the cost of goods sold under both absorption and variable costing.
19) How many units would have to be sold to yield a target operating income of
$23,000, assuming variable costs are $25 per unit, total fixed costs are $2,000, and the
unit selling price is $30?
A) 4,800 units
B) 4,400 units
C) 5,000 units
D) 5,200 units
20) All else being equal, a reduction in selling price will ________.
A) increase contribution margin
B) reduce fixed costs
C) increase variable costs
D) reduce operating income
21) Period costs ________.
A) are treated as expenses in the period they are incurred
B) are directly traceable to products
C) are treated as expenses in the following period they are incurred
D) are also referred to as manufacturing overhead costs
22) The following information pertains to Hepburn Company:
Cash is collected from customers in the following manner:
Month of sale30%
Month following the sale70%
40% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
Labor costs are 20% of sales. Other operating costs are $30,000 per month (including
$8,000 of depreciation). Both of these are paid in the month incurred.
The cash balance on March 1 is $8,000. A minimum cash balance of $6,000 is required
at the end of the month. Money can be borrowed in multiples of $1,000.
How much cash will be collected from customers in March?
A) $94,000
B) $86,000
C) $100,000
D) $110,000
23) A company pursuing cost leadership may try to further analyze the change in
operating income even when the growth component is highly favorable. Why?
24) Explain the difference between the cumulative average-time learning model and the
incremental unit-time learning model.
25) Dulcet Foods, Inc., has the option to sell either of the variant. Which one is a better
alternative?
26) ‘Managers should be wary of using the same unitized fixed overhead costs for
planning and control purposes’. Do you agree with this argument? Give reasons for your
answer.
27) The president of the company, Gregory Peters, has come to you for help. Use the
following data to prepare a flexible budget for possible sales/production levels of
10,000, 11,000, and 12,000 units. Show the contribution margin at each activity level.
28) In order, list the five steps in the decision-making process.
29) Briefly explain each of the four levels of control. Why does a company need to
implement more than a diagnostic control system?
30) Explain why there is no production-volume variance for variable manufacturing
overhead costs.
31) Is it possible to have an active cost management program without an Enterprise
Resource Planning (ERP) System?
32) Why do managers prepare cost-hierarchy-based operating incomes statements?