1) The post-sale service and disposal cycle is distinct from the manufacturing cycle.
2) For some employees, pay may not be a motivator.
3) Prepackaged ABC software packages must be customized to the products, services
and related activities of the company.
4) Many organizations start the planning stage by re-affirming or updating its mission
statement.
5) Time-driven ABC enables the model to reflect how particular order and activity
characteristics cause processing times to vary.
6) Opportunity costs are implicit costs.
7) When opportunity costs exist, they are always relevant.
8) The first step in designing an activity-based cost system is to develop an activity
dictionary.
9) Sometimes qualitative factors are the most important factors in make-or-buy
decisions.
10) Additional costs to serve and retain the customer in year t is represented in the
customer lifetime value equation as ct.
11) Activity-based cost systems use cost centers to accumulate costs.
12) For the segment manager to be properly evaluated, common costs should NOT be
allocated to the various segments, even if an arbitrary allocation is required.
13) Careful attention to motivation is a key step for the organization and its employees
to align their respective goals.
14) Management accounting is subject to the rules formulated by standard setters such
as the Financial Accounting Standards Board (FASB).
15) Kaizen costing assumes engineers and managers possess the best knowledge to
improve processes and reduce costs.
16) Monitoring focuses on measuring employee performance against stated objectives.
17) The organization generates information that helps decision makers assess whether
the MACS is achieving its objectives.
18) According to the total life cycle concept, minimizing the cost of ownership of a
product over its useful life means:
A) maximizing the purchase price
B) considering the initial purchase price as well as the costs of operating, maintaining
and disposing of the product
C) including costs incurred in the research development and engineering phase
D) full costing
19) Although planners update or revise the budgets during the period, ________ is
typically performed once per year.
A) zero-based budgeting
B) periodic budgeting
C) incremental budgeting
D) continuous budgeting
20) In the Balanced Scorecard, operating income and return on investment
A) indicate whether the company’s strategy and its implementation are increasing
shareholders’ value
B) are learning and growth measures
C) are more important process measures than market share
D) are direct measures of customer satisfaction
21) ________ include an expected cash flow statement, the projected balance sheet, and
the projected income statement.
A) Annual reports
B) Financial budgets
C) Operating budgets
D) Capital budgets
22) The management accountant for the Martino Organics has prepared the following
segmented income statement for the most current year.
Assume that the Sundries department has been discontinued and long-term capacity of
the company has had time to adjust. The projected long-term effect of this action on
annual corporate profits would be a decrease of:
A) $40,000
B) $32,000
C) $29,000
D) $22,000
23) Overcosting a particular product may result in:
A) gain of market share for the product
B) higher profits per unit for the product
C) operating efficiencies
D) overstating total costs of all the products
24) Transaction drivers count how often an activity is performed.
Duration drivers represent the amount of time required to perform an activity.
Intensity drivers directly charge for the resources used each time an activity is
performed.
Also, a weighted index approach might be used to simulate an intensity driver.
a. Give an example of each of the four types of drivers described above.
b. Explain when each of the four types of drivers should be used.
c. For each of the first three types of drivers, explain the assumptions about the activity
and the object of the activity.
d. For each of the following activities identify a transaction driver, a duration driver,
and an intensity driver.
Machine maintenance
Machine setup
Quality control
Material ordering
Production scheduling
Warehouse expense
Engineering design
25) Which of the following minimize the risks of outsourcing the production of a part?
A) the use of short-term contracts that specify price
B) the responsibility for on-time delivery is now the responsibility of the supplier
C) building close relationships with the supplier
D) All of the above minimize the risks of outsourcing
26) Financial accounting information:
A) provides a signal that something is wrong
B) identifies what is wrong
C) explains what is wrong
D) simply summarizes information but gives no indication that anything is wrong
27) For decision making, a listing of the relevant costs:
A) will help the decision maker concentrate on the pertinent data
B) will only include future costs
C) will only include costs that differ among the decision alternatives
D) should include all of the above
28) Contribution margin equals revenues minus:
A) product costs
B) period costs
C) variable costs
D) fixed costs
29) The theory of constraints:
A) emphasizes long-term optimization
B) maintains that carefully managing production bottlenecks will increase operating
income
C) helps managers make special one-time decisions
D) suggests that some component parts should be outsourced
30) Identify the BEST description of the Balanced Scorecard’s learning and growth
perspective. To achieve our firm’s vision and strategy:
A) How do we obtain a greater market share?
B) What do our noncustomers consider to be most important?
C) What new processes do our customers value?
D) How do we identify the objectives for the people, information technology, and
organizational alignment that will drive improvement in the various process objectives?
31) Which of the following could be used to measure the objective of reducing product
development cycle time?
A) potential value of projects in the project pipeline
B) number of new projects launched based on customer input
C) number of projects delivered on time
D) number of failures or returns of new products from customers
32) Umberger Manufacturing, Inc., is considering reorganizing its plant into
manufacturing cells. The following estimates have been prepared to evaluate the
benefits from the reorganization:
Inventory carrying costs are estimated to be 10% per year.
As a result of switching to a cellular manufacturing operation, total benefits are
projected to increase annually by:
A) $216,500
B) $200,000
C) $183,500
D) $176,500
33) In a manufacturing environment, an indirect cost such as ________ would usually
be allocated to a cost object.
A) utilities
B) raw materials
C) labor of employees who operate manufacturing equipment
D) labor of administrative secretaries
34) When discussing the roles of budgets, a control role includes:
A) identifying organizational objectives and short-term goals
B) developing long-term strategies and short-term plans
C) measuring and assessing performance against budgeted amounts
D) developing the master budget
35) Which of the following best represents the Act step in the Plan-Do-Check-Act
(PDCA) cycle?
A) Take actions to lower costs, change resource allocations, improve the quality, cycle
time and flexibility of processes, modify the product mix, change customer
relationships, and redesign and introduce new products
B) Measure and monitor ongoing performance and take short-term actions based on the
measured performance
C) Define the organization’s purpose and select the focus and scope of its strategy
D) Implement the chosen course of action
36) The actual information pertains to the month of June. As part of the budgeting
process, Petrified Products Company developed the following master budget for June.
The manager, Pete, is in the process of preparing the flexible budget and understanding
the results.
The flexible budget variance for flexible (variable) costs is:
A) $32,000 unfavorable
B) $120,000 unfavorable
C) $32,000 favorable
D) $120,000 favorable
37) Blitzer Enterprises has identified three cost pools and three corresponding cost
drivers to allocate overhead costs. The following estimates are provided for the coming
year:
The accounting records show the Gergen Job consumed the following resources:
If Blitzer Enterprises uses the three activity cost pools to allocate overhead costs, what
are the activity-cost driver rates for the supervision of direct labor, machine
maintenance, and facility rent, respectively?
A) $1.20 per direct labor hour, $0.50 per machine hour, $3.60 per sq ft
B) $2.50 per direct labor hour, $0.50 per machine hour, $1.00 per sq ft
C) $0.80 per direct labor hour, $0.10 per machine hour, $2.40 per sq ft
D) $0.60 per direct labor hour, $0.40 per machine hour, $2.60 per sq ft
38) EJL Herbal Remedies sells several products for an average price of $17 per unit.
Average variable costs per unit are as follows:
EJL’s annual fixed costs total $82,500.
The contribution margin per unit is:
A) $7.50
B) $10.50
C) $12
D) $14
39) A decentralized organization does all the following EXCEPT it:
A) encourages local success rather than organizational success
B) trains employees in skills needed for decision making
C) assigns responsibility to front-line employees
D) adapts to the local business environment
40) Budgeting does NOT require:
A) knowledge of the organization’s activities
B) specialized expertise in financial management and control
C) knowledge about how activities affect costs
D) the ability to see how the organization’s different activities fit together
41) Based on the following company data, what is the net promoter score?
A) 2.18%
B) 38.12%
C) 12.82%
D) 5.88%
42) Customer financial performance:
A) are best measured with financial metrics
B) are reflected on the balanced scorecard as part of the learning and growth
perspective
C) can be improved by offering special features, and highly responsive customer
service
D) is improved by focusing on a combination of financial and nonfinancial metrics
43) To promote ethical decision making:
A) consequences of unethical behavior should be left undefined to allow for flexibility
B) a statement of the organization’s code of ethics should be communicated to each
employee
C) violators of the code of ethics should be allowed several warnings before severe
consequences are imposed
D) management should be excused from adhering to the organization’s ethical code of
conduct when it conflicts with personal values
44) To the extent that an ethical hierarchy exists, ________ have the least authority.
A) societal norms
B) groups norms
C) personal norms
D) legal rules
45) Aero Company has implemented a gain sharing compensation plan for its
production employees. The plan is a Scanlon plan and the base period payroll costs are
$10,000. The value of production in the base period was $100,000. The plan calls for
labor savings to be added to, or excess labor costs to be deducted from, the bonus pool
each quarter. The payroll costs and value of production in each quarter of the current
year were:
The base ratio is:
A) 0.09
B) 0.10
C) 0.105
D) None of the above is correct
46) In compensation plans, profit sharing:
A) is a group incentive compensation plan
B) is focused on projected long-term performance
C) must distribute an equal share of the profits to each employee
D) All of the above are correct
47) Wisconsin Electronics has received an order for 1,000 specially designed TV/VCR
combinations. The following standards were compiled for this order:
Assume the company adds a 10% markup to arrive at a selling price. The bid price for
this order totals:
A) $203,500
B) $185,000
C) $115,500
D) $80,000
48) Community Manufacturing Inc. developed the following standard costs for direct
material and direct labor for one of their major products, the 30-gallon heavy-duty
plastic container.
During May, Community produced and sold 10,000 containers using 2,200 pounds of
direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an
average wage of $14.75 per hour.
May’s direct labor efficiency variance was:
A) $750.00 unfavorable
B) $262.50 favorable
C) $487.50 favorable
D) indeterminable using the above information
49) (CPA adapted) The strategy MOST LIKELY to reduce the break-even point would
be to:
A) increase both the capacity-related (fixed) costs and the contribution margin per unit
B) decrease both the capacity-related (fixed) costs and the contribution margin per unit
C) decrease the capacity-related (fixed) costs and increase the contribution margin per
unit
D) increase the capacity-related (fixed) costs and decrease the contribution margin per
unit
50) When a manager’s and employee’s goals are aligned with organizational goals, it is
referred to as:
A) a diagnostic control system
B) the intensity factor
C) goal congruence
D) monitoring
51) A daily report on the number of quality units assembled by each employee is
information MOST useful to:
A) a front-line assembly worker
B) the accounting department
C) the chief executive officer
D) the personnel department
52) A flexible budget variance is $1,500 favorable for unit-related costs. This indicates
that:
A) actual costs were $1,500 more than the master budget
B) actual costs were $1,500 less than standard for the achieved level of activity
C) the sum of the planning and efficiency variances totals $1,500
D) actual costs were $1,500 less than for the planned level of activity
53) ________ occur(s) when a superior simply tells subordinates what their budget will
be.
A) Traditional budgeting
B) Stretch goals
C) Beyond budgeting approach
D) Budget slack
54) Determining realistic, practical capacity measurements is a(n):
A) fairly simple process
B) judgmental process
C) straightforward process
D) impossible process
55) A measure of operations efficiency generally divides:
A) output by input
B) standard revenues by standard costs
C) sales by cost of goods sold
D) sales by investment
56) What is environmental costing?
57) Describe the characteristics of high cost-to-serve customers and low cost-to-serve
customers.
58) Are relevant revenues and costs the only information needed by managers to select
among alternatives? Explain using examples.
59) Explain the role of management accounting in helping an enterprise develop and
implement its strategy.
60) What are the four options that manufacturing and service companies have to
transform breakeven or loss customers into profitable ones?
61) Compare and contrast a typical salesperson’s revenue based compensation plan to a
compensation plan based on customer profits.
62) Provide at least two examples of types of costs that would be higher for factories
producing a more varied and complex mix of products than for factories producing only
a narrow range of products.
63) Distinguish between direct and indirect costs. Give examples of each with regard to
a specific product.
64) How does the total-life-cycle costing approach differ from traditional product
costing? Explain.
65) Palermo Primping Products is contemplating introducing a new type of deluxe eye
cream to complement its existing line of products. The following information applies.
Target price $25 per unit
Estimated annual target sales volume 60,000
Expected return on sales target 35%
Required:
Compute the unit target cost per unit.
