1) Determining the “right” level of capacity is one of the most strategic and difficult
decisions managers face.
2) The difference between total revenues and total variable costs is called contribution
margin.
3) Multiple regression analysis estimates the relationship between the dependent
variable and two or more independent variables.
4) Management accounting has to strictly follow the rules of generally accepted
accounting principles for the purposes of measurement and reporting.
5) For normal costing, even though the indirect-cost rate is based on actuals, indirect
costs are allocated to products based on the normal capacity of the cost-allocation base.
6) The financial perspective of the balanced scorecard focuses on the profits and value
created for shareholders.
7) The price-recovery component of the change in operating income measures solely
the effect of price changes on revenues and costs.
8) The conference method and the account analysis method use subjective assessments
to choose a cost driver and to estimate the fixed and variable components of the cost
function.
9) A learning curve is a function ________.
A) that measures the decline in labor-hours per unit due to workers becoming better at a
job
B) that increases at a greater rate as workers become more familiar with their tasks
C) where unit costs increase as productivity increases
D) that is linear
10) Grip Manufacturing currently produces 1,000 tires per month. The following per
unit data for 1,000 tires apply for sales to regular customers:
The plant has capacity for 3,000 tires and is considering expanding production to 2,000
tires. What is the total cost of producing 2,000 tires?
A) $110,000
B) $98,000
C) $68,000
D) $88,000
11) Using ________ as the denominator level also gives the manager a more accurate
idea of the resources needed and used to produce a unit by excluding the cost of unused
capacity.
A) practical capacity
B) normal capacity utilization
C) theoretical capacity
D) master-budget capacity utilization
12) At a plant where a union agreement sets annual salaries and conditions, annual labor
costs usually ________.
A) are considered a variable cost
B) are considered a fixed cost
C) depend on the scheduling of floor workers
D) depend on the scheduling of production runs
13) Which of the following capacity levels do proponents of activity-based costing
recommend to be used as the denominator level to calculate activity cost rates?
A) practical capacity
B) normal capacity utilization
C) theoretical capacity
D) master-budget capacity utilization
14) The East Company manufactures several different products. Unit costs associated
with Product ORD210 are as follows:
What is the percentage of the total fixed costs per unit associated with Product ORD105
with respect to total cost?
A) 32%
B) 28%
C) 26%
D) 20%
15) The contribution-margin format is used for ________.
A) variable costing income statement
B) mixed costing income statement
C) absorption costing income statement
D) job order costing income statement
16) The following data pertains to activity and utility cost for two recent periods:
Utility cost is a mixed cost with both fixed and variable components. Using the
high-low method, the cost formula for utility cost is:
A) Y = $1.00 X
B) Y = $1.25 X
C) Y = $4,000 + $0.50 X
D) Y = $1,500 + $1.25 X
17) Care Inc., has two divisions that operate independently of one another. The financial
data for the year 2015 reported the following results:
The company’s desired rate of return is 10%. Income is defined as operating income.
What are the respective return-on-investment ratios for the North and South Divisions?
A) 10.00% and 15.00%
B) 11.71% and 14.00%
C) 10.71% and 12.00%
D) 12.50% and 15.00%
18) Which of the following markets is said to exist when there is a homogeneous
product with many sellers?
A) monopoly market
B) oligopoly market
C) monopolistic market
D) perfect market
19) Hugo, owner of Automated Fabric, Inc., is interested in using the reciprocal
allocation method. The following data from operations were collected for analysis:
What is the complete reciprocated cost of the Maintenance Department?
A) $331,267
B) $326,667
C) $300,000
D) $0
20) Which of the following statements is true in the case of budgeting for multinational
companies?
A) While budgeting for multinational companies, managers consider difference in tax
statutes as an uncontrollable factor.
B) While budgeting for multinational companies, managers do not account for foreign
exchange fluctuations as the operating profits are reported in different currencies.
C) While budgeting for multinational companies, managers must be aware that budgets
will not be used for evaluating performance.
D) While budgeting for multinational companies, managers are not concerned about the
domestic factors of the different countries in which they operate.
21) The sales-volume variance is the difference between ________.
A) a sales-mix variance and the corresponding sales-quantity variance
B) a flexible-budget amount and the corresponding static-budget amount
C) a market-share variance and the corresponding market-size variance
D) a sales-mix variance and the corresponding market size variance
22) Which of the following general ledger accounts will have a subsidiary ledger
account?
A) Cost of Goods Sold account
B) Work-in-Process Control account
C) Joe’s Accounts Receivable subsidiary account
D) Operating Expenses account
23) Managers can reduce capacity-based fixed costs by measuring and managing
________.
A) unused capacity
B) variable costs
C) engineered costs
D) discretionary costs
24) Operating decisions primarily deal with ________.
A) the best use of scarce resources
B) how to obtain funds to acquire resources
C) acquiring equipment and buildings
D) satisfying stockholders