For which types of operations do firms design operational planning and control
systems?
A.manufacturing operations only.
B.marketing and manufacturing operations only.
C.manufacturing and other activities but not marketing.
D.manufacturing, marketing, and other activities.
Which costing methodology derives a rate for applying overhead to units produced
before the production period, then uses this “predetermined rate” in applying overhead
to each unit as they produces it?
A.Normal costing
B.Actual costing
C.Predetermined costing
D.Imputed production costing
On a balanced scorecard, the measure of the increase in machine availability would
most likely be an example of a performance measure in the:
A.financial dimension
B.customer dimension
C.internal business process dimension
D.learning and growth dimension
Which of these is a common fraud in financial reporting?
A.improper revenue recognition.
B.understating inventory.
C.overstating liabilities.
D.understating assets.
The following information relates to the operating performance of three divisions of
Santos, Inc. for last year.
Required:
a. Compute the rate of return on investment (ROI) of each division for last year.
b. Assume that the firm levies a charge on each division for the use of funds. The
charge is 10 percent on investment, and the accounting system deducts it in measuring
divisional net income. Recalculate ROI using divisional net income after deduction of
the use-of-funds charge in the numerator.
c. Which of these two measures do you think gives the better indication of operating
performance? Explain your reasoning.
The total of all the costs incurred by the activities in the value chain are
A.variable costs.
B.fixed costs.
C.total costs.
D.full costs.
Sebastian Enterprises sells a product for $25 per unit and has the following costs for the
product
The company received a special order for 100 units of the product. The order would
require rental of a special tool which costs $200. What is the minimum price per unit
that Sebastian Enterprises should charge for this special order if they wish to earn a
$300 profit on this order? Assume there is sufficient idle capacity to accept this order.
A.$18
B.$20
C.$23
D.$25
What is the analysis of differences among particular alternative actions called?
A.incremental analysis.
B.marginal analysis.
C.differential analysis.
D.All of the answers are correct.
When measuring a division’s operating costs, direct controllable operating costs include
A.labor used in the division’s production.
B.salary of the division manager (controlled by top management).
C.costs of providing centralized services, such as data processing and employee
training.
D.company president’s salary.
Costs that change in total as the level of activity changes are which of the following?
A.direct costs.
B.indirect costs.
C.variable costs.
D.fixed costs.
Why is differential analysis considered to be an extension of financial modeling which
focuses on cash flows?
A.Cash is the medium of exchange.
B.Cash serves as a common, objective measure of the benefits of alternatives.
C.Cash serves as a common, objective measure of the costs of alternatives.
D.All of the answers are correct.
An investment of $20,000 today will yield $8,000 a year at the end of the next three
years.
Refer to the above information. Will the project be accepted at a cost of capital of 8
percent?
The XYZ Company is evaluating a capital budgeting proposal for the current year. The
initial investment would be $50,000. It would be depreciated on a straight-line basis
over five years with no salvage value. The before-tax annual cash inflow due to this
investment is $5,000, and the income tax rate is 40 percent paid in the same year as
incurred. The desired after-tax rate of return is 15 percent. All cash flows occur at
year-end.
What is the net present value of XYZ’s capital-budgeting proposal? Should the proposal
be accepted?
Customer profitability analysis. TMBank’s management is evaluating the profitability
of providing special Christmas Club accounts. The company’s financial analysts have
developed the following cost information:
On average, each account generates $75 per year in fees and interest. After inquiring
whether the costs above are all differential, you learn that the $100,000 per year cost to
acquire accounts includes $10,000 of advertising that TMBank would have done with
or without the new accounts. The remainder of the $100,000 costs are differential.
Further, you learn that $5 of the $50 to process and service accounts are general office
costs allocated to these accounts, which are incurred whether or not the bank has the
new accounts. The bank has an average of 3,500 new Christmas Club accounts each
year.
Required:
Should TMBank continue to offer these promotional accounts?
How is activity-based costing used to allocate service department costs?
How are joint-process costs allocated?
A marketing company expects to incur fixed expenses of $50,000 per month and
variable costs of $4.00 per sales call and $2.00 per telephone call. During the month the
sales force made 100 sales calls and 500 telephone calls. Actual costs incurred included
$52,000 for fixed costs and $1,200 for variable costs. Compute the flexible budget
variance.
The budget formula for manufacturing costs is $13,500 + $6.00 per unit per unit
produced. The budget formula for marketing and administrative costs is $10,000 +
$8.00 per unit sold. If 10,000 units are expected to be produced, but only 8,000 units are
expected to be sold, what are the total budgeted expenses for the period?
Explain the problem of just using cash flow analysis in justifying or rejecting an
investment in advanced manufacturing systems.
Sales volume variance analysis. Crank Company prepared a budget last period with
budgeted sales of 56,000 units at a price of $70 each. Variable costs were budgeted to
be $10 per unit. Fixed costs were budgeted to be $2,100,000 for the period. During the
period, actual sales totaled 60,000 units.
Required:
Prepare a variance report to show the difference between the master budget and the
flexible budget.
