1) Process layouts are characterized by long production paths, high inventory levels and
small batches of unique products.
2) Management accounting information is primarily oriented to external stakeholders,
such as investors, creditors, regulators, and tax authorities.
3) Database and information systems are physical assets which create distinctive value
for companies.
4) Poor scorecard design, rather than a poor organizational process, is the biggest threat
to successful Balanced Scorecard implementation.
5) The pricing waterfall charts revenue leaks from list price caused by discounts and
allowances used to gain customer loyalty.
6) Once authorized, discretionary spending budgets are committed or fixed and do not
vary with levels of production or service.
7) Marketing, selling, distribution, and administrative expenses are dependent on the
volume and mix of products that the company produces.
8) Value is defined as any action or process for which a customer would be willing to
pay.
9) Measuring customer profitability can be accomplished through an activity based
costing study.
10) A revenue center is like an independent business.
11) Profit sharing rewards short-term performance while stock options attempt to
reward long-term performance.
12) The cost of a computer system installed last year is an example of:
A) a sunk cost
B) a relevant cost
C) a differential cost
D) an avoidable cost
13) Vander Belt 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 11% per year.
After the change, work-in-process inventory carrying costs are projected to decrease
because of:
A) reduced costs in materials handling
B) lower financing costs
C) the decreased need for inventory storage
D) All of the above are correct
14) Skate Magic manufactures three different product lines, Model TS, Model AY, and
Model GG. Considerable market demand exists for all models. The following per unit
data apply:
How can the Vice-president of sales at Skate Magic encourage her salespeople to
promote the more profitable model?
A) Put all sales persons on salary
B) Provide higher sales commissions for higher priced items
C) Provide higher sales commissions for items with the greatest contribution margin per
constrained resource
D) Provide higher sales commissions for higher priced items and items with the greatest
contribution margin per constrained resource
15) The MOST likely result of a negotiated transfer price is that it:
A) takes away the ultimate responsibility of the resulting transfer price from the two
parties
B) may reflect the relative negotiating skills of the two parties
C) generally results in transferring more than the optimum number of units
D) reflects purely economic considerations
16) ________ provide(s) the starting point for developing the operating budget.
A) The demand forecast
B) Projected income statement
C) The production plan
D) Expected cash flows
17) Bealing Company has the following operating profit:
Sales $400,000
Variable Costs 160,000
Contribution Margin $240,000
Fixed Costs 140,000
Operating Profit $100,000
a. Bealing could increase revenues by 10% by reducing sales discounts by 10%. There
will be no changes in variable or fixed costs. What would be the percentage increase in
operating profits?
b. Refer to the original information in this problem. Suppose Bealing’s sales people
discounted sales another 2% with no change in variable or fixed costs. What is the
change in operating profits?
18) The post-sale service and disposal cycle of total-life-cycle costing consists of the
following stages:
A) market research, product design, and product development
B) research, development, and engineering, manufacturing, and post-sale service and
disposal
C) selling price, target profit, and target cost
D) rapid growth, transition, and maturity
19) The ________ assumes that people find work objectionable and should therefore be
monitored carefully.
A) MACS
B) Human relations movement
C) Scientific management school
D) HRMM
20) The four key behavioral considerations in management accounting and control
system design include all of the following EXCEPT:
A) integrating the organization’s pay scale
B) using a mix of short- and long-term qualitative and quantitative performance
measures
C) empowering employees to be involved in decision making and MACS design
D) developing an appropriate incentive system to reward performance
21) Which of the following statements regarding the use of strategy in companies is
correct?
A) All employees are challenged to develop individual personal objectives that support
corporate objectives
B) CEOs and senior leadership can implement a company’s strategy by themselves
C) It is safe to assume that the workforce is incapable of understanding these concepts
and ideas
D) All of the above are correct
22) For most products, the majority of the product’s total life costs are incurred during
the:
A) research, development, and engineering cycle
B) manufacturing cycle
C) post-sale service and disposal cycle
D) operating cycle
23) Vander Belt 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 11% per year.
As a result of switching to a cellular manufacturing operation, total benefits are
projected to increase annually by:
A) $222,800
B) $227,200
C) $272,800
D) $277,200
24) DJK Enterprises are using the Kaizen approach to budgeting for 2011 . The
budgeted income statement for January 2011 is as follows:
Under the Kaizen approach, cost of goods sold and variable operating expenses are
budgeted to decline by 1% per month.
What is the budgeted gross margin for March 2011?
A) $196,020
B) $198,000
C) $204,020
D) $205,970
25) The saying “what gets measured gets done” refers to measuring performance:
A) so that appropriate disciplinary actions can be taken
B) to ensure that employees perform equally in all dimensions of their jobs
C) so that essential tasks get accomplished
D) to ensure that the ethical code of conduct is also being enforced
26) Lewis Auto Company manufactures a part for use in its production of automobiles.
When 10,000 items are produced, the costs per unit are:
Monty Company has offered to sell Lewis Auto Company 10,000 units of the part for
$120 per unit. The plant facilities could be used to manufacture another part at a savings
of $180,000 if Lewis Auto accepts the supplier’s offer. In addition, $20 per unit of fixed
manufacturing support on the original part would be eliminated.
Required:
a. What is the relevant cost per unit for the original part?
b. Which alternative is best for Lewis Auto Company? By how much?
27) Which of the following is not a critical parameter for calculating customer lifetime
value?
A) initial acquisition cost
B) revenues
C) profits or losses
D) the duration of the relationship
28) Rupe Company has two departments: Machining and Assembly. The following
estimates are for the coming year:
A single predetermined manufacturing cost driver rate based on total plant direct labor
hours is:
A) $ 4 per direct labor hour
B) $10 per direct labor hour
C) $20 per direct labor hour
D) $40 per direct labor hour
29) In regard to the amount of detail, a budget should:
A) show the detail for each product
B) group products into pools of products
C) strike a balance between detail and aggregated information
D) not consider the cost of gathering the information
30) Power Cycle 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.
After the change, direct labor costs as a percentage of sales are projected to decrease
because:
A) less work-in-process inventory needs to be moved from location to location
B) fewer employees are needed to produce a product due to the new work design
C) less supervisors are needed to oversee operations
D) All of the above are correct
31) Skate Magic manufactures three different product lines, Model TS, Model AY, and
Model GG. Considerable market demand exists for all models. The following per unit
data apply:
If there is a machine breakdown, which model is the most profitable to produce?
A) Model TS
B) Model AY
C) Model GG
D) both Models AY and GG
32) Consistency is an important technical consideration for a MACS because:
A) the system includes the organization’s ethical code of conduct
B) the system provides feedback
C) the system needs to be applied globally across all the segments of the organization
D) the system’s applications need to be capable of being customized for local decisions
33) A manufacturing firm produces multiple families of products requiring various
combinations of different types of parts. Of the following, the MOST appropriate cost
driver for assigning materials handling costs to the various products is:
A) direct labor hours
B) number of units produced
C) number of parts used
D) number of suppliers involved
34) Job order costing:
A) can only be used in manufacturing
B) records the flow of costs for each customer
C) allocates an equal amount of cost to each unit made during a time period
D) is commonly used when each unit of output is identical
35) Vander Belt 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 11% per year.
After the change, sales are projected to increase because:
A) of shorter delivery lead times
B) of higher sales prices
C) of the ability to process larger batch sizes
D) All of the above are correct
36) All of the following are true of flexible budgets EXCEPT that they:
A) use the same flexible (variable) cost per unit as the master budget
B) result in higher total costs for greater levels of production
C) allow comparison of actual results to targets based on the achieved level of
production
D) reflect the same level of production as the master budget
37) In compensation plans, a stock option is:
A) categorized as a long-term motivational device
B) usually reserved for employees who affect long-term results
C) most effective when the exercise price is more than the market price of the stock at
issuance
D) All the above are correct
38) For service organizations that bill customers at a predetermined average cost rate,
activity-based cost systems can help to:
A) clarify appropriate cost assignments for various service activities
B) identify the profitability of various service activities
C) clarify appropriate cost assignments and identify the profitability of various service
activities
D) None of the above is correct
39) Vander Belt 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 11% per year.
After the change, sales are projected to increase because:
A) of shorter delivery lead times
B) of higher sales prices
C) of the ability to process larger batch sizes
D) All of the above are correct
40) 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 planning variance was:
A) $134,512.50 favorable
B) $ 487.50 favorable
C) $ 487.50 unfavorable
D) indeterminable using the above information
41) Power Cycle 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.
After the change, a decreased amount of work-in-process inventory is projected
because:
A) of reduced cycle times resulting from a more continuous production flow
B) of lower financing costs and the reduced need for storage and handling
C) larger batches can be processed faster and more efficiently
D) All of the above are correct
42) Yurus Manufacturing Company produces two products, X and Y. The following
information is presented for both products:
Total fixed costs$234,000
Required:
Assume the sales mix is 3 units of X for every unit of Y:
a. What is the weighted revenue per unit of composite average product, the weighted
average variable cost, and the weighted contribution margin per unit of composite
average product?
b. What is the break-even point in units of both X and Y?
43) Many intangible assets:
A) do not appear on the balance sheet since it is difficult to place a reliable financial
value on them
B) should be evaluated with ROI and other performance measures
C) can be measured and managed with current financial control systems
D) are unimportant because they have no physical substance
44) Vander Belt 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 11% per year.
As a result of switching to a cellular manufacturing operation, total benefits are
projected to increase annually by:
A) $111,400
B) $113,600
C) $136,400
D) $138,600
45) Human resources costs might be allocated to individual cost centers:
A) based on the square footage each cost center uses
B) based on the number of employees utilized by each individual center
C) only if the allocation serves some decision-making purpose
D) never, because it is a non-cash cost that should not be allocated
46) All of the following are true statements about the role of budgets and budgeting
EXCEPT that:
A) a budget is a quantitative summary of the expected allocations and financial
consequences of the organization’s short-term operating activities
B) budgeting includes the process of estimating money inflows and outflows to
determine a financial plan that will meet an organization’s objectives
C) the difference between actual results and the budget plan are called variances
D) budgeting solves most business challenges because it coordinates activities and
communicates the organization’s short-term goals to its members