1) a manager uses regression to express sales as a function of advertising expenditures
(x1), and per capita income (x2) in your sales area. the following multiple linear
regression equation is developed:
y = 10 + .51×1 + .45×2
the coefficient of determination is .96
determine which of the following conclusions is valid regarding the coefficient of
determination:
a.more analysis is needed. the coefficient of determination leaves much unexplained
b.the regression line fits the data used in the sample very well. there is a strong
indication of the relationship of the two variables with sales
c.the coefficient of determination is positive because the constant term is positive
d.the coefficient of determination should always be greater than one
2) all of the following are ways of setting the budget, except:
a.negotiation-based budgeting
b.two-stage budgeting
c.participative budgeting
d.authoritative budgeting
e.all of the above are ways of setting the budget
3) orange, inc. has identified the following cost drivers for its expected overhead costs
for the year:
total direct labor hours budgeted = 2,000 hours.
the following data applies to product x, one of the products completed during the year
if the activity-based cost drivers are used to allocate overhead cost, the total overhead
cost of product x will be:
a.$1,500
b.$1,560
c.$2,000
d.$2,400
e.$2,560
4) which of the following is not a characteristic of kaizen budgeting?
a.these budgets reflect continuous-improvement standards
b.these budgets adjust required resource demands based on targeted efficiency and
productivity gains
c.this approach to budgeting can be used in conjunction with both traditional and
activity-based budgeting
d.the approach can be used internally, but not for external purposes (e.g., in budgeting
supplier costs)
5) depreciation expense is a relevant cost in a decision only in the context of:
a.time value of money
b.amortized values
c.reducing the tax liability of the organization
d.determining sunk costs associated with the decision problem
e.financial accounting
6) which of the following formulas can be used to represent targeted pretax profit, b, as
a function of targeted after-tax profit, a, given an effective income tax rate of t?
a.b = a (1 – t)
b.b = a (1 – t)
c.b = a (1 + t)
d.b = (1 + t) a
e.b = fc (1 – t)
7) processing sales returns and allowances is usually classified as a:
a.customer unit-level cost
b.customer batch-level cost
c.customer-sustaining cost
d.distribution-channel cost
e.sales-level cost
8) corporate management is required to identify and solve problems from a
cross-functional view. instead of viewing a problem as related to a specific business
function, management solves these problems by combining skills from different
functions simultaneously. this approach is called:
a.inclusive approach
b.integrative approach
c.intra-function approach
d.multilateral approach
9) the most effective basis for cost allocation exists when which one of the following
can be determined?
a.cost shifting
b.benefit received
c.equity share
d.cause and effect relationship
e.ability to bear
10) woodcarving co. incurred the following costs during may:
what was the amount of direct materials and direct labor used in may?
a.option a
b.option b
c.option c
d.option d
11) kingston company, which needs 10,000 units of a certain part to be used in its
production cycle, can make or buy the part. if kingston buys the part from utica
company, kingston could not use the released facilities in another manufacturing
activity within the coming year. 60% of the fixed overhead applied will continue
regardless of which decision is made. the following information is available: cost to
kingston to make the part:
in deciding whether to make or buy the part, kingston’s total relevant costs to make the
part are:
a.$342,000
b.$480,000
c.$530,000
d.$570,000
e.some other amount
12) giddings pharmaceutical company is a maker of drugs for high blood pressure and
uses a process costing system. the following information pertains to the final
department of giddings’s blockbuster drug called solcax.
giddings calculates separate costs of spoilage by computing both normal and abnormal
spoiled units. normal spoilage costs are reallocated to good units and abnormal spoilage
costs are charged as a loss. the units of solcax that are spoiled are the result of defects
not discovered before inspection of finished units. materials are added at the beginning
of the process. using the weighted-average method, answer the following question:
what are the equivalent units for conversion costs?
a.4,200 units
b.4,800 units
c.4,000 units
d.4,400 units
13) with regard to critical success factors, which one of the following would not be
considered a financial measure of success?
a.cash flow
b.growth in industry productivity
c.sales growth
d.earnings growth
e.reduction in the cost of inventory
14) customer profitability analysis boston depot sells office supplies to area
corporations and organizations. tom delayne, founder and ceo, has been disappointed
with the operating results and the profit margin for the last two years. business forms
are mostly a “commodity” business with low profit margins. to increase profit margins
and gain competitive advantages, delayne introduced “desk-top delivery” service. the
business seems to be as busy as ever. yet, the operating income has been declining. to
help identify the root cause of declining profits, he decided to analyze the profitability
of two of the firm’s major customers: omega international (oi) and city of albion (ca).
according to the customer profitability analysis that boston depot conducts regularly,
boston depot has the same amount of total sales with both oi and ca. however, the firm
earns a higher gross margin and gross margin ratio from ca than those from the sales to
oi, as demonstrated here:
boston depot adds a flat 17.5 percent to all sales for expenses incurred in such activities
as handling customers’ requests, pick-packing, order delivery, warehousing, and data
entry. however, not all customers require the same level of services. operation manager,
jamie steel, points out that ca has been a much heavier service user than oi. she shows
the following data to support her belief:
controller rod jay has been investigating ways to determine the costs of performing
various activities. he summarized his findings:
steel points out that activities cost money. two customers who request different service
activities most likely are not costing the firm the same.
required:
1> using activity-based costing, compute the charges per unit of service activities.
2> using activity-based costing, compute the total distribution costs for each of the
customers.
3> is the city of albion a more profitable customer?
4> is omega international a better customer for boston depot?
15) a job in which a quantity of products is ordered by a single customer is more likely
to be an example of:
a.the pull method of production
b.the resource-based method
c.the push method of production
d.the lean method of production
e.none of the above
16) harrington corporation produces three products, a, b, and c. pertinent information on
these products is as follows:
there are 150 direct labor hours available. machine-hour capacity allows 100 anchor
bolts, only; 50 bearings, only; 40 casters, only; or any combination of the three that
does not exceed the capacity.
the direct labor-hour constraint for harrington’s linear program is:
a.a + b + c 150
b.min z = 2a + 2b + 3c
c.max z = 2a + 2b + 3c – 150
d.100a + 50b + 40c 1,050
e.2a + 2b + 3c 150