1) Organizations use nonfinancial control to provide a summary measure of how well
their systems of operations control are working.
2) Monitoring is the process of measuring the system’s current level of performance.
3) The buildup of inventories decreases the cycle time of production.
4) A good management accounting system can become a source of competitive
advantage for a company.
5) A support department, such as human resources, should be evaluated as a cost center.
6) The role of budgeting in planning and control is more important in manufacturing
than in a not-for-profit environment.
7) The goal of standard costing is to reduce costs through small, incremental changes.
8) The most widespread use of cost information is in budgeting.
9) If a company is deciding whether to outsource a part, business-sustaining costs are
always unavoidable.
10) Committed costs can change because demands for the capacity resource change or
because of changes in efficiency in performing activities.
11) Traditional budgeting takes a top-down approach.
12) The production plan should be based on the sales plan.
13) Stock option plans provide incentive compensation to the participants when the
stock price falls.
14) A properly constructed Balanced Scorecard tells the story of a business unit’s
strategy.
15) CEOs and senior leadership can effectively implement a company’s strategy by
themselves.
16) When replacing an old machine with a new machine, the book value of the old
machine is a relevant cost.
17) Break-even point is NOT an important concept since the goal of business is to make
a profit.
18) Management accounting reports might include information about:
A) customer complaints
B) net income for the year on budgeted income statement
C) total assets on budgeted balance sheet
D) All of the above are correct
19) The management accountant for the Martino Organics has prepared the following
segmented income statement for the most current year.
Assume an advertising campaign could increase revenues for any of the products by
$15,000. To maximize corporate profits, the ________ department should receive the
advertising dollars. Assume the cost of the advertising campaign is less than the
revenues it generates.
A) Sundries
B) Fish & Meat
C) Produce
D) From the information given, the correct product line cannot be determined.
20) Brent Company’s cost system assigns MSDA expenses to customers using a rate of
33% of sales revenue. The new CFO has discovered that Brent’s customers differ
greatly in their ordering patterns and interaction with Brent’s sales force. Because the
CFO believes Brent’s cost system does not accurately assign MSDA expenses to
customers, he developed an ABC system and gathered the following information.
Austin Brooke
Sales $860,000 $700,000
Cost of Goods Sold 440,000 310,000
Sales representative travel 18,000 84,000
Service customers 30,000 220,000
Handle customer orders 2,000 24,000
Ship to customers 48,000 144,000
Required:
(a) Using the current cost system’s approach of assigning MSDA expenses to customers
using a rate of 33% of sales revenue, determine the operating profit associated with
Austin and with Brooke.
(b) Using the activity-based costing information provided, determine the operating
profit associated with Austin and with Brooke.
(c) Which of the two methods produces more accurate assignments of MSDA expenses
to customers? Explain.
21) Extrinsic rewards for compensation:
A) are always motivating
B) are from another person and reinforce distinguished behavior
C) result from a feeling of job satisfaction
D) are always financial
22) The following information for the second quarter of 2011 pertains to Huffington
Company:
Cash is collected from customers in the following manner:
40% of purchases are paid for in cash in the month of purchase, and the balance is paid
the following month.
Labor costs are 20% of sales. Other operating costs are $45,000 per month (including
$12,000 of depreciation). Both of these are paid in the month incurred.
The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is required at
the end of the month. Money can be borrowed in multiples of $3,000.
No loans outstanding on June 1 .
What is the ending cash balance for June?
A) ($50,000)
B) $6,000
C) $5,400
D) $11,400
23) The use of multiple-performance measures in the Balanced Scorecard would be
expected to lead to all of the following EXCEPT:
A) more extensive use of financial measures such as cost and profit
B) employees recognizing the various dimensions of their work
C) the use of new performance measures such as customer satisfaction and employee
morale
D) group-level performance measures
24) The impetus for developing ways to improve employees’ morale and job
satisfaction was:
A) the scientific management school
B) the balanced scorecard
C) results control system
D) the human relations movement
25) Concerns about target costing include all EXCEPT that:
A) attention may be diverted away from other company goals
B) excessive pressure is put on suppliers
C) development time may decrease
D) burnout of design engineers occurs
26) The Balanced Scorecard’s objectives are in balance when:
A) debits equal credits
B) financial performance measurements are less than the majority of the performance
measurements
C) the measurements are fair
D) the measurements reflect an improvement over the previous year
27) Budgeting provides all of the following EXCEPT:
A) a means to communicate the organization’s short-term goals to its members
B) support for the management functions of planning and coordination
C) a means to anticipate problems
D) an ethical framework for decision making
28) 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:
Which model has the greatest contribution margin per unit?
A) Model TS
B) Model AY
C) Model GG
D) both Models TS and AY
29) An example of a direct cost for a service provided by an accounting firm, such as a
tax return, would be:
A) depreciation on computer system
B) labor of staff accountant who prepared the return
C) labor of file clerk who filed copies of return
D) rent on the office
30) Caution should be taken when interpreting a segment margin income statement
because:
A) revenues may be based on transfer prices
B) the interactive effects among responsibility centers are generally not clearly captured
C) expenses may be a result of subjective allocation of jointly incurred costs
D) All of the above are correct
31) If a performance measure in the customer perspective of the Balanced Scorecard
was customer loyalty, then a driver from the process perspective would MOST likely
be:
A) implementing cutting-edge technology
B) repeat sales
C) high-quality production processes
D) increased profits
32) Success for nonprofit and government organizations is measured primarily by:
A) their financial performance
B) their effectiveness in providing benefits to constituents
C) whether they can raise money
D) whether they can balance their budgets
33) Apple Valley Corporation uses a job order cost system and has two production
departments, A and B. Budgeted manufacturing costs for the year are:
The actual material and labor costs charged to Job #432 are as follows:
Apple Valley applies manufacturing overhead costs to jobs on the basis of direct labor
cost using departmental rates determined at the beginning of the year.
Total manufacturing costs associated with Job #432 equal:
A) $55,000
B) $65,000
C) $70,000
D) $75,000
34) Tao Industries, Inc. developed standard costs for direct material and direct labor. In
2012 Tao estimated the following standard costs for one of their major products, the
50-gallon plastic container.
Standard quantityStandard price
Direct materials0.25 pounds$40 per pound
Direct labor0.03 hours$18 per hour
During August, Tao produced and sold 8,000 containers using 1,900 pounds of direct
materials at an average cost per pound of $41 and 250 direct labor hours at an average
wage of $18.25 per hour. Determine the following variances for August:
Required:
a. Total direct material cost variance.
b. Direct material price variance.
c. Direct material quantity variance.
d. Total direct labor cost variance.
e. Direct labor rate variance.
f. Direct labor efficiency variance.
35) ________ and ________ are typically the measures of volume of activity in
traditional volume-based cost systems.
A) Practical capacity; products sold
B) Direct labor hours; practical capacity
C) Direct labor hours; machine hours
D) Square footage; machine hours
36) When making decisions:
A) quantitative factors are the most important
B) qualitative factors are the most important
C) appropriate weight must be given to both quantitative and qualitative factors
D) both quantitative and qualitative factors are unimportant
37) Narly Skateboards manufactures three different product lines, Base, Long, and
Trick. 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
38) Depreciation on computers at the corporate headquarters is best characterized as
A) direct costs
B) fixed manufacturing overhead
C) variable overhead
D) period costs
39) When a company manufactures a variety of complex products, several unit-level
cost drivers can capture the complexity and diversity of the production processes:
A) always
B) frequently
C) infrequently
D) never
40) Which of the following would NOT be considered in a make-or-buy decision?
A) fixed costs that will no longer be incurred
B) variable costs of production
C) potential rental income from space occupied by the production area
D) unchanged supervisory costs
41) Which of the following companies is a service company?
A) Lands’ End
B) Schwinn Bicycles
C) Orkin Pest Control
D) British Petroleum
42) The ________ perspective of the Balanced Scorecard focuses on creating value for
customers.
A) Value
B) Financial
C) Stakeholder
D) Customer
43) Jim’s 5-year-old Hyundai Elantra requires repairs estimated at $3,000 to make it
roadworthy again. His friend, Julie, suggested that he should buy a 5-year-old used
Honda Civic instead for $3,000 cash. Julie estimated the following costs for the two
cars:
What should Jim do? What are his savings in the first year?
A) Buy the Honda Civic; $9,780
B) Fix the Hyundai Elantra; $5,518
C) Buy the Honda Civic; $180
D) Fix the Hyundai Elantra; $5,280
44) A chain of cause-and-effect relationships that appropriately link the four balanced
scorecard perspectives is:
A) a high return on investment causes customer loyalty that results in skilled production
workers that improve process quality
B) skilled production workers help to produce process quality that results in customer
loyalty that helps to increase return on investment
C) customer loyalty results in a high return on investment that results in the ability to
attract skilled production workers that improve process quality
D) improved process quality results in a high return on investment that causes customer
loyalty that results in the ability to attract skilled production workers
45) What does the breakeven time (BET) metric for the product development process
measure?
A) The length of time from the project’s beginning until the product has been
introduced
B) The length of time from when the product is introduced until the product becomes
profitable
C) The length of time from the project’s beginning until the project has been introduced
and generates enough profit to pay back the investment originally made in its
development
D) The length of time until sales cover fixed costs
46) Costing systems that are used for the costing of like or similar units of products in
mass production are called:
A) inventory-costing systems
B) job order costing systems
C) process-costing systems
D) conversion costing systems
47) Customers that require a low price and lots of customized service are:
A) high cost to serve and low margin
B) low cost to serve and low margin
C) high cost to serve and high margin
D) low cost to serve and high margin
48) How does the human resource model of motivation differ from the scientific
management school?
49) Explain how traditional cost systems, using only unit level cost drivers, distort
customer costs.
50) What assumptions does the human resource model of motivation make about
employees? Why is it important for management to understand these assumptions?
51) Which costs are relevant for making decisions that affect the short-term? The
long-term? Why?
52) Discuss the potential behavior implications of performance evaluation.