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1) To prepare budgets based on actual data from past periods is preferred since past
inefficiencies are EXCLUDED.
2) Indirect costs such as rent, telephone, and depreciation are always costs of the period
in which they are incurred and are not associated with inventories.
3) Many common performance measures, such as customer satisfaction, rely on internal
financial accounting information.
4) An operation is a standardized method or technique performed repetitively, often on
different materials, resulting in different finished goods.
5) Machine-hours is a more economically plausible cost driver of machine maintenance
than number of direct manufacturing labor-hours.
6) The production-volume variance only exists under variable costing and not under
absorption costing.
7) Cost objects may be jobs, products, or customers.
8) Unlike the payback method, which ignores cash flows after the payback period, the
AARR method considers income earned throughout a project's expected useful life.
9) Direct costs are allocated to the cost object using a cost-allocation method.
10) The incremental unit-time learning model with a 80% learning curve indicates that
if it takes 150 minutes to manufacture the first unit of a new model, then the second unit
will take only 120 minutes to manufacture.
11) If there is an ethical conflict concerning your direct supervisor, when is it
appropriate to contact authorities or individuals not employed by the organization?
A) when there is a personal conflict
B) when your supervisor is about to be promoted
C) when there is a clear violation of the law
D) when you face injustice from your supervisor
12) At the Verill Company, the cost of the library and information center has always
been charged to the various departments based upon number of employees. Recently,
opinions gathered from the department managers indicate that the number of engineers
within a department might be a better predictor of library and information center costs.
Total library and information center costs are $200,000.
What are the estimated total costs if the company expects to sell 3,500 units next year?
A) $2,028,000
B) $3,619,000
C) $3,271,000
D) $1,429,000
13) Approaches used to rank products for revenue allocation can include ________.
A) surveying suppliers on the importance of each product
B) using recent data on stand-alone sales performance
C) having sales agents use their knowledge and intuition
D) surveying middlemen on the importance of each product
14) ________ is the detailed planning and engineering and testing of products, services,
or processes.
A) Plan of implementation
B) Design
C) Production
D) Research and development
15) Staff management includes ________.
A) manufacturing managers
B) management accountants
C) purchasing managers
D) distribution managers
16) A finance manager has to select one of the four different suppliers of raw materials.
The total cost functions under the four options are given below. Assume the quality of
the raw material to be the same, which of the following is preferred by the finance
manager?
A) y = 200 + 5X
B) y = 200 + 5.50X
C) y = 200 + 4.50X
D) y = 200 + 4.70X
17) The costs used in cost-based transfer prices ________.
A) are actual costs
B) are budgeted costs
C) can either be actual or budgeted costs
D) are lower than the market-based transfer prices
18) Nile Corp. has identified three cost pools to allocate overhead costs. The following
estimates are provided for the coming year:
The accounting records show the Mossman Job consumed the following resources:
If Nile Corp. uses the three activity cost pools to allocate overhead costs, what are the
activity-cost driver rates for supervision of direct labor, machine maintenance, and
facility rent, respectively?
A) $0.50 per dlh; $0.125 per mh; $1.50 per sq ft
B) $1.25 per dlh; $0.25 per mh; $1.67 per sq ft
C) $0.50 per dlh; $0.125 per mh; $1.60 per sq ft
D) $0.40 per dlh; $0.125 per mh; $1.68 per sq ft
19) Gotham University offers only high-tech graduate-level programs. Gotham has two
principal operating departments, Engineering and Computer Sciences, and two support
departments, Facility and Technology Maintenance and Enrollment Services. The base
used to allocate facility and technology maintenance is budgeted total maintenance
hours. The base used to allocate enrollment services is number of credit hours for a
department. The Facility and Technology Maintenance budget is $350,000, while the
Enrollment Services budget is $950,000. The following chart summarizes budgeted
amounts and allocation-base amounts used by each department:
Required:
a.Set up algebraic equations in linear equation form for each activity.
b.Determine total costs for each department by solving the equations from part (a) using
the reciprocal method.
(Engineering= Eng; Computer Sciences = CS; Facility and Technical Maintenance =
FTM; Enrollment Service = ES)
20) The time taken to fulfill clients' requests is an example of the ________ measure of
a balanced-scorecard.
A) internal business process perspective
B) customer perspective
C) learning and growth perspective
D) financial perspective
21) Which of the following statements best defines setup time?
A) It is the time required to manufacture an item, including order preparation time,
inspection time, and customer delivery time.
B) It is the time required to get equipment, tools, and materials ready to start the
production of a component or product.
C) It is a time or period ranging from the time when a customer orders goods to the
time when they are delivered to the customer.
D) It is the time required to create a new product to be sold by a business to its
customers.
22) ________ translates an organization's mission and strategy into a comprehensive set
of performance measures that provide the framework for implementing its strategy.
A) Performance scoreboard
B) Product differentiation
C) Differential report
D) Balanced scorecard
23) The method that allocates costs by explicitly including all the services rendered
among all support departments is the ________.
A) direct method
B) step-down method
C) reciprocal method
D) sequential method
24) Which method of accounting recognizes byproducts in the financial statements at
the time their production is completed?
A) gross margin method
B) sales method
C) production method
D) market value method
25) ________ are the costs of activities undertaken to support individual products or
services regardless of the number of units or batches in which the units are produced.
A) Unit-level costs
B) Batch-level costs
C) Product-sustaining costs
D) Facility-sustaining costs
26) Which of the following is true of a budgeting system?
A) It compels managers to plan ahead.
B) It increases agency costs.
C) It is easy to measure the exact benefits of a budgeting system.
D) It leads to operational inefficiency.
27) A steeply sloped regression line indicates ________.
A) a strong relationship between the cost driver and costs
B) a greater proportion of fixed costs than variable costs
C) an increase in number of units produced during the period
D) a strong relationship between fixed cost and variable cost
