Chapter 19—Controlling Cost and Profit Key
1. Which of the following is NOT a type of responsibility center?
2. Responsibility accounting is the concept that:
3. Which type of center is usually found at the lowest levels in a firm?
4. Which of the following is NOT a benefit of decentralization?
5. The report which highlights variances from budget is the:
6. Centralization refers to the concept of having decision-making authority in the hands of:
7. Of the following, which is probably the greatest benefit of centralization?
8. A disadvantage to decentralization is:
9. Goal congruence can be achieved by:
10. In which of the following is a manager responsible for costs and revenues?
11. In which of the following is a manager responsible for costs, revenues, and assets?
12. In which of the following is a manager responsible for only costs?
13. How can an organization prevent decisions made by a decentralized manager from being inconsistent with
the firm’s objectives?
14. In a responsibility accounting system, which of the following is true?
15. Responsibility accounting is used in:
16. Standard costs are generally based on:
17. Which of the following may affect the behavior of costs?
18. Management by exception uses which of the following?
19. Standard costs are used to control all of the following costs EXCEPT:
20. All of the following are criteria for investigating a variance EXCEPT:
21. Which of the following is NOT an advantage of standard costing?
22. Which of the following is NOT a disadvantage of standard costing?
23. The variance computed by multiplying the difference between the actual and standard quantity of materials
by the standard price paid is the:
24. A materials quantity variance is unfavorable when:
25. The difference between the standard price and the actual price multiplied by the actual quantity of materials
is the:
26. A favorable materials price variance would occur when the:
27. Which of the following is a true statement?
28. To prevent quantity variances from being influenced by price changes, which is used?
29. Which variance compares actual inputs used at actual and standard prices?
30. Which of the following would NOT cause a material quantity variance?
31. The variance computed by multiplying the difference between the actual rate and the standard rate by the
actual hours is:
32. The difference between standard hours and actual hours multiplied by the standard rate is the:
33. The labor rate variance is the difference between the:
34. All favorable labor rate variances indicate that:
35. The labor efficiency variance is the difference between the:
36. A favorable labor efficiency variance would occur when the:
37. Which of the following compares actual inputs at standard prices with standard quantity of inputs at
standard prices?
39. Exhibit 19-1
The following information relates to Almira’s operations for the month of August:
Actual quantity of materials used
22,000 pounds
Standard quantity of materials
20,000 pounds
Actual price of materials
$ 8.00
Standard price of materials
$ 7.60
Actual direct labor hours
40,000
Standard direct labor hours
42,000
Actual direct labor rate
$15.00
Standard direct labor rate
$14.00
Refer to Exhibit 19-1. Given the information above, the materials quantity variance is:
40. Exhibit 19-1
The following information relates to Almira’s operations for the month of August:
Actual quantity of materials used
22,000 pounds
Standard quantity of materials
20,000 pounds
Actual price of materials
$ 8.00
Standard price of materials
$ 7.60
Actual direct labor hours
40,000
Standard direct labor hours
42,000
Actual direct labor rate
$15.00
Standard direct labor rate
$14.00
Refer to Exhibit 19-1. Given the information above, the materials price variance is:
41. Exhibit 19-1
The following information relates to Almira’s operations for the month of August:
Actual quantity of materials used
22,000 pounds
Standard quantity of materials
20,000 pounds
Actual price of materials
$ 8.00
Standard price of materials
$ 7.60
Actual direct labor hours
40,000
Standard direct labor hours
42,000
Actual direct labor rate
$15.00
Standard direct labor rate
$14.00
Refer to Exhibit 19-1. Given the information above, the labor efficiency variance is:
42. Exhibit 19-1
The following information relates to Almira’s operations for the month of August:
Actual quantity of materials used
22,000 pounds
Standard quantity of materials
20,000 pounds
Actual price of materials
$ 8.00
Standard price of materials
$ 7.60
Actual direct labor hours
40,000
Standard direct labor hours
42,000
Actual direct labor rate
$15.00
Standard direct labor rate
$14.00
Refer to Exhibit 19-1. Given the information above, the labor rate variance is:
43. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the quantity of direct materials that should have been used is:
44. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the materials price variance for materials actually used is:
45. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the journal entry to record the purchase of materials and the materials price variance would
include a debit to:
46. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the materials quantity variance is:
47. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the journal entry to record the use of materials and the materials quantity variance would
include a debit to:
48. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the number of direct labor hours that should have been used is:
49. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the labor efficiency variance is:
50. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the labor rate variance is:
51. Exhibit 19-2
The following information relates to Bergen Corporation:
Standard
cost per
unit:
Direct materials (6 pounds)
$18
Direct labor (3 hours)
24
Actual
resource
s used:
Direct materials
12,500 pounds at $2.95
Direct labor
5,900 hours at $7.85
Units of output
2,000
Refer to Exhibit 19-2. Based on the information above, the journal entry to record the labor costs and variances for Bergen Corporation would
include a debit to:
52. Twin Pines Custom Trim established the standard labor rate as $8.60 and the standard hours as 4 hours per
unit. During June, 100 units were manufactured, and 410 actual labor hours were incurred at a rate of $8.50 per
hour. The labor efficiency variance is:
53. Exhibit 19-3
The following information relates to Lamb Company:
Actual units completed
1,440 units
Standard labor rate per hour
$10
Standard hours per unit
250 hours
Labor rate variance
$33,730 U
Labor efficiency variance
$27,000 F
Refer to Exhibit 19-3. Given the information above, the standard labor cost per unit is:
54. Exhibit 19-3
The following information relates to Lamb Company:
Actual units completed
1,440 units
Standard labor rate per hour
$10
Standard hours per unit
250 hours
Labor rate variance
$33,730 U
Labor efficiency variance
$27,000 F
Refer to Exhibit 19-3. Given the information above, the actual labor hours were:
55. Exhibit 19-3
The following information relates to Lamb Company:
Actual units completed
1,440 units
Standard labor rate per hour
$10
Standard hours per unit
250 hours
Labor rate variance
$33,730 U
Labor efficiency variance
$27,000 F
Refer to Exhibit 19-3. Given the information above, total actual labor costs are:
56. Segment managers are generally NOT concerned with:
57. A segment margin income statement is a measure of performance in which type of responsibility center?
58. A responsibility center in which the manager is responsible for only revenues and costs is a(n):
59. A segment margin income statement typically includes all of the following EXCEPT:
60. Profit center managers are most often evaluated on the basis of:
61. Costs that a manager CANNOT control are called:
62. Costs that a manager can control are called:
63. Which of the following informs management whether actual sales prices were higher or lower than
expected?
64. Which of the following informs management whether units sold were more or less than expected?
65. Exhibit 19-4
The following information relates to St. Jean Industries:
Expected unit sales
145
Expected unit sales price
$45
Expected market sales
1,800
Actual unit sales
150
Actual unit sales price
$50
Actual market sales
1,788
Refer to Exhibit 19-4. Based on the information above, the sales price variance is:
66. Exhibit 19-4
The following information relates to St. Jean Industries:
Expected unit sales
145
Expected unit sales price
$45
Expected market sales
1,800
Actual unit sales
150
Actual unit sales price
$50
Actual market sales
1,788
Refer to Exhibit 19-4. Based on the information above, the sales volume variance is:
67. Managers with the most costs to control are found:
68. The income a segment is able to earn above a specified minimum return is called:
69. Return on investment is a direct function of all the following EXCEPT:
70. When other factors remain constant, an increase in average total assets:
71. The type of center that is evaluated on the basis of residual income is a(n):
72. Which of the following will most likely increase the return on investment?
73. Profit margin is equal to:
74. Return on investment is equal to profit margin:
75. Which type of responsibility center would usually be found at the highest level in an organization?
76. Which of the following will cause the ROI to decrease?
77. Residual income is equal to:
78. An independent subsidiary of a decentralized company would be considered a(n):
79. Which of the following can be evaluated using ROI?
80. Which of the following would NOT improve ROI?
81. Walnut Company has sales of $1,000,000 and total expenses of $900,000. If operating assets are $500,000,
82. Walnut Company has sales of $1,000,000 and total expenses of $900,000. If operating assets are $500,000,
and a minimum required return of 15%, the residual income is:
83. Exhibit 19-5
Ridgeline Corporation has the following operating data for the year:
Revenue
$1,125,000
Expenses
$ 850,000
Average total assets
$ 750,000
Average total liabilities
$ 475,000
Refer to Exhibit 19-5. Given the above data for Ridgeline Company, what is the ROI assuming the minimum rate of return on assets is 10%?