1) A customer cost hierarchy may include distribution-channel costs.
2) Effort in terms of management control systems is defined in terms of physical
exertion such as a worker producing at a faster rate.
3) The design of products, services, and processes component of the supply chain refers
to the detailed planning, engineering, and testing of products and processes.
4) For service organizations, activity-based cost systems may be used to clarify
appropriate cost assignments.
5) Operating income is sales revenue minus operating expenses.
6) When calculating indirect cost rates, the longer the time period, the greater the
influence of seasonal patterns on the amount of costs.
7) Sales mix is the quantities or proportion of various products or services that
constitute a company’s total unit sales.
8) Accrual accounting rate of return is calculated by dividing an increase in expected
average annual after-tax operating income by the net initial or average investment.
9) Margin of safety measures the difference between budgeted revenues and breakeven
revenues.
10) Allocating all corporate costs motivates division managers to examine how
corporate costs are planned and controlled.
11) An activity-based costing system may focus on customers rather than products.
12) Downsizing never involves eliminating jobs as it adversely affects employee
morale.
13) Hybrid transfer prices can be arrived at through negotiations.
14) Both direct and the step-down method can provide relevant information for
outsourcing decisions.
15) Costs that are subject to short-run fluctuations for given jobs are ________.
A) actual costs
B) budgeted direct costs
C) budgeted indirect costs
D) normal costs
16) Crimpson Company has invested $2,000,000 in a plant to make commercial juicer
machines. The target operating income desired from the plant is $299,000 annually. The
company plans annual sales of 7,000 juicer machines at a selling price of $400 each.
What is the cost base of each juicer machine for Crimpson Company?
A) $357.29
B) $352.35
C) $338.64
D) $328.00
17) The constant gross-margin percentage NRV method of joint cost allocation
________.
A) involves allocating costs in such a way that maintaining the same gross margin
percentage for each product that was obtained in prior years
B) computes gross margin before allocating the costs to the products
C) is the same as the estimated NRV method
D) is the same as the sales-value at splitoff method
18) Which of the following companies will use a process costing system?
A) an oil refining company
B) a manufacturer of ships
C) a custom watch manufacturer
D) an advertising firm
19) Relative performance evaluation ________.
A) determines the effective intensity of incentives placed on each measure of
performance
B) filters out the effect of common uncontrollable factors
C) results in managers helping each other who run similar operations
D) leads to goal congruence
20) Under GAAP, for the purposes of calculating inventory costs, product costs include
________.
A) all costs incurred along the value chain
B) design costs
C) only inventoriable costs
D) only research and development costs
21) If the Polishing Division sells 100,000 pairs of shoes at a price of $120 a pair to
customers, what is the operating income of both divisions together?
A) $8,800,000
B) $6,800,000
C) $6,000,000
D) $5,200,000
22) Diemia Hospital has been considering the purchase of a new x-ray machine. The
existing machine is operable for five more years and will have a zero disposal price. If
the machine is disposed now, it may be sold for $80,000. The new machine will cost
$600,000 and an additional cash investment in working capital of $25,000 will be
required. The new machine will reduce the average amount of time required to take the
x-rays and will allow an additional amount of business to be done at the hospital. The
investment is expected to net $50,000 in additional cash inflows during the year of
acquisition and $200,000 each additional year of use. The new machine has a five-year
life, and zero disposal value. These cash flows will generally occur throughout the year
and are recognized at the end of each year. Income taxes are not considered in this
problem. The working capital investment will not be recovered at the end of the asset’s
life.
In using the net present value method, only projects with a zero or positive net present
value are acceptable because ________.
A) the return from these projects equals or exceeds the cost of capital
B) a positive net present value on a particular project guarantees company profitability
C) the company will be able to pay the necessary payments on any loans secured to
finance the project
D) it results in high payback period
23) Which of the following departments is a support department for a boat
manufacturing company?
A) production
B) molding
C) assembling
D) accounting
24) Which of the following would most likely be included as part of manufacturing
overhead in the production of a wooden table?
A) The amount paid to the individual who stains the table.
B) The commission paid to the salesperson who sold the table.
C) The cost of glue used in the table.
D) The cost of the wood used in the table.
25) Malive Park Department is considering a new capital investment. The following
information is available on the investment. The cost of the machine will be $119,000.
The annual cost savings if the new machine is acquired will be $35,000. The machine
will have a 5-year life, at which time the terminal disposal value is expected to be zero.
Malive Park is assuming no tax consequences. Malive Park has a 12% required rate of
return. What is the payback period for the investment?
A) 4.2 years
B) 3.4 years
C) 5 years
D) 6.8 years
26) When demand for a product is very elastic and prices are increased, demand will
________.
A) remain the same, and operating profits will increase
B) remain the same, and operating profits may either increase or decrease
C) decrease, and operating profits will decrease
D) decrease, and operating profits may either increase or decrease
27) The budgeted contribution margin per composite unit for the budgeted sales mix
can be computed by dividing the ________.
A) total budgeted contribution margin by the actual total units
B) total budgeted contribution margin by the total budgeted units
C) actual total contribution margin by the total actual total units
D) actual total contribution margin by the total budgeted units
28) ________ is the fundamental rethinking and redesign of business processes to
achieve improvements in critical measures of performance such as cost, quality, service,
speed, and customer satisfaction.
A) Strategy
B) Product differentiation
C) Product designing
D) Reengineering
29) Goldfarb’s Book and Music Store has two service departments, Warehouse and Data
Center. Warehouse Department costs of $350,000 are allocated on the basis of budgeted
warehouse-hours. Data Center Department costs of $150,000 are allocated based on the
number of computer log-on hours. The costs of operating departments Music and Books
are $250,000 and $300,000, respectively. Data on budgeted warehouse-hours and
number of computer log-on hours are as follows:
What is the complete reciprocated cost of the Data Processing Department?
A) $90,000
B) $118,750
C) $122,971
D) $152,432
30) The production method will report Product X in the balance sheet at ________.
A) $0
B) $1,500
C) $375
D) $2,500
31) Aurous Incorporated planned to use $35 of material per unit but actually used $34
of material per unit, and planned to make 1,500 units but actually made 1,300 units.
The flexible-budget amount for materials is ________.
A) $45,500
B) $52,500
C) $51,000
D) $44,200
32) Given the cost formula Y = $18,000 + $6X, total cost at an activity level of 9,000
units would be:
A) $72,000
B) $18,000
C) $36,000
D) $54,000
33) An example of a nonfinancial measure for customer satisfaction is ________.
A) number of customer complaints
B) warranty claims
C) liability claims incurred to the company
D) rework costs due to inefficiency