1) Breakeven time brings together the two elements of R&D and profitability.
2) In determining whether to keep or drop a product line, product contribution is
calculated as sales minus variable costs, minus avoidable fixed costs.
3) In a decentralized organization, front-line employees are trained to respond to
changes in the business environment.
4) An activity-based costing system is necessary for costing services that are different.
5) The direct material quantity variance is computed by multiplying the difference
between the actual quantity of material and the standard quantity by the standard price.
6) Intrinsic rewards are any rewards that one person provides to another to recognize a
job well done.
7) Conventional segment margin income statements clearly capture the interactive
effects among responsibility centers.
8) Outcomes, rather than activities, primarily drive the strategy of nonprofit and
government organizations.
9) Variable costs vary with the level of production or sales volume.
10) For an organization to be successful, activities within sales, manufacturing, and
customer service need to be coordinated.
11) The most successful ABC projects occur when a clear business purpose exists for
building the ABC model.
12) It is most meaningful to compare cost targets in the master budget to actual cost
results.
13) Transfer prices based on actual costs provide no incentive to the supplying division
to control costs.
14) The practical capacity of a cost driver is the short-term capacity made available by
the amount of resources committed to an overhead activity.
15) Selling price per unit is $60, variable cost per unit is $30, and fixed cost per unit is
$20. When this company operates above the break-even point, the sale of one more unit
will increase net income by $10.
16) The check step in the PDCA cycle includes two components measuring and
monitoring ongoing performance and taking short-term actions based on the measured
performance.
17) If amounts in the sales forecast change, amounts in the production budgets will also
change.
18) Discounts given to encourage large purchases are known as sales discounts.
19) Sensitivity analysis is the process of selectively varying a plan’s or a budget’s key
estimates for the purpose of identifying over what range a decision option is preferred.
20) Which of the following describes a variable cost?
A) Variable cost are always indirect costs
B) Variable costs increase in total when the actual level of activity increases
C) Variable costs include most personnel costs and depreciation on machinery
D) Variable costs can always be traced directly to the cost object
21) 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 .
How much cash will be disbursed for labor and operating costs in June?
A) $63,000
B) $70,000
C) $88,400
d. $96,400
22) All of the following situations cause major deterrents to effective ABC
implementation EXCEPT when:
A) the ABC system lacks a clear business purpose
B) the ABC system’s model design is poor
C) the ABC consultants fail to adapt the ABC system adequately to the specifics of the
organization
D) senior management communicates their commitment to the change
23) Grapevine Corporation plans to grow by offering a cellular phone model, the
QWERTY Touch Screen, which is superior and unique from the competition. Grapevine
believes that putting additional resources into R&D and staying ahead of the
competition with technological innovations are critical to implementing its strategy.
Required:
a. Is Grapevine’s strategy one of product innovation and leadership, lowest total cost, or
complete customer solutions? Briefly explain.
Identify at least one key element that you would expect to see included in the Balanced
Scorecard:
b. for the financial perspective;
c. for the customer perspective;
d. for the process perspective; and
e. for the learning and growth perspective.
24) The following information pertains to the October operating budget for Flockhart
Corporation.
Budgeted sales for October $100,000 and November $200,000.
Collections for sales are 60% in the month of sale and 40% the next month.
Gross margin is 30% of sales.
Administrative costs are $10,000 each month.
Beginning accounts receivable (October 1) $20,000.
Beginning inventory (October 1) $14,000.
Beginning accounts payable (October 1) $60,000. (All from inventory purchases.)
Purchases are paid in full the following month.
Desired ending inventory is 20% of next month’s cost of goods sold (COGS).
No loans are outstanding on October 1
For October, budgeted net income is:
A) $20,000
B) $30,000
C) $40,000
D) None of the above is correct
25) Relevant costs in a make-or-buy decision of a part include:
A) setup overhead costs for the manufacture of the product using the outsourced part
B) currently used manufacturing capacity that has alternative uses when part is
outsourced
C) annual plant insurance costs that will remain the same
D) corporate office costs that will be allocated differently
26) The following annual information is for Bressler Corporation:
Total fixed costs: $100,000
If the sales mix consists of two units of Product X and one unit of Product Y, what is the
weighted revenue per unit of composite product?
A) $10.00
B) $11.66
C) $13.33
D) $15.00
27) Webster Company provides the following ABC costing information:
The above activities are used by Departments A and B as follows:
How much of the account inquiry cost will be assigned to Department A?
A) $5,000
B) $25,000
C) $75,000
D) $250,000
28) In a just-in-time management system, explain
a. why suppliers become very important to the overall manufacturing process, and
b. what incentives can be offered to reward good suppliers.
29) An organization planned to use $44 of material per unit of activity but it actually
used $42 of material per unit of activity, and it planned to make 1,200 units but it
actually made 1,000 units. The planning variance is:
A) $2,000
B) $8,800
C) $16,400
D) $2,400
30) Management accounting information includes all of the following except:
A) tabulated results of customer satisfaction surveys
B) the cost of producing a product
C) the percentage of units produced that is defective
D) market price of the stock
31) In compensation plans, a cash bonus:
A) is based on individual or group performance
B) does not affect long-term pay
C) is usually triggered when performance exceeds a target
D) All of the above are correct
32) Key performance indicator cards:
A) lead to local but not global or strategic improvements if they are not linked to
strategy
B) include only financial measures
C) are organized into ten perspectives
D) measure only a single Balanced Scorecard perspective
33) Randall Company makes and distributes outdoor play equipment. Last year sales
were $4,800,000, operating income was $1,200,000, and the assets used were
$6,000,000.
The return on investment (ROI) is:
A) 20%
B) 80%
C) 25%
D) 125%
34) High levels of inventory result in all EXCEPT:
A) high moving, handling, and storage costs
B) increased product obsolescence and damage
C) increased financing costs
D) idle facilities
35) JB Juice Company uses a manufacturing process that has two distinct stages: the
juicing process (P1) and the straining process (P2). Raw material is consumed in P1 at
the beginning of the process. No additional raw material is required in the second stage
of the process (in P2). The following information pertains to the production of 5,000
units of output in March 2011:
Assume 5,000 units are 100% complete with respect to raw materials and conversion
costs at the end of March.
The conversion cost per unit of output for stage PI for the JB Juice Company totals:
A) $84 per unit
B) $36 per unit
C) $64 per unit
D) $20 per unit
36) Which of the following best represents the Check step in the Plan-Do-Check-Act
(PDCA) cycle?
A) Take actions to lower costs, change resource allocations, improve the quality, cycle
time and flexibility of processes, modify the product mix, change customer
relationships, and redesign and introduce new products
B) Measure and monitor ongoing performance and take short-term actions based on the
measured performance
C) Define the organization’s purpose and select the focus and scope of its strategy
D) Implement the chosen course of action
37) Power Cycle Manufacturing, Inc., is considering reorganizing its plant into
manufacturing cells. The following estimates have been prepared to evaluate the
benefits from the reorganization:
Inventory carrying costs are estimated to be 10% per year.
As a result of switching to a cellular manufacturing operation, total benefits are
projected to increase annually by:
A) $433,000
B) $400,000
C) $367,000
D) $353,000
38) Splashdown Corporation manufactures water toys. It plans to grow by producing
high-quality water slides at a low cost that are delivered in a timely manner. There are a
number of other manufacturers who produce similar water slides. Splashdown believes
that continuously improving its manufacturing processes and having satisfied
employees are critical to implementing its strategy.
To further the company’s strategy, measures on the balanced scorecard would MOST
likely include:
A) number of process improvements
B) first to market
C) longer cycle times
D) number of new products
39) All of the following create problems with accurate product or job costing except:
A) incorrect job numbers are recorded on source documents
B) bar coding is used to record materials used on the job
C) using budgeted overhead costs to determine overhead cost allocation rates
D) a computer screen requests an employee number before that employee is able to
work on information related to a specific job
40) A cost center is a business segment:
A) that usually evaluates employee performance by comparing the center’s actual costs
with target or standard costs for the amount and type of work done
B) in which interperiod cost comparisons can be misleading if the output level and
production mix are constant
C) that usually includes individual stores within a department-store chain
D) that should be evaluated solely on its ability to control and reduce costs
41) Freddie’s Fudge Factory currently makes fudge for retail and mail order customers.
It also offers a variety of roasted nuts. Fudge sales have increased over the past year, so
Freddie is considering outsourcing the roasted nuts and using the roasting space to
make additional fudge. A reliable supplier has quoted a price of $0.85 per pound for the
roasted nuts. The following amounts reflect the in-house manufacturing costs per pound
for the roasted nuts:
Required:
a. Should Freddie’s Fudge Factory outsource the roasted nuts? Why or why not?
Discuss all items that should be considered.
b. What incentives can Freddie offer the supplier of the roasted nuts to encourage
continued reliability?
42) The primary goal of transfer pricing is to:
A) motivate the decision maker to act in the organization’s best interests
B) obtain a high transfer price for the supplying unit
C) obtain a high transfer price for the receiving unit
D) agree on a price for external sales
43) The stage of the research development and engineering cycle in which the technical
aspects of products and services are developed is the:
A) service phase
B) market research stage
C) product development stage
D) product design stage
44) Abita Manufacturing has prepared the following flexible budget for October and it
is in the process of interpreting the variances. F denotes a favorable variance and U
denotes an unfavorable variance.
The MOST LIKELY explanation of the above direct labor variances is that:
A) the average wage rate paid to employees was less than expected
B) employees did not work as efficiently as expected to accomplish the job
C) the company may have assigned more experienced employees this month than
originally planned
D) management may have a problem with budget slack and may be using lax standards
for both labor wage rates and expected efficiency
45) Characteristics of a product layout include:
A) raw materials and purchased parts are delivered directly to the production line where
they are needed
B) low-volume production
C) a U-shaped layout
D) small batches of unique products
46) Economic value added:
A) encourages segment managers to accept only new capital projects with a return on
investment (ROI) that exceed the current ROI
B) of $100,000 indicates the segment earned $100,000 for the company
C) of $20,000 indicates the segment’s actual earnings (adjusted for biasing effects of
accounting conservatism) exceeded the company’s cost of capital by $20,000
D) is considered an inferior method of evaluating investment center performance
47) Sanchez & Ryan, Inc, sells a single product. This year, 20,000 units were sold
resulting in $130,000 of sales revenue, $60,000 of variable costs, and $17,500 of fixed
costs.
The contribution margin per unit is:
A) $6.50
B) $3.50
C) $3.00
D) $1.75
48) Abita Manufacturing has prepared the following flexible budget for October and it
is in the process of interpreting the variances. F denotes a favorable variance and U
denotes an unfavorable variance.
The MOST LIKELY explanation of the above variances for Material A is that:
A) a lower price than expected was paid for Material A
B) higher quality raw materials were used than were planned
C) the company used a new supplier
D) Material A used during October was $2,000 less than expected
49) Narly Skateboards manufactures three different product lines, Base, Long, and
Trick. Considerable market demand exists for all models. The following per unit data
apply:
If there is excess capacity, which model is the most profitable to produce?
A) base model
B) long model
C) trick model
D) both the base model and the long model
50) For improving operational efficiencies and customer satisfaction, nonfinancial
information is:
A) critical
B) moderate
C) infrequently used
D) unnecessary
51) Which BEST describes the control function in a management accounting and
control system?
A) MACS seeks out areas that are out-of-control but not for corrective action
B) MACS achieves cost reduction targets that are continually adjusted downward
C) MACS guides and motivates employees to achieve organizational objectives
D) MACS ensures performance standard goals are being met
52) All of the following are true of a revenue center EXCEPT that it:
A) controls service quality and units sold
B) controls the acquisition cost of the product or service sold
C) may control price, product mix, and promotional activities
D) may incur sales and marketing costs
53) For each cost pool, a(n) ________ is identified that is the primary factor causing
overhead costs to increase during the accounting period.
A) activity
B) job
C) level
D) process
54) Operating budgets include all of the following EXCEPT:
A) a sales plan
B) a labor hiring and training plan
C) an administrative and discretionary spending plan
D) projected balance sheet
55) Assume an organization’s cost of capital is 10% and Division X has operating
income of $3 million and uses $20 million of capital. The economic value added for
Division X is:
A) $200,000
B) $300,000
C) $1,000,000
D) $1,700,000
56) Baldwin Printers has contracts to complete weekly supplements required by
forty-two customers. For the year 2011, manufacturing overhead cost estimates total
$1,840,000 for an annual production capacity of 20 million pages.
For 2011 Baldwin Printers has decided to evaluate the use of additional cost pools.
After analyzing manufacturing overhead costs, it was determined that number of design
changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
During 2011, two customers, Wellington Drugs and Home Again, are expected to use
the following printing services:
Using pages printed as the only overhead cost driver, what is the manufacturing
overhead cost estimate for Wellington Drugs during 2011?
A) $5,000
B) $8,280
C) $11,200
D) $18,500
57) ________ occur(s) when managers ask subordinates to discuss their ideas about the
budget, but no joint decision-making occurs.
A) Authoritative budgeting
B) Stretch targets
C) Consultative budgeting
D) Budget slack