Designate the best answer for each of the following questions.
1. Which of the following best describes a nonfinancial performance measure contained in most Balanced Scorecards?
a. Customer response time
b. Increase in sales
c. Materials purchase variance
d. Return on assets
2. Which one of the following responsibility centers is most likely to be the responsibility of a sales manager?
a. Cost Center
b. Profit Center
c. Revenue Center
d. Investment Center
3. Which one of the following describes how a master budget is used?
a. It deals only with those categories that will appear on future financial statements.
b. It compiles the operational budgets of all the separate operational and financial groups in the organization.
c. It is followed for exactly one year.
d. Its objectives are focused only on future costs and revenues
4. Which one of the following is the most critical factor in just-in-time systems?
a. Parts delivered by suppliers must be received on time and within quality specifications.
b. Management must disclose major corporate decisions to workers.
c. The production facility must utilize all capacity available.
d. Actual sales must meet the forecast per the Sales Budget.
5. In a make-or-buy decision, which one of the following is not considered a relevant cost?
a. Supervisors salary expense
b. Direct labor
c. Avoidable fixed costs
d. Variable manufacturing costs
6. Which one of the following types of companies would most likely use a job cost system?
a. Manufacturer of potato chips
b. Manufacturer of staplers
c. Manufacturer of petroleum
d. General contractor of homes
7. The starting point of the Master Budget is the preparation of the
a. Budgeted Balance Sheet
b. Capital Expenditure Budget
c. Sales Budget
d. Production Budget
8. The most useful measure for evaluating the performance of the manager of an investment center is:
a. Return on investment.
b. Controllable margin.
c. Contribution margin.
d. Income from operations.
9. From which one of the following would a process cost system most likely be used:
a. Jeweler
b. Real Estate Agent
c. Cola company
d. Motion pictures production company
10. In order to arrive at equivalent units, what adjustments are made to physical units?
a. The percent the units are complete
b. The cost incurred during the year.
c. An arbitrary factor.
d. Manufacturing overhead.
11. A flexible budget
a. Is also called a static budget
b. Can be considered a series of related static budgets,
c. Can be prepared for sales or production budgets, but not for an operating expense budget.
d. Typically uses an activity index different from that used in developing the predetermined overhead rate.
12. Meyers Corporation expected to sell 5,000 units of its product at a target price of $100 per unit. The current full cost of the product is $60 per unit. If Meyers Corporation wants to earn an operating profit margin of 25%, the target cost per unit is:
a. $25
b. $50
c. $75
d. $100
13. Which one of the following is a cost which remains constant in total at various levels of activity?
a. A variable cost.
b. A mixed cost.
c. A fixed cost.
d. A contribution margin.
14. When inventory is sold, where are the related costs transferred to?
a. Work in process
b. Cost of goods sold
c. Finished goods
d. Manufacturing overhead
15. Which one of the following is true concerning a CVP income statement?
a. Costs and expenses are classified only by function.
b. It is prepared for both internal and external use.
c. It shows contribution margin instead of gross profit.
d. Costs and expenses are classified as product or period.
16. For which of the following decisions is incremental analysis not appropriate?
a. Elimination of an unprofitable segment.
b. Determining cost behavior.
c. A make or buy decision.
d. An allocation of limited resource decision.
17. Which of the following statements about overhead variances is false?
a. Standard hours allowed are used in calculating the controllable variance.
b. Standard hours allowed are used in calculating the volume variance.
c. The controllable variance pertains solely to fixed costs.
d. The total overhead variance pertains to both variable and fixed costs.
18. Which of the following is an element of manufacturing overhead?
a. Factory workers wages
b. Components used in calculators during production
c. Plant manager's salary
d. Flour used in manufacturing cake mixes
19. What journal entry should be made when a job is completed and all costs have been accumulated on a job cost sheet?
a. A debit to Finished Goods Inventory, and a credit to Work in Process Inventory
b. A debit to Work in Process Inventory, and a credit to Direct Materials, Direct Labor and Manufacturing Overhead.
c. A debit to Finished Goods Inventory and a credit to Direct Materials, Direct Labor, and Manufacturing Overhead.
d. A debit to Cost of Goods Sold Inventory, and a credit to Work in Process Inventory.
20. Which cost is not charged to the product under variable costing?
a. Direct materials.
b. Direct labor.
c. Variable manufacturing overhead.
d. Fixed manufacturing overhead.
21. Which cost is not charged to the product under absorption costing?
a. Direct materials.
b. Direct labor.
c. Variable manufacturing overhead.
d. Fixed administrative expenses.
22. A responsibility center that incurs costs (and expenses) and generates revenues is classified as a(n)
a. Cost center.
b. Revenue center.
c. Profit center.
d. Investment center.
23. For which one of the following would a process cost system most likely be used?
a. Custom furniture
b. Potato chips
c. Aircraft manufacturer
d. Cruise ships
24. What is a relevant range of activity?
a. The geographical locations in which the company operates
b. The activity level at which profits are maximized
c. The levels of activity over which the company expects to operate
d. The level of activity in which all costs are constant
25. What is the process of evaluating financial data that changes under alternative courses of action called?
a. Incremental analysis
b. Decision-making analysis
c. Contribution margin analysis
d. Cost-benefit analysis
26. The transfer pricing approach that does not reflect the selling division's true profitability is the
a. Cost-based approach.
b. Market-based approach.
c. Negotiated price approach.
d. Time and material pricing approach.
27. Under the absorption cost approach, all of the following are included in the cost base except
a. Direct materials.
b. Fixed manufacturing overhead.
c. Selling and administrative costs.
d. Variable manufacturing overhead.
28. Which one of the following does not affect a make or buy decision?
a. Variable manufacturing costs
b. Opportunity cost
c. Incremental revenue
d. Direct labor
29. Net income under variable costing is contribution margin less:
a. Cost of goods sold.
b. Fixed manufacturing overhead and fixed selling and administrative expenses.
c. Fixed manufacturing overhead and variable manufacturing overhead.
d. Variable selling and administrative expenses and fixed selling and administrative expenses.
30. What is "balanced" in the balanced scorecard approach?
a. The number of products produced
b. The emphasis on financial and non-financial performance measurements
c. The amount of costs allocated to products
d. The number of defects found on each product