1. The use of dual rates in a cost allocation system assumes that common costs can be:

a) Separated into their fixed and variable components.

b) Traced directly to a specific division or manager.

c) Allocated based on a physical quantities measure.

d) Assigned to an investment responsibility center.

2. Which of the following budgets is not required in a wholesale organization?

a) Cash

b) Sales

c) Production

d) Cost of goods sold

e) Marketing and administrative expenses

3. In general, the first budget prepared is the:

a) Production budget.

b) Direct labor budget.

c) Sales budget.

d) Overhead budget.

e) Capital expenditures budget.

4. Which of the following items would be classified as a batch-level cost in an activity-based cost management (ABM) system?

a) Indirect labor

b) Production supervisors salary

c) Depreciation on factory building

d) Machinery set-up costs

5. Which of the following statements is (are) true regarding the master budget?

(A) A master budget consists of (a) organizational goals, (b) strategic long-range profit plan, and (c) tactical short-range profit plan.

(B) A master budget consists of a budgeted (a) income statement, (b) balance sheet, and (c) stockholders equity statement.

a) Only A is true.

b) Only B is true

c) Both A and B are true.

d) Neither A nor B is true.

6, Assets invested in a responsibility center are included in a performance report of :

(A) Cost Center

(B) Profit Center

a) Only A is true.

b) Bother A and B are true.

c) Neither A nor B is true.

d) Only B is true.

7. Which of the following is a weakness of the step method of service cost allocations?

a) Some user departments are ignored.

b) All interdepartmental services are ignored.

c) All intradepartmental services are ignored.

d) The order of service department allocation has to be determined.

e) Computations are more complex than the reciprocal method.

8. Which of the following is not a characteristic of a decentralized organization?

a) Better use of local knowledge

b) Better use of top managements time

c) Reduced response time to environmental changes

d) More decisions made by relatively few individuals

9. Pardee Company makes 30% of its sales for cash and 70% on account. 60% of the account sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following information has been gathered for the current year:

Month 1 2 3 4

Total sales $60,000 $70,000 $50,000 $30,000

Total cash receipts in Month 4 will be:

a) $38,000

b) $47,900

c) $27,230

d) $36,230

Long-range planning as a management function is more important:

a) At top management levels.

b) At lower management levels.

c) At middle management levels.

d) For staff functions than line functions.

e) For line functions than staff functions.