1. Which of the following is a characteristic of zero-based budgeting?

A. It uses the same level of activity as the prior budget period.

B. It is relatively inexpensive to implement.

C. It is used mostly by manufacturing companies.

D. It results in a fresh consideration of the validity of budget amounts.

2. Which of the following is not typically a part of the master budget?

A. Direct material purchases budget

B. Performance report budget

C. Projected cash receipts and disbursements

D. Budgeted balance sheet

3. Which of the following contains at least one item that is not a common method companies use to estimate sales?

A. Economic models, and estimates from a companys own sales force

B. Trends in a companys own sales data, and estimates from a companys own sales force

C. Estimates from a companys own sales force, and expected production levels

D. Economic models, and trends in a companys own sales data

4. Which of the following is not used in deciding how many units to produce in a period?

A. The desired number of units in ending finished goods inventory

B. The expected sales in units

C. The number of units in beginning finished goods inventory

D. The number of units of raw material needed for production

5. A significant difference between the direct material purchases budget and the direct labor budget is that the direct material purchases budget

A. is based on units sold, while the direct labor budget is based on units produced.

B. considers beginning and ending inventory amounts, which are not part of the direct labor budget.

C. is constructed for each quarter, while the direct labor budget is constructed for each pay period.

D. is constructed from the top down, while the direct labor budget uses a bottom-up approach.

6. Which of the following is a reason the amount of cash paid out for manufacturing overhead each period does not equal the total overhead incurred?

A. Depreciation is an overhead expense that does not require the use of cash.

B. Overhead expenses are only estimates, and they do not require cash.

C. Cash is only paid out for variable manufacturing overhead expenses.

D. The amount of cash paid out is adjusted for the number of units sold.

7. What are standard cost variances?

A. Differences between standard and actual costs

B. Amounts that exceed budgeted amounts

C. Useful industry-developed amounts that can be used by companies to evaluate their performance

D. Differences between budgeted and standard amounts

8. In what industries are standard costs used?

A. Manufacturing companies only

B. Service companies only

C. Both manufacturing and service companies

D. None of these answer options are correct.

9. For which one of the following are standard production costs not developed?

A. Direct materials

B. Commission per unit

C. Manufacturing overhead

D. Fixed costs

10. Which one of the following is often used to determine a standard price for materials?

A. Time-and-motion studies

B. A union labor contract

C. Price lists provided by suppliers

D. Materials requisition forms

11. Which of the following is a method of determining the standard quantity of direct labor?

A. An analysis of past data regarding overhead required for various levels of production

B. Labor contract negotiated with the union employees

C. Time-and-motion studies conducted by industrial engineers

D. Suppliers estimates of labor quantities to be used

12. Which of the following is a reason that most managers support the use of attainable standards rather than ideal standards?

A. Attainable standards allow for an occasional equipment failure.

B. Attainable standards recognize that suppliers must provide raw materials with no defects.

C. Attainable standards are required in order to have zero variances.

D. Attainable standards motivate employees to achieve perfection.

13. Why are accounting distortions removed when evaluating performance using EVA?

A. To remove amounts that are a free source of financing

B. To remove amounts that divisional managers are unable to control

C. To remove the costs of assets that must be capitalized under GAAP

D. To encourage managers to spend money on elements that will benefit the company in the long run

14. Which one of the following is not an advantage of decentralization for an organization?

A. Enhanced goal congruence, because the subunits managers are more focused to improve the performance of the company as a whole.

B. Faster response to changing circumstances, because decisions are not made by higher-level managers who need to be advised of all the facts

C. Increased motivation of managers, because they are responsible for their own decisions and the results of their respective divisions

D. Better training for future executives, because lower level managers get involved in more diverse business decisions

15. Which of the following components are evaluated when using the Balanced Scorecard approach?

A. Innovation, financial, expansion, and internal processes

B. Value added, innovation/growth, expansion, and customer

C. Financial, development, expansion and research

D. Learning and growth, financial, customer, and internal processes

16. Which of the following methods of setting a transfer price most closely reflects an arms-length, independent transaction?

A. Full-cost price

B. Variable cost

C. Market price

D. Full-cost plus profit

17. When making a decision that involves a product transferred from another subunit of the company, the manager of the selling division should choose the alternative that

A. maximizes the profit of his subunit.

B. requires a negotiated transfer price.

C. minimizes the goods needed from another subunit of the company.

D. maximizes profit for the company as a whole.

18. In what manner does the balanced scorecard challenge managers?

To focus on the single most important measure to the company

To perform on a variety of dimensions simultaneously

To look forward as well as backward

A. I and II

B. II and III

C. I and III

D. I, II, and III

19. A manager is evaluated based on return on investment. The corporate minimum required return is 11 percent and the manager runs a division that has attained a 14 percent return on investment. Which of the following statements is true?

A. The manager will most likely not invest in a project that has a return on investment of 13 percent.

B. The manager will invest in all projects that increase operating income.

C. The manager will not consider projects that exceed 14 percent.

D. The manager may prefer to invest in projects that have a return on investment that is very close 11 percent to stay in line with corporate expectations.

20. The income amount that is used in the calculation of return on investment is usually

A. earnings before interest and taxes.

B. net income as defined by GAAP.

C. operating cash flows.

D. net operating profit after taxes.

21. What does ROI measure?

A. The amount of profit generated out of each sales dollar

B. The amount of sales generated out of each dollar of assets invested

C. The amount of profit generated out of each dollar of assets invested

D. The amount of revenue generated out of each sales dollar

22. Which of the following units of Walmart will most likely be a cost center?

A. A Walmart store in Dallas, Texas

B. The corporate payroll department

C. The pharmacy department

D. The optical department