49. T/F Service companies do not have fixed cost all cost incurred are variable costs 50. T/F Separating cost by behavior fixed and variable a service company can calculate the contribution margin ratio by dividing the contribution margin by revenues 51. The budget process is a loop that consists of ____ a. Planning directing and controlling b. Developing strategies, planning, directing and controlling c. Developing strategies planning and directing d. Developing strategies planning and controlling 52. T/F Budgeting requires managers to develop overall business goals and budget for specific actions to achieve those goals 53. Which of the following statements is true of the budgeting process a. If a company plans for its future, there will be no need to make modifications in the budget period b. It is a continuous process for a ____________(16:30) c. It shows that actual performance of the business d. Managers and employers are motivated to accept the budget goals because they enjoy having their work monitored and evaluated 54. T/F A strategic budget is a long term financial plan used to coordinate the activities needed to achieve the long term goals of the company 55. T/F A static budget is a financial plan only for one level of sales volume 56. T/F The level of forecasted sales has little effect on other elements of the master budget 57. T/F Capital expenditures budget is completed before the preparing of a cash budget 58. Which of the following statements regarding capital expenditure budget is correct a. Installment payments related to the purchase of current assets are included in the capital expenditures budget b. Capital expenditures are purchases of long term assets such as office supplies c. The decision to purchase long term assets is part of a strategic plan d. Capital expenditures are inexpensive assets 59. T/F For a merchandising company the budgeted total sales equals the expected number of units sold multiplied by the budgeted selling price per unit 60. T/F Sensitivity analysis is a what if technique 61. T/F A static budget is prepared for only one level of sales volume 62. Which of the following amounts of a flexible budget remains constant within the specified relevant range where sales volume changes a. Total contribution margin b. Total Fixed Cost c. Total Variable Cost d. Total Sales Revenue 63. T/F A standard is a sales price, cost or quantity that is expected under normal conditions 64. Which of the following best describes a standard a. A sales price cost b. Quantity that is expected under normal conditions c. Cost incurred to produce a product d. Cost variances e. Actual Sales Price Cost and Quantity f. Quantity 65. T/F Only standard unfavorable variances should be investigated to determine their causes 66. T/F A favorable?? Direct materials cost variance occurs when the actual direct materials cost incurred is less than the standard direct materials cost 67. T/F When investigating variable overhead variances management needs to determine weather cost increases or are controllable or if the cost standard needs to be updated 68. Tall Company using a standard cost system. Variable overhead cost are allocated based on direct labor hours in the first quarter Tall had a favorable cost variance for variable overhead cost which of the following is a reasonable explanation for this variance a. The actual number of direct labor hours was lower than the budgeted hours b. The actual variable overhead cost were higher than the budgeted cost c. The actual variable overhead cost were lower than the budgeted cost d. The actual number of direct hours were higher than the budgeted hours 69. When using management by exception the purchasing manager should be questioned for which of the following variances a. Direct materials efficiency b. Variable overhead efficiency c. Direct materials cost d. Direct labor efficiency 70. T/F An unfavorable variance means more cost has been incurred than planned 71. T/F Centralized operations are better for small companies due to their smaller scope of their operations 72. Companies in which owners are top executives make all the planning directing and controlling decisions are ____ companies a. Centralized b. Decentralized c. Formalized d. Segmented 73. T/F The practice of operating a companies achievements against the best practice in the industry is known as gold concurrence 74. The performance evaluation system should provide incentive to segment managers for coordinating activities of the sub units and directing them towards the overall company goals 75. Which of the following performance measurement goals has been described by this statement a. Motivating seggmant managers b. Promoting gold concurrence c. Providing feedback d. Benchmarking 76. T/F Because profit centers are only responsible for controlling cost their performance reports include only information on actual cost versus budgeted cost 77. Which of the following is most likely to appear on the responsibility report for the manufacturing production supervisor a. Direct labor cost b. Factory Rent c. Advertising Cost d. Deprecations 78. T/F Investment center managers are responsible for generating profits and making the best use of the investment centers assets 79. To evaluate the financial performance of an investment center a business needs key performance indicators that measure ____ a. Manufacturing Efficiency and product defect rate b. Operating income and the use center asset c. Customer satisfaction and market share d. Generation of sales revenue and control of sales revenue 80. T/F the transfer price is the transaction amount of one unit of goods when the transaction occurs between the company and its customers 81. The transaction amount for one unit of goods when the transaction occurs between divisions within the same company is the ___ a. Transfer Price b. Opportunity Cost c. Variable Cost d. Sales Price 82. T/F When considering whether to replace building roof the total amount paid for previous roof repairs is relevant to the business decision 83. T/F Company is considering purchasing a new truck decision has been narrowed to two models the cost of each of the tricks is relevant to the business decision 84. Which of the following is not one of the steps in the managerial decision making process a. Basing decisions on sunk cost b. Defining business goals c. Identify alternative courses of action d. Gathering and analyzing relevant information 85. T/F Target full product cost equals the revenue at the market price minus the desired profit 86. T/F Price setters emphasize a target pricing approach while price takers emphasize a cost plus pricing approach 87. T/F Companies that are price takers have considerable flexibility in setting the prices of their products 88. T/F Assuming there are no other significant consideration a product line with a negative contribution margin should be dropped 89. In deciding whether to drop its electronic products line a company manager should ignore ____ a. The variable and fixed cost which would be saved b. The Revenue it would lose c. The effect of dropping the product line on the sales of other product lines d. The amount of unavoidable fixed cost 90. T/F An outsourcing decision is a choice made by management about whether to make a component internally or from an outside source 91. ___ refers to the benefit given up by choosing an alternate course of action a. Opportunity cost b. Sunk Cost c. Relevant Cost d. Irrelevant Cost 92. T/F An operational asset used for a long period of time is known as a capital asset 93. Capital budgeting involves _____ a. Budgeting for yearly operational expenses b. Preparing the sales budget for the coming year c. Evaluating various long term investment d. Analyzing various alternatives of financing available to a company 94. T/F Capital rationing is a process adopted when the company has limited resources and it must find ways to reduce operating expenses in all the division and units 95. T/F All else being equal investments with longer pay back periods are preferable 96. T/F A major criticism of the pay back method is that it only focuses only on the time to recover the investments and ignores profitability 97. T/F The pay back method is used only when the net cash inflows from the capitol investments are the same in each period 98. T/F The fact that invested cash earns interest over time is called the time value of money 99. Which of the following describes the time value of money? a. The time value of money has no effect on the capital investments b. Money losing its purchasing power over time due to inflation c. The fact that the invested cash may not earn interest over time is called the time value of money d. A dollar received today is worth more than a dollar to be received in the future 100. Discounted cash flow methods typically ____ a. Use simple interest calculation b. Assume the cash flows will be invested when received c. Focus on the payback period d. Comply with the requirements with GAAP 101. T/F The residual value is discounted as a single lump sum because it will be received only once when the asset is sold