Test Questions Question No 1 Information is relevant in business decisions if it is a(n) A past revenue and it differs among alternatives B expected future revenue and it differs among alternatives C expected future revenue that differs from past revenue D expected future revenue or it differs among alternatives Question No 2 In determining whether to purchase a labor saving machine, extreme resistance to the machine by employees would be a(n) A relevant qualitative factor B relevant quantitative factor C irrelevant qualitative factor D irrelevant quantitative factor Question No 3 The contribution approach to the income statement emphasizes the distinction between A value chain functions B different business segments C variable and fixed costs D different functional areas in a firm Question No 4 Sue is considering leaving her current position to open a coffee shop Sue's current annual salary is $83,000 Annual coffee shop revenue and costs are estimated at $260,000 and $210,000, respectively What is Sue's opportunity cost of staying at her current work position A $50,000 B $210,000 C $343,000 D $83,000 Question No 5 budgeting is when budgets are formulated with the active involvement of all affected employees A Zero based B Team C Participative D Rolling Question No 6 What is the sequence of steps in preparing the master budget A Output from the financial budget is used to prepare the budgeted income statement B Output from the financial budget is used to prepare the operating budget C Output from the operating budget is used to prepare the financial budget D Output from the financial budget is used to prepare the operating expense budget Question No 7 Wininger Company is preparing a cash budget for the month of June The following information is available Cash Balance, May 31, 2015 $20,000 Cash collections from customers in June 46,000 Cash paid for merchandise in June 42,000 Paid operating expenses in June 12,000 Purchase furniture for cash in June 3,000 Depreciation expense in June 2,000 Amortization expense in June 4,000 The minimum cash balance desired is $10,000 What is the deficiency of cash before financing at June 30, 2015 A $(11,000) B $(7,000) C $(1,000) D $(3,000) Question No 8 The flex in the flexible budget relates solely to variable costs Do you agree Explain A No Fixed costs are also adjusted in a flexible budget to reflect varying levels of activity Therefore, flexible budgets are flexible with respect to both variable and fixed costs B Yes Flexible budgets are flexible only with respect to variable costs By definition, fixed costs do not change with the level of activity, and therefore there is no flex in the fixed cost portion of a flexible budget C No Flexible budgets are prepared for only one expected level of activity By definition, fixed costs do not change with the level of activity, and therefore fixed costs are the only costs included in a flexible budget D Yes Flexible budgets are flexible only with respect to variable costs Although fixed costs change with the level of activity, only variable costs are evaluated in a flexible budget Question No 9 To calculate the numbers in a flexible budget, managers use A cost functions developed from regression analysis B cost functions obtained from the high low method C flexible budget formulas D all of the above Question No 10 Which is NOT a reason for a static budget variance A Actual variable costs were higher than static budget variable costs B Actual sales volume in current period was higher than projected sales volume in last period C Actual sales volume was higher than projected sales volume D Actual fixed costs were higher than static budget fixed costs Question No 11 Rate variances are the same as variances Efficiency variances are the same as variances A usage quantity B spending effective C activity static D price quantity Question No 12 is the logical integration of techniques to gather and use data for planning and control decisions and to evaluate performance A A quality control system B A management control system C An internal control system D A financial reporting system Question No 13 To design a management control system that meets an organization's needs, managers must identify what motivates employees, and A develop performance measures based on these employee motivators establish a monitoring and reporting structure for the performance measures B develop performance measures that meet organizational objectives establish an accounting system to measure productivity C develop performance measures to encourage managerial effort establish a monitoring and reporting structure for productivity D develop performance measures based on goal congruence establish an accounting system to measure goal congruence Question No 14 Goal congruence exists when A the management control system reflects the organization's goals B employees respond to incentives created by a management control system and make decisions that help meet the goals of the organization C performance reports are used constructively D short run goals and long run goals are the same Question No 15 To calculate income before taxes for a segmented company as a whole, take contribution by segments and subtract A costs controllable by segment managers B costs controllable by third parties C unallocated costs D allocated costs Question No 16 What is a balanced scorecard and why are more companies using one What is a balanced scorecard A A performance report that contains measures of all the key financial and nonfinancial variables that are important for a company to prosper B A logical integration of techniques to gather and use information to make planning and controldecisions, to motivate employee behavior, and to evaluate performance C A measurement technique that focuses on prevention of defects and on achievement of customer satisfaction D A characteristic or attribute that must be achieved in order to drive the organization towards its goals Why are more com Why are more companies using a balanced scorecard A Companies find that it compares profit to investment using measures such as return on investment or residual income B Companies find that it is a useful tool to help managers focus on the multidimensional factors that make an organization successful C Companies find that it builds on the assumption that an organization minimizes the cost of quality when it achieves high quality levels D Companies find that it facilitates forecasting and budgeting and communicates results of actions across the organization Question No 17 What kinds of organizations find decentralization to be preferable to centralization A Profit seeking organizations prefer decentralization because if a local manager makes poordecisions, the results will be less obvious B Decentralization is usually most successful in organizations where segments are relatively independent If segments buy from or sell to one another, or if there are many common customers orsuppliers, decentralization is less likely to be desirable C Organizations with top managers who like to be involved in all decision making are more likely to prefer decentralization D Decentralization is usually most successful in nonprofit organizations (where results can be measured more easily) Question No 18 Which of the following statements about management control systems is FALSE A Profit center managers always have more decentralized decision making authority than cost center managers B The design of a management control system should consider the responsibilities of managers and the amount of autonomy they have C In designing management control systems, top managers must consider the system's impact on the employee behavior desired by the organization D The management control system should be designed to achieve the best possible alignment between managerial effort and goal congruence Question No 19 How does economic profit differ from net income A The major difference is that economic profit includes a capital charge, that is, a cost of using all capital In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D B The major difference is that net income includes a capital charge, that is, a cost of using all capital In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D C The major difference is that net income includes a capital charge, that is, a cost of using all capital In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D D The major difference is that economic profit includes a capital charge, that is, a cost of using all capital In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D Question No 20 Which of the following departments is NOT a service department A laundry department in a hospital B maintenance department in a hospital C surgery floor in a hospital D housekeeping department in a hospital Question No 21 Budgeted cost rates are used for allocating variable costs of service departments to user departments because A it provides service departments a greater incentive to be efficient B it protects user departments from inefficiencies in service departments C it protects managers in service departments from inflation D A and B Question No 22 When determining product costs, the last step in the traditional approach to cost allocation is A trace direct costs to products B divide costs in each producing department into direct costs and indirect costs C select cost pools and cost allocation bases in each production department and assign indirect department costs to the appropriate cost pool D allocate the costs in each cost pool to the products in proportion to their usage of the related cost allocation base Question No 23 USC Company has the following information available Budgeted factory overhead costs $90,000 Actual factory overhead costs $80,000 Budgeted direct labor hours 20,000 Actual direct labor hours 21,000 Assume direct labor hours are the cost driver of factory overhead costs The budgeted factory overhead rate is A $4 50 per direct labor hour B $4 00 per direct labor hour C $3 57 per direct labor hour D $3 81 per direct labor hour Question No 24 If a department identifies more than one cost driver for overhead costs, the department ideally should A create as many cost pools as there are cost drivers B put 80 percent of the costs into one pool and 20 percent into a second pool C allocate 80 percent of the costs with 20 percent of the cost drivers D select a single cost driver Question No 25 The only difference between the net income between variable costing and absorption costing is the treatment of A fixed selling costs B fixed manufacturing overhead costs C variable administrative costs D variable selling costs Question No 26 Is the comparison of actual overhead costs to budgeted overhead costs part of the product costing process or part of the control process Explain The comparison of actual overhead costs to budgeted overhead costs is part of the Control Process or 2) Product Costing Process Then it is part of this process because A it tells managers how to control actual overhead costs B it tells managers when the actual results differ from what was expected C it tells managers how to control inventory costs D it tells managers how to improve the process Question No 27 The production volume variance is a line item on the income statement A variable costing B absorption costing and variable costing C absorption costing D contribution approach Question No 28 The system is better suited for a single physical unit or a few similar units A activity based costing B job order costing C process costing D activity based management Question No 29 In a job order system, accountants apply factory overhead costs to Work In Process Inventory by using the The company does not use activity based costing A budgeted overhead rate B actual overhead costs C actual overhead rate D budgeted indirect costs for value chain functions Question No 30 Durante Company produces plastic cups in a one department process The following data is available for the past month Work in process inventory, beginning 0 Units started 60,000 Units completed and transferred 48,000 Work in process inventory, ending 12,000 The units in process at the end of the month are 100 percent complete with respect to materials and 50 percent complete with respect to conversion costs What are the equivalent units for conversion costs for the month A 30,000 B 60,000 C 54,000 D 12,000 Test Questions Question No 1 Information is relevant in business decisions if it is a(n) A past revenue and it differs among alternatives B expected future revenue and it differs among alternatives C expected future revenue that differs from past revenue D expected future revenue or it differs among alternatives Question No 2 In determining whether to purchase a labor saving machine, extreme resistance to the machine by employees would be a(n) A relevant qualitative factor B relevant quantitative factor C irrelevant qualitative factor D irrelevant quantitative factor Question No 3 The contribution approach to the income statement emphasizes the distinction between A value chain functions B different business segments C variable and fixed costs D different functional areas in a firm Question No 4 Sue is considering leaving her current position to open a coffee shop Sue's current annual salary is $83,000 Annual coffee shop revenue and costs are estimated at $260,000 and $210,000, respectively What is Sue's opportunity cost of staying at her current work position A $50,000 B $210,000 C $343,000 D $83,000 Question No 5 budgeting is when budgets are formulated with the active involvement of all affected employees A Zerobased B Team C Participative D Rolling Question No 6 What is the sequence of steps in preparing the master budget A Output from the financial budget is used to prepare the budgeted income statement B Output from the financial budget is used to prepare the operating budget C Output from the operating budget is used to prepare the financial budget D Output from the financial budget is used to prepare the operating expense budget Question No 7 Wininger Company is preparing a cash budget for the month of June The following information is available Cash Balance, May 31, 2015 $20,000 Cash collections from customers in June 46,000 Cash paid for merchandise in June 42,000 Paid operating expenses in June 12,000 Purchase furniture for cash in June 3,000 Depreciation expense in June 2,000 Amortization expense in June 4,000 The minimum cash balance desired is $10,000 What is the deficiency of cash before financing at June 30, 2015 A $(11,000) B $(7,000) C $(1,000) D $(3,000) Question No 8 The flex in the flexible budget relates solely to variable costs Do you agree Explain A No Fixed costs are also adjusted in a flexible budget to reflect varying levels of activity Therefore, flexible budgets are flexible with respect to both variable and fixed costs B Yes Flexible budgets are flexible only with respect to variable costs By definition, fixed costs do not change with the level of activity, and therefore there is no flex in the fixed cost portion of a flexible budget C No Flexible budgets are prepared for only one expected level of activity By definition, fixed costs do not change with the level of activity, and therefore fixed costs are the only costs included in a flexible budget D Yes Flexible budgets are flexible only with respect to variable costs Although fixed costs change with the level of activity, only variable costs are evaluated in a flexible budget Question No 9 To calculate the numbers in a flexible budget, managers use A cost functions developed from regression analysis B cost functions obtained from the highlow method C flexible budget formulas D all of the above Question No 10 Which is NOT a reason for a static budget variance A Actual variable costs were higher than static budget variable costs B Actual sales volume in current period was higher than projected sales volume in last period C Actual sales volume was higher than projected sales volume D Actual fixed costs were higher than static budget fixed costs Question No 11 Rate variances are the same as variances Efficiency variances are the same as variances A usage quantity B spending effective C activity static D price quantity Question No 12 is the logical integration of techniques to gather and use data for planning and control decisions and to evaluate performance A A quality control system B A management control system C An internal control system D A financial reporting system Question No 13 To design a management control system that meets an organization's needs, managers must identify what motivates employees, and A develop performance measures based on these employee motivators establish a monitoring and reporting structure for the performance measures B develop performance measures that meet organizational objectives establish an accounting system to measure productivity C develop performance measures to encourage managerial effort establish a monitoring and reporting structure for productivity D develop performance measures based on goal congruence establish an accounting system to measure goal congruence Question No 14 Goal congruence exists when A the management control system reflects the organization's goals B employees respond to incentives created by a management control system and make decisions that help meet the goals of the organization C performance reports are used constructively D shortrun goals and longrun goals are the same Question No 15 To calculate income before taxes for a segmented company as a whole, take contribution by segments and subtract A costs controllable by segment managers B costs controllable by third parties C unallocated costs D allocated costs Question No 16 What is a balanced scorecard and why are more companies using one What is a balanced scorecard A A performance report that contains measures of all the key financial and nonfinancial variables that are important for a company to prosper B A logical integration of techniques to gather and use information to make planning and controldecisions, to motivate employee behavior, and to evaluate performance C A measurement technique that focuses on prevention of defects and on achievement of customer satisfaction D A characteristic or attribute that must be achieved in order to drive the organization towards its goals Why are more com Why are more companies using a balanced scorecard A Companies find that it compares profit to investment using measures such as return on investment or residual income B Companies find that it is a useful tool to help managers focus on the multidimensional factors that make an organization successful C Companies find that it builds on the assumption that an organization minimizes the cost of quality when it achieves high quality levels D Companies find that it facilitates forecasting and budgeting and communicates results of actions across the organization Question No 17 What kinds of organizations find decentralization to be preferable to centralization A Profit seeking organizations prefer decentralization because if a local manager makes poordecisions, the results will be less obvious B Decentralization is usually most successful in organizations where segments are relatively independent If segments buy from or sell to one another, or if there are many common customers orsuppliers, decentralization is less likely to be desirable C Organizations with top managers who like to be involved in all decision making are more likely to prefer decentralization D Decentralization is usually most successful in nonprofit organizations (where results can be measured more easily) Question No 18 Which of the following statements about management control systems is FALSE A Profitcenter managers always have more decentralized decisionmaking authority than costcenter managers B The design of a management control system should consider the responsibilities of managers and the amount of autonomy they have C In designing management control systems, top managers must consider the system's impact on the employee behavior desired by the organization D The management control system should be designed to achieve the best possible alignment between managerial effort and goal congruence Question No 19 How does economic profit differ from net income A The major difference is that economic profit includes a capital charge, that is, a cost of using all capital In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D B The major difference is that net income includes a capital charge, that is, a cost of using all capital In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D C The major difference is that net income includes a capital charge, that is, a cost of using all capital In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D D The major difference is that economic profit includes a capital charge, that is, a cost of using all capital In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R D Question No 20 Which of the following departments is NOT a service department A laundry department in a hospital B maintenance department in a hospital C surgery floor in a hospital D housekeeping department in a hospital Question No 21 Budgeted cost rates are used for allocating variable costs of service departments to user departments because A it provides service departments a greater incentive to be efficient B it protects user departments from inefficiencies in service departments C it protects managers in service departments from inflation D A and B Question No 22 When determining product costs, the last step in the traditional approach to cost allocation is A trace direct costs to products B divide costs in each producing department into direct costs and indirect costs C select cost pools and cost allocation bases in each production department and assign indirect department costs to the appropriate cost pool D allocate the costs in each cost pool to the products in proportion to their usage of the related costallocation base Question No 23 USC Company has the following information available Budgeted factory overhead costs $90,000 Actual factory overhead costs $80,000 Budgeted direct labor hours 20,000 Actual direct labor hours 21,000 Assume direct labor hours are the cost driver of factory overhead costs The budgeted factory overhead rate is A $4 50 per direct labor hour B $4 00 per direct labor hour C $3 57 per direct labor hour D $3 81 per direct labor hour Question No 24 If a department identifies more than one cost driver for overhead costs, the department ideally should A create as many cost pools as there are cost drivers B put 80 percent of the costs into one pool and 20 percent into a second pool C allocate 80 percent of the costs with 20 percent of the cost drivers D select a single cost driver Question No 25 The only difference between the net income between variable costing and absorption costing is the treatment of A fixed selling costs B fixed manufacturing overhead costs C variable administrative costs D variable selling costs Question No 26 Is the comparison of actual overhead costs to budgeted overhead costs part of the product costing process or part of the control process Explain The comparison of actual overhead costs to budgeted overhead costs is part of the I) Control Process or 2) Product Costing Process Then it is part of this process because A it tells managers how to control actual overhead costs B it tells managers when the actual results differ from what was expected C it tells managers how to control inventory costs D it tells managers how to improve the process Question No 27 The production volume variance is a line item on the income statement A variable costing B absorption costing and variable costing C absorption costing D contribution approach Question No 28 The system is better suited for a single physical unit or a few similar units A activitybased costing B joborder costing C processcosting D activitybased management Question No 29 In a joborder system, accountants apply factory overhead costs to WorkInProcess Inventory by using the The company does not use activitybased costing A budgeted overhead rate B actual overhead costs C actual overhead rate D budgeted indirect costs for value chain functions Question No 30 Durante Company produces plastic cups in a onedepartment process The following data is available for the past month Workinprocess inventory, beginning 0 Units started 60,000 Units completed and transferred 48,000 Workinprocess inventory, ending 12,000 The units in process at the end of the month are 100 percent complete with respect to materials and 50 percent complete with respect to conversion costs What are the equivalent units for conversion costs for the month A 30,000 B 60,000 C 54,000 D 12,000

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Test Questions Question No 1 Information is relevant in business decisions if it is a(n) ________. A. past revenue and it differs among alternatives B.

Test Questions

Question No 1

Information is relevant in business decisions if it is a(n) ________.

past revenue and it differs among alternatives

expected future revenue and it differs among alternatives

expected future revenue that differs from past revenue

expected future revenue or it differs among alternatives

Question No 2

In determining whether to purchase a labor ?saving machine, extreme resistance to the machine by employees would be a(n) ________.

relevant qualitative factor

relevant quantitative factor

irrelevant qualitative factor

irrelevant quantitative factor

Question No 3

The contribution approach to the income statement emphasizes the distinction between ________.

value chain functions

different business segments

variable and fixed costs

different functional areas in a firm

Question No 4

Sue is considering leaving her current position to open a coffee shop. Sue's current annual salary is $83,000. Annual coffee shop revenue and costs are estimated at $260,000 and $210,000, respectively. What is Sue's opportunity cost of staying at her current work position?

$50,000

$210,000

$343,000

$83,000

Question No 5

________ budgeting is when budgets are formulated with the active involvement of all affected employees.

Zero?based

Team

Participative

Rolling

Question No 6

What is the sequence of steps in preparing the master budget?

Output from the financial budget is used to prepare the budgeted income statement.

Output from the financial budget is used to prepare the operating budget.

Output from the operating budget is used to prepare the financial budget.

Output from the financial budget is used to prepare the operating expense budget.

Question No 7

Wininger Company is preparing a cash budget for the month of June. The following information is available:

Cash Balance, May 31, 2015 $20,000

Cash collections from customers in June 46,000

Cash paid for merchandise in June 42,000

Paid operating expenses in June 12,000

Purchase furniture for cash in June ???3,000

Depreciation expense in June 2,000

Amortization expense in June 4,000

The minimum cash balance desired is $10,000. What is the deficiency of cash before financing at June 30, 2015?

$(11,000)

$(7,000)

$(1,000)

$(3,000)

Question No 8

"The flex in the flexible budget relates solely to variable costs." Do you agree? Explain.

No. Fixed costs are also adjusted in a flexible budget to reflect varying levels of activity. Therefore, flexible budgets are flexible with respect to both variable and fixed costs.

Yes. Flexible budgets are flexible only with respect to variable costs. By definition, fixed costs do not change with the level of activity, and therefore there is no "flex" in the fixed cost portion of a flexible budget.

No. Flexible budgets are prepared for only one expected level of activity. By definition, fixed costs do not change with the level of activity, and therefore fixed costs are the only costs included in a flexible budget.

Yes. Flexible budgets are flexible only with respect to variable costs. Although fixed costs change with the level of activity, only variable costs are evaluated in a flexible budget.

Question No 9

To calculate the numbers in a flexible budget, managers use ________.

cost functions developed from regression analysis

cost functions obtained from the

high?low method

flexible budget formulas

all of the above

Question No 10

Which is NOT a reason for a static budget variance?

Actual variable costs were higher than static budget variable costs.

Actual sales volume in current period was higher than projected sales volume in last period.

Actual sales volume was higher than projected sales volume.

Actual fixed costs were higher than static budget fixed costs.

Question No 11

Rate variances are the same as ________ variances. Efficiency variances are the same as ________ variances.

usage; quantity

spending; effective

activity; static

price; quantity

Question No 12

________ is the logical integration of techniques to gather and use data for planning and control decisions and to evaluate performance.

A quality control system

A management control system

An internal control system

A financial reporting system

Question No 13

To design a management control system that meets an organization's needs, managers must identify what motivates employees, ________ and ________.

develop performance measures based on these employee motivators; establish a monitoring and reporting structure for the performance measures

develop performance measures that meet organizational objectives; establish an accounting system to measure productivity

develop performance measures to encourage managerial effort; establish a monitoring and reporting structure for productivity

develop performance measures based on goal congruence; establish an accounting system to measure goal congruence

Question No 14

Goal congruence exists when ________.

the management control system reflects the organization's goals

employees respond to incentives created by a management control system and make decisions that help meet the goals of the organization

performance reports are used constructively

short?run goals and long?run goals are the same

Question No 15

To calculate income before taxes for a segmented company as a whole, take contribution by segments and subtract ________.

costs controllable by segment managers

costs controllable by third parties

unallocated costs

allocated costs

Question No 16

What is a balanced scorecard and why are more companies using one?

What is a balanced scorecard?

A performance report that contains measures of all the key financial and nonfinancial variables that are important for a company to prosper.

A logical integration of techniques to gather and use information to make planning and controldecisions, to motivate employee behavior, and to evaluate performance.

A measurement technique that focuses on prevention of defects and on achievement of customer satisfaction.

A characteristic or attribute that must be achieved in order to drive the organization towards its goals.??

Why are more com

Why are more companies using a balanced scorecard?

Companies find that it compares profit to investment using measures such as return on investment or residual income.

Companies find that it is a useful tool to help managers focus on the multidimensional factors that make an organization successful.

Companies find that it builds on the assumption that an organization minimizes the cost of quality when it achieves high quality levels.

Companies find that it facilitates forecasting and budgeting and communicates results of actions across the organization.

Question No 17

What kinds of organizations find decentralization to be preferable to centralization?

Profit-seeking organizations prefer decentralization because if a local manager makes poordecisions, the results will be less obvious.

Decentralization is usually most successful in organizations where segments are relatively independent. If segments buy from or sell to one another, or if there are many common customers orsuppliers, decentralization is less likely to be desirable.

Organizations with top managers who like to be involved in all decision-making are more likely to prefer decentralization.

Decentralization is usually most successful in nonprofit organizations (where results can be measured more easily).

Question No 18

Which of the following statements about management control systems is FALSE?

Profit?center managers always have more decentralized decision?making authority than

cost?center managers.

The design of a management control system should consider the responsibilities of managers and the amount of autonomy they have.

In designing management control systems, top managers must consider the system's impact on the employee behavior desired by the organization.

The management control system should be designed to achieve the best possible alignment between managerial effort and goal congruence.

Question No 19

How does economic profit differ from net income?

The major difference is that economic profit includes a capital charge, that is, a cost of using all capital. In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

The major difference is that net income includes a capital charge, that is, a cost of using all capital. In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

The major difference is that net income includes a capital charge, that is, a cost of using all capital. In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

The major difference is that economic profit includes a capital charge, that is, a cost of using all capital. In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D.

Question No 20

Which of the following departments is NOT a service department?

laundry department in a hospital

maintenance department in a hospital

surgery floor in a hospital

housekeeping department in a hospital

Question No 21

Budgeted cost rates are used for allocating variable costs of service departments to user departments because ________.

it provides service departments a greater incentive to be efficient

it protects user departments from inefficiencies in service departments

it protects managers in service departments from inflation

A and B

Question No 22

When determining product costs, the last step in the traditional approach to cost allocation is ________.

trace direct costs to products

divide costs in each producing department into direct costs and indirect costs

select cost pools and cost allocation bases in each production department and assign indirect department costs to the appropriate cost pool

allocate the costs in each cost pool to the products in proportion to their usage of the related

cost?allocation

base

Question No 23

USC Company has the following information available:

Budgeted factory overhead costs $90,000

Actual factory overhead costs $80,000

Budgeted direct labor hours 20,000

Actual direct labor hours 21,000

Assume direct labor hours are the cost driver of factory overhead costs. The budgeted factory overhead rate is ________.

$4.50 per direct labor hour

$4.00 per direct labor hour

$3.57 per direct labor hour

$3.81 per direct labor hour

Question No 24

If a department identifies more than one cost driver for overhead costs, the department ideally should________.

create as many cost pools as there are cost drivers

put 80 percent of the costs into one pool and 20 percent into a second pool

allocate 80 percent of the costs with 20 percent of the cost drivers

select a single cost driver

Question No 25

The only difference between the net income between variable costing and absorption costing is the treatment of ________.

fixed selling costs

fixed manufacturing overhead costs

variable administrative costs

variable selling costs

Question No 26

Is the comparison of actual overhead costs to budgeted overhead costs part of the product-costing process or part of the control process? Explain.

The comparison of actual overhead costs to budgeted overhead costs is part of the

Control Process or 2) Product Costing Process

Then

it is part of this process because

it tells managers how to control actual overhead costs.

it tells managers when the actual results differ from what was expected.

it tells managers how to control inventory costs.

it tells managers how to improve the process.

Question No 27

The production volume variance is a line item on the ________ income statement.

variable costing

absorption costing and variable costing

absorption costing

contribution approach

Question No 28

The ________ system is better suited for a single physical unit or a few similar units.

activity?based costing

job?order costing

process?costing

activity?based management

Question No 29

In a job?order system, accountants apply factory overhead costs to

Work?In?Process Inventory by using the ________. The company does not use

activity?based costing.

budgeted overhead rate

actual overhead costs

actual overhead rate

budgeted indirect costs for value chain functions

Question No 30

Durante Company produces plastic cups in a one?department

process. The following data is available for the past month:

Work?in?process inventory, beginning 0

Units started 60,000

Units completed and transferred 48,000

Work?in?process inventory, ending 12,000

The units in process at the end of the month are 100 percent complete with respect to materials and 50 percent complete with respect to conversion costs. What are the equivalent units for conversion costs for the month?

30,000

60,000

54,000

12,000

Test Questions Question No 1 Information is relevant in business decisions if it is a(n) ________. A. past revenue and it differs among alternatives B. expected future revenue and it differs among alternatives C. expected future revenue that differs from past revenue D. expected future revenue or it differs among alternatives Question No 2 In determining whether to purchase a labor saving machine, extreme resistance to the machine by employees would be a(n) ________. A. relevant qualitative factor B. relevant quantitative factor C. irrelevant qualitative factor D. irrelevant quantitative factor Question No 3 The contribution approach to the income statement emphasizes the distinction between ________. A. value chain functions B. different business segments C. variable and fixed costs D. different functional areas in a firm Question No 4 Sue is considering leaving her current position to open a coffee shop. Sue's current annual salary is $83,000. Annual coffee shop revenue and costs are estimated at $260,000 and $210,000, respectively. What is Sue's opportunity cost of staying at her current work position? A. $50,000 B. $210,000 C. $343,000 D. $83,000 Question No 5 ________ budgeting is when budgets are formulated with the active involvement of all affected employees. A. Zerobased B. Team C. Participative D. Rolling Question No 6 What is the sequence of steps in preparing the master budget? A. Output from the financial budget is used to prepare the budgeted income statement. B. Output from the financial budget is used to prepare the operating budget. C. Output from the operating budget is used to prepare the financial budget. D. Output from the financial budget is used to prepare the operating expense budget. Question No 7 Wininger Company is preparing a cash budget for the month of June. The following information is available: Cash Balance, May 31, 2015 $20,000 Cash collections from customers in June 46,000 Cash paid for merchandise in June 42,000 Paid operating expenses in June 12,000 Purchase furniture for cash in June 3,000 Depreciation expense in June 2,000 Amortization expense in June 4,000 The minimum cash balance desired is $10,000. What is the deficiency of cash before financing at June 30, 2015? A. $(11,000) B. $(7,000) C. $(1,000) D. $(3,000) Question No 8 "The flex in the flexible budget relates solely to variable costs." Do you agree? Explain. A. No. Fixed costs are also adjusted in a flexible budget to reflect varying levels of activity. Therefore, flexible budgets are flexible with respect to both variable and fixed costs. B. Yes. Flexible budgets are flexible only with respect to variable costs. By definition, fixed costs do not change with the level of activity, and therefore there is no "flex" in the fixed cost portion of a flexible budget. C. No. Flexible budgets are prepared for only one expected level of activity. By definition, fixed costs do not change with the level of activity, and therefore fixed costs are the only costs included in a flexible budget. D. Yes. Flexible budgets are flexible only with respect to variable costs. Although fixed costs change with the level of activity, only variable costs are evaluated in a flexible budget. Question No 9 To calculate the numbers in a flexible budget, managers use ________. A. cost functions developed from regression analysis B. cost functions obtained from the highlow method C. flexible budget formulas D. all of the above Question No 10 Which is NOT a reason for a static budget variance? A. Actual variable costs were higher than static budget variable costs. B. Actual sales volume in current period was higher than projected sales volume in last period. C. Actual sales volume was higher than projected sales volume. D. Actual fixed costs were higher than static budget fixed costs. Question No 11 Rate variances are the same as ________ variances. Efficiency variances are the same as ________ variances. A. usage; quantity B. spending; effective C. activity; static D. price; quantity Question No 12 ________ is the logical integration of techniques to gather and use data for planning and control decisions and to evaluate performance. A. A quality control system B. A management control system C. An internal control system D. A financial reporting system Question No 13 To design a management control system that meets an organization's needs, managers must identify what motivates employees, ________ and ________. A. develop performance measures based on these employee motivators; establish a monitoring and reporting structure for the performance measures B. develop performance measures that meet organizational objectives; establish an accounting system to measure productivity C. develop performance measures to encourage managerial effort; establish a monitoring and reporting structure for productivity D. develop performance measures based on goal congruence; establish an accounting system to measure goal congruence Question No 14 Goal congruence exists when ________. A. the management control system reflects the organization's goals B. employees respond to incentives created by a management control system and make decisions that help meet the goals of the organization C. performance reports are used constructively D. shortrun goals and longrun goals are the same Question No 15 To calculate income before taxes for a segmented company as a whole, take contribution by segments and subtract ________. A. costs controllable by segment managers B. costs controllable by third parties C. unallocated costs D. allocated costs Question No 16 What is a balanced scorecard and why are more companies using one? What is a balanced scorecard? A. A performance report that contains measures of all the key financial and nonfinancial variables that are important for a company to prosper. B. A logical integration of techniques to gather and use information to make planning and controldecisions, to motivate employee behavior, and to evaluate performance. C. A measurement technique that focuses on prevention of defects and on achievement of customer satisfaction. D. A characteristic or attribute that must be achieved in order to drive the organization towards its goals. Why are more com Why are more companies using a balanced scorecard? A. Companies find that it compares profit to investment using measures such as return on investment or residual income. B. Companies find that it is a useful tool to help managers focus on the multidimensional factors that make an organization successful. C. Companies find that it builds on the assumption that an organization minimizes the cost of quality when it achieves high quality levels. D. Companies find that it facilitates forecasting and budgeting and communicates results of actions across the organization. Question No 17 What kinds of organizations find decentralization to be preferable to centralization? A. Profit-seeking organizations prefer decentralization because if a local manager makes poordecisions, the results will be less obvious. B. Decentralization is usually most successful in organizations where segments are relatively independent. If segments buy from or sell to one another, or if there are many common customers orsuppliers, decentralization is less likely to be desirable. C. Organizations with top managers who like to be involved in all decision-making are more likely to prefer decentralization. D. Decentralization is usually most successful in nonprofit organizations (where results can be measured more easily). Question No 18 Which of the following statements about management control systems is FALSE? A. Profitcenter managers always have more decentralized decisionmaking authority than costcenter managers. B. The design of a management control system should consider the responsibilities of managers and the amount of autonomy they have. C. In designing management control systems, top managers must consider the system's impact on the employee behavior desired by the organization. D. The management control system should be designed to achieve the best possible alignment between managerial effort and goal congruence. Question No 19 How does economic profit differ from net income? A. The major difference is that economic profit includes a capital charge, that is, a cost of using all capital. In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D. B. The major difference is that net income includes a capital charge, that is, a cost of using all capital. In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D. C. The major difference is that net income includes a capital charge, that is, a cost of using all capital. In contrast, economic profit includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of economic profit rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D. D. The major difference is that economic profit includes a capital charge, that is, a cost of using all capital. In contrast, net income includes a charge for using debt capital (interest) but no charge for using equity capital. Some measures of net income rely primarily on financial reporting numbers and others, such as EVA, include adjustments such as deducting cash taxes rather than tax expense or capitalizing rather than expensing R&D. Question No 20 Which of the following departments is NOT a service department? A. laundry department in a hospital B. maintenance department in a hospital C. surgery floor in a hospital D. housekeeping department in a hospital Question No 21 Budgeted cost rates are used for allocating variable costs of service departments to user departments because ________. A. it provides service departments a greater incentive to be efficient B. it protects user departments from inefficiencies in service departments C. it protects managers in service departments from inflation D. A and B Question No 22 When determining product costs, the last step in the traditional approach to cost allocation is ________. A. trace direct costs to products B. divide costs in each producing department into direct costs and indirect costs C. select cost pools and cost allocation bases in each production department and assign indirect department costs to the appropriate cost pool D. allocate the costs in each cost pool to the products in proportion to their usage of the related costallocation base Question No 23 USC Company has the following information available: Budgeted factory overhead costs $90,000 Actual factory overhead costs $80,000 Budgeted direct labor hours 20,000 Actual direct labor hours 21,000 Assume direct labor hours are the cost driver of factory overhead costs. The budgeted factory overhead rate is ________. A. $4.50 per direct labor hour B. $4.00 per direct labor hour C. $3.57 per direct labor hour D. $3.81 per direct labor hour Question No 24 If a department identifies more than one cost driver for overhead costs, the department ideally should________. A. create as many cost pools as there are cost drivers B. put 80 percent of the costs into one pool and 20 percent into a second pool C. allocate 80 percent of the costs with 20 percent of the cost drivers D. select a single cost driver Question No 25 The only difference between the net income between variable costing and absorption costing is the treatment of ________. A. fixed selling costs B. fixed manufacturing overhead costs C. variable administrative costs D. variable selling costs Question No 26 Is the comparison of actual overhead costs to budgeted overhead costs part of the product-costing process or part of the control process? Explain. The comparison of actual overhead costs to budgeted overhead costs is part of the I) Control Process or 2) Product Costing Process Then it is part of this process because A. it tells managers how to control actual overhead costs. B. it tells managers when the actual results differ from what was expected. C. it tells managers how to control inventory costs. D. it tells managers how to improve the process. Question No 27 The production volume variance is a line item on the ________ income statement. A. variable costing B. absorption costing and variable costing C. absorption costing D. contribution approach Question No 28 The ________ system is better suited for a single physical unit or a few similar units. A. activitybased costing B. joborder costing C. processcosting D. activitybased management Question No 29 In a joborder system, accountants apply factory overhead costs to WorkInProcess Inventory by using the ________. The company does not use activitybased costing. A. budgeted overhead rate B. actual overhead costs C. actual overhead rate D. budgeted indirect costs for value chain functions Question No 30 Durante Company produces plastic cups in a onedepartment process. The following data is available for the past month: Workinprocess inventory, beginning 0 Units started 60,000 Units completed and transferred 48,000 Workinprocess inventory, ending 12,000 The units in process at the end of the month are 100 percent complete with respect to materials and 50 percent complete with respect to conversion costs. What are the equivalent units for conversion costs for the month? A. 30,000 B. 60,000 C. 54,000 D. 12,000