When managers produce value for the customer

1.When managers produce value for the customer, their orientation consists of all the following except: (Points : 2)

Quality and Service.
Timeliness of delivery.
The ability to respond to the customer’s desire for specific features.
State of the art manufacturing facilities.

Question 2. 2.Important changes in the contemporary business environments include all of the following except: (Points : 2)

Management organizations.
Climate change.
Information technology.
Customer expectations.

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Question 3. 3.Which of the following contemporary management techniques requires a balancing of multiple goals? (Points : 2)

Target costing.
The theory of constraints.
Benchmarking.
Business process improvement.
Enterprise sustainability.

Question 4. 4.Over the past several years it has become increasingly important for firms to improve achievement towards their social and environmental responsibilities. What is the best way the management accountant can help the firm improve on sustainability? (Points : 2)

Participate in programs of environmental organizations.
Develop and implement a legal staff and public relations staff for dealing with sustainability issues that may affect the firm.
Develop and implement a sustainability scorecard.
Risk management.

Question 5. 5.The five steps of strategic decision making include all of the following except: (Points : 2)

Based on strategy and analysis, choose and implement the desired alternative.
Identify the alternative actions.
Determine the strategic issues surrounding the problem.
Select the proper cost management technique.
Provide an ongoing evaluation of the effectiveness of the decision.

Question 6. 6.Factory overhead costs for a given period were 3 times as much as the direct material costs. Prime costs totaled $2,000. Conversion costs totaled $3,280. What are the direct labor costs for the period? (Points : 2)

$1,220.
$1,360.
$1,410.
$1,540.

Question 7. 7.Assume the following information pertaining to a Company:

Prime costs = $195,000
Conversion Costs = $221,000
Direct Materials used = $85,000
Beginning Work-in-Process = $98,000
Ending Work-in-Process = $81,000

Factory overhead is calculated to be: (Points : 2)

$306,000.
$26,000.
$110,000.
$84,000.
$111,000.

Question 8. 8.At the end of a fiscal year, overapplied factory overhead should be: (Points : 2)

Debited to Cost of Goods sold.
Credited to Cost of Goods sold.
Debited to Cost of Good Manufactured.
None of the above.

Question 9. 9.The general sales manager’s salary is an example of a: (Points : 2)

Customer unit-level cost.
Customer batch-level cost.
Customer-sustaining cost.
Distribution-channel cost.
Sales-level cost.

Question 10. 10.Standard costs are: (Points : 2)

Planned costs the firm should attain.
Associated with direct materials and factory overhead only.
Associated with direct labor and factory overhead only.
Targeted low costs the firm should strive for.
None of the above.

Question 11. 11.The number of the same or similar units that could have been produced given the amount of work actually performed on both complete and partially complete units is referred to as: (Points : 2)

Physical units.
Completed units.
Equivalent units.
Produced units.

Question 12. 12.In calculating unit cost in a process costing system, “conversion cost” is defined as the sum of: (Points : 2)

Direct and indirect material costs.
Direct and indirect labor costs.
Direct labor and factory overhead costs.
Indirect labor and factory overhead costs.

Question 13. 13.East Bay Fisheries Inc. processes king salmon for various distributors. Two departments are involved — processing and packaging. Data relating to tons of king salmon processed in the processing department during June 2013 are provided below:

Tons of Percent Completed
King Salmon Materials Conversion
Work-in-Process Inventory – June 1 1,500 90 80
Work-in-Process Inventory – June 1 2,800 60 40
Started processing during June 7,800

Total equivalent units for materials under the weighted-average method are calculated to be: (Points : 2)

6,830 equivalent units.
8,180 equivalent units.
6,980 equivalent units.
7,140 equivalent units.
7,620 equivalent units.

Question 14. 14.ABC Company uses a Materials Inventory account to record both direct and indirect materials. ABC charges direct materials to WIP, while indirect materials are charged to the Factory Overhead account. During the month of April, the company has the following cost information:

Total Materials (Direct and Indirect) Purchased = $ 90,000
Indirect Materials Issued to Production = 30,000
Total Materials Issued to Production = 110,000
Beginning Materials Inventory = 50,000

The debit to Work-in-Process Inventory account for materials is: (Points : 2)

$110,000.
$30,000.
$90,000.
$80,000.

Question 15. 15.The contribution income statement would require a firm to: (Points : 2)

Separate costs into fixed and variable categories.
Separate revenue into different categories.
Round off amounts to the nearest dollar.
Ignore some estimated fixed expenses, such as depreciation, that don’t involve a cash outlay.
Restructure its accounting system to accommodate activity-based costing

Question 16. 16.Joint products are products that: (Points : 2)

Have minor total sales value.
Have substantial sales value.
Come from different production processes.
Are marketed in a joint marketing program.

Question 17. 17.Thompson Refrigerators Inc. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.

MONTH TOTAL O/H MACHINE HOURS
Jan $ 8,258 2,134
Feb 8,006 2,045
Mar 8,387 2,276
Apr 8,832 2,743
May 8,921 2,834
June 7,841 2,034

Using the high-low method, unit variable overhead cost is calculated to be: (Points : 2)

$1.35.
$1.15
$1.40.
$1.65.
$1.25.

Question 18. 18.Which one of the following methods of allocating joint costs allocates joint costs to joint products on the basis of estimated sales values at the split-off point? (Points : 2)

Net realizable value method.
Physical measure method.
Average cost method.
Net sales value method.
Sales value at split-off method.

Question 19. 19.Regression analysis is better than the high-low method of cost estimation because regression analysis: (Points : 2)

Is mathematical.
Can provide greater precision and reliability.
Fits data into a mathematical equation.
Takes less time.
Is a statistical method.

Question 20. 20.Jackson, Inc. is preparing a budget for the coming year and requires a breakdown of the cost of electrical power used in its factory into the fixed and variable elements. The following data on the cost of power used and direct labor hours worked are available for the last six months of this year:

Month $ for Power DL Hours
July $ 15,850 3,000
Aug 13,400 2,050
Sept 16,370 2,900
Oct 19,800 3,650
Nov 17,600 2,670
Dec 18,500 2,650
Total $101,520 16,920

Assuming that Jackson uses the high-low method of analysis, the estimated variable cost of steam per direct labor hour is: (Points : 2)

$4.00.
$5.42.
$5.82.
$6.00.

Question 21. 21.Cleaning Care Inc. expects to sell 10,000 mops. Fixed costs (for the year) are expected to be $10,000, unit sales price is expected to be $12, and unit variable costs are budgeted at $7.

Cleaning Care’s margin of safety (MOS) in units is: (Points : 2)

1,000.
2,000.
4,000.
8,000.
9,000.

Question 22. 22.In terms of evaluating mutually exclusive projects, the internal rate of return (IRR) method mistakenly favors investment proposals with: (Points : 2)

Short useful lives.
Long useful lives.
Moderate cash flow returns.
Large residual values.

Question 23. 23.To make a decision whether to accept or reject a special sales order, managers need critical information about all the following except: (Points : 2)

Relevant costs.
Prior period operating costs.
Any opportunity costs.
The strategic, competitive environment of the firm.

Question 24. 24.In deciding between alternative choices for a given situation, managers usually employ a five-step process. Which of the following is not a step in the decision-making process? (Points : 2)

Evaluate performance.
Specify the criteria and identify the alternative actions.
Select and implement the best course of action.
Perform relevant and strategic cost analysis.
Review the audit report.

Question 25. 25.Research has shown that in framing capital investment decisions, sunk costs tend to: (Points : 2)

Have no discernible impact on decisions by managers.
Have a slight impact on the decision-making process.
Have an impact only when capital funds are limited.
Escalate commitment in making capital budgeting decisions.

Question 26. 26.Which of the following statements regarding “opportunity costs” is TRUE? (Points : 2)

These costs are recorded routinely by cost accounting systems.
These costs relate to the benefit lost or foregone when a chosen option (course of action) precludes the benefits from an alternative option.
These costs are generally deductible for federal income tax purposes.
In terms of most short-run decisions, they are irrelevant.

Question 27. 27.Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique’s combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the paybackperiod for the new machine (rounded to nearest one-tenth of a year)? (Assume that the cash inflows occur evenly throughout the year.) (Points : 2)

2.5 years.
2.7 years.
3.1 years.
3.6 years.

Question 28. 28.Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique’s combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.

What is the present value payback period, rounded to one-tenth of a year? (Points : 2)

2.5 years.
3.0 years.
3.3 years.
3.6 years.
4.0 years.

Question 29. 29.The goals of coordinating manufacturing processes, reducing the amount of inventory, and improving overall productivity is particularly important in a: (Points : 2)

Standard cost system.
Just-in-time system.
Normal costing system.
Activity based costing system.
Total quality management system.

Question 30. 30.A flexible-budget variance measures the impact on short-term operating profit of: (Points : 2)

Changes in sales volume.
Changes in output during the period.
Differences in sales mix—budgeted versus actual.
Selling price and cost differences—actual versus budgeted.
Selling price, but not cost differences—actual versus budgeted.

Question 31. 31.The theory of constraints (TOC) emphasizes which of the following? (Points : 2)

Developing competitive constraints.
Finding and eliminating design constraints.
Removing bottlenecks from the production process.
Improving overall production efficiency.

Question 32. 32.Which of the following benefits is not typically associated with a move to a just-in-time (JIT) manufacturing system? (Points : 2)

Raw materials are delivered as close as possible to time of production.
Existence of long-term contracts with selected suppliers.
Reduction in employee training and education costs.
Decreases in manufacturing lead time.
Improved customer-response time (CRT).

Question 33. 33.The difference between total variable overhead cost incurred and the standard variable overhead cost based on the actual quantity of the cost driver used to apply variable overhead is the: (Points : 2)

Total variable overhead variance.
Variable overhead spending variance.
Variable overhead rate variance.
Variable overhead efficiency variance.
Variable overhead flexible-budget variance.

Question 34. 34.In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 is fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution margin, $27,000U

The actual amount of operating income earned in September was: (Points : 2)

$15,000.
$40,000.
$63,000.
$78,000.
$105,000.

Question 35. 35.Bonehead Co. has the following factory overhead costs:

Standard Overhead Applied to this Period’s Production = $72,500
Flexible Budget for Overhead Based on Output (Units Produced) = 65,000
Total Budgeted Overhead in the Master (Static) Budget = 86,000
Actual Total Overhead Cost Incurred During the Period = 76,000

The total underapplied or overapplied factory overhead for Bonehead Co. for the period is: (Points : 2)

$4,000 underapplied.
$7,000 overapplied.
$10,000 overapplied.
$11,000 underapplied.
$14,000 underapplied.

Question 36. 36.SBU is the acronym for: (Points : 2)

Small Business Unit.
Sustainable Business Unit.
Standard Business Unit.
Strategic Business Unit.

Question 37. 37.Of the three basic forms of management compensation (salary, bonus, benefits), the fastest growing part of total compensation is: (Points : 2)

Salary.
Bonus.
Benefits.
Salary and bonus.

Question 38. 38.The evaluation by upper-level managers of the performance of mid-level managers is: (Points : 2)

Performance evaluation.
Operational control.
Goal congruence.
Principal-agent model.
Management control.

Question 39. 39.The most important objective of a strategic performance measurement system is: (Points : 2)

Budgeting.
Motivation.
Authority.
Variances.
Pricing.

Question 40. 40.A unit of an organization is referred to as a profit center if it has: (Points : 2)

Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply.
Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply and significant control over the amount of invested capital.
Authority to make decisions over the most significant costs of operations, including the power to choose the sources of supply.
Authority to provide specialized support to other units within the organization.
Responsibility for combining material, labor, and other factors of production into a final output.

Question 41. 41.The need for coordination between the production and the selling function will impact the choice of: (Points : 2)

Profit, cost or revenue center.
Manager for the firm.
Formal or informal control systems.
Profitability goal for the firm.
Control measures to prevent fraud.

Question 42. 42.Salary is: (Points : 2)

A fixed payment that includes a bonus.
A fixed payment that includes benefits.
A benefit that includes a bonus.
A fixed payment.

Question 43. 43.A method for determining a bonus based upon the performance of the unit is a(n): (Points : 2)

Segment-based pool.
Unit-based pool.
Firm-based pool.
Activity-based pool.
Function-based pool.

Question 44. 44.Which one of the following has been the most common payment option for bonus compensation in recent years? (Points : 2)

Vacation time.
Stock options.
Increased benefits.
Salary increase.

Question 45. 45.EVA is calculated as: (Points : 2)

EVA Net Income – (Cost of Capital x EVA Invested Capital).
Total Net Income – (Cost of Capital x Invested Capital).
Gross Income – Cost of Capital.
Total Net Income – EVA Net Income.
Accounting earnings adjusted for EVA.

Question 46. 46.The receivables turnover ratio is a measure of: (Points : 2)

Asset value.
Leverage.
Sales performance.
Profitability.
Liquidity.

Question 47. 47.The objectives of management compensation, when compared to the objectives used to develop performance measurement systems, are: (Points : 2)

More numerous.
Less specific.
Consistent in their objectives.
Significantly broader in scope.
More specific.

Question 48. 48.During October, Rover Industries produced 35,000 units of product with costs as follows:
DM = $ 84,000
DL = 43,000
Variable O/H = 13,000
Fixed O/H = 147,000
Total =$ 287,000
What is Rover’s unit cost for October, calculated on the variable costing basis? (Points : 2)

$3.25.
$3.75.
$4.00.
$4.50.
$5.00.

Question 49. 49.The King Mattress Company had the following operating results for 2012-2013. In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company’s stock price in 2012 was $8 and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2013.

Balance Sheet, December 31
2013 2012
Cash $ 340,000 $ 100,000
Accounts Receivable 350,000 400,000
Inventory 250,000 300,000
Total Current Assets $ 940,000 $ 800,000
Long Lived Assets 1,080,000 1,100,000
Total Assets $ 2,020,000 $ 1,900,000
Current Liabilities $ 200,000 $ 300,000
Long-Term Liabilities 600,000 500,000
Stockholder’s Equity 1,220,000 1,100,000
Total Liabilities & Equity $ 2,020,000 $ 1,900,000
Income Statement for the Year Ended December 31
Sales $ 4,750,000 $ 4,500,000
Cost of Sales 4,100,000 4,000,000
Gross Margin $ 650,000 $ 500,000
Operating Expenses 350,000 400,000
Operating Income $ 300,000 $ 100,000
Taxes 120,000 40,000
Net Income $ 180,000 $ 60,000
Cash Flow from Operations
Net Income $ 180,000 $ 60,000
Plus Depreciation Expense 50,000 50,000
+Decrease (-Inc) in A/T and Inventory 100,000 – 0 –
+Increase (-Dec) in Current Liabilities (100,000) – 0 –
Cash Flow from Operations $ 230,000 $ 110,000

The current ratio for 2013 is: (Points : 2)

1.8
2.0
3.9
4.7

Question 50. 50.The King Mattress Company had the following operating results for 2012-2013. In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company’s stock price in 2012 was $8 and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2013.

Income Statement for the Year Ended December 31
Sales $ 4,750,000 $ 4,500,000
Cost of Sales 4,100,000 4,000,000
Gross Margin $ 650,000 $ 500,000
Operating Expenses 350,000 400,000
Operating Income $ 300,000 $ 100,000
Taxes 120,000 40,000
Net Income $ 180,000 $ 60,000

Cash Flow from Operations
Net Income $ 180,000 $ 60,000
Plus Depreciation Expense 50,000 50,000
+Decrease (-Inc) in A/T and Inventory 100,000 – 0 –
+Increase (-Dec) in Current Liabilities (100,000) – 0 –
Cash Flow from Operations $ 230,000 $ 110,000

The inventory turnover ratio for 2013 is (rounded): (Points : 2)

11.2
12.7
13.7
14.9

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