Question 1

The flexible budget uses budgeted costs at the actual level of activity.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would most likely be evaluated using residual income?

Accepted Answer

A) cost center 
B) profit center 
C) revenue center 
D) investment center 
A) cost center 
B) profit center 
C) revenue center 
D) investment center

Question 3

Sales revenue growth, gross margin growth, and return on investment are the key performance indicators (KPIs)for the:

Accepted Answer

A) financial perspective. 
B) customer perspective. 
C) internal business perspective. 
D) learning and growth perspective. 
A) financial perspective. 
B) customer perspective. 
C) internal business perspective. 
D) learning and growth perspective.

Question 4

A system of evaluating the performance of each responsibility center and its manager is known as responsibility accounting system.

Accepted Answer

A) True 
 B)False

Question 5

A market-based transfer price considers the ________ when determining the price.

Accepted Answer

A) variable costs 
B) sales price of goods 
C) cost of the goods 
D) contribution margin 
A) variable costs 
B) sales price of goods 
C) cost of the goods 
D) contribution margin

Question 6

WAX-D Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of component is $25. What is the minimum transfer price if the division is operating at capacity?

Accepted Answer

A) $150 
B) $45 
C) $55 
D) $140 
A) $150 
B) $45 
C) $55 
D) $140

Question 7

A good balanced scorecard focuses only on lead indicators, because lag indicators are not important for the scorecard.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following four perspectives of the balanced score card enables the management to answer the question: "How can we continue to improve and create value?"

Accepted Answer

A) financial perspective 
B) customer perspective 
C) internal business perspective 
D) learning and growth perspective 
A) financial perspective 
B) customer perspective 
C) internal business perspective 
D) learning and growth perspective

Question 9

Quality Stereo Company has provided the following information regarding its activity-based costing system: • Purchasing department costs are allocated based on the number of purchase orders and the cost allocation rate is $75 per purchase order.
• Assembly department costs are allocated based on the number of parts used and the cost allocation rate is $1.00 per part.
• Packaging department costs are allocated based on the number of units produced and the allocation rate is $2.00 per unit produced.
Each stereo produced has 50 parts, and the direct materials cost per unit is $70. There are no direct labor costs. Quality Stereo has an order for 1,000 stereos which will require 50 purchase orders in all. What is the total cost of the 1,000 stereos?

Accepted Answer

A) $125,750 
B) $55,750 
C) $123,750 
D) $122,000 
A) $125,750 
B) $55,750 
C) $123,750 
D) $122,000

Question 10

Johnson Construction Materials Company has a sales office which sells concrete culvert pipe to property developers. The sales office is a revenue center and must prepare a monthly performance report. It has provided the following information.   How much is the flexible budget variance for the 40 inch pipe?

Accepted Answer

A) $1,850 U 
B) $3,000 F 
C) $10,000 U 
D) $1,500 F 
A) $1,850 U 
B) $3,000 F 
C) $10,000 U 
D) $1,500 F

Question 11

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows:   What is the cost of assembling per ceiling fan?

Accepted Answer

A) $87.50 
B) $7.00 
C) $7.50 
D) $35.00 
A) $87.50 
B) $7.00 
C) $7.50 
D) $35.00

Question 12

The goal of the balanced scorecard is to:

Accepted Answer

A) maximize profits. 
B) maximize operational efficiency. 
C) develop a set of organizational performance measures. 
D) increase the market share and maximize shareholders' wealth. 
A) maximize profits. 
B) maximize operational efficiency. 
C) develop a set of organizational performance measures. 
D) increase the market share and maximize shareholders' wealth.

Question 13

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts. The direct material cost is $95 and each ceiling fan requires 2.5 hours of machine time to manufacture. Additional information is as follows:   What is the cost of materials handling per ceiling fan?

Accepted Answer

A) $1.60 
B) $7.20 
C) $6.00 
D) $5.00 
A) $1.60 
B) $7.20 
C) $6.00 
D) $5.00

Question 14

Increased number of repeat customers and increased rate of on-time deliveries are the indicators of:

Accepted Answer

A) product quality. 
B) market share. 
C) customer satisfaction. 
D) skills and knowledge of the employees. 
A) product quality. 
B) market share. 
C) customer satisfaction. 
D) skills and knowledge of the employees.

Question 15

Which of the following affects the company's ability to make on-time deliveries?

Accepted Answer

A) return on investment 
B) product's price 
C) warranty claims 
D) production cycle time 
A) return on investment 
B) product's price 
C) warranty claims 
D) production cycle time

Question 16

Which of the following perspectives of the balanced scorecard focuses on revenue growth and productivity?

Accepted Answer

A) financial perspective 
B) customer perspective 
C) internal business perspective 
D) learning and growth perspective 
A) financial perspective 
B) customer perspective 
C) internal business perspective 
D) learning and growth perspective

Question 17

Pitt Jones Company had the following activities, allocated costs, and allocation bases:   The above activities are carried out at two of their regional offices.   What is the cost per letter for the correspondence activity?

Accepted Answer

A) $10.00 
B) $30.50 
C) $25.00 
D) $0.75 
A) $10.00 
B) $30.50 
C) $25.00 
D) $0.75

Question 18

Activity-based management focuses on making decisions that improve customers' satisfaction while also increasing profits.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is a disadvantage of decentralization?

Accepted Answer

A) increases the customer response time 
B) only the top management is allowed to make decisions 
C) demotivates employees as the decision making powers are not delegated 
D) problems in achieving goal congruence 
A) increases the customer response time 
B) only the top management is allowed to make decisions 
C) demotivates employees as the decision making powers are not delegated 
D) problems in achieving goal congruence

Question 20

Recreation Equipment Company has several divisions which are investment centers. Data for the Boat Division and the Trailer Division are shown here:   Which of the following statements would be the most meaningful interpretation of this data?

Accepted Answer

A) Performance of Boat Division is better than that of Trailer Division because Boat Division has higher assets. 
B) Trailer Division uses its assets more efficiently than Boat Division because it has higher ROI. 
C) Boat Division shows more efficient use of assets than Trailer Division because it has higher operating income. 
D) Boat Division is more financially successful than Trailer Division because it shows an increase in assets 
A) Performance of Boat Division is better than that of Trailer Division because Boat Division has higher assets. 
B) Trailer Division uses its assets more efficiently than Boat Division because it has higher ROI. 
C) Boat Division shows more efficient use of assets than Trailer Division because it has higher operating income. 
D) Boat Division is more financially successful than Trailer Division because it shows an increase in assets

Exam 24: Cost Allocation and Responsibility Accounting

The flexible budget uses budgeted costs at the actual level of activity.

Which of the following would most likely be evaluated using residual income?

Sales revenue growth, gross margin growth, and return on investment are the key performance indicators (KPIs)for the:

A system of evaluating the performance of each responsibility center and its manager is known as responsibility accounting system.

A market-based transfer price considers the ________ when determining the price.

WAX-D Inc. has a division that manufactures a component that sells for $150 and has a variable cost of $45. Another division of the company wants to purchase the component. Fixed cost per unit of component is $25. What is the minimum transfer price if the division is operating at capacity?

A good balanced scorecard focuses only on lead indicators, because lag indicators are not important for the scorecard.

Which of the following four perspectives of the balanced score card enables the management to answer the question: "How can we continue to improve and create value?"

The goal of the balanced scorecard is to:

Increased number of repeat customers and increased rate of on-time deliveries are the indicators of:

Which of the following affects the company's ability to make on-time deliveries?

Which of the following perspectives of the balanced scorecard focuses on revenue growth and productivity?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. What is the cost per letter for the correspondence activity?

Activity-based management focuses on making decisions that improve customers' satisfaction while also increasing profits.

Which of the following is a disadvantage of decentralization?

Recreation Equipment Company has several divisions which are investment centers. Data for the Boat Division and the Trailer Division are shown here: Which of the following statements would be the most meaningful interpretation of this data?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Short-Term Business Decisions

Capital Investment Decisions

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