Question 1

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 2

Which of the following statements is true?

Accepted Answer

A)  Many traditional costing systems can distort product costs and profitability. 
B)  Traditional costing systems tend to be more costly than activity-based costing systems. 
C)  Activity-based costing systems tend to combine various costs into a single cost pool. 
D)  Activity-based costing systems tend to use fewer cost pools than does a traditional costing system. 
A)  Many traditional costing systems can distort product costs and profitability. 
B)  Traditional costing systems tend to be more costly than activity-based costing systems. 
C)  Activity-based costing systems tend to combine various costs into a single cost pool. 
D)  Activity-based costing systems tend to use fewer cost pools than does a traditional costing system.

Question 3

RI (Residual Income) considers both the division's operating income and its average total assets. In addition, it also incorporates another piece of information known as top management's target rate of return.

Accepted Answer

A) True 
 B)False

Question 4

In a balanced scorecard, which of the following is a key performance indicator of the customer perspective?

Accepted Answer

A)  Defect rate 
B)  Employee satisfaction 
C)  Gross margin growth 
D)  Number of repeat customers 
A)  Defect rate 
B)  Employee satisfaction 
C)  Gross margin growth 
D)  Number of repeat customers

Question 5

The activity-based costing system improves the allocation of:

Accepted Answer

A)  indirect manufacturing costs. 
B)  direct labor. 
C)  direct materials. 
D)  sales commissions. 
A)  indirect manufacturing costs. 
B)  direct labor. 
C)  direct materials. 
D)  sales commissions.

Question 6

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 7

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. $$\begin{array}{l}
\text { Revenue Center Performance Report }\
\begin{array} { | c | r | c | c | c | c | c | c | } 
\hline & \text { Actual } & \text { Flexible Budget } & & \text { Flexible } & \text { Sales Volume } & & \text { Static } \
\hline \text { Product type: } & \text { Sales Revenue } & \text { Variance } & \text { U/F } & \text { Budget } & \text { Variance } & \text { U/F } & \text { Budget } \
\hline 40 \text { inch } & \$ 31,500 & & & \$ 30,000 & & & \$ 40,000 \
\hline 36 \text { inch long } & \$ 40,150 & & & \$ 42,000 & & & \$ 33,000 \
\hline 36 \text { inch short } & \$ 36,200 & & & \$ 33,000 & & & \$ 30,000 \
\hline 32 \text { inch } & \$ 19,000 & & & \$ 20,000 & & & \$ 28,000 \
\hline
\end{array}
\end{array}$$ 
-How much is the sales volume variance for the 36 inch long pipe?

Accepted Answer

A)  $1,850 U 
B)  $9,000 F 
C)  $10,000 U 
D)  $1,500 F 
A)  $1,850 U 
B)  $9,000 F 
C)  $10,000 U 
D)  $1,500 F

Question 8

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 9

Activity-based costing uses a common allocation base for all activities.

Accepted Answer

A) True 
 B)False

Question 10

Responsibility reports for revenue centers show all costs incurred by the department and are useful when management needs to know the total cost of operating the department.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is the correct formula for asset turnover ratio?

Accepted Answer

A)  Net sales ÷ Average total assets 
B)  Net sales ÷ Cost of goods sold 
C)  Net Sales ÷ Net assets 
D)  Net profit ÷ Net sales 
A)  Net sales ÷ Average total assets 
B)  Net sales ÷ Cost of goods sold 
C)  Net Sales ÷ Net assets 
D)  Net profit ÷ Net sales

Question 12

Recreation Equipment Company has several divisions that are investment centers. Data for the Boat Division and the Trailer Division are shown here:
 $\begin{array}{|l|c|c|} 
\hline& \text { Boat Division } & \text { Trailer Division } \
\hline \text { Operating income } & \$ 90,000 & \$ 36,000 \
\hline \text { Total assets at Jan } 1 & \$ 670,000 & \$ 230,000 \
\hline \text { Total assets at Dec } 31 & \$ 710,000 & \$ 220,000\\hline
\end{array}$ With regard to the efficient use of assets, the Boat Division has a higher ROI (Return on Investment) because it has the highest operating income.

Accepted Answer

A) True 
 B)False

Question 13

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

Accepted Answer

A) True 
 B)False

Question 14

A high rate of employee turnover indicates that:

Accepted Answer

A)  employees of the organization leave jobs frequently. 
B)  pay packages of employees are at par with that of industry. 
C)  the employees' retention ratio is also high. 
D)  employees also participate in the decision making process. 
A)  employees of the organization leave jobs frequently. 
B)  pay packages of employees are at par with that of industry. 
C)  the employees' retention ratio is also high. 
D)  employees also participate in the decision making process.

Question 15

Which of the following is an expanded form of calculating return on investment?

Accepted Answer

A)  Profit margin ratio × Asset turnover ratio 
B)  Net profit ratio × Inventory turnover ratio 
C)  Gross profit ratio × EVA 
D)  Asset turnover ratio × inventory turnover ratio 
A)  Profit margin ratio × Asset turnover ratio 
B)  Net profit ratio × Inventory turnover ratio 
C)  Gross profit ratio × EVA 
D)  Asset turnover ratio × inventory turnover ratio

Question 16

Pitt Jones Company had the following activities, allocated costs, and allocation bases: $$\begin{array} { | l | r | r | } 
\hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \
\hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \
\hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \
\hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \
\hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \
\hline
\end{array}$$ The above activities are carried out at two of their regional offices.
$\begin{array}{|l|r|r|} 
\hline& \text { Northeast Office } & \text { Midwest Office } \
\hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \
\hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \
\hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \
\hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \
\hline
\end{array}$ 
- How much of the correspondence cost will be assigned to the Northeast Office?

Accepted Answer

A)  $500 
B)  $1,200 
C)  $2,500 
D)  $800 
A)  $500 
B)  $1,200 
C)  $2,500 
D)  $800

Question 17

The responsibilities of a manager of an investment center are to generate profits and to efficiently manage the center's invested capital.

Accepted Answer

A) True 
 B)False

Question 18

Cardec, a leading manufacturer of car spare parts, divided its manufacturing process into two departments: 1) Production 2) Packing. Estimated overhead costs for the Production and Packing department amounted to $25,000,000 and $20,000,000, respectively. The company produces two types of parts: Part-1 and Part-2. The total estimated labor hours for the year 2015 were 40,000 and estimated machine hours were 50,000. The Production department was mechanized whereas the Packing department was labor oriented. Calculate departmental overhead allocation rates.
 $\begin{array}{lll}&\text { Production } & \text { Packing } \
&\text { Machine hours } & \text { Labor hours }\
\text { Part-1 } & 15,000 & 25,000 \
\text { Part-2 } & 35,000 & 15,000 \
\hline&50,000&40,000
\end{array}$

Accepted Answer

Calculatio

Question 19

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. $$\begin{array}{l}
\text { Revenue Center Performance Report }\
\begin{array} { | c | r | c | c | c | c | c | c | } 
\hline & \text { Actual } & \text { Flexible Budget } & & \text { Flexible } & \text { Sales Volume } & & \text { Static } \
\hline \text { Product type: } & \text { Sales Revenue } & \text { Variance } & \text { U/F } & \text { Budget } & \text { Variance } & \text { U/F } & \text { Budget } \
\hline 40 \text { inch } & \$ 31,500 & & & \$ 30,000 & & & \$ 40,000 \
\hline 36 \text { inch long } & \$ 40,150 & & & \$ 42,000 & & & \$ 33,000 \
\hline 36 \text { inch short } & \$ 36,200 & & & \$ 33,000 & & & \$ 30,000 \
\hline 32 \text { inch } & \$ 19,000 & & & \$ 20,000 & & & \$ 28,000 \
\hline
\end{array}
\end{array}$$ 
- The company uses management by exception to address flexible budget variances. On which variance would the company focus first?

Accepted Answer

A)  40 inch 
B)  36 inch long 
C)  36 inch short 
D)  32 inch 
A)  40 inch 
B)  36 inch long 
C)  36 inch short 
D)  32 inch

Question 20

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

Accepted Answer

A) True 
 B)False

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

Which of the following statements is true?

RI (Residual Income) considers both the division's operating income and its average total assets. In addition, it also incorporates another piece of information known as top management's target rate of return.

In a balanced scorecard, which of the following is a key performance indicator of the customer perspective?

The activity-based costing system improves the allocation of:

The goal of the balanced scorecard is to:

Activity-based costing uses a common allocation base for all activities.

Responsibility reports for revenue centers show all costs incurred by the department and are useful when management needs to know the total cost of operating the department.

Which of the following is the correct formula for asset turnover ratio?

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

A high rate of employee turnover indicates that:

Which of the following is an expanded form of calculating return on investment?

The responsibilities of a manager of an investment center are to generate profits and to efficiently manage the center's invested capital.

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

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

Filters

Exam 7: Cost Allocation and Responsibility Accounting

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

Which of the following statements is true?

RI (Residual Income) considers both the division's operating income and its average total assets. In addition, it also incorporates another piece of information known as top management's target rate of return.

In a balanced scorecard, which of the following is a key performance indicator of the customer perspective?

The activity-based costing system improves the allocation of:

The goal of the balanced scorecard is to:

Activity-based costing uses a common allocation base for all activities.

Responsibility reports for revenue centers show all costs incurred by the department and are useful when management needs to know the total cost of operating the department.

Which of the following is the correct formula for asset turnover ratio?

Uncontrollable costs are the costs that can be influenced by the decisions of a manager.

A high rate of employee turnover indicates that:

Which of the following is an expanded form of calculating return on investment?

The responsibilities of a manager of an investment center are to generate profits and to efficiently manage the center's invested capital.

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

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

Filters