Question 1

Companies calculate predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.

Accepted Answer

A) True 
 B)False

Question 2

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: $\begin{array}{|l|l|c|}
\hline{\text { Activity }} & {\text { Allocation Base }} & \text { Cost Allocation Rate } \$ \
\hline \text { Materials handling } & \text { Number of parts } & 0.08 \
\hline \text { Machining } & \text { Machine hours } & 7.20 \
\hline \text { Assembling } & \text { Number of parts } & 0.35 \
\hline \text { Packaging } & \text { Number of finished units } & 2.70 \
\hline
\end{array}$
- 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 3

To adequately evaluate an investment center's financial performance, summary performance measures that include both the division's operating income and its assets are required.

Accepted Answer

A) True 
 B)False

Question 4

Communicating the expectations of top management to segment managers improves goal congruence.

Accepted Answer

A) True 
 B)False

Question 5

RI (Residual Income) compares the division's actual operating income with the minimum operating income expected given the size of the division's average total assets.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true of performance reporting?

Accepted Answer

A)  Responsibility reports should focus on the person responsible for unfavorable variances, rather than information. 
B)  Managers should not be held accountable for uncontrollable variances. 
C)  Only unfavorable variances should be explained in the reports. 
D)  Every variance, regardless of magnitude, must be investigated by the managers. 
A)  Responsibility reports should focus on the person responsible for unfavorable variances, rather than information. 
B)  Managers should not be held accountable for uncontrollable variances. 
C)  Only unfavorable variances should be explained in the reports. 
D)  Every variance, regardless of magnitude, must be investigated by the managers.

Question 7

Long-term investments are made by the manager of an investment division for the purpose of:

Accepted Answer

A)  increasing profits. 
B)  decreasing profits. 
C)  increasing interest liability. 
D)  decreasing debt liability. 
A)  increasing profits. 
B)  decreasing profits. 
C)  increasing interest liability. 
D)  decreasing debt liability.

Question 8

Centralized operations are better for small companies due to the smaller scope of their operations.

Accepted Answer

A) True 
 B)False

Question 9

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

Accepted Answer

A) True 
 B)False

Question 10

Zhongfang Consumer Products has a small car division that operates as a profit center. Below is a partially completed performance report for the first quarter. $$\begin{array} { | l | r | r | r | l | l | l | } 
\hline & \text { Actual } & \begin{array} { c } 
\text { Flexible } \
\text { Budget }
\end{array} & \begin{array} { c } 
\text { Flexible } \
\text { Budget } \
\text { Variance }
\end{array} & \text { U/F } & \text { \% Variance } & \text { U/F } \
\hline \text { Sales Revenue } & \$ 688,000 & \$ 700,000 & & & & \
\hline \text { Variable expenses } & 309,000 & 320,000 & & & & \
\hline \text { Contribution margin } & 379,000 & 380,000 & & & & \
\hline \text { Traceable fixed expenses } & 371,000 & 368,000 & & & & \
\hline \text { Division margin } & \$ 8,000 & \$ 12,000 & & & & \
\hline
\end{array}$$
- How much is the percentage flexible budget variance for sales revenue?

Accepted Answer

A)  1.7 % F 
B)  1.7 % U 
C)  3.4 % U 
D)  3.4 % F 
A)  1.7 % F 
B)  1.7 % U 
C)  3.4 % U 
D)  3.4 % F

Question 11

One part of the balanced scorecard helps management answer the question "How do we look to shareholders?" Which of the four perspectives is being described here?

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 12

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 13

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Accepted Answer

A) True 
 B)False

Question 14

Key performance indicators (KPIs) are summary performance measures that help managers assess whether the company is achieving its goals.

Accepted Answer

A) True 
 B)False

Question 15

Companies evaluate investment centers using the same measures as the profit centers.

Accepted Answer

A) True 
 B)False

Question 16

The term goal congruence refers to the:

Accepted Answer

A)  matching of financial goal of the company with its nonfinancial goals. 
B)  aligning the goals of business segment managers with the goals of top management. 
C)  achievement of the goals set by the management by utilizing the resources available. 
D)  duplication of costs as a result of decentralization. 
A)  matching of financial goal of the company with its nonfinancial goals. 
B)  aligning the goals of business segment managers with the goals of top management. 
C)  achievement of the goals set by the management by utilizing the resources available. 
D)  duplication of costs as a result of decentralization.

Question 17

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize overall company profits.

Accepted Answer

A) True 
 B)False

Question 18

The product line of a manufacturing company is most likely to be considered as:

Accepted Answer

A)  cost centers. 
B)  profit centers. 
C)  revenue centers. 
D)  investment centers. 
A)  cost centers. 
B)  profit centers. 
C)  revenue centers. 
D)  investment centers.

Question 19

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Accepted Answer

A)  number of employees 
B)  number of materials purchased 
C)  number of machine hours 
D)  number of service calls 
A)  number of employees 
B)  number of materials purchased 
C)  number of machine hours 
D)  number of service calls

Question 20

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

Accepted Answer

A) True 
 B)False

Companies calculate predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.

To adequately evaluate an investment center's financial performance, summary performance measures that include both the division's operating income and its assets are required.

Communicating the expectations of top management to segment managers improves goal congruence.

RI (Residual Income) compares the division's actual operating income with the minimum operating income expected given the size of the division's average total assets.

Which of the following statements is true of performance reporting?

Long-term investments are made by the manager of an investment division for the purpose of:

Centralized operations are better for small companies due to the smaller scope of their operations.

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

One part of the balanced scorecard helps management answer the question "How do we look to shareholders?" Which of the four perspectives is being described here?

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

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Key performance indicators (KPIs) are summary performance measures that help managers assess whether the company is achieving its goals.

Companies evaluate investment centers using the same measures as the profit centers.

The term goal congruence refers to the:

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize overall company profits.

The product line of a manufacturing company is most likely to be considered as:

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

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

Companies calculate predetermined overhead rate at the beginning of an accounting period using the actual values of overhead costs.

To adequately evaluate an investment center's financial performance, summary performance measures that include both the division's operating income and its assets are required.

Communicating the expectations of top management to segment managers improves goal congruence.

RI (Residual Income) compares the division's actual operating income with the minimum operating income expected given the size of the division's average total assets.

Which of the following statements is true of performance reporting?

Long-term investments are made by the manager of an investment division for the purpose of:

Centralized operations are better for small companies due to the smaller scope of their operations.

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

One part of the balanced scorecard helps management answer the question "How do we look to shareholders?" Which of the four perspectives is being described here?

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

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Key performance indicators (KPIs) are summary performance measures that help managers assess whether the company is achieving its goals.

Companies evaluate investment centers using the same measures as the profit centers.

The term goal congruence refers to the:

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize overall company profits.

The product line of a manufacturing company is most likely to be considered as:

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

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