business decisions

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

A.past revenue and it differs among alternatives

B.expected future revenue or it differs among alternatives

C.expected future revenue that differs from past revenue

D.expected future revenue and it differs among alternatives

2. In considering whether to produce a single​ product, the associated direct materials and direct labor costs would probably be​ ________.

A.relevant quantitative factors

B.relevant qualitative factors

C.irrelevant quantitative factors

D.irrelevant qualitative factors

3. Under the contribution approach to the income​ statement, the difference between sales and​ ________ is contribution margin.

A.manufacturing costs

B.all variable expenses

C.all fixed expenses

D.cost of goods sold

4. The salary foregone by a person who quits a job to start a business is an example of​ a(n) ________.

A.outlay cost

B.opportunity cost

C.sunk cost

D.depreciable cost

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

A.Zerominus−based

B.Participative

C.Rolling

D.Team

6.       What is the sequence of steps in preparing the master​ budget?

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

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

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.

7. The total amount of cash collections from customers by month appears on the​ ________.

A.sales budget

B.operating expense budget

C.budgeted balance sheet

D.cash budget

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

A.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.

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. 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.

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.

9. Which of the following statements is​ FALSE?

A.Flexible budgets are based on different assumptions about cost behavior than those used for static budgets.

B.A flexible budget is also called a variable budget.

C.Flexible budgets are matched to actual levels of activity.

D.Flexible budgets are prepared for a range of activity.

10. If sales are the cost​ driver, unfavorable flexible budget variances result from​ ________.

A.actual sales exceeding planned sales

B.planned sales exceeding actual sales

C.planned costs exceeding actual costs

D.actual costs exceeding planned costs

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

A.price; quantity

B.activity; static

C.spending; effective

D.usage; quantity

12. Which of the following is the first and most basic component in a management control​ system?

A.managerial effort

B.the​ stockholders’ goals

C.the​ organization’s goals

D.the​ organization’slongminus−range budget

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 to encourage managerial​ effort; establish a monitoring and reporting structure for productivity

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

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

14. ​________ is the drive for some selected goal that creates effort and action toward that goal.

A.Personal rewards

B.Managerial effort

C.Goal congruence

D.Motivation

15. Assume you are preparing income statements for different segments. Which of the following is NOT a fixed cost controllable by a segment​ manager?

A.training costs for new employees at segment

B.advertising costs in local paper to promote segment

C.salespersons’ salaries for segment

D.segment​ manager’s salary

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

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

D.A logical integration of techniques to gather and use information to make planning and control​ decisions, to motivate employee​ behavior, and to evaluate performance.

16.A/ Why are more companies using a balanced​ scorecard?

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

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

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

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

17.     Why is decentralization more popular in​ profit-seeking organizations than in nonprofit​ organizations?

A.Due to how costly it is to​ implement, decentralization only works for​ profit-seeking organizations and not for nonprofit organizations.

B.It is more difficult to hold managers of nonprofit organizations responsible for performance because inputs and outputs are generally more difficult to measure. Without reliable performance​ measures, granting managerial freedom is more risky.

C.In a​ nonprofit, the local managers do not make decisions that are in the​ organization’s best interests. Only because they want to improve their own​ segment’s performance at the expense of the organization.

D.Due to the lack of qualified​ personnel, it is easier for​ profit-seeking organizations to keep all the​ decision-making authority only at the highest levels of the organization than it is for nonprofit organizations.

18. In designing management control​ systems, top managers should consider the​ system’s impact on the behavior of employees.

  1. True
  • False

19. What is the major benefit of the ROI technique for measuring​ performance?

A.Its attention to the required asset investment in relation to operating income.

B.Decision-making is the responsibility of those local managers who often have the best information concerning local conditions.

C.The manager is rewarded based on his or her individual performance rather than no controllable factors.

D.The fact that managers who make decisions to improve their​ segment’s performance also increase the performance of the organization as a whole.

20. Service departments in organizations exist to support​ ________.

A.producing departments and suppliers only

B.producing departments and customers only

C.other service​ departments, producing departments and customers

D.other service departments and customers only

21.     Which of the following formulas should be used to allocate variable costs from service departments to user​ departments?

A.budgeted unit rate times × total budgeted units planned to be used

B.actual unit rate times × total budgeted units planned to be used

C.budgeted unit rate times × actual units used

D.actual unit rate times × actual units used

22. The phrase​ “cost application” refers to the allocation of the total departmental costs to​ ________.

A.revenueminus−producing departments

B.service departments

C.revenueminus−producing products

D.service departments and producing departments

23.  The budgeted factory overhead rate is computed as​ ________.

A.actual factory overhead costs divided by actual cost driver activity

B.actual factory overhead costs divided by actual production in units

C.budgeted factory overhead costs divided by budgeted costminus−allocation base level

D.budgeted factory overhead costs divided by actual cost driver activity

24. If a department identifies more than one cost driver for overhead​ costs, the department ideally should​ ________.

A.select a single cost driver

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.create as many cost pools as there are cost drivers

25. ________ is used for external reporting.

A.Direct costing

B.Variable costing

C.The contribution margin approach

D.Absorption costing

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

  1. Control Process
  2. Product costing Process

26. A/ It is part of this process because

A.it tells managers how to improve the process.

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

C.it tells managers how to control actual overhead costs.

D.it tells managers how to control inventory costs.

27. The fixed overhead spending variance is also called the​ ________ variance.

A.fixed overhead usage

B.fixed overhead flexible budget

C.fixed overhead efficiency

D.production volume

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

A.jobminus−order costing

B.activityminus−based management

C.activityminus−based costing

D.processminus−costing

29. Conoco Company has an actual factory overhead cost of Depreciation Expenselong dash—Equipment of​ $5,000. Jobminus−order costing is used. The journal entry to record this actual cost would include​ ________.

A.Debit Workminus−Inminus−Process Inventory​ $5,000 and Credit to Factory Department Overhead Control​ $5,000

B.Debit to Factory Department Overhead Control​ $5,000 and Credit to Accumulated Depreciationlong dash—Equipment ​$5,000

C.Debit to Depreciation Expenselong dash—Equipment ​$5,000 and Credit to Accumulated Depreciationlong dash—Equipment ​$5,000

D.Debit to Workminus−Inminus−Process Inventory​ $5,000 and Credit to Factory Department Overhead Applied​ $5,000

30. Rozman Company produces calendars in a oneminus−department process. The following data is available for the past​ month:

Work-in- process ​inventory, beginning                        0

Units started 15,000

Units completed and transferred                  ​12,000

Work- in- process inventory, ending                       ​3,000

Direct materials added  $30,000                                                                                                                  

Direct labor  ​$20,700                                                                                                                                                                                                                    

Factory overhead costs     ​$10,350    

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

A.13,500

B.3,000

C.12,000

D.15,000

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