Accounting Exam 3

Which of the following is used to compute the labor rate variance?

(Actual rate × Actual hours) - (Standard rate × Actual hours)

An accountant would refer to a cost sheet to perform which of the following actions?

- Calculate the total amount of inputs allowed for the actual output. - Calculate standard cost per unit. - Calculate efficiency variances.

Which of the following budgets can be used for control?

- Cash budget - Budgeted income statement - Production budget - Selling and administrative expense budget

Which of the following could be considered a segment?

- Division - Sales territory - Product-line

Which of the following is a perspective of the Balanced Scorecard?

- Learning and growth (infrastructure) - Internal business process - Customer - Financial

Managers may use the accounting rate of return to evaluate potential investment projects because

- debt contracts require that a firm maintain certain ratios that are affected by income and long-term asset levels. - it can be tied to the manager's personal income. - bonuses to managers may be based on accounting income and/or return on assets. - it serves as a screening measure to insure that new investments do not affect key financial ratios.

When investing in automated systems, which of the following intangible or indirect benefits may be important?

- improved customer satisfaction - reduced support labor cost - reduced lead time - improved market share

Which of the following is an absolute dollar measure rather than a percentage?

- operating income. - economic value added (EVA). - average operating assets. - residual income.

Before a direct materials purchases budget can be prepared, you should first

- prepare a sales budget. - prepare a production budget. - decide on the desired ending inventory of materials. - obtain the expected price of each type of material.

If the NPV is positive, it signals

- that the initial investment has been recovered. - that the required rate of return has been earned. - that the value of the firm has increased.

Which of the following is true while making a capital investment decision?

A manager should assess the risk of the project

The total fixed overhead variance is calculated by the following formula:

Actual Fixed Overhead − (Standard Fixed Overhead Rate × Standard Hours Allowed)

The strategic management system that translates an organization's mission and strategy into operational objectives and performance measures is

Balanced Scorecard

Traditional organizational theory uses which of the following to motivate workers?

Bonuses

Which of the following is true of budgetary slack?

Budgetary slack occurs when a manager deliberately underestimates revenues or overestimates costs in order to make budgeted expectations more easily achievable in the future

Which of the following is used to calculate the fixed overhead volume variance?

Budgeted Fixed Overhead - Applied Fixed Overhead

The planned ending cash balance for the year appears on which of the following statements?

Budgeted balance sheet

Which of the following is an operating budget?

Budgeted income statement

Which of the following is true of budgets?

Budgets are financial plans for the future

If the variable cost per unit goes down

Contribution margin increases and Break-even point decreases

Which of the following appears on a budgeted balance sheet?

Estimated finished goods inventory

Which of the following is true of a performance report?

It compares actual costs with budgeted costs

Which of the following is an advantage of participative budgeting?

It fosters a sense of responsibility and encourages creativity

Which of the following is not an advantage of budgeting?

It guarantees an improvement in organizational efficiency

Which of the following results from decentralization?

It results in the usage of a firm's resources to maximize firm value by the lower-level managers

Which of the following is true of a decentralized company?

Local managers in a decentralized company can make better decisions using local information

Which of the following equations calculates the number of units to sell to earn a targeted income?

Number of Units to Earn Target Income = (Total Fixed Cost + Target Income) / Contribution Margin per Unit

Which of the following equations calculates the operating income?

Operating Income = (Price × Units Sold) − (Unit Variable Cost × Units Sold) - Fixed Cost

Which of the following is used to calculate the payback period?

Original Investment / Annual Cash Flow

Which of the following formulas computes residual income?

Residual Income = Operating Income − (Minimum Rate of Return × Average Operating Assets)

Which of the following is used to calculate the segment margin?

Segment margin = Segment's sales revenue - Direct fixed costs - Variable costs

In a segmented income statement, which of the following statements is true?

Segment margin is equal to contribution margin less direct fixed expenses

Depreciation expense on sales equipment appears in a separate line on which of the following budgets?

Selling and administrative expenses budget

Which of the following is not true regarding the use of labor variance information?

The actual wage rate is almost always different from the standard rate

Which of the following is true of goal congruence?

The alignment of managerial and organizational goals is often referred to as goal congruence

Which of the following methods assumes that each cash inflow is reinvested at the rate at which the present value of a project's cash inflows equal the present value of its cash outflows?

The internal rate of return

Which of the following can be considered a crude measure of operating risk?

The margin of safety

Which of the following capital investment decision models is based on the time required for a firm to recover its original investment?

The payback period

Which of the following decisions focuses on whether or not to perform further actions on joint products?

The sell-or-process-further decision

In a standard cost system, costs are assigned to all of the following, except for

WRONG direct labor. WRONG fixed overhead. WRONG variable overhead. WRONG direct materials. CORRECT None of these choices are correct.

In preparing the overhead budget, many companies use

a unit-based driver such as direct labor hours

The _____ is the person responsible for directing and coordinating an organization's overall budget process

budget director

The variable overhead efficiency variance claims to measure

changes in variable overhead costs because of the efficient (inefficient) use of the cost driver

Total contribution margin divided by total sales is the

contribution margin ratio

A responsibility center in which a manager is responsible only for costs is a(n)

cost center

The decision-making approach that allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility is

decentralization

If the selling price per unit increases, the break-even point in units will

decrease

The _____ can be measured for a given level of sales by taking the ratio of contribution margin to operating income

degree of operating leverage

The use of fixed costs to extract higher percentage changes in profits as sales activity changes involves

degree of operating leverage

For the break-even computation to be meaningful to management, the sales mix should be computed using the:

expected mix

In going from the sales budget to the production budget, adjustments to the sales budget need to be made for

finished goods inventories

The disadvantage of a payback period is that it:

ignores the project's total profitability

If fixed costs increase, the break-even point in units will

increase

The manager of a division is displeased with the ROI of the division. One step that would increase ROI (holding everything else constant) is

increasing sales

The interest rate that sets the present value of a project's cash inflows equal to the present value of the project's cost is called the ________

internal rate of return

A responsibility center in which a manager is responsible for revenues, costs, and investments is a(n):

investment center

Which of the following costs is not relevant to a decision to sell a product at split-off or process the product further and then sell the product?

joint costs allocated to the product

If there is a competitive outside market for the transferred product, then the best transfer price is the

market price

A division manager is considering a project that requires a significant initial investment. The company's top management will not approve any project that does not return at least 12%. The manager will most likely use which of the following capital investment models?

net present value

Looking ahead to see what actions should be taken to realize particular goals is:

planning

Responsibility for the materials usage variance is usually assigned to

production

A responsibility center in which a manager is responsible for both revenues and costs is a(n)

profit center

If sales and average operating assets for Year 2 are identical to their values in Year 1, yet operating income is higher, Year 2 turnover (compared with Year 1 turnover) will

stay the same

The contribution margin is

the difference between sales and variable costs

In the sell-or-process-further decision,

the most profitable outcome may be to further process some separately identifiable products beyond the split-off point, but sell others at the split-off point

The absolute dollar measure of a project is given by:

the net present value

The two variances for fixed overhead are

volume and spending

If the contribution margin per unit decreases, the break-even point in units:

will increase