Exam 2 - Review

The idea that managers should only be held responsible for costs or profits over which they have decision-making authority is the ______ concept

controllability

The basic approach in product costing is to allocate costs in the cost pools to individual cost ______.

objects

The opportunity cost of equity and debt resources invested in the business is the company's cost ______ ______.

of capital

Production departments, bank check-processing departments and hospital food services departments are all examples of ______ centers.

cost

The best ______ ______ is one that is causally related to the cost being allocated.

cost driver

The cause of an activity cost is called a(n) ______ ______.

cost driver

Cost of invested capital equals ______.

cost of capital x assets invested

In an ABC two-stage cost system, each activity has an associated ______ ______.

cost pool/activity

Charging costs to the wrong jobs can result in Blank______. Multiple select question. better pricing cost-plus pricing errors poor decisions

cost-plus pricing errors poor decisions

The concept that tension exists between expenses to ensure quality is met as defined and the expenses incurred by not meeting that definition is the basis of a(n) ______ of ______ system.

cost; quality

The strengths of a company that enable it to outperform competitors are their _____ _____ _____.

critical success factors

Adding a flat fee for each order in addition to other delivery charges will put the trade-off decision between delivery costs and inventory holding costs in the hands of the ______.

customer

A measure of an investment center's ability to control its cost for a given level of revenue is ______.

profit margin ratio

An account that records financial transactions for a specific customer, vendor, or job is a(n) _____ _____account.

subsidiary ledger

One issue with accounting information is that it treats ______ costs as providing benefits in the future.

sunk

In order to reduce the costs that a company incurs for delivery, they must ______.

take steps to redeploy assets and reduce resources used by delivery

The group method used to enhance forecasting and reduce bias in estimates is ______.

the Delphi technique

If a revenue center manager has decision authority over sales or marketing costs, a performance measure option is ______.

the contribution of the center

When a new manager takes over an existing, established division, implementing ______ is a challenge.

the controllability concept

A total quality management (TQM) system will have little economic benefit unless ______.

the cost accounting system is designed to support it

An approach to production that tries to significantly reduce production cost using just-in-time production and tighter quality control is called ______ ______.

lean manufacturing

As companies have become more automated, including those in the service sector such as banks, direct labor has become ______ (more/less) appropriate as a basis for allocating overhead.

less

If customers are not charged based on their cost, ______ customers will seek other sellers.

lower cost

The structure and procedures principals in a organization use to influence agents is called a(n) ______ ______ system.

management control

Companies need ______ because the interests of managers and the interest of organizations do not always align.

management control systems

Activity-based cost management (ABCM) concepts apply to ______.

manufacturing, retail, service, nonprofit, and governmental agencies

A static financial plan of an organization for the coming year or other planning period is called a(n) ______ budget.

master

If a company records and reports cost increases but does not record and report quality improvements, managers ______.

may choose not to improve quality

Allocating corporate costs to managers for the purpose of performance evaluation ______.

may violate the controllability principal

Using average investments as the investment base for performance evaluation ______.

minimizes problems related to acquisitions and dispositions

The cost driver rate per minute for an activity is calculated by dividing the cost of the activity by ______ ______.

minutes available

The purpose of a management control system is to ______.

more closely align manager and organization interests

Assume a company uses straight-line depreciation for assets, all operating profits are earned at the end of the year, ROI is based on year-end investment value and there is no income tax. Even without any operational changes, ROI will increase each year if the company uses the ______ book value method

net

Joint costs allocated based on the proportional values of the joint products at the split-off points is called the ______ method.

net realizable value

A cash budget does NOT report the ______.

non-cash transactions for cash receipts and disbursements

Both internal failure and external failure costs are ______ costs

nonconformance

Long-run expected volume produced is called ______ activity.

normal

When the cost of a job is determined by actual direct materials and labor cost plus overhead applied using a predetermined rate and the actual volume of the allocation base, _____ costing is being used.

normal

Identifying the activities is the ______ step in developing an ABC system.

first

How subordinates are paid for performance is defined by the ______ and ______ system.

compensation; reward

if a cost of quality system is not ______, there is a danger that decisions will be distorted.

comprehensive

The degree to which a product or service performs as designed is called ______ to ______.

conformance; specification

Budgets should ______.

consider the importance of the human factor

When it comes to managers' pay, ______ compensation is the amount that is based on performance.

contingent

An account in the general ledger that summarizes a set of subsidiary ledger accounts is a ______ account.

control

When it comes to managers' pay, ______ compensation is not directly linked to performance.

fixed

The outputs from a common input and common production process are called ______ ______.

joint products

Service businesses need to carefully coordinate sales with required ______.

labor

The manager of a company owned fast food restaurant would most likely be considered a(n) ______ center manager.

profit

The estimated net realizable value method is sometimes referred to as the ______ or ______ method.

workback; netback

To simplify the budgeting process, overhead costs are usually divided into ______. - variable - semi-fixed - fixed

- variable - fixed

If a company is concerned about the cost of maintaining an ABC system, they should ______.

consider time-driven activity-based costing

Marshall Industries uses a bulldozer to clear land. Data on the bulldozer and its usage follow: Resources Used: Gasoline Cost Driver Rate: $3.50 per machine hour Cost Driver Volume: 3,000 machine hours Repairs Cost Driver Rate: $20.00 per job Cost Driver Volume: 200 jobs Resources Supplied: Gasoline $11,200 Repairs 4,500 What is Martin's unused resource capacity cost for gasoline and repairs?

$1,200

Abert's uses two suppliers for a component part used in production. Supplier A charges $1.50 per unit and Supplier B charges $1.52 per unit. The cost of late deliveries adds $.15 to the unit cost. If the probability of a late delivery is 40% for Supplier A and 10% for Supplier B, the effective cost per unit for Supplier A is ______.

$1.56 Reason: $.15 x 40% = $.06 expected cost of late delivery per board making the total effective cost $1.56.

Gate Industries manufactures a standard model and a deluxe model of skateboard. The company, which uses a plantwide allocation method, applies overhead on the basis of machine hours. The following activity and cost data were from March: Standard Number of Set-Ups: 20 Number of Production Runs: 6 Number of Machine Hours: 30,000 Deluxe Number of Set-Ups: 5 Number of Production Runs: 4 Number of Machine Hours: 10,000 Overhead costs Number of Set-Ups: $20,000 Number of Production Runs: $30,000 How much overhead will be assigned to the deluxe model?

$12,500

Given: Product A's net realizable value = $400,000 Product B's net realizable value = $600,000 The company has $300,000 of joint costs for product A and product B. The amount to be allocated to Department A is ______.

$120,000 Reason: $400,000/$1,000,000 x $300,000

A company currently sells $800,000 of unassembled furniture, model A and model B. It is considering whether to sell model B assembled. Given the following, how much joint costs should be allocated to assembled model B? Sales value of unassembled Model B = $400,000 Sales value of assembled Model B = $500,000 Additional cost to assemble Model B = $100,000 Joint costs = $240,000

$120,000 Reason: ($400,000/$800,000) x $240,000

Given the following information, assign overhead costs to Product B using ABC. Activity: Assembling costs Costs: $200,000 Cost Driver: Machine-hours Activity: Setup costs Costs: $75,000 Cost Driver: Number of setups Activity: Inspecting costs Costs: $50,000 Cost Driver: Direct-labor hours Activity: Assembling costs Product A Use: 500 machine hours Product B Use: 300 machine hours Activity: Setup costs Product A Use: 10 setups Product B Use: 15 setups Activity: Inspecting costs Product A Use: 25 direct labor hours Product B Use: 15 direct labor hours

$138,750 Reason: 200,000 (300/800) + 75,000 (15/25) + 50,000 (15/40)

Gate Industries manufactures a standard model and a deluxe model of skateboard. The company, which uses an activity-based costing system, has identified the number of setups and number of production runs as cost drivers for overhead. The following activity and cost data were from March. Standard Number of Set-Ups: 20 Number of Production Runs: 6 Number of Machine Hours: 30,000 Deluxe Number of Set-Ups: 5 Number of Production Runs: 4 Number of Machine Hours: 10,000 Overhead costs Number of Set-Ups: $20,000 Number of Production Runs: $30,000 How much overhead will be assigned to the deluxe model?

$16,000

Given the following information, assign overhead costs to Product A using ABC. Activity: Assembling costs Costs: $200,000 Cost Driver: Machine-hours Activity: Setup costs Costs: $75,000 Cost Driver: Number of setups Activity: Inspecting costs Costs: $50,000 Cost Driver: Direct-labor hours Activity: Assembling costs Product A Use: 500 machine hours Product B Use: 300 machine hours Activity: Setup costs Product A Use: 10 setups Product B Use: 15 setups Activity: Inspecting costs Product A Use: 25 direct labor hours Product B Use: 15 direct labor hours

$186,250 Reason: 200,000 (500/800) + 75,000 (10/25) + 50,000 (25/40)

Baker, Inc. allocates IT costs on the basis of computer hours. Total costs incurred were $300,000. A total of 100,000 hours were used as follows: Administration used 50,000, Department A used 15,000, and Department B used 35,000. Using the direct method, the total IT costs allocated to Department B is ______.

$210,000 Reason:All costs are allocated to user departments under the direct method so Department B uses 70% of the total (35,000/50,000 = 70%). $300,000 x 70% = $210,000.

Baker, Inc. allocates IT costs on the basis of computer hours. Total costs incurred were $300,000. A total of 100,000 hours were used as follows: Administration used 50,000, Department A used 15,000, and Department B used 35,000. Using the direct method, the total IT costs allocated to Department A is ______.

$290,000 Reason:All costs are allocated to user departments under the direct method so Department B uses 30% of the total (15,000/50,000 = 30%). $300,000 x 30% = $90,000.

Kilwin Candy Company employs 6 workers, each working 8-hour days. Each worker has the capacity to make 200 candy bars per day. The average pay of these workers is $8.00 per hour. On Wednesday, the workers only made 1,080 candy bars. The cost driver rate for this activity was calculated to be $0.32 per bar. The cost of unused capacity on Wednesday was:

$38.40

Given the following information, how much cash is collected in February? January Total Sales = $500,000 February Total Sales = $400,000 Assumptions for the budget: • 20 percent is collected in the month of sales • 75 percent is collected in the next month • 2 percent is taken as a cash discount • 3 percent will not be collected because accounts are written off as bad debts

$455,000 Reason: 500,000 x.75 + 400,000 x.20

Accounts receivable had a beginning balance of $600,000, and an ending balance of $1,000,000. Calculate total sales if the transferred out amount totaled $5,000,000.

$5,400,000 Reason: 1,000,000 + 5,000,000 - 600,000

Morris Company is planning on producing 200,000 units. Direct labor is estimated at 0.25 hours per unit at a cost of $10 per hour. The total direct labor cost is ______.

$500,000 Reason: 200,000 units x 0.25 hours per unit x $10 per hour

Consider the following information about a company's processing costs: Activity: Activity Cost: Cost Driver Volume: Cost Driver: Number: Activity:Entering order Activity Cost: $150,000 Cost Driver Volume: 12,000 orders Cost Driver: Number of orders Number: 200 Activity: Picking order Activity Cost: $200,000 Cost Driver Volume: 80,000 items Cost Driver: Number of items Number: 600 Activity: Delivering order Activity Cost: $400,000 20,000 deliveries Cost Driver Volume: 8Number of deliveries Number: 200 What is the activity-based costing system estimate of total order processing costs?

$8,000

A firm has two major customers - Betty and Bill. The firm assigns general delivery costs to customers based on the total value of orders placed. Last year Betty placed 100 orders at a total value of $49,980 and Bill placed 250 orders at a total value of $52,020. If total general delivery costs totaled $20,000, the amount assigned to Betty equals ______.

$9,800 Reason: $49,980+$52,020 = $102,000 $49,980/$102,000 x $20,000 = $9,800

The Antigone Company uses machine hours to apply overhead to the Machining Department and direct labor hours in the Assembly Department. The following information is available for the current year: Estimated overhead Machining: $420,000 Assembly: $540,000 Estimated activity: Machine hours Machining: 70,000 Assembly: 15,000 Direct labor hours Machining: 40,000 Assembly: 60,000 Actual activity: Machine hours Machining: 64,500 Assembly: 12,500 Direct labor hours Machining: 35,000 Assembly: 63,200

$955,800

Information needed to calculate cost of goods sold includes ______. - beginning finished goods inventory - ending finished goods inventory - beginning work in process inventory - cost of goods manufactured - ending work in process inventory

- beginning finished goods inventory - ending finished goods inventory - cost of goods manufactured

Lean manufacturing ______. - attempts to significantly reduce production costs - flows naturally from careful activity analysis - focuses on the elimination of waste - requires the use of lean accounting

- attempts to significantly reduce production costs - flows naturally from careful activity analysis - focuses on the elimination of waste

Incentives to manipulate purchases and dispositions exist if a company chooses to use the ______ balance of assets for the investment base for performance evaluation. - beginning - ending - average

- beginning - ending

Which of the following statements are true? - It is generally easy to identify companies that use ABC. - ABC may be applied to parts of an organization but not everywhere. - ABC means different things to different observers. - Companies are not likely to announce they have discontinued the use of ABC.

- ABC may be applied to parts of an organization but not everywhere. - ABC means different things to different observers. - Companies are not likely to announce they have discontinued the use of ABC.

Which of the following are problems with identifying users of ABC? - ABC means different things to different organizations - Organizations may not use ABC throughout their organization - Organizations will announce the discontinuance of ABC

- ABC means different things to different organizations - Organizations may not use ABC throughout their organization

Which of the following statements are true? - Allocating all costs to units can be misleading. - Capacity level costs cannot be changed by management decisions. - A company that makes custom products has few product level costs. - Decisions that can affect capacity will probably affect all costs in the cost hierarchy.

- Allocating all costs to units can be misleading. - Decisions that can affect capacity will probably affect all costs in the cost hierarchy.

The production level may be computed as ______. - Beginning balance + transfers in - transfers out = ending balance - Units in beginning inventory + required production units - budgeted sales units = units in ending inventory - Required production units + Budgeted sales units = Units in beginning inventory - Units in ending inventory

- Beginning balance + transfers in - transfers out = ending balance - Units in beginning inventory + required production units - budgeted sales units = units in ending inventory

Which of the following statements are correct? - Budgeting is an ongoing process in most companies - Final budget approvals are made shortly before the fiscal year begins. - The master budget generally provides detailed figures for the upcoming 2 - 3 fiscal years.

- Budgeting is an ongoing process in most companies - Final budget approvals are made shortly before the fiscal year begins.

Which of the following statements are correct? - Cost allocation is somewhat arbitrary, regardless of the method chosen. - All three methods of cost allocation are still in use today. - The step method of allocating service costs is always superior to the direct method.

- Cost allocation is somewhat arbitrary, regardless of the method chosen. - All three methods of cost allocation are still in use today.

Which of the following statements are true? - Conformance to specification is sufficient to ensure a successful product. - Customer expectations must be linked to specifications. - Conformance to specification is an internal view of quality. - A "quality" product will meet or exceed established specifications.

- Customer expectations must be linked to specifications. - Conformance to specification is an internal view of quality. - A "quality" product will meet or exceed established specifications.

Transactions that reduce collections of accounts receivable include ______. - cash discounts - multiperiod cash collections - bad debts

- cash discounts - bad debts

Which of the following statements are correct? - When determining groups of customers that are most profitable, the only focus should be on the amount of product various groups purchase. - Firms must make decisions about customers much like the decisions made about products and services. - Some customers cost more money to serve than others.

- Firms must make decisions about customers much like the decisions made about products and services. - Some customers cost more money to serve than others.

Which of the following statements are correct? - No one allocation method is appropriate for all situations. - It is impossible to separate joint costs attributable to products on a cause-and-effect basis. - Because it is arbitrary, allocating joint costs is rarely done in practice.

- No one allocation method is appropriate for all situations. - It is impossible to separate joint costs attributable to products on a cause-and-effect basis.

Which of the following statements are true? - All actions taken by managers that improve reported performance are beneficial to organizational performance. - Performance evaluation systems should reward people when they do the right thing. - Performance measures should reflect the results of actions that improve organizational performance.

- Performance evaluation systems should reward people when they do the right thing. - Performance measures should reflect the results of actions that improve organizational performance.

Which of the following statements are true? - Residual income does not eliminate the suboptimization problem. - A project with a positive net present value can have a negative residual income in some years. - Residual income solves the problem of distortions in incentives resulting from accounting measures.

- Residual income does not eliminate the suboptimization problem. - A project with a positive net present value can have a negative residual income in some years.

Which of the following statements are true? - The external view of quality is everything the customer values. - Customer expectations of quality are important quality determinants. - Customer expectations provide a useful guide for managers. - Customer expectations of quality are both tangible and intangible.

- The external view of quality is everything the customer values. - Customer expectations of quality are important quality determinants. - Customer expectations of quality are both tangible and intangible.

Which of the following statements are correct? - Total costs of quality must be reduced over time. - The ultimate goal in implementing a quality improvement program is to achieve zero quality costs. - Managers make trade-offs between the four costs of quality categories.

- Total costs of quality must be reduced over time. - Managers make trade-offs between the four costs of quality categories.

Which of the following statements are true? - If a project has a positive NPV, it will also have an acceptable ROI. - Two managers evaluating the same investment could make different decisions. - A manager with a current ROI of 14% will have an incentive not to accept a project with an ROI of 12%. - Evaluation using ROI could cause a manager to reject a project that adds value to the firm.

- Two managers evaluating the same investment could make different decisions. - A manager with a current ROI of 14% will have an incentive not to accept a project with an ROI of 12%. - Evaluation using ROI could cause a manager to reject a project that adds value to the firm.

A firm has two major customers - Betty and Bill. The firm assigns general delivery administrative costs to customers based on the total value of orders placed. Last year Betty placed 100 orders at a total value of $49,980 and Bill placed 250 orders at a total value of $52,020. Which of the following statements are correct? - When customer buying patterns are different, costs need to be charged based on those differences. - Betty is likely to be satisfied with the costs she is charged for general delivery administrative costs. - Bill is likely to be satisfied with the costs he is charged for general delivery administrative costs. - Bill and Betty were charged approximately the same amount of general delivery costs during the year.

- When customer buying patterns are different, costs need to be charged based on those differences. - Bill is likely to be satisfied with the costs he is charged for general delivery administrative costs. - Bill and Betty were charged approximately the same amount of general delivery costs during the year.

To prevent costs per unit from changing as activity level changes, ______. - a measure of capacity may be used as the allocation base - variable costing may be used - all costs should be allocated based on expected volume annually

- a measure of capacity may be used as the allocation base - variable costing may be used

When considering a sell or process further decision, management must consider ______. - the joint costs for the intermediate stage - additional revenue after processing further - additional cost of processing further

- additional revenue after processing further - additional cost of processing further

Issues in evaluating profit center managers include ______. - allocated corporate costs - shared facilities with other units - calculating revenues earned by the center - transfer costs between organizational units

- allocated corporate costs - shared facilities with other units - transfer costs between organizational units

Capacity level costs ______. - are fixed with respect to volume - are fixed by management decisions - cannot be changed in the short-run or long-run

- are fixed with respect to volume - are fixed by management decisions

When developing performance measures, considerations include ______. - are managers taking action that improve reported performance but are detrimental to organizational performance? - does the measure reflect results of actions that improve organizational performance? - is the measure consistent with the manager's decision making authority? - does the measure ensure that managers who perform above standards will receive a bonus?

- are managers taking action that improve reported performance but are detrimental to organizational performance? - does the measure reflect results of actions that improve organizational performance? - is the measure consistent with the manager's decision making authority?

Budgets for marketing and administrative costs ______. - should be based on direct links between costs and the impact on sales - are often more difficult to create than production cost budgets - may include costs that are related to compensation packages - may include costs that appear unnecessary

- are often more difficult to create than production cost budgets - may include costs that are related to compensation packages - may include costs that appear unnecessary

Activity analysis includes ______. - charting company activities for completing a product - identifying customer wants and expectations - setting prices for the finished product - developing activity-based costing information for each activity

- charting company activities for completing a product - identifying customer wants and expectations - developing activity-based costing information for each activity

Using ROI, residual income, and EVA as performance measures ______. - helps prevent decisions that are suboptimal for the firm as a whole - recognizes that business units are part of a firm - considers that business units rely on each other - considers the activities of each business unit independently - ignores the effect of decisions on other business units

- considers the activities of each business unit independently - ignores the effect of decisions on other business units

The predicted sales for the coming period can be related to such factors as ______. - consumer-confidence indexes - econometric indicators - supplier-demand indexes

- consumer-confidence indexes - econometric indicators

Time-driven activity-based costing requires the ______ - time it takes to complete surveys or interviews of multiple managers - cost of the resources supplied to a department - time it takes to complete the various activities of the department

- cost of the resources supplied to a department - time it takes to complete the various activities of the department

Strategic long-range plans discuss ______. - operational or tactical planning - developing particular markets - major capital investments - diversifying processes

- developing particular markets - major capital investments - diversifying processes

Disadvantages of using after-tax divisional income as a performance measure include ______. - difficulty in measuring divisions of different sizes - the measure does not fully reflect the manager's decision authority - it uses dollars of income as a measure - it summarizes the results of decisions affecting revenues and costs

- difficulty in measuring divisions of different sizes - the measure does not fully reflect the manager's decision authority

Organization goals include ______. - employee learning - financial goals - innovation - enabling changes in the stock - market

- employee learning - financial goals - innovation

The budgeted balance sheets are the result of the ______. - estimated changes in sales and production - estimated changes in assets and liabilities - estimate of financial position at the beginning of the period - estimated results of operations for the period

- estimated changes in assets and liabilities - estimate of financial position at the beginning of the period - estimated results of operations for the period

The predetermined overhead rate formula based on direct labor includes ______ in its calculation. - actual manufacturing overhead - estimated direct labor cost - actual direct labor cost - estimated manufacturing overhead

- estimated direct labor cost - estimated manufacturing overhead

When budgeting for the amount of marketing and administrative costs required to operate the company at its projected level of sales and production, management should start with the previous period's actual or budgeted amounts and adjust for ______. - inflation - changes in operation - customer needs

- inflation - changes in operation

Participative budgeting ______. - involves using input from lower and middle management - can serve a management training or development role - enhances employee motivation - saves time and costs during the budgeting process - yield information that managers do not know

- involves using input from lower and middle management - can serve a management training or development role - enhances employee motivation - yield information that managers do not know

An appropriate management control system ______. - is based on organizational strategy - puts decision making in the hands of top management only - provides complete information for decisions - depends on the organization's envir

- is based on organizational strategy - puts decision making in the hands of top management only

Giving a manager a budget with instructions not to exceed it ______. - is typical for discretionary cost center managers - can invite suboptimal behavior - helps define the relationship between quality of services and costs - is typical for investment center managers

- is typical for discretionary cost center managers - can invite suboptimal behavior

If the NPV of a project is positive ______. - managers will always choose to accept the project - it is an acceptable investment - the firm will benefit from the project - the ROI always exceeds the required rate of return

- it is an acceptable investment - the firm will benefit from the project

Budgeting overhead requires an estimate based on ______. - long-range capacity - production levels - administration needs - management discretion

- long-range capacity - production levels - management discretion

Disadvantages of decentralization include ______. - manager self-interest in decision making - administrative duplication - dysfunctional decision making - local knowledge for decision making

- manager self-interest in decision making - administrative duplication - dysfunctional decision making

The purpose of cash budgeting is to ______. - maximize the equity of the company - maximize interest earned on cash balances - ensure company solvency - determine whether enough cash is available for present and future operations

- maximize interest earned on cash balances - ensure company solvency - determine whether enough cash is available for present and future operations

Divisional income statements ______. - may ignore income taxes - must be prepared using GAAP - are internal performance measures - may use firmwide averages for some accounts

- may ignore income taxes - are internal performance measures - may use firmwide averages for some accounts

Economic value added (EVA) ______. - may lead to disagreements regarding how adjustments should be made - addresses many problems associated with ROI and residual income - replaces one accounting system for another - resolves the problem of suboptimization regarding which investments should be made - is not a ratio

- may lead to disagreements regarding how adjustments should be made - addresses many problems associated with ROI and residual income - replaces one accounting system for another - is not a ratio

The sales staff ______ - may possess the best information about customer needs - have an incentive to provide the most accurate forecast - is generally evaluated, at least in part, on the sales budget

- may possess the best information about customer needs - is generally evaluated, at least in part, on the sales budget

Accounting for by-products attempts to ______. - always ensure that by-products are treated as a reduction of the cost of the main products - minimize recordkeeping for inventory valuation purposes - reflect the economic relationship between the by-products and the main products

- minimize recordkeeping for inventory valuation purposes - reflect the economic relationship between the by-products and the main products

Major methods for allocating joint costs are ______ method. - net realizable value - gross realizable - physical quantities

- net realizable value - physical quantities

Major components of a master budget are the ______. - organization goals - strategic long-range profit plan - financial trend analysis - tactical short-range profit plan

- organization goals - strategic long-range profit plan - tactical short-range profit plan

Regarding service department allocations, user departments can be ______ departments. - other service - production - marketing - other user

- other service - production - marketing

Terms for a master budget include ______. - planning budget - profit plan - budget plan - static budget

- planning budget - budget plan - static budget

Key differences in the master budget of a service enterprise is the absence of ______. - overhead costs - product inventories - material inventories

- product inventories - material inventories

Ethical issues arise in the budgeting process due to managers ______. - being unable to control the differences between budgets and actuals - providing much of the information for the budget - being evaluated for budget results

- providing much of the information for the budget - being evaluated for budget results

A successful management control system ______. - results in higher share prices - ensures managers work to achieve results - helps an organization attain its goals - will shape and define organizational strategy

- results in higher share prices - helps an organization attain its goals

Examples of batch related activities include ______. - setup costs - regulatory compliance costs - machine repair - material handling

- setup costs - material handling

The physical quantities method is used when ______. - significant processing occurs between the split-off point and the first point of marketability - product prices are set by the market - output product prices are highly volatile

- significant processing occurs between the split-off point and the first point of marketability - output product prices are highly volatile

A performance evaluation system ______. - specifies how subordinate managers are evaluated - only focuses on measures that are objective - is always based on financial criteria - includes measurements of performance

- specifies how subordinate managers are evaluated - includes measurements of performance

Methods to allocate service department costs are the ______ methods. - step - reciprocal - direct - mixed

- step - reciprocal - direct

The predetermined overhead rate is computed in advance based on annual amounts so ______. - the cost of jobs can be calculated as completed - erratic daily or monthly costs and production volumes do not affect the calculation of long-run costs - the maximum cost is assigned to each job with higher costs assigned in peak months - the cost of jobs is not distorted

- the cost of jobs can be calculated as completed - erratic daily or monthly costs and production volumes do not affect the calculation of long-run costs - the cost of jobs is not distorted

Advantages of using after-tax divisional income as a performance measure include ______. - ease of comparing division of different sizes - the income computation matches the way the firm's income is computed - it summarizes the results of decisions affecting revenues and costs - the measure fully reflects the manager's decision authority

- the income computation matches the way the firm's income is computed - it summarizes the results of decisions affecting revenues and costs

Joint costs are allocated to determine ______ - whether or not to outsource a department - the inventory value of products - costs for evaluating executive performance

- the inventory value of products - costs for evaluating executive performance

The choice of whether to use a plantwide rate or departmental rates depends on ______. - the products and the production process - the costs and benefits of information provided by each system - types of allocation drivers to be used

- the products and the production process - the costs and benefits of information provided by each system

In computing economic value added (EVA) ______. - the treatment of inventory costs is adjusted - intangibles such as R&D are capitalized and amortized - current liabilities are added to the calculation of capital

- the treatment of inventory costs is adjusted - intangibles such as R&D are capitalized and amortized

Because most accounting systems do not collect the cost of lost business, a cost of quality system is likely to ______. - result in an over-investment in prevention activities - underestimate external failure costs - result in an under-investment in appraisal activities - overestimate internal failure costs

- underestimate external failure costs - result in an under-investment in appraisal activities

According to the Treadway Commission report ______. - company environment does not impact the occurrence of fraudulent financial reporting - unrealistic budgeted profit objectives have been a cause of financial fraud - financial pressure resulting from bonus plans linked to short-term economic performance can lead to fraud - the forces that give rise to financial fraud exist to some degree in all companies - too much emphasis on long-term financial performance can lead to f

- unrealistic budgeted profit objectives have been a cause of financial fraud - financial pressure resulting from bonus plans linked to short-term economic performance can lead to fraud - the forces that give rise to financial fraud exist to some degree in all companies

When there are no reciprocal services among the service departments, the cost savings from eliminating a department should consist of ______. - variable costs - any service costs that are not allocated to other departments - allocated fixed costs - avoidable fixed costs

- variable costs - avoidable fixed costs

A company has $300,000 of joint costs for product A and product B. Product A's net realizable value = $400,000 and Product B's net realizable value = $600,000. The amount of joint cost allocated to product B is $______.

180,000 Reason: ($600,000/($400,000+$600,000)*$300,000

Given the following information, calculate the operating margin ratio. Sales: $275,000 Cost of goods sold: $150,000 Operating income: $65,000 After-tax income: $45,500

23.64% Reason: $65,000/$275,000 = 23.64%

If a department estimates manufacturing overhead for the year will be $100,000 and direct labor cost will be $400,000, the predetermined overhead rate percentage is ______%

25

Assuming that 4 employees work 48 weeks each year, and 35 hours out of a 40 hour week, the minutes of capacity available equals ______.

403,200 Reason: 48 weeks x 35 hours/wk x 60 min/hr x 4 employees

Morris Company is planning on producing 200,000 units. Direct labor is estimated at 0.25 hours per unit at a cost of $10 per hour. The total direct labor needed is ______ hours.

50,000 Reason: 200,000 units x 0.25 hours per unit

Which of the following statements regarding customer profitability is not correct? - Customers affect a company's profitability by their effect on our costs. - Information on customer profitability is important for managers, so they can make decisions that will improve firm performance. - Some customers take longer to complete transactions; the additional time those customers take adds cost to the company. - Customers affect company's profitability by their buying behavior. - All of these are correct statements.

All of these are correct statements.

If budgeted overhead cost is $250,000 and budgeted direct labor cost is $400,000 then the overhead rate equals:

62.5% of direct labor cost

Which of the following is NOT a problem with accounting measures? - Accounting for intangibles results in early recognition of the costs but not the benefits. - Some expenditures with long-term returns are expensed when incurred. - Accounting information omits benefits and costs of actions of a particular year. - Accounting income is forward looking.

Accounting income is forward looking.

Which of the following statements regarding the differences between activity-based costing and traditional department product costing methods is not correct? - Activity-based costing requires less record keeping. - Activity-based costing provides better information about how much each activity costs. - Activity-based costing provides more detailed measures of costs. - All of these statements are correct. - Activity-based costing provides more information about product costs.

Activity-based costing requires less record keeping.

Which of the following is NOT an advantage of decentralization? - Better use of local knowledge - Faster response - On-the-job decision making training - Administrative duplication

Administrative duplication

Abert's uses two suppliers for a component part used in production. Supplier A charges $1.50 per unit and Supplier B charges $1.52 per unit. The cost of late deliveries adds $.15 to the unit cost. If the probability of a late delivery is 40% for Supplier A and 10% for Supplier B. If Abert's goal is to reduce total cost, the company should purchase the part from Supplier ______

B Reason: Supplier A: $1.50+(0.15x50%)=$1.58 Supplier B: $1.52+(0.15x10%)=$1.54

The basic cost flow equation is ______,

BB + TI - TO = EB

Which of the following statements regarding the management of the cost of quality is not correct? - Information used by TQM should be more detailed than that found in traditional managerial accounting systems. - To ensure that they produce high-quality products, many companies have adopted total quality management (TQM) systems that support quality initiatives. - Quality can be defined as conformance to specification. - Effective implementation of TQM requires that information be available quickly (for example, daily) so workers can get feedback quickly. - Conformance to specification (that is producing a product that is 100% within specification), meets both the external and internal views of quality.

Conformance to specification (that is producing a product that is 100% within specification), meets both the external and internal views of quality.

What is the term used to describe a process that attempts to recover a fixed amount of costs with fewer and fewer units?

Death spiral

Forecasting method where individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called the ______ ______.

Delphi technique

True or false: Starting with allocations from the service department that provides the largest proportion of services to user departments minimizes the service costs ignored in the allocation process of the step method.

False

True or false: The cost estimate to make a product is the same regardless of the cost allocation method used.

False

Which of the following is NOT one of the categories addressed by internal control? - Compliance with applicable laws and regulations. - Effectiveness and efficiency of operations. - Reliability of financial reporting. - Fair and adequate management compensation.

Fair and adequate management compensation.

True or false: Activity-based cost management (ABCM) is another term for the value chain.

False

True or false: Activity-based cost management applies only to manufacturing organizations.

False

True or false: Compensation includes only rewards that are explicit such as cash, bonuses and stock options.

False

True or false: Divisional income is rarely used as a performance measure for geographical responsibility units. True false question.

False

True or false: For most firms, customer costs do not vary between customers.

False

True or false: Identifying the costs of customers and pricing services to reflect the costs is sufficient to reduce costs.

False

True or false: If a production department stops using the services of a service department, the costs saved equals the costs allocated to it using any of the service allocation methods.

False

True or false: In an outsourcing decision where there are reciprocal services, it is always best to use the step method of allocation to determine the costs that can be avoided by outsourcing.

False

True or false: Incentive compensation plans do not motivate behaviors.

False

True or false: Managing costs only means reducing costs.

False

True or false: Manufacturing overhead is recorded on the job cost sheet when costs are directly incurred.

False

Which of the following statements is false? - The best cost driver is the one that is causally related to the cost being allocated. - In ABC, the selection of a cost driver is often easy because a measure of the activity volume can be used. - Finding a cost driver that is causally related to the cost being allocated is easier with plantwide allocation.

Finding a cost driver that is causally related to the cost being allocated is easier with plantwide allocation.

Which of the following is NOT a component of the work-in-process inventory account? - Direct labor - Manufacturing overhead - Direct materials - Finished goods

Finished goods

When overhead is applied based on the volume of output, which of the following product types would receive relatively more overhead? - Low-volume, complex products - High-volume, less complex products - There would be no difference. - High-volume, complex products - Low-volume, less complex products

High-volume, complex products

When activity-based costing is applied to administrative activities, a four-step process is used. The four steps, in random order, are: I. Identify the cost driver associated with each activity. II. Identify the activities that consume resources. III. Assign costs to the marketing or administration activity by multiplying the cost driver rate by the volume of cost driver units consumed for that activity. IV. Compute a cost rate per cost driver for each unit or transaction. The correct order in which these steps should be taken is:

II, I, IV, III

Which of the following statements are true? - It is difficult to compare manufacturing centers with centers that provide services. - Companies rarely consider encouraging competition among their centers. - It is always best for an organization to compare the performance of its centers to each other. - Investment centers are all very similar, regardless of where they exist.

It is difficult to compare manufacturing centers with centers that provide services.

Which of the following is true? - High-volume products should always have overhead allocated using volume-based methods. - Low-volume, complex products require more machine-setups. - High-volume products always require more direct labor-hours per unit.

Low-volume, complex products require more machine-setups.

All actual overhead costs are recorded in ______.

Manufacturing Overhead Control

Which of the following is NOT an inventory account? - Finished goods - Work-in-process - Manufacturing overhead - Direct materials

Manufacturing overhead

Which of the following is NOT a type of internal control? - Prohibiting certain activities or behaviors. - Requiring management authorizations. - Requiring employees to be available to work weekends. - Setting expenditure limits. - Accounting reconciliations.

Requiring employees to be available to work weekends.

Which of the following is not true about the development of the master budget? - The bulk of the work of developing a budget happens one month preceding the beginning of the coming fiscal year. - Budgeting is an ongoing process for most organizations. - Budgets are created after organizational goals, strategies, and long-range plans are created.

The bulk of the work of developing a budget happens one month preceding the beginning of the coming fiscal year.

Which of the following statements regarding time-drive activity-based costing (TDABC) is not correct? - The cost driver rate for the various activities equals the time available divided by the cost of the resources supplied. - With TDABC, the manager only needs to determine the time it takes to complete the various activities of the department and the cost of the resources supplied to a department. - TDABC provides an alternative to an unmodified ABC system that might be too costly to maintain given the benefits the ABC system provides. - Time equations allow managers to adjust the times for orders with different characteristics. - Unless the system is modified, TDABC is all based on a single measure for each activity: time.

The cost driver rate for the various activities equals the time available divided by the cost of the resources supplied.

True or false: A management control system helps to reduce the impact of dysfunctional decision making.

True

True or false: At the most basic level, managers should design systems that do not punish people for doing the right thing.

True

True or false: Critical success factors are responsible for making the strategic planning process successful.

True

True or false: Higher share prices should result when a company has a successful management control system.

True

True or false: In many organizations, the sales staff has the best information available to develop the sales budget.

True

True or false: The difference between "net realizable value" and "estimated net realizable value" is whether or not the product can be sold at the split-off point.

True

True or false: When using activity-based costing, the predetermined overhead rate applies to any type of indirect cost.

True

Direct labor would fall into what cost category?

Unit-level

Put the following activity analysis steps in order: I. Chart, from start to finish, the company's activities for completing the product. II. Compare the costs of each activity with the value that customers assign to it. III. Classify all activities as value-added or nonvalue-added. IV. Develop activity-based costing data for each activity, based on the resources used in each activity. V. Identify what the customer wants or expects from the firm's products or services, including key features, price, and quality. VI. Continuously improve the efficiency of all value-added activities and eliminate or reduce nonvalue-added activities.

V, I, IV, III, II, VI

When activity-based costing is used, the entry to record the application of overhead for a given activity includes a debit to:

When activity-based costing is used, the entry to record the application of overhead for a given activity includes a debit to:

The journal entry to record the purchase of direct materials on account includes a credit to ______.

accounts payable

A way for organizations to think systematically about the processes they use to provide products to customers is called ______ ______.

activity analysis

The final step in the activity-based costing system is to assign the ______ ______ to products.

activity costs

An approach that uses activity-based costing data to evaluate the cost of value-chain activities and identify opportunities for improvement is ______.

activity-based cost management

The method that first assigns costs to activities and then assigns them to products based on the product's consumption of activities is ______-______ ______.

activity-based costing

The two-stage product costing method that assigns costs first to activities and then to the products based on each product's use of activities is called ______.

activity-based costing

A cost of quality report is only effective if ______.

all quality costs are measured and reported

When unused capacity costs are for the benefit of specific customers, it is best to ______.

allocate the costs to the specific customers who are benefited

End-of-process sampling and field testing are examples of ______ costs.

appraisal

In deciding whether to sell goods now or process them further, the costs incurred to get the goods to this point ______ relevant to the decision.

are never

Evaluating inventory levels would be a possible response to a reduction in ______.

asset turnover

The main difference between an activity-based costing system and a two-stage costing system is that, in the first-stage allocation, an activity-based costing system:

assigns costs directly to activities.

Time-driven activity-based costing ______ the need to conduct surveys or interviews of multiple managers and employees.

avoids

Ideally performance in a cost center should be measured by ______.

comparing actual inputs to standard inputs

Costs are assigned to individual cost objects (products or services) using appropriate cost allocation ______ or ______.

bases; drivers

When a cost system allocates all costs based on expected volume annually, costs per unit will ______ volume.

be lower in years with higher

Cost of goods sold =

beginning finished goods inventory + cost of goods manufactured - ending finished goods inventory

Units in ______ inventory + Required production (units) - Budgeted ______ (units) = Units in ______ inventory.

beginning; sales; ending

When an individual acts in the best interests of the organization regardless of his or her own goals, ______ congruence exists

behavioral

The budget is not formally adopted until the ______ approves the master budget.

board of directors

A plan stated in financial terms of how the organization expects to carry out its activities and meet the financial goals established in the planning process is called a(n) ______.

budget

The financial plan of the revenues and resources needed to carry out activities and meet financial goals is called a(n) ______.

budget

Overhead rates based on machine-hours are calculated by taking ______ overhead costs divided by ______ machine-hours.

budgeted; budgeted

Effective performance measures for investment centers, commonly called ______ ______, include measures of profit and asset usage.

business units

The outputs from joint production process that are relatively minor in quantity and/or value when compared to the main outputs are called ______-______.

by-products

Activity-based costing ______ be applied to administrative activities.

can

Using the current cost method instead of historical cost ______.

can be difficult and expensive

When a business owner makes most of the important decisions, the business is very ______.

centralized

The process that begins by attempting to increase price to meet reported product costs, losing market, reporting higher costs, and so on until out of business is the ______ ______.

death spiral

The process where a company attempts to recover costs by increasing price for a product with decreasing demand describes the ______ ______.

death spiral

The delegation of decision-making authority throughout an organization is called ______.

decentralization

Dysfunctional decision making is a possible consequence when an organization is ______.

decentralized

Top managers have more time to focus on strategic decisions when an organization is ______.

decentralized

Automation has caused direct labor costs in companies to (decrease/increase) ______.

decrease

When a company uses one allocation base, it gives the appearance that when a company drops a segment, all overhead costs will (increase/decrease) ______.

decrease

The essence of decentralization is ______ ______ authority which specifies subordinate managers' authority.

delegated decision

A local manager has the ability to hire an employee but does not have the ability to hire another manager. This is an example of ______.

delegated decision authority

If multiple products use the manufacturing facilities in many different ways, the ______ allocation method is the best choice to allocate overhead costs.

department

The merchandise purchase budget is similar to the ______ ______ ______ budget in manufacturing.

direct materials purchases

Intermediate users are ignored when using the ______ ______ to allocate service department costs.

direct method

Methods to allocate service department costs are the ______, ______, and ______ methods.

direct; step; reciprocal

Accounting, advertising, and many other administrative departments are generally considered ______ centers.

discretionary cost

When managers are responsible for costs, but the input-output relationship is not well established, a(n) ______ ______ center is established.

discretionary cost

To assign overhead costs to a product, multiply the cost driver rates by the number of units of the cost ______.

driver in each product

Fixed and variable costs are allocated using different allocation bases under a(n) ______-______ method.

dual-rate

Statistical methods of forecasting economic data using regression analysis is called ______ models.

econometric

"Accounting distortions" such as the treatment of inventory costs and expensing of intangibles are eliminated in the calculation of ______.

economic value added (EVA)

Adding a flat fee for each order in addition to other delivery charges will ______.

encourage customers to place larger orders

Required materials purchases = materials to be used in production + estimated ______.

ending materials inventory - estimated beginning materials inventory

An effective cost allocation system should ______.

ensure the performance of managers who have decision-making authority affecting costs will be measured by the costs

When no sales values exist for the outputs at the split-off point, the ______ ______ ______ value should be determined by taking the sales value of each product at the first point at which it can be marketed.

estimated net realizable

Because management performance is compared to budgets they help create, budgeting creates serious ______ issues for many people.

ethical

Because of the ways costs are tracked, a cost of quality system is likely to underestimate ______ costs.

external failure

Lost future business is an example of a(n) ______ cost.

external failure

Marketing costs incurred to improve a company's tarnished image is an example of a(n) ______ ______ cost.

external failure

Liability claims are an example of:

external failure costs.

Most companies ______.

fall between the extremes of centralization and decentralization

The Treadway Commission concluded that a frequent incentive for A process designed to provide reasonable assurance that an organization will achieve its objectives is in financial reporting is the desire to obtain higher stock prices.

fraud

When all members of an organization have agreed to on a common set of objectives, total ______ ______ exists.

goal congruence

The use of input from lower-and middle-management employees is often participative or ______ ______ budgeting.

grass roots

To prevent ROI from increasing each year due to accumulated depreciation, a company should choose to use the ______ book value method.

gross

(Sales minus cost of goods sold)/sales is the formula for the ______ ______ ratio.

gross margin

Costs other than cost of goods sold are ignored when computing the ______ ______ ratio.

gross margin

The original cost to purchase or build an asset is called the ______ cost.

historical

Budget preparation rests on ______ estimates of an unknown future.

human

The first step in activity-based costing is ______.

identify the activities

The second step in activity-based costing is Blank______.

identify the cost drivers

One problem with divisional income, ROI, residual income, and EVA is they ______.

ignore the effect of decisions on other business units

Bonuses based on sales is an example of a(n) ______ ______ plan.

incentive compensation

The profit plan is another name for the ______ ______ portion of the master budget.

income statement

The purpose of a management control system is to ______.

influence managers operating in a particular environment

How salespeople treat customers and delivery time are all ______ features of a product.

intangible

A company's first line of defense against fraud are often the ______.

internal auditors

By monitoring and reviewing internal controls, ______ ______ are often a company's first defense against fraud.

internal auditors

A process designed to provide reasonable assurance that an organization will achieve its objectives is ______ ______.

internal control

Rotating employee responsibilities and enforced vacations are both examples of ______ ______ that companies use.

internal controls

Scrap and rework are examples of ______ ______ costs.

internal failure

Direct materials, work-in-process, and finished goods are assets that are classified as ______ accounts.

inventory

Effective performance measures for ______ centers or business units include measures of profit and asset usage.

investment

Managers of ______ centers make capital budgeting and other decisions affecting asset use.

investment

When a manager has the ability to make large-dollar asset acquisitions without higher approval, (s)he is running a(n) ______ center.

investment

Economic value added (EVA) does not resolve the suboptimization problem because ______.

it is based on accounting income while investment decisions are based on the present value of cash flows

When evaluating investment center income ______.

it may make sense to compare it to an industry competitor

A unit of a product that is easily distinguishable from other units is called a(n) _____.

job

Firms that produce jobs are often called ______ ______.

job shops

If allocated ______ costs are used for decision-making purposes, there should be full recognition of their limitations.

joint

The cost of a manufacturing process with two or more outputs is called a(n) ______ ______.

joint cost

When companies are subjected to regulations, the allocation of ______ ______ can be a significant factor in determining the regulated rates.

joint costs

A supervisor routinely checks equipment at the start of every shift to make sure that they are setup correctly. After batches of products have been produced, she randomly checks the output to ensure it meets specifications. These costs are ______.

one prevention and one appraisal cost

Operating income/sales is the formula for the ______ ______ ratio.

operating margin

The effect of both cost of goods sold and operating costs but not taxes is considered in the computation of the ______ ______ ratio.

operating margin

A company's broad objectives established by management that employees work to achieve are called ______ ______.

organizational goals

When overhead is applied based on the volume of output, high-volume products are generally ______ (over/under)-costed and low-volume products are ______ (over/under)-costed.

over; under

Direct cost of service departments become ______ costs to user departments.

overhead

Consistency with the decision authority of the manager and reflection of results that improve the organization are two considerations when developing ______ measures.

performance

How a subordinate is measured and how the measurement results will be used are part of the ______ ______ system.

performance evaluation

Activity-based costing can be applied to administrative activities to compute the cost of ______.

performing an administrative service

When joint costs are allocated based on measurement of the volume or weight of the joint products at the split-off point, the ______ ______ method is being used.

physical quantities

The term ______ refers to an entire factory, store, or hospital.

plant

When a nonmanufacturing organization uses a single overhead rate to allocate indirect costs, it is called a(n) ______ allocation.

plantwide

When one cost pool is used to allocate overhead costs to products for all departments the ______ allocation method is in use.

plantwide

When excess capacity costs are assigned to customers who do not benefit from those costs, ______.

poor pricing decisions may result in the loss of customers

When a company has excess capacity due to plans for expansion, the better cost system to report cost would use ______,

practical capacity

Inspections (materials, processes, and equipment) are examples of ______ costs.

prevention

Quality training and product design are examples of ______ costs.

prevention

When authority in an organization is decentralized, a(n) ______-______ relationship exists.

principal-agent

Joint costs are incurred ______ the split-off point.

prior to

Changing operations to improve performance, often after examining activity-based costing data to determine opportunities for improvement is called ______ ______.

process reengineering

Changing operations to improve performance, often after examining activity-based costing data to determine opportunities for improvement is called ______.

process reengineering

Testing for environmental compliance and design and specification are examples of ______ related costs.

product

A merchandiser does not have a(n) ______ budget but instead has a merchandiser purchases budget.

production

If production is more uncertain than sales, it is reasonable to start the master budget with a forecast of ______.

production

Managers of ______ ______ centers are responsible for both revenues and costs.

profit

Net income is an appropriate performance measure for a(n) ______ center manager.

profit

The two major methods for allocating joint costs are the net ______ ______ method and the ______ method.

realizable value; physical quantities

Total Service Department Costs = Direct Costs of the Service Department + Cost Allocated to the Service Department is the formula for the ______ method.

reciprocal

All services provided by any service department including services provided to other service departments are recognized when using the ______ ______.

reciprocal method

Residual income ______ the suboptimization problem.

reduces

Comparing managers of one division with that of peer group divisions is called ______ ______ evaluation.

relative performance

The purpose of ______ is to go beyond setting internal targets and compare managers to comparable divisions.

relative performance evaluation

Allocating corporate costs to managers who do not have the decision-making authority to influence the costs ______.

renders the management control system ineffective

Materials to be used in production + estimated ending materials inventory - estimated beginning materials inventory equals ______ ______ ______.

required materials purchases

The first-draft budget usually ______.

requires revision before being finalized

After-tax income - (Cost of capital x Divisional assets) is the formula for ______ ______.

residual income

The economist's notion of profit as being the amount left over after all costs, including the cost of capital employed, are subtracted is similar to the concept of ______.

residual income

In activity-based costing, the ______ ______ to an activity are the expenditures or amounts spent on it.

resources supplied

In activity-based costing, ______ ______ for an activity are measured by multiplying the cost driver rate by the cost driver volume.

resources used

Multiplying the cost driver rate by the cost driver volume measures the _________ for an activity.

resources used

After-tax income/Divisional assets is the formula for ______ on ______.

return; investment

One of the most common performance measures for divisional managers is ______ on ______.

return; investment

The appliance department of a large department store is an example of a(n) ______ center.

revenue

The obvious performance measure for a(n) ______ center is the amount of sales or fees earned.

revenue

Managers of ______ ______ typically are responsible for selling products and generally marketing costs.

revenue centers

In most firms, forecasting ______ is the most difficult aspect of budgeting.

sales

The net realizable value is also called the ______ ______ at split-off.

sales value

Identifying the cost drivers is the ______ step in developing an ABC system.

second

Asking hypothetical questions in order to evaluate an organization's exposure to risk is the basis of ______ analysis.

sensitivity

By asking and answering hypothetical questions during the planning phase, ______ analysis helps management determine the risk of various phases of its operations and develop contingency plans.

sensitivity

According to the concept of ______ ______ ______, the person who prepares the payroll checks cannot sign them and distribute them to employees.

separation of duties

Under the concept of ______ ______, no person has control over an entire transaction.

separation of duties

Processing costs incurred prior to the ______-______ ______ are the joint costs.

split-off point

The stage of processing at which the two products are separated is called the ______-______ ______.

split-off point

A unit is called a(n) ______ ______ center if the relationship between costs and outputs can be specified.

standard cost

The method that allocates some service department costs to other service departments is called the ______ ______.

step method

A statement detailing steps to take to achieve a company's organization goals is called a(n) ______ ______-______ plan.

strategic long-range

Forecasting sales is difficult due to ______.

subjectivity

The amount of production possible under ideal conditions with no downtime is called ______ capacity.

theoretical

A TDABC can be extended to allow for differences among orders by using ______ ______.

time equations

A method that addresses the costs of maintaining an ABC system is called ______-______ activity-based costing.

time-driven

Optimal levels of capital investment in long-term assets, investment in working capital and financing decisions fall under the ______ function.

treasurer's

The forecasting method that ranges from a simple visual extrapolation of points on a graph to a highly sophisticated computerized time series analysis is called ______ ______.

trend analysis

The forecasting method that ranges from a simple visual extrapolation of points on a graph to a highly sophisticated computerized time series analysis is called ______.

trend analysis

Many companies begin preparation of the Master Budget with the sales budget because, for many organizations, sales are most ______.

uncertain

A cost of quality system is likely to underestimate:

underestimate

Which of the following is NOT a potential reason for unused capacity? - expansion plans - unexpected demand - seasonal demand

unexpected demand

A department that requires the functions of service departments is called a(n) ______ department.

user

TDABC ______.

uses time equations to allow for differences among orders

The set of activities that transforms raw resources into products for customers is called the ______ ______.

value chain

Activities that customers are willing to pay for are called ______-______ activities.

value-added

When a company uses only one rate to allocate overhead costs, the accounting system treats all overhead as if the costs were ______.

variable

Activity-based costing assigns costs to products by multiplying the cost driver rate by the ______ of cost driver units consumed by the product.

volume

Activity-based costing system recognizes that overhead is not necessarily related to the ______ of output.

volume

The entry to record the direct labor incurred and assigned to a job includes a credit to ______.

wages payable

The ultimate goal in implementing a quality improvement program is to achieve zero defects ______ costs of quality.

while incurring minimal

When a company assigns costs to customers incorrectly, they run the danger of being left ______ customers.

with higher cost

Direct materials, direct labor, and manufacturing overhead are components of the _____-_____-_____ inventory account.

work-in-process