Management Accounting Multiple Choice

Which of the following is an appropriate measure within the Learning & Growth perspective? % on-time delivery # of new products % Increase in Sales Market share

# of new products

A particular airline's GROWTH component showed a $ 4,200,000 positive impact on income. If we know that the airline experienced total growth of 15% and that the market size of the airline industry increased 6%, what is the $ positive impact of the airline's growth in market share? $3,780,000 $378,000 $2,520,000 Some other amount $630,000

$2,520,000 ((15%-6%)/15%)*4,200,000

Which of the following benefits will not be achieved with Customer Profitability Management? A firm will replace intuition with facts about its customer base A firm will better understand which customers are contributing to profits and which customers are eroding profits All of these are benefits gained from customer profitability management A firm will better understand the relationship between the behaviors of customers and its costs. A firm will better understand which steps in the production process are not adding value

A firm will better understand which steps in the production process are not adding value

Division S (seller) incurs variable cost of $80 per unit. There is unlimited demand for the output of Division S in the external market where the market price is $125 per unit. IF there is no excess capacity in Division S, what is the opportunity cost (per unit) for Division S if the transfer price to Division B is set at $100? A. $25 B. Some other amount C. There is zero opportunity cost. D. $20 E. $45

A. $25

Which of the following increased due to growth in Revenue Passenger Miles? A. All of these B. Passenger-related costs C. Fuel costs D. Flight-related costs

A. All of these

Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows: Raw lumber division = $125 per 100 board-ft Finished lumber division= $145 per 100 board-feet of finished lumberAssume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $175 per 100 board-feet. Finished lumber can be sold at$345 per 100 board-feet.Assume that internal transfers are made at 130%. Which of the following statements is CORRECT? A. All of these statements are correct B. The finished lumber division will benefit from this transfer price. C. The raw lumber division will not be in favor of this transfer price if unlimited demand exists in the external market for raw lumber. D. The incremental profit for the company by processing raw lumber further amounts to $25 per 100 board-feet. E. None of these statements are correct

A. All of these statements are correct

The general minimum transfer pricing rule is: A. Incremental Cost + Opportunity Cost for the selling division B. Full Cost + Markup for the selling division C. Full cost + Opportunity Cost for the selling division D. None of these

A. Incremental Cost + Opportunity Cost for the selling division

Which statement best describes the effect of transfer pricing between Division S (seller) and Division B (buyer) on overall company profits? A. Transfer prices do not directly impact company profits but can lead to decisions which do negatively impact overall profits. This negative impact on overall company profits is insidious and may not be transparent to division managers or top management. B. Transfer prices do not directly impact company profits but can lead to decisions which do negatively impact overall profits. This negative impact on overall company profits is obvious to division managers and top management. C. Transfer pricing directly impacts overall company profits as well as the profits of Divisions S and B. D. Transfer prices relate to internal transactions (between Division S and Division B) and therefore do not impact overall company profits

A. Transfer prices do not directly impact company profits but can lead to decisions which do negatively impact overall profits. This negative impact on overall company profits is insidious and may not be transparent to division managers or top management.

FOH is treated as a product cost under which costing method?

Absorption

"Costs to serve": None of these All of these Occur both upstream (before) and downstream (after) in reference to the point of sale Are hidden within the S, G, and A component of the Income Statement Should be allocated to the customers who create the cost

All of these

Which of the elements increased in 2005 at Southwest? None of these Market size All of these Market share Available Passenger Miles Miles flown per passenger

All of these

Which of the following statements are CORRECT in regard to SW flying longer flights in 2005? The PRODUCTIVITY component was positively affected None of these statements arecorrect All of these statements are correct This attribute of an airline is referred to as stage length SW achieved more efficient fuel usage.

All of these statements are correct

How is capacity measured in the airline industry? Revenue Passenger Miles Passenger Load Factor Stage Length Available Passenger Miles

Available Passenger Miles

ASMS

Available seat miles, #available seats and #miles flown

Division S (seller) incurs variable cost of $80 per unit. There is unlimited demand for the output of Division S in the external market where the market price is $125 per unit. IF there is excess capacity in Division S, what is the minimum transfer price Division S will accept to avoid incurring a loss? A. $125 B. $80 C. Some other amount

B. $80

In the airline industry and within the Productivity Component, which of the following negatively impacts income? A. Longer stage length B. Shorter flights taken by passengers C. All of these D. Fuller planes (fewer empty seats) E. None of these

B. Shorter flights taken by passengers

Meridian Company's Production Division was operating below capacity. Its Assembly Division had been buying a part for its final product XX-1 in the external market for $40 per unit and is now asking the Production Division to supply 10,000 units of this part for $30 per unit. The variable cost for the Production Department would be $22.00. IF the Production refuses to make the 10,000 parts for a transfer price of $30 because this is less than the $40 the Production Division is currently paying, what will be the financial impact for Meridian Company of this standoff between divisional managers? A. This will cost Meridian Company $100,000 B. This will cost Meridian Company $180,000 C. There will be no impact on Meridian Company profits D. This will cost Meridian Company $400,000

B. This will cost Meridian Company $180,000

Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows: Raw lumber division = $125 per 100 board-ft Finished lumber division= $145 per 100 board-feet of finished lumber Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $175 per 100 board-feet. Finished lumber can be sold at$345 per 100 board-feet.Assume that internal transfers are made at 130% of Variable Cost. Calculate the operating income per 100 board-feet for the Finished lumber Division. A. $182.50 B. $75.00 C. $37.50 D. Some other amount

C. $37.50

The most frequently used method for setting transfer prices is: A. Market-based B. Negotiated (hybrid) C. Cost-Based D. No difference in usage between the 3 methods

C. Cost-Based

Which of the following IS NOT a recommendation of the authors of "Multinational Transfer Pricing" in regard to multinational companies and the risk of "tax avoidance" penalties? A. Transfer prices between multinational divisions should be set as if the transaction were "an arm's length" transaction B. Transfer prices between multinational divisions should be set at market price in order to avoid "tax avoidance" penalties C. Divisional managers in multinational companies should exert their autonomy and negotiate for transfer prices that benefit their own divisions D. Multinational companies are motivated to set transfer prices such that the division which operates in a "low tax rate" company recognizes more of the profit.

C. Divisional managers in multinational companies should exert their autonomy and negotiate for transfer prices that benefit their own divisions

Which of the following statements is CORRECT concerning transfer prices between Division S (seller ) and Division B (buyer)? A. Division managers are fully aware of the cost structure of other divisions and can see how decisions they make impact other divisions and the company as a whole. B. To encourage operational efficiency in Division S, the transfer price when selling to Division B should be based on actual costs. C. None of these statements are Correct. D. Divisional managers in a decentralized organization will tend to make decisions that improve overall company profits, even if the decision results in an operating loss for their division. E. All of these statements are Correct

C. None of these statements are Correct.

Which of the following components was positively impacted by the fact that SW flew "fuller" planes in 2005? A. Growth Component B. Price Recovery C. Productivity

C. Productivity

Which of the following statements is INCORRECT in regard to the capacity component of the SW's strategic analysis of income? A. SW increased its Revenue Passenger Miles in 2005 B. SW increased its Available Seat Miles in 2005 C. SW increased its cost per ASM in 2005 D> None of these statements are incorrect - all correct statements

C. SW increased its cost per ASM in 2005

Calgary Lumber has a raw lumber division and a finished lumber division. The variable costs are as follows: Raw lumber division = $125 per 100 board-ft Finished lumber division= $145 per 100 board-feet of finished lumberAssume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $175 per 100 board-feet. Finished lumber can be sold at$345 per 100 board-feet. The transfer price is set at 130% of variable cost. Assume Finished Lumber Division has a special order whereby the new customer offers to pay $300 per 100 board-feet. Also assume that both divisions have the capacity needed for this special order. Which of the following will likely result in regard to this special offer? A. The Finished Lumber Division will reject this special order and this decision will positively impact overall company profits B. The Finished Lumber Division will accept this special order and this decision will positively impact overall company profits C. The Finished Lumber Division will reject this special order and this decision will negatively impact overall company profits D. The Finished Lumber Division will accept this special order and this decision will negatively impact overall company profits

C. The Finished Lumber Division will reject this special order and this decision will negatively impact overall company profits

Which of the following category of costs had the largest negative impact on the operating income of SW in 2005? All had about the same negative impact Passenger-related costs Flight-related costs Cost of fuel

Cost of fuel

Which of the following balanced scorecard perspectives examines a company's success in targeted market segments? Internal Business Customer Learning and Growth Financial

Customer

Which statement reflects the philosophy of customer profitability management? The primary focus should be on the profitability of individual products Customers require different amounts of resources of the firm Companies should focus on increasing the customer base and increasing sales Business facility costs should be allocated to customers

Customers require different amounts of resources of the firm

Which of the following statements is CORRECT about cost control within target costing? A. The assumption is that all costs are necessary and add value B. Trying to reduce costs after production is easier than trying to do this before production C. If target costs are not met, then companies will adjust the price accordingly D. Cost reduction should occur before production begins

D. Cost reduction should occur before production begins

Which of the following NEGATIVELY impacts the PRODUCTIVITY COMPONENT? Decrease in the average stage length of flights Increase in the miles flown per passenger All negatively impact Increase in the passenger load factor

Decrease in the average stage length of flights

Which of the following represents the 1st step in the target costing process? Determine the cost of the product Determine the profit margin desired Determine the price customers are willing to pay for the product Determine the price the company wants to charge for the product

Determine the price customers are willing to pay for the product

On a balanced scorecard, which of the following is not a customer satisfaction measure? Customer retention Market share Response Time Economic value added

Economic value added

What is the reconcilliation formula for NI?

FOH per unit * (difference in #units sold and #units produced)

Which of the following does best describes the common-sizing technique often used within Customer Profitability Management? Firms use a horizontal (rather than vertical) approach when common-sizing Firms calculate each "cost to serve" item allocated to Customer A relative to revenues earned for Customer A Firms calculate the revenues earned from Customer A relative to the revenues earned from all customers Firms calculate each "cost to serve" item allocated to Customer A relative to "costs to serve" for all customers.

Firms calculate each "cost to serve" item allocated to Customer A relative to revenues earned for Customer A

Which statement is INCORRECT concerning Customer Profitability Management? Firms should target marketing efforts to "angel"customers Firms should "fire the customers" who are expensive to serve Firms should "play defense" - try to retain the good customers they have Firms can offset costs to serve by adding surcharges for costly services provided to customers

Firms should "fire the customers" who are expensive to serve

An overall positive effect on income emerged in which 2 components of SW in 2005? Productivity and Capacity Capacity and Growth Capacity and Price Recovery Price Recovery and Productivity Growth and Productivity

Growth and Productivity

Which statement is INCORRECT concerning SW and the GROWTH component? None of these statements are incorrect - all are correct In terms of percentage growth, the market share for SW grew in 2005 but not as significantly as did the market size Market size refers to the overall size of the market for the entire industry Market share refers to SW's proportion of the overall market The increase in SW's market share also brought additional costs to SW

In terms of percentage growth, the market share for SW grew in 2005 but not as significantly as did the market size

Which of the following would NOT be a leading indicator that future sales are likely to exceed current sales? Increase in the # of new customers this year Increase in customer satisfaction ratings Increase in Market Share Increase in profit margin this year

Increase in profit margin this year

Which of these improvements would be found in the Internal Business section of the balanced scorecard? Increase in the cycle time on the production floor Increase in the % of employees receiving training Increase in profit margin Increase in customer satisfaction ratings

Increase in the cycle time on the production floor

Under the balanced scorecard concept, employee satisfaction and retention are measures used under which of the following perspectives? Learning and Growth Customer Financial Internal Business

Learning and Growth

Which of the following sets of factors would be considered EXTERNAL Factors outside the control of SW? Fuel prices and setting fares to cover cost increases Market Share and Fuel prices Market Size and Fuel prices Setting fares to cover cost increases and market size

Market Size and Fuel prices

Using the balanced scorecard approach, an organization evaluates managerial performance based on: A single ultimate measure of operating results, such as return on assets Multiple non-financial measures only. Multiple financial and non-financial measures Multiple financial measures only

Multiple financial and non-financial measures

Does transfer pricing indirectly affect firm-wide profits

No, but it does affect manager decisions which can impact the overall earnings of a company

In regard to how costs are assigned to individual customers, which of these statements is CORRECT? All of these statements are correct None of these statements are correct A traditional ABC costing system is the best system choice when assigning "costs to serve" to individual customer All non-production costs should be assigned to specific customers The assignment of "costs to serve" should be assigned to individual customers using a volume-based approach

None of these statements are correct

Which of the following statements is CORRECT concerning the SW PRICE RECOVERY COMPONENT? All of these statements are correct Southwest Airlines is generally recognized as an airline which chooses a product differentiation strategy Southwest Airlines covered its cost increases thru the fares charged to customers in 2005 All airlines, regardless of their strategy and reputation, will raise fares enough to cover increases in costs None of these statements are correct

None of these statements are correct

The airline measure that is based on both the # of passengers on a flight and the # of available seats is the: Passenger Load Factor None of these Stage Length Revenue Passenger Miles

Passenger Load Factor

RPMs

Revenue passenger miles, combo of #passengers and #miles flown

How do you find volume variance?

The difference between budgeted and actual units produced

Which of the following represents information that cannot be derived from viewing a whale graph? The % of customers who actually erode profits The names of the most profitable customers The total profit that could have been earned if the customer base only included those customers who contribute to profits The percentage of customers who neither contribute to profits nor erode profits

The names of the most profitable customers

FOH is treated as a period cost under which costing method?

Variable

What are 3 ways transfer prices are set?

cost based, market based, negotiated

When units produced < units sold, inventory will (increase/decrease) and net income will generally be higher for (absorption/variable)

decrease; variable

If budgeted units produced < actual units produced is your volume variance favorable or unfavorable?

favorable

When units produced > units sold, inventory will (increase/decrease) and net income will generally be higher for (absorption/variable)

increase; absorption

If budgeted units produced = actual units produced is your volume variance favorable or unfavorable?

neither; there is no volume variance

Passenger Load Factor

the percentage of available seats on a flight that are actually sold;

If budgeted units produced > actual units produced is your volume variance favorable or unfavorable?

unfavorable