Final Questions Practice

Which of the following is NOT one of the steps in the managerial decision-making process? A) Basing decisions on sunk costs B) Defining business goals C) Identifying alternative courses of action D) Gathering and analyzing relevant information

A) Basing decisions on sunk costs

The best measure for evaluating the effectiveness of a manager in an investment center would be ___________. A) Residual income measures B) Success in controlling costs C) Success in meeting budgeted revenues D) Current ratio measures

A) Residual income measures

Bag Company, Inc. intends to increase its profits by 50% in the next fiscal year. Which of the following is most likely to be a lag indicator in Bag Company, Inc. performance report? A) Return on investment B) Number of repeat customers C) Rate of on-time deliveries D) Defect rate

A) Return on investment

Which of the following is NOT a benefit of benchmarking? A) It helps companies determine where they can improve B) It does not help management highlight company problems C) It can be used to compare a company's budgets to other leading companies through the use of industry averages. D) It helps companies develop budgets to assist in meeting performance goals.

B )It does not help management highlight company problems.

Which of the following is true about the following statements? 1) A static budget is a financial plan for only one level of sales volumes. 2) A flexible budget is prepared to represent various levels of sales volumes.

Both Statements are true.

Profit center responsibility reports include ________________. Revenues Expenses Both None

Both revenues and expenses.

Which of the following is an example of the benchmarking function of the budget process? A) A budget demands integrated input from different business units and functions B) Budgeting requires close cooperation between accountants and operational personnel C) Budget numbers are used to evaluate the performance of managers. D) The budget outlines a specific course of action for the coming period.

C) Budget numbers are used to evaluate the performance of managers.

Which of the following is true of participative budgeting? A) Preliminary budgets are developed by top management and flows down to the departmental level. B) Budgets are developed separately in a company's segments so coordination is not necessary. C) Budgets are more achievable because those impacted by the budget helped create it. D) The budgeting process is quick, usually only requiring one-two weeks to complete.

C) Budgets are more achievable because those impacted by the budget helped create it.

Capital budgeting involves___________. A) Budgeting for yearly operational expenses B) Preparing the sales budget for the coming year C) Evaluating various long-term investments D) Analyzing various alternatives of financing available to a company.

C) Evaluating various long-term investments

Which of the following is NOT a benefit of a static budget performance report? A) It is useful in evaluating a manager's effectiveness when actual sales approximate budgeted amounts B) It is useful in evening a manager's control over fixed costs. C) It is useful in evaluating a manager's control over variable costs. D) It is useful in evaluating a manager's control over fixed selling and administrative expenses.

C) It is useful in evaluating a manager's control over variable costs.

Which of the following is irrelevant when deciding to upgrade a company's heating and air conditioning system? A) The energy efficiency of the old equipment versus the energy efficiency of the new equipment B) The safety of the new equipment compared to the old one C) The purchase price of the old equipment D) The productivity of the old equipment compared to that of the new equipment.

C) The purchase price of the old equipment

Companies in which owners or top executives make all of the planning, directing and controlling decisions are _________ companies.

Centralized

The production line of a manufacturing company is most likely to be considered to be a(n)______________.

Cost Center

Which of the following vest describes a capital budgeting post-audit? A) An audit of an operating unit of a company B) An audit performed only at the end of the project's life span C) An analysis of an investment's cash flows prior to committing to the initial investment D) A comparison of actual results of capital investments with projected results

D) A comparison of actual results of capital investments with projected results

When analyzing short-term business decisions, what are two important factors? A) Focus on costs that do not change under two alternatives and on historic costs B) Focus on qualitative data only and ignore future cash flows C) Focus on sunk costs and quantitative data D) Focus on relevant costs and use the contribution margin approach

D) Focus on relevant costs and use the contribution margin approach.

Which of the following is a disadvantage of decentralization?? A)It results in increased customer response time. B) It allows only the top management to make decisions. C) It does not motivate employees because the decision-making powers are not delegated. D) It results in problems with achieving goal congruence.

D) It results in problems with achieving goal congruence

Which of the following is always irrelevant to short-term operating decisions? A) Relevant cost B) Differential cost C) Opportunity cost D) Sunk Cost

D) Sunk Cost

An unfavorable flexible budget variance in operating income might be due to a(n)

Increase in variable cost per unit

Which of the following amounts of a flexible budget remains constant, within the specified relevant range, when the sales volume changes? A) Total contribution margin B) Total fixed costs C) Total variable costs D) Total sales revenues

Total Fixed Costs

T or F The capital expenditures budget must be completed before the cash budget is prepared.

True

A company is analyzing its month-end results by comparing it to both static and flexible budgets. During the month, the actual sales price was higher than the expected sales price as per the static budget. The difference results in a(n)

Unfavorable flexible budget variance for sales revenues.