ACCT 203 - Ch. 11

Throughput time is the amount of time required to move a completed unit from the factory floor to the warehouse.

False

A change in sales has no effect on margin and turnover.

False

Residual income can be used most effectively in comparing the performance of divisions of different size.

False

Return on investment (ROI) equals margin multiplied by sales.

False

For a production budget, the ______ is the beginning inventory for the year. A) Beginning inventory for the first quarter B) Beginning inventory for the last quarter C) Ending inventory for the last quarter D) Sum of beginning inventories for the four quarters

A

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories? A) Costs of carrying inventory. B) General administrative policy of the company. C) Selling price of the finished product. D) Statutory requirements.

A

Which of the following is not a benefit of budgeting? A) The budgeting process enables managers to uncover bottlenecks as they occur. B) Budgets communicate management's plans throughout the organization. C) Budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance.

A

Which of the following is true of self-imposed (participative) budgets? A) Self-imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process. B) Self-imposed budgets are prepared without consulting lower-level managers. C) The estimates used in self-imposed budgets rely primarily on the inputs and insights of top managers. D) Managers who create self-imposed budgets do not have an opportunity to embed budgetary slack within their estimates.

A

Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same?

An increase in operating assets.

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________. A) Beginning balance of accounts payable. B) Desired ending raw materials inventory for the last period. C) Total merchandise purchased during the year. D) Value of raw material used during the year.

B

The purpose of preparing a direct materials budget is to ________. A) Allocate the cost of raw materials to production departments. B) Estimate the manufacturing overhead. C) Estimate the quantity of raw materials to be purchased. D) Estimate the unit cost of direct materials to be purchased.

C

The system of accountability in which managers are held responsible for those items of revenue and costs—and only those items—over which they can exert significant control is referred to as ________ A) Budgeting B) Control C) Responsibility Accounting D) Self-imposed Accounting

C

Which of the following explains why operating budgets generally span a period of one year? A) Accounting regulations mandate that all operating budgets be prepared for one year. B) Operating budgets, by definition, are prepared for one-year periods. C) Companies choose a span of one year to correspond to their fiscal years. D) Operating budgets need to correspond with the calendar year.

C

Which of the following is not a benefit of self-imposed budgets? A) A manager who is not able to meet a budget that has been imposed from above can always say that the budget was unrealistic and impossible to meet. B) Budget estimates prepared by front-line managers are often more accurate and reliable. C) Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations. D) Motivation is generally higher.

C

The budgeting process begins with the preparation of the ______ budget. A) Cash B) Direct Materials C) Production D) Sales

D

All other things equal, which of the following would increase a division's residual income?

Decrease in average operating assets.

Which of the following performance measures will increase if inventory decreases and all else remains the same?

ROI and Residual Income

An advantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income.

True

Move time is considered non-value-added time.

True

Net operating income is income before interest and taxes.

True

ROI and residual income are tools used to evaluate managerial performance in investment centers.

True

The use of return on investment (ROI) as a performance measure may lead managers to reject a project that would be favorable for the company as a whole.

True

When used in return on investment (ROI) calculations, turnover equals sales divided by average operating assets.

True