431 Test 1
Successful implementation of a product differentiation strategy will result in ________. A. a large favorable price-recovery and productivity components B. a large favorable growth and price-recovery components C. a large favorable productivity and growth components D. only a large favorable growth component
B
The fundamental rethinking and redesign of business processes to achieve improvements in critical measures of performance, such as cost, quality, service, speed, and customer satisfaction is ________. A. controlling B. reengineering C. structuring D. directing
B
The ideal database for estimating cost functions contains ________. A. only the independent variable and not the dependent variable B. numerous cost driver observations C. a few values of the cost driver that are grouped closely together D. cost driver observations spanning a narrow range
B
Unit cost data can most mislead decisions by ________. A. computing administrative costs B. not computing unit costs at the same output level C. not computing fixed overhead costs D. computing labor and materials costs only
B
What is the term for an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control? A. Marketing strategy B. Cost leadership C. Product differentiation D. Competitor differentiation
B
When using the high-low method, the two observations used are the high and low observations of the ________. A. fixed cost component B. cost driver C. slope coefficient D. direct cost
B
Which of following is a firm's risk of outsourcing the production of a part? A. increased need of skilled workers B. leakage of intellectual property C. scarcity of indirect labor D. fluctuation in the manufacturing costs
B
Which of the following focuses on these five factors: competitors, potential entrants to the market, equivalent products, bargaining power of customers, and bargaining power of suppliers? A. balanced scorecard B. industry analysis C. business process reengineering D. product differentiation analysis
B
Which of the following is a measure of the balanced scorecard's customer perspective? A. Revenue growth B. Number of client complaints C. Number of process improvements D. Defect rates
B
Which of the following is a step to overcome problems related to data collection for estimating cost function? A. The analyst should not use accrual accounting. B. The analyst should remove the inflationary effects. C. The analyst should consider fixed costs as variable. D. The analyst should also use extreme values while calculating cost functions.
B
Which of the following is not true about oneminus−timeminus−only special orders? A. along with other criteria, there must be excess capacity to accept an order B. special orders would be accepted if they result in an increase in the contribution margin regardless of capacity and longminus−term implications C. the impact on operating income of the acceptance of a specialminus−order must be analyzed by management before making a final decision D. along with other criteria, there must not be significant longminus−term negative implications of accepting a special order
B
When deciding whether to discontinue a segment of a business, relevant costs include ________. A. auditing expenses for the whole company B. annual insurance costs of the company C. future administrative costs that can be eliminated D. fees paid to a management consultant to study the feasibility of the business segment
C
When evaluating a makeminus−orminus−buy decision, which of the following needs to be considered? A. materialminus−handling costs that cannot be eliminated B. the original cost of the production equipment C. alternative uses of the production capacity D. pension costs to the current employees
C
When there is an excess capacity, it makes sense to accept a oneminus−timeminus−only special order for less than the current selling price if ________. A. incremental revenue equals incremental operating income B. the company placing the order is in the same market segment as your current customers C. incremental revenues exceed incremental costs D. additional fixed costs is incurred to accommodate the order
C
Which cost estimation method would involve analyzing direct labor subsidiary accounts and classifying costs as as variable, fixed, or mixed to derive cost estimation formulas? A. the conference method B. the marginal costing method C. the account analysis method D. the incremental costing method
C
A cost function is a ________. A. mathematical description of how a cost changes with changes in the level of an activity relating to that cost B. process of allocating costs to cost centers or cost objects C. process of calculating present value of projected cash flows D. is a very thorough and detailed way to identifying a cost object when there is a physical relationship between inputs and outputs
A
A plot of cost driver data and cost data may show all but the following: A. cause-and-effect relationship B. a positive relationship C. a strong relationship D. linear relationship
A
An experience curve ________. A. measures the decline in cost per unit as production decreases for various value-chain functions such as marketing as production increases B. is a narrower application of the learning curve C. only measures the decline in labor-hours per unit as units produced increases D. measures the increase in cost per unit as productivity increases
A
An organization that is using the product differentiation approach would most likely do which of the following? A. use innovative research and development and develop effective promotional campaigns to increase customer loyalty and charge higher prices B. provide products that are similar to competitors C. offer products at a lower cost than competitors D. focus on tight cost control to create a reputation of saving its customers money
A
Crimson Services, Inc., employs 8 individuals. They are all paid $16.50 per hour. How would total costs of personnel be classified? A. variable cost B. fixed cost C. irrelevant cost D. mixed cost
A
Engineered costs ________. A. are from physically observable activities and have a repetitive relationship with output B. are non repetitive but are physically observable C. are embedded in the manufacturing process but have no measurable cause-and-effect relationship between output and resources used D. possess a high level of uncertainty but are significant costs when they are incurred
A
If a company has excess capacity, the most it would pay for buying a product that it currently makes would be the ________. A. total variable cost of producing the product B. total cost of producing the product C. full cost of producing the product D. business function cost of the product
A
In a strategy map, a strategic objective where many ties spur out from it resulting in the achievement of many strategic objectives is called: A. trigger point B. focal points C. orphan objectives D. distinctive objectives
A
Place the following steps from the fiveminus−step decision process in order: A = Obtain information including historical costs B = Evaluate performance to provide feedback C = Make decisions choosing among alternatives D = Make predictions about the future E = Identify the problem and uncertainties A. E, A, D, C, B B. A, E, D, B, C C. D, C, B, A, E D. E, A, D, B, C
A
Put the following steps in order for using the high-low method of estimating a cost function: A = Identify the cost function B = Calculate the constant C = Calculate the slope coefficient D = Identify the highest and lowest observed values A. A D C B B. C D A B C. D C A B D. D C B A
A
The slope of the line of regression is the ________. A. rate at which the dependent variable varies B. rate at which the independent variable varies C. difference between actual cost and estimated cost for each observation of the cost driver D. difference between the fixed cost and variable cost associated with the cost driver
A
Variable cost per laborminus−hour is $ 0.86$0.86 Fixed cost is $ 11 comma 500$11,500. Machine hours during the period are 4040. Calculate the total cost for 310310 labor hours. A. $11,767 B. $11,534 C. $11,801 D. $ 301
A
What is a plausible explanation of a cost function that has a slope coefficient of $30 for purchases of 1 to 1,000 units and $25 for production of 1,100 minus− 2,000 units, and $20 for production of 2,001 minus− 3,000 units. A. economies of scale allowing for lower cost purchases with larger orders B. their is a linear cost function in effect C. contribution margins are decreasing D. the fixed cost per unit has decreased because of efficiencies
A
When analyzing the change in operating income, the strategy component of price-recovery ________. A. compares the change in output price with the changes in input prices B. will report a large positive amount when a company has successfully pursued the cost leadership strategy C. isolates the change attributed solely to an increase in production efficiencies D. calculations are similar to the efficiency-variance calculations
A
Which of the following best describes a step variable-cost function? A. a step cost function in which cost remains the same over narrow ranges of the level of activity in each relevant range B. a step cost function in which cost remains the same over narrow ranges of the level of activity outside the relevant range C. a step cost function where the cost remains the same over wide ranges of the activity in each relevant range D. a step cost function where the cost remains the same over wide ranges of the activity outside the relevant range
A
Which of the following statements is true of a balanced scorecard? A. The balanced scorecard reduces managers' emphasis on short-run financial performance. B. The primary goal of using the balanced scorecard is to sustain short-run nonfinancial performance. C. The balanced scorecard reduces managers' emphasis on long-run financial performance. D. The primary goal of using the balanced scorecard is to sustain short-run financial performance.
A
Which of the following statements is true of strategic analysis of operating income? A. Change in operating income from one period to any future period can be subdivided into product differentiation, cost leadership, and growth components. B. Management accountants compare actual and budgeted operating performance over the same time periods. C. It focuses on differences in individual categories of costs (direct materials, direct manufacturing labor, and overheads). D. Subdividing the change in operating income to evaluate the success of a strategy has no similarity to the variance analysis
A
Which of the following statements is true of the internal-business-process perspective of a balanced scorecard? A. Internal-business-process improvement targets are often determined after benchmarking against an organization's main competitors standards. B. Internal-business-process perspective is composed of three subprocesses: operations process; learning-and-growth process; and post sales-service process. C. Internal-business-process perspective is composed of three subprocesses: innovation process; learning-and-growth process; and post sales-service process. D. Internal-business-process perspective evaluates the profitability of the strategy and the creation of shareholder value.
A
Goodness-of-fit measures how well the predicted values in a cost estimating equation ________. A. match the actual cost observations B. match the cost driver C. determine the level of activity D. rely on the independent variable
A
A cost driver should be measurable and have an economically plausible relationship with the dependent variable which means: A. that the cost driver can be identified in an economically feasible way B. that the relationship is based on a cause-and-effect criterion and makes economic sense to management C. that the relationship must be based on a physical relationship D. that the relationship is based on correlation
B
As a result of learning curve, ________. A. unit costs increase as productivity increases and the unit-cost function behaves linearly B. unit costs decrease as productivity increases and the unit-cost function behaves nonlinearly C. unit costs decrease as productivity increases and the unit-cost function behaves linearly D. unit costs increase as productivity increases and the unit-cost function behaves nonlinearly
B
Assuming previous year's production capacity was adequate to produce current year output, the cost effect of growth for fixed costs is calculated by multiplying the difference between ________ by price per unit of capacity in the previous year. A. actual units of capacity in current year and actual units of capacity in previous year B. actual units of capacity in previous year and actual units of capacity in previous year C. capacity units required to produce previous year output in current year and the previous year capacity units D. capacity units required to produce current year output in previous year and the current year capacity units
B
If a company does not use one of its limited resources in the best possible way, the lost contribution to income could be called a(n) ________. A. sunk cost B. opportunity cost C. business function cost D. carrying cost
B
Springer Products manufactures three different product lines, Model X, Model Y, and Model Z. Considerable market demand exists for all models. The following per unit data apply: Model X Model Y Model Z Selling price $ 53$53 $ 70$70 $ 76$76 Direct materials 66 66 66 Direct labor ($ 12$12 per hour) 1212 1212 2424 Variable support costs ($ 5$5 per machineminus−hour) 55 1515 1010 Fixed support costs 1515 1515 1515 How can Lisa Dynondo encourage her salespeople to promote the more profitable model? A. Provide higher sales commissions for items which has the lowest cost and lower sales commissions for items with highest cost. B. Provide higher sales commissions for items with the greatest contribution margin per constrained resource. C. Put all sales persons on fixed salary. D. Provide higher sales commissions for higher priced items.
B
Successful implementation of a cost leadership strategy will result in ________. A. large favorable growth and price-recovery components B. large favorable productivity and growth components C. only a large favorable growth component D. large favorable price-recovery and productivity components
B
Which of the following is not true about the cause-and-effect criterion when estimating a cost function? A. Managers must be careful not to equate high correlation between two variables to mean that either variable causes the other. B. Correlation of variables proves cause-and-effect. C. Knowledge of operations can help managers discover cause-and-effect relationships. D. Contractual arrangements may show a direct cause and effect between two variables.
B
Which of the following minimizes the risks of outsourcing? A. shifting the firm's responsibility for onminus−time delivery to the supplier B. building close partnerships with the supplier C. increasing the contract price D. the use of shortminus−term contracts that specify price
B
Which of the following statements best relates to the balanced scorecard's learning and growth perspective? A. How do we lower costs? B. How will we empower our employees? C. What processes will increase value to customers? D. How can we obtain greater profits?
B
Which of the following statements is a possible pitfall while implementing a balanced scorecard? A. Managers using cost-benefit considerations while designing a balanced scorecard. B. Top management ignoring nonfinancial measures when evaluating employee performance. C. Managers using subjective measures in the balanced scorecard. D. Managers ignoring objective measures as market share, manufacturing yield.
B
Which of the following statements is of true engineered costs? A. They include advertising, executive training, and R&D. B. They have a detailed, physically observable, and repetitive relationship with output. C. They have high level of uncertainty. D. They arise from periodic (usually annual) decisions regarding the maximum amount to be incurred.
B
Why is choosing the correct cost driver to estimate indirect manufacturing costs important? A. Identifying the wrong driver can increase the direct costs of the cost object B. Identifying the wrong driver can lead management to incorrect and costly decisions C. Identifying the wrong driver can increase the usage of the correct driver D. Identifying the wrong driver can increase actual overhead costs
B
With a constraining resource, managers should choose the product with the ________. A. highest sales price B. highest contribution margin per unit of the constraining resource C. lowest contribution margin per unit of the constraining resource D. highest gross profit
B
Conversion costs are an example of ________. A. direct engineered costs B. unused capacity costs C. indirect engineered costs D. discretionary costs
C
Each of the following are true of relevant information except: A. Different alternatives can be compared by examining differences in expected future revenues and expected total future costs B. Past costs are helpful when making predictions but not relevant when making decisions C. significant past investment amounts are relevant to decision making D. Not all future revenues and expenses are relevant
C
In general, profit potential of an organization decreases with ________. A. lesser competition and stronger potential entrants B. lesser competition and weaker potential entrants C. greater competition and stronger potential entrants D. greater competition and weaker potential entrants
C
Management is considering two alternatives. Alternative A has projected revenue per year of $100,000 and costs of $70,000 while Alternative B has revenue of $100,000 and costs of $60,000. Both projects require an initial investment of $250,000 of which $75,000 has already been set aside and will be used as a down payment on the project that is chosen. There are also other qualitative factors that management must consider before making a final choice. Which of the following statements is correct about relevant costs and relevant revenues. A. The sunk cost of $75,000 is relevant B. The projected revenues are relevant to the decision C. The only relevant item are the costs as they differ between alternatives D. The initial investment of $250,000, the projected revenues, and the projected costs are all relevant
C
Relevant data in a makeminus−orminus−buy decision of a part include which of the following? A. Annual plant insurance costs B. Management consultant fees to restructure the organization framework of the company and improve overall strategic planning C. Some portion of fixed costs that would be saved if the product is outsourced D. The portion of fixed costs that would be incurred whether the product is made or purchased
C
The cost to be predicted and managed is referred to as the ________. A. independent variable B. cost driver C. dependent variable D. regression
C
The employee turnover rates is an example of the ________ measure of a balanced-scorecard. A. customer perspective B. financial perspective C. learning and growth perspective D. internal business process perspective
C
The revenue effect of price recovery is calculated by multiplying the difference in selling price (current year minus the previous year) by ________. A. actual units sold in the previous year B. budgeted units sold in the current year C. actual units sold in the current year D. budgeted units sold in the previous year
C
When analyzing the change in operating income, the strategy component of growth ________. A. calculations are similar to the selling-price variance calculations B. isolates the change attributed solely to an increase in market share C. isolates the change attributed solely to an increase in the quantity of units sold D. isolates the change attributed solely to an increase in industry growth
C
When analyzing the change in operating income, the strategy component of productivity ________. A. compares the change in output price with the changes in input prices B. isolates the change attributed solely to an increase in the quantity of units sold C. will report a large positive amount when a company has successfully pursued the cost leadership strategy D. calculations are similar to the sales-volume variance calculations
C
When analyzing the change in operating income, the strategy component of price-recovery will increase when ________. A. more units are sold B. capacity is reduced C. selling prices are increased D. market share is increased
C
Which of the following are potential problems managers face in relevantminus−cost analysis? A. considering past historical costs when making predictions about future costs B. examining differences in expected total future revenues and expected total future costs among alternatives C. incorrect assumptions such as all variable costs are relevant and all fixed costs are not D. Including only relevant costs and relevant revenues in an analysis
C
Which of the following functions represents the least total cost assuming the number of units is equal in each case? A. y = 290290 + 55X B. y = 6060 + 1010X C. y = 6060 + 55X D. y = 290290 + 1010X
C
Which of the following is NOT an engineered cost? A. the cost of direct laborers who work in the factory B. depreciation of all factory tools C. advertising costs for a new product that the factory will start producing D. direct material cost of a major component of the product
C
Which of the following is not a nonlinear cost function? A. variable cost of $5 per unit B. increase of $20,000 revenues with increase in sales in units C. a step cost function D. total fixed cost of $25,000
C
Which of the following is not correct about the balanced scorecard? A. the balanced scorecard reveals information about the success of the company in its target market B. nonfinancial and operational indicators are reported on a balance scorecard C. the balance scorecard increases management's emphasis on short-term results D. profits and value created for shareholders are perspectives revealed on a balance scorecard
C
Which of the following statements best define a product differentiation strategy? A. It is an organization's ability to achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control. B. It describes how an organization can increase customer base by differentiating its' product prices from its competitors. C. It is an organization's ability to offer products or services its customers perceive to be superior and unique relative to the products or services of its competitors. D. It describes how an organization can decrease product prices by differentiating its' raw materials from its competitors.
C
Which of the following statements is true of a linear cost function? A. It presents total cost as slope coefficient. B. It presents variable cost as an intercept. C. It presents variable cost as a slope coefficient. D. It presents total cost as an intercept.
C
Which of the following statements is true of choosing cost drivers under activity-based costing? A. There should be a clear cause-and-effect relationship between cost drivers and cost pools. B. All the cost drivers should be unit-level cost drivers. C. Cost drivers are independent variables. D. A single cost driver should be identified for all the activities.
C
Which of the following statements shows a difference between simple regression and multiple regression? A. Simple regression uses more than one dependent and independent variables, whereas multiple regression uses only one dependent and independent variable. B. Simple regression uses only the independent variables, whereas multiple regression uses only dependent variables. C. Simple regression uses only one dependent and one independent variable, whereas multiple regression uses one dependent and more than one independent variable. D. Simple regression uses only one dependent variable and more than one independent variables, whereas multiple regression uses more than one dependent variable and only one independent variable.
C
________ are the subdivisions of income that management accountants use for the strategic analysis of operating income. A. Growth, cost leadership and productivity components B. Growth, price-recovery and cost leadership components C. Growth, price-recovery and productivity components D. Cost leadership, price-recovery and productivity components
C
Which of the following is a relevant cost to be included in a makeminus−orminus−buy decision? A. pension costs to the current employees B. materialminus−handling costs that cannot be eliminated even if the product is outsourced C. increase in the cost of repairing of all equipment of the firm D. fixed salaries that will not be incurred if the part is outsourced
D
All of the following are examples of quantitative factors except A. budget for marketing activities B. product development time C. cost of direct materials D. employee morale
D
A company's balanced scorecard measures yield, order-delivery time, cycle time, and errors as part of which of the following perspectives? A. Financial B. Customer C. Learning-and-growth D. Internal-business-process
D
Based on the theory of constraints, investments equal ________. A. the sum of material costs in direct materials, workminus−inminus−process, and finished goods inventories; R&D costs; sunk costs, full costs, and business function costs B. the sum of material costs in direct and indirect materials, workminus−inminus−process, and finished goods inventories; R&D costs; and business function costs C. the sum of material costs in direct and indirect materials, workminus−inminus−process, and finished goods inventories; R&D costs; and full costs D. the sum of material costs in direct materials, workminus−inminus−process, and finished goods inventories; R&D costs; and capital costs of equipment and buildings
D
Managers can reduce capacity-based fixed costs by measuring and managing ________. A. discretionary costs B. variable costs C. engineered costs D. unused capacity
D
Quantitative analysis methods estimate cost functions ________. A. using the time-and-motion studies B. using the pooling of knowledge from each value chain function C. based on analysis and opinions gathered from various departments D. using a formal mathematical method to fit cost functions to past data observations
D
The account analysis method estimates cost functions ________. A. at a high cost, which renders it seldom used B. in a manner that cannot be usefully combined with any other cost estimation methods C. using time-and-motion studies D. by classifying cost accounts as variable, fixed, or mixed based on qualitative analysis
D
The conference method estimates cost functions ________. A. using quantitative methods that can be very time consuming and costly B. by mathematically analyzing the relationship between inputs and outputs in physical terms C. using time-and-motion studies D. based on analysis and opinions gathered from various departments
D
The cost effect of productivity for variable costs is calculated by multiplying the difference in actual input units used to produce current year output and units of input required to produce current year output in previous year by the ________. A. price per unit of capacity in the current year B. price per input unit of previous year C. price per unit of capacity in the previous year D. price per input unit of current year
D
The gross margin percentage is an example of the ________ measure of a balanced-scorecard. A. internal business process perspective B. customer perspective C. learning and growth perspective D. financial perspective
D
Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity minus− enough excess capacity to accept the order? A. units sold B. material cost C. labor hours incurred D. fixed manufacturing costs
D
Which of the following is NOT a discretionary cost? A. the cost of total quality management training for executives B. the cost of social networking activities to promote a product C. legal costs D. the cost to train factory general managers to use a new activity based management system
D
Which of the following is a learning-curve model? A. the account analysis learning model and the conference learning method model B. the simple regression model and the multiple regression model C. the multicollinearity learning model and the goodness of fit learning model D. the cumulative average-time learning model and the incremental unit-time learning model
D
Which of the following is not true with regards to relevant costs and relevant revenues? A. The differ among alternative courses of action B. They occur in the future C. They are expected costs and expected revenues D. They are sunk costs and historical revenues
D
Which of the following is true in a decision to keep or replace existing equipment? A. Property taxes is relevant. B. Depreciation on the new equipment is relevant. C. The book value of the old equipment is relevant. D. The disposal value of the old equipment is relevant.
D
Which of the following statements is true of discretionary costs? A. They arise from day-to-day operational decisions. B. They include conversion cost, direct material costs. C. They have measurable cause-and-effect relationship between output and resources used. D. They have high level of uncertainty.
D
Which of the following would be considered in a makeminus−orminus−buy decision? A. fixed costs that will still be incurred B. unchanged supervisory costs C. prepaid rent expense for warehousing finished goods and inventories D. potential rental income from space occupied by the production area
D
With a step fixed-cost function ________. A. fixed cost changes proportionally with the level of activity B. fixed cost is often approximated with a continuous variable-cost function C. the cost varies with the changes in the activity D. the cost remains the same over wide ranges of the activity in each relevant range
D
