ACCT 3100 Final Exam

Asset Turnover =

Sales / Assets

What is the focus of operational control?

Short-term operating performance.

Which of the following is not one of the five steps in target costing that manages the trade-offs between functionality and cost?

Determine what new products should be made.

The percentage of completion of the beginning work-in-process inventory should be considered in the computation of the equivalent units for which of the following methods of process costing? FIFO Weighted-Average A)Yes Yes B)Yes No C)No Yes D)No No

Option B, Yes, No

The five steps of strategic decision-making include all of the following except:

Gather and report accounting information.

Controllable margin is determined by subtracting short-term controllable fixed costs from the:

Contribution margin.

The contribution by profit center (CPC) expands the contribution margin income statement by distinguishing:

Controllable, noncontrollable, and untraceable fixed costs.

Cost of Goods Sold =

Cost of Goods Available - Ending Inventory

The sales quantity variance of a firm arises when the:

Total units of all products sold differ from the budgeted total units to be sold.

One of the most important international tax issues faced by multinational corporations is:

Transfer pricing.

A primary limitation of return on investment (ROI) as a performance evaluation metric for investment centers is that ROI:

Understates the level of investment for organizations operating in the so-called knowledge-based economy.

Which one of the following is an advantage of both Return on Investment (ROI) and Residual Income (RI)?

They both measure all elements important for measuring short-term financial performance of investment centers: revenues, costs, and investment.

The manager acting independently in such a way as to simultaneously achieve top management's objectives is exhibiting:

Goal congruence.

High operating leverage represents increased risk associated with relatively:

High fixed cost in the firm's cost structure.

Cost-volume-profit (CVP) analysis using activity-based costs will tend to shift some costs from fixed to variable classifications, resulting in:

Higher or lower breakeven sales, depending on batch size.

Which one of the following is not one of the five steps in theory of constraints (TOC) analysis?

Identify those responsible for bottlenecks and make adjustments as needed

What is the manager of a profit center not responsible for?

Invested capital.

The balanced scorecard:

Is forward looking, stressing nonfinancial measures that can lead to benefits in the future.

What is the purpose for the theory of constraints (TOC)?

It is aimed at reducing cycle time by removing bottlenecks from the production process.

In which of the following situations would Theory of Constraints be useful?

Long lines at checkout stands.

As a strategic issue, "budget slack" could represent a:

Lower overall level of expected performance than is achievable.

The evaluation by upper-level managers of the performance of mid-level managers is:

Management control.

The common factor among control systems in hiring practices, promotion policies, and strategic performance measurement is:

Management sets expectations for desired employee performance.

Performance evaluation in most firms is applied at:

Many different levels from top management down to individual production and sales employees.

EVA =

NOPAT - (WACC x Costly Capital)

The evaluation of operating level employees by mid-level managers is:

Operational control.

The process by which managers at all levels in the firm gain information about the performance of tasks within the firm and judge that performance against pre-established criteria is:

Performance measurement.

ROS =

Profit / sales

Strategic business units (SBU) that generate revenues and incur the major portion of the cost for producing those revenues are:

Profit centers.

The need for coordination between the production and the selling function will impact the choice of:

Profit, cost, or revenue center.

Under the notion of controllability, it is most appropriate for top management to evaluate the profitability of an investment center in terms of:

Profits generated in relation to the amount of capital invested in the unit.

From a strategic standpoint, profit centers tend to:

Provide incentive for coordination among managers of different functional units.

ROI =

ROS * asset turnover

Which of the following is the most appropriate and comprehensive short-term financial-performance indicator for an investment center that is a division of a larger business entity?

Residual income (RI).

What is a key criterion for including an asset in the return on investment (ROI) calculation?

The degree to which the business unit controls the asset.

The biggest problem with cost-based transfer prices is:

The fact that their use may result in sub-optimal decisions from the standpoint of the organization as a whole.

Determination of the useful life of an asset and choice of a depreciation method will affect all of the following except:

The opportunity cost of lost sales on alternative projects.

The cause and effect relationships among critical success factors are best captured in:

The strategy map.

The choice of valuation method for inventories would normally not affect which item(s) used in calculating Return on Investment (ROI)?

The valuation of fixed assets (e.g., Plant, Property, and Equipment) used by an investment center.

What is not a term used for a strategic business unit (SBU)?

Function.

In the current business environment, companies cannot survive without a strategy. What exactly should an effective strategy include?

A set of plans for using resources to achieve sustainable goals.

Because residual income (RI) is a dollar amount, in contrast to a percentage (like return on investment, ROI), RI:

Allows, through different discount rates, adjustment for differing levels of risk across investment centers within an organization.

Ending Inventory =

Beginning Inv. + Units Produced - Units Sold

Cost of Goods Available =

Beginning Inventory + Cost of Goods Manufactured

Which of the following is not an advantage of a decentralized firm?

Can hinder coordination among managers.

Since residual income (RI) is not a percentage, it is not very useful for:

Comparing business units of significantly different size.

Which method is used when costs are considered largely uncontrollable?

Discretionary-cost method.

During which step of value chain analysis will the company discover whether or not it has a cost advantage, and why?

During the second step, when the firm develops a competitive advantage by either reducing cost or adding value.

Residual Income =

Profit - (Rate of Return * Net Book Value)

Price to be charged using transfer pricing

=Variable Cost + Opportunity lost OR (Market Rate - Variable Cost)

Which of the following aspects of a company would not be considered a critical success factor, for a company that competes on differentiation?

A high level of production efficiency.

Operational control has a management-by-exception approach in contrast to management control, which is more consistent with:

A management-by-objectives approach.

In contrast to residual income (RI), economic value added (EVA®) uses in its calculation:

A measure (or estimate) of economic, not accounting, income.

Return on investment (ROI) encourages business units—such as investment centers— to invest only in projects that earn:

A rate of return higher than the unit's current ROI.

Which of the following is not an objective of management control?

Create a work environment in which everyone knows their roles.

Value activities can best be defined as:

Activities that firms in the industry must perform in the process of producing the product or providing the service.

Which of the following is one of the key steps in determining process costs?

All of these answer choices are correct.

The use of gross book value (GBV) for measuring the level of investment in depreciable assets (for purposes of calculating return on investment, ROI) is preferred by those who value the objectivity of:

An historical cost number.

In a not-for-profit organization, you are more likely to see

Cost centers.

Production or support strategic business units (SBU) within the firm that have the goal of providing the best quality product or service at the lowest cost are:

Cost centers.

For production and support departments, a method of implementing cost centers that is output-oriented is the:

Engineered-cost method.

Put simply, transfer pricing is a management tool for assigning a "price" to internally transferred goods (or services) in order to simulate the marketplace, thus encouraging managers to make decisions that are in the best interest of the:

Firm as a whole.

What is used to explain the master budget variance for a period?

Flexible budgets and standard costs.

Full Costing

formatted like a financial income statement with COGS and GM then all other costs after