cost accounting final

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

Cost centers.

A division's after-tax cash operating income less depreciation and less an imputed cost of capital is called its:

Economic value added (EVA®).

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

Engineered-cost method.

The main concept of the balanced scorecard is that, to evaluate the SBU's progress to strategic success, an organization must use all of the following except:

Value chain analysis.

The primary limitation of using Economic Value Added (EVA®) to evaluate the financial performance of investment centers is:

Complexity of the calculation.

Because the full-cost method of transfer pricing includes fixed cost, it can:

Cause sub-optimal short-term decision making.

The most relevant factor in deciding how or which costs should be assigned to an SBU is the degree of:

Controllability.

Production or support SBUs within the firm that have the goal of providing the best quality product or service at the lowest cost are:

Cost centers.

The replacing of controllable costs with non-controllable costs by a department is:

Cost shifting.

Which one of the following determines the transfer price based on the seller's costs, plus a gross profit percentage determined from comparison of sales of the seller to those of unrelated parties?

Cost-plus method.

A significant problem in comparing profitability measures among companies is the:

Differences in the accounting methods used by the companies.

Which one of the following is a result of the difference between the actual sales mix and the budgeted sales mix?

Sales mix variance.

(Units sold − budgeted sales units) × (Budgeted contribution margin per unit) equals:

Sales volume variance.

Which one of the following is the result of the [(units sold) × (actual selling price per unit)] − [(units sold) × (budgeted selling price per unit)]:

Selling price variance.

A manufacturing company that uses standard costs and flexible budgets can break the total variable overhead cost variance into:

Spending and efficiency variances.

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.

For product-costing purposes, which of the following statements is true?

Under the absorption or full-costing approach it is necessary to "unitize" fixed overhead costs.

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.

Order-filling costs:

Usually have a relatively clear relationship to sales volume.

Use of net book value (NBV) in valuing investment in operating plant assets for investment centers, in contrast to using an estimate of current value, will:

Usually overstate ROI.

Among the benefits of centralized management in a firm is(are):

Utilization of expertise of top management.

The difference between the standard variable overhead cost for the actual quantity of the cost driver used for applying variable overhead and the standard variable overhead cost allowed for the units manufactured during a given period is the:

Variable overhead efficiency variance.

The difference in each period between total variable overhead cost incurred and the standard variable overhead cost for the period based on the actual quantity of the cost driver used to apply variable overhead cost is the:

Variable overhead spending variance.

Which of the following is not an element of a product's sales quantity variance?

Actual sales mix ratio.

Division A, which is operating at capacity, produces a component that currently sells in a competitive market for $25 per unit. At the current level of production, the fixed cost of producing this component is $8 per unit and the variable cost is $10 per unit. Division B would like to purchase this component from Division A. The price that Division A should charge Division B for this component is:

$25 per unit.

The fixed factory overhead production-volume variance represents:

A result of unitizing fixed overhead costs for product-costing purposes.

"Outsourcing" a cost center is often done to:

Reduce cost and obtain improve focus.

All the following choices exist for defining the denominator volume (denominator activity level) for assigning fixed overhead costs in a standard cost system, except:

Actual capacity utilization.

Which of the following is not a part of the sales mix variance equation?

Actual contribution margin per unit of the product.

In a standard cost system, an unfavorable production-volume variance would result if:

Actual production is less than the "denominator volume" (that is, the volume level used to establish the fixed overhead application rate).

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.

The difference between the historical cost and the net book value (NBV) of a plant asset is the:

Accumulated depreciation expense on the asset.

An unfavorable sales mix variance arises for a product when the:

Actual sales mix percentage is less than the budgeted sales mix percentage.

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.

A measure of the manager's ability to produce increased sales from a given level of investment is:

Asset turnover (AT).

A segment of an organization is referred to as an investment center if it has:

Authority to make decisions affecting the major determinants of profit, including the power to choose its markets and sources of supply and significant control over the amount of invested capital.

The use of replacement cost of assets for purposes of calculating return on investment (ROI) has the advantage of:

Being a relevant measure of the level of investment in a continuing business.

The fixed factory overhead application rate (for product-costing purposes) is equal to:

Budgeted fixed factory overhead divided by denominator activity.

Which of the following specifications for calculating EVA® is correct?

EVA® = NOPAT − Imputed charge on EVA® capital, where NOPAT = net operating profit after (cash) taxes.

The balanced scorecard is particularly important in difficult economic times because:

Financial measures may be distorted.

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.

Which of the following is not a characteristic of the discretionary-cost approach?

Firms use an output-oriented evaluation focus.

All of the following are possible transfer pricing methods used in practice except:

Fixed cost.

The difference between budgeted fixed factory overhead for a period and the amount of fixed factory overhead applied to production during the period is the:

Fixed factory overhead production-volume variance.

The sales volume variance is:

Further divided into separate sales quantity and sales mix variances.

Many firms feel a strong obligation to establish and use a standard rate for fixed factory overhead because:

Generally accepted accounting principles in the U.S. require full costing of inventories for financial reporting purposes.

The major criticism of using return on investment (ROI) for evaluating the financial performance of business units considered investment centers is that ROI:

Gives managers of profitable business units an incentive to reject some projects that would benefit the organization as a whole.

Managerial performance can be measured in various ways, including return on investment (ROI) and residual income (RI). A good reason for using RI rather than ROI is:

Goal congruence is more likely to be promoted by using RI.

Which one of the following is not an order-filling cost?

Inspection

A fully-owned subsidiary of a multinational company reports its return on investment (ROI) periodically during the year. This unit of the company, for performance evaluation purposes, is likely considered a(n):

Investment center.

Decentralized firms can delegate authority and yet retain control and monitor managers' performances by structuring the organization into so-called "responsibility centers." Which one of the following business segments/responsibility centers is most like an independent business?

Investment center.

SBUs that include the assets they employ as well as profits in the performance evaluation are:

Investment centers.

Which of the following items would most likely not be incorporated into the calculation of a division's investment base when using the residual income (RI) or the return on investment (ROI) approach for performance measurement and evaluation?

Land being held by the division as a site for a new plant in the future.

The estimated price that could be received for the sale of divisional assets is referred to as:

Liquidation value.

Firms with high operating leverage tend to have:

Low asset turnover and high return on sales.

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

Lower overall level of expected performance than is achievable.

Transfer prices based on actual costs of the selling division as opposed to standard costs incurred by that division:

May fail to provide the selling division with an incentive to control costs.

Which one of the following is a drawback of decentralization?

May hinder coordination among independent SBUs.

The two major contributing factors to a sales volume variance are deviations in:

Sales mix and sales quantity.

A selling price variance is:

Not further divided.

Economic value added (EVA®):

Of $10,000 indicates that the division's actual earnings (adjusted for bias effects of accounting conservatism) exceed the division's imputed capital charge by $10,000.

Compared to return on investment (ROI), residual income (RI) may be a better measure of the financial performance of an investment center because:

Of the fact that desirable investment opportunities will not be neglected by divisions currently earning high rates of return.

Residual income (RI) is:

Operating income of an investment center, less the imputed interest on the capital used by the center.

Factors contributing to the fixed factory overhead spending variance can include all the following except:

Operating inefficiency.

Expenditures made in revenue centers usually include:

Order-getting costs.

Quick Technology Company is a supplier of high-end research equipment for the pharmaceutical industry. Quick currently has a variety of different firms producing computer chips for increased memory and improved processing speeds which are installed in Quick's equipment. In this case, having another firm provide supplies for Quick's equipment is an example of:

Outsourcing.

For internal reporting purposes, it is recommended that fixed overhead allocation rates in a standard costing system be based on which of the following denominator volume choices?

Practical capacity.

Which of the following is not a revenue driver factor which affects sales volume for a manufacturing firm?

Productivity.

SBUs that generate revenues and incur the major portion of the cost for producing those revenues are:

Profit centers.

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.

Which of the following is not an objective when choosing a cost allocation method?

Provide an opportunity for managers to make decisions consistent with the manager's goals.

The estimated cost to replicate assets of an investment center at the current level of service and functionality of these assets is defined as:

Replacement cost.

In terms of allocating fixed overhead cost to products, generally accepted accounting principles in the U.S.:

Require that such allocations be based on normal capacity.

Return on investment (ROI) is the result of multiplying:

Return on sales (ROS) by asset turnover (AT).

A measure of the manager's ability to control expenses and increase revenues to improve profitability is:

Return on sales (ROS).

Expropriation occurs when the government in which a foreign company's investment assets are located:

Takes ownership and control of those assets.

Determining the standard fixed factory overhead cost applied to production for a period involves all the following essential elements except:

The actual amount of fixed overhead cost incurred during the period.

A key standard in international transfer pricing is:

The arm's-length standard.

In the context of transfer pricing, dual pricing is:

The simultaneous use of two or more transfer pricing methods.

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.

Which one of the following is not a limitation shared by residual income (RI) and return on investment (ROI) divisional performance measures?

They both relate, in percentage terms, earnings to the level of investment in each division.

All of the following are true of market-based transfer prices except:

They can be determined for all goods and services transferred internally.

As a general rule, leased assets should be included as part of the calculation of "investment" (for calculating ROI and residual income) since they represent assets used:

To generate operating income.