Which of the following is considered to be an advantage of using both nonfinancial and financial information in the balanced scorecard? (Points : 2)
        Nonfinancial information is most helpful in analyzing a company’s past performance, while financial information is most useful in evaluating potential future performance.
        Nonfinancial information provides the short-term perspective while financial information provides the long-term perspective of performance.
        Nonfinancial information reflects the company’s current and potential competitive advantage, while financial information tends to focus on a firm’s achieved financial performance.
        Nonfinancial information should be included with financial information because it is more reliable than financial information.

Question 2.2. Which of the following tend to be non-differential in the short term since they cannot be changed, but are more likely to be differential in the long term? (Points : 2)
        Fixed costs.
        Variable costs.
        Mixed costs.
        Semi-variable costs.

Question 3.3. When managers produce value for the customer, their orientation consists of all the following except: (Points : 2)
        Quality and Service.
        Timeliness of delivery.
        The ability to respond to the customer’s desire for specific features.
        State of the art manufacturing facilities.

Question 4.4. Target costing determines the desired cost for a product upon the basis of a given competitive price such that the product will: (Points : 2)
        Earn at least a small profit.
        Earn a desired profit.
        Earn the maximum profit.
        Break even.

Question 5.5. Over the past several years it has become increasingly important for firms to improve achievement towards their social and environmental responsibilities. What is the best way the management accountant can help the firm improve on sustainability? (Points : 2)
        Participate in programs of environmental organizations.
        Develop and implement a legal staff and public relations staff for dealing with sustainability issues that may affect the firm.
        Develop and implement a sustainability scorecard.
        Risk management.

Question 6.6. Factory overhead costs for a given period were 2 times as much as the direct material costs. Prime costs totaled $8,000. Conversion costs totaled $11,350. What are the direct labor costs for the period? (Points : 2)
        $4,650.
        $3,560.
        $4,200.
        $3,860.

Question 7.7. Tierney Construction, Inc. recently lost a portion of its financial records in an office theft. The following accounting information remained in the office files:
 
COGS = $80,000
WIP Inventory – January 1. = $18,500
WIP Inventory – December 31 = $14,500
Selling & Administrative Expenses = $16,000
Net Income = $30,000
Factory O/H = $20,000
Direct Materials Inventory, January 1= $26,000
Direct Materials Inventory, December 31= $14,000
COGM = $98,000
Finished Goods Inventory, January 1 = 31,000
 
Direct labor cost incurred during the period amounted to 2.5 times the factory overhead. The CFO of Tierney Construction, Inc. has asked you to recalculate the following accounts and to report to him by the end of tomorrow.
 
What should be the amount in the finished goods inventory at December 31, 2013? (Points : 2)
        $55,500.
        $35,000.
        $43,000.
        $49,000.

Question 8.8. The journal entry to record requisitioned and usage of direct materials would include a credit to: (Points : 2)
        Work-in-Process Inventory.
        Accrued Payroll.
        Factory Overhead.
        Materials Inventory.
        Finished Goods Inventory.

Question 9.9. Abnormal spoilage: (Points : 2)
        Is considered part of good production.
        Arises under efficient operating conditions.
        Is controllable in the short run.
        Is unacceptable spoilage that should not occur under efficient operating conditions.
        Is part of inventory product cost.

Question 10.10. Which of the following is most likely to be the cost driver for the packaging and shipping activity? (Points : 2)
        Number of setups.
        Number of components.
        Number of orders.
        Hours of testing.
        Number of production runs.

Question 11.11. The ideal criterion for choosing an allocation base for overhead is: (Points : 2)
        Ease of calculation.
        A cause-and-effect relationship.
        Ease of use.
        Its preciseness.

Question 12.12. An activity that is performed to support the production of a new custom-order product is a(n): (Points : 2)
        Product-level activity.
        Facility-level activity.
        Unit-level activity.
        Customer-support activity.
        Batch-level activity.

Question 13.13. The objectives of cost allocation are to: (Points : 2)
        Motivate, provide incentives, and determine fair rewards.
        Accurately define, divide and spread direct costs.
        Value, measure, and interpret cost data.
        Connect, communicate, and discern information.
        Define, refine, and re-define indirect costs.

Question 14.14. ABC Company uses a Materials Inventory account to record both direct and indirect materials. ABC charges direct materials to WIP, while indirect materials are charged to the Factory Overhead account. During the month of April, the company has the following cost information:
 
Total Materials (Direct and Indirect) Purchased   =        $ 90,000
Indirect Materials Issued to Production         =                30,000
Total Materials Issued to Production             =              110,000
Beginning Materials Inventory                      =                 50,000
 
The debit to Work-in-Process Inventory account for materials is: (Points : 2)
        $110,000.
        $30,000.
        $90,000.
        $80,000.

Question 15.15. The cost allocation method most widely used because of its accuracy and ability to provide a detailed level of analysis is: (Points : 2)
        Departmental approach.
        Activity-based approach.
        Direct approach.
        Accounting approach.
        Joint product costing.

Question 16.16. Firm X has a production process that has a total joint cost of $15,000. At the split-off point, there are 2,000 pounds of Product 1 and 3,000 pounds of Product 2. What is the cost per pound of Product 1 using the physical measure method? (Points : 2)
        $2.50.
        $3.00.
        $3.50.
        $4.00.

Question 17.17. Which one of the following methods uses units of output to allocate joint costs to joint products? (Points : 2)
        Net realizable value method.
        Physical units method.
        Net sales value method.
        Sales value at split-off method.

Question 18.18. Cost-volume-profit (CVP) relationships that are curvilinear may be analyzed linearly by considering only: (Points : 2)
        Fixed and semi-variable costs.
        Relevant fixed costs.
        Relevant variable costs.
        A relevant range of volume.
        The multi-product/multi-service context.

Question 19.19. The point in a joint production process at which individual products can be identified for the first time is called the: (Points : 2)
        Separable point.
        By-pass point.
        Split-off point.
        Joint identification point.

Question 20.20. Cleaning Care Inc. expects to sell 10,000 mops. Fixed costs (for the year) are expected to be $10,000, unit sales price is expected to be $12, and unit variable costs are budgeted at $7.
 
Cleaning Care’s margin of safety (MOS) in units is: (Points : 2)
        1,000.
        2,000.
        4,000.
        8,000.
        9,000.
 

Question 21.21. Variable costs will generally be relevant for decision making because they: (Points : 2)
        Differ between options.
        Are volume-based.
        Have not been committed and differ between options.
        Differ between options and have been committed.
        Measure opportunity cost.

Question 22.22. When the net present value (NPV) of a project is calculated based on the assumption that the after-tax cash inflows occur at the end of the year when they actually occur uniformly throughout each year, the NPV will: (Points : 2)
        Not be in error.
        Be slightly overstated.
        Be unusable for actual decision-making.
        Be slightly understated but probably usable.

Question 23.23. Value streams are useful in decision-making because: (Points : 2)
        They identify all value-added products and services.
        They help to highlight the improved efficiency in the plant.
        Special orders can be evaluated within the context of the value stream.
        Irrelevant costs are identified.
        Lean thinking produces better decision making.

Question 24.24. Which of the following statements regarding “opportunity costs” is TRUE? (Points : 2)
        These costs are recorded routinely by cost accounting systems.
        These costs relate to the benefit lost or foregone when a chosen option (course of action) precludes the benefits from an alternative option.
        These costs are generally deductible for federal income tax purposes.
        In terms of most short-run decisions, they are irrelevant.

Question 25.25. Which of the following is not true regarding the appropriate discount rate to be used in conjunction with discounted cash flow (DCF) decision models? (Points : 2)
        For projects of “above average” risk, the appropriate discount rate is the weighted-average cost of capital (WACC)
        It includes an estimate of the after-tax cost of debt.
        It can differ across investment projects, according to perceived risk.
        It is also sometimes referred to as the “hurdle rate” for capital budgeting purposes.

Question 26.26. In deciding whether to drop or keep a product line, all of the following are relevant to the decision EXCEPT: (Points : 2)
        The level of unavoidable fixed costs.
        The segment margin generated by the product line.
        Demand interdependencies across product lines of the company.
        Effect of the decision on overall company morale.

Question 27.27. Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique’s combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.
 
What is the payback period for the new machine (rounded to nearest one-tenth of a year)? (Assume that the cash inflows occur evenly throughout the year.) (Points : 2)
        2.5 years.
        2.7 years.
        3.1 years.
        3.6 years.

Question 28.28. Pique Corporation wants to purchase a new machine for $300,000. Management predicts that the machine can produce sales of $200,000 each year for the next 5 years. Expenses are expected to include direct materials, direct labor, and factory overhead (excluding depreciation) totaling $80,000 per year. The firm uses straight-line depreciation with no residual value for all depreciable assets. Pique’s combined income tax rate is 40%. Management requires a minimum after-tax rate of return of 10% on all investments.
 
What is the present value payback period, rounded to one-tenth of a year? (Points : 2)
        2.5 years.
        3.0 years.
        3.3 years.
        3.6 years.
        4.0 years.

Question 29.29. A total variable cost variance (such as for direct materials) can be broken down into separate variances that evaluate: (Points : 2)
        Price and efficiency.
        Units and cost.
        Volume and productivity.
        Sales-volume versus sales-mix effects.
        Efforts and results.

Question 30.30. The difference between the total actual sales revenue of a period and the total flexible-budget sales revenue for the units sold during the period is the: (Points : 2)
        Total flexible-budget variance.
        Sales volume variance.
        Selling price variance.
        Operating income flexible-budget variance.

Question 31.31. Traditional financial control systems have recently been criticized because: (Points : 2)
        They use flexible, not static, budgets.
        They generally lead to goal-congruent behavior on the part of managers.
        They focus more in improving basic business processes than short-term financial results.
        They fail to incorporate nonfinancial performance indicators into the evaluation process.

Question 32.32. The “flexible budget” can best be described as a budget that adjusts: (Points : 2)
        Revenues for sales-dollar changes.
        Revenues and expenses for changes in output (such as sales volume).
        Expenses for changes in budgeted output between two periods.
        For efficiency, but not selling price and cost variances.
        For selling price and cost variances, but not efficiency variances.

Question 33.33. A flexible-budget variance measures the impact on short-term operating profit of: (Points : 2)
        Changes in sales volume.
        Changes in output during the period.
        Differences in sales mix—budgeted versus actual.
        Selling price and cost differences—actual versus budgeted.
        Selling price, but not cost differences—actual versus budgeted.

Question 34.34. Matinna Co. maintains no inventories and has the following data pertaining to one of its direct materials in July:
Standard Quantity of DM for the Units Manufactured   =   30,000
DM Purchased – Actual Cost    =  $63,000
Standard Price per Unit of DM (SP) = $2.00
Direct Material Efficiency Variance  =  $4,500 (F)
All materials purchased during the month were issued to production.
 
What was the company’s direct materials flexible-budget (FB) variance for July? (Points : 2)
        $1,500 favorable.
        $3,000 unfavorable.
        $3,000 favorable.
        $7,500 unfavorable.
        $7,500 favorable.

Question 35.35. Lucky Company’s direct labor information for the month of February is as follows:
 
Actual DL Hours Word (AQ)         =  61,500
Standard DL Hours Allowed (SQ) = 63,000
Total Payroll for DL                            =  $774,900
DL Efficiency Variance                      =    $18,000
 
The actual direct labor rate per hour (AP) is: (Points : 2)
        $12.00.
        $12.30.
        $12.60.
        $13.20.
        $13.50.

Question 36.36. Which one of the following is a drawback of decentralization? (Points : 2)
        Uses local knowledge only.
        May hinder coordination among independent SBUs.
        Provides less effective operational control.
        May affect goal congruence.
        Offers an inefficient method of performance evaluation.

Question 37.37. What costs are treated as product costs under variable costing? (Points : 2)
        Only variable costs.
        Only variable production costs.
        All variable costs.
        All variable and fixed manufacturing costs.

Question 38.38. Of the three basic forms of management compensation (salary, bonus, benefits), the fastest growing part of total compensation is: (Points : 2)
        Salary.
        Bonus.
        Benefits.
        Salary and bonus.

Question 39.39. SBU is the acronym for: (Points : 2)
        Small Business Unit.
        Sustainable Business Unit.
        Standard Business Unit.
        Strategic Business Unit.

Question 40.40. The need for coordination between the production and the selling function will impact the choice of: (Points : 2)
        Profit, cost or revenue center.
        Manager for the firm.
        Formal or informal control systems.
        Profitability goal for the firm.
        Control measures to prevent fraud.

Question 41.41. The balanced scorecard measures the SBU’s performance in all of the following areas except: (Points : 2)
        Learning and growth.
        Managerial performance.
        Customer satisfaction.
        Internal business processes.
        Accounting and tax compliance.

Question 42.42. A company had income of $50,000 using variable costing for a given period. Beginning and ending inventories for that period were 80,000 units and 90,000 units, respectively. If the fixed overhead application rate were $10.00 per unit, what would operating income have been using full costing? (Points : 2)
        $(50,000).
        $170,000.
        $150,000.
        $0.
        Cannot be determined from the information given.

Question 43.43. Which one of the following items is not a measure of a company’s liquidity? (Points : 2)
        Accounts receivable turnover.
        Return on equity.
        Quick ratio.
        Cash flow ratio.
        Day’s sales in inventory.

Question 44.44. Which one of the following has been the most common payment option for bonus compensation in recent years? (Points : 2)
        Vacation time.
        Stock options.
        Increased benefits.
        Salary increase.

Question 45.45. The objectives of management compensation, when compared to the objectives used to develop performance measurement systems, are: (Points : 2)
        More numerous.
        Less specific.
        Consistent in their objectives.
        Significantly broader in scope.
        More specific.

Question 46.46. EVA is calculated as: (Points : 2)
        EVA Net Income – (Cost of Capital x EVA Invested Capital).
        Total Net Income – (Cost of Capital x Invested Capital).
        Gross Income – Cost of Capital.
        Total Net Income – EVA Net Income.
        Accounting earnings adjusted for EVA.

Question 47.47. Which one of the following refers to the firm’s ability to pay its current operating expenses and maturing debt? (Points : 2)
        Discounted cash flow.
        Liquidity.
        Earnings base.
        Profitability.
        Purchasing power.

Question 48.48. During October, Rover Industries produced 35,000 units of product with costs as follows:
DM                  = $  84,000
DL                    =      43,000
Variable O/H  =     13,000
Fixed O/H       =   147,000
       Total         =$ 287,000
What is Rover’s unit cost for October, calculated on the variable costing basis? (Points : 2)
        $3.25.
        $3.75.
        $4.00.
        $4.50.
        $5.00.

Question 49.49. The King Mattress Company had the following operating results for 2012-2013. In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company’s stock price in 2012 was $8 and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2013.
 
Balance Sheet, December 31
                                                                         2013                    2012
Cash                                                       $    340,000           $   100,000
Accounts Receivable                                 350,000                 400,000
Inventory                                                     250,000                300,000
               Total Current Assets            $     940,000           $   800,000
Long Lived Assets                                    1,080,000             1,100,000
     Total Assets                                    $  2,020,000          $ 1,900,000
Current Liabilities                                $     200,000          $    300,000
Long-Term Liabilities                                 600,000                 500,000
Stockholder’s Equity                               1,220,000             1,100,000
      Total Liabilities & Equity              $  2,020,000          $ 1,900,000

Income Statement for the Year Ended December 31
Sales                                                  $   4,750,000             $ 4,500,000
Cost of Sales                                          4,100,000                4,000,000                             
       Gross Margin                              $     650,000             $    500,000
Operating Expenses                                 350,000                   400,000
     Operating Income                       $      300,000             $    100,000
Taxes                                                           120,000                     40,000
    Net Income                                     $     180,000              $     60,000  

Cash Flow from Operations
Net Income                                          $     180,000              $     60,000
Plus Depreciation Expense                          50,000                     50,000
+Decrease (-Inc) in A/T and Inventory    100,000                       – 0 –
+Increase (-Dec) in Current Liabilities    (100,000)                     – 0 –
     Cash Flow from Operations           $   230,000               $  110,000

The inventory turnover ratio for 2013 is (rounded): (Points : 2)
        11.2
        12.7
        13.7
        14.9

Question 50.50. The King Mattress Company had the following operating results for 2012-2013. In addition, the company paid dividends in both 2012 and 2013 of $60,000 per year and made capital expenditures in both years of $30,000 per year. The company’s stock price in 2012 was $8 and $7 in 2013. The industry average earnings multiple for the mattress industry was 9 in 2013 and the free cash flow and sales multiples were 18 and 1.5, respectively. The company is publicly owned and has 1,200,000 shares of outstanding stock at the end of 2013.
 
Balance Sheet, December 31
                                                                         2013                    2012
Cash                                                       $    340,000           $   100,000
Accounts Receivable                                 350,000                 400,000
Inventory                                                     250,000                300,000
               Total Current Assets            $     940,000           $   800,000
Long Lived Assets                                    1,080,000             1,100,000
     Total Assets                                    $  2,020,000          $ 1,900,000
Current Liabilities                                $     200,000          $    300,000
Long-Term Liabilities                                 600,000                 500,000
Stockholder’s Equity                               1,220,000             1,100,000
      Total Liabilities & Equity              $  2,020,000          $ 1,900,000
Income Statement for the Year Ended December 31
Sales                                                  $   4,750,000             $ 4,500,000
Cost of Sales                                          4,100,000                4,000,000                             
       Gross Margin                              $     650,000             $    500,000
Operating Expenses                                 350,000                   400,000
     Operating Income                       $      300,000             $    100,000
Taxes                                                           120,000                     40,000
    Net Income                                     $     180,000              $     60,000  
Cash Flow from Operations
Net Income                                          $     180,000              $     60,000
Plus Depreciation Expense                          50,000                     50,000
+Decrease (-Inc) in A/T and Inventory    100,000                       – 0 –
+Increase (-Dec) in Current Liabilities    (100,000)                     – 0 –
     Cash Flow from Operations           $   230,000               $  110,000

The current ratio for 2013 is: (Points : 2)
        1.8
        2.0
        3.9
        4.7