Subject: Business / Accounting
1. Information is relevant in business decisions if it is a(n) ________.
A. past revenue and it differs among alternatives
B. expected future revenue or it differs among alternatives
C. expected future revenue that differs from past revenue
D. expected future revenue and it differs among alternatives 2. In considering whether to produce a single product, the associated direct
materials and direct labor costs would probably be ________.
A. relevant quantitative factors
B. relevant qualitative factors
C. irrelevant quantitative factors
D. irrelevant qualitative factors
3. Under the contribution approach to the income statement, the difference
between sales and ________ is contribution margin.
A. manufacturing costs
B. all variable expenses
C. all fixed expenses
D. cost of goods sold
4. The salary foregone by a person who quits a job to start a business is an
example of a(n) ________.
A. outlay cost
B. opportunity cost
C. sunk cost D. depreciable cost
5. ________ budgeting is when budgets are formulated with the active
involvement of all affected employees.
6. What is the sequence of steps in preparing the master budget? A. Output from the financial budget is used to prepare the operating budget.
B. Output from the financial budget is used to prepare the budgeted income
C. Output from the operating budget is used to prepare the financial budget.
D. Output from the financial budget is used to prepare the operating expense
7. The total amount of cash collections from customers by month appears on
A. sales budget
B. operating expense budget
C. budgeted balance sheet
D. cash budget
8. "The flex in the flexible budget relates solely to variable costs." Do you
A. No. Flexible budgets are prepared for only one expected level of activity. By
definition, fixed costs do not change with the level of activity, and therefore fixed
costs are the only costs included in a flexible budget. B. Yes. Flexible budgets are flexible only with respect to variable costs. By
definition, fixed costs do not change with the level of activity, and therefore there
is no "flex" in the fixed cost portion of a flexible budget.
C. No. Fixed costs are also adjusted in a flexible budget to reflect varying levels of
activity. Therefore, flexible budgets are flexible with respect to both variable and
D. Yes. Flexible budgets are flexible only with respect to variable costs. Although
fixed costs change with the level of activity, only variable costs are evaluated in a
9. Which of the following statements is FALSE?
A. Flexible budgets are based on different assumptions about cost behavior than
those used for static budgets.
B. A flexible budget is also called a variable budget.
C. Flexible budgets are matched to actual levels of activity.
D. Flexible budgets are prepared for a range of activity.
10. If sales are the cost driver, unfavorable flexible budget variances result
A. actual sales exceeding planned sales
B. planned sales exceeding actual sales
C. planned costs exceeding actual costs
D. actual costs exceeding planned costs
11. Rate variances are the same as ________ variances. Efficiency variances
are the same as ________ variances.
A. price; quantity
B. activity; static
C. spending; effective D. usage; quantity
12. Which of the following is the first and most basic component in a
management control system?
A. managerial effort
B. the stockholders’ goals
C. the organization’s goals
D. the organization’s longminus?range budget
13. To design a management control system that meets an organization’s
needs, managers must identify what motivates employees, ________ and
________. A. develop performance measures based on these employee motivators; establish a
monitoring and reporting structure for the performance measures
B. develop performance measures to encourage managerial effort; establish a
monitoring and reporting structure for productivity
C. develop performance measures that meet organizational objectives; establish an
accounting system to measure productivity
D. develop performance measures based on goal congruence; establish an
accounting system to measure goal congruence
14. ________ is the drive for some selected goal that creates effort and action
toward that goal.
A. Personal rewards
B. Managerial effort
C. Goal congruence
D. Motivation 15. Assume you are preparing income statements for different segments.
Which of the following is NOT a fixed cost controllable by a segment
A. training costs for new employees at segment
B. advertising costs in local paper to promote segment
C. salespersons’ salaries for segment
D. segment manager’s salary
16. What is a balanced scorecard and why are more companies using one?
What is a balanced scorecard?
A. A performance report that contains measures of all the key financial and
nonfinancial variables that are important for a company to prosper.
B. A characteristic or attribute that must be achieved in order to drive the
organization towards its goals.??
C. A measurement technique that focuses on prevention of defects and on
achievement of customer satisfaction.
D. A logical integration of techniques to gather and use information to make
planning and control decisions, to motivate employee behavior, and to evaluate
16.A/ Why are more companies using a balanced scorecard?
A. Companies find that it facilitates forecasting and budgeting and communicates
results of actions across the organization.
B. Companies find that it compares profit to investment using measures such as
return on investment or residual income.
C. Companies find that it is a useful tool to help managers focus on the
multidimensional factors that make an organization successful. D. Companies find that it builds on the assumption that an organization minimizes
the cost of quality when it achieves high quality levels.
17. Why is decentralization more popular in profit-seeking organizations
than in nonprofit organizations?
A. Due to how costly it is to implement, decentralization only works for profitseeking organizations and not for nonprofit organizations.
B. It is more difficult to hold managers of nonprofit organizations responsible for
performance because inputs and outputs are generally more difficult to measure.
Without reliable performance measures, granting managerial freedom is more
C. In a nonprofit, the local managers do not make decisions that are in the
organization’s best interests. Only because they want to improve their own
segment’s performance at the expense of the organization.
D. Due to the lack of qualified personnel, it is easier for profit-seeking
organizations to keep all the decision-making authority only at the highest levels of
the organization than it is for nonprofit organizations.
18. In designing management control systems, top managers should consider
the system’s impact on the behavior of employees. A. True B. False
19. What is the major benefit of the ROI technique for measuring
A. Its attention to the required asset investment in relation to operating
B. Decision-making is the responsibility of those local managers who often
have the best information concerning local conditions. C. The manager is rewarded based on his or her individual performance
rather than no controllable factors.
D. The fact that managers who make decisions to improve their segment’s
performance also increase the performance of the organization as a whole.
20. Service departments in organizations exist to support ________.
A. producing departments and suppliers only
B. producing departments and customers only
C. other service departments, producing departments and customers
D. other service departments and customers only
21. Which of the following formulas should be used to allocate
variable costs from service departments to user departments?
A. budgeted unit rate times × total budgeted units planned to be used
B. actual unit rate times × total budgeted units planned to be used
C. budgeted unit rate times × actual units used
D. actual unit rate times × actual units used
22. The phrase "cost application" refers to the allocation of the total
departmental costs to ________.
A. revenueminus?producing departments
B. service departments
C. revenueminus?producing products
D. service departments and producing departments
23. The budgeted factory overhead rate is computed as ________.
A. actual factory overhead costs divided by actual cost driver activity
B. actual factory overhead costs divided by actual production in units
C. budgeted factory overhead costs divided by budgeted
costminus?allocation base level
D. budgeted factory overhead costs divided by actual cost driver activity
24. If a department identifies more than one cost driver for overhead
costs, the department ideally should ________. A. select a single cost driver
B. put 80 percent of the costs into one pool and 20 percent into a second
C. allocate 80 percent of the costs with 20 percent of the cost drivers
D. create as many cost pools as there are cost drivers
25. ________ is used for external reporting.
A. Direct costing
B. Variable costing
C. The contribution margin approach
D. Absorption costing
26. Is the comparison of actual overhead costs to budgeted overhead
costs part of the product-costing process or part of the control process?
The comparison of actual overhead costs to budgeted overhead costs is
part of the
A. Control Process
B. Product costing Process
26. A/ It is part of this process because
A. it tells managers how to improve the process.
B. it tells managers when the actual results differ from what was expected.
C. it tells managers how to control actual overhead costs.
D. it tells managers how to control inventory costs.
27. The fixed overhead spending variance is also called the ________
A. fixed overhead usage
B. fixed overhead flexible budget
C. fixed overhead efficiency
D. production volume
28. The ________ system is better suited for a single physical unit or a
few similar units.
A. jobminus?order costing
B. activityminus?based management C. activityminus?based costing
29. Conoco Company has an actual factory overhead cost of
Depreciation Expenselong dash—Equipment of $5,000. Jobminus?order
costing is used. The journal entry to record this actual cost would
A. Debit Workminus?Inminus?Process Inventory $5,000 and Credit to
Factory Department Overhead Control $5,000
B. Debit to Factory Department Overhead Control $5,000 and Credit to
Accumulated Depreciationlong dash—Equipment $5,000
C. Debit to Depreciation Expenselong dash—Equipment $5,000 and Credit
to Accumulated Depreciationlong dash—Equipment $5,000
D. Debit to Workminus?Inminus?Process Inventory $5,000 and Credit to
Factory Department Overhead Applied $5,000
30. Rozman Company produces calendars in a one minus?department
process. The following data is available for the past month:
Work-in- process inventory, beginning 0 Units started 15,000
Units completed and transferred
Work- in- process inventory, ending
Direct materials added $30,000
Direct labor $20,700
Factory overhead costs $10,350 12,000
3,000 The units in process at the end of the month are 100 percent complete
with respect to direct materials and 50 percent complete with respect to
conversion costs. What are the equivalent units for conversion costs for
Subject: Business / Accounting