Finance: Measurement and Decision Making

Subject: Business    / Finance
Question

GB519: Measurement and Decision Making (Mid-term)

1.Which one of the following would not be found in a merchandising company? (Points : 2)

Beginning inventory.

Cost of goods sold.

Ending inventory.

Gross profit.

Work-in-process.

2.Which one of the following critical success customer factors is best measured by warranty expense? (Points : 2)

Quality.

Dealer and distributor efficiency and effectiveness.

Timeliness of delivery.

Customer satisfaction.

3.Which one of the following is not a type of cost driver? (Points : 2)

Structural cost driver.

Executional cost driver.

Volume-Based cost driver.

Differential cost driver.

Activity-Based cost driver.

4.In the current business environment, companies cannot survive without a long-term strategy. What exactly should an effective strategy include? (Points : 2)

A set of policies, procedures, and approaches to business that will result in long-term success.

A focus on accurate financial data, thus allowing the firm to effectively compete in any environment.

A focus on long-term nonfinancial information that will provide the company with versatile management techniques capable of being used in a wide variety of situations.

A clear, concise mission statement, naming every product and outlining the company’s long-term goals of success.

5.With the enactment of the Sarbanes-Oxley Act of 2002, all public companies are now required by the SEC to disclose whether or not the company has: (Points : 2)

An audit committee.

Human resources guidelines.

A code of ethics.

A management compensation plan.

6.Which of the following organizations presents awards to firms that excel at execution of strategy, based on criteria such as leadership, marketing, strategic planning and process management? (Points : 2)

International Organization for Standardization.

Malcolm Baldrige National Quality Program.

Global Reporting Initiative.

World Resources Institute.

American Institute of Certified Public Accountants.

7.The additional cost incurred as the cost driver increases by one unit is: (Points : 2)

Average cost.

Controllable cost.

Variable cost.

Unit cost.

8.The cause and effect relationships among critical success factors are best captured in: (Points : 2)

The balanced scorecard

Business intelligence

The value chain

The strategy map

SWOT analysis

9.After critical success factors (CSFs) have been identified, the next step in developing a competitive strategy is to develop relevant and reliable measures for these CSFs. These measures are important to help the organization: (Points : 2)

Make profit for any extended period.

Increase sales above previous year(s).

Develop policies to enhance customer profitability.

Improve productivity in selected product areas.

Monitor progress toward achieving strategic goals.

10.Which of the following aspect of a contemporary management technique is a framework and process that organizations use to manage the occurrence of possible events that could negatively or positively affect the company’s competitiveness and success? (Points : 2)

Total quality management

Lean accounting

The theory of constraints

Enterprise sustainability

Enterprise risk management

11.Strategic analysis uses which of the following to help a firm improve its competitive position through an analysis of product and production complexity? (Points : 2)

Differential cost drivers.

Discretionary cost drivers.

Structural cost drivers.

Marginal cost drivers.

12.In order to assure that accounting information is accurate and to avoid potentially costly mistakes in the decision making process, firms should: (Points : 2)

Design and monitor an effective system of internal accounting controls.

Have the internal auditors and controller each check the accounting data before it is released to management.

Purchase an accounting system that is designed specifically for the industry in which the firm conducts business.

Develop and implement a code of ethics.

13.When cost relationships are linear, total variable costs will vary in proportion to changes in: (Points : 2)

Direct labor hours.

Total material cost.

Total overhead cost.

Volume of production.

Machine hours.

14.JCH Company conducts business in the lumber and building products industry. Last week, JCH purchased 50 railcars of lumber from a mill in Oregon and sold all 50 to a Home Depot store in North Carolina. In this instance, JCH Company would most likely be classified as a: (Points : 2)

Manufacturer.

Retailer.

Warehouse.

Wholesaler.

15.A manager of a small manufacturing firm is interested in knowing what the company’s product costs are. Which of the following would be considered a product cost for the manager’s company? (Points : 2)

Direct materials.

Product design cost.

Office expenses.

Selling expenses.

Advertising expense.

16.The sum of units transferred out and ending inventory units, assuming no spoilage, determines the: (Points : 2)

Units completed during the period.

Units spoiled.

Units transferred in during the period.

Units accounted for.

17.For job costing in service industries, overhead costs are usually applied to jobs based on: (Points : 2)

Factory overhead.

Indirect labor.

Indirect materials.

Direct labor-hours or dollars.

Direct materials.

18.In a process costing system, the cost of abnormal spoilage should be: (Points : 2)

Prorated between units transferred out and ending inventory.

Included in the cost of units transferred out.

Treated as a loss in the period incurred.

Ignored in the period incurred.

19.Customer equity is a type of analysis used to: (Points : 2)

Assess the ethical practices of each salesperson-customer relationship.

Assess the current profit potential of a customer.

Assess the long term profit potential of a customer.

Assess the current profit potential of all the firm’s customers.

Assess the long term profit potential of all the firm’s customers.

20.The major limitation of volume-based costing systems is the use of volume-based: (Points : 2)

Criteria.

Standards.

Rates.

Variances.

Restrictions.

21.The three major differences between process and job order costing systems are those relating to: (Points : 2)

Quantity, quality, and cost.

Speed, accuracy, and design.

Cost object, product or service variety, and timing of unit cost calculation.

Responsibility for cost, system design, and authorization codes.

22.Multistage ABC is used when: (Points : 2)

There are many departments in the organization.

Management wants a higher level of accuracy from the ABC calculations.

There are complex relationships among the activities.

To simplify the ABC calculations.

There is no such thing as Multistage ABC.

23.The journal entry to record incurred direct labor would include a credit to: (Points : 2)

Work-in-Process Inventory.

Accrued Payroll.

Factory Overhead.

Materials Inventory.

Finished Goods Inventory.

24.A time ticket: (Points : 2)

Shows the time an employee worked on each job, pay rate, and total cost chargeable to each job.

Shows the time that a department’s employees worked on all jobs, the pay rate of each employee, and the total cost chargeable to each job.

Shows the time an employee worked on each job and the total cost chargeable to each job only.

Shows the time an employee worked on each job only.

25.Which method is a method used to prepare the departmental production cost report when using a process cost system? (Points : 2)

LIFO method.

FIFO method.

Weighted production method.

Production average method.

Throughput average method

26.The number of the same or similar units that could have been produced given the amount of work actually performed on both complete and partially complete units is referred to as: (Points : 2)

Physical units.

Completed units.

Equivalent units.

Produced units.

Units to account for.

27.Which of the following characteristics applies to process costing but not to job costing? (Points : 2)

Identifiable batches of production.

Average costs.

Equivalent units.

Application of overhead.

28.Freight charges based on number of units shipped to customers is a: (Points : 2)

Customer unit-level cost.

Customer batch-level cost.

Customer-sustaining cost.

Distribution-channel cost.

Sales-level cost.

29.Under conventional job costing, factory overhead costs are assigned to products or services using labor or machine hours which are: (Points : 2)

Multiple cost pools.

A homogeneous cost pool.

Volume-based cost drivers.

Nonvolume-based cost drivers only.

30.Roussey Co. had the following information for the month of June:

Work-in-Progress Inventory – 6/1

2,000 Units

Units Transferred In

10,000 Units

Work-in-Progress Inventory – 6/30

3,000 Units

Beginning work-in-process inventory is 30 percent complete as to conversion. Ending work-in-process inventory is 40 percent complete as to conversion. Materials are added at the end of the process.

How many units were completed in June? (Points : 2)

12,000.

10,000.

9,600.

9,000.

31.Assume only the specified parameters change in a sensitivity analysis. If the contribution margin increases by $2 per unit, then operating profits will: (Points : 2)

Also increase by $2 per unit.

Increase by less than $2 per unit.

Decrease by $2 per unit.

Increases, but by an indeterminate amount.

32.Which one the following is a variable that takes on values of 1, 2, 3,¼ for each period in sequence? (Points : 2)

Dummy variable.

Outlier.

Trend variable.

Dependent variable.

Independent variable.

33.A plan that states the units or costs of merchandise to be purchased by a retailer or wholesaler during the budget period is called a: (Points : 2)

Production budget.

Merchandise purchases budget.

Accounts payable budget.

Cash payments budget.

Cost of goods sold budget.

34.Becker Sofa Company expected to sell 12,000 leather sofas. Fixed costs were $8,400,000; unit sales price was $4,600; and unit variable costs were $2,200. Becker Sofa Company’s margin of safety ratio is calculated to be: (Points : 2)

71.29%.

77.98%.

70.83%.

79.27%.

73.35%.

35.A plan of dollar amounts to be spent on long-term projects is called a: (Points : 2)

Cash budget.

Capital budget.

Rolling budget.

Sales budget.

Rolling financial forecast.

36.Framing House, Inc. produces and sells picture frames. Variable costs are $17 per frame, and fixed costs for the year total $130,000. The selling price is $25 per frame. The sales units required to make an after-tax profit of $10,000, given an income tax rate of 20 percent, are calculated to be (round up to nearest whole unit: (Points : 2)

17,734 units.

16,583 units.

17,813 units.

17,049 units.

16,366 units.

37.Fresplanade Co. had the following historical pattern for its credit sales:

75% collected in the month of sale

12% collected in the first month after sale

8% collected in the second month after sale

3% collected in the third month after sale

2% uncollectible

The sales on open account (credit sales) have been budgeted for the last six months of the year as shown below:

July $72,000

August $84,000

September $96,000

October $108,000

November $120,000

December $102,000

The estimated cash collection during September from July, August, and September accounts receivable is: (Points : 2)

$83,160.

$79,380.

$87,840.

$54,000.

$71,640.

38.Which of the following factors is not involved in studying cost/volume/profit relationships? (Points : 2)

Desired profit.

Variable costs.

Fixed costs.

Product mix.

Actual sales.

39.Which of the following is not a potential benefit of having a sound budgeting process? (Points : 2)

Improved decision-making.

Improved performance-evaluation process.

Improved coordination of business activities.

Improved motivation for company employees.

Lower acceptance rate for capital budgeting projects.

40.Which of the following best describes the process of sales forecasting? (Points : 2)

Multiple sales forecasting tools are available.

Trend analysis cannot be used for sales forecasting.

Econometric models cannot be used for sales forecasting because of their inherent complexity.

Sales forecasting works best with a simple visual plotting of past data on a graph.

41.Which of the following is not used for evaluating a regression analysis? (Points : 2)

Correlation.

t-value.

R-Squared.

F value

Multicollinearity.

42.The p-value measures: (Points : 2)

The probability that the regression equation is reliable.

The statistical significance of the dependent variable.

The risk that a particular independent variable has only a chance relationship to the dependent variable.

The confidence range around the regression prediction.

43.Which one of the following is defined as the ratio of the contribution margin to profit? (Points : 2)

Contribution margin ratio.

Margin of safety ratio.

Operating leverage.

Breakeven point.

Margin of safety.

44.The process of examining how a change in a single item in a budget (e.g., sales volume) affects one or more items in the budget (e.g., budgeted sales revenue and budgeted operating income) is generally referred to as: (Points : 2)

Flexible budgeting.

Sensitivity analysis.

Uncertainty programming.

What-if analysis.

Activity-based budgeting (ABB).

45.ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March? (Points : 2)

3,500.

4,500.

5,000.

5,500.

7,500.

46.All of the following are ways of setting the budget, except: (Points : 2)

Negotiation-based budgeting.

Two-stage budgeting.

Participative budgeting.

Authoritative budgeting.

All of the above are ways of setting the budget.

47.Which of the four types of cost drivers – activity-based, volume-based, structural and executional – are often best related to linear cost estimation methods? (Points : 2)

Activity-based only.

Activity-based and volume-based.

Structural and volume-based.

Executional and volume-based.

Structural and executional.

48.The equation method and the contribution margin method: (Points : 2)

Can determine the breakeven point in units sold but not in sales dollars.

Can determine the breakeven point in sales dollars but not in units sold.

Cannot determine the breakeven point in units sold.

Cannot determine the breakeven point in sales dollars.

Can determine the breakeven point in units sold or sales dollars.

49.Which of the following budgets is not a financial budget? (Points : 2)

Sales budget.

Cash receipts budget.

Budgeted cash-flow statement.

Budgeted balance sheet.

Cash payments budget.

50.OutlyTech Corp. expected to sell 24,000 telephone switches. Fixed costs were $12,144,000, unit sales price was $3,200, and unit variable costs were $1,440. OutlyTech’s margin of safety ratio is: (Points : 2)

71.25%.

87.00%.

70.25%.

92.50%.

76.15%.