Management Level Control

Management Level Control

Unit 6 : Unit 6: Management Level Control - Practice Final Exam 



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Question 1. 1. If the volume of production is increased over the level planned, the cost per unit would be expected to: (Points : 2) 
Decrease for fixed costs and remain unchanged for variable costs.
Remain unchanged for fixed costs and increase for variable costs.
Decrease for fixed costs and increase for variable costs.
Increase for fixed costs and increase for variable costs.





Question 2. 2. The cost of goods that were finished and transferred out of work-in-process during the current period is: (Points : 2) 
Cost of goods sold.
Cost of goods available for use.
Cost of goods manufactured.
Cost of goods available for sale.





Question 3. 3. Cost management has moved from a traditional role of product costing and operational control to a broader strategic focus, which places an emphasis on: (Points : 2) 
Competitive pricing.
Domestic marketing.
Short-term thinking.
Strategic thinking.
Independent judgment.





Question 4. 4. If finished goods inventory has increased during the period, which of the following is always true? (Points : 2) 
Cost of goods sold is less than cost of goods manufactured.
Cost of goods sold is more than cost of goods manufactured.
Cost of goods manufactured is more than total manufacturing costs.
Cost of goods manufactured is less than total manufacturing costs.





Question 5. 5. Certain workers are assigned the task of unpacking production materials received from suppliers. These workers place the material in a storage area pending subsequent use in the production process. The labor cost of such workers is normally classified as: (Points : 2) 
Direct labor.
Direct materials.
Indirect labor.
Indirect materials.





Question 6. 6. Factory overhead costs for a given period were 1.5 times as much as the direct material costs. Prime costs totaled $15,500. Conversion costs totaled $22,725. What are the direct labor costs for the period? (Points : 2) 
$1,200.
$1,050.
$1,075.
$1,155.





Question 7. 7. Direct materials and direct labor costs total $70,000 and factory overhead costs total $100 per machine hour. If 200 machine hours were used for Job #333, what is the total manufacturing cost for Job #333? (Points : 2) 
$20,000
$70,200
$70,000
$90,000






Question 8. 8. Which one of the following is the amount of factory overhead applied that exceeds the actual factory overhead cost? (Points : 2) 
Factory overhead applied.
Actual factory overhead.
Overapplied overhead.
Allocated factory overhead.
Underapplied overhead.





Question 9. 9. The journal entry required to record factory depreciation includes: (Points : 2) 
A debit to the Cost of Goods Manufactured account.
A debit to the Factory Overhead account.
A debit to the Depreciation Expense account.
A debit to the Accumulated Depreciation account.
None of the above.





Question 10. 10. Which one of the following is one of the key steps in determining process costs? (Points : 2) 
Assigning the total manufacturing costs to the units completed and transferred out and the units of work in process at the end of the period.
Analyzing the physical flow of production units.
Computing the cost per equivalent unit for each manufacturing cost element.
Calculating equivalent units of production for all manufacturing cost elements.
All of the above are correct.





Question 11. 11. Conversion costs in a process cost system include: (Points : 2) 
Direct materials and direct labor.
Direct labor and manufacturing overhead.
Direct materials and manufacturing overhead.
Manufacturing overhead and selling, general & administrative expenses.





Question 12. 12. The key distinction between job costing and process costing is: (Points : 2) 
The difference in detail required by each approach.
The use made of the collected data.
The journal entries required.
The cost object for which costs are accumulated.





Question 13. 13. ABC Company listed the following data for the current year:
Budgeted Factory Overhead = $ 1,044,000
Budgeted Direct labor Hours = 69,600
Budgeted Machine Hours = 24,000
Actual Factory Overhead = 1,037,400
Actual Labor Hours = 72,400
Actual Machine Hours = 23,600

Assuming ABC applied overhead based on machine hours, the company's predetermined overhead rate for the year is: (Points : 2) 
$43.95 per machine hour.
$14.38 per machine hour.
$43.50 per machine hour.
$14.50 per machine hour.
$14.28 per machine hour.





Question 14. 14. Randall Company manufactures products to customer specifications. A job costing system is used to accumulate production costs. Factory overhead cost was applied at 125% of direct labor cost. Selected data concerning the past year's operation of the company are presented below.

Direct Materials January 1 = $77,000
Direct Materials December 31 = 40,000
WIP January 1 = 66,000
WIP December 31 = 42,000
Finished Goods January 1 = 115,000
Finished Goods December 31 = 100,000

Other Information:
Direct Materials Purchased = $324,000
Cost of Goods Available for Sale = 950,000
Actual Factory Overhead = 206,000

The cost of direct materials used for production is: (Points : 2) 
$351,000.
$297,000.
$361,000.
$306,000.
$324,000.





Question 15. 15. Which of the following statements best describes a by-product? (Points : 2) 
A product that is produced from material that would otherwise be scrap.
A product that has a selling price similar to that of the main product.
A product created along with the main product whose sales value does not cover its cost of production.
A product that usually produces a small amount of revenue when compared to the main product's revenue.
A product that has a lower unit selling price than the main unit.





Question 16. 16. If the coefficient of correlation between two variables is nearly zero, how might a graph of these variables appear? (Points : 2) 
Random points.
A least squares line that slopes up to the right.
A least squares line that slopes down to the right.
Under this condition, a scatter diagram could not be plotted on a graph.





Question 17. 17. When using cost-volume-profit (CVP) analysis, the following information helps to show how decisions affect operating income except: (Points : 2) 
Variable costs.
Fixed costs.
Output level.
Gross margin.
Sales volume.





Question 18. 18. CVP analysis using activity-based costs will tend to shift some costs from fixed to variable classifications, resulting in: (Points : 2) 
Lower breakeven sales.
Higher breakeven sales.
Higher or lower breakeven sales, depending on batch size.
A higher contribution margin per unit.
A lower contribution margin per unit.





Question 19. 19. Cost allocation provides a service firm a basis for evaluating the: (Points : 2) 
Cost and profitability of its services.
Value of its services.
Manufacturing costs for the company.
Profitability of its customers.





Question 20. 20. Stylish Sitting is a retailer of office chairs located in San Francisco, California. Due to increased market competition, the CFO of Stylish Sitting has grown worried about the firm's upcoming income stream. The CFO asked you to use the company financial information provided below.
Sales Price $75.00
Per Unit Variable Costs:
Invoice Cost 41.70
Sales Commission 18.30
Total Per Unit Variable Cost $60.00
Fixed Costs:
Advertising $ 56,000
Rent 78,000
Salaries 226,000
Total Annual Fixed Costs $360,000 

The annual breakeven point, in unit sales, is: (Points : 2) 
15,000 units.
24,000 units.
36,000 units.
13,000 units.





Question 21. 21. 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 ratio (MOS%) is: (Points : 2) 
20%.
40%.
80%.
85%.
90%






Question 22. 22. A special sales order is: (Points : 2) 
Typically expected.
A profitable opportunity to sell a specified quantity of a firm's product or service.
A one-time opportunity to sell a specified quantity of a product or service.
A particularly large customer order.
In most cases, a rush order.





Question 23. 23. Which one of the following is correct for determining relevant costs for decision-making? (Points : 2) 
Differential.
Integrative.
Long-term focus.
Subjective.
Absorption.





Question 24. 24. Depreciation expense is a relevant cost in a decision only in the context of: (Points : 2) 
Time value of money.
Amortized values.
Reducing the tax liability of the organization.
Determining sunk costs associated with the decision problem.





Question 25. 25. In a make-or-buy decision: (Points : 2) 
Only variable costs are relevant.
Fixed costs that can be avoided in the future are relevant.
Fixed costs that will continue regardless of the decision are relevant.
Only opportunity costs are relevant.
Opportunity costs are generally zero.





Question 26. 26. If a company must choose between two mutually exclusive investment projects, the best general method to employ for decision-making purposes is: (Points : 2) 
Cash-flow bailout.
Cash-flow break-even.
Net present value (NPV).
Discounted payback.
Accounting (book) rate of return, based on average investment over the life of each project.





Question 27. 27. A truck, costing $25,000 and uninsured, was wrecked the very first day it was used. It can either be disposed of for $5,000 cash and be replaced with a similar truck costing $27,000, or rebuilt for $20,000 and be brand new as far as operating characteristics and looks are concerned. The best choice provides a net cost savings of: (Points : 2) 
$2,000.
$5,000.
$7,000.
$12,000.
Some other amount.





Question 28. 28. A boat, costing $108,000 and uninsured, was wrecked the very first day it was used. It can either be disposed of for $11,000 cash and be replaced with a similar boat costing $110,000, or rebuilt for $98,000 and be brand new as far as operating characteristics and looks are concerned. A relevant cost analysis of the decision to replace the boat shows: (Points : 2) 
A cost equivalence between the two decision options.
An $11,000 net advantage associated with the decision to fix the old boat.
A $1,000 cost advantage associated with the decision to fix the old boat.
A $21,000 cost advantage associated with the decision to fix the old boat.
A $2,000 cost advantage associated with the decision to purchase a new boat.





Question 29. 29. Which of the following statements about variable overhead costs is true? (Points : 2) 
The underlying model for control and product-costing purposes is the same for variable overhead.
The amount of variable overhead applied to production is a function of the denominator output volume and the actual quantity of the cost-allocation base (cost driver) used to apply overhead.
The total variable overhead cost variance can be decomposed into a production-volume variance and a flexible-budget variance.
For control purposes, the actual quantity of the cost-allocation base (cost driver) is used.
Standard costs can be used for control, but not product-costing, purposes.





Question 30. 30. Activity-based costing and the theory of constraints (TOC) are viewed as methods that are: (Points : 2) 
Substitutions for one another.
Complementary.
Auxiliary.
Responsive.
Parallel.





Question 31. 31. The difference between budgeted fixed factory overhead for a period and the amount of the fixed factory overhead applied to production during the period is the: (Points : 2) 
Fixed factory overhead efficiency variance.
Fixed factory overhead production-volume variance.
Fixed factory overhead spending variance.
Fixed factory overhead sales-volume variance.
Fixed factory overhead flexible budget variance.





Question 32. 32. Which one of the following reflects both price (rate) as well as efficiency (quantity) effects regarding variable overhead items? (Points : 2) 
Variable overhead production-volume variance.
Variable overhead rate variance.
Variable overhead spending variance.
Variable usage variance.
Variable overhead efficiency variance.





Question 33. 33. The way managers and employees who are affected by a standard cost system perceive the system will: (Points : 2) 
Be of little consequence on the success of the system if correctly implemented.
Generally be minimal in impact on the implementation of the system.
Affect its success or failure in implementing the system.
Be difficult to assess.
Not matter in the long run.





Question 34. 34. Bonehead Co. has the following factory overhead costs:

Standard Overhead Applied to this Period’s Production = $72,500
Flexible Budget for Overhead Based on Output (Units Produced) = 65,000
Total Budgeted Overhead in the Master (Static) Budget = 86,000
Actual Total Overhead Cost Incurred During the Period = 76,000

The total overhead flexible-budget (FB) variance for Bonehead Co. this period is: (Points : 2) 
$4,000 unfavorable.
$7,000 favorable.
$10,000 favorable.
$11,000 unfavorable.
$14,000 unfavorable.





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 direct labor rate variance is: (Points : 2) 
$36,900 unfavorable.
$37,800 unfavorable.
$55,350 unfavorable.
$56,700 unfavorable.
$73,800 unfavorable.





Question 36. 36. Under full costing, fixed manufacturing overhead costs would be classified as: (Points : 2) 
Period costs.
Product costs.
Selling costs.
Inventory costs.





Question 37. 37. Profit center income statements are most meaningful to managers when they are prepared: (Points : 2) 
On a full cost basis.
On a cost behavior basis.
On a cash basis.
In a single-step format.
In a multiple-step format.





Question 38. 38. The value stream income statement provides the following information not usually contained in the contribution income statement: (Points : 2) 
Allocated fixed costs
Contribution by profit center.
A separate accounting for the effect of inventory change on profit.
A separate accounting for the effect of productivity change on profit.





Question 39. 39. From a strategic standpoint, profit centers tend to: (Points : 2) 
Free the center manager from concerns about markets.
Place more cost emphasis on rush orders.
Provide incentive for coordination among managers of different units.
Focus managers on cost control rather than revenue generation.
All of the above answers are correct.





Question 40. 40. The objectives of management control of the manager include: (Points : 2) 
Cost, quality, and functionality.
Management by objectives.
Management by exception.
Motivation, incentive and fairness.





Question 41. 41. Which of the following is an advantage of decentralization? (Points : 2) 
Promote coordination among SBUs.
Limits conflicts among SBUs.
Motivates managers.
Offers qualitative method of performance evaluation.





Question 42. 42. Bonus payment options include all of the following except: (Points : 2) 
Perks.
Current bonus.
Deferred bonus.
Stock options.
Performance shares.





Question 43. 43. A deferred bonus can consist of: (Points : 2) 
Cash only.
Stock only.
Cash and/or stock.
Membership in a fitness club.





Question 44. 44. Which of the following would not play a strategic role in management compensation? (Points : 2) 
Ethical issues.
Strategic conditions facing the firm.
The effect of a change in financial reporting method.
The effect of risk aversion on managers' decision making.





Question 45. 45. The balanced scorecard critical success factors (CSFs) provide strong motivation in bonus compensation plans if the non-controllable factors are: (Points : 2) 
Emphasized.
Separated.
Recognized.
Excluded.





Question 46. 46. The balanced scorecard evaluation of the firm is an especially strong financial tool because of its: (Points : 2) 
Use of qualitative measures.
Use of quantitative measures.
Simplicity in use.
Ability to predict change.
Use of multiple critical success factors (CSFs).





Question 47. 47. In service firms, improvement in long term profitability is best measured by all the following except: (Points : 2) 
Staff utilization.
Net revenues.
Collections of customer accounts.
Materials usage.





Question 48. 48. During January, Long, Inc. produced 10,000 units of product with costs as follows:
DM = $ 40,000
DL = 22,000
Variable O/H = 10,000
Fixed O/H = 90,000
Total = $ 162,000

What is Lang's unit cost for January, calculated on the variable costing basis? (Points : 2) 
$6.20.
$7.20.
$7.50.
$8.50.
$9.50.





Question 49. 49. A company's operating income was $70,000 using variable costing for a given period. Beginning and ending inventories for that period were 45,000 units and 50,000 units, respectively. Ignoring income taxes, if the fixed factory overhead application rate was $8.00 per unit, what would operating income have been using full costing? (Points : 2) 
$30,000.
$140,000.
$110,000.
$100,000.





Question 50. 50. Home Products Inc has failed to reach its planned activity level during its first two years of operation. The following table shows the relationship between units produced, sales, and normal activity for these years and the projected relationship for Year 3. All prices and costs have remained the same for the last two years and are expected to do so in Year 3. Income has been positive in both Year 1 and Year 2.

Year 1 Units Produced = 90,000
Year 1 Sales = 90,000
Year 1 Planned Production = 100,000
Year 2 Units Produced = 95,000
Year 2 Sales = 95,000
Year 2 Planned Production = 100,000
Year 3 Units Produced = 95,000
Year 3 Sales = 90,000
Year 3 Planned Production = 100,000

Because Home Products uses a full costing system, one would predict operating income for Year 3 to be: (Points : 2) 
Greater than operating income under variable costing.
Less than year 2
The same as operating income under variable costing.
Less than the operating income under variable costing.