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Question;81.;Under variable costing, fixed manufacturing overhead costs would be classified;as;A.;Period costs.;B.;Product costs.;C.;Selling costs.;D.;Inventory costs.;82.;Under full costing, fixed manufacturing overhead costs would be classified as;A.;Period costs.;B.;Product costs.;C.;Selling costs.;D.;Inventory costs.;83.;Under the;principal-agent model of contract relationships, situations such as machine;breakdowns or a decrease in market demand would be classified under;A.;Lack of observability.;B.;Lack of responsibility.;C.;Uncertainty.;D.;Decentralization.;84. In;a formal management control system, top management sets expectations for;desired manager performance. Which of the following is not one of the;areas in which a formal individual management control system would be used?;A.;Hiring practices.;B.;Promotion policies.;C.;Operations.;D.;Sales.;E.;Organizational culture.;85. The;type of strategic business unit (SBU) where the SBU focuses on the selling;function of a specific product line or by a geographical location is referred;to as a(n);A.;Profit center.;B.;Cost center.;C.;Revenue center.;D.;Investment center.;E.;All of the above.;86.;SBU is the acronym for;A.;Small Business Unit.;B.;Sustainable Business;Unit.;C.;Standard Business Unit.;D.;Strategic Business Unit.;87. 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;A.;Strategic positioning.;B.;Opportunity costing.;C.;Profitability;maximization.;D.;Outsourcing.;E.;Value chain analysis.;88.;Which of the following is not a criterion for choosing a cost allocation;method?;A.;Provide an incentive for managers to;make decisions consistent with top management's goals.;B.;Provide an opportunity;for managers to make decisions consistent with the manager's goals.;C.;Provide a basis for a;fair evaluation of manager's performance.;D.;Motivate managers to;exert a high level of effort.;89.;Which one of the following is not an order-filling cost?;A.;Freight.;B.;Warehousing.;C.;Inspection.;D.;Collections.;90.;Controllable fixed costs;A.;Are those costs that the profit center;manager can influence in approximately a year or less.;B.;Are those costs that the;profit center manager can influence in approximately a year or more.;C.;Include variable costs.;D.;Have no effect on;operating income.;91.;Using;the balanced scorecard to describe the firm's strategy in detail through the;use of a cause-and-effect diagram which is also known as;a(n);A.;Status Diagram.;B.;Strategy Map.;C.;Performance Flowchart.;D.;Organizational Diagram.;E.;Operational;Work-through.;92.;The cost method that is input-oriented and considers costs largely;uncontrollable at the planning stage is called the;A.;Engineered-cost method.;B.;ABC costing.;C.;Discretionary-cost;method.;D.;Job costing.;E.;Standard costing.;93.;Costs such as depreciation, taxes and insurance and usually extending beyond;one year are considered;A.;Controllable fixed costs.;B.;Noncontrollable fixed;costs.;C.;Noncontrollable variable;costs.;D.;Controllable variable;costs.;E.;Controllable margin;costs.;94.;Which of the following is not a revenue driver factor which affects;sales volume for a manufacturing firm?;A.;Price changes.;B.;Customer service.;C.;Delivery dates.;D.;Discounts.;E.;Productivity.;95.;Which of the following is an argument against the use of variable costing?;A.;Full costing overstates the balance;sheet value of inventories.;B.;Variable factory;overhead is a period cost.;C.;Fixed factory overhead;is difficult to allocate properly.;D.;Fixed factory overhead;is necessary for the production of a product.;96. Table;Inc. planned and manufactured 250,000 units of its single product in 2010, its;first year of operations. Variable manufacturing costs were $30 per unit of;production. Planned and actual fixed manufacturing costs were $500,000.;Marketing and administrative costs (all fixed) were $300,000 in 2010. Table;Inc. sold 200,000 units of product in 2010 at $50 per unit. Sales for 2010 are;calculated to be;A.;$1,000,000.;B.;$5,000,000.;C.;$7,500,000.;D.;$10,000,000.;E.;$12,500,000.;97. Table;Inc. planned and manufactured 250,000 units of its single product in 2010, its;first year of operations. Variable manufacturing costs were $30 per unit of;production. Planned and actual fixed manufacturing costs were $500,000.;Marketing and administrative costs (all fixed) were $300,000 in 2010. Table;Inc. sold 200,000 units of product in 2010 at $50 per unit. Full costing;operating income for 2010 is calculated to be;A.;$1,000,000.;B.;$3,200,000.;C.;$3,300,000.;D.;$4,200,000.;E.;$4,300,000.;98. Table;Inc. planned and manufactured 250,000 units of its single product in 2010, its;first year of operations. Variable manufacturing costs were $30 per unit of;production. Planned and actual fixed manufacturing costs were $500,000.;Marketing and administrative costs (all fixed) were $300,000 in 2010. Table;Inc. sold 200,000 units of product in 2010 at $50 per unit. Variable costing;operating income for 2010 is calculated to be;A.;$1,000,000.;B.;$3,200,000.;C.;$3,300,000.;D.;$4,200,000.;E.;$4,300,000.;99.;Strategic performance measurement is a(n);A.;Accounting system used by top management;for the evaluation of SBU managers.;B.;System of shared;responsibility.;C.;Accounting system for;determining strategy.;D.;System to design and;implement the balanced scorecard.;100.;Managers who are risk averse;A.;Seek to accept options with low risk and;would choose an option with lower expected value if it had more risk.;B.;Seek to avoid options;with low risk and would choose an option with higher expected value if it had;more risk.;C.;Seek to avoid options with high risk and;would choose an option with lower expected value if it had less risk.;D.;Seek to accept options;with high risk and would choose an option with lower expected value if it had;less risk.;E.;Seek to accept options;with low risk and would choose an option with higher expected value if it had;more risk.;101.;Managers who are risk prone;A.;Seek risky projects that promise some;chance of a low benefit.;B.;Seek risky projects that;promise some chance of a high benefit, although the projects may have a risk of;low benefit.;C.;Seek risky projects.;D.;Seek high risk projects;that promise some chance of a high benefit, although the projects may have a;very significant risk of no benefit.;102.;Risk plays a critical;role in the decision making process. However, numerous studies have shown that;most executives, managers and individuals are considered to be;A.;Risk neutral.;B.;Risk prone.;C.;Risk averse.;D.;Risk seekers.;103.;A value stream income statement is best associated with;A.;Value chain analysis.;B.;Activity-based costing.;C.;The theory of;constraints.;D.;Lean manufacturing.;104.;A value stream is;A.;A set of value-adding activities.;B.;A sequence of efficient;processes.;C.;A group of related;products.;D.;A strategy map with a;focus on value-adding activities.;105. Reasons;for failure to implement the balanced scorecard effectively include all but;which of the following;A.;Failure to link nonfinancial measures to;strategy.;B.;Failure to validate the;assumptions in the strategy map.;C.;Setting the wrong;performance targets.;D.;Failure to include;financial reporting requirements to the SEC.;E.;Measuring the results;incorrectly.;106. The;sales life cycle has three phases: early, growth, and maturity. The appropriate;performance measures for the growth phase include;A.;Profitability, market penetration.;B.;Profitability, strategy.;C.;Revenue, strategy.;D.;Profitability, asset;management.;107.;SeaScape Resorts owns;and operates two resorts in a coastal town. Both resorts are located on a;barrier island that is connected to the mainland by a high bridge. One resort;is located on the beach and is called the Crystal Coast Resort. The other;resort is located on the inland waterway which passes between the town and the;mainland, it is called the Harborview Resort. Some key information about the;two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;Determine;the amount of cost to be allocated to the Harborview Resort using revenue as an;allocation base.;A.;$1,050,000;B.;$1,950,000;C.;$1,500,000;D.;$420,000;E.;$1,680,000;108.;SeaScape Resorts owns and operates two resorts in a coastal town. Both resorts;are located on a barrier island that is connected to the;mainland;by a high bridge. One resort is located on the beach and is called the Crystal;Coast Resort. The other resort is located on the inland waterway which passes;between the town and the mainland, it is called the Harborview Resort. Some key;information about the two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;What is the;operating profit of the Crystal Coast Resort, using revenue as an allocation;base?;A.;$2,450,000;B.;$1,600,000;C.;$1,500,000;D.;$4,550,000;E.;$3,550,000;109.;SeaScape Resorts owns;and operates two resorts in a coastal town. Both resorts are located on a;barrier island that is connected to the mainland by a high bridge. One resort;is located on the beach and is called the Crystal Coast Resort. The other;resort is located on the inland waterway which passes between the town and the;mainland, it is called the Harborview Resort. Some key information about the;two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;Using;the information regarding the allocation of the $3 million to the four cost;drivers, determine the amount of cost to be allocated to the Harborview Resort.;A.;$1,050,000;B.;$1,950,000;C.;$1,500,000;D.;$715,000;E.;$1,680,000;110.SeaScape Resorts owns;and operates two resorts in a coastal town. Both resorts are located on a;barrier island that is connected to the mainland by a high bridge. One resort;is located on the beach and is called the Crystal Coast Resort. The other;resort is located on the inland waterway which passes between the town and the;mainland, it is called the Harborview Resort. Some key information about the;two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;Using the information regarding the;allocation of the $3 million to the four cost drivers, determine the operating;profit of the Crystal Coast Resort.;A.;$1,500,000;B.;$2,050,000;C.;$2,785,000;D.;$3,525,000;E.;$4,215,000;111. SeaScape;Resorts owns and operates two resorts in a coastal town. Both resorts are;located on a barrier island that is connected to the mainland by a high bridge.;One resort is located on the beach and is called the Crystal Coast Resort. The;other resort is located on the inland waterway which passes between the town;and the mainland, it is called the Harborview Resort. Some key information;about the two resorts for the current year is shown below.;The nontraceable;operating costs of the resort amount to $3 million. By careful study, the;management accountant at SeaScape has determined that, while the costs are not;directly traceable, the total of $3 million could be fairly allocated to the;four cost drivers as follows.;The Crystal;Coast resort is likely to be favored in terms of a lower cost allocation under;A.;Revenue-based allocation.;B.;Cost-driver based;allocation.;C.;Cannot be determined;from the information.;D.;Would be the same for;both allocation methods.;112. Tough-Built;Corporation produces specialized truck body components, specializing in;hydraulic lifts for dump trucks. Founded 35 years ago by George Halloway, the;firm now employs 150 workers and has annual sales of over $10 million. George;operates the firm in a highly centralized way, and retains control over all;changes in operations. He is a regular visitor to the production area, which;helps him "keep his finger on the pulse of the firm." Although George;Halloway is now 67 years old, he has no apparent management successor, and has;always hand-picked his department heads and staff personnel. He has been;generous to those who worked for him, paying substantial bonuses each year to;the employees based on his personal evaluation of each worker. Just six weeks;ago, a heart attack convinced George to consider retirement, and he decided to;sell the firm to his employees. You are assigned the task of recommending a set;of strategic performance measures for the firm, assuming that the new worker;management wants to operate as a decentralized firm. Required: What;major management problems do you foresee in the transition from sole owner to;employee ownership?;113. Harrison;Hartwell and Zenith is a successful law firm employing 26 professionals. There;is an internal controversy over allocation of the $104,000 purchase cost of a;highly sophisticated electronic law library. Each professional employee of the;firm has been assessed $4,000 as a charge against the profit distribution;account of each of the 26 members affected. In addition, it is expected to cost;about $2,600 per month to update information for the library system, resulting;in a monthly $100 assessment against each professional in the firm.;Required;(a) As a new junior member of the professional legal group of 26, why might you;not like the proposed electronic library costallocation? (b) Propose an;alternate allocation method for both the initial purchase cost and the updating;charge that is more equitable (fair).(c) Could one argue for no allocation at;all in this case? On what basis?;114.;McShane Inc. manufactures;hair brushes that sell at wholesale for $6.00 per unit. Budgeted production in;both 2009 and 2010 was 2,000 units and fixed overhead budgeted was $25,000 in;each year. There was no beginning inventory in 2009. The following data;summarized the 2009 and 2010 operations;Required;Determine;income under both full costing and variable costing and explain the difference.;115. The;Daniels Tool & Die Corporation has been in existence for a little over;three years, its sales have been increasing each year as it has built a;reputation. The company manufactures dies to its customers' specifications, as;a consequence, a job order cost system is employed. Factory overhead is applied;to the jobs based on direct labor hours. Actual variable overhead is the same;as applied variable overhead. Overapplied or underapplied overhead is treated;as an adjustment to cost of goods sold. The company's income statements for the;last two years are presented below. Daniels used the same predetermined;overhead rate in applying overhead to production orders in both 2010 and 2011.;The rate was based on the following estimates;In;2009 and 2010, actual direct labor hours expended were 20,000 and 23,000;respectively. Raw materials put into production were $292,000 in 2009 and;$370,000 in 2010. Actual fixed overhead was $37,400 for 2010 and $42,300 for;2009, and the planned direct labor rate was the direct labor rate achieved. For;both years, all of the reported administrative costs were fixed, while the;variable portion of the reported selling expenses result from a commission of;five percent of sales revenue. Required: (1) For the year December 31;2010, prepare a revised income statement for Daniels Tool & Die Corporation;utilizing the variable costing method. Be sure to include the contribution;margin on your statement. (2) Prepare a numerical reconciliation of the difference;in operating income between Daniels Tool & Die Corporation's costing and;the revised 2010 income statement prepared on the basis of variable costing.;(3) Describe both the advantages and disadvantages of using variable costing.;116. Red;Apple Industries manufactures institutional-use furniture. Dept. A is;responsible for welding the base of the desk to the chair assembly. The desks;are then placed on an automatic conveyer to Dept. B, where the desktop is;riveted to the chair. The desks continue on the conveyer to Dept. C for further;assembly. Wanda, the manager of Dept. A, is responsible for moving 800 welded;desks per hour to Dept. B. A faulty circuit in Dept. B causes a delay in;processing in the department and prompts Rosie, the Dept. B manager, to ask;Wanda to stop the conveyer. Wanda refuses, necessitating the removal of the;welded desks from the conveyer until the riveting can resume. Rosie bills;Wanda's department for the costs of this extra work. Wanda disputes the charge;citing her responsibility to convey 800 desks/hour to Dept. B.;Required;How should the managers' dispute be resolved? How could it have been avoided?;117.Betty Jones and Penny;White are associates at the same law firm in Atlanta. They traveled to New York;City together recently to visit;their;respective clients. From the airport, they shared a cab ride to their hotel.;The cab ride for Betty alone would have cost $18.00, but for two passengers the;cost was $22.00. Had Betty not offered to share the cab ride, Penny (in;deference to her client's frugality) would have taken the bus to Grand Central;Station, which is six blocks from the hotel, at a cost of $10.00.;Required;How should the $22.00 cost of the cab ride be allocated to the two clients?;118. Divisional;managers of SIU Incorporated have been expressing growing dissatisfaction with;the current methods used to measure divisional performance. Divisional;operations are evaluated every quarter by comparison with the static budget;prepared during the prior year. Divisional managers claim that many factors are;completely out of their control but are included in this comparison. This;results in an unfair and misleading performance evaluation. The managers have;been particularly critical of the process used to establish standards and;budgets. The annual budget, stated by quarters, is prepared six months prior to;the beginning of the operating year. Pressure by top management to reflect;increased earnings has often caused divisional managers to overstate revenues;and/or understate expenses. In addition, once the budget had been established;divisions were required to "live with the budget." Frequently;external factors such as the state of the economy, changes in consumer;preferences, and actions of competitors have not been adequately recognized in;the budget parameters that top management supplied to the divisions. The;credibility of the performance review is curtailed when the budget can not be;adjusted to incorporate these changes. Top management, recognizing the current;problems, has agreed to establish a committee to review the situation and to;make recommendations for a new performance evaluation system. The committee;consists of each division manager, the Corporate Controller, and the Executive;Vice President who serves as the chairman. At the first meeting one division;manager outlined an Achievement of Objectives System (AOS). In this performance;evaluation system, divisional managers would beevaluated;according to three criteria:? Doing better than last year-;Various measures would be compared to the same measures of the;prior year.? Planning realistically-;Actual performance for the current year would be compared to realistic plans;and/or goals.?;Managing;current assets - Various measures would be used to evaluate the divisional;management's achievements and reactions to changing business and economic;conditions. A division manager believed this system would overcome many of the;inconsistencies of the current system because divisions could be evaluated from;three different viewpoints. In addition, managers would have the opportunity to;show how they would react and account for changes in uncontrollable external;factorA second division manager was also in favor of the proposed AOS. However;he cautioned that the success of a new performance evaluation system would be;limited unless it had the complete support of top management. Further, this;support should be visible within all divisions. He believed that the committee;should recommend some procedures which would enhance the motivational and;competitive spirit of the divisions. Required: (1) Explain whether or;not the proposed AOS would be an improvement over the measure of divisional;performance nowused by SIU Incorporated. (2) Develop specific;performance measures for each of the three criteria in the proposed AOS which;could be used to evaluate divisional managers. (3) Discuss the motivational and;behavioral aspects of the proposed performance system. Also, recommend specific;programs which could be instituted to promote morale and give incentives to;divisional management.;119. Chadd;Fisher was recently appointed vice president of operations for Cary;Corporation. He has a manufacturing background and previously served as;operations manager of Cary's building products division. The business units of;Cary Corporation include divisions that manufacture building products, process;food, and provide financial services. In a recent conversation with Drew;Williams, Cary's chief financial officer, Chadd suggested evaluating unit;managers on the basis of the business unit data in Cary's annual financial;report. This report presents revenues, earnings, identifiable assets, and;depreciation for each business unit for a five-year period. He believes that;evaluating business unit managers by criteria similar to that used to evaluate;the company's top management is appropriate. Drew has reservations about using;information from the annual financial report for this purpose and suggested;that Chadd consider other criteria to use in the evaluation.;Required;1. Explain why the business unit information prepared for public reporting;purposes might not be appropriate for theevaluation of unit managers;performance. 2. Describe the possible motivational impact on Cary Corporation's;unit managers if Chadd's proposal for their evaluation is accepted. 3. Identify;and describe several types of financial information that would be more;appropriate for Chadd Fisher to use when evaluating the performance of unit;managers.;120. Tyler;Company had the following manufacturing information for the current year.;Required:Determine;operating income under both full costing and variable costing and explain the;difference.;121. Greg;Peterson was recently appointed vice president of operations for Webster;Corporation. He has a manufacturing background and previously served as;operations manager of Webster's tractor division. The business units of Webster;Corporation include divisions that manufacture heavy equipment, process food;and provide financial services. In a recent conversation with Carol Andrews;Webster's chief financial officer, Greg suggested evaluating unit managers on;the basis of the business unit data in Webster's annual financial report. This;report presents revenues, earnings, identifiable assets, and depreciation for;each business unit for a five-year period. He believes that evaluating business;unit managers by criteria similar to that used to evaluate the company's top;management is appropriate. Carol has reservations about using information from;the annual financial report for this purpose and suggested that Greg consider;other criteria to use in the evaluation.;Required;1. Explain why the business unit information prepared for public reporting;purposes might not be appropriate for the evaluation of unit managers;performance. 2. Describe the possible motivational impact on Webster Corporation's;unit managers if Greg's proposal for their evaluation is accepted. 3. Identify;and describe several types of information that would be appropriate for Greg;Peterson to use when evaluating the performance of unit managers.;(CMA Adapted)

 

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