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GB519 Management Level Control - Unit 6 Final Exam




Question;1.Omaha Plating Corporation is;considering purchasing a machine for $1,500,000. The machine will generate;a constant after-tax income of $100,000 per year for 15 years. The firm;will use straight-line (SL) depreciation for the new machine over 10 years with;no residual value.;What is the payback period for the new machine, under the assumption that;cash inflows occur evenly throughout the year? (Points: 2);4 years. 5 years. 6 years. 10 years. 15 years.;2.In making capital budgeting;decisions, the principal focus is on: (Points: 2);Cash flows;only. Timing of the;cash flows only. Cash flows;and the timing of the cash flows. Accounting-based;measures of revenues and expenses. Nonfinancial;performance indicators.;3.The excess of the present;value of future cash flows over the initial investment outlay for a project;is the: (Points: 2);Internal rate;of return (IRR) of the project. Modified;internal rate of return (MIRR) on the project. Book;(accounting) rate of return for the project. Net present;value (NPV) of the project. Modified;internal rate of return (MIRR) of the project.;4.Done on a regular basis;relevant cost pricing in special order decisions can erode normal pricing;policies and lead to: (Points: 2);Overconfidence;in decision-making. A loss in the;firm's profitability. Conflicting;goals between management and sales personnel. A cost;leadership strategy. Maximization;of resources.;5.Which one of the following is;most descriptive of strategic analysis? (Points: 2);Quantitative. Customer;focus. Short-term;focus. Individual;product focus. Not linked to;the firm's strategy.;6.Which one of the following;statements concerning capital budgeting is not true? (Points: 2);A basic;objective underlying capital budgeting is to select assets that will earn a;satisfactory return. Capital;budgeting is the process of planning asset investments. Capital;budgeting is based on precise estimates of future events. Capital;budgeting involves estimating the revenues and costs of each proposed;project, evaluating their merits, and choosing those worthy of investment. Capital;budgeting uses after-tax cash flows in the analysis of proposed investments.;7.The decision technique that;measures the estimated performance of a capital investment by dividing the;project's annual after-tax income by the average investment cost is called;the: (Points: 2);Break-even;point for the project. Internal rate;of return on the proposed investment. Accounting;(book) rate of return on the investment. Capital asset;pricing model. Profitability;index (PI) for the investment.;8.To make a special order;decision, managers need critical information about all the following;except: (Points: 2);Relevant;costs. Prior period;operating costs. Any;opportunity costs. The;strategic, competitive environment of the firm.;9.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;savings of: (Points: 2);$2,000. $5,000. $7,000. $12,000.;10.Which one of the following;methods assumes that all interim cash inflows generated by an investment;earn a return equal to the internal rate of return (IRR) of the investment?;(Points: 2);Modified;internal rate of return (MIRR). Payback. Net present;value (NPV). Present value;index (PI). Internal rate;of return method (IRR).;11.The opportunity cost of;making a component part in a factory with no excess capacity is the;(Points: 2);Variable;manufacturing cost of the component. Fixed;manufacturing cost of the component. Total;manufacturing cost of the component. Cost of the;production given up in order to manufacture the component. Net benefit;foregone from the best alternative use of the capacity required.;12.Generally speaking, when;ranking two mutually exclusive investments with different initial amounts;management should give first priority to the project: (Points: 2);That;generates cash flows for the longer period of time. Whose net;after-tax cash flows equal the initial investment outlay. That has the;greater accounting rate of return (ARR). Whose cash;flows vary the least. That has the;greater profitability index (PI).;13.Which one of the following is;correct for determining relevant costs? (Points: 2);Differential. Integrative. Long-term;focus. Subjective. Opportunistic.;14.The term "breakeven;after-tax cash flow" represents: (Points: 2);A pessimistic;estimate in a typical scenario analysis. An optimistic;estimate in a typical scenario analysis. The amount of;after-tax cash flow needed to generate a return equal to a project's IRR. The cash flow;needed to generate an IRR of zero. An estimate;that can be arrived at using Goal Seek in Excel.;15.The value chain analysis used;in connection with the make or buy decision often leads a firm to make use;of: (Points: 2);Activity-based;costing. Cost-volume;profit analysis. Outsourcing;activities. Relevant;cost-based pricing.;16.During the sales life cycle;which is an example of what happens during the maturity phase? (Points: 2);Sales and;price decline, as do the number of competitors. Sales;continue to increase but at a decreasing rate. The number of competitors and;product variety decline. Sales;increase rapidly along with an increase in product variety. Sales rise;slowly as customers become aware of the new product or service. Product;variety is limited.;17.Which of the following is not;a cost system proposed as an extension to ABC systems, with the overall;goal of more accurately allocating manufacturing overhead costs to outputs?;(Points: 2);Resource;consumption accounting (RCA). Flexible;standard costing. GPK;(Grenzplankostenregnung). Variable;costing.;18._________________________ is;an important first step in value engineering because it identifies critical;consumer preferences that will define the product's desired functionality.;(Points: 2);Consumer;analysis Sales force;analysis Design;analysis R&D;analysis Market place;analysis;19.The difference between the;actual fixed overhead cost incurred during a period and the budgeted fixed;overhead cost for the period is the: (Points: 2);Fixed;overhead efficiency variance. Fixed;overhead production-volume variance. Fixed;overhead spending variance. Fixed;overhead rate variance. Fixed;overhead sales-volume variance.;20.Xero Company's standard;factory overhead rate is $3.75 per direct labor hour (DLH), calculated at;90% capacity = 900 standard DLHs. In December, the company operated at 80%;of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of;capacity is $3,150, of which $1,350 is fixed overhead. For December, the;actual factory overhead cost was $3,800 for 840 actual DLHs, of which;$1,300 was for fixed factory overhead. Under a four-way breakdown;(decomposition) of the total overhead variance, what is the variable;factory overhead spending variance for December? (Points: 2);$50;favorable. $225;favorable. $425;unfavorable. $610;unfavorable. $650;unfavorable.;21.Target cost can be defined;as: (Points: 2);Manufacturing;cost - sales price. Competitive;price - desired profit. Desired;profit - market price. Target price;- manufacturing cost.;22.A deviation from standard;that occurs during operations as a result of operator errors is an example;of a(n): (Points: 2);Random error. Prediction;error. Implementation;error. Modeling;error. Accounting;error.;23.If there is a 90 percent;chance that an observed variance is random, the cost of conducting an;investigation is $1,000, the cost to correct a variance if the;investigation reveals a nonrandom cause, and the amount of loss a company;expects to incur if it does not investigate a variance that had a nonrandom;cause is $30,000, what is the expected cost of not investigating the;variance? (Points: 2);$30,000. $1,500. $0. $3,900. $3,000.;24.Henry Ford was an early pioneer;in the use of: (Points: 2);the theory of;constraints. target;costing. life cycle;costing. just-in-time;manufacturing.;25.In a standard cost system, an;unfavorable production-volume variance would result if: (Points: 2);There is an;unfavorable labor efficiency variance. There is an;unfavorable labor rate variance. Actual;production is less than the "denominator volume." There is an unfavorable;manufacturing overhead spending variance. Actual fixed;overhead costs are greater than budgeted fixed overhead costs.;26.During the sales life cycle;which is an example of what happens during the introduction phase? (Points;2);Sales and;price decline, as do the number of competitors. Sales;continue to increase but at a decreasing rate. The number of competitors and;product variety decline. Sales;increase rapidly along with an increase in product variety. Sales rise;slowly as customers become aware of the new product or service. Product;variety is limited.;27.An organization subject to;intense competitive pressures would most likely use: (Points: 2);Ideal;standards for its operations. Real;standards for its operations. Caution in;even using standards. A mix of;types of standards.;28.Which of the following is a;theory of constraints (TOC) measure of product profitability that equals;price less materials cost, including all purchased components and materials;handling costs? (Points: 2);Takt time. Throughput;margin. Profitability;margin. Price;analysis.;29.Using an activity-based;costing system (ABC) enables a firm to calculate overhead variances for;(Points: 2);Sales volume;and production volume. Spending and;selling price. Each;activity-based cost driver. Semi-variable;overhead costs. Federal;income tax purposes.;30.By convention, short-term;financial control is accomplished by all the following except: (Points: 2);Comparing;actual to budgeted financial results. Calculating a;series of cost and revenue variances at the end of the period. The use of;flexible budgets and standard costs. Explaining;the total operating-income variance for a given period. The use of;productivity analysis.;31.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.;32.Which one of the following;develops the value of the firm as the discounted present value of the;firm's net free cash flows? (Points: 2);Discounted;cash flow method. Liquidity;method. Multiples-based;method. Profitability;method.;33.Performance evaluation in;most firms is applied at: (Points: 2);Many;different levels from top management down to individual production and sales;employees. All levels of;production, but only top levels of sales. Top and;mid-management levels only. Lower and mid-management;levels only. The;mid-management level only.;34.An employment contract is an;agreement between the manager and top management designed to provide;incentives for the manager to act: (Points: 2);Independently;to achieve top management's objectives. Consistently;with that of other managers. Independently;to achieve the manager's objectives. Independently;to achieve the customer's objectives.;35.Other things being equal;income computed by the variable costing method will exceed that computed by;the full costing method if: (Points: 2);Units;produced exceed units sold. Units sold;exceed units produced. Fixed;manufacturing costs increase. Variable;manufacturing costs increase.;36.Due in part to the failure of;many banks in 2008, executive compensation is getting increased oversight;by: (Points: 2);Audit;committees of corporate boards Top;management Compensation;committees of corporate boards Banking;regulators and corporate compensation committees Banking;regulators such as the SEC;37.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.;38.The value stream income;statement can be compared to: (Points: 2);Value chain;analysis. The;contribution income statement. A streamlined;production process. A streamlined;accounting system.;39.Of most relevance in deciding;how or which costs should be assigned to an SBU is the degree of: (Points;2);Avoidability. Causality. Controllability. Reliability.;40.Risk aversion is by: (Points;2);Lack of a;strategic emphasis in decision making. Use of;non-strategic performance measurement systems. Presence of;uncertainty in a manager's environment. A manager's;inability to deal with stress.;41.A strategic business unit;(SBU) consists of a well-defined set of controllable operating;activities;over/about which the SBU manager is: (Points: 2);Knowledgeable. Responsible;for strategy. Responsible;for strategy and execution. Responsible;for strategy, execution, and performance.;42.Managers who are risk prone;(Points: 2);Seek risky;projects that promise some chance of a low benefit. Seek risky;projects that promise some chance of a high benefit, although the projects;may have a risk of low benefit. Seek risky;projects. Seek high;risk projects that promise some chance of a high benefit, although the projects;may have a very significant risk of no benefit.;43.Which one of the following;computes value based on annual earnings? (Points: 2);Discounted;cash flow method. Liquidity;method. Multiples-based;method. Profitability;method.;44.There is a current tax for;the manager when which of the following types of compensation is received?;(Points: 2);Qualified;stock options Nonqualified;stock options Deferred;bonus Current bonus;45.There is a common concern;today that executive compensation in the U. S. is: (Points: 2);Not;adequately linked to strategic performance measures Ineffective;as a performance incentive Not properly;disclosed to the IRS Varies too;greatly from industry to industry;46.If fairness only is;considered, unit managers prefer: (Points: 2);Not to be;evaluated. A subjective;measure. A single;objective measure. A firm-wide;pool over a unit-based pool. A unit-based;pool over a firm-wide pool.;47.Cost allocation of service;department costs to production departments make the evaluation and control;processes in the production departments: (Points: 2);Simpler. More complex. Forthright;and fair. Less;efficient.;48.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: (Points: 2);$1,000,000. $3,200,000. $3,300,000. $4,200,000.;49.Compensation plans for;high-level managers and executives are usually explained in the firm's;(Points: 2);Management;Discussion and Analysis (MD&A). Income;Statement. Notes to the;Financial Statements. Proxy;Statement.;50.There is a current tax;deduction for the firm for which of the following types of compensation?;(Points: 2);Qualified;stock options. Nonqualified;stock options. Deferred;bonus. Current;bonus. Performance;shares


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