Gb519 unit 6 final exam

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1. Which of the
following aspects of a company would not be considered a critical success
factor, for a company that competes on differentiation? (Points : 2)

Cutting edge
research and development.

Excellent
customer service.

Award-winning
product quality.

Continually
beating competitors to the market with new, innovative products.

A high level of production
efficiency

Question 2. 2. Which
of the following tend to be non-differential in the short term since they
cannot be changed, but are more likely to be differential in the long term?
(Points : 2)

Fixed costs.

Variable
costs.

Mixed costs.

Semi-variable
costs.

Question 3. 3. The
competitive strategy in which the firm succeeds by developing and maintaining a
unique value for the product, as perceived by the customer, is termed: (Points
: 2)

Differentiation.

Specialization
advantage.

Design
strategy.

Benchmarking.

Product
Specialization.

Question 4. 4. Using
value-chain analysis, a firm can develop a competitive advantage by
specifically looking for ways to: (Points : 2)

Add value and reduce cost.

Improve
manufacturing productivity.

Improve
customer service.

Improve product quality.

Question 5. 5. Which
of the following contemporary management techniques requires a balancing of
multiple goals? (Points : 2)

Target costing.

The theory of
constraints.

Benchmarking.

Business
process improvement.

Enterprise sustainability.

Question 6. 6. Direct
materials and direct labor costs total $40,000 and factory overhead costs total
$100 per machine hour. If 200 machine hours were used for Job #202, what is the
total manufacturing cost for Job #202? (Points : 2)

$95,000

$75,000

$65,000

$60,000

Question 7. 7.
Tierney Construction, Inc. recently lost a portion of its financial
records in an office theft. The following accounting information remained in
the office files:

COGS = $80,000

WIP Inventory – January 1. = $18,500

WIP Inventory – December 31 = $14,500

Selling & Administrative Expenses = $16,000

Net Income = $30,000

Factory O/H = $20,000

Direct Materials Inventory, January 1= $26,000

Direct Materials Inventory, December 31= $14,000

COGM = $98,000

Finished Goods Inventory, January 1 = 31,000

Direct labor cost incurred during the period amounted to 2.5
times the factory overhead. The CFO of Tierney Construction, Inc. has asked you
to recalculate the following accounts and to report to him by the end of
tomorrow.

What should be the amount in the finished goods inventory at
December 31, 2013? (Points : 2)

$55,500.

$35,000.

$43,000.

$49,000.

Question 8. 8. The
key difference between weighted-average and FIFO process costing methods is the
handling of the partially completed: (Points : 2)

Beginning
direct materials inventory.

Ending direct
materials inventory.

Beginning work-in-process inventory.

Ending
work-in-process inventory.

Beginning
finished goods inventory.

Question 9. 9. When
completed units are transferred to the warehouse: (Points : 2)

Cost of Goods
Sold account is debited.

Cost of Goods
Manufactured account is debited.

Finished Goods Inventory account
is debited.

Work-in-Process Inventory account is debited.

Finished Goods
Inventory account is credited.

Question 10. 10.
Effective implementation of activity-based costing (ABC) requires:
(Points : 2)

Normally the
assistance of a consultant.

A
sophisticated and expensive computer system.

Support of top management and
key employees.

Capturing
properly the complexity of the data.

ABC has no
significant implementation issues.

Question 11. 11. The
total cost of direct materials, direct labor, and factory overhead transferred
from the Work-in-Process Inventory account to the Finished Goods Inventory
account during an accounting period is: (Points : 2)

Normal cost of
goods sold.

Adjusted cost
of goods sold.

Total
manufacturing cost.

Cost of goods manufactured.

Actual cost of
goods sold.

Question 12. 12.
Units accounted for includes units completed and transferred out plus:
(Points : 2)

Beginning
inventory.

Units to
account for.

Ending inventory.

Units started.

Question 13. 13. ABC
Company uses a Materials Inventory account to record both direct and indirect
materials. ABC charges direct materials to WIP, while indirect materials are
charged to the Factory Overhead account. During the month of April, the company
has the following cost information:

Total Materials (Direct and Indirect) Purchased =
$ 90,000

Indirect Materials Issued to Production = 30,000

Total Materials Issued to Production = 110,000

Beginning Materials Inventory = 50,000

The ending materials inventory cost is: (Points : 2)

$110,000.

$30,000.

$90,000.

$80,000.

Question 14. 14.
Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct
labor hours, and had the following manufacturing overhead:

Overhead Cost Pool –
Budgeted O/H $ – Budgeted Level for
Cost Driver – O/H Cost Driver

Materials Handling
$160,000
3,200 lbs. Material Weight

Machine Setup 13,200 390 S/U’s # of S/Us

Machine Repair 1,380 30,000 Mach. Hrs Machine Hrs.

Inspections 10,560 160 Inspections # of Inspections

Requirements for Job #971 which included 4 Units of
Production:

D/L Hours = 20 Hours

D/Mat’ls = 130 lbs.

Machine S/U = 30 Set-ups

Machine Hrs. = 15,000 Machine Hours

Inspections = 15 Inspections.

Using ABC, the materials handling overhead cost assigned to
Job #971 is: (Points : 2)

$2,300.

$990.

$6,500.

$690.

$1,020.

Question 15. 15.
Which of the following is required for multiple regression? (Points :
2)

The use of
dummy variables.

The use of more than one cost
driver.

The use of
more than one dependent variable.

The use of a
trend variable.

The use of
multiple sets of data.

Question 16. 16.
Technology and complexity issues often lead management to simplify and
to: (Points : 2)

Use linear estimation methods.

Use
volume-based costing and nonlinear estimation methods.

Use
volume-based costing methods.

Use nonlinear
estimation methods.

Use
activity-based costing and volume-based costing methods.

Question 17. 17.
Which of the following methods considers all reciprocal flows between
service departments through simultaneous equations? (Points : 2)

Dual method.

Step method.

Reciprocal method.

Direct method.

The net
realizable value method.

Question 18. 18. A
relatively low margin of safety ratio (MOS%) for a product is usually an
indication that the product: (Points : 2)

Is losing
money.

Has a high
contribution margin.

Is riskier than a product with a
higher margin of safety ratio.

Is less risky
than a product with a higher margin of safety ratio.

Requires heavy
fixed cost to produce or sell.

Question 19. 19. The
use of a relationship of total factory overhead to direct labor hours is said
to be valid only within the relevant range, which means: (Points : 2)

Within a
reasonable dollar amount for labor costs.

Within the range of observations
of the cost driver.

Within the
range of reasonableness as judged by the department supervisor.

Within the
budget allowance for overhead.

Question 20. 20.
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 (MOS) in units is: (Points
: 2)

1,000.

2,000.

4,000.

8,000.

9,000.

Question 21. 21.
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

If 40,000 office chairs were sold, Stylish Sitting’s
operating income would be: (Points : 2)

$240,000.

$280,000.

$210,000.

$340,000.

$120,000.

Question 22. 22. The
Robinson-Patman Act, administered by the U.S. Federal Trade Commission,
addresses pricing that could substantially damage the competition in an
industry. This pricing is called: (Points : 2)

Competitive
pricing.

Predatory pricing.

Cost-benefit
pricing.

Variable
pricing.

Question 23. 23. In
terms of evaluating mutually exclusive projects, the internal rate of return
(IRR) method mistakenly favors investment proposals with: (Points : 2)

Short useful
lives.

Long useful lives.

Moderate cash
flow returns.

Large residual
values.

Question 24. 24.
Which of the following statements regarding a joint production process
is NOT true? (Points : 2)

The essential decision facing
management is whether to sell products at the split-off point or to sell these
products after further processing.

The allocation of joint (common)
production costs to individual products helps management determine which
products should be processed beyond the split-off point.

Costs incurred
up to the split-off point are referred to as joint production costs.

The decision
as to whether individual products should be sold “as is” or processed
further is made on the basis of comparing incremental revenues and incremental
costs.

Question 25. 25.
Which of the following is not true regarding the appropriate discount
rate to be used in conjunction with discounted cash flow (DCF) decision models?
(Points : 2)

For projects of “above
average” risk, the appropriate discount rate is the weighted-average cost
of capital (WACC)

It includes an
estimate of the after-tax cost of debt.

It can differ
across investment projects, according to perceived risk.

It is also
sometimes referred to as the “hurdle rate” for capital budgeting
purposes.

Question 26. 26. In a
sell-or-process-further decision, joint production costs: (Points : 2)

Are irrelevant
to the decision.

Should be allocated to outputs
on the basis of relative sales dollars.

Should be
allocated to outputs on the basis of relative physical units.

Cannot be
allocated to products for financial reporting purposes.

Question 27. 27.
Pique Corporation wants to purchase a new machine for $300,000.
Management predicts that the machine can produce sales of $200,000 each year
for the next 5 years. Expenses are expected to include direct materials, direct
labor, and factory overhead (excluding depreciation) totaling $80,000 per year.
The firm uses straight-line depreciation with no residual value for all
depreciable assets. Pique’s combined income tax rate is 40%. Management
requires a minimum after-tax rate of return of 10% on all investments.

What is the payback period for the new machine (rounded to
nearest one-tenth of a year)? (Assume that the cash inflows occur evenly
throughout the year.) (Points : 2)

2.5 years.

2.7 years.

3.1 years.

3.6 years.

Question 28. 28.
____________________ 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.

Question 29. 29. The
“flexible budget” can best be described as a budget that adjusts:
(Points : 2)

Revenues for
sales-dollar changes.

Revenues and expenses for
changes in output (such as sales volume).

Expenses for
changes in budgeted output between two periods.

For
efficiency, but not selling price and cost variances.

For selling
price and cost variances, but not efficiency variances.

Question 30. 30. An
organization’s overall management accounting and control system: (Points : 2)

Includes the
planning function.

Is also referred as the
organization’s core performance-measurement system.

Is separate
from its operational control system.

Includes
nonfinancial, but not financial, performance measures.

Focuses on strategic, not operational,
control

Question 31. 31. The
total operating income variance for a period reveals whether a company has
achieved: (Points : 2)

The sales level
budgeted for the period.

An adequate return
on investment (assets) during the period.

Control of
basic business processes.

Control of
total expenses for the period.

The master budgeted operating
income for the period.

Question 32. 32.
Which of the following benefits is not typically associated with a move
to a just-in-time (JIT) manufacturing system? (Points : 2)

Raw materials
are delivered as close as possible to time of production.

Existence of
long-term contracts with selected suppliers.

Reduction in employee training
and education costs.

Decreases in
manufacturing lead time.

Improved
customer-response time (CRT).

Question 33. 33. The
difference between the total actual sales revenue of a period and the total
flexible-budget sales revenue for the units sold during the period is the:
(Points : 2)

Total
flexible-budget variance.

Sales volume
variance.

Selling price variance.

Operating
income flexible-budget variance.

Question 34. 34. The
process by which managers at all levels in the firm gain information about the
performance of tasks within the firm and judge that performance against
pre-established criteria is: (Points : 2)

Performance measurement.

Employee
inspection.

Goal
congruence.

Managerial
evaluation.

Management
control.

Question 35. 35.
Matinna Co. maintains no inventories and has the following data
pertaining to one of its direct materials in July:

Standard Quantity of DM for the Units Manufactured =
30,000

DM Purchased – Actual Cost
= $63,000

Standard Price per Unit of DM (SP) = $2.00

Direct Material Efficiency Variance =
$4,500 (F)

All materials purchased during the month were issued to
production.

What was the company’s direct materials flexible-budget (FB)
variance for July? (Points : 2)

$1,500
favorable.

$3,000 unfavorable.

$3,000
favorable.

$7,500
unfavorable.

$7,500
favorable.

Question 36. 36. The
manager acting independently in such a way as to simultaneously achieve top
management’s objectives is: (Points : 2)

Performance
evaluation.

Operational
control.

Goal congruence.

Principal-agent model.

Management
control.

Question 37. 37. The
“risk-averse” manager will be improperly biased to: (Points : 2)

Seek out
decisions with uncertain outcomes.

Make risky
decisions.

Avoid decisions with uncertain
outcomes.

Maximize his
or her own risk and minimize the company’s risk.

Use resources
beyond his/her control.

Question 38. 38.
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.

Question 39. 39. The
common factor among control systems in hiring practices, promotion policies,
and strategic performance measurement is: (Points : 2)

Management sets expectations for
desired employee performance.

Employee-determined expectations for desired employee performance.

Coordination
of activities.

Communication
of results.

Question 40. 40. The
contribution by profit center (CPU) expands the contribution margin income
statement by distinguishing: (Points : 2)

Variable and
fixed costs.

Short-term and
long-term fixed costs.

Controllable
and non-controllable fixed costs.

Noncontrollable and untraceable
fixed costs.

Net income and
contribution margin.

Question 41. 41.
Controllable margin is determined by subtracting short-term controllable
fixed costs from the: (Points : 2)

Long-term
controllable fixed cost.

Contribution margin.

Variable
costs.

Fixed costs.

Variable costs
and fixed costs.

Question 42. 42.
Economic value added is calculated from: (Points : 2)

Average total
assets, current liabilities, net income, and the cost of capital.

EVA net income
and EVA invested capital.

Net income,
cost of capital, and net assets.

Net income and
the cost of capital.

EVA net income, the cost of
capital, and EVA invested capital.

Question 43. 43.
Which one of the following develops the value of the firm as the present
value of the firm’s net free cash flows? (Points : 2)

Discounted cash flow method.

Cash flow
liquidity method.

Multiples-based method.

Profitability
method.

Purchasing
power method.

Question 44. 44. When
strategic performance measures or critical success factors are used to
determine bonus compensation, the bonus will usually depend either on the
amount of improvement in the measure or on: (Points : 2)

Maintaining the
current level.

Achieving a predetermined goal.

Quality of
work completed.

Intensity of
effort expended.

Question 45. 45.
Which of the following is one of the most comprehensive bases of
compensation? (Points : 2)

Balanced scorecard.

Unit-based
compensation pool.

Firm-wide
compensation pool.

Salary.

Question 46. 46. The
receivables turnover ratio is a measure of: (Points : 2)

Asset value.

Leverage.

Sales
performance.

Profitability.

Liquidity.

Question 47. 47. The
stock option form of bonus payments to managers usually: (Points : 2)

Motivates well
even in extended market downturns.

Can lose some motivation because
of the delay in reward.

Focuses on the
short-term.

Is not
consistent with shareholder interests.

Has less risk
than other types of bonus payment plans.

Question 48. 48. The
King Mattress Company had the following operating results for 2012-2013. In
addition, the company paid dividends in both 2012 and 2013 of $60,000 per year
and made capital expenditures in both years of $30,000 per year. The company’s
stock price in 2012 was $8 and $7 in 2013. The industry average earnings
multiple for the mattress industry was 9 in 2013 and the free cash flow and
sales multiples were 18 and 1.5, respectively. The company is publicly owned
and has 1,200,000 shares of outstanding stock at the end of 2013.

Balance Sheet, December 31

2013 2012

Cash
$ 340,000 $
100,000

Accounts Receivable 350,000 400,000

Inventory
250,000 300,000

Total
Current Assets $ 940,000 $
800,000

Long Lived Assets
1,080,000 1,100,000

Total Assets $ 2,020,000 $ 1,900,000

Current Liabilities $ 200,000 $
300,000

Long-Term Liabilities 600,000 500,000

Stockholder’s Equity 1,220,000 1,100,000

Total
Liabilities & Equity
$ 2,020,000 $ 1,900,000

Income Statement for the Year Ended December 31

Sales
$ 4,750,000 $ 4,500,000

Cost of Sales
4,100,000
4,000,000

Gross
Margin
$ 650,000 $ 500,000

Operating Expenses 350,000 400,000

Operating
Income $ 300,000 $ 100,000

Taxes
120,000 40,000

Net Income $ 180,000 $ 60,000

Cash Flow from Operations

Net Income
$ 180,000 $ 60,000

Plus Depreciation Expense 50,000 50,000

+Decrease (-Inc) in A/T and Inventory 100,000 – 0 –

+Increase (-Dec) in Current Liabilities (100,000) – 0 –

Cash Flow from
Operations $ 230,000
$ 110,000

The inventory turnover ratio for 2013 is (rounded): (Points
: 2)

11.2

12.7

13.7

14.9

Question 49. 49.
During October, Rover Industries produced 35,000 units of product with
costs as follows:

DM =
$ 84,000

DL
= 43,000

Variable O/H = 13,000

Fixed O/H = 147,000

Total =$ 287,000

What is Rover’s unit cost for October, calculated on the
variable costing basis? (Points : 2)

$3.25.

$3.75.

$4.00.

$4.50.

$5.00.

Question 50. 50. The
King Mattress Company had the following operating results for 2012-2013. In
addition, the company paid dividends in both 2012 and 2013 of $60,000 per year
and made capital expenditures in both years of $30,000 per year. The company’s
stock price in 2012 was $8 and $7 in 2013. The industry average earnings
multiple for the mattress industry was 9 in 2013 and the free cash flow and
sales multiples were 18 and 1.5, respectively. The company is publicly owned
and has 1,200,000 shares of outstanding stock at the end of 2013.

Balance Sheet, December 31

2013 2012

Cash $ 340,000 $
100,000

Accounts Receivable 350,000 400,000

Inventory
250,000 300,000

Total
Current Assets $ 940,000 $
800,000

Long Lived Assets
1,080,000 1,100,000

Total Assets $ 2,020,000 $ 1,900,000

Current Liabilities $ 200,000 $
300,000

Long-Term Liabilities 600,000 500,000

Stockholder’s Equity 1,220,000 1,100,000

Total
Liabilities & Equity
$ 2,020,000 $ 1,900,000

Income Statement for the Year Ended December 31

Sales
$ 4,750,000 $ 4,500,000

Cost of Sales
4,100,000 4,000,000

Gross
Margin
$ 650,000 $ 500,000

Operating Expenses 350,000 400,000

Operating
Income $ 300,000 $ 100,000

Taxes
120,000 40,000

Net Income $ 180,000 $ 60,000

Cash Flow from Operations

Net Income
$ 180,000 $ 60,000

Plus Depreciation Expense 50,000 50,000

+Decrease (-Inc) in A/T and Inventory 100,000 – 0 –

+Increase (-Dec) in Current Liabilities (100,000) – 0 –

Cash Flow from
Operations $ 230,000 $ 110,000

The current ratio for 2013 is: (Points : 2)

1.8

2.0

3.9

4.7

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