1. Which of the following assets would not be included in average operating assets used to calculate ROI?
a. Building
b. Equipment used in production
c. Equipment no longer in use
d. Factory machinery
2. Which of the following is not a characteristic of a bottom-up budget environment?
a. Executive management creates the budget.
b. At each higher level of management, the budget is reviewed and may be altered.
c. The budget approach may also be referred to as participative budgeting.
d. All of these answer choices are characteristics of a bottom-up budget environment.
3. A characteristic of irrelevant information is that
a. The information is the same among the alternatives.
b. Differences will occur in the future.
c. Differences among the alternatives must have occurred in the past and must occur in the future.
d. None of these answer choices are correct.
4. Which of the following is an advantage of ideal standards?
a. Employees will be motivated.
b. Employees will take pride in their work.
c. Employee morale will be high.
d. None of these choices are advantages of ideal standards.
5. Which of the following is a reason a company would be willing to accept new business at a loss?
a. The new business will allow the company to reduce its fixed costs.
b. The new business will always cover variable costs.
c. The new business may result in certain customers influencing other potential customers.
d. All of these answer choices are correct.
6. If a company gets the sales forecast wrong, which of the following budgets will also be incorrect?
a. Direct labor budget
b. Production budget
c. Budgeted income statement
d. All of these answer choices are correct.
7. To calculate the weighted-average cost of capital we do not need to know
a. The relative percentage of capital provided by each source.
b. The required rate of return.
c. The date of each capital source.
d. All of these answer choices are necessary to calculate the weighted-average cost of capital.
8. Which of the following costs would be relevant in deciding whether to accept a special order?
a. Direct material
b. Variable overhead
c. Both direct material and variable overhead
d. Neither direct material nor variable overhead
9. Which of the following is not a characteristic of a participative budget?
a. It will produce a more accurate budget than an imposed budget.
b. It tends to elicit more commitment to the budget than a top-down budget.
c. It is the most efficient method of budget preparation.
d. It is a time consuming process as many people must provide input.
10. Which of the following is not one of the top ten reasons companies outsource their operations?
a. More effective than producing all the components of a product
b. Provides a cash infusing as freed-up assets are sold
c. Provides world-class capabilities at lower cost
d. Transfers a portion of business risk to an outsource provider
11. If a cost is incurred to support the company as a whole, it is referred to as a
a. Common cost.
b. Traceable cost.
c. Direct cost.
d. None of these answer choices are correct.
12. The costs that should be included in an outsourcing decision are the:
a. Sunk costs.
b. Recurring costs.
c. Relevant costs.
d. All of these answer choices are correct.
13. If a cost is incurred specifically for a segment of an organization, it is referred to as a
a. Common cost.
b. Traceable cost.
c. Allocated cost.
d. Unavoidable cost.
14. According to the theory of constraints, which of the following is not a step required to maximize and improve the performance of a value chain?
a. Identify the constraint.
b. Decide how to exploit the constraint.
c. Subordinate and synchronize everything else to the first two decisions.
d. Determine customer demand.
15. In the manufacturing of swim suits, in addition to the price of fabric, the standard materials price also includes
a. Cost of shipping.
b. Volume discounts.
c. Taxes.
d. All of these answer choices are correct.
16. A common mistake managers make in deciding to close a division is
a. Allowing allocated fixed costs to influence the decision.
b. Allowing qualitative issues to influence the decision.
c. Allowing avoidable costs to influence the decision.
d. All of these answer choices are correct.
17. ABC Corporation has three divisions, a service division with two locations, a retail division with four locations, and a home office, each of which is evaluated individually. This is an example of which type of organization?
a. Segmented decision making
b. Decentralized
c. Divisional instability
d. None of these answer choices are correct.
18. Which of the following is not a behavioral issue related to a top-down budgeting environment?
a. Employees may feel that an imposed budget is unfair.
b. Employees will have no motivation to attempt to meet the budget.
c. Employees may engage in budgetary padding.
d. The organization's resources may be wasted.
19. In a responsibility accounting environment, upper managers evaluate the performance of the unit managers based
a. On those items over which the unit managers have control.
b. Not only on cost, but also on revenues.
c. On the overall profit of the organization.
d. None of these answer choices of correct.
20. In a decision to add or eliminate a product or service, which of the following is an avoidable cost?
a. Common costs
b. Depreciation
c. Variable overhead
d. Allocated overhead