16-1. In contemporary manufacturing environment, there is a. more emphasis on material and labour price and efficiency variance b.

more emphasis on quality products and customer satisfaction c. more emphasis on throughput efficiency d. all of the above e. b and c. 16-2. Use this data in conjunction with questions 2 through 5. Nahid Curtains makes two kinds of curtains. Curtain A uses nine yards of fabric and curtain B uses 5.5 yards. Fabric A is $16 per yard while B is $12. For the month of June 2000, 3200 yards of A and 2400 yards of B were purchased for $79,200. From this amount $52,800 was for fabric A. A total of 310 curtain A's and 340 curtain B's were made in this time perioD. The actual usage amounted to 3,050 yards of A and 1900 yards of B. Material purchase price variance for A amounts to a. - $1,525 b. - $1,600 c. $1,900 d. $2,400 e. none of the above 16-3. Material usage variance for B amounts to a. - $360 b. - $4,160 c. $375 d. $800 e. none of the above 16-4. Material price variance (based on usage) for B amounts to a. - $1,525 b. - $1,600 c. $1,900

d. $2,400 e. none of the above. 16-5. The journal entry for material purchased, excluding variances, should a. debit accounts payable and credit work in process b. debit inventory and credit accounts payable c. debit work in process and credit inventory d. debit inventory and credit work in process e. none of the above 16-6. Use this data to respond to questions 6 through 8. Saba typesetting uses two grades of labour. Grade one is budgeted at $8 an hour and grade two at $11 an hour. Each job requires 1.5 hours of grade one and .8 hours of grade two labour. Grade one labour for the period amounted to 1100 hours and grade two amounted to 560 hours. Total payroll for wage employees amounted to $15,400. From this amount, $13,850 is for direct labour and from this total, $8250 is for grade one labour. A total of 685 jobs were processed in the period. Labour efficiency variance for grade one labour is a. $132 b. $580 c. - $132 d. - $580 e. none of the above 16-7. Labour rate variance for grade two labour amounts to a. - $30 b. $428 c. $550 d. $560 e. none of the above 16-8. The journal entry for payroll (exclusive of variances) should a. debit manufacturing overhead for $1,550, work in process for $13,850, and credit payroll summary for $15,400 b. debit WIP for $15,400 and credit payroll summary for $15,400

c. debit payroll summary and credit WIP for $15,400 d. debit payroll expense for $15,400 and credit payroll summary for $15,400 e. none of the above. 16-9. Use the following data to respond to questions 9 through 13. Production of each unit of X requires 8 lbs of M at a cost of $9 per lb and 4 lbs of N at $11.20 per lB. However, for production of 1,000 units of X 10,000 lbs were used, 75% of which was for material M at a cost of $8 per lb for M and $9 per lb for N. Material usage variance for M amounts to a. $4,500 b. $16,800 c. - 4,500 d. - 16,800 e. none of the above 16-10. Material price variance for N amounts to a. - $5,500 b. - $7,500 c. $5,500 d. $7,500 e. none of the above 16-11. Material yield variance for M amounts to a. $7,467 b. -$7,497 c. $9,330 d. $12,000 e. none of the above 16-12. Material mix variance for N amounts to a. $7,467 b. -$7,497 c. $9,330

d. $12,000 e. none of the above 16-13. Total mix variance amounts to a. $1,833 b. $12,833 c. $16,467 d. $19,467 e. none of the above 16-14. Material yield variance is indicative of a. having used a higher or lower share of material times total actual usage times actual rates b. having used a higher or lower share of materials times total standard usage times actual rates c. having used a higher or lower share of materials times total actual usage times standard rates d. total actual usage minus standard usage times standard share of material times actual rates e. total actual usage minus standard usage times standard share of material times standard rates. 16-15. Criticisms of standard costing include a. variances are too aggregate and too late to be useful b. variances are not tied to specific product lines or flexible manufacturing system cells c. standard costing systems focus too much on direct labour d. all of the above e. a and c 16-16. Advantages attributed to standard costing often include a. standard costing enables managers to employ management by exception b. standard costing provides a basis for sensible cost comparisons c. variances provide a means of performance evaluation

d. all of the above e. a and b 16-17. When using mix variances, we often use a. its individual components for analysis b. it in its totality for analysis c. it in its totality only if variances are favourable d. its individual components if variances are unfavourable e. none of the above 16-18. Standard cost may be used in a. job order costing or process costing b. job order costing but not process costing c. process costing but not job order costing d. normal costing but not job order costing e. actual costing but not process costing 16-19. Which of the following factors should be considered when deciding whether to investigate a variance? a. magnitude of the variance and the cost of investigation b. trend of the variances over time c. likelihood that an investigation will eliminate future occurrences of the variance d. whether the variance is favourable or unfavourable e. a, b, and c. 16-20. Which department is customarily responsible for an unfavourable labour efficiency variance? a. quality control b. purchasing c. engineering d. production e. personnel e, b, a, c, b, d, d, a, a, c, d, c, a, e, d, d, b, a, e, d

1. Bellows Manufacturing employs a standard costing system. Bellows separately computes Materials Price and Usage (Quantity) Variances because: a. It is required as part of Generally Accepted Accounting Principles (GAAP). b. Direct Materials prices are controlled by the purchasing department, while Usage (Quantity) is controlled by the production department. c. Standard quantities are more difficult to estimate than standard prices. d. Standard prices change more often than standard quantities. 2. Bellows Manufacturing employs a standard costing system. If Bellow's actual quantity of direct materials used in producing a commodity differs from the standard quantity, it classifies the difference in its computation of the: a. Material Spending Variance b. Material Price Variance c. Material Usage (Quantity) Variance d. Material Rate Variance 3. Bellows Manufacturing employs a standard costing system. If Bellow's actual price of direct materials used in producing a commodity differs from the standard price, it classifies the difference in its computation of the: a. Material Spending Variance b. Material Price Variance c. Material Usage (Quantity) Variance d. Material Rate Variance 4. Bellows Manufacturing employs a standard costing system. If Bellow's actual direct labor hourly rate differs from the standard rate, it classifies the difference in its computation of the: a. Labor Spending Variance b. Labor Price Variance c. Labor Efficiency Variance d. Labor Rate Variance

5. Bellows Manufacturing employs a standard costing system. If the amount of direct labor hours used by Bellow differs from the standard hours allowed, it classifies the difference in its computation of the: a. Labor Spending Variance b. Labor Price Variance c. Labor Efficiency Variance d. Labor Rate Variance 6. Bellows Manufacturing employs a standard costing system. If Bellow's actual variable overhead rate differs from its standard variable overhead rate, it classifies the difference in its computation of the: a. Variable Overhead Spending Variance b. Variable Overhead Efficiency Variance c. Fixed Overhead Budget Variance d. Fixed Overhead Volume Variance 7. Bellows Manufacturing employs a standard costing system. If Bellow's actual variable direct labor (or machine hours) differs from its standard variable direct labor (or machine hours) rate, it classifies the difference in its computation of the: a. Variable Overhead Spending Variance b. Variable Overhead Efficiency Variance c. Fixed Overhead Budget Variance d. Fixed Overhead Volume Variance 8. Bellows Manufacturing employs a standard costing system. If Bellow's actual fixed overhead differs from its budgeted fixed overhead, it classifies the difference in its computation of the: a. Variable Overhead Spending Variance b. Variable Overhead Efficiency Variance c. Fixed Overhead Budget Variance d. Fixed Overhead Volume Variance 9. Bellows Manufacturing employs a standard costing system. When measuring its overhead, Bellow includes the difference between the standard hours allowed for actual output and the budgeted hours in its computation of the:

a. Variable Overhead Spending Variance b. Variable Overhead Efficiency Variance c. Fixed Overhead Budget Variance d. Fixed Overhead Volume Variance 10. The difference between actual direct labor hours and standard direct labor hours allowed multiplied by the standard direct labor rate is termed the: a. Labor Spending Variance b. Labor Price Variance c. Labor Efficiency Variance d. Labor Rate Variance 11. The difference between the actual material unit price and the standard material unit price multiplied by the quantity of material used is termed the: a. Material Spending Variance b. Material Price Variance c. Material Usage (Quantity) Variance d. Material Rate Variance 12. The difference between the actual variable overhead rate and the standard variable overhead rate multiplied by the actual activity rate (e.g., direct labor, machine hours, etc.) is termed the: a. Variable Overhead Spending Variance b. Variable Overhead Efficiency Variance c. Fixed Overhead Budget Variance d. Fixed Overhead Volume Variance 13. The difference between the actual direct labor rate and the standard direct labor rate multiplied by the actual direct labor hours used is termed the: a. Labor Spending Variance b. Labor Price Variance c. Labor Efficiency Variance d. Labor Rate Variance

14. The difference between the actual fixed overhead and budgeted fixed overhead is termed the: a. Variable Overhead Spending Variance b. Variable Overhead Efficiency Variance c. Fixed Overhead Budget Variance d. Fixed Overhead Volume Variance 15. Rubbo Machining offers the following data for November, 2001: Actual costs 9,000 pounds at $3.00

Standard costs 9,200 pounds at $2.75 Rubbo's Material Price Variance is: a. $2,250 favorable b. $2,250 unfavorable c. $2,300 unfavorable d. $1,700 unfavorable 16. Rubbo Machining offers the following data for November, 2001: Actual costs 9,000 pounds at $3.00

Standard costs 9,200 pounds at $2.75 Rubbo's Material Usage (Efficiency) Variance is: a. $550 unfavorable b. $600 favorable c. $550 favorable d. $600 unfavorable 17. Lean Manufacturing reports the following results for its May, 2001 operations: Standard costs 3,000 hours at $24.00 Actual costs 3,750 hours at $23.20

Lean's Labor Rate Variance is: a. $15,000 unfavorable b. $3,000 favorable c. $17,400 unfavorable d. $2,400 favorable

18. Lean Manufacturing reports the following results for its May, 2001 operations: Standard costs 3,000 hours at $24.00 Actual costs 3,750 hours at $23.20

Lean's Labor Efficiency Variance is: a. $17,400 unfavorable b. $18,000 favorable c. $18,000 unfavorable d. $17,400 favorable 19. Rubbo Machining offers the following data for September, 2001: Actual costs 4,500 pounds at $6.00 3. 2.

Standard costs 4,600 pounds at $5.50 Rubbo's Material Price Variance is: a. $2,250 favorable b. $2,250 unfavorable c. $2,300 unfavorable d. $1,700 unfavorable 20. Lean Manufacturing offers the following information for January, 2001: Standard Direct Labor Hours per unit Expected Direct Labor Hours Standard Fixed Overhead Rate 12 60,000 $12.00 per DL Hour

4.

5.

During January, Lean produced 48,000 units and incurred 57,200 Direct Labor Hours. Actual Fixed Overhead amounted to $694,000. Lean's Fixed Overhead Spending Variance is: a. $26,000 favorable b. $7,600 favorable c. $118,000 unfavorable d. $7,600 unfavorable The process of responsibility accounting ensures that: $500,000 $1,500,000 6.

1.

management accountants are responsible for calculating variances 2. problems identified by variances are tracked to their source 3. there is a strict management hierarchy of responsibility 4. standard costing systems are implemented properly Standard costing is a system of costing that can be used in business environments where: 1. there are likely to be large fluctuations in costs 2. goods are supplied in standard sizes only 3. a repetitive series of standardised operations are carried out 4. each product is customised to purchaser requirements Prideaux Fabrications Limited does not absorb production overhead using an overhead absorption rate and it may be assumed that all of its overheads are fixed in nature. If the company flexes its budget for 700 units what will be the revised net profit figure? 1. 6 300 2. 12 900 3. 9 300 4. 7 300 Quayle Farrar Limited, see information. What is the sales profit volume variance for the month? 1. 8950 (A) 2. 1470 (F) 3. 8950 (F) 4. 1470 (A) Quayle Farrar Limited, see information. What is the sales price variance for the month? 1. 14 750 (A) 2. 2250 (F) 3. 14 750 (F) 4. 2250 (A) Quayle Farrar Limited, see information. What is the direct materials price variance for the month? 1. 10 620 (A) 2. 10 620 (F) 3. 5 900 (F) 4. 5 900 (A)

1.

7.

Quayle Farrar Limited, see information. What is the direct materials quantity variance for the month? 1. 17 700 (A) 2. 16 520 (A) 3. 16 520 (F) 4. 17 700 (F) 8. Quayle Farrar Limited, see information. What is the direct labour rate variance for the month? 1. 720 (F) 2. 1770 (F) 3. 2520 (F) 4. 0 9. Quayle Farrar Limited, see information. What is the direct labour efficiency variance for the month? 1. 1770 (A) 2. 1050 (F) 3. 1050 (A) 4. 1770 (F) 10. Which of the following is not a valid possible cause of direct materials quantity variances? 1. better or worse quality of materials purchased 2. increased/decreased level of quality checks on the production process 3. poor functioning of machinery giving rise to excessive wastage 4. obtaining quantity discounts for large orders of materials

Consider the following: Sales $4,500,000 Cost of goods sold $2,500,000 Operating expense $1,200,000 Invested capital $6,000,000 31 What is the residual income if the minimum acceptable return is 12%? A) B) $720,000 $800,000

C)

D)

None of the above

E) D) 32 A division's after tax income is $450,000, its total assets are $5,000,000, and its current liabilities are $700,000. If its current EVA is $20,000, what is the weighted-average cost of capital? A) B) C) D) E) 33 A strategy to improve delivery applies to which perspective under the balanced scorecard lens? A) B) C) D) E) 34 A strategy to improve employee productivity applies to which perspective under the balanced scorecard lens? A) B) C) Financial perspective Customer perspective Business process perspective 37 Financial perspective Customer perspective Business process perspective Learning and growth perspective None of the above 36 4.44% 10.0% 95.5% 4.65% Cannot be determined 35 E)

Learning and growth perspective None of the above

A frequent lack of clarity and sense of direction from considering the large number of measures C) suggested by the four perspectives. The time and expense of maintaining a balanced D) scorecard can be significant. All of the above. E) 11-1. The term production control means: a. assuring that output is produced at the least possible cost, consistent with quality standards. b. assuring that production goals in terms of output are met. c. assuring that production goals are met at the lowest possible cost, consistent with quality standards. d. assuring that all products produced are free of defects. 11-2. A static budget is most effective in measuring: a. cost control.

A strategy to improve shareholder perspectives applies to which perspective under the balanced scorecard lens? A) B) C) D) E) Financial perspective Customer perspective Business process perspective Learning and growth perspective None of the above

A strategy to increase orders from profitable customers applies to which perspective under the balanced scorecard lens? A) B) C) D) E) Financial perspective Customer perspective Business process perspective Learning and growth perspective None of the above

b. production control. c. cost control and production control. d. neither cost control nor production control. 11-3. Which of the following is not an appropriate activity base for developing a flexible budget? a. direct labour hours. b. machine hours. c. number of invoices processed. d. direct labour cost. 11-4. The variable overhead spending variance is most effective in measuring: a. price changes for overhead items during a period. b. the efficiency with which the activity base was utilized in production.

Which of the following is a difficulty of using a fully designed and functioning balanced scorecard? Assessing the importance that should be attached A) to each perspective. The technical hurdlers of measuring, quantifying and evaluating some of the qualitative B) components.

c. excessive use of overhead materials.

a. favourable efficiency variance. b. favourable spending variance. c. unfavourable efficiency variance. 2

E)

Investment return.

d. the utilization of plant facilities.

What is the investment horizon? A) The amount of money invested in a year.

11-5. The variable overhead efficiency variance is most effective in measuring: a. the difference between actual variable overhead costs incurred during the period and the budget allowance based on actual input. b. the difference between actual variable overhead costs incurred during the period and the budget amount based on the time that should have been expended in producing at a certain level of activity. c. the difference between actual hours utilized in production and the standard hours allowed at a certain level of output. d. excessive usage of overhead materials.

d. unfavourable spending variance. 11-9. At Candy Company, maintenance is exclusively a variable cost that varies directly with machine hours. The performance report for June showed that actual maintenance costs totaled $9,340 and that the associated spending variance was $140 unfavourable. If 8,000 machine hours were actually worked during June, the budgeted maintenance cost per machine hour was: a. $1.185 b. $1.1675 c. $1.2025 d. $1.15 3 B)

The number of years an investment will last.

The time it takes to raise the money for an investm C)

D)

The period over which the payback for an investm

E)

The number of years that it takes to pay for an inv

Future values of an investment are calculated using compound growth A) TRUE

11-6. A company using an activity-based costing system should: a. not use a flexible budget since the concept of flexible budgets is incongruent with the concept of activity-based costing. b. prepare a flexible budget for each activity center identified. c. prepare a flexible budget only for the entire company. d. prepare a flexible budget only for manufacturing cost pools. 11-7. The denominator level of activity applies to: a. fixed overhead costs only. b. variable overhead costs only. c. both fixed and variable overhead costs. d. actual but not standard costing systems. 11-8. If the price a company paid for overhead items, such as utilities, decreased during the year, the company would probably report a(n):

11-10. When using a flexible budget, a decrease in production levels within a relevant range: a. decreases variable cost per unit. b. decreases total costs. c. increases total fixed costs.

B) 4

FALSE

Net present values can only be positive. A) TRUE

B) 5

FALSE

d. increases variable cost per unit. Streams of money in and out of a business are called the firms: A) expenditure.

What does an NPV of zero tell us? A) We made a mistake in the calculation.

B)

A very good investment. A very poor investment. C)

B)

income. revenue. C) Cash flow. 6

D)

The investment would provide the same value as n

E)

There is no solution to the investment question.

D)

If investment A has an IRR of 8% and investment B has an IRR of 4% th A) TRUE

A way of discounting using a nominated discount rate. Accounting systems help B) create and set goals and 1 The payback period. objectives through planning B) If the IRR is 3% and the discount rate for investment is 4%, then the NPV for the same investment will be? information such as The effective growth on the capital outlay. budgeting. Positive C) A) True A) The effective annual percentage rate of return on the capital outlay. Negative False D) B) B) FALSE A) Zero C) Not defined 11 The effective annual percentage rate of return2on the capital inflows. Accounting systems measure progress toward the goals and provide feedback The payback period is the time it takes for future returns to pay back the about initial capital outlay. that progress. E) A) TRUE

D)

E) 8

Infinity B) 12

FALSE

IRR cannot be calculated by: A) A formula.

A) B)

True False

If the payback period is 4 years then NPV for a period greater than 4 years will be: A) Positive. D. E. 3

B)

Trial and error guesses. Bisection. C) Graphical methods. B)

Negative. Zero. C) Not defined. 4 Infinite.

Accounting based information is instrumental in allocating rewards for progress toward goal achievement. A) B) True False

D)

E) 9

Using a spreadsheet.

D)

What is the relationship between NPV and IRR? A) Linear.

E) 13

The return on investment (ROI) basically tells managers the amount of earnings expected for every sales dollar generated. A) B) True False

Which of the following is untrue? A) Payback period for an investment can be negative.

B)

Exponential. Hyperbolic. C) Multivariate.

5 The planning horizon is necessary information to calculate a NPV. Capital turnover tells managers about how B) the the invested capital is generating sales A positive NPV will always have a payback period within planning horizon. dollars. C) IRR is preferred to NPV when the discount rate is not known. A) B) True False

D)

E) 10 The IRR is:

Quadratic.

D)

E)

For a given investment, the higher the discount rate, the longer the payback period. 6 The Du Pont system of performance

measurement is a method that analyzes business performance by considering both the earnings per sales dollar and the investment used to generate those sales dollars. A) B) 7 Using ROI as a primary motivator for management performance can result in mangers making decisions that increase the ROI for their responsibility center but do not meet the goals and objectives of the organization. A) B) 8 Managers can improve the ROI of their responsibility centers by purchasing higher quality merchandise at higher prices. A) B) 9 Under some circumstances, using ROI as the only business performance measure may present an incentive for a manager to reject a good project that would increase the ROI for the organization as a whole. A True ) True False 13 True False True False 11

process. A) B) True False

16 Customer profitability is one of the measures of the success of the strategies under the customer perspective lens of the balanced scorecard. A) B) 17 The number of on-time deliveries is one of the measures of the success of the strategies under the customer perspective lens of the balanced scorecard. A) B) 18 The EVA is one of the measures of the success of the strategies under the financial perspective lens of the balanced scorecard. A) B) 19 Organizations can avoid the difficulties associated with the balanced scorecard by increasing the number of measures used in each of the perspectives to critical business issues. A) B) 20 One method of motivating managers to make decisions that are in the best interest of the organization is to provide stock options as part of, or in place of, the bonus compensation. A) B) 21 True False True False True False True False True False

Residual income is the amount by which operating earnings exceed a minimum acceptable return on the average invested capital. A) B) 12 The measurement of residual income is a refinement of the economic value added (EVA) measurement. A) B) True False True False

The EVA performance measure motivates managers to turn down investments that are expected to earn a return below their current ROI. A) B) 14 There are few if any major criticisms of using residual income and EVA as performance evaluation tools. A) B) True False True False

B False ) 10 When units within an organization share invested capital, the allocation of that capital to measure ROI is a simple, straightforward

15 The balanced scorecard is a systematic attempt to create a business performance measurement process that integrates objectives across the span of the value chain. A) B) True False

One of the disadvantages of using a fixed bonus rather than variable bonus as a means of management compensation is that the fixed bonus does not usually accommodate a complex system like a balanced scorecard. A) B) 22 Compensation designers will often tie incentives only to stock market information and ignore accounting information. A) B) 23 The grading system in most academic settings is a competitive incentive scheme. A) B) 24 Compensation designers must take care that the compensation design does not create goal incongruence between the individual and the organization. A) B) 25 Accounting information plays an important role in aligning employee and organizational goals and in motivating employees to achieve those goals. How does the accounting system provide this motivation? A) B) C) D) E) It helps create and set goals. It helps measure progress. It provides feedback. It is instrumental in allocating rewards. All of the above. True False True False True False True False

26 The current ROI of a profit center is 10.0%. Its return on sales of $2,000,000 is 20%. What is the average invested capital? A) B) C) D) E) 27 The current ROI of a profit center is 10%. Its return on sales of $1,500,000 is 30% and operating earnings are $450,000. What is the capital turnover? A) B) C) D) E) 28 Operating earnings are currently $300,000 from sales of $1,500,000. The average invested capital of $5,000,000 is expected to increase $600,000, which is anticipated to increase the ROI to 8%. The return on sales is anticipated to increase to 25%. What is the anticipated increase in sales? A) B) C) D) E) 29 The current ROI is 6%. Total sales were $ 75,000 $120,000 $148,000 $292,000 $268,000 40.0% 20.0% 33.3% 44.4% 30.0% 30 $4,000,000 $2,000,000 $6,000,000 $ 200,000 Cannot be determined

$200,000, the cost of goods sold was $100,000, and the operating expenses were $40,000. The average invested capital is $1,000,000. An investment in equipment will reduce the cost of goods sold by 10% and will increase the average invested capital to $1,040,000. Sales volume and operating expenses are not expected to change in the subsequent period. Which of the following is not true? A) B) C) D) E) Capital turnover will be 19.2%. Return on sales will be 35.0%. Operating earnings will be $70,000. The cost of goods sold will be $90,000. ROI will be 5.3%.

Which of the following is not a criticism of using ROI and the Du Pont system as the only business performance measurement? A) B) C) D) E) The short horizon problem Failing to undertake profitable investments Measurement problems The earnings per sales dollar is ignored All of the above