MANAGERIAL ACCOUNTING, PART 2

REVIEWER FOR FIMAL DEPARMENTAL EXAMINATION

1ST SEMESTER, SY 2015-2016
Multiple Choice Questions
Theories
1. Which of the following is not an ordering cost?
a.
b.
c.
d.

cost of receiving inventory

cost of preparing the order
cost of the merchandise ordered
cost of storing the inventory

2. The cost of receiving inventory is regarded as.

a.
b.
c.
d.

an ordering cost.
a carrying cost.
a purchasing cost.
a cost of not carrying goods in stock

3. The two most basic inventory questions answered by the typical inventory model are
a.
b.
c.
d.

timing and cost of orders.

quantity and cost of orders
timing and quantity of orders.
order quantity and service level.

4. The proper quantity of safety stock is typically determined by

a. using a single-period model
b. carrying sufficient safety stock so as to eliminate all stockouts
c. multiplying the EOQ by the desired service level
d. setting the level of safety stock so that a given stockout risk is not exceeded
5. The proper quantity of safety stock is typically determined by
A) using a single-period model
B) carrying sufficient safety stock so as to eliminate all stockouts
C) multiplying the EOQ by the desired service level
D) setting the level of safety stock so that a given stockout risk is not exceeded
6. Which of the following is not considered a step in the decision-making process?
A) Clearly identify the problem.
B) Select the best alternative.
C) Develop objectives.
D) Evaluate alternatives.
E) Minimize costs whenever possible.
7. The first step, and a key element, in the decision-making process is to
A) consult a specialist
B) clearly define the problem

C) develop objectives
D) monitor the results
E) select the best alternative
8. The last step of the decision-making process is to
A) develop a model
B) evaluate each alternative
C) pick the best alternative
D) implement the decision
E) check the decision with senior management
9. A square node on a decision tree infers that
A) the node splits into various states of nature, of which only one will occur
B) there are several alternatives available
C) the manager must choose an alternative
D) both B and C
E) A, B, and C
10. The expected value with perfect information is
A) the maximum EMV for a set of alternatives
B) the same as the expected value of perfect information
C) valuable in situations involving risk
D) the average return obtained when the decision maker knows which state of nature is going
to occur before the decision is made
E) obtained using conditional probabilities
11.

Which of the following is not an indirect fixed cost?

a.
Company president's salary
b.
Depreciation on the company building housing several profit centers
c.
Company personnel department costs
d.
Profit center supervisory salaries

12.

The expected value with perfect information

A) equals EVPI EMV
B) requires that each decision alternative have a known probability of occurrence
C) is an input into the calculation of the expected value of perfect information
D) is the average of the maximax and the maximin
E) none of the above

13. The difference between the expected payoff under perfect information and the maximum expected
payoff under risk is
A) expected monetary value
B) economic order quantity
C) expected value of perfect information
D) PERT
E) expected monetary payoff
14.

Cruise Division of Harrahs Companys operating results include: controllable margin,

$200,000; sales $2,200,000; and operating assets, $800,000. The Cruise Divisions ROI is
25%. Management is considering a project with sales of $100,000, variable expenses of

$60,000, fixed costs of $40,000; and an asset investment of $150,000. Should management
accept this new project?
a.
No, since ROI will be lowered.
b.
Yes, since ROI will increase.
c.
Yes, since additional sales always mean more customers.
d.
No, since a loss will be incurred.
15. In which of the following has LP been applied successfully?
A) minimizing distance traveled by school buses carrying children
B) minimizing 911 response time for police patrols
C) minimizing labor costs for bank tellers while maintaining service levels
D) determining the distribution system for multiple warehouses to multiple destinations
E) all of the above
16. Which of the following represents valid constraints in linear programming?
A) 2X 7X Y
B) 2X 7Y 500
C) 2X + 7Y 100
D) 2X2 + 7Y 50
E) All of the above are valid linear programming constraints.
17. Which of the following is not a requirement of a linear programming problem?
A) an objective function, expressed in terms of linear equations
B) constraint equations, expressed as linear equations
C) an objective function, to be maximized or minimized
D) alternative courses of action
E) for each decision variable, there must be one constraint or resource limit
18. Which of the following is not a common queuing situation?
A) grocery shoppers being served by checkout clerks
B) commuters slowing or stopping at toll plazas to pay highway tolls
C) machinery waiting to be repaired or maintained
D) parcel delivery truck following its computer-generated route
E) patients in a health clinic waiting to see one of several
19. If cars sell for $500 profit and trucks sell for $300 profit which of the following represents the
objective function?
A) Maximize = 500C+300T
B) Minimize = 500C + 300T
C) Maximize = 500C 300T
D) Minimize = 300T- 500C
E) None of the above
20.

Dodge City Parts has a current return on investment of 10% and the company has established
an 8% minimum rate of return for the division. The division manager has two investment
projects available, for which the following estimates have been made:
Project A - Annual controllable margin = $24,000, operating assets = $400,000
Project B - Annual controllable margin = $60,000, operating assets = $550,000
Which project should be funded?
a.
Both projects
b.
Project A
c.
Project B
d.
Neither project

Problems
21.

Down Co. has 3 divisions: R, S, and T. Division Rs income statement shows the following
for the year ended December 31, 2001:
Sales
Cost of goods sold
Gross profit
Selling expenses
Administrative expenses
Net loss

$1,000,000
(800,000 )
$ 200,000
$100,000
250,000

(350,000 )
$ (150,000 )

Cost of goods sold is 75 percent variable and 25 percent fixed. Of the fixed costs, 60 percent
are avoidable if the division is closed. All of the selling expenses relate to the division and
would be eliminated if Division R were eliminated. Of the administrative expenses, 90
percent are applied from corporate costs. If Division R were eliminated, Down Co. income
would
a.
b.
c.
d.

increase by $150,000.
decrease by $ 75,000.
decrease by $155,000.
decrease by $215,000.

22. Students arrive randomly at the help desk of the computer lab. There is only one service agent,
and the time required for inquiry varies from student to student. Arrival rates have been found
to follow the Poisson distribution, and the service times follow the negative exponential
distribution. The average arrival rate is 12 students per hour, and the average service rate is 20
students per hour. What is the average service time for this problem?
A) 1 minute
B) 2 minutes
C) 3 minutes
D) 5 minutes
E) 20 minutes
23.

What is the expected value of perfect information of the following decision table?
States of Nature
Alternatives
S1
S2
p
.6
.4
Option 1
200
300
Option 2
50
350
A) 0
B) 20
C) 50
D) 150
E) 200

24.

Espinosa Corporation had $220,000 in invested assets, sales of $242,000, income from
operations amounting to $48,400, and a desired minimum rate of return of 3%. The rate of
return on investment for Espinosa is:

a.
b.
c.
d.

4%
22%
3%
6.4%

25. What combination of a and b will yield the optimum for this problem?
Maximize $6a + $15b, subject to (1) 4a + 2b < 12 and (2) 5a + 2b < 20 and (3) a, b 0.
A) a = 0, b = 0
B) a = 3, b = 3
C) a = 0, b = 6
D) a = 6, b = 0
E) cannot solve without values for a and b
26. A linear programming problem has three constraints:
2X + 10Y 1004X + 6Y 1206X + 3Y 90
What is the largest quantity of X that can be made without violating any of these constraints?
A) 50
B) 30
C) 20
D) 15
E) 10
27. Suppose that an iso-profit line is given to be X+Y=15. What would be the profit made from
producing 20X and 10Y?
A) 15
B) 30
C) 0
D) 20X and 10Y is not a feasible solution.
E) Unable to determine
28. Suppose that an iso-profit line is given to be X+Y=10. Which of the following represents another
iso-profit line for the same scenario?
A) X+Y=15
B) X-Y=10
C) Y-X=10
D) 2X+Y=10
E) None of the above
29. What is the EMV for Option 1 in the following decision table?
States of Nature
Alternatives
S1
S2
p
.3
.7
Option 1
15,000 20,000
Option 2
10,000 30,000
A) 15,000
B) 17,000
C) 17,500
D) 18,500
E) 20,000
30. A single-phase waiting-line system meets the assumptions of constant service time or M/D/1.
Units arrive at this system every 12 minutes on average. Service takes a constant 8 minutes.
The average length of the queue Lq is approximately

A) 0.67
B) 2.5
C) 4.5
D) 5.0
E) 7.5
31. 17) What combination of x and y will yield the optimum for this problem?
Minimize $3x + $15y, subject to (1) 2x + 4y < 12 and (2) 5x + 2y < 10 and (3) x, y 0.
A) x = 2, y = 0
B) x = 0, y = 3
C) x = 0, y = 0
D) x = 1, y = 5
E) none of the above
32. What combination of a and b will yield the optimum for this problem?
Maximize $6a + $15b, subject to (1) 4a + 2b < 12 and (2) 5a + 2b < 20 and (3) a, b 0.
A) a = 0, b = 0
B) a = 3, b = 3
C) a = 0, b = 6
D) a = 6, b = 0
E) cannot solve without values for a and b
The Anderson Company has sales of $4,500,000. It also has invested assets of $2,000,000 and
operating expenses of $3,600,000. The company has established a minimum rate of return of 7%.
33.

What is Anderson Company's profit margin?

a.
20%
b.
80%
c.
44.4%
d.
18%

34.

What is Anderson Company's investment turnover?

a.
1.80
b.
2.25
c.
1.25
d.
1.4

35.

What is Anderson Company's rate of return on investment?

a.
56%
b.
20%
c.
45%
d.
25%

Answers:
Theories
1. D
2. A
3. C
4. D
5. D
6. E
7. B
8. D
9. D
10. D
11. D
12. C
13. C
14. A
15. E
16. C
17. E
18. D
19. A
20. C
Problems
21. C
22. C
23. B
24. B
25. C
26. D
27. B
28. A
29. D
30. A
31. C
32. C
33. A
34. B
35. C