ACCT 5060
Final Exam
Winter 2011

Name:__________________________________

1.

The four key behavioral considerations in management accounting and control
system design include all of the following EXCEPT:
a.
integrating the organization’s pay scale
b.
using a mix of short- and long-term qualitative and quantitative performance
measures
c.
empowering employees to be involved in decision making and MACS design
d.
developing an appropriate incentive system to reward performance

2.

Pressures on managers to act unethically include all of the following EXCEPT:
a.
pressures to act in the long-run best interest of the shareholders
b.
solicitations for confidential information
c.
requests to falsify reports
d.
requests to bias information in favor of certain stakeholders

3.

To the extent that an ethical hierarchy exists, _____ have the highest authority.
a.
societal norms
b.
legal rules
c.
organizational norms
d.
personal norms

4.

When a manager’s and employee’s goals are aligned with organizational goals,
it is referred to as:
a.
a diagnostic control system
b.
the intensity factor
c.
goal congruence
d.
monitoring

5.

The roles of performance measurement systems in organizations include all of
the following EXCEPT:
a.
motivate employees to help the organization achieve its strategic objectives
b.
help managers with resource allocation
c.
create value from intangible assets as well as their physical and financial
assets
d.
communicate the company’s strategic objectives

6.

The Balanced Scorecard is said to be “balanced” because it measures:
a.
short-term and long-term objectives
b.
financial and nonfinancial objectives

c.
d.

internal and external objectives
All of the above are correct.

7.

The ______________ perspective of the Balanced Scorecard asks, “At which
processes must we excel to satisfy our customers and shareholders?”
a.
learning and growth
b.
customer
c.
process
d.
shareholder

8.

The __________ perspective of the Balanced Scorecard focuses on creating
value for customers.
a.
Value
b.
Financial
c.
Stakeholder
d.
Customer

9.

Measures of employees’ skills and capabilities are included in the ________
perspective of the Balanced Scorecard.
a.
financial
b.
internal
c.
customer
d.
learning and growth perspective

10. A chain of cause-and-effect relationships that appropriately link the four
balanced scorecard perspectives is:
a.
a high return on investment causes customer loyalty that results in skilled
production workers that improve process quality
b.
skilled production workers help to produce process quality that results in
customer loyalty that helps to increase return on investment
c.
customer loyalty results in a high return on investment that results in the
ability to attract skilled production workers that improve process quality
d.
improved process quality results in a high return on investment that causes
customer loyalty that results in the ability to attract skilled production workers
11.

Participative budgeting is an approach to budgeting that
a. is top-down in nature.
b. allows top management to set the budget.
c. discourages budget slack.
d. is more likely to motivate people to work towards the organization's goals t
than a top-down approach.

12.

Which of the following is not included in the operating budget?
a. Budgeted balance sheet
b. Sales budget
c. Selling and administrative budget
d. Raw materials purchases budget

13.

A primary financial budget is the
a.. Production budget
b. Cash budget
c. Inventory budget
d. Selling and administrative budget

14. Jackel Company produces hand tools. A sales budget for the next four months is
as follows: March 10,000 units, April 13,000, May 16,000 and June 21,000. Jackel
Company's ending finished goods inventory policy is 10% of the following month's
sales. What is budgeted finished goods inventory for May?
a. 1,000
b. 1,300
c. 1,600
d. 2,100
15.

In which order are the following developed?
A = Production plan B = Materials purchasing plan
C = Demand forecast D = Sales plan
a.
first to last: A, B, C, D
b.
first to last: C, D, A, B
c.
first to last: D, C, B, A
d.
first to last: C, A, D, B

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 16 -18.
For the next six months, Berry Company projects the following information (in
units).
Retail demand
Dealer demand
Shop capacity
Painting capacity

July
100
200
500
350

Aug.
100
250
500
350

Sept.
150
300
500
350

Oct.
150
350
500
600

Nov.
200
400
500
600

Dec.
200
450
500
600

Demand drives production for that month and cannot be carried over from one month to
another. Retail customers are satisfied first.

16.

The production for July is projected to be:
a.
100 units
b.
300 units
c.
350 units
d.
500 units

17.

The number of dealer units that will be produced and sold in September is:
a.
300 units
b.
350 units
c.
500 units
d.
200 units

18.

Painting capacity appears to be:
a.
short-term capacity
b.
intermediate-term capacity
c.
long-term capacity
d.
total demand

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 19 -21
The following information for the second quarter of 2006 pertains to Huffman Company:
Month
April
May
June

Sales
$45,000
$60,000
$75,000

Purchases
$24,000
$30,000
$42,000





*

40% of purchases are paid for in cash in the month of purchase, and the balance
is paid the following month.





Cash is collected from customers in the following manner:
Month of sale
30%
Month following the sale 70%

Labor costs are 20% of sales. Other operating costs are $22,500 per month
(including $6,000 of depreciation). Both of these are paid in the month
incurred.

The cash balance on June 1 is $6,000. A minimum cash balance of $4,500 is
required at the end of the month. Money can be borrowed in multiples of $1,500.
No loans outstanding on June 1.

19.

How much cash will be collected from customers in June?
a.
$64,500
b.
$70,500
c.
$75,000
d.
None of the above is correct.

20. How much cash will be paid to suppliers in June?
a.
$34,800
b.
$28,000
c.
$44,000
d.
None of the above is correct.
21.

How much cash will be disbursed for labor and operating costs in June?
a.
$31,500
b.
$35,000
c.
$44,200
d.
$48,200

22.

In __________, as one budget period passes, planners delete that budget period
from the master budget and add another one.
a.
zero-based budgeting
b.
periodic budgeting
c.
incremental budgeting
d.
continuous budgeting

THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 23 – 25.
Community Manufacturing Inc., developed the following standard costs for direct
material and direct labor for one of their major products, the 30-gallon heavy-duty plastic
container.
Direct materials
Direct labor

Standard quantity
0.20 pounds
0.10 hours

Standard price
$25 per pound
$15 per hour

During May, Community produced and sold 10,000 containers using 2,200 pounds of
direct materials at an average cost per pound of $24 and 1,050 direct labor hours at an
average wage of $14.75 per hour.

23.

May’s direct material price variance was:
a.
$2,800 favorable
b.
$2,200 favorable
c.
$5,000 unfavorable
d.
None of the above is correct.

24.

May’s direct material quantity variance was:
a.
$2,800 unfavorable
b.
$2,200 favorable
c.
$5,000 unfavorable
d.
None of the above is correct.

25.

May’s direct labor rate variance was:
a.
$750.00 unfavorable
b.
$262.50 favorable
c.
$487.50 favorable
d.
indeterminable using the above information

26. Which of the following methods is calculated as annual net income as a
percentage of the original investment in assets?
a. Accounting rate of return
b. Payback period
c. Net present value
d. Internal rate of return

27. Sorius Corp is considering the purchase of a new piece of equipment. The cost
savings from the equipment would result in an annual increase in net cash flows of
$100,000. The equipment will have an initial cost of $400,000 and have a 5 year life.
If the salvage value of the equipment is estimated to be $75,000, what is the annual
net income? Ignore income taxes.
a. $25,000
b. $35,000
c. $165,000
d. $175,000

28. Peet's Corp is considering the purchase of a new piece of equipment. The cost
savings from the equipment would result in an annual increase in cash flow of
$100,000. The equipment will have an initial cost of $400,000 and have a 5 year life.
If the salvage value of the equipment is estimated to be $75,000, what is the payback
period? Ignore income taxes.
a. 3.25 years
b. 4.00 years
c. 4.75 years
d. 7.00 years

29. Marchand Corp is considering the purchase of a new piece of equipment, which
would have an initial cost of $500,000, a 7 year life, and $150,000 salvage value. The
increase in cash flow each year of the equipment's life would be as follows:

What is the payback period?
a. 5.51 years
b. 5.97 years
c. 6.00 years
d. 6.18 years

30. The idea that the value of money changes over time because it can be invested to
earn interest is the
a. net present value of money.
b. accounting value of money.
c. time value of money.
d. investment value of money.

31. When making screening decisions using the net present value method, a project
is acceptable if
a. the NPV is greater than the hurdle rate.
b. the NPV is greater than the IRR.
c. the NPV is positive.
d. the NPV is negative.

32. Minne Corp is considering the purchase of a new piece of equipment. When
discounted at a hurdle rate of 8%, the project has a net present value of $24,580.
When discounted at a hurdle rate of 10%, the project has a net present value of
($28,940). The internal rate of return of the project is
a. zero.
b. between zero and 8%.
c. between 8% and 10%.
d. greater than 10%.

33. An analysis that reveals whether changing the underlying assumptions would
affect the decision is a
a. net present value analysis.
b. internal rate of return analysis.
c. payback period analysis.
d. sensitivity analysis

34. Jonas Inc. is considering whether to lease or purchase a piece of equipment. The
total cost to lease the equipment will be $120,000 over its estimated life, while the
total cost to buy the equipment will be $75,000 over its estimated life. At Jonas's
required rate of return, the net present value of the cost of leasing the equipment is
$73,700 and the net present value of the cost of buying the equipment is $68,000.
Based on financial factors, Jonas should
a. lease the equipment, saving $45,000 over buying.
b. buy the equipment, saving $45,000 over leasing.
c. lease the equipment, saving $5,700 over buying.
d. buy the equipment, saving $5,700 over leasing.

35.

In a decentralized organization:
a.
local-division managers must receive higher approval for most business
decisions
b.
company-wide standard operating procedures are common
c.
local-division managers have an opportunity to gain decision-making
experience
d.
decisions are made by senior executives

36.

All of the following are true of responsibility centers EXCEPT that they:
a.
operate like a small business
b.
promote the interests of the larger organization
c.
coordinate activities with other responsibility centers
d.
are best used in a centralized organization

37.

Segment margin includes:
a.
all costs traceable to the segment
b.
the segment’s share of allocated corporate costs
c.
the segment’s share of allocated unavoidable costs
d.
All of the above are correct.

38

The primary goal of transfer pricing is to:
a.
motivate the decision maker to act in the organization’s best interests
b.
obtain a high transfer price for the supplying unit
c.
obtain a high transfer price for the receiving unit
d.
agree on a price for external sales

39.

Return on investment (ROI) can be increased by:
a.
increasing sales
b.
decreasing operating assets
c.
decreasing operating income
d.
decreasing asset turnover

40. Randall Company makes and distributes outdoor play equipment. Last year
sales were $2,400,000, operating income was $600,000, and the assets used were
$3,000,000.The return on investment (ROI) is:
a.
20%
b.
80%
c.
25%
d.
125%

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