1.Omaha Plating Corporation is
considering purchasing a machine for $1,500,000. The machine will generate
a constant after-tax income of $100,000 per year for 15 years. The firm
will use straight-line (SL) depreciation for the new machine over 10 years with
no residual value.
What is the payback period for the new machine, under the assumption that
cash inflows occur evenly throughout the year? (Points : 2)

4 years.
5 years.
6 years.
10 years.
15 years.

2.In making capital budgeting
decisions, the principal focus is on: (Points : 2)

Cash flows
only.
Timing of the
cash flows only.
Cash flows
and the timing of the cash flows.
Accounting-based
measures of revenues and expenses.
Nonfinancial
performance indicators.

3.The excess of the present
value of future cash flows over the initial investment outlay for a project
is the: (Points : 2)

Internal rate
of return (IRR) of the project.
Modified
internal rate of return (MIRR) on the project.
Book
(accounting) rate of return for the project.
Net present
value (NPV) of the project.
Modified
internal rate of return (MIRR) of the project.

4.Done on a regular basis,
relevant cost pricing in special order decisions can erode normal pricing
policies and lead to: (Points : 2)

Overconfidence
in decision-making.
A loss in the
firm’s profitability.
Conflicting
goals between management and sales personnel.
A cost
leadership strategy.
Maximization
of resources.

5.Which one of the following is
most descriptive of strategic analysis? (Points : 2)

Quantitative.
Customer
focus.
Short-term
focus.
Individual
product focus.
Not linked to
the firm’s strategy.

6.Which one of the following
statements concerning capital budgeting is not true? (Points : 2)

A basic
objective underlying capital budgeting is to select assets that will earn a
satisfactory return.
Capital
budgeting is the process of planning asset investments.
Capital
budgeting is based on precise estimates of future events.
Capital
budgeting involves estimating the revenues and costs of each proposed
project, evaluating their merits, and choosing those worthy of investment.
Capital
budgeting uses after-tax cash flows in the analysis of proposed investments.

7.The decision technique that
measures the estimated performance of a capital investment by dividing the
project’s annual after-tax income by the average investment cost is called
the: (Points : 2)

Break-even
point for the project.
Internal rate
of return on the proposed investment.
Accounting
(book) rate of return on the investment.
Capital asset
pricing model.
Profitability
index (PI) for the investment.

8.To make a special order
decision, managers need critical information about all the following
except: (Points : 2)

Relevant
costs.
Prior period
operating costs.
Any
opportunity costs.
The
strategic, competitive environment of the firm.

9.A truck, costing $25,000 and
uninsured, was wrecked the very first day it was used. It can either be
disposed of for $5,000 cash and be replaced with a similar truck costing
$27,000, or rebuilt for $20,000 and be brand new as far as operating
characteristics and looks are concerned. The best choice provides a net
savings of: (Points : 2)

$2,000.
$5,000.
$7,000.
$12,000.

10.Which one of the following
methods assumes that all interim cash inflows generated by an investment
earn a return equal to the internal rate of return (IRR) of the investment?
(Points : 2)

Modified
internal rate of return (MIRR).
Payback.
Net present
value (NPV).
Present value
index (PI).
Internal rate
of return method (IRR).

11.The opportunity cost of
making a component part in a factory with no excess capacity is the:
(Points : 2)

Variable
manufacturing cost of the component.
Fixed
manufacturing cost of the component.
Total
manufacturing cost of the component.
Cost of the
production given up in order to manufacture the component.
Net benefit
foregone from the best alternative use of the capacity required.

12.Generally speaking, when
ranking two mutually exclusive investments with different initial amounts,
management should give first priority to the project: (Points : 2)

That
generates cash flows for the longer period of time.
Whose net
after-tax cash flows equal the initial investment outlay.
That has the
greater accounting rate of return (ARR).
Whose cash
flows vary the least.
That has the
greater profitability index (PI).

13.Which one of the following is
correct for determining relevant costs? (Points : 2)

Differential.
Integrative.
Long-term
focus.
Subjective.
Opportunistic.

14.The term “breakeven
after-tax cash flow” represents: (Points : 2)

A pessimistic
estimate in a typical scenario analysis.
An optimistic
estimate in a typical scenario analysis.
The amount of
after-tax cash flow needed to generate a return equal to a project’s IRR.
The cash flow
needed to generate an IRR of zero.
An estimate
that can be arrived at using Goal Seek in Excel.

15.The value chain analysis used
in connection with the make or buy decision often leads a firm to make use
of: (Points : 2)

Activity-based
costing.
Cost-volume
profit analysis.
Outsourcing
activities.
Relevant
cost-based pricing.

16.During the sales life cycle,
which is an example of what happens during the maturity phase? (Points : 2)

Sales and
price decline, as do the number of competitors.
Sales
continue to increase but at a decreasing rate. The number of competitors and
product variety decline.
Sales
increase rapidly along with an increase in product variety.
Sales rise
slowly as customers become aware of the new product or service. Product
variety is limited.

17.Which of the following is not
a cost system proposed as an extension to ABC systems, with the overall
goal of more accurately allocating manufacturing overhead costs to outputs?
(Points : 2)

Resource
consumption accounting (RCA).
Flexible
standard costing.
GPK
(Grenzplankostenregnung).
Variable
costing.

18._________________________ 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

19.The difference between the
actual fixed overhead cost incurred during a period and the budgeted fixed
overhead cost for the period is the: (Points : 2)

Fixed
overhead efficiency variance.
Fixed
overhead production-volume variance.
Fixed
overhead spending variance.
Fixed
overhead rate variance.
Fixed
overhead sales-volume variance.

20.Xero Company’s standard
factory overhead rate is $3.75 per direct labor hour (DLH), calculated at
90% capacity = 900 standard DLHs. In December, the company operated at 80%
of capacity, or 800 standard DLHs. Budgeted factory overhead at 80% of
capacity is $3,150, of which $1,350 is fixed overhead. For December, the
actual factory overhead cost was $3,800 for 840 actual DLHs, of which
$1,300 was for fixed factory overhead. Under a four-way breakdown
(decomposition) of the total overhead variance, what is the variable
factory overhead spending variance for December? (Points : 2)

$50
favorable.
$225
favorable.
$425
unfavorable.
$610
unfavorable.
$650
unfavorable.

21.Target cost can be defined
as: (Points : 2)

Manufacturing
cost – sales price.
Competitive
price – desired profit.
Desired
profit – market price.
Target price
– manufacturing cost.

22.A deviation from standard
that occurs during operations as a result of operator errors is an example
of a(n): (Points : 2)

Random error.
Prediction
error.
Implementation
error.
Modeling
error.
Accounting
error.

23.If there is a 90 percent
chance that an observed variance is random, the cost of conducting an
investigation is $1,000, the cost to correct a variance if the
investigation reveals a nonrandom cause, and the amount of loss a company
expects to incur if it does not investigate a variance that had a nonrandom
cause is $30,000, what is the expected cost of not investigating the
variance? (Points : 2)

$30,000.
$1,500.
$0.
$3,900.
$3,000.

24.Henry Ford was an early pioneer
in the use of: (Points : 2)

the theory of
constraints.
target
costing.
life cycle
costing.
just-in-time
manufacturing.

25.In a standard cost system, an
unfavorable production-volume variance would result if: (Points : 2)

There is an
unfavorable labor efficiency variance.
There is an
unfavorable labor rate variance.
Actual
production is less than the “denominator volume.”
There is an unfavorable
manufacturing overhead spending variance.
Actual fixed
overhead costs are greater than budgeted fixed overhead costs.

26.During the sales life cycle,
which is an example of what happens during the introduction phase? (Points
: 2)

Sales and
price decline, as do the number of competitors.
Sales
continue to increase but at a decreasing rate. The number of competitors and
product variety decline.
Sales
increase rapidly along with an increase in product variety.
Sales rise
slowly as customers become aware of the new product or service. Product
variety is limited.

27.An organization subject to
intense competitive pressures would most likely use: (Points : 2)

Ideal
standards for its operations.
Real
standards for its operations.
Caution in
even using standards.
A mix of
types of standards.

28.Which of the following is a
theory of constraints (TOC) measure of product profitability that equals
price less materials cost, including all purchased components and materials
handling costs? (Points : 2)

Takt time.
Throughput
margin.
Profitability
margin.
Price
analysis.

29.Using an activity-based
costing system (ABC) enables a firm to calculate overhead variances for:
(Points : 2)

Sales volume
and production volume.
Spending and
selling price.
Each
activity-based cost driver.
Semi-variable
overhead costs.
Federal
income tax purposes.

30.By convention, short-term
financial control is accomplished by all the following except: (Points : 2)

Comparing
actual to budgeted financial results.
Calculating a
series of cost and revenue variances at the end of the period.
The use of
flexible budgets and standard costs.
Explaining
the total operating-income variance for a given period.
The use of
productivity analysis.

31.The balanced scorecard
measures the SBU’s performance in all of the following areas except:
(Points : 2)

Learning and
growth.
Managerial
performance.
Customer
satisfaction.
Internal
business processes.
Accounting
and tax compliance.

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

Discounted
cash flow method.
Liquidity
method.
Multiples-based
method.
Profitability
method.

33.Performance evaluation in
most firms is applied at: (Points : 2)

Many
different levels from top management down to individual production and sales
employees.
All levels of
production, but only top levels of sales.
Top and
mid-management levels only.
Lower and mid-management
levels only.
The
mid-management level only.

34.An employment contract is an
agreement between the manager and top management designed to provide
incentives for the manager to act: (Points : 2)

Independently
to achieve top management’s objectives.
Consistently
with that of other managers.
Independently
to achieve the manager’s objectives.
Independently
to achieve the customer’s objectives.

35.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.

36.Due in part to the failure of
many banks in 2008, executive compensation is getting increased oversight
by: (Points : 2)

Audit
committees of corporate boards
Top
management
Compensation
committees of corporate boards
Banking
regulators and corporate compensation committees
Banking
regulators such as the SEC

37.Which one of the following
items is not a measure of a company’s liquidity? (Points : 2)

Accounts
receivable turnover.
Return on
equity.
Quick ratio.
Cash flow
ratio.
Day’s sales
in inventory.

38.The value stream income
statement can be compared to: (Points : 2)

Value chain
analysis.
The
contribution income statement.
A streamlined
production process.
A streamlined
accounting system.

39.Of most relevance in deciding
how or which costs should be assigned to an SBU is the degree of: (Points :
2)

Avoidability.
Causality.
Controllability.
Reliability.

40.Risk aversion is by: (Points
: 2)

Lack of a
strategic emphasis in decision making.
Use of
non-strategic performance measurement systems.
Presence of
uncertainty in a manager’s environment.
A manager’s
inability to deal with stress.

41.A strategic business unit
(SBU) consists of a well-defined set of controllable operating
activities
over/about which the SBU manager is: (Points : 2)

Knowledgeable.
Responsible
for strategy.
Responsible
for strategy and execution.
Responsible
for strategy, execution, and performance.

42.Managers who are risk prone:
(Points : 2)

Seek risky
projects that promise some chance of a low benefit.
Seek risky
projects that promise some chance of a high benefit, although the projects
may have a risk of low benefit.
Seek risky
projects.
Seek high
risk projects that promise some chance of a high benefit, although the projects
may have a very significant risk of no benefit.

43.Which one of the following
computes value based on annual earnings? (Points : 2)

Discounted
cash flow method.
Liquidity
method.
Multiples-based
method.
Profitability
method.

44.There is a current tax for
the manager when which of the following types of compensation is received?
(Points : 2)

Qualified
stock options
Nonqualified
stock options
Deferred
bonus
Current bonus

45.There is a common concern
today that executive compensation in the U. S. is: (Points : 2)

Not
adequately linked to strategic performance measures
Ineffective
as a performance incentive
Not properly
disclosed to the IRS
Varies too
greatly from industry to industry

46.If fairness only is
considered, unit managers prefer: (Points : 2)

Not to be
evaluated.
A subjective
measure.
A single,
objective measure.
A firm-wide
pool over a unit-based pool.
A unit-based
pool over a firm-wide pool.

47.Cost allocation of service
department costs to production departments make the evaluation and control
processes in the production departments: (Points : 2)

Simpler.
More complex.
Forthright
and fair.
Less
efficient.

48.Table Inc. planned and
manufactured 250,000 units of its single product in 2010, its first year of
operations. Variable manufacturing costs were $30 per unit of production. Planned
and actual fixed manufacturing costs were $500,000. Marketing and
administrative costs (all fixed) were $300,000 in 2010. Table Inc. sold
200,000 units of product in 2010 at $50 per unit. Variable costing
operating income for 2010 is calculated to be: (Points : 2)

$1,000,000.
$3,200,000.
$3,300,000.
$4,200,000.

49.Compensation plans for
high-level managers and executives are usually explained in the firm’s:
(Points : 2)

Management
Discussion and Analysis (MD&A).
Income
Statement.
Notes to the
Financial Statements.
Proxy
Statement.

50.There is a current tax
deduction for the firm for which of the following types of compensation?
(Points : 2)

Qualified
stock options.
Nonqualified
stock options.
Deferred
bonus.
Current
bonus.
Performance
shares