Deck 11: Reporting for Control

Question 1

Which of the following is a correct definition of operating income?

A) Sales minus variable expenses.
B) Sales minus variable expenses and traceable fixed expenses.
C) Contribution margin minus traceable and common fixed expenses.
D) Income before interest and taxes (EBIT).

Answer 1

D

Question 2

Assuming that sales and operating income remain the same,which of the following statements about a company's return on investment is correct?

A) It will increase if operating assets increase.
B) It will decrease if operating assets decrease.
C) It will decrease if turnover decreases.
D) It will decrease if turnover increases.

Answer 2

C

Question 3

Divisions A and B of Denner Company reported the following results for October: If common fixed expenses were $31,000,what were the total fixed expenses?

A) $31,000.
B) $52,000.
C) $62,000.
D) $93,000.

Answer 3

D

Question 4

Which of the following is NOT an operating asset?

A) Cash.
B) Inventory.
C) Plant equipment.
D) Common shares.

Question 5

Which of the following is the numerator in the calculation of the turnover component of ROI?

A) Invested capital.
B) Total assets.
C) Operating income.
D) Sales.

Question 6

During April,Division D of Carney Company had a segment margin ratio of 15%,a variable expense ratio of 60% of sales,and traceable fixed expenses of $15,000.Division D's sales were closest to which of the following?

A) $22,500.
B) $33,333.
C) $60,000.
D) $100,000.

Question 7

In computing the margin in a ROI analysis,which of the following is used?

A) Sales in the denominator.
B) Operating income in the denominator.
C) Average operating assets in the denominator.
D) Residual income in the denominator.

Question 8

What were the total fixed costs (traceable and common)for Canon Company for the year?

A) $24,000.
B) $25,000.
C) $49,000.
D) $50,000.

Question 9

What were the total sales in Store J?

A) $100,000.
B) $150,000.
C) $250,000.
D) $400,000.

Question 10

Which of the following statements provide(s)an argument in favour of including only a plant's net book value rather than gross book value as part of operating assets in the ROI computation? I.Net book value is consistent with how plant and equipment items are reported on a balance sheet.
II)Net book value is consistent with the computation of operating income,which includes amortization as an operating expense.
III)Net book value allows ROI to decrease over time as assets get older.

A) I only.
B) III only.
C) I and II only.
D) I and III only.

Question 11

More Company has two divisions: L and M.During July,the contribution margin in Division L was $60,000.The contribution margin ratio in Division M was 40%,and its sales were $250,000.Division M's segment margin was $60,000.The common fixed expenses were $50,000,and the company operating income was $20,000.What was the segment margin for Division L?

A) $0.
B) $10,000.
C) $50,000.
D) $60,000.

Question 12

All other things being equal,which of the following is a consequence of an increase in a division's traceable fixed expenses?

A) The division's contribution margin ratio will decrease.
B) The division's segment margin ratio will remain the same.
C) The division's segment margin will decrease.
D) The overall company operating income will remain the same.

Question 13

What were the variable costs for the South area for the year?

A) $65,000.
B) $162,500.
C) $185,000.
D) $230,000.

Question 14

What was the segment margin ratio in Store J?

A) 16%.
B) 24%.
C) 40%.
D) 60%.

Question 15

What were the total variable expenses in Store K?

A) $70,000.
B) $110,000.
C) $130,000.
D) $200,000.

Question 16

What would be a good example of a common cost that normally could NOT be assigned to products on a segmented income statement except on an arbitrary basis?

A) Product advertising outlays.
B) Salary of a corporation president.
C) Direct materials.
D) The product manager's salary.

Question 17

All other things equal,a company's return on investment is affected by a change in which of the following?

A) Option A
B) Option B
C) Option C
D) Option D

Question 18

What were Ieso Company's total fixed expenses for the year?

A) $40,000.
B) $100,000.
C) $140,000.
D) $170,000.

Question 19

All other things equal,which of the following events would generally cause an increase in a company's return on investment (ROI)?

A) An increase in average operating assets.
B) A decrease in sales.
C) A decrease in operating expenses.
D) An increase in operating expenses.

Question 20

How is a company's return on investment calculated?

A) Dividing the margin by the turnover.
B) Multiplying the margin by the turnover.
C) Dividing the turnover by the average operating assets.
D) Multiplying the turnover by the average operating assets.

Question 21

Which of the following represents value-added time in the manufacturing cycle?

A) Inspection time.
B) Queue time.
C) Move time.
D) Process time.

Question 22

Which costing system focuses on all costs along the value chain?

A) Activity-based costing.
B) Process costing.
C) Life cycle costing.
D) Absorption costing.

Question 23

Suppose a manager's performance is to be evaluated by residual income.Which of the following will NOT result in an increase in the residual income figure for this manager,assuming other factors remain constant?

A) An increase in sales.
B) An increase in the minimum required rate of return.
C) A decrease in expenses.
D) A decrease in operating assets.

Question 24

Throughput time consists of which of the following?

A) Process time.
B) Inspection time and move time.
C) Process time,inspection time,and move time.
D) Process time,inspection time,move time,and queue time.

Question 25

Which of the following would be classified as a prevention cost on a quality cost report?

A) Lost sales arising from a reputation for poor quality.
B) Final product testing and inspection.
C) Net cost of spoilage.
D) Quality data gathering,analysis,and reporting.

Question 26

Delmar Corporation is considering the use of residual income as a measure of the performance of its divisions.What major disadvantage of this method should the company consider before deciding to institute it?

A) This method does not make allowance for difference in the size of compared divisions.
B) Opportunities may be undertaken that will decrease the overall return on investment.
C) The minimum required rate of return may eliminate desirable opportunities from consideration.
D) Residual income does not measure how effectively the division manager controls costs.

Question 27

The cost of which one of the following business functions making up the value chain is included in product costs for financial reporting purposes under generally accepted accounting principles?

A) Product design.
B) Research and development.
C) Customer service.
D) Manufacturing.

Question 28

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Supervision of testing and inspection activities.
B) Systems development.
C) Quality engineering.
D) Quality training.

Question 29

Which of the following would be classified as a prevention cost on a quality cost report?

A) Cost of field servicing and handling complaints.
B) Warranty repairs and replacements.
C) Systems development.
D) Rework labour and overhead.

Question 30

The costs of which of the following business functions making up the value chain are NOT part of the downstream costs?

A) Manufacturing.
B) Distribution.
C) Marketing.
D) Customer Service.

Question 31

How is manufacturing cycle efficiency (MCE)computed?

A) By dividing throughput time by delivery cycle time.
B) By dividing process time by delivery cycle time.
C) By dividing value-added time by throughput time.
D) By dividing value-added time by delivery-cycle time.

Question 32

Which of the following would be classified as a prevention cost on a quality cost report?

A) Re-entering data because of keying errors.
B) Rework labour and overhead.
C) Net cost of scrap.
D) Technical support provided to suppliers.

Question 33

An increase in appraisal costs will usually result in an increase in which of the following?

A) Prevention costs.
B) Internal failure costs.
C) External failure costs.
D) Opportunity costs.

Question 34

Which of the following best describes a segment of a business responsible for both revenues and expenses?

A) A cost centre.
B) An investment centre.
C) A profit centre.
D) A residual income centre.

Question 35

The performance of the manager of Division A is evaluated by residual income.Which of the following would improve the manager's performance?

A) Increase in average operating assets.
B) Decrease in average operating assets.
C) Increase in minimum required return.
D) Decrease in operating income.

Question 36

Effective decentralization is essential for which of the following management accounting practices in organizations?

A) Break-even analysis.
B) Product costing.
C) Segment reporting.
D) Activity-based costing.

Question 37

When the selling division in an internal transfer has unsatisfied demand from outside customers for the product that is being transferred,what is the lowest acceptable transfer price as far as the selling division is concerned?

A) Variable cost of producing a unit of product.
B) The full absorption cost of producing a unit of product.
C) The market price charged to outside customers,less any costs saved by transferring internally.
D) The amount that the purchasing division would have to pay an outside seller to acquire a similar product for its use.

Question 38

Which of the following statements about quality costs is correct?

A) They relate only to the manufacturing process.
B) They should be focused on appraisal activities.
C) They are minimized by having a team of well-trained quality control inspectors.
D) They cut across departmental lines and often are not accumulated and reported to management.

Question 39

Consider the following three statements: I.A profit centre has control over both cost and revenue.
II)An investment centre has control over invested funds,but not over costs and revenue.
III)A cost centre has no control over sales.
Which statement(s)is/are correct?

A) I only.
B) II only.
C) I and III only.
D) I and II only.

Question 40

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Returns and allowances arising from quality problems.
B) Downtime caused by quality problems.
C) Test and inspection of in-process goods.
D) Cost of field servicing and handling complaints.

Question 41

What will be the total prevention cost appearing on the quality cost report?

A) $43,000.
B) $45,000.
C) $47,000.
D) $51,000.

Question 42

What will be the total appraisal cost appearing on the quality cost report?

A) $128,000.
B) $165,000.
C) $185,000.
D) $196,000.

Question 43

What will be the total appraisal cost appearing on the quality cost report?

A) $70,000.
B) $97,000.
C) $110,000.
D) $119,000.

Question 44

Which of the following would be classified as an external failure cost on a quality cost report?

A) Quality training.
B) Systems development.
C) Repairs and replacements beyond the warranty period.
D) Quality engineering.

Question 45

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Supplies used in testing and inspection.
B) Final product testing and inspection.
C) Net cost of scrap.
D) Amortization of test equipment.

Question 46

Which of the following would be classified as an external failure cost on a quality cost report?

A) Product recalls.
B) Quality engineering.
C) Quality training.
D) Systems development.

Question 47

What will be the total internal failure cost appearing on the quality cost report?

A) $54,000.
B) $75,000.
C) $80,000.
D) $121,000.

Question 48

What will be the total appraisal cost appearing on the quality cost report?

A) $75,000.
B) $92,000.
C) $102,000.
D) $112,000.

Question 49

What will be the total external failure cost appearing on the quality cost report?

A) $124,000.
B) $132,000.
C) $245,000.
D) $524,000.

Question 50

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Rework labour and overhead.
B) Technical support provided to suppliers.
C) Quality improvement projects.
D) Systems development.

Question 51

What will be the total external failure cost appearing on the quality cost report?

A) $119,000.
B) $143,000.
C) $277,000.
D) $628,000.

Question 52

What will be the total prevention cost appearing on the quality cost report?

A) $69,000.
B) $139,000.
C) $148,000.
D) $178,000.

Question 53

What will be the total prevention cost appearing on the quality cost report?

A) $103,000.
B) $145,000.
C) $151,000.
D) $155,000.

Question 54

Which of the following would be classified as an appraisal cost on a quality cost report?

A) Quality circles.
B) Downtime caused by quality problems.
C) Supplies used in testing and inspection.
D) Quality engineering.

Question 55

What will be the total prevention cost appearing on the quality cost report?

A) $102,000.
B) $112,000.
C) $130,000.
D) $167,000.

Question 56

Which of the following would be classified as an external failure cost on a quality cost report?

A) Amortization of test equipment.
B) Test and inspection of in-process goods.
C) Test and inspection of incoming materials.
D) Warranty repairs and replacements.

Question 57

What will be the total external failure cost appearing on the quality cost report?

A) $54,000.
B) $95,000.
C) $175,000.
D) $328,000.

Question 58

Which of the following would be classified as an internal failure cost on a quality cost report?

A) Re-entering data because of keying errors.
B) Final product testing and inspection.
C) Supplies used in testing and inspection.
D) Amortization of test equipment.

Question 59

What will be the total internal failure cost appearing on the quality cost report?

A) $64,000.
B) $113,000.
C) $121,000.
D) $124,000.

Question 60

What will be the total internal failure cost appearing on the quality cost report?

A) $134,000.
B) $143,000.
C) $150,000.
D) $158,000.

Question 61

What will be the total prevention cost appearing on the quality cost report?

A) $84,000.
B) $92,000.
C) $98,000.
D) $113,000.

Question 62

What will be the total external failure cost appearing on the quality cost report?

A) $59,000.
B) $79,000.
C) $22,000.
D) $403,000.

Question 63

What will be the total internal failure cost appearing on the quality cost report?

A) $71,000.
B) $74,000.
C) $132,000.
D) $163,000.

Question 64

What will be the total external failure cost appearing on the quality cost report?

A) $75,000.
B) $109,000.
C) $286,000.
D) $533,000.

Question 65

(Appendix 11A)Which of the following is(are)NOT used in calculating sales mix variances for two products that are close substitutes?

A) The budgeted sales mix percentages.
B) The actual sales mix percentages.
C) The actual total units of the two products sold.
D) The market volume in units.

Question 66

What will be the total appraisal cost appearing on the quality cost report?

A) $102,000.
B) $108,000.
C) $121,000.
D) $247,000.

Question 67

What will be the total internal failure cost appearing on the quality cost report?

A) $99,000.
B) $102,000.
C) $158,000.
D) $211,000.

Question 68

What will be the total prevention cost appearing on the quality cost report?

A) $41,000.
B) $103,000.
C) $107,000.
D) $140,000.

Question 69

What will be the total prevention cost appearing on the quality cost report?

A) $64,000.
B) $73,000.
C) $78,000.
D) $93,000.

Question 70

What will be the total appraisal cost appearing on the quality cost report?

A) $74,000.
B) $78,000.
C) $81,000.
D) $181,000.

Question 71

(Appendix 11B)Which one of the following is NOT an example of an order-filling marketing activity?

A) Warehousing of customers' orders.
B) Advertising.
C) Order entry.
D) Collection of accounts receivable.

Question 72

(Appendix 11A)What is the sum of the sales mix variance and the sales quantity variance?

A) The flexible budget variance.
B) The sales volume variance.
C) The master budget variance.
D) The market share variance.

Question 73

What will be the total external failure cost appearing on the quality cost report?

A) $80,000.
B) $107,000.
C) $324,000.
D) $481,000.

Question 74

What will be the total internal failure cost appearing on the quality cost report?

A) $104,000.
B) $147,000.
C) $166,000.
D) $247,000.

Question 75

What will be the total appraisal cost appearing on the quality cost report?

A) $79,000.
B) $127,000.
C) $140,000.
D) $157,000.

Question 76

(Appendix 11A)The sales quantity variance is calculated by holding constant which of the following?

A) The budgeted sales mix percentages.
B) The actual sales mix percentages.
C) The budgeted contribution margin per unit.
D) Both the budgeted sales mix percentages and the budgeted contribution margin per unit.

Question 77

(Appendix 11B)Which of the following is NOT an example of an order-getting marketing activity?

A) Advertising.
B) Sales travel.
C) Training of sales staff.
D) Delivery of customers' orders.

Question 78

What will be the total appraisal cost appearing on the quality cost report?

A) $99,000.
B) $155,000.
C) $170,000.
D) $197,000.

Question 79

What will be the total internal failure cost appearing on the quality cost report?

A) $85,000.
B) $127,000.
C) $146,000.
D) $217,000.

Question 80

What will be the total external failure cost appearing on the quality cost report?

A) $100,000.
B) $126,000.
C) $373,000.
D) $570,000.