Accurate cost estimates are required by strategic management for all


Question 1. 1. Accurate cost estimates are required by strategic management for all except: (Points : 2)

To facilitate strategic positioning analysis.

To facilitate target costing and life-cycle costing.

To facilitate value-chain analysis.

Accounting internal control.

Question 2. 2. The use of a relationship of total factory overhead to direct labor hours is said to be valid only within the relevant range, which means: (Points : 2)

Within a reasonable dollar amount for labor costs.

Within the range of observations of the cost driver.

Within the range of reasonableness as judged by the department supervisor.

Within the budget allowance for overhead.

Question 3. 3. Which of the following is required for multiple regression? (Points : 2)

The use of dummy variables.

The use of more than one cost driver.

The use of more than one dependent variable.

The use of a trend variable.

The use of multiple sets of data.

Question 4. 4. The R-squared in a satisfactory regression should be: (Points : 2)

less than .3

greater than .3

less than .7

greater than .7

Question 5. 5. High operating leverage represents increased risk associated with relatively: (Points : 2)

High variable costs in the firm’s cost structure.

High fixed cost in the firm’s cost structure.

High sales revenue combined with high variable costs.

High asset turnover.

High levels of unit-level (i.e., volume-related) costs.

Question 6. 6. The difference between sales price per unit and variable cost per unit is the: (Points : 2)

Contribution margin per unit (cm).

Total contribution margin (CM).

Contribution margin ratio.

Margin of safety (MOS).

Breakeven point.

Question 7. 7. Income taxes have the following effect on the breakeven point calculation: (Points : 2)

They generally increase the breakeven point.

They generally decrease the breakeven point.

They have no effect on the breakeven point.

They may increase or decrease the breakeven point, depending on the cost structure of the organization.

They increase the variable cost per unit.

Question 8. 8. Which of the following can use cost/volume/profit (CVP) analysis? (Points : 2)

Not-for-profit organizations, but not service firms.

Service firms, but not organizations that are not-for-profit.

Not-for-profit organizations, service firms, and manufacturers.

Manufacturing firms, but not service firms.

Question 9. 9. A master budget is typically prepared for: (Points : 2)

A period of one year.

Top management only.

Strategic planning purposes only.

Strategic business units only.

Operating activities only.

Question 10. 10. A budgeting system that has, in effect, a budget for a set number of periods (i.e., a constant planning horizon) at all times is called a(n): (Points : 2)

Financial budget

Operating budget

Rolling financial forecast

Capital budget

Master budget

Question 11. 11. The act of encouraging non-value-adding actions on the part of management in order to improve indicated performance is referred to as: (Points : 2)

Goal congruency.

Gaming the performance indicator.

The use of fixed-performance contract.

Linear optimization analysis.

The use of a relative-performance contract.

Question 12. 12. All of the following represent alternative approaches to the traditional budget-preparation process except which one? (Points : 2)

Master budgeting.

Kaizen budgeting.

Continuous-improvement budgeting.

Activity-based budgeting (ABB)

Time-driven activity based budgeting (TDABB)

Question 13. 13. Thompson Refrigerators Inc. needs to prepare pro forma financial statements for the next fiscal year. To do so, the company must forecast its total overhead cost. The actual machine hours and total overhead cost are presented below for the past six months.


Jan $ 8,258 2,134

Feb 8,006 2,045

Mar 8,387 2,276

Apr 8,832 2,743

May 8,921 2,834

June 7,841 2,034

Using the high-low method, unit variable overhead cost is calculated to be: (Points : 2)






Question 14. 14. Brownsville Novelty Store prepared the following budget information for the month of May:

• Sales are budgeted at $360,000. All sales are on account and a provision for bad debts is made

monthly at three percent of sales.

• Inventory was $84,000 on April 30 and an increase of $12,000 is planned for May 31.

• All inventory is marked to sell at cost plus fifty percent.

• Estimated cash disbursements for selling and administrative expenses for the month are $48,000.

• Depreciation for May is projected at $6,000.

Brownsville’s budgeted operating income for May is: (Points : 2)






Question 15. 15. ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March? (Points : 2)









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