Question 1

Variable costing operating income for 2013 is calculated to be:

Accepted Answer

Risk-seeking managers are willing to pursue projects that have a higher potential for gain, even if they come with a higher degree of risk. Option B specifically mentions seeking risky projects with the potential for high benefits, even if there is a risk of low benefits. This aligns with the behavior of risk-seeking managers. The other options are too broad or too extreme, such as seeking all risky projects (option C) or only high-risk projects with significant risk of no benefit (option D). Option A is close, but it does not emphasize the desire for high benefits that is characteristic of risk-seeking behavior.

Question 2

Which of the following is an argument against the use of variable costing?

Accepted Answer

Option A is an argument in favor of variable costing as it states that full costing (which includes fixed overheads) overstates the value of inventory on the balance sheet. Option B is true, but it is not an argument against the use of variable costing. Option C is a challenge, but not an argument against the use of variable costing, as variable costing ignores fixed overheads. Option D is the correct answer. Fixed factory overhead costs are necessary and cannot be ignored in determining the cost of producing a product. By ignoring fixed overhead costs, variable costing ignores a substantial portion of the cost of producing a product. As a result, variable costing may lead to incorrect pricing decisions and inefficient resource allocation.

Question 3

Under variable costing, fixed manufacturing overhead costs would be classified as:

Accepted Answer

Situations such as machine breakdowns or a decrease in market demand fall under the category of "uncertainty" in the principal-agent model of contract relationships. This is because they are unpredictable events that can cause a disruption to the contract relationship between the principal and the agent. The principal may not know how the agent will respond to such situations and this can lead to a lack of trust in the relationship.

Question 4

Using the balanced scorecard to describe the firm's strategy in detail through the use of a cause-and-effect diagram which is also known as a(n):

Accepted Answer

The use of a cause-and-effect diagram to describe the firm's strategy in detail is known as a strategy map. A strategy map is a visual representation of the company's strategy that depicts how various objectives are linked together in a cause-and-effect relationship. It is one of the tools used in the balanced scorecard approach, which seeks to align business activities with the company's strategy and vision. Therefore, the best choice for this question is B) Strategy Map.

Question 5

Controllable fixed costs:

Accepted Answer

Controllable fixed costs are those costs that the profit center manager can directly influence or control within approximately a year or less. This includes costs such as salaries, repairs and maintenance, advertising, and supplies. These costs can be adjusted by the manager to optimize profitability and improve the overall performance of the profit center.

Question 6

In a formal management control system, top management sets expectations for desired manager performance. Which of the following is not one of the areas in which a formal individual management control system would be used?

Accepted Answer

SBU stands for Strategic Business Unit, which refers to a business unit within a company that has a clearly defined strategic role and operates somewhat independently from the rest of the company. SBU's are often responsible for their own budgeting, planning, and marketing strategies.

Question 7

Strategic performance measurement is a(n):

Accepted Answer

Strategic performance measurement is an accounting system used by top management to evaluate the performance of strategic business unit managers. It includes measures of financial and non-financial performance that align with the company's strategic goals and objectives.

Question 8

Under full costing, fixed manufacturing overhead costs would be classified as:

Accepted Answer

Under full costing, fixed manufacturing overhead costs are included in the cost of the product and are therefore classified as product costs.

Question 9

Quick Technology Company is a supplier of high-end research equipment for the pharmaceutical industry. Quick currently has a variety of different firms producing computer chips for increased memory and improved processing speeds which are installed in Quick's equipment. In this case, having another firm provide supplies for Quick's equipment is an example of:

Accepted Answer

Outsourcing refers to obtaining goods or services from an outside or foreign supplier. Quick is obtaining computer chips from external firms, which is an example of outsourcing.

Question 10

SBU is the acronym for:

Accepted Answer

SBU stands for Strategic Business Unit, which is a fully functional and independent unit of a larger company, responsible for its own business strategy and decision-making.

Question 11

Costs such as depreciation, taxes and insurance and usually extending beyond one year are considered:

Accepted Answer

These costs are usually fixed for a period beyond one year and cannot be easily controlled or changed by the management. Hence, they are classified as noncontrollable fixed costs.

Question 12

Under the principal-agent model of contract relationships, situations such as machine breakdowns or a decrease in market demand would be classified under:

Accepted Answer

Situations such as machine breakdowns or a decrease in market demand are examples of uncertainty in the principal-agent model. Uncertainty arises when the outcome of the agent's effort is not perfectly predictable or known, and this can lead to adverse selection and moral hazard problems in the contract relationship.

Question 13

Which one of the following is not an order-filling cost?

Accepted Answer

The balanced scorecard is a strategic planning and management tool, and a cause-and-effect diagram, also known as a strategy map, is used to describe strategy in detail. Therefore, the correct answer is B, Strategy Map. The other options, Status Diagram, Performance Flowchart, Organizational Diagram, and Operational Work-through, are not commonly associated with the balanced scorecard.

Question 14

The type of strategic business unit (SBU) where the SBU focuses on the selling function of a specific product line or by a geographical location is referred to as a(n):

Accepted Answer

A revenue center focuses on generating revenue through selling a specific product line or by a geographical location. Profit centers focus on both generating revenue and controlling costs, while cost centers only focus on controlling costs. Investment centers are responsible for investing funds to generate a return on investment. Therefore, the correct choice is C, revenue center.

Question 15

Sales for 2013 are calculated to be:

Accepted Answer

Strategic performance measurement is a method used by top management to evaluate the performance of their business units (SBU). It is not a system of shared responsibility or a tool for designing and implementing the balanced scorecard. While it may involve accounting methods, its primary purpose is not for determining strategy but for measuring the success of strategies already in place.

Question 16

Which of the following is not a criterion for choosing a cost allocation method?

Accepted Answer

The criteria for choosing a cost allocation method should primarily focus on providing incentives for managers to make decisions consistent with top management's goals, ensuring a fair evaluation of manager's performance, and motivating managers to exert a high level of effort. Providing an opportunity for managers to make decisions consistent with their goals is not a relevant criteria as the allocation method should align with the organization's overall objectives.

Question 17

The cost method that is input-oriented and considers costs largely uncontrollable at the planning stage is called the:

Accepted Answer

The discretionary-cost method considers costs that are largely uncontrollable at the planning stage and focuses on input-oriented costs. This method is often used for budgeting and planning purposes in areas of the organization where costs are not directly related to production. The other options (engineered-cost, ABC costing, job costing, and standard costing) do not specifically focus on input-oriented costs or consider costs largely uncontrollable at the planning stage.

Question 18

Which of the following is not a revenue driver factor which affects sales volume for a manufacturing firm?

Accepted Answer

The answer of Which of the following is not a...

Question 19

Full costing operating income for 2013 is calculated to be:

Accepted Answer

Full costing includes all direct and indirect costs of production. The full cost of goods sold is $11,000,000 + ($2,000,000/2) + ($3,000,000/3) = $12,166,667. Operating expenses are $3,000,000. Therefore, operating income is $12,166,667 - $9,000,000 = $3,166,667. Adding back the fixed production costs that were expensed under full cost accounting gives an operating income of $3,166,667 + $2,053,333 = $5,220,000.

Question 20

Managers who are risk averse:

Accepted Answer

A value stream income statement focuses on identifying the costs and profits associated with specific value streams within a manufacturing process, which is a core concept of lean manufacturing. Value chain analysis, activity-based costing, and the theory of constraints are related to different aspects of manufacturing and cost accounting, but they are not directly linked to the value stream income statement concept.

Quiz 18: Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard