Question 1

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 2

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

The situation described is an example of outsourcing, which is the practice of hiring an external company to provide goods or services that would otherwise be done in-house. In this case, Quick is outsourcing the production of computer chips to different firms rather than producing them in-house.

Question 3

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

Accepted Answer

The description given in the question matches the features of the discretionary-cost method. This method is input-oriented and largely considers costs that are uncontrollable at the planning stage. The method assumes that certain costs are discretionary or optional, and hence can be reduced if needed. Therefore, managers are required to decide the level of such discretionary costs, and then the planning process continues based on those decisions. Hence, option C is the correct answer.

Question 4

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 fall under the category of uncertainty in the principal-agent model. Uncertainty refers to unpredictable events or circumstances that may affect the outcome of the contract. It is an important consideration in contract design and requires provisions for risk-sharing or contingency planning. Lack of observability relates to the difficulty of measuring or monitoring the agent's performance, while lack of responsibility refers to situations where the agent is not held accountable for their actions. Decentralization refers to the delegation of decision-making authority to lower levels of the organization.

Question 5

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 balanced scorecard is typically accompanied by a strategy map, which is a visual representation of the cause-and-effect relationships between the various strategic objectives identified in the balanced scorecard.

Question 6

Full costing operating income for 2013 is calculated to be:

Accepted Answer

Managers who are risk averse seek to avoid options with high risk and would choose an option with lower expected value if it had less risk. They prioritize the avoidance of risk over potential gains, so they would choose a safer option even if it means lower expected returns.

Question 7

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

Accepted Answer

This statement is an argument against the use of variable costing. Fixed factory overhead is necessary for the production of a product, so excluding it from the cost of goods sold calculation can result in an incomplete picture of the actual cost of producing a product.

Question 8

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 9

Strategic performance measurement is a(n):

Accepted Answer

Strategic performance measurement is an accounting system used by top management for the evaluation of SBU (Strategic Business Unit) managers. It helps top management to assess whether the business units are meeting their strategic objectives and goals. It also aids in making informed decisions and allocating resources effectively. Option B is not an accurate description of strategic performance measurement, and option C is not specific enough. Option D is a specific tool that can be used within a strategic performance measurement system, but it is not the definition of strategic performance measurement itself.

Question 10

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

Accepted Answer

Depreciation, taxes, and insurance are considered fixed costs because they do not vary with changes in production levels. However, they are noncontrollable because they cannot be controlled by the day-to-day decisions of management.

Question 11

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

Accepted Answer

Fixed manufacturing overhead costs are incurred in the production process and are therefore considered a part of the cost of producing a product. As such, they are classified as product costs under full costing.

Question 12

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 13

Controllable fixed costs:

Accepted Answer

Controllable fixed costs are those costs that the profit center manager can influence in approximately a year or less. These costs can be adjusted by the manager's decisions and actions, such as reducing expenses or negotiating better pricing with suppliers. They do not include variable costs, which are directly linked to the level of production or sales. The management of controllable fixed costs can have a significant impact on the operating income of the profit center.

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 is a type of SBU that focuses on the selling function of a specific product line or by a geographical location. Profit centers focus on both revenue generation and cost control, while investment centers have the additional responsibility of managing assets and investments. Cost centers focus primarily on cost control. Therefore, choice C is the best answer.

Question 15

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

Accepted Answer

The criteria for choosing a cost allocation method typically include providing incentives for managers to make decisions consistent with top management's goals, providing a basis for a fair evaluation of manager's performance, and motivating managers to exert a high level of effort. However, providing an opportunity for managers to make decisions consistent with their own goals is not a typical criterion for choosing a cost allocation method.

Question 16

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 17

SBU is the acronym for:

Accepted Answer

SBU stands for Strategic Business Unit, which is a separate unit within a company that operates independently from the rest of the organization. SBU is typically responsible for its own budgeting, marketing, and decision-making, often focused on a specific product or market segment.

Question 18

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 19

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

A formal individual management control system would not typically be used to control and manage organizational culture, as it is a more abstract and intangible aspect of the organization. The other options listed, such as hiring practices, promotion policies, operations, and sales, are all areas where formal management control systems can be used to set expectations and monitor performance.

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