Question 1

The activity-based costing system
A)is the most appropriate method of cost accounting for rigid hierarchical organizations.
B)effectively departmentalizes an organization based on its core functions, such as human resources and maintenance.
C)provides a more accurate picture of how costs should be charged to products and services.
D)assumes that organizations are bureaucratic "machines" that can be separated into component functions.
E)fails to allocate costs across business processes and is less effective than traditional methods of cost accounting.

Accepted Answer

The activity-based costing system provides a more accurate picture of how costs should be charged to products and services. It allocates costs based on the activities involved in producing those products or services, rather than just based on departmental or organizational structure. This can lead to more precise cost allocation and better decision-making.

Question 2

"Many of your management trainees do not have formal educations or degrees in accounting or finance. And that is OK," said the corporate trainer. "That's why this training module will cover control by ________, which is most commonly used for the entire enterprise and, in the case of a diversified corporation such as ours, its divisions."
A)profit and loss
B)assets
C)liabilities
D)financial ratios
E)expenses

Accepted Answer

Control by profit and loss is a common method used across entire enterprises and their divisions to manage and assess financial performance, making it relevant for management trainees without formal accounting or finance backgrounds.

Question 3

Evelyn had to buy a lot of equipment to open her beauty salon. She bought most of it on credit. The amounts of money that she owes her creditors are called
A)assets.
B)capital.
C)investments.
D)liabilities.
E)equity.

Accepted Answer

The amounts of money that Evelyn owes to her creditors are considered liabilities, as they represent debts that she has to pay off in the future. Assets are things she owns that have value, investments are assets purchased with the hope of generating income or increasing in value, capital refers to the financial resources she has invested in her business, and equity refers to the residual value of her business assets after liabilities are deducted.

Question 4

"The amount of information in the accounting reports is so overwhelming that I cannot understand it," said Ripley to his division manager, Sotol. "Yes," said Sotol, "The sheer volume of the numbers in the reports is daunting. That's why we have decided that an effective approach for checking our firm's overall performance is to use ________, which indicate strengths and weaknesses."
A)profit and loss statements
B)key financial ratios
C)assets
D)liabilities
E)balance sheets

Accepted Answer

Key financial ratios are a way to distill the overwhelming amount of information in accounting reports into easily understandable and comparable numbers that indicate a company's strengths and weaknesses. Profit and loss statements, assets, liabilities, and balance sheets are all components of accounting reports and do not provide the same level of simplified analysis as financial ratios.

Question 5

A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity is referred to as a(n)
A)profit and loss statement.
B)balance sheet.
C)expense report.
D)income statement.
E)budget report.

Accepted Answer

A balance sheet is a financial report that provides an overview of a company's financial position at a specific point in time. It itemizes assets, liabilities, and stockholders' equity to give a comprehensive view of the company's financial picture. A profit and loss statement (D) summarizes a company's revenues and expenses over a specific period, while an expense report (C) is a document that records the expenses incurred by an individual on behalf of the company. A budget report (E) is a report that compares actual financial results to projected or planned results.

Question 6

A company's balance sheet shows its
A)areas of improvement.
B)projected profit.
C)strengths, weaknesses, and threats.
D)financial picture at a given time.
E)performance over time.

Accepted Answer

A balance sheet is a financial statement that shows a company's financial position at a given time. It includes the company's assets, liabilities, and equity. It gives a snapshot of the company's financial health and can be used to assess its ability to pay off debts and meet financial obligations.

Question 7

The Southern Educational Technology Alliance has begun a new system of allocating costs according to the tasks their employees perform and the amount of time they spend on the particular tasks. This practice is referred to as
A)unit-based accounting.
B)time-based auditing.
C)task accounting.
D)activity-based costing.
E)allocation costing.

Accepted Answer

This practice of allocating costs based on the tasks and activities performed by employees is known as activity-based costing. It aims to provide more accurate and detailed information on the cost of producing goods or services, by taking into account the specific activities that contribute to those costs.

Question 8

"Why is the ________ budget for next year 35 percent higher than this year's actual expenses?" asked Alli Truelove, CEO of PremierHealth Group. Her CFO, Blake Barnstone, replied, "We need to hire two additional human resources professionals to oversee the new benefits program and an additional attorney to handle claims. Also, our new lease for Building 13 will go into effect, and that includes a 14 percent increase in the first year." Alli replied, "Ouch. It's tough to absorb those kinds of increases from parts of our organization that generate no revenue."
A)cash
B)cost
C)production
D)master
E)maintenance

Accepted Answer

The CEO is asking about the budget, and the CFO explains that the increase in expenses is due to adding new personnel and paying for a higher lease cost. These are all costs, so the best choice is "cost."

Question 9

Which of the following can be drawn tentatively and used as a goal against which actual performance can be measured?
A)statements of cash flow
B)profit and loss statements
C)balance sheets
D)external audits
E)capital budgets

Accepted Answer

The answer of Which of the following can be drawn...

Question 10

________ ratio is a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities.
A)Debt-equity
B)Current
C)Profitability
D)Return on investment
E)Stockholders' equity

Accepted Answer

The current ratio measures the company's ability to use its current assets to satisfy its current liabilities. In other words, it indicates how well a company can pay off its short-term debts with its short-term assets. Therefore, it helps in identifying whether the company is capable of meeting its short-term obligations, even in cases of a sudden loss in short-term assets.

Question 11

Liquidity ratios indicate a company's
A)ability to pay short-term debts.
B)ability to generate a financial return on sales.
C)relative amounts of funds supplied by creditors.
D)ability to meet its long-term financial obligations.
E)profitability and leverage ratios.

Accepted Answer

Liquidity ratios measure a company's ability to meet short-term debts, such as current liabilities. Examples of liquidity ratios include current ratio, quick ratio, and cash ratio.

Question 12

Gina developed a revised balance sheet for her company. She used the balance sheet to show her company's _________, or the amounts the company owes to various creditors.
A)liabilities
B)assets
C)budgets
D)diseconomies
E)expenses

Accepted Answer

Liabilities represent the amounts a company owes to various creditors. The other choices (assets, budgets, diseconomies, expenses) do not accurately reflect this information.

Question 13

Which of the following are the basic elements of a balance sheet?
A)income, expenses, and outcome
B)operations, sales, and growth
C)assets, liabilities, and stockholders' equity
D)receipts, deductions, and taxes
E)budgets, controls, and corrective actions

Accepted Answer

The basic elements of a balance sheet are assets, liabilities, and stockholders' equity. Income, expenses, outcome, operations, sales, growth, receipts, deductions, taxes, budgets, controls, corrective actions are related to income statement, income and expense projection, income, profit and loss statements, and budgeting.

Question 14

The debt-equity ratio is an example of a ________ ratio.
A)net working capital
B)profitability
C)leverage
D)current
E)liquidity

Accepted Answer

The debt-equity ratio measures the amount of debt being used to finance a company's operations in comparison to equity (or shareholder investment) and is therefore an example of a leverage ratio.

Question 15

Angus interviews and observes his employees as part of his managerial duties at Shipko, a large packing supplies manufacturer. During the interviews, Angus receives a wide array of facts, figures, and predictions, and his observations reveal a variety of behaviors. He suspects some of the employees are telling him things and doing things that are designed to outsmart management rather than to give him an honest report. What type of behavior might be a clue for Angus that an employee is trying to beat management's control system?
A)purposefully estimating that they can produce 20,000 feet of cardboard in a day when they can actually produce 50,000 feet
B)following Shipko rules regarding safety without question, even if they seem counterproductive or inefficient
C)sorting and packaging only the minimal number of boxes per day that company expectations require
D)focusing on required behaviors, such as ensuring machines remain unclogged, instead of building relationships with managers
E)emphasizing sticking with the tried and true shipping container designs instead of experimenting with models that use fewer materials

Accepted Answer

Purposefully estimating a much lower production rate than what they are capable of could be a clue that an employee is trying to beat management's control system. This behavior allows them to meet their goals quickly and easily without being asked to do more or being given more difficult or time-consuming tasks.

Question 16

Which of the following best describes what a profitability ratio is?
A)It shows the relative amount of funds in the business supplied by shareholders.
B)It indicates a company's ability to pay short-term debts.
C)It indicates management's ability to generate a financial return on sales or investment.
D)It shows a company's profit margins for the last six months.
E)It indicates a company's future profits from its current customer base.

Accepted Answer

A profitability ratio is a financial ratio that indicates management's ability to generate a financial return on sales or investment. It measures a company's efficiency in using its resources to generate profits. Examples of profitability ratios include return on investment (ROI), return on assets (ROA), and return on equity (ROE).

Question 17

An itemized financial statement of the income and expenses of a company's operations is called the
A)statement of financial ratios.
B)balance sheet.
C)cash flow statement.
D)assets and liabilities statement.
E)profit and loss statement.

Accepted Answer

An itemized financial statement of the income and expenses of a company's operations is called a profit and loss statement, also known as an income statement.

Question 18

On the balance sheet, the amount accruing to a corporation's owners is referred to as
A)a liability.
B)transfer price.
C)an asset.
D)stockholders' equity.
E)return on investment.

Accepted Answer

The amount accruing to a corporation's owners is referred to as stockholders' equity. This represents the residual interest in the assets of a corporation after deducting liabilities. It includes the value of common stock, retained earnings, and additional paid-in capital.

Question 19

"Phil, if our top-level management wants us to produce a new line of lawn tractors over the next ten years, we will need to invest in another factory assembly line. And that's going to cost big bucks," said Bob Lawson, factory manager for TopLawn, Inc. "Please start greasing the skids internally. I don't want the home-office executives to be surprised when they see high-dollar fixed assets in my ________ budget."
A)sales
B)production
C)capital
D)master
E)operational

Accepted Answer

The blank requires a term that refers to the budget for purchasing fixed assets, such as a new factory assembly line. The term "capital" best fits this description. The other options do not specifically relate to the purchase of fixed assets.

Question 20

Leverage ratios indicate
A)the relative amount of funds in the business supplied by creditors and shareholders.
B)a company's ability to pay its short-term debts.
C)management's ability to generate a financial return on sales or investment.
D)a company's profit margins for the last six months.
E)the future profits the company can expect from its current customer base.

Accepted Answer

Leverage ratios, also known as debt ratios, show the proportion of debt financing vs. equity financing in a company's capital structure. This indicates the relative amount of funds in the business supplied by creditors and shareholders, which is the definition given in choice A. The other options are not related to leverage ratios.

Quiz 16: Managerial Control

The activity-based costing system

Evelyn had to buy a lot of equipment to open her beauty salon. She bought most of it on credit. The amounts of money that she owes her creditors are called

A report that shows the financial picture of a company at a given time and itemizes assets, liabilities, and stockholders' equity is referred to as a(n)

A company's balance sheet shows its

The Southern Educational Technology Alliance has begun a new system of allocating costs according to the tasks their employees perform and the amount of time they spend on the particular tasks. This practice is referred to as

Which of the following can be drawn tentatively and used as a goal against which actual performance can be measured?

________ ratio is a liquidity ratio that indicates the extent to which short-term assets can decline and still be adequate to pay short-term liabilities.

Liquidity ratios indicate a company's

Gina developed a revised balance sheet for her company. She used the balance sheet to show her company's _________, or the amounts the company owes to various creditors.

Which of the following are the basic elements of a balance sheet?

The debt-equity ratio is an example of a ________ ratio.

Which of the following best describes what a profitability ratio is?

An itemized financial statement of the income and expenses of a company's operations is called the

On the balance sheet, the amount accruing to a corporation's owners is referred to as

Leverage ratios indicate