Question 1

An organization subject to intense competitive pressures would most likely use:
A)Ideal standards for its operations.
B)Real standards for its operations.
C)Caution in even using standard costs at all.
D)A mix of types of standards.
E)Standards that are not modified over time.

Accepted Answer

A

Question 2

Authoritative standards (within the context of a standard cost system) are determined primarily by:
A)Distributors.
B)Employees.
C)Negotiation.
D)A two-way information flow.
E)Managers.

Accepted Answer

Authoritative standards are determined primarily by managers who have the responsibility and authority to establish the standards for the organization. They are responsible for ensuring that the standards are realistic and achievable, as well as for communicating them to the employees who will be responsible for meeting them. Therefore, the best choice is E.

Question 3

One important short-term financial goal for a company is to earn the projected operating income for the period. Attainment of this goal is measured by comparing the actual operating income for the period to the:
A)Flexible-budget operating income for the period.
B)Prior period's operating income.
C)Income reflected in the company's balanced scorecard.
D)Master budget operating income.
E)Industry average operating income.

Accepted Answer

The best comparison to measure attainment of the short-term financial goal of earning projected operating income for the period is to compare the actual operating income for the period to the master budget operating income. The master budget includes the company's initial, projected operating income for the period and is used to measure the company's performance against its initial goals and plans. A flexible-budget operating income is not a predetermined goal, but rather a recalculated operating income based on actual sales and production levels. The prior period's operating income, income reflected in the company's balanced scorecard, and industry average operating income are not directly relevant to measuring attainment of a company's specific financial goals.

Question 4

Operational control systems can be distinguished from financial control systems:
A)In the time horizon: financial-control systems have a long-term perspective.
B)Because they focus on the control of basic business processes.
C)Because such systems rely on the use of flexible, not static, budgets.
D)Because they focus on explaining the total operating income variance for a period.
E)Because they do not include nonfinancial performance indicators.

Accepted Answer

Operational control systems focus on the control of basic business processes, while financial control systems focus on financial aspects such as budgeting, cost control, and income statement analysis. The time horizon and use of flexible budgets or nonfinancial performance indicators may vary depending on the specific control system. However, the key distinguishing factor is the focus on either basic business processes (operational control) or financial aspects (financial control).

Question 5

An organization's overall management accounting and control system:
A)Includes the planning function.
B)Is also referred as the organization's core performance-measurement system.
C)Is separate from its operational control system.
D)Includes nonfinancial, but not financial, performance measures.
E)Focuses on strategic, not operational, control

Accepted Answer

The overall management accounting and control system within an organization is also referred to as the core performance-measurement system. This system includes planning, operational control, financial and nonfinancial performance measures, and focuses on both strategic and operational control. Therefore, option A, C, D, and E are incorrect.

Question 6

A flexible-budget variance measures the impact on short-term operating profit of:
A)Changes in sales volume.
B)Changes in output during the period.
C)Differences in sales mix-budgeted versus actual.
D)Selling price and cost differences-actual versus budgeted.
E)Selling price, but not cost differences-actual versus budgeted.

Accepted Answer

A flexible-budget variance measures the difference between the actual results and the expected performance (budgeted amounts) based on the actual level of output, including both selling price and cost differences.

Question 7

The "flexible budget" can best be described as a budget that adjusts:
A)Revenues for sales-dollar changes.
B)Revenues and expenses for changes in output (such as sales volume).
C)Expenses for changes in budgeted output between two periods.
D)For efficiency, but not selling price and cost variances.
E)For selling price and cost variances, but not efficiency variances.

Accepted Answer

A flexible budget adjusts both revenues and expenses for changes in output or sales volume. It allows for more accurate budgeting and forecasting by taking into account the variable costs that vary with changes in sales volume, such as materials and labor. This type of budget enables a company to better understand how changes in sales volume will impact their financial performance and to plan accordingly.

Question 8

The total operating income variance for a period reveals whether a company has achieved:
A)The sales level budgeted for the period.
B)An adequate return on investment (assets) during the period.
C)Control of basic business processes.
D)Control of total expenses for the period.
E)The master budgeted operating income for the period.

Accepted Answer

The total operating income variance for a period is the difference between actual operating income and the master budgeted operating income for the period. Therefore, it reveals whether the company has achieved the master budgeted operating income for the period.

Question 9

The arrival of new manufacturing techniques such as automation, flexible manufacturing systems, and cluster or cell manufacturing has:
A)Emphasized the importance of direct labor variances.
B)Not had an effect on the importance of direct labor variances.
C)De-emphasized the importance of direct labor cost variances.
D)Made direct labor variances obsolete.
E)Eliminated the need to calculate and report direct materials variances.

Accepted Answer

New manufacturing techniques such as automation and flexible manufacturing systems reduce the amount of direct labor required in production, making it less significant in terms of cost. As a result, the importance of direct labor cost variances has been de-emphasized.

Question 10

Differences in expectation levels lead to two basic types of standards in a standard cost system:
A)Ideal and real.
B)Ideal and currently attainable.
C)Normal and conceptual.
D)Attainable and real.
E)Current and future.

Accepted Answer

The two basic types of standards in a standard cost system are ideal standards, which reflect perfect or optimal levels of performance, and currently attainable standards, which reflect more realistic levels of expected performance based on current conditions. Normal standards, conceptual standards, attainable standards, real standards, current standards, and future standards are not commonly used terms in describing the types of standards in a standard cost system.

Question 11

A "currently attainable standard" emphasizes:
A)Ideal or theoretical performance.
B)Past performance of the organization.
C)Future performance of the organization's primary competitors.
D)Maximum performance.
E)Relatively efficient operating performance.

Accepted Answer

A "currently attainable standard" refers to a standard of performance that is currently achievable by the organization in its current state. It focuses on relatively efficient operating performance, rather than maximum or ideal performance, past performance, or the performance of competitors.

Question 12

A standard cost system:
A)Cannot be used in conjunction with a job-cost system.
B)Is not permissible for financial-reporting purposes.
C)Is most easily introduced in conjunction with a process-cost system.
D)Is useful for planning but not control purposes.
E)Is useful for cost control but not planning purposes.

Accepted Answer

A standard cost system is most easily introduced in conjunction with a process-cost system, as a process-cost system involves the continuous production of homogeneous products, making it easier to set standard costs. Standard costs are used for controlling costs and improving efficiency. They are also useful for planning and budgeting purposes. Job-cost systems, on the other hand, are used for custom orders and involve varying costs, making it difficult to set standard costs. Standard costs can be used for financial-reporting purposes as well.

Question 13

An organization planned to use $82 of direct material per unit of output, but it actually used $80 per unit. During this period, the company planned to make 1,200 units, but actually produced only 1,000 units. The flexible budget amount for direct materials cost is:
A)$80,000.
B)$82,000.
C)$96,000.
D)$98,400.

Accepted Answer

The answer of An organization planned to use $82 of...

Question 14

By convention, short-term financial control is accomplished by all the following except:
A)Comparing actual to budgeted financial results.
B)Calculating a series of cost and revenue variances at the end of the period.
C)The use of flexible budgets and standard costs.
D)Explaining the total operating-income variance for a given period.
E)The use of productivity analysis.

Accepted Answer

Short-term financial control typically involves comparing actual financial results to budgeted figures, calculating variances, and using flexible budgets and standard costs to understand and manage performance. Productivity analysis, while valuable, is more aligned with operational efficiency and long-term strategic planning rather than short-term financial control.

Question 15

A materials efficiency variance can be caused by all of the following except:
A)Actual output volume of the period (i.e., units produced).
B)Performance of the workers in using the materials.
C)Quality of the materials.
D)Skill level of the workers using the materials.
E)Inadequate employee supervision.

Accepted Answer

A materials usage variance is related to the quantity of materials used in the production process. Therefore, the number of units produced during the period (i.e., output volume) is not a factor that can cause a materials usage variance. The variance would be affected by factors such as the performance and skill level of workers, the quality of materials used, and inadequate employee supervision.

Question 16

Traditional financial control systems have recently been criticized because:
A)They use flexible, not static, budgets.
B)They generally lead to goal-congruent behavior on the part of managers.
C)They focus more in improving basic business processes than short-term financial results.
D)They fail to incorporate nonfinancial performance indicators into the evaluation process.
E)They provide performance data on a real-time basis.

Accepted Answer

Traditional financial control systems have been criticized for failing to consider nonfinancial performance indicators in the evaluation process, which can lead to a narrow focus on short-term financial results and overlook the impact of other important aspects of the business such as customer satisfaction, employee morale, and innovation. Incorporating nonfinancial performance metrics can provide a more comprehensive picture of organizational performance and help managers make more informed decisions.

Question 17

A ______________ standard gets progressively tighter over time:
A)Peak-efficiency.
B)Currently attainable.
C)Benchmarked.
D)Flexible-budget.
E)Continuous-improvement.

Accepted Answer

A continuous improvement standard focuses on getting better over time by regularly setting new, higher benchmarks for performance.

Question 18

Which of the following is different in a flexible budget compared to the master budget for a period?
A)Selling price per unit.
B)Variable cost per unit.
C)Budgeted fixed cost.
D)Sales volume.
E)Budgeted fixed administrative costs.

Accepted Answer

Sales volume is different in a flexible budget compared to the master budget as the flexible budget adjusts the sales volume based on actual sales or production levels. The selling price per unit, variable cost per unit, budgeted fixed cost, and budgeted fixed administrative costs may be the same in both the flexible and master budgets.

Question 19

A "standard cost" is a predetermined amount (e.g., cost) that:
A)Should be incurred under relatively efficient operating conditions.
B)Will be incurred for an operation or a specific objective.
C)Must occur for an operation or a specific objective.
D)Cannot be changed once it is established by management.
E)Is useful for planning and control but not inventory valuation purposes.

Accepted Answer

A standard cost is a predetermined amount that should be incurred under relatively efficient operating conditions. It is used as a basis for comparison with actual costs incurred and also for determining inventory valuation. Option B, C, and D are not accurate since a standard cost is a predetermined estimation and may not be the actual cost incurred. Option E is incorrect as standard cost is also used for inventory valuation purposes.

Question 20

Another name for the total operating income variance for a period is:
A)Flexible-budget variance.
B)Master (static) budget variance.
C)Sales volume variance.
D)Total income variance.
E)Sales mix variance.

Accepted Answer

The answer of Another name for the total operating income...

Quiz 14: Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

An organization subject to intense competitive pressures would most likely use:

Authoritative standards (within the context of a standard cost system) are determined primarily by:

One important short-term financial goal for a company is to earn the projected operating income for the period. Attainment of this goal is measured by comparing the actual operating income for the period to the:

Operational control systems can be distinguished from financial control systems:

An organization's overall management accounting and control system:

A flexible-budget variance measures the impact on short-term operating profit of:

The "flexible budget" can best be described as a budget that adjusts:

The total operating income variance for a period reveals whether a company has achieved:

The arrival of new manufacturing techniques such as automation, flexible manufacturing systems, and cluster or cell manufacturing has:

Differences in expectation levels lead to two basic types of standards in a standard cost system:

A "currently attainable standard" emphasizes:

A standard cost system:

An organization planned to use $82 of direct material per unit of output, but it actually used $80 per unit. During this period, the company planned to make 1,200 units, but actually produced only 1,000 units. The flexible budget amount for direct materials cost is:

By convention, short-term financial control is accomplished by all the following except:

A materials efficiency variance can be caused by all of the following except:

Traditional financial control systems have recently been criticized because:

A ______________ standard gets progressively tighter over time:

Which of the following is different in a flexible budget compared to the master budget for a period?

A "standard cost" is a predetermined amount (e.g., cost) that:

Another name for the total operating income variance for a period is: