1. The theory of constraints seeks to (Points: 5)

improve throughput in all departments.

improve throughput in the departments with the binding constraint.

create more constraints.

All of the above.

2. Petco makes 2 products, dog collars and cat collars. Each passes through the cutting machine, which is the binding constraint. Dog collars take 6 minutes on the cutting machine and have a contribution margin per unit of $10. Cat collars take 4 minutes on the cutting machine and have a contribution margin per unit of $8.

Assume that there are 2,000 hours available on the cutting machine and that the demand for each product is 15,000 units. If one more hour of machine time could be obtained, how much would profits increase? (Points: 5)

$10

$8

$120

$100

3. An investment of $100,000 promises returns of $40,000 per year for each of the next three years. If taxes are ignored and the required rate of return is 14%, what is the net present value of the project? (Points: 5)

$92,864

$20,000

($7,136)

($19,000)

4. Using spreadsheet based computer programs will help a company perform "what if" budget analysis. (Points: 5)

True

False

5. The overhead volume variance is a signal that the actual quantity produced was not equal to the quantity anticipated when the standard overhead rate was set. (Points: 5)

True

False

6. A set of budget relationships that can be adjusted for various activity levels is called a(n) (Points: 5)

opportunity budget.

static budget.

variable budget.

flexible budget.

7. Which of the following does not appear on the budgeted income statement? (Points: 5)

Cost of goods sold.

Sales.

Selling and administrative expenses.

Accounts receivable.

8. The master budget incorporates individual budgets such as those for (Points: 5)

direct materials, direct labor, and selling and administrative expenses.

best case, worst case, and most likely sales forecasts.

one year ago, five years ago, and ten years ago.

each company in the industry.

9. The cost that management believes should be incurred to produce a product under anticipated conditions is called a(n) (Points: 5)

actual cost.

ideal cost.

slack cost.

standard cost.

10. Volume variance occurs because: (Points: 5)

cost control is poor.

the estimated activity level is wrong.

Both A and B.

Neither A nor B.

11. The four dimensions of performance which are considered in a balanced scorecard are financial, customer, internal process, and innovation. (Points: 5)

True

False

12. The advantage of using a negotiated transfer price instead of a cost-based transfer price is that: (Points: 5)

managers should be able to consider opportunity costs in a negotiated price.

a negotiated transfer price provides managers greater autonomy than a cost-based transfer price.

a negotiated transfer price will get a good result if managers act rationally.

All of the above.

13. A cost center (Points: 5)

does not have responsibility for generating revenue.

should be evaluated using return on investment.

has a manager who is instrumental in setting prices for the product.

has a set of performance measures that is more complex than those for an investment center.

14. Which of the following is not a disadvantage of a decentralized organization? (Points: 5)

Managers’ goals may not be the same as the goals of the company as a whole.

Some activities may be duplicated and incur unnecessary costs.

Managers with the best information make the appropriate decisions.

All of the above are disadvantages of a decentralized organization.