1. For a given product, the sales mix variance plus the sales quantity variance is equal to its industry volume variance plus its market share variance.

True

False 2. There is no need to investigate any favorable variances.

True

False 3. Managerial performance can be measured in many different ways including return on investment (ROI) and residual income. A good reason for using residual income instead of ROI is that:

A) Residual income can be computed without regard to identifying an investment base.

B) Appropriate goal congruence behavior is more likely to occur when using residual income.

C) Residual income is well accepted in many organizations and is often referenced in the financial press.

D) ROI does not take into consideration both the investment turnover ratio and return-on-sales percentage.

E) An imputed interest rate (cost of capital) does not have to be determined when using residual income. 4. The general principle on setting transfer prices that are in the organization's best interests is:

A) outlay cost plus opportunity cost of the resource at the point of transfer.

B) variable costs plus opportunity cost of the resource at the point of transfer.

C) lost contribution margin less the allocated fixed costs for the selling division.

D) gross margin for the buying division plus the gross margin for the selling division. 5. In a decentralized company in which divisions may buy goods from one another, the transfer pricing system should be designed primarily to:

A) increase total corporate profitability.

B) allow division manager to buy from outsiders.

C) maximize the degree of autonomy of division managers.

D) aid in the appraisal and motivation of managerial performance. 6. Standard costs should be based on:

A) perfect performance.

B) an average of past costs.

C) most likely level of performance.

D) reasonably attainable levels of efficiency. 7. Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?

A) The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid experienced individuals.

B) The mix of workers assigned to the particular job was heavily weighted towards the use of new relatively low paid unskilled workers.

C) Because of the production schedule, similar workers from other production areas were assigned to assist this particular process.

D) Defective materials caused more labor to be used in order to produce a standard unit.

8. Which unfavorable variances should be investigated?

A) All of them because they negatively affect operating profits.

B) Only those for which the expected benefits of correction exceed the costs of investigating and correcting.

C) Only those above a pre-established level of significance.

D) Only those above a pre-established level of significance for three or more reporting periods.

9. Manufacturing cycle efficiency is computed by dividing process time by:

A) moving time + storage time.

B) storage time + inspection time.

C) moving time + storage time + inspection time.

D) process time + inspection time + moving time.

E) process time + moving time + storage time + inspection time. 10. One of the results in using balanced scorecards is a shift from a focus on financial results to a focus on:

A) maximizing market share.

B) minimizing budgetary slack.

C) eliminating fraudulent behavior.

D) increasing customer satisfaction.

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