Question: 9. The direct labor rate variance is never controllable. Do you agree or disagree? Why? 10. Suggest some possible causes of an unfavorable direct labor

9. The direct labor rate variance is never controllable. Do you agree or disagree? Why?

10. Suggest some possible causes of an unfavorable direct labor efficiency variance.

11. Explain why the variable overhead spending variance is not a pure price variance.

12. What is the cause of an unfavorable volume variance? Does the volume variance convey any meaningful information to managers?

13. What are control limits, and how are they set?

14. Explain how the two-, three-, and four-variance overhead analyses are related.

15. Explain what mix and yield variances are.

Chapter 10

1. What is decentralization? Discuss the differences between centralized and decentralized decision making.

2. Explain why firms choose to decentralize. 3. Explain how access to local information can improve decision making.

4. What are margin and turnover? Explain how these concepts can improve the evaluation of an investment center.

5. What are the three benefits of ROI? Explain how each can lead to improved profitability.

6. What are two disadvantages of ROI? Explain how each can lead to decreased profitability.

7. What is residual income? Explain how residual income overcomes one of ROIs disadvantages.

8. What is EVA? How does it differ from ROI and residual income?

9. What is a stock option? How can it encourage goal congruence?

10. What is a transfer price?

11. What is the transfer pricing problem?

12. If the minimum transfer price of the selling division is less than the maximum transfer price of the buying division, the intermediate product should be transferred internally. Do you agree or disagree? Why?

13. If an outside, perfectly competitive market exists for the intermediate product, what should the transfer price be? Why?

14. Identify three cost-based transfer prices. What are the disadvantages of cost-based transfer prices? When might it be appropriate to use cost-based transfer prices?

15. What is the purpose of Internal Revenue Code Section 482? What four methods of transfer pricing are acceptable under this section?

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