1. Which one of the following is the estimated rate (i.e., percentage) that makes the discounted present value of future cash flows equal to the initial investment? (Points : 2)       [removed] Weighted-average cost of capital (WACC).       [removed] Modified internal rate of return (MIRR).       [removed] Book (accounting) rate of return.       [removed] Internal rate of return (IRR).       [removed] Accounting rate of return (ARR), after tax. 2. Done on a regular basis, relevant cost pricing in special order decisions can erode normal pricing policies and lead to: (Points : 2)       [removed] Overconfidence in decision-making.       [removed] A loss in the firm's profitability.       [removed] Conflicting goals between management and sales personnel.       [removed] A cost leadership strategy.       [removed] Maximization of resources. 3. When the internal rate of return (IRR) method and the net present value (NPV) method do not yield the same recommendation for the same investment project, the technique normally selected is: (Points : 2)       [removed] IRR, because all reinvestment of funds occurs at the rate of the cost of capital and because it takes into consideration the relative size of the initial investment.       [removed] NPV, because it takes into consideration the relative size of the initial investment.       [removed] IRR, because all reinvestment of funds occurs at the discount rate that will make the NPV of the project equal to zero.       [removed] NPV, because all reinvestment of funds occurs at the discount rate that will make the NPV of the project equal to zero. 4. Which one of the following statements concerning capital budgeting is not true? (Points : 2)       [removed] A basic objective underlying capital budgeting is to select assets that will earn a satisfactory return.       [removed] Capital budgeting is the process of planning asset investments.       [removed] Capital budgeting is based on precise estimates of future events.       [removed] Capital budgeting involves estimating the revenues and costs of each proposed project, evaluating their merits, and choosing those worthy of investment.       [removed] Capital budgeting uses after-tax cash flows in the analysis of proposed investments. 5. The term "breakeven after-tax cash flow" represents: (Points : 2)       [removed] A pessimistic estimate in a typical scenario analysis.       [removed] An optimistic estimate in a typical scenario analysis.       [removed] The amount of after-tax cash flow needed to generate a return equal to a project's IRR.       [removed] The cash flow needed to generate an IRR of zero.       [removed] An estimate that can be arrived at using Goal Seek in Excel. 6. The capital budgeting method(s) that is (are) most likely to provide consistency between data for capital budgeting and data for subsequent performance evaluation is (are) the: (Points : 2)       [removed] Pay.

1. 1.
Which one of the following is the estimated rate (i.e.,
percentage) that makes the discounted present value of future
cash flows equal to the initial investment? (Points : 2)
[removed]
Weighted-average cost of capital (WACC).
[removed]
Modified internal rate of return (MIRR).
[removed]
Book (accounting) rate of return.
[removed]
Internal rate of return (IRR).
[removed]
Accounting rate of return (ARR), after tax.
2.
Done on a regular basis, relevant cost pricing in special order
decisions can erode normal pricing policies and lead to: (Points
: 2)
[removed]
Overconfidence in decision-making.
[removed]
A loss in the firm's profitability.
[removed]

2. Conflicting goals between management and sales personnel.
[removed]
A cost leadership strategy.
[removed]
Maximization of resources.
3.
When the internal rate of return (IRR) method and the net
present value (NPV) method do not yield the same
recommendation for the same investment project, the technique
normally selected is: (Points : 2)
[removed]
IRR, because all reinvestment of funds occurs at the rate of the
cost of capital and because it takes into consideration the
relative size of the initial investment.
[removed]
NPV, because it takes into consideration the relative size of the
initial investment.
[removed]
IRR, because all reinvestment of funds occurs at the discount
rate that will make the NPV of the project equal to zero.
[removed]
NPV, because all reinvestment of funds occurs at the discount
rate that will make the NPV of the project equal to zero.

3. 4.
Which one of the following statements concerning capital
budgeting is not true? (Points : 2)
[removed]
A basic objective underlying capital budgeting is to select
assets that will earn a satisfactory return.
[removed]
Capital budgeting is the process of planning asset investments.
[removed]
Capital budgeting is based on precise estimates of future events.
[removed]
Capital budgeting involves estimating the revenues and costs of
each proposed project, evaluating their merits, and choosing
those worthy of investment.
[removed]
Capital budgeting uses after-tax cash flows in the analysis of
proposed investments.
5.
The term "breakeven after-tax cash flow" represents: (Points :
2)
[removed]
A pessimistic estimate in a typical scenario analysis.
[removed]

4. An optimistic estimate in a typical scenario analysis.
[removed]
The amount of after-tax cash flow needed to generate a return
equal to a project's IRR.
[removed]
The cash flow needed to generate an IRR of zero.
[removed]
An estimate that can be arrived at using Goal Seek in Excel.
6.
The capital budgeting method(s) that is (are) most likely to
provide consistency between data for capital budgeting and data
for subsequent performance evaluation is (are) the: (Points : 2)
[removed]
Payback period.
[removed]
Discounted cash flow (DCF) methods.
[removed]
Book (i.e., accounting) rate of return method.
[removed]
Discounted payback period.
[removed]
Cash-flow proxy method.

5. 7.
Which of the following is not one of the four general classes of
real options? (Points : 2)
[removed]
Expansion option.
[removed]
Exercise option.
[removed]
Abandonment option.
[removed]
Investment-timing option (e.g., delay)
8.
The opportunity cost of making a component part in a factory
with no excess capacity is the: (Points : 2)
[removed]
Variable manufacturing cost of the component.
[removed]
Fixed manufacturing cost of the component.
[removed]
Total manufacturing cost of the component.
[removed]
Cost of the production given up in order to manufacture the

6. component.
[removed]
Net benefit foregone from the best alternative use of the
capacity required.
9.
You just bought a new car for $125,000. Before you had time to
get insurance, the car was wrecked. Weird Wally offers to take
it off your hands for $10,000. You can then purchase a similar
model for $128,000. A body-shop with an excellent reputation
offers to rebuild it for $90,000 and loan you a similar model
while the vehicle is being rebuilt. Once rebuilt, the body-shop
claims, it will run like a new car and nobody will be able to tell
the difference. What would you do from a financial point of
view? (Points : 2)
[removed]
Rebuild to save $13,000.
[removed]
Rebuild to save $28,000.
[removed]
Rebuild to save $38,000.
[removed]
Sell to Weird Wally and save $7,000.
10.

7. The opportunity cost of making a component part in a factory
with excess capacity for which there is no alternative use is:
(Points : 2)
[removed]
The variable manufacturing cost of the component.
[removed]
The total manufacturing cost of the component.
[removed]
The total variable cost of the component.
[removed]
The fixed manufacturing cost of the component.
[removed]
Zero.
11.
An effective analysis of sales mix needs to include an analysis
of: (Points : 2)
[removed]
Value chain analysis.
[removed]
Production constraints.
[removed]
Sales mix costing.
[removed]

8. Revenue forecasting.
12.
Omaha Plating Corporation is considering purchasing a machine
for $1,500,000. The machine will generate a constant after-tax
income of $100,000 per year for 15 years. The firm will use
straight-line (SL) depreciation for the new machine over 10
years with no residual value.
What is the payback period for the new machine, under the
assumption that cash inflows occur evenly throughout the year?
(Points : 2)
[removed]
4 years.
[removed]
5 years.
[removed]
6 years.
[removed]
10 years.
[removed]
15 years.
13.
Which of the following statements regarding capital investment

9. analysis is false? (Points : 2)
[removed]
A long-term planning horizon is assumed.
[removed]
Benefits of potential investment projects are conceptually
expressed in terms of accounting income (or reduction in costs).
[removed]
Project acceptance decisions are based on models that explicitly
incorporate the time value of money.
[removed]
Need to incorporate income-tax effects in the analysis, for both
revenues (gains) as well as expenses (losses).
14.
The value chain analysis used in connection with the make or
buy decision often leads a firm to make use of: (Points : 2)
[removed]
Activity-based costing.
[removed]
Cost-volume profit analysis.
[removed]
Outsourcing activities.
[removed]
Relevant cost-based pricing.

10. 15.
Which one of the following methods assumes that all interim
cash inflows generated by an investment earn a return equal to
the internal rate of return (IRR) of the investment? (Points : 2)
[removed]
Modified internal rate of return (MIRR).
[removed]
Payback.
[removed]
Net present value (NPV).
[removed]
Present value index (PI).
[removed]
Internal rate of return method (IRR).
16.
Customer-response time (CRT) is defined as: (Points : 2)
[removed]
The time between when a customer places an order and the time
when the order is received by the customer.
[removed]
The elapsed time between initial customer contact and the time
a customer places an order.

11. [removed]
The time between when a customer places an order and when
that order is manufactured.
[removed]
The time between when an order is started into production and
when that order is completed.
17.
Xero Company's standard factory overhead rate is $3.75 per
direct labor hour (DLH), calculated at 90% capacity = 900
standard DLHs. In December, the company operated at 80% of
capacity, or 800 standard DLHs. Budgeted factory overhead at
80% of capacity is $3,150, of which $1,350 is fixed overhead.
For December, the actual factory overhead cost was $3,800 for
840 actual DLHs, of which $1,300 was for fixed factory
overhead. Assuming the use of a four-way breakdown
(decomposition) of the total overhead variance, what is the
variable factory overhead efficiency variance for December?
(Points : 2)
[removed]
$90 unfavorable.
[removed]
$150 unfavorable.
[removed]
$225 favorable.
[removed]
$425 unfavorable.

12. [removed]
$650 unfavorable.
18.
Xero Company's standard factory overhead rate is $3.75 per
direct labor hour (DLH), calculated at 90% capacity = 900
standard DLHs. In December, the company operated at 80% of
capacity, or 800 standard DLHs. Budgeted factory overhead at
80% of capacity is $3,150, of which $1,350 is fixed overhead.
For December, the actual factory overhead cost was $3,800 for
840 actual DLHs, of which $1,300 was for fixed factory
overhead. Under a four-way breakdown (decomposition) of the
total overhead variance, what is the variable factory overhead
spending variance for December? (Points : 2)
[removed]
$50 favorable.
[removed]
$225 favorable.
[removed]
$425 unfavorable.
[removed]
$610 unfavorable.
[removed]
$650 unfavorable.

13. 19.
Which of the following are computer-based databases that
include comprehensive information about the firm's cost
drivers? (Points : 2)
[removed]
Cost tables.
[removed]
Cost databases.
[removed]
Cost driver tables.
[removed]
Excel tables.
20.
_________________________ is an important first step in value
engineering because it identifies critical consumer preferences
that will define the product's desired functionality. (Points : 2)
[removed]
Consumer analysis
[removed]
Sales force analysis
[removed]
Design analysis
[removed]

14. R&D analysis
[removed]
Market place analysis
21.
Target cost can be defined as: (Points : 2)
[removed]
Manufacturing cost - sales price.
[removed]
Competitive price - desired profit.
[removed]
Desired profit - market price.
[removed]
Target price - manufacturing cost.
22.
Differences in expectation levels lead to two basic types of
standards in a standard cost system: (Points : 2)
[removed]
Ideal and real.
[removed]
Ideal and currently attainable.
[removed]

15. Normal and conceptual.
[removed]
Attainable and real.
[removed]
Current and future.
23.
In a standard cost system, an unfavorable production-volume
variance would result if: (Points : 2)
[removed]
There is an unfavorable labor efficiency variance.
[removed]
There is an unfavorable labor rate variance.
[removed]
Actual production is less than the "denominator volume."
[removed]
There is an unfavorable manufacturing overhead spending
variance.
[removed]
Actual fixed overhead costs are greater than budgeted fixed
overhead costs.
24.

16. Henry Ford was an early pioneer in the use of: (Points : 2)
[removed]
the theory of constraints.
[removed]
target costing.
[removed]
life cycle costing.
[removed]
just-in-time manufacturing.
25.
Which of the following is not a cost system proposed as an
extension to ABC systems, with the overall goal of more
accurately allocating manufacturing overhead costs to outputs?
(Points : 2)
[removed]
Resource consumption accounting (RCA).
[removed]
Flexible standard costing.
[removed]
GPK (Grenzplankostenregnung).
[removed]
Variable costing.

17. 26.
Xero Company's standard factory overhead rate is $3.75 per
direct labor hour (DLH), calculated at 90% capacity = 900
standard DLHs. In December, the company operated at 80% of
capacity, or 800 standard DLHs. Budgeted factory overhead at
80% of capacity is $3,150, of which $1,350 is fixed overhead.
For December, the actual factory overhead cost was $3,800 for
840 actual DLHs, of which $1,300 was for fixed factory
overhead. What was the fixed factory overhead spending
variance for December? (Points : 2)
[removed]
$50 favorable.
[removed]
$225 favorable.
[removed]
$425 unfavorable.
[removed]
$560 unfavorable.
[removed]
$610 unfavorable.
27.
Gerhan Company's flexible budget for the units actually
manufactured in May shows $15,640 of total factory overhead;
this output level represents 70% of available capacity. During

18. May the company applied overhead to production at the rate of
$3.00 per direct labor hour (DLH), based on a denominator
volume level of 6,120 DLHs, which represents 90% of available
capacity. The company spent 5,000 DLHs and incurred $16,500
of total factory overhead cost during May, including $6,800 for
fixed factory overhead. Under a three-variance breakdown
(decomposition) of the total overhead variance, what is the total
factory overhead spending variance for May? (Points : 2)
[removed]
N/A—this variance does not exist in a three-variance analysis of
the total overhead variance.
[removed]
$300 favorable.
[removed]
$380 unfavorable.
[removed]
$480 unfavorable.
[removed]
$1,160 unfavorable.
28.
One important short-term 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 to
the: (Points : 2)
[removed]
Flexible-budget operating income.

19. [removed]
Prior period's operating income.
[removed]
The income reflected in the company's balanced scorecard.
[removed]
Master budget operating income.
[removed]
Industry average operating income.
29.
An organization planned to use $82 of 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 materials is:
(Points : 2)
[removed]
$80,000.
[removed]
$82,000.
[removed]
$96,000.
[removed]
$98,400.

20. 30.
By convention, short-term financial control is accomplished by
all the following except: (Points : 2)
[removed]
Comparing actual to budgeted financial results.
[removed]
Calculating a series of cost and revenue variances at the end of
the period.
[removed]
The use of flexible budgets and standard costs.
[removed]
Explaining the total operating-income variance for a given
period.
[removed]
The use of productivity analysis.
31.
Risk aversion is by: (Points : 2)
[removed]
Lack of a strategic emphasis in decision making.
[removed]
Use of non-strategic performance measurement systems.
[removed]

21. Presence of uncertainty in a manager's environment.
[removed]
A manager's inability to deal with stress.
32.
Table Inc. planned and manufactured 250,000 units of its single
product in 2010, its first year of operations. Variable
manufacturing costs were $30 per unit of production. Planned
and actual fixed manufacturing costs were $500,000. Marketing
and administrative costs (all fixed) were $300,000 in 2010.
Table Inc. sold 200,000 units of product in 2010 at $50 per unit.
Variable costing operating income for 2010 is calculated to be:
(Points : 2)
[removed]
$1,000,000.
[removed]
$3,200,000.
[removed]
$3,300,000.
[removed]
$4,200,000.
33.
Which one of the following refers to the firm's ability to pay its
current operating expenses and maturing debt? (Points : 2)

22. [removed]
Discounted cash flow.
[removed]
Liquidity.
[removed]
Earnings base.
[removed]
Profitability.
[removed]
Purchasing power.
34.
Managers who are risk prone: (Points : 2)
[removed]
Seek risky projects that promise some chance of a low benefit.
[removed]
Seek risky projects that promise some chance of a high benefit,
although the projects may have a risk of low benefit.
[removed]
Seek risky projects.
[removed]
Seek high risk projects that promise some chance of a high
benefit, although the projects may have a very significant risk
of no benefit.

23. 35.
Bonus payment options include all of the following except:
(Points : 2)
[removed]
Perks.
[removed]
Current bonus.
[removed]
Deferred bonus.
[removed]
Stock options.
[removed]
Performance shares.
36.
Which one of the following develops the value of the firm as
the discounted present value of the firm's net free cash flows?
(Points : 2)
[removed]
Discounted cash flow method.
[removed]
Liquidity method.

24. [removed]
Multiples-based method.
[removed]
Profitability method.
37.
For production and support departments, a method of
implementing cost centers that is output-oriented is the: (Points
: 2)
[removed]
Budget slack method.
[removed]
Cost shifting approach.
[removed]
Outsourcing approach.
[removed]
Discretionary-cost method.
[removed]
Engineered-cost approach.
38.
The stock option form of bonus payments to managers usually:
(Points : 2)

25. [removed]
Motivates well even in extended market downturns.
[removed]
Can lose some motivation because of the delay in reward.
[removed]
Focuses on the short-term.
[removed]
Is not consistent with shareholder interests.
39.
Compensation plans for high-level managers and executives are
usually explained in the firm's: (Points : 2)
[removed]
Management Discussion and Analysis (MD&A).
[removed]
Income Statement.
[removed]
Notes to the Financial Statements.
[removed]
Proxy Statement.
40.

26. In a formal management control system, top management sets
expectations for desired manager performance. Which of the
following is not one of the areas in which a formal individual
management control system would be used? (Points : 2)
[removed]
Hiring practices.
[removed]
Promotion policies.
[removed]
Operations.
[removed]
Sales.
[removed]
Organizational culture.
41.
There is a current tax for the manager when which of the
following types of compensation is received? (Points : 2)
[removed]
Qualified stock options
[removed]
Nonqualified stock options
[removed]
Deferred bonus
[removed]

27. Current bonus
42.
SBUs that generate revenues and incur the major portion of the
cost for producing those revenues are: (Points : 2)
[removed]
Revenue centers.
[removed]
Contribution centers.
[removed]
Profit centers.
[removed]
Cost centers.
43.
Which one of the following computes value based on annual
earnings? (Points : 2)
[removed]
Discounted cash flow method.
[removed]
Liquidity method.
[removed]

28. Multiples-based method.
[removed]
Profitability method.
44.
Of most relevance in deciding how or which costs should be
assigned to an SBU is the degree of: (Points : 2)
[removed]
Avoidability.
[removed]
Causality.
[removed]
Controllability.
[removed]
Reliability.
45.
There is a current tax deduction for the firm for which of the
following types of compensation? (Points : 2)
[removed]
Qualified stock options.
[removed]
Nonqualified stock options.

29. [removed]
Deferred bonus.
[removed]
Current bonus.
[removed]
Performance shares.
46.
Risk aversion by managers should be recognized when revising
compensation plans because: (Points : 2)
[removed]
Compensation mix (salary, bonus) can influence a manager's
risk aversion.
[removed]
Most companies want risk averse managers.
[removed]
Most companies want risk taking managers.
[removed]
It costs less to pay risk averse managers.
47.
A strategic business unit (SBU) consists of a well-defined set of
controllable operating activities

30. over/about which the SBU manager is: (Points : 2)
[removed]
Knowledgeable.
[removed]
Responsible for strategy.
[removed]
Responsible for strategy and execution.
[removed]
Responsible for strategy, execution, and performance.
48.
An increase in the market price of a company's common stock
will immediately affect its: (Points : 2)
[removed]
Stock return.
[removed]
Debt to equity ratio.
[removed]
Earnings per share.
[removed]
Economic value added.
[removed]
Return on common stockholders' equity.

31. 49.
There is a common concern today that executive compensation
in the U. S. is: (Points : 2)
[removed]
Not adequately linked to strategic performance measures
[removed]
Ineffective as a performance incentive
[removed]
Not properly disclosed to the IRS
[removed]
Varies too greatly from industry to industry
50.
Cost allocation of service department costs to production
departments make the evaluation and control processes in the
production departments: (Points : 2)
[removed]
Simpler.
[removed]
More complex.
[removed]
Forthright and fair.

32. [removed]
Less efficient.