This document contains 25 multiple choice questions related to accounting concepts such as cost allocation, activity-based costing, transfer pricing, and performance measurement. The questions cover topics like identifying cash flows, selecting appropriate cost hierarchy levels, calculating variances, and matching balanced scorecard perspectives to performance measures.

1. 1.
(Points: 16.0) Identify each of the following cash flows in 1-
8 and their association with (a) initial, (b) periodic, or (c)
terminal cash flows for an investment project.
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The project asset cost
terminal cash flows
Expenditures for fixed and variable production costs
initial cash flows
Tax on gain (loss) on disposal of the investment
periodic cash flows
Loss in tax savings from lost depreciation
Receipts from sales
Freight and installation costs
Proceeds of salvage of equipment
Opportunity costs of undertaking this particular project

2. Matching pairs
(Match options are: terminal cash flows, initial cash flows,
periodic cash flows)
1. The project asset cost
2. Expenditures for fixed and variable production costs
3. Tax on gain (loss) on disposal of the investment
4. Loss in tax savings from lost depreciation
5. Receipts from sales
6. Freight and installation costs
7. Proceeds of salvage of equipment
8. Opportunity costs of undertaking this particular project
2.
(Points: 16.0) Select the appropriate cost hierarchy level for
each of the following questions.
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Human Resource Department
Product-level activity
Top Management
Unit-level activity
Machine set-ups
Facility-level activity
Direct Material costs
Batch-level activity

3. Customer service
Customer-level activity
Customer files
Design work
Advertising
Matching pairs
1. Human Resource Department
2. Top Management
3. Machine set-ups
4. Direct Material costs
5. Customer service
6. Customer files
7. Design work
8. Advertising
(Match options are: Product-level activity, unit-level activity,
Facility-level activity, Batch-level activity, Customer-level
activity)3.
(Points: 2.0) Activity-based costing is commonly used with
standard costing. Using activity-based costing, a company has
1. multiple cost drivers.

4. 2. a single cost driver
3. the same cost drivers as standard costing.
4. no cost drivers.
4.
(Points: 2.0) What is the result of substituting computerized
equipment for direct labor?
1. Less direct labor and more manufacturing overhead.
2. Less direct material and more manufacturing overhead.
3. Less manufacturing overhead and more direct materials.
4. Less direct labor and more direct material.
5.
(Points: 2.0) ABC Company
ABC Company reports the following information for the most
recent period when 2,750 units were produced.
Cost
Standard
Actual
Materials
2 lbs. @ $5.00 per pound
7,000 pounds purchased for $34,650
Labor
0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour

5. Refer to ABC Company. Calculate the direct materials
efficiency variance.
1. $7,150 U
2. $7,150 F
3. $7,500 U
4. $7,500 F
6.
(Points: 2.0) ABC Company
ABC Company reports the following information for the most
recent period when 2,750 units were produced.
Cost
Standard
Actual
Materials
2 lbs. @ $5.00 per pound
7,000 pounds purchased for $34,650
Labor
0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour
Refer to ABC Company. Calculate the direct materials price

6. variance.
1. $350 F
2. $7,150 U
3. $-0-
4. $350 U
7.
(Points: 2.0) ABC Company
ABC Company reports the following information for the most
recent period when 2,750 units were produced.
Cost
Standard
Actual
Materials
2 lbs. @ $5.00 per pound
7,000 pounds purchased for $34,650
Labor
0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour
Refer to ABC Company. Calculate the total direct materials
variance.

7. 1. $7,850 U
2. $7,000 U
3. $7,150 U
4. $7,500 U
8.
(Points: 2.0) ABC Company
ABC Company reports the following information for the most
recent period when 2,750 units were produced.
Cost
Standard
Actual
Materials
2 lbs. @ $5.00 per pound
7,000 pounds purchased for $34,650
Labor
0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour
Refer to ABC Company. Calculate the direct labor price
variance.
1. $270 U
2. $130 U

8. 3. $70 F
4. $200 U
9.
(Points: 2.0) ABC Company
ABC Company reports the following information for the most
recent period when 2,750 units were produced.
Cost
Standard
Actual
Materials
2 lbs. @ $5.00 per pound
7,000 pounds purchased for $34,650
Labor
0.50 hours @ $8.00 per hour
1,400 hours @ $7.95 per hour
Refer to ABC Company. Calculate the direct labor efficiency
variance.
1. $270 U
2. $70 F
3. $200 U
4. $130 U
10.

9. (Points: 2.0) Which of the following is management’s
challenge when setting transfer prices?
1. Ensuring both the buyer and seller have goal congruence with
respect to the organization’s goals.
2. Ensuring the seller has goal congruence with respect to the
organization’s goals.
3. Ensuring the buyer has goal congruence with respect to the
organization’s goals.
4. Ensuring either the buyer or the seller, but not both, has goal
congruence with respect to the organization’s goals.
11.
(Points: 2.0) What is generally considered the best transfer
pricing basis when there is a competitive market for the product
and market prices are readily available?
1. Market price-based transfer pricing
2. Fixed cost-based transfer pricing
3. Variable cost-based transfer pricing
4. Fixed price-based transfer pricing
12.
(Points: 2.0) Transfer prices are the prices charged
1. for the goods produced by one division to another division

10. that needs those goods.
2. for distributing goods from one warehouse to another.
3. when delivering goods to the customer.
4. when transferring goods to international divisions.
13.
(Points: 2.0) What transfer pricing mechanism generally
applies a normal markup to costs as a surrogate for market
prices when intermediate market prices are not available?
1. Activity-based costing
2. Cost-plus transfer pricing
3. Full-absorption costing
4. Fixed price-based transfer pricing
14.
(Points: 2.0) The following is a measure for assessing how
effectively management used the funds invested and is the ratio
of divisional sales to the investment in divisional assets.
1. profit margin percentage.
2. investment realization ratio.
3. return on investment.
4. investment turnover ratio.
15.

11. (Points: 2.0) Which of the following best indicates how much
shareholder wealth is being created by company managers?
1. Return on investment divided by retained earnings.
2. Economic value added (EVA).
3. Return on investment divided by total liabilities.
4. Return on investment divided by total assets.
16.
(Points: 2.0) Why would the calculation of economic value
added (EVA) alleviate the shortcoming of the return on
investment measurement?
1. Because it is required by generally accepted accounting
principles.
2. Because it assures compliance with Internal Revenue Service
Code requirements.
3. Because it is required for Securities and Exchange
Commission reporting.
4. Because managers many not accept good investment
opportunities if the ROI of the investment is lower than the
present ROI of the division.
17.
(Points: 2.0) What is economic value added (EVA)?

12. 1. The same as the rate of return on shareholders equity.
2. The same as the rate of return on total assets.
3. The amount of earnings generated above the cost of funds
invested to generate those earnings.
4. The same as the rate of return on liabilities.
18.
(Points: 24.0) Marrs Company is implementing a balanced
scorecard approach to improve performance. Match each of the
following perspectives of the balanced scorecard with the
performance measures from Marrs Company listed in to
numbers one through twelve below.
(Keep in mind that a performance measure could be associated
with more than one balanced scorecard perspective.)
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Employee productivity
Internal business perspective
Employee satisfaction
Financial perspective
Return on Investment
Customer perspective
Customer satisfaction
Both internal business perspective and customer perspective

13. Employee turnover
Learning and growth perspective
On-time delivery performance from suppliers
Percent of customers who are repeat customers
On-time delivery performance to customers
Product quality
Economic value added
Throughput time
Percent of sales dollars invested in employee training
Matching pairs
1. Employee productivity
2. Employee satisfaction

14. 3. Return on Investment
4. Customer satisfaction
5. Employee turnover
6. On-time delivery performance from suppliers
7. Percent of customers who are repeat customers
8. On-time delivery performance to customers
9. Product quality
10. Economic value added
11. Throughput time
12. Percent of sales dollars invested in employee training
(Match options are: Internal business perspective, Financial
perspective, Customer perspective, Both internal business
perspective and customer perspectiveLearning and growth
perspective)19.
(Points: 2.0) How can a department manager’s salary be
characterized?
1. direct cost of the department, but indirect to the units the
department produces.
2. variable cost of the department, but direct to the units the
department produces.
3. indirect cost of the department, but direct to the units the
department produces.
4. process cost of the department, but indirect to the units the
department produces.
20.
(Points: 2.0) Costs of operating the human resources,
accounting, computer support, and maintenance departments are
allocated to other departments. All are examples of which of the
following?

15. 1. common departments.
2. direct departments.
3. producing departments.
4. service departments.
21.
(Points: 2.0) What is the proper sequence of steps in
allocating costs to production departments?
1. Assign direct costs to departments, allocate indirect costs to
departments, and allocate service department costs to
production departments.
2. Assign indirect costs to departments, allocate service
department costs to departments, and allocate direct costs to
production departments.
3. Assign indirect costs to departments, allocate direct costs to
departments, and allocate service department costs to
production departments.
4. Assign service department costs to production departments,
allocate direct costs to departments, and allocate indirect costs
to production departments.
22.
(Points: 2.0) Which of the following statements best
describes cost allocation?

16. 1. A company can maximize or minimize total company income
by selecting different bases on which to allocate indirect costs.
2. A company should select an allocation base to raise or lower
reported income on given products.
3. A company's total income will remain unchanged no matter
how indirect costs are allocated.
4. A company, as a general rule, should allocate indirect costs
randomly or based on an "ability-to-bear" criterion.
23.
(Points: 2.0) Marketing and administrative costs are allocated
to departments for purposes of performance evaluation using
techniques
1. different than those employed in allocating common
department costs.
2. similar to those employed in allocating production
department costs.
3. similar to those employed in allocating service department
costs.
4. different than those employed in allocating service
department costs.
24.
(Points: 2.0) Joint-process cost allocations arise from the
need to assign joint-process costs to

17. 1. a single product manufactured from two or more common
inputs.
2. two or more products manufactured from two or more
common inputs.
3. a single product manufactured from a common input.
4. two or more products manufactured from a common input.
25.
(Points: 2.0) The method of allocating joint costs used when
product prices are not set by the market (for example with
heavily regulated companies) is called the
1. physical quantities method.
2. absolute quantities method.
3. regulation method.
4. physical qualities method.