Multiple Choice Answers

1. The pricing objective of maximizing profits:
a) has not been affected by other, more socially focused concerns.
b) is to be implemented under any and all circumstances.
c) has not always been considered the underlying objective of any pricing policy.
d) must be considered when determining the price needed to increase market share.
2. To stay in business, a company must have a selling price that is:
a) acceptable to the customer.
b) able to recover the variable costs of production.
c) the highest in the marketplace.
d) equal to or lower than the company’s costs per unit.
3. An internal issue to be considered when setting a price is:
a) whether the process is labor-intensive or automated.
b) the customer’s preferences for quality versus price.
c) current prices of competing products or services.
d) the life of the product or service.
4. An external issue to be considered when setting a price is:
a) the variable costs of the product or service.
b) the desired rate of return.
c) the quality of materials and labor.
d) the number of competing products or services.
5. Fixed costs that change for activity outside the relevant range would include:
a) supervision costs.
b) electricity costs.
c) production supplies costs.
d) raw materials costs.
6. When gross margin pricing is used, the markup percentage includes:
a) desired profits plus total selling, general, and administrative expenses.
b) only the desired profit factor.
c) total costs and expenses.
d) desired profits plus total fixed production costs plus total selling, general, and administrative expenses.
. The return on assets pricing method:
a) has very little appeal and support.
b)has a primary objective of earning a minimum rate of return on assets.
c) is a crude approach to pricing and should be used as a last resort.
d) replaces the desired rate of return used in cost-based pricing methods with a desired profit objective.
8. The pricing method that establishes selling prices based on a stipulated rate above total production costs is:
a) return on assets pricing.
b) target cost pricing.
c) gross margin pricing.
d) time and materials pricing.
9. A major advantage of the target costing approach to pricing is that target costing:
a) allows a company to analyze the potential profit of a product before spending money to produce the product.
b) is not dependent on customers’ quality versus price decisions.
c) identifies unproductive assets.
d) anticipates the product’s profitability midway through its life cycle.
10. Use of market transfer prices:
a) is the only acceptable approach in a free enterprise economy.
b) usually does not cause the selling division to ignore negotiating attempts by the buying division.
c)   may cause an internal shortage of materials.
d) usually does not work against the operating objectives of the company as a whole.
Question 1
How does an ERP system differ from an MIS?
A. The ERP system informally links the different areas of management for specific purposes.
B. There is no difference.
C. The ERP system combines all areas of management into one centralized data warehouse.
D. The ERP system can be used only in a service business.
Question 2
Quality costs of conformance and costs of nonconformance are related to each other:

A. rarely.
B. directly.
C. indirectly.
D. inversely.
Question 3
The overall objective of controlling the costs of quality is to eliminate:
A. appraisal costs.
B. costs of nonconformance.
C. costs of conformance.
D. the costs of quality.
Question 4
Some companies have moved to JIT without changing the substance of their accounting systems. Relying on the former accounting system may present problems for management because:
A. traditional accounting systems are designed to track items (labor efficiency, purchase price, overhead absorption) that are no longer primary concerns of management.
B. control of cost drivers will be lost.
C. managers do not understand the new manufacturing environment.
D. traditional accounting systems discourage the creation of large inventories that are necessary to ensure uninterrupted production runs.
Question 5
With respect to product quality:
A. quality must be “traded off” against cost considerations.
B. the best quality control systems rely on inspection points to ensure product quality.
C. accountants do not need to be concerned with quality control reporting, as it is entirely nonfinancial in nature.
D. quality output starts with correct product design.
Question 6
CAD is:
A. a cost allocating decision.
B. computer aided downtime.
C. a computer-based engineering system.
D. an organizational environment.
Question 7
Which of the following specific measures of vendor quality would be used when evaluating vendors that supply a company with direct materials?
A. Defect-free material as a percentage of total materials received
B. Number of customer complaints
C. Time it takes to make a product
D. All would be considered to assess vendor quality of direct materials
Question 8
The term given to the act of a company comparing its processes to similar processes in a successful company is called:
A. process mapping.
C. benchmarking.
D. return on quality.
Question 9
The award given to companies that achieve distinctive results in implementing total quality control is the:
B. Malcolm Baldrige Quality Award.
C. Deming Application Prize.
D. Kaizen Prize.
Question 10
A producing center is another term for a(n):
A. service center.
B. cost center.
C. revenue center.
D. activity center.
Question 11
A discretionary cost center is another term for a(n):
A. service center.
B. activity center.
C. cost center.
D. revenue center.
Question 12
The allocation base used to assign service center costs is called a:
A. service base.
B. cost driver.
C. revenue driver.
D. revenue base.
Question 13
An organization that does not require precise measurements of the use of services probably would allocate its service center costs by:
A. using some form of the step method.
B. applying the direct method.
C. each revenue center’s ability to absorb the cost.
D. the actual usage of the service by the revenue centers.
Question 14
Which of the following is a problem inherent in charging revenue centers for usage of service centers?
A. It is difficult to determine the amount that each revenue center should be charged for services.
B. The usage among the revenue centers could vary widely.
C. A particular revenue center may not use any of the support of a specific service center.
D. The revenue centers could choose to use services from outside the company instead.
Question 15
Another name for the simultaneous equation method is the:
A. reciprocal method.
B. two-step method.
C. step down method.
D. indirect method.
Question 16
Which of the following methods allocates each service center’s costs to all centers supported?
A. Simultaneous equation method
B. Step method
C. Direct method
D. None of the above
Question 17
Activity-based overhead rates differ from departmental overhead rates in that:
A. they are not used to help determine the full cost of a product or service.
B. they do not include any costs allocated from service centers in their calculation.
C. there are more than one per department.
D. they lessen a manager’s ability to control costs.
Question 18
The cost allocation method that assigns joint costs to products based on their relative market value at the split-off point is the:
A. simultaneous equation method.
B. relative sales value method.
C. net realizable value method.
D. physical units method.
Question 19
Joint costs are:
A. incurred prior to the separation of joint products.
B. incurred after separation of joint products.
C. incurred prior and after separation of joint products.
D. None of the above
Question 20
Which of the following is an example of a by-product?
A. Sawdust from a lumber mill used to make fireplace logs
B. Broken cookies used in cookies-and-cream ice cream
C. Pineapple skins from processing pineapple used for animal feed
D. None of the above
Question 1   Which of the following is a component of productivity in the 4-P cycle of continuous improvement?  A. System flexibility B. Organizational learning C. Reduced waste and rework D. Technological advancement
Question 2   __________ is the process of working with and through others to achieve organizational objectives in an efficient and ethical manner.  A. Organizational manner B. Sociology C. Organization theory D. Management
Question 3   If Monica wants to be an effective manager, which of the following skills, according to Wilson’s research, should she focus on developing?  A. Vertical communication B. A monocultural orientation  C. Develop narrow specialty D. Empowerment and delegation
Question 4   The nature of interpersonal relationships for 21st-century managers should be which of these?  A. Competitive B. Judicial C. Neutral D. Cooperative
Question 5   In today’s workplace, __________ are becoming the primary building block of organizations.  A. teams B. suppliers C. contingent employees D. individuals
Question 6   Which of the following is NOT a landmark in the evolution of understanding and managing people?  A. The human relations movement B. The total quality management movement C. The glass ceiling movement D. The contingency approach to management
Question 7   Which of the following is a Theory X assumption about people at work?  A. Work is a natural activity. B. People are capable of self-direction if they are committed to objectives. C. The typical employee can learn to accept and seek responsibility. D. Most people prefer to be directed.
Question 8   In a recent survey of managers from 36 countries by the American Management Association, __________ and __________ ranked as the corporate world’s top two concerns.  A. quality; productivity B. customer service; quality C. productivity; employee satisfaction D. morale; performance
Question 9   The pioneering work on TQM was done by:  A. Mayo. B. Deming. C. Follett. D. McGregor.
Question 10   Which approach calls for using management concepts and techniques in a situationally appropriate manner?  A. One best way approach B. Human relations approach C. Theory X management approach D. Contingency approach
Question 11   The three fundamental layers of organizational culture are:  A. observable artifacts, ethics, and socialization. B. ethics, socialization, and mentoring. C. ethics, observable artifacts, and mentoring. D. observable artifacts, espoused values, and basic underlying assumptions.
Question 12   At the more visible level, culture represents:  A. espoused values. B. basic underlying assumptions. C. ethics. D. observable artifacts.
Question 13   The values and norms that are exhibited by employees are called:  A. espoused values. B. ethical values. C. socialized values. D. enacted values.
Question 14   Which of the following represents the core of organizational culture?  A. Observable artifacts B. Basic assumptions C. Ethics D. Espoused values
Question 15   According to research, constructive culture is negatively correlated to:  A. job satisfaction. B. intention to stay at the company. C. innovation. D. work avoidance.
Question 16   According to research, financial performance was higher among companies that had:  A. culture clashes. B. adaptive and flexible cultures. C. young managers in top management positions. D. established cultures with at least 20 years of experienced management team.
Question 17   The process by which employees learn an organization’s values, norms, and required behaviors is referred to as:  A. mentoring. B. organizational enculturation. C. organizational socialization. D. espoused value system indoctrination.
Question 18   Which phase of socialization requires employees to master important tasks and roles and to adjust to their work group’s values and norms?  A. Renewal B. Change and acquisition C. Anticipatory socialization D. Encounter
Question 19   Which phase of socialization requires employees to master important tasks and roles and to adjust to their work group’s values and norms?  A. Renewal B. Change and acquisition C. Anticipatory socialization D. Encounter
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