Multiple Choice Answers

1. The method of accounting for joint product costs that will produce the same gross margin for all products is the replacement method.
physical quantities method.
net realizable value method.
relative sales value method.

2. Which of the following budgets is not required in a service organization? (Points : 1)
cash
sales
labor
cost of goods sold
marketing and administrative expenses

3. Which of the following is not an example of an external failure cost? (Points : 1)
Accepting company liability resulting from product failure
Experiencing decreasing sales as a result of poor-quality products
Repairing or replacing defective products after they’ve been sold
Testing products in use at the customer’s site

4. Long-range planning as a management function is more important (Points : 1)
at top management levels.
at lower management levels.
at middle management levels.
for staff functions than line functions.
for line functions than staff functions.

5. Which of the following statements is (are) false regarding the direct method of allocating service department costs?
(A) The selection of an allocation base in the direct method is easier than the selection of an allocation base in the step method.
(B) Once an allocation is made from a service department using the direct method, no further allocations are made back to that department. (Points : 1)
Only A is false.
Only B is false.
Neither A nor B is false
Both A and B are false.

6. The unused resource capacity is the difference between the resources supplied and the resources (Points : 1)
purchased.
wasted.
used.
on hand.

7. Which of the following activities is most likely to be classified as value-added for a manufacturing company? (Points : 1)
storing
ordering
inspecting
assembling

8. Which of the following statements is false? (Points : 1)
The military is a good example of an organization that is highly decentralized.
The degree of decentralization depends on how many decisions principals delegate to agents.
Management control systems are used to measure the performance of an agent’s decisions.
Most organizations have some operating units that are centralized and some that are decentralized.

9. Which of the following statements is (are) true regarding the master budget?
(A) A master budget consists of (a) organizational goals, (b) strategic long-range profit plan, and (c) tactical short-range profit plan.
(B) A master budget consists of a budgeted (a) income statement, (b) balance sheet, and (c) stockholder’s equity statement. (Points : 1)
Only A is true.
Only B is true.
Both A and B are true.
Neither A nor B is true.

10. Which of the following is not a characteristic of a decentralized organization? (Points : 1)
better use of local knowledge
better use of top management’s time
reduced response time to environmental changes
more decisions made by relatively few individuals