Part I: True/False 1. One of the companies to first employ a successful cost leadership strategy was Carnegie Steel Company. 2. The number of units sold is a better independent variable than square feet of all manufacturing facilities in estimating the cost function of a headphone manufacturer. 3. The break-even point for a company with multiple products cannot be determined using a unit contribution margin calculation since there are multiple products each of which has a different unit contribution margin. 4. Differential analysis is an approach to the analysis of relevant costs that focuses on the costs that differ under alternative actions 5. If costs are accurately estimated when establishing an annual predetermined overhead rate, there should never be an overapplied or underapplied overhead balance. 6. The plant-wide rate approach is the simplest to apply, but it is also the most costly to implement, compared to a departmental or activity-based cost allocation system. 7. Just-in-time strives to eliminate inventories by using a pull approach 8. Benchmarking is just a more elegant term for corporate espionage 9. All type of Operations budgeting emphasizes activities performed, rather than traditional expense categories? 10. Unfavorable materials quantity variances may be partially explained by unfavorable materials price variances 11. The balanced scorecard approach for evaluating managerial performance is designed to overcome the limits of single measure performance systems, such as ROI or EVA, by evaluating performance on several key dimensions. 12. A clean audit report asserts among other things that (a) the auditor has prepared all necessary financial statements and (b) management has expressed its opinion that they are prepared in conformity with GAAP. 13. According to the revenue recognition principle, companies are required to record revenue when cash is received as this provides the most objective evidence for the auditors. 14. To close revenue accounts, a company must debit Retained Earnings because Revenue has a credit balance and debits must equal credits. 15. Net operating asset turnover (NOAT) measures a companys profitability. 16. When a company reports a deferred tax asset it means that the company will receive a tax benefit in the future. 17. LIFO inventory costing yields more accurate reporting of the inventory balance on the balance sheet. 18. Fair-value changes in available-for-sale investments are recognized in the income statement as unrealized gains or losses. 19. A bond selling for an amount above face value is said to be selling at a discount. 20. A stock split is a monetary transaction. Consequently, a company that splits its stock must make several financial statement adjustments 21. The purpose of cost assignment is to match costs in a common cost pool to cost objectives 22. Target costing is generally more beneficial with products that have a short life cycle, rather than a long life cycle 23. The traditional justifications of budgeting include improved communications, improved planning, and improved sales. 24. A labor efficiency variance results from the inefficient use of labor quantity to produce a given amount of product or service 25. In the short run, the best profitability number for deciding the impact of discontinuing a segment is segment margin. Part II: Multiple C hoice 1. The process of selecting strategies to achieve goals is often referred to as: A) Controlling B) Organizing C) Motivating D) Planning 2. This is an organizational cost driver for a discount department store chain: A) The decision to price lower than a key competitor B) The decision to rearrange merchandise within a store C) The decision to issue a purchase order for raw materials D) The decision to sale product globally versus only domestically 3. Mary French uses gas to heat her home. She has accumulated the following information regarding her monthly gas bill and monthly heating degree-days. The …
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