# GB519: Measurement and Decision Making unit 5 quiz

1.During the sales life cycle, which is an example of what happens during the maturity phase? (Points : 2)

Sales and price decline, as do the number of competitors.
Sales continue to increase but at a decreasing rate. The number of competitors and product variety decline.
Sales increase rapidly along with an increase in product variety.
Sales rise slowly as customers become aware of the new product or service. Product variety is limited.

2.Which of the following is a common type of value engineering in which the performance and cost of each major function or feature of the product is examined? (Points : 2)

Cost analysis.
Variable design engineering.
Cost-based value engineering.
Functional analysis.
Design analysis.

3.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)

\$50 favorable.
\$225 favorable.
\$425 unfavorable.
\$560 unfavorable.
\$610 unfavorable.

4.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)

Flexible-budget operating income.
Prior period’s operating income.
The income reflected in the company’s balanced scorecard.
Master budget operating income.
Industry average operating income.

5.Which of the following are computer-based databases that include comprehensive information about the firm’s cost drivers? (Points : 2)

Cost tables.
Cost databases.
Cost driver tables.
Excel tables.

6.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)

\$80,000.
\$82,000.
\$96,000.
\$98,400.

7.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)

\$50 favorable.
\$225 favorable.
\$425 unfavorable.
\$610 unfavorable.
\$650 unfavorable.

8.Henry Ford was an early pioneer in the use of: (Points : 2)

the theory of constraints.
target costing.
life cycle costing.
just-in-time manufacturing.

9._________________________ is an important first step in value engineering because it identifies critical consumer preferences that will define the product’s desired functionality. (Points : 2)

Consumer analysis
Sales force analysis
Design analysis
R&D analysis
Market place analysis

10.A deviation from standard that occurs during operations as a result of operator errors is an example of a(n): (Points : 2)

Random error.
Prediction error.
Implementation error.
Modeling error.
Accounting error.

11.If there is a 90 percent chance that an observed variance is random, the cost of conducting an investigation is \$1,000, the cost to correct a variance if the investigation reveals a nonrandom cause, and the amount of loss a company expects to incur if it does not investigate a variance that had a nonrandom cause is \$30,000, what is the expected cost of not investigating the variance? (Points : 2)

\$30,000.
\$1,500.
\$0.
\$3,900.
\$3,000.

12.Which one of the following is the difference in direct material costs between the actual amount incurred and the total standard cost in the flexible budget for the units manufactured during the period? (Points : 2)

Direct materials price variance.
Direct materials mix variance.
Direct materials usage variance.
Direct materials flexible-budget variance.
Direct materials efficiency variance.

13.In September, Larson Inc. sold 40,000 units of its only product for \$240,000 and incurred a total cost of \$225,000, of which \$25,000 is fixed costs. The flexible budget for September showed total sales of \$300,000. Among variances of the period were: total variable cost flexible-budget variance, \$8,000U; total flexible-budget variance, \$63,000U; and, sales volume variance, in terms of contribution margin, \$27,000U. The total number of budgeted units reflected in the master budget for September was: (Points : 2)

36,000 units.
40,000 units.
45,000 units.
48,000 units.
50,000 units.

14.Target cost can be defined as: (Points : 2)

Manufacturing cost – sales price.
Competitive price – desired profit.
Desired profit – market price.
Target price – manufacturing cost.

15.The difference between the actual fixed overhead cost incurred during a period and the budgeted fixed overhead cost for the period is the: (Points : 2)

16.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)

Resource consumption accounting (RCA).
Flexible standard costing.
GPK (Grenzplankostenregnung).
Variable costing.

17.During the sales life cycle, which is an example of what happens during the introduction phase? (Points : 2)

Sales and price decline, as do the number of competitors.
Sales continue to increase but at a decreasing rate. The number of competitors and product variety decline.
Sales increase rapidly along with an increase in product variety.
Sales rise slowly as customers become aware of the new product or service. Product variety is limited.

18.Which of the following is not a plausible cause of a systematic variance? (Points : 2)

Prediction error.
Modeling error.
Implementation error.
Measurement error.
Random error.

19.The sequence of phases in the product or service’s life in the market – from the introduction of the product or service to the growth in sales and finally maturity, decline, and withdrawal from the market is the: (Points : 2)

Sales life cycle.
Target life cycle.
Market life cycle.
Critical life cycle.
Cost life cycle.

20.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)

\$90 unfavorable.
\$150 unfavorable.
\$225 favorable.
\$425 unfavorable.
\$650 unfavorable.

21.Electronic Component Company is a producer of high-end video and music equipment. ECC currently sells its top of the line “ECC” DVD player for a price of \$250. It costs ECC \$210 to make the player. ECC’s main competitor is coming to market with a new DVD player that will sell for a price of \$220. ECC feels that it must reduce its price to \$220 in order to compete. The sales and marketing department of ECC believes the reduced price will cause sales to increase by 15%. ECC currently sells 200,000 DVD players per year.
Irrespective of the competitor’s price, what is EEC’s required selling price if the target profit is 25% of sales and current costs cannot be reduced? (Points : 2)

\$280.00.
\$292.50.
\$299.00.
\$308.50.

22.An organization subject to intense competitive pressures would most likely use: (Points : 2)

Ideal standards for its operations.
Real standards for its operations.
Caution in even using standards.
A mix of types of standards.

23.If inventories in a business using a standard cost system are insignificant, the firm would be justified (in a practical sense) by disposing of variances each year: (Points : 2)

As an adjustment to the finished goods inventory only.
As an adjustment to cost of goods sold only.
As adjustments to both inventory accounts and the cost of goods sold for the period.
As a special item (gain or loss) on the income statement for the period.
As an adjustment to the work-in-process (WIP) inventory only.

24.Which of the following statements about the standard variable factory overhead application rate is true? (Points : 2)

The rate is a function of the denominator volume chosen.
The rate is used for cost-control, but not product-costing purposes.
The rate is used for product-costing, but not cost-control purposes.
The same rate is used for both product-costing and cost-control purposes.
Generally speaking, the rate will be independent of the allocation base chosen to apply overhead.

25.Which of the following is a common form of value engineering in which the design team prepares several possible designs of the product, each having similar features with different levels of performance and different costs? (Points : 2)

Cost analysis.
Variable design engineering.
Cost-based value engineering.
Functional analysis.
Design analysis.

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