Mockboard (Mas)

1.
Breakeven analysis assumes that over the relevant range

a. Total costs are unchanged c. Selling prices are unchanged
b. Fixed costs are nonlinear d. Variable costs are nonlinear
2. When monthly production volume is constant and sales volume is less than production, profit
determined with variable costing procedures will:
a. Always be greater than profit determined using absorption costing
b. Always be less than profit determined using absorption costing
c. be equal to profit determined using absorption costing
d. be equal to contribution margin per unit times units sold
3. Management accounting is used by an entity’s management for a multitude of purposes that do not
include
a. Marketing c. Evaluation
b. Control d. Reporting
4. Management is considering replacing an existing fixed salary plan to sales commission

compensation plan. If the change is adopted, the company’s
a. Profit must decrease c. Margin of safety must increase
b. Breakeven point must decrease d. Operating leverage must decrease
5. BTS Company sells three chemicals: Petrol, Septine and Tridol. Petrol is the company’s most
profitable product while Tridol is the least profitable. Which one of the following events will definitely
decrease the firm’s overall breakeven point for the upcoming accounting period?
a. A decrease in Tridol’s selling price
b. An increase in the overall market for Septine
c. Installation of new machinery and subsequent layoff of workers
d. An increase in anticipated sales of Petrol relative to sales of Septine and Tridol
Note: Shifting the sales mix to more profitable products decreases break-even point due to higher over
all contribution margin.
6. Which of the following is true of budgets when they are administered thoughtfully?
a. They eliminate subjectivity in performance evaluation
b. They can eliminate the uncertainty faced by a company
c. They promote coordination within the subunits of a company
d. They are a substitute of the planning and coordination functions of management
7. The linear programming method is most useful in optimization problems involving

a. Nonlinear constraints
b. A quadratic objective function
c. A linear objective and linear constraints
d. Investment decisions and other long-term decisions
8. The direct materials price variance is best measured and reported to appropriate management
personnel at the time
a. Purchased quantities exceed standard order size.
b. Quarterly financial statements are prepared.
c. Shipments are received and recorded as purchases.
d. Direct materials are issued to production areas.
9. A company that is operating at full capacity should emphasize those products and services that
have the
a. highest operating income
b. lowest total per-unit costs
c. highest contribution margin per unit
d. highest contribution margin per unit of scarce resource
10. Momo Co. recently reviewed the profitability of each of its segments the company’s Japan unit
projected a loss for the coming period and was shut down. In which one of the following situations
would the total company profits of Momo Co. decrease after shutting down the Japan unit?
a. Japan unit’s projected loss was less than the allocated home office cost.
b. Japan unit’s projected contribution margin was negative.
c. Japan unit’s inventory was transferred to other divisions.
d. Japan unit’s projected fixed costs were eliminated
11. When compared with ideal standards, practical standards
a. Produce lower per-unit product costs.
b. Result in a less desirable basis for the development of budgets.
c. Serve as a better motivating target for manufacturing personnel.
d. Incorporate very generous allowance for spoilage and worker inefficiencies
12. A decrease in demand is represented by:

a. A shift inward of the entire demand curve
b. A shift outward of the entire demand curve
c. A movement along the demand curve in a southeasterly direction
d. A movement along the demand curve in a northwesterly direction
13. The imputed interest rate used in the residual income approach to performance evaluation is
described as
a. Average lending rate for the year being evaluated
b. Historical weighted average cost of capital for the company
c. Target return on investment set by the company’s management
d. Marginal after-tax cost of capital on new equity capital
14. Which balanced scorecard perspective is the objective “reduce staff turnover” most likely to be
included?
a. Learning and growth c. Customer
b. Internal business processes d. Financial
15. The learning curve is also known as

a. Growth curve c. Experience curve
b. Production curve d. Exponential curve
16. The biggest advantage of capitalism is that

a. It forces involuntary exchanges
b. It generates wealth with the help of government intervention
c. Prices hinder in moving assets from high-value to low-value uses
d. It creates wealth by letting a person follow his or her own self-interest
17. Which of the following is a disadvantage of a focus on return on investment?

a. It can encourage managers to focus on cost cutting measures
b. It can encourage managers to cut inventories and reduce overall investment
c. It can encourage managers to focus on the long run at the expense of the short run
d. It can produce a narrow focus on divisional profitability at the expense of profitability for the
overall firm
18. What is ‘strategy mapping’ in the balanced scorecard?

a. Setting the mission
b. Mapping the business processes
c. Identifying causal links between the four perspectives
d. Agreeing the strategy with the director of the business
20. Which of the following statements regarding transfer pricing is false?

a. When idle capacity exists, there is no opportunity cost to producing intermediate products for
another division.
b. Market-based transfer prices should be reduced by any costs avoided by selling internally
rather than externally.
c. No contribution margin is generated by the transferring division when variable cost-based
transfer prices are used.
d. The goal of transfer pricing is to provide segment managers with incentive to maximize the
profits of their division.
21. The standard deviation of a stock investment is best described as the

a. Variability of expected returns c. Trade-off between risk and return
b. Sensitivity to market movements d. Variation around the mean return
NOTE: usual mistake is choice A. The precise description is in choice D where “mean return” refers to the
weighted average of returns with a given probability distribution.
22. The internal rate of return method assumes that the project funds are reinvested at the
a. Hurdle rate c. Cost of equity capital
b. Cost of debt capital d. Rate of return earned on the project
23. In order to enhance the wealth of shareholders and to send positive signals to the market,
corporations generally raise funds using the following order:
a. Retained earnings, debt, equity c. Debt, retained earnings, equity
b. Equity, retained earnings, debt d. Retained earnings, equity, debt
NOTE: Due to flotation costs, internal financing thru retained earnings is generally cheaper than external
financing. For external financing, debt capital is often preferred over equity capital because of its tax
shield features (i.e., interest payments are deductible for tax purposes).
24. Discounted cash flow techniques for analyzing capital budgeting decisions are not normally
applied to projects
a. That are essential to the business
b. Involving replacement of existing assets
c. Having useful lives shorter than one year
d. Requiring no investment after the first year of life
25. A firm with a cash conversion cycle of 175 days can stretch its average payment period from 30
days to 45 days. This will result in a (an)
a. Increase of 15 days in the cash conversion cycle
b. Decrease of 15 days in the cash conversion cycle
c. Increase of 30 days in the cash conversion cycle
d. Decrease of 30 days in the cash conversion cycle
26. Determine the FALSE statement.

a. A security’s historical average return can be used to estimate its actual expected return.
b. The standard error is the standard deviation of the average return.
c. The standard error provides an indication of how far the sample average might deviate from
the expected return.
d. 95% confidence interval for the expected return is defined as the historical average return plus
or minus three standard errors.
NOTE: 95% confidence interval for the expected return is defined as the historical average return plus or
minus TWO (not three) standard errors.
27. The main focal point of financial management in a firm is the

a. Profit earned by the firm
b. Creation of value for shareholders
c. Minimization of the amount of taxes paid by the firm
d. The number and types of products or services provided by thefirm
28. The product strategy in which companies first determine the price at which they can sell a new
product and then design a product that can be produced low enough cost to provide an adequate
profit margin is referred to as
a. Full costing
b. Target costing
c. Predatory pricing
d. Discriminatory pricing
29.An advantage of socialism over capitalism is

a. Centralized command center
b .Promotes pluralism and diversity
c. Better product quality through competition
d. Economic decisions are primarily made by private individuals and business entities rather than by the
state
30. A company is expected to have unsold units on its first year of operations, then its
a. Sales must be below breakeven point
b. Manufacturing variances are expected to be mostly unfavorable
c. Profit under absorption costing must be higher than the profit under variable costing
d. Decision to accept or reject a special order on the unsold units shall include an element of
opportunity cost

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1.

Breakeven analysis assumes that over the relevant range

4. Management is considering replacing an existing fixed salary plan to sales commission

7. The linear programming method is most useful in optimization problems involving

12. A decrease in demand is represented by:

15. The learning curve is also known as

16. The biggest advantage of capitalism is that

17. Which of the following is a disadvantage of a focus on return on investment?

18. What is ‘strategy mapping’ in the balanced scorecard?

20. Which of the following statements regarding transfer pricing is false?

21. The standard deviation of a stock investment is best described as the

26. Determine the FALSE statement.

27. The main focal point of financial management in a firm is the

29.An advantage of socialism over capitalism is

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