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UNIT 5 QUIZ 1. Question : When a firm determines the desired cost for a product or service, given a competitive market price, in order to earn a desired profit, the firm is exercising: Student Answer: Target costing. Life cycle costing. Variable costing. Absorption costing. Competitive costing.

Question 2. Question : The theory of constraints (TOC) emphasizes which of the following? Student Answer: Developing competitive constraints. Finding and eliminating design constraints. Removing bottlenecks from the production process. Improving overall production efficiency.


Question 3. Question : Generally, firms will price a product more competitively at which stages of the product's sales life cycle? Student Answer: Product introduction and Growth. Maturity and Decline. Throughout the cycle. At the end of the life cycle. UNIT 5 QUIZ Question 4. Question : Throughput margin is defined as sales less: Student Answer: Direct labor costs. Direct material costs. Direct labor and material costs. Processing costs. Manufacturing costs.

Question 5. Question : Traditional financial control systems have recently been criticized because: Student Answer: They use flexible, not static, budgets. They generally lead to goal-congruent behavior on the part of managers.


They focus more in improving basic business processes than short-term financial results. They fail to incorporate nonfinancial performance indicators into the evaluation process. They provide performance data on a real-time basis.

Question 6. Question : Which one of the following is the difference between the actual hourly wage rate and the standard hourly wage rate, multiplied by the actual direct labor hours worked during a period? Student Answer: Total direct labor standard cost variance. Direct labor efficiency variance. Direct labor usage variance. Direct labor flexible-budget variance. Direct labor rate variance.

UNIT 5 QUIZ Question 7. Question : A "standard cost" is a predetermined amount (e.g., cost) that: Student Answer: Should be incurred under relatively efficient operating conditions. Will be incurred for an operation or a specific objective. Must occur for an operation or a specific objective. Cannot be changed once it is established by management.


Is useful for planning and control but not inventory valuation purposes.

Question 8. Question : The difference between the total actual sales revenue of a period and the total flexible-budget sales revenue for the units sold during the period is the: Student Answer: Total flexible-budget variance. Sales volume variance. Selling price variance. Operating income flexible-budget variance. Operating income variance.

Question 9. Question : Which of the following is not a plausible cause of a systematic variance? Student Answer: Prediction error. Modeling error. Implementation error. Measurement error. Random error


UNIT 5 QUIZ Question 10. Question : Which one of the following journal entries in a standard cost system would be used to apply factory overhead costs to production? Student Answer: A debit to the factory overhead account, at standard cost. A credit to the factory overhead account, at standard cost. A debit to WIP inventory, at actual cost. A credit to Finished Goods Inventory, at standard cost.

Question 11. Question : Which of the following factors is not usually important when deciding whether to investigate a variance? Student Answer: Magnitude of the variance. Trend of the variance over time. Whether the variance is favorable or unfavorable. Cost of investigating the variance. Likelihood that the variance will recur in the future.

Question 12. Question : The difference between total variable overhead cost incurred and the standard variable overhead cost based on the actual quantity of the cost driver used to apply variable overhead is the: Student Answer:


Total variable overhead variance. Variable overhead spending variance. Variable overhead rate variance. Variable overhead efficiency variance.

UNIT 5 QUIZ Question 13. Question : Electronic Component Company (ECC) is a producer of highend 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. Assuming sales and marketing are not correct in their estimation and the volume of sales is not changed and ECC meets the competitive price, what is the target cost if ECC wants to maintain its same income level? Student Answer: $210. $200. $190. $180.


Question 14. Question : Lucky Company's direct labor information for the month of February is as follows: Actual DL Hours Word (AQ) = 61,500 Standard DL Hours Allowed (SQ) = 63,000 Total Payroll for DL = $774,900 DL Efficiency Variance = $18,000 The standard direct labor rate per hour is: Student Answer: $12.00. $12.30. $12.60. $13.20. $13.50. UNIT 5 QUIZ

Question 15. Question : Lucky Company's direct labor information for the month of February is as follows: Actual DL Hours Word (AQ) = 61,500 Standard DL Hours Allowed (SQ) = 63,000 Total Payroll for DL = $774,900 DL Efficiency Variance = $18,000 The actual direct labor rate per hour (AP) is: Student Answer: $12.00. $12.30.


$12.60. $13.20. $13.50.

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