Business Strategy and Cost Management
Final Exam Questions
Course Introduction
Business Strategy and Cost Management explores the integration of strategic planning and cost control in modern organizations. The course examines how businesses develop competitive strategies and utilize cost information to make informed decisions, allocate resources efficiently, and drive organizational success. Topics include strategic analysis, cost behavior, budgeting, performance measurement, and the implementation of management accounting tools. Through case studies and real-world applications, students learn to link financial data with strategic objectives, enabling them to enhance value creation and sustain long-term growth in dynamic business environments.
Recommended Textbook
Cost Management A Strategic Emphasis 6th Edition by Edward Blocher
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Page 2
Chapter 1: Cost Management and Strategy
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Sample Questions
Q1) Target costing:
A)Determines cost based on an expected market demand for the product.
B)Determines cost based on a budget.
C)Determines cost based on standard cost.
D)Determines cost based upon market price and desired profit.
Answer: D
Q2) Of the following, which aspect of a contemporary management technique is a framework and process that organizations use to manage the occurrence of possible events that could negatively or positively affect the company's competitiveness and success?
A)Total quality management
B)Lean accounting
C)The theory of constraints
D)Enterprise sustainability
E)Enterprise risk management
Answer: E
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Q1) With regard to critical success factors, which one of the following would not be considered a financial measure of success?
A)Cash flow.
B)Growth in industry productivity.
C)Sales growth.
D)Earnings growth.
E)Reduction in the cost of inventory.
Answer: B
Q2) Which of the following does not represent a possible opportunity for a manufacturing firm as a part of SWOT analysis?
A)Demographic trends.
B)Technological advances in the industry.
C)A patent developed by another firm for manufacturing a product.
D)Changes in regulation of the industry.
E)Changes in the economic environment facing all industries.
Answer: C
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Chapter 3: Basic Cost Management Concepts
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Sample Questions
Q1) Structural cost drivers are to executional cost drivers as:
A)Long-term is to short-term.
B)Fixed is to variable.
C)Total is to partial.
D)Direct is to indirect.
Answer: A
Q2) Complete the inventory formula: Beginning Inventory + ______ = ________ + Ending Inventory
A)Cost added; cost transferred out
B)Cost transferred out; cost added
C)Cost of goods sold; cost added
D)Cost added; cost of goods manufactured
Answer: A
Q3) There is no convenient or economical way to trace a(n) _______ from the cost to the cost pool or from the cost pool to the cost object.
A)Direct cost
B)Indirect cost
C)Cost assignment
D)Cost allocation
Answer: B
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Chapter 4: Job Costing
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Sample Questions
Q1) The debit to Work-in-Process Inventory account for materials is:
A)$110,000.
B)$30,000.
C)$90,000.
D)$80,000.
E)$50.000.
Q2) The cost of goods manufactured during the year is:
A)$850,000.
B)$348,000.
C)$672,000.
D)$835,000.
E)$811,000.
Q3) Which of the following is not a cost element on the job cost sheet?
A)Materials.
B)Labor.
C)Hours.
D)Overhead.
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Chapter 5: Activity-Based Costing and Customer
Profitability Analysis
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Sample Questions
Q1) In regard to selling activities, which one of the following would be a cost driver for selling expense?
A)Number of invoices.
B)Number of sales calls.
C)Number of production runs.
D)Number of shipments.
E)All of the above.
Q2) Using ABC, how much product-level overhead is assigned to the current order for Men's Razors?
A)$218.00.
B)$250.70.
C)$331.20.
D)$284.00.
E)$288.00.
Q3) Using ABC, how much total overhead is assigned to the order?
A)$42,160.
B)$43,740.
C)$44,268.
D)$44,432.
E)$45,993.
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Chapter 6: Process Costing
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Sample Questions
Q1) In a process costing system, the cost of abnormal spoilage should be:
A)Prorated between units transferred out and ending inventory.
B)Included in the cost of units transferred out.
C)Treated as a loss in the period incurred.
D)Added to overhead.
Q2) Total equivalent units for conversion under the weighted-average method are calculated to be:
A)6,830 equivalent units.
B)8,180 equivalent units.
C)6,980 equivalent units.
D)7,140 equivalent units.
E)7,620 equivalent units.
Q3) What are the unit conversion costs?
A)$2.15.
B)$2.36.
C)$2.50.
D)$2.75.
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Chapter 7: Cost Allocation: Departments, Joint Products, and
By-Products
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Q1) The amount of joint costs allocated to product L using the physical measure method is (calculate all ratios and percentages to 4 decimal places, for example 33.3333%, and round all dollar amounts to the nearest whole dollar):
A)$23,438.
B)$33,434.
C)$40,313.
D)$27,109.
E)$11,250.
Q2) Which one of the following methods of cost allocation is completed by taking the service flows to production departments only and determining each production department's share of that service?
A)Direct method.
B)Indirect method.
C)Step method.
D)Reciprocal method.
E)Cross-functional method.
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Chapter 8: Cost Estimation
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Sample Questions
Q1) The identification of cost drivers is perhaps the most important step in developing the cost estimate because:
A)It is the first step in cost estimation.
B)It is the final step in cost estimation.
C)There may be a number of relevant drivers, some not immediately obvious.
D)The other steps are easier to execute.
E)It requires much more time than the other steps.
Q2) If the pistons are manufactured by Marshall Co., the average direct labor hours per unit for the first 800 pistons (including the pilot run) produced is calculated to be (use five decimal places in calculating the average time):
A)0.20926.
B)0.21408.
C)0.22528.
D)0.23056.
E)0.24797.
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Chapter
Cvp Analysis
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Sample Questions
Q1) The name for a variety of methods used to examine how an amount will change if factors involved in predicting that amount change is:
A)Sensitivity analysis.
B)Contribution margin analysis.
C)Factor analysis.
D)Cost analysis.
E)Cost-volume-profit analysis.
Q2) X Company's degree of operating leverage (DOL) at the current sales volume level is calculated to be:
A)4.00
B)5.00
C)7.00
D)6.00
E)3.00
Q3) Staley Co.'s operating income is calculated to be:
A)$19,800.
B)$21,800.
C)$24,800.
D)$23,800.
E)$20,800.
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Chapter 10: Strategy and the Master Budget
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Q1) One of the behavioral considerations in implementing a budgeting system has to do with the issue of budgetary slack. What are the positive and negative aspects of building slack into budgets from top management's point of view, and the employee's point of view (i.e., the individual responsible for building slack into the budget)?
Q2) A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise (or materials) to be purchased, the manufacturing, selling, administrative, and general expense to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:
A)Master budget.
B)Kaizen budget.
C)Capital expenditures budget.
D)Continuous budget.
E)Operating budget.
Q3) What is the focus of activity-based budgeting (ABB)? What is the principal advantage of ABB?
Q4) Explain benefits of implementing a master budgeting system.
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Chapter 11: Decision Making With a Strategic Emphasis
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Sample Questions
Q1) The point where M = 2 and S = 3 would:
A)Minimize total cost.
B)Minimize total variable cost.
C)Lie in a corner.
D)Be a feasible point.
E)Be the optimal solution point.
Q2) Fixed costs will often be irrelevant for decision making because they:
A)Do not vary on a per-unit-of-output basis.
B)Are the same each time period.
C)Typically do not differ between and among decision alternatives.
D)Are not committed.
E)Cannot be estimated with precision.
Q3) In a sell-or-process-further decision, joint production costs:
A)Are irrelevant to the decision.
B)Should be allocated to outputs on the basis of relative sales dollars.
C)Should be allocated to outputs on the basis of relative physical units.
D)Cannot be allocated to products for financial reporting purposes.
E)Usually are traceable to individual products/outputs.
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Chapter 12: Strategy and the Analysis of Capital Investments
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Q1) Which one of the following statements concerning capital budgeting is not true?
A)A basic objective underlying capital budgeting is to select assets that will earn a satisfactory return.
B)Capital budgeting is the process of identifying, evaluating, selecting, and controlling long-term investment projects.
C)Capital budgeting is based on precise estimates of future events.
D)Capital budgeting involves estimating the revenues and costs of each proposed project, evaluating their merits, and choosing those worthy of investment.
E)Capital budgeting uses after-tax cash flows in the analysis of proposed investments.
Q2) What is the amount of net income (after taxes) in Year 2 of the investment?
A)$24,000.
B)$36,000.
C)$48,000.
D)$72,000.
E)$120,000.
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Chapter 13: Cost Planning for the Product Life Cycle: Target
Costing, Theory of Constraints, and Strategic Pricing
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Q1) Which of the following is a theory of constraints (TOC) measure of product profitability that equals price less materials cost, including all purchased components and materials handling costs?
A)Takt time.
B)Throughput margin.
C)Profitability margin.
D)Price analysis.
Q2) What cost management technique does this case illustrate?
A)Target costing.
B)Theory of constraints.
C)Life-cycle costing.
D)ABC analysis.
Q3) The current profit per unit is:
A)$250.
B)$300.
C)$400.
D)$450.
E)$475.
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Chapter
Direct-Cost Variances, and the Role of Nonfinancial
Performance Measures
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Q1) The actual direct labor rate per hour (AP) is:
A)$13.44.
B)$13.65.
C)$13.78.
D)$14.00.
E)$14.35.
Q2) A standard that sets the performance criterion at a level that workers with proper training and experience can attain most of the time without extraordinary effort is a(n):
A)Currently attainable standard.
B)Practical standard.
C)Efficiency standard.
D)Ideal standard.
E)Authoritative standard.
Q3) How many units of the product were produced in August?
A)4,000.
B)4,250.
C)4,500.
D)4,750.
E)5,000.
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Chapter 15: Operational Performance Measurement:
Indirect-Cost Variances and Resource-Capacity Management
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Sample Questions
Q1) The budgeted total factory overhead for the Machining Department is:
A)$617,100
B)$875,000.
C)$883,500.
D)$892,500.
E)$1,050,000.
Q2) It can be argued that manufacturing overhead analysis under an ABC system is more informative or useful to management because of the associated richness of the analysis and therefore increased potential for cost control. Of particular interest under an ABC system is the flexible-budget analysis that can be performed when there is a standard batch size for production activity.
Required: Explain how the conventional analysis of overhead variances through the use of flexible budgets can be expanded when production is characterized by a standard batch size. Focus specifically on the analysis of batch-related costs, for example, production-related set-up costs. Discuss separately the analysis of fixed setup-related costs and variable setup-related manufacturing support costs.
Q3) What are the steps in determining the standard fixed factory overhead application rate? Does the procedure differ for product-costing versus cost-control purposes?
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Chapter 16: Operational Performance Measurement:
Further Analysis of Productivity and Sales
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Sample Questions
Q1) The contribution margin sales volume variance for Product X is:
A)$6,600 unfavorable.
B)$8,300 favorable.
C)$12,200 favorable.
D)$12,200 unfavorable.
E)$14,800 favorablE.Budgeted units: $286,000/$110 = 2,600
Q2) The weighted-average budgeted contribution margin per unit is:
A)$19.95.
B)$35.50.
C)$30.60.
D)$40.00.
E)$77.50.
Q3) What is ET's sales mix variance?
A)$7,680 favorable.
B)$8,640 favorable.
C)$11,520 favorable.
D)$12,960 favorable.
E)$24,960 favorablE.
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Chapter 17: The Management and Control of Quality
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Sample Questions
Q1) What is the processing cycle efficiency (PCE) for this order (rounded)?
A)25.0%.
B)13.6%.
C)37.5%.
D)69.2%.
E)33.3%.
Q2) Which of the following is not a characteristic of a lean accounting system?
A)Calculated costs are used in setting product prices.
B)Reporting is done frequently (often weekly, or even daily).
C)Product aggregation-product costs are determined at the value-stream level.
D)Use of average costs for products in each value stream.
E)Includes, in the form of box score report, nonfinancial as well as financial performance results.
Q3) The four categories of cost associated with a Cost-of-Quality (COQ) reporting system are:
A)External failure, internal failure, prevention, and carrying.
B)External failure, internal failure, prevention, and appraisal.
C)External failure, internal failure, training, and appraisal.
D)Warranty, product liability, training, and appraisal.
E)Warranty, product liability, prevention, and appraisal.
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Chapter 18: Strategic Performance Measurement: Cost
Centers, Profit Centers, and the Balanced Scorecard
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Sample Questions
Q1) Variable costing operating income for 2013 is calculated to be:
A)$149.
B)$430.
C)$655.
D)$1,030.
E)$1,180.
Q2) Using the information regarding the allocation of the $4 million to the four cost drivers, determine the operating profit of the Crystal Coast Resort.
A)$1,500,000.
B)$2,050,000.
C)$2,785,000.
D)$3,395,000.
E)$4,215,000.
Q3) Which one of the following is not an order-filling cost?
A)Freight.
B)Warehousing.
C)Inspection.
D)Collections.
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Chapter 19: Strategic Performance Measurement:
Investment Centers and Transfer Pricing
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Sample Questions
Q1) Max Ltd. produces kitchen tools, and operates several divisions as investment centers. Division M produces a product that it sells to other companies for $16 per unit. It is currently operating at its full capacity of 45,000 units per year. Variable manufacturing cost is $9 per unit, and variable marketing cost is $3 per unit. The company wishes to create a new division, Division N, to produce an innovative new tool that requires the use of Division B's product (or one very similar). Division N will produce 30,000 units. Currently, Division N can purchase a product equivalent to Division M's from Company X for $15 per unit. However, Max Ltd. is considering transferring the necessary product from Division M.
Required:
1. Assume the transfer price is $12 per unit.
a. How would this affect the purchasing costs of Division N?
b. How would this affect the profits of Division M?
c. How would this affect Max Ltd. as a whole?
2. What if the transfer price was $13 per unit?
Q2) This question pertains to the use of market-based transfer prices.
Required:
What is the primary advantage and what is the primary difficulty in using market-based transfer prices?
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Chapter 20: Management Compensation, Business
Analysis,
and Business Valuation
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Sample Questions
Q1) Performance shares grant stock for achieving certain performance goals:
A)In the following year.
B)In two years or more.
C)In the current period.
D)When stock prices improve.
Q2) Risk aversion by managers should be recognized when revising compensation plans because:
A)Compensation mix (salary, bonus) can influence a manager's risk aversion.
B)Most companies want risk averse managers.
C)Most companies want risk taking managers.
D)It costs less to pay risk averse managers.
Q3) Which one of the following has been the most common payment option for bonus compensation in recent years?
A)Vacation time.
B)Stock options.
C)Increased benefits.
D)Salary increase.
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