Operations Management Exam Preparation Guide
Course Introduction
Operations Management explores the fundamental principles, strategies, and techniques used to design, operate, and improve the processes that produce goods and services in organizations. The course covers key topics such as process analysis, quality management, supply chain management, capacity planning, inventory control, and lean operations. Through case studies and practical examples, students learn how to effectively allocate resources, optimize workflows, and respond to real-world business challenges. The goal is to develop the analytical and decision-making skills necessary to enhance efficiency, productivity, and value creation across various industries.
Recommended Textbook Managerial Accounting v. 2.1 by Kurt Heisinger and Joe Hoyle
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Chapter 1: What Is Managerial Accounting
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Q1) Before purchasing an Enterprise Resource Planning (ERP)system,companies must confirm that the benefits of an ERP system will outweigh the costs of implementation.
A)True
B)False
Answer: True
Q2) Costs of completed but unsold products would be found in which account?
A)Raw Materials Inventory.
B)Work in Process Inventory
C)Finished Goods Inventory.
D)Cost of Goods Sold.
E)None of the above.
Answer: C
Q3) The inventory cost flow equation is:
A)Beginning balance + Transfers in - Ending balance = Transfers out
B)Beginning balance + Transfers in + Ending balance = Transfers out
C)Beginning balance - Transfers in - Ending balance = Transfers out
D)Beginning balance - Transfers in + Ending balance = Transfers out
E)None of the above.
Answer: A
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Chapter 2: How Is Job Costing Used to Track Production Costs
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Q1) The entry to record the requisition of indirect materials in a job cost system includes a:
A)debit to Work in Process Inventory.
B)debit to Manufacturing Overhead.
C)credit to Accounts Payable.
D)credit to Work in Process Inventory.
E)None of the answer choices is correct.
Answer: B
Q2) Service organizations often use a predetermined overhead rate similar to manufacturing companies.
A)True
B)False
Answer: True
Q3) When a manufacturing company purchases raw materials,the Raw Materials Inventory account is debited.
A)True
B)False Answer: True
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Chapter 3: How Does an Organization Use Activity-Based
Costing to Allocate Overhead Costs
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Q1) Refer to Exhibit 3-2.What is the overhead rate for the purchasing activity?
A)$8.00
B)$3.60
C)$18.00
D)$6.00
E)None of the answer choices is correct.
Answer: D
Q2) Refer to Exhibit 3-1.What is the total overhead cost for Sports Light using ABC?
A)$53,750
B)$57,564
C)$23,945
D)$76,271
E)None of the answer choices is correct.
Answer: A
Q3) Organizations that use activity-based costing to allocate overhead typically have many different products and complex operations.
A)True
B)False
Answer: True
Page 5
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Chapter 4: How Is Process Costing Used to Track
Production Costs
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Q1) The ending WIP Inventory in the Assembly Department contains 800 units that are 100% complete with respect to direct materials and 80% complete with respect to direct labor and overhead.The cost per equivalent unit for inventory is $3.00,which consists of $2.00 for materials,$0.80 for labor,and $0.20 for overhead.What dollar value is assigned to the ending WIP Inventory?
A)$1,600
B)$512
C)$128
D)$2,240
E)None of the answer choices is correct.
Q2) A company producing the following product will likely not use process costing?
A)Milk
B)Custom built yachts
C)Oil
D)soda
E)None of the answer choices is correct.
Q3) Process costing is typically used by service companies that have one department.
A)True
B)False
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Chapter 5: How Do Organizations Identify Cost Behavior
Patterns
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Q1) Refer to Exhibit 5-6.Using the information above,what is the cost equation in the form Y = f + vX?
A)880 = f + v (1,016.75)
B)Y = 1,016.75 + 880X
C)1,016.75 = 880 + vX
D)Y = 880 + 1,016.75X
E)None of the answer choices is correct.
Q2) Refer to Exhibit 5-2.What was the variable cost per unit for the company's most recent fiscal year?
A)$120 per unit
B)$180 per unit
C)$145 per unit
D)$150 per unit
E)None of the answer choices is correct.
Q3) If a firm's activity expands beyond its relevant range,only fixed costs must be reevaluated.
A)True
B)False
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Chapter 6: How Is Cost-Volume-Profit Analysis Used for Decision Making
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Q1) Refer to Exhibit 6-6.Which of the following is the correct contribution margin per direct labor hour?
A)$12.50
B)$6.25
C)$0.08
D)$0.10
E)None of the answer choices is correct.
Q2) A change in the sales mix will always decrease the break-even point. A)True
B)False
Q3) Refer to Exhibit 6-2.What would be the operating profit if the unit variable cost decreases 20 percent?
A)$75,000
B)$275,000
C)$100,000
D)$120,000
E)None of the answer choices is correct.
Q4) Absorption costing treats fixed manufacturing overhead costs as product costs. A)True B)False
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Chapter 7: How Are Relevant Revenues and Costs Used to
Make Decisions
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Q1) All managers require one standard format for differential analysis.
A)True
B)False
Q2) One of the factors to consider when evaluating special orders is the impact that special pricing will have on long-run pricing with existing customers.
A)True
B)False
Q3) Refer to Exhibit 7-4.If allocated fixed costs are based on sales revenue for each product line as a proportion of total sales revenue,what is the profit or (loss)for Plain?
A)($9,000)
B)$6,000
C)$1,500
D)($16,500)
E)None of the answer choices is correct.
Q4) Using activity-based costing information with differential analysis can lead to better decisions.
A)True
B)False
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Chapter 8: How Is Capital Budgeting Used to Make Decisions
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Q1) Both the net present value method and the payback method consider the time value of money.
A)True
B)False
Q2) Which of the following is a benefit of using the payback method?
A)It considers the time value of money.
B)It considers the cash inflows after the initial cash outflows are recovered.
C)It measures profitability.
D)It determines how long it will take to recover the initial investment.
E)None of the answer choices is correct.
Q3) Before income taxes,McFadden Company had revenues of $200,000 and expenses of $75,000 for the year.The expenses include $25,000 of depreciation.The company pays taxes at a 30% rate.What is the company's after-tax cash flow for the year?
A)$125,000
B)$97,500
C)$100,000
D)$112,500
E)None of the answer choices is correct.
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Chapter 9: How Are Operating Budgets Created
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Q1) The production budget for Ventura Company shows the company expects to produce 3,000 units in the first quarter and 3,200 units in the second quarter.Each unit requires 30 pounds of direct materials at a cost of $5 per pound.The company prefers to maintain raw materials inventory equal to 25 percent of next quarter's materials needed in production.Each unit of product requires four direct labor hours at a cost of $20 per hour.Variable overhead cost per unit is $5 for indirect materials,$8 for indirect labor,and $12 for other items.Fixed overhead cost per quarter is $90,000 for salaries,$50,000 for rent,and $10,000 for depreciation.
Prepare a manufacturing overhead budget for the first quarter.
Q2) All of the following appear on the budgeted income statement except:
A)selling and administrative expenses.
B)cost of goods sold.
C)accounts payable.
D)sales.
E)None of the answer choices is correct.
Q3) The budgeted balance sheet shows an estimate of the organization's profit for a given budget period.
A)True
B)False
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Chapter 10: How Do Managers Evaluate Performance Using Cost Variance Analysis
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Q1) Which of the following would most likely be the reason for an unfavorable labor efficiency variance?
A)A higher mix of skilled workers made more efficient use of the labor hours.
B)The company used lower skilled workers than they anticipated to complete products.
C)High-quality materials resulted in less time spent working with materials waste.
D)An employee training program improved the efficient use of time.
E)None of the answer choices is correct.
Q2) If an analysis shows an unfavorable labor rate variance of $18,000 and a favorable labor efficiency variance of $10,000,the entry to record the cost of direct labor and related variances would include:
A)a debit to Labor Rate Variance for $18,000.
B)a credit to Work in Process inventory for $18,000.
C)a debit to Labor Efficiency Variance for $10,000.
D)a debit to Cost of Goods Sold for $10,000.
E)None of the answer choices is correct.
Q3) Standard cost information never comes from historical data.
A)True
B)False
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Chapter 11: How Do Managers Evaluate Performance in
Decentralized Organizations
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Q1) The cost-plus approach is the best approach for establishing transfer prices for all companies.
A)True
B)False
Q2) Residual income is the portion of income produced by the division that is not related to its daily activities.
A)True
B)False
Q3) Which of the following best describes an advantage of decentralization from the company's perspective?
A)Decentralization allows decisions to be made more quickly at the division level.
B)Managers at the division level might make decisions that are in their best interest even if the decision is not in the best interest of the company as a whole.
C)Decentralization allows top-level management at a corporate headquarters to work with division managers in making day-to-day decisions at the division level.
D)Decentralization allows for the duplication of administrative services.
E)None of the answer choices is correct.
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Chapter 12: How Is the Statement of Cash Flows Prepared and Used
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Q1) Dayton Company reported a net loss of $88,000 for the year.During the year,the company had $22,000 of Depreciation Expense and incurred a $68,000 loss on the cash sale of equipment.In addition,the company had the following changes in balance sheet accounts during the year:
\[\begin{array} { l r }
\text { Accourts Payable } & \$ 2,000 \text { decrease } \\
\text { Accourts Receivable } & \$ 14,000 \text { decrease } \\
\text { Merchardise Inventory } & \$ 4,000 \text { increase }
\end{array}\]
Using the indirect method,what is the amount of cash provided (used)by operating activities?
A)$10,000
B)($10,000)
C)$14,000
D)($58,000)
E)None of the answer choices is correct.
Q2) Operating cash flow ratios are always greater than 1.0.
A)True
B)False
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Chapter 13: How Do Managers Use Financial and
Nonfinancial Performance Measures
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Q1) The following condensed income statement is for Boston Inc. \(\begin{array}{c}
\text {Boston Inc.}\\
\text {Income Statement}\\
\text {Years ended December 31, 2017 and 2016}\\
\text {(in thousands)}\\
\begin{array}{lcc} &2017&2016\\
\text { Net sales } & \$ 20,000 & \$ 13,000 \\
\text { Cost of goods sold } & 13,000 & 9,000 \\
\text { Gross margin } & 7,000 & 4,000 \\
\text { Selling and administrative expenses } & 3,000 & 2,000 \\
\text { Operating income } & 4,000 & 2,000 \\
\text { Other expense, net } & 300 & 200 \\
\text { Income before taxes } & 3,700 & 1,800 \\
\text { Income tax expense } & 800 & 400 \\
\text { Net income } & \$ 2.900 & \$ 1.400 \\
\end{array}\end{array}\)
Prepare a common-size analysis of the income statements for 2016 and 2017.(Round percent computations to one decimal place. )
Page 15
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