KUIS_SPM_Chp 1 until 9

1.Incomplete profit center focuses on:Immersive Reader

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax

Revenue, Cost of Goods Sold, Gross Margin

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax, Income Tax, Profit After Tax

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion

2.Risk sharing can involve

bying insurance to protect against certain types of potentially large losses the organization might
not be able to afford

purchase fidelity bonds on employees in sensitive positions (such as bank tellers) to reduce the
firm's exposure

joint venture agreement

all the answers above are correct

3.Behavioral displacement can also occur with action controls. One forms of action
control-related displacement is often referred to as means-ends inversion, meaning that

Employees pay attention to what they do while losing sight of what they are to accomplish (the
ends)

Managers who are given an approval limit for capital expenditures have been known to invest in
a series of small projects, each of which fall just within their authorization limits.

PC maker implemented a policy to put a time limit on customer service calls. Specifically,
customer service reps who spent more than 13 minutes talking to a customer would not earn
their commission. Not surprisingly, service reps began doing just about anything possible to get
customers off the phone, such as pretending that the line was not working or just hanging up.

Some actions controls rigid, non-adaptive behaviours, bureaucratic organizations

All of the answers above are correct

4.Which of the following is NOT a component of the master budget?
Sales Budget

Capital Budget

Cost of Goods Sold Budget

Budget to Actual Variance Analysis

5.The Engine Division provides engines for the Truck Division of a company. The standard unit
costs for the Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

What is the transfer price based on full cost plus a markup of 30 percent?

$585

$2,925

$2,760

$2,730
6.Financial Results Controls has three core elements:

Financial responsibility centers, non-formal management processes, motivational contracts

Financial responsibility centers, formal management processes, unmotivational factors

Financial responsibility centers, formal management processes, motivational contracts

All the answers above are correct

7.The decision as to whether controls should be applied more or less tightly in any particular
organization, or in an area within the organization, depends on the answer to three questions:

What are the unpotential benefits of tight controls, what are the costs, are any harmful
side-effects likely

What are the potential benefits of tight controls, what are the revenues, are any harmful
side-effects likely
What are the potential benefits of tight controls, what are the costs, are any positive side-effects
likely

What are the potential benefits of tight controls, what are the costs, are any harmful side-effects
likely

8.Multinational Organizations face a multidimensional organizational problems:

Geography and national cultures

Differences in local business environments

Two answers above are correct

They are organized only by functions and /or product line

All the answers above are correct

9.The quantitative expression of a plan stated in either physical or financial terms or both is
called

Cost of goods sold statement

Financial statement

Budget

Cost of goods manufactured statement

10.Control can be defined as

the process of setting standards, receiving feedback on actual performance, and taking
corrective action whenever actual performance deviates significantly from plan.

a quantification of plans, stated in either physical or financial terms, or both.

identification of corporate objectives.

a comprehensive financial plan.

11.PT XXX had the following historical accounting data per unit:

Direct materials $60

Direct labor 30
Variable overhead 15
Fixed overhead 24
Variable selling expenses 45
Fixed selling expenses 9

The units are normally transferred internally from Division A to Division B. The units also may be
sold externally for $210 per unit. The minimum profit level accepted by the company is a markup
of 30 percent. There were no beginning or ending inventories.

If the negotiated price is used, Division A's transfer price should be a

minimum of $120.00.

minimum of $153.00.

maximum of $198.90.

maximum of $210.00.
12.Participative budgeting has which of the following potential problems?

Option 1building slack into a budget

encourages individual behavior that is in basic conflict with the goals of the organization

using budgets as a part of performance evaluations could lead to unethical behavior

managers take action that will improve performance in the short run but has long-term
consequences
13.Upper cutoff

To maintain vertical compensation equity

To keep total compensation somewhat smooth over time

To avoid the fact that managers will be “unduly” motivated to take actions to maximize bonus
payouts

To avoid undeserved bonuses due to “windfall” gains

To alleviate the possibility of a faulty compensation plan design

All the answers above are correct

14.Bonus determination approach Formulaically:

The performance-reward link is explicit

Alleviates bias or favoritism in assessing and rewarding performance
But possibly less focus on performance dimensions that are more difficult to quantify (e.g., R&D)
All the answers above are correct

15.The transfer price that would leave the buying division no worse off if an input is purchased
from an internal division is(are) called:

The maximum transfer price

The minimum transfer price

The negotiated transfer price

Both a and c
16.Cost center focuses on

Advertising and promotions, research and development

Cost of goods sold, research and development

Cost of goods sold, advertising and promotions, research and development

Cost of goods sold, advertising and promotions

17.XXX Division provides engines for the Tractor Division of a company. The standard unit costs
for the Engine Division are as follows:

Direct materials $ 600

Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

What is the transfer price based on variable product costs plus 20 percent?

$720

$2,160

$2,100

$2,520
18.Bonus determination approach Subjectively
Allows performance to be evaluated more “completely” considering any of a number of
hard-to-quantify, but important, performance areas

Lack of explicitness increases the employee's risk (due to possible bias)

All the answers above are correct

Alleviates bias or favoritism in assessing and rewarding performance

19.If corporate managers decide that the managers of their foreign entities should not bear the
foreign exchange risk, they can instead use any of four essentially identical methods

Evaluate the manager in terms of local currency profits as compared to a local currency plan or
budget

Treat the foreign gain or loss as “below” the income statement line for which he manager is held
accountable

Evaluate the manager in terms of profits measured in home currency, but calculate a “foreign
exchange variance” and treat it as uncontrollable

Re-express the home currency budget for the entity in local currency using the end-of-year, not
beginning -of-year, exchange rate of some average for the period. This procedure creates a
budget that “flexes” with exchange rates

All of the answers above are correct

20.Planning cycle

Strategic planning (relatively broad proesses of thinking about the missions, goals, and
strategies; normally a top-management proess)

Programming Capital Budgeting (specification of specific action programs to be implemented

over the next few years and specification of the resources each will consume; it involves
managers at different levels (top-down/ bottom-up)

Operational budgeting (short-term financial planning, budgets match the organization’s

responsibility structure, emphasis on quantitative data)

All the answers above are correct

21.Complete Profit Center focuses on:

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax, Income Tax, Profit After Tax
Revenue, Cost of Goods Sold, Gross Margin, Profit Before Tax, Income Tax, Profit After Tax

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax

Revenue, Cost of Goods Sold, Gross Margin, Profit Before Tax

22.Profit center focuses on:

Revenue, Advertising and promotion, Research and development, Proft Before Tax, Income
Tax, Profit After Tax

Revenue, COGS, Research and development, Proft Before Tax, Income Tax, Profit After Tax

Revenue, COGS, Gross Margin, Proft Before Tax, Income Tax, Profit After Tax

Revenue, COGS, Gross Margin, Advertising and pr

omotion, Research and development, Proft Before Tax, Income Tax, Profit After Tax

23.Division ‘A’ produces a component and wants to sell it to Division ‘B’. The transfer price is

revenue to Division ‘A’ and a cost to Division ‘B’

revenue to Division ‘B’ and a cost to Division ‘A’

revenue to Division ‘A’ and no effect on Division ‘B’

a cost to Division ‘B’ and no effect on Division ‘A’

24.PT Cemerlang Indah Perkasa (CIP) has two divisions, X and Y. Division X sells its product to
Division Y. Standard costs for Division X are as follows:

Direct materials $ 4 per unit

Direct labor 2 per unit
Variable overhead 5 per unit
Fixed overhead 3 per unit
Total $14 per unit

What is the transfer price for Division X based on standard variable cost plus a markup of 25
percent?

$11.00
$17.50

$13.75

$7.50

25.Which of the following statement is correct regarding a continuous budget?

budget is prepared for a one­year period that corresponds to the company’s fiscal year.

A continuous budget is a monthly budget.

As a month/period expires in the budget, an additional month/period in the future is added so

the company always has a 12-month budget on hand.

None of thesetion 1
26.Rewards:

Monetary: salary increases, bonuses, benefits, perquisites, promotion; non monetary:

Autonomy. Recognition. Participation in decisions, office assignments, preferred parking places,
titles

Monetary: salary increases, bonuses, perquisites; non monetary: promotion. Benefits,

Autonomy. Recognition. Participation in decisions, office assignments, preferred parking places,
titles

Monetary: salary increases, bonuses, benefits, perquisites; non monetary: promotion.

Autonomy. Recognition. Participation in decisions, office assignments, preferred parking places,
titles
All the answers above are correct

27.Which of the following is NOT an advantage of budgeting?

It forces managers to plan.

It provides resource information that can be used to improve decision making.

It aids in the use of resources and employees by setting a benchmark that can be used for the
subsequent evaluation of performance.

It provides organizational independence.

28.Management control focuses on execution, and it involves addressing the general question:
are our employees likely to behave appropriately? This questions
do our employees understand what we expect of them?

will the work consistently hard and try to do what is expected of them-- that is, will they pursue
the organization's objectives in line with the strategy?

are they capable of doing a good job?

all the answers above are correct

29.Conditions determining the effectiveness of results controls

knowledge of desired results, ability to influence desired results, ability to measure

uncontrollable results effectively

knowledge of undesired results, ability to influence desired results, ability to measure

controllable results effectively

knowledge of desired results, ability to influence desired results, ability to measure controllable
results effectively

knowledge of desired results, disability to influence desired results, ability to measure

controllable results effectively

30.No ID
Enter your answer

31.Before Tax Profit Center focuses on:

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax, Income Tax, Profit After Tax

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development

Revenue, Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and
Development, Profit Before Tax, Income Tax, Profit After Tax

32.Which of the following is true of benchmarking two managers against each other if they carry
out similar operations?

It would lead to better cooperation among the managers.

It would reduce the managers' incentives to help one another.

It would enhance the accomplishment of organization goals.

It would help reduce costs common to both the departments.

33.Differences in local business environments consists of:

Foreign currency translation

Uncertainty, inflation, talent

National culture

All the answers above are correct

34.PT Milenial., is a multinational company with divisions around the world. Division A in the
United States purchases a part from Division G in China. There is no outside market for the part
because it is used to manufacture another product. The manufacturing cost for the part is $5.
Transportation is $1 and commissions are $.5 but do not need to be paid.

What is the transfer price using the cost-plus method?

$5.50

$6.50

$6

$5
35.Nama ???
Enter your answer.

36.In the PT ABC, Division A has a product that can be sold either to outside customers or to
Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10
Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. What is the maximum
transfer price in Case 2?

$75

$68

$74

$58
37.Disadvantages of action controls:

Lead to documentation of the accumulation of knowledge as to what works best

Policies and procedures are an efficient way to aid organizational coordination.

Two answers above are correct

Excellent knowledge of what actions are desirable exists only for highly routinized jobs

Potentially causing behavioural placement

38.In the PT ABC, Division A has a product that can be sold either to outside customers or to
Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. What is the minimum
transfer price in Case 2?
$58

$74

$68

$75
39.Garuda Furniture had the following historical accounting data, per hundred board feet,
concerning one of its products:

Finished shelving:
Direct materials $30
Direct labor 16
Variable overhead 10
Fixed overhead 12
Variable selling expenses 8
Fixed selling expenses 4

The shelving is normally transferred internally from the Cutting Division to the Finishing Division.
It also may be
sold externally for $110 per hundred board feet. The minimum profit level accepted by the
company is a markup of 20 percent.

If the variable manufacturing cost transfer price method is used without a fixed fee, Garuda
Furniture's transfer price will be

$56

$84

$64

$68
40.Which of the following factors is NOT an advantage of preparing operating budgets?

It provides resource information that can be used to improve decision making.

It improves communication and coordination.

It aids in the use of resources and employees by setting a benchmark that can be used for the
subsequent evaluation of performance.

It saves time and resources

41.Which of the following is true of an executive compensation plan?

The compensation paid to the executives should be linked only to the financial performance of
the company.

The executive compensations should be reported to credit rating agencies.

It does not help balancing risk with short-run and long-run incentives.

It includes benefits such as medical benefits, pension plans, and life insurance.
42.Negotiated prices are transfer prices

determined between a division and corporate headquarters.

negotiated with external customers.

used when supplying and buying divisions independently agree on a price.

agreed to by division management and employees

43.Advantages of action controls:

Lead to documentation of the accumulation of knowledge as to what works best

Policies and procedures are an efficient way to aid organizational coordination.

Two answers above are correct

Excellent knowledge of what actions are desirable exists only for highly routinized jobs

Potentially causing behavioural displacement

44.Budget slack

Negotiating more easily achievable targets; that is, targets that are deliberately lower than their
best-guess forecast of the future.

Protects the managers against unforeseen contingencies and improves the probability that the
budget target will be met, thus increasing the likelihood of receiving a favourable evaluation and
associated rewards (such as a raise, a bonus, recognition, or a promotion)

The two answers above are correct

Reporting erroneous data, meaning that the data are changed

45.Budget Participative

The budgetee is both involved and has influence over setting the budget

Leads to better acceptance of budget targets, and hence, commitment to achieve them

Is an effective way of information sharing bringing together corporate priorities and constraints
with lower-level insights about business potentials and risks

But, potential for slack, bias, conservatism,

All the answers above are correct

46. Gross Margin Center focuses on:

Revenue, Cost of Goods Sold Research and Development, Profit Before Tax, Income Tax, Profit
After Tax

Cost of Goods Sold, Gross Margin, Advertising and Promotion, Profit Before Tax, Income Tax,
Profit After Tax

Revenue, Cost of Goods Sold, Gross Margin

Cost of Goods Sold, Gross Margin, Advertising and Promotion, Research and Development,
Profit Before Tax, Income Tax, Profit After Tax
47.Simultaneous tight-loose controls means

Tight on subjectives and core values, but loose on procedures

Loose on objectives and core values, but tight on procedures

Tight on objectives and core values, but loose on procedures

Loose on subjectives and core values, but tight on procedures

48.PT Elang Jaya Nusantara (EJN) has two divisions, the Blending Division and Canning
Division. The Blending Division sells chemicals to the Canning Division.

Standard costs for the Blending Division are as follows:

Direct materials $3.00 per gallon

Direct labor 2.40 per gallon

The Canning Division uses the following predetermined overhead rate:

Variable overhead $3.60 per gallon
Fixed overhead 2.40 per gallon
Total $6.00 per gallon
What is the transfer price for the chemicals per gallon based on standard variable cost?

$3.00

$9.00

$5.40

$11.40

49.The achievement of tight results control depends on characteristics

Definition of the desired results area, the performance measures, and the forcement provided

definitions of the undesired results areas, the performance measures, and the reinforcement or
incentives provided

definitions of the desired results areas, the performance measures, and the reinforcement or
incentives provided

definitions of the desired results areas, the performance achieved, and the reinforcement or
incentives provided

50.Typical financial responsibility centers in a divisionalized organization

IC = Investment center
PC = Profit center
RC = Revenue center
CC = Cost center

Top: President (IC), Middle: Group Vice President (IC) lower: Division manager (PC) and
bottom: Marketing manager (PC) & Other Functional Managers (CC), Group Vice President (IC)
and lower: Division manager (PC), Administrative and Financial Vice Presidents (CC)

Top: President (IC), Middle: Group Vice President (IC) lower: Division manager (PC) and
bottom: Marketing manager (RC) & Other Functional Managers (CC), Group Vice President (IC)
and lower: Division manager (PC), Administrative and Financial Vice Presidents (CC)

Top: President (IC), Middle: Group Vice President (IC) lower: Division manager (PC) and
bottom: Marketing manager (RC) & Other Functional Managers (RC), Group Vice President (IC)
and lower: Division manager (PC), Administrative and Financial Vice Presidents (CC)
Top: President (IC), Middle: Group Vice President (IC) lower: Division manager (PC) and
bottom: Marketing manager (RC) & Other Functional Managers (CC), Group Vice President (IC)
and lower: Division manager (CC), Administrative and Financial Vice Presidents (RC)

51.Garuda Furniture had the following historical accounting data, per hundred board feet,
concerning one of its products:

Finished shelving:
Direct materials $30
Direct labor 16
Variable overhead 10
Fixed overhead 12
Variable selling expenses 8
Fixed selling expenses 4

The shelving is normally transferred internally from the Cutting Division to the Finishing Division.
It also may be sold externally for $110 per hundred board feet. The minimum profit level
accepted by the company is a markup of 20 percent.

If the negotiated price is used, Garuda Furniture's transfer price should be a

maximum of $100.80.

minimum of $84.00.

minimum of $80.00.

maximum of $110.00.
52.The most widely cited taxonomy consists of the four cultural dimensions identified in a study
by Geert Hofstede:

Individualism vs collectivism, power distance, uncertainty avoidance, masculinity vs femininity

Individualism vs egocentrism, power distance, uncertainty avoidance, masculinity vs femininity

Individualism vs collectivism, lower distance, uncertainty avoidance, masculinity vs femininity

Individualism vs collectivism, power distance, certainty avoidance, masculinity vs femininity

53.Any action undertaken to change the reported results (sales numbers of profit) while
providing no real economic advantage to the organization and, sometimes, even causing harm.
Results controls can produce negative attitudes
Full of employee commitment to the performance targets defined in the results-control system.

Most employees are committed to targets they consider too difficult, not meaningful, not
controllable, or imprudent (and, of course, illegal or unethical).

Managers complain that their performance evaluation are not fair because they are being held
accountable for things over which they have little or no control.

Rewards that are perceived as equitable, and perhaps most forms of punishment, tend to
produce negative attitudes

All the answers above are correct

54.Control types that can addressed all control problems are:

Results accountability, behavioural constraints, training

Preaction reviews, Action accountability, selection and placement

Creation of strong organizational culture, group based rewards, provision of necessary

resources

Training, redundancy, group based reward

55.Criteria for evaluating reward systems

Rewards should be valued, Rewards should be large enough to have impact, Rewards should
be understandable

Rewards should be timely, Rewards should be durable, Rewards should be reversible

All the answers above are correct

Rewards should be cost highly

56.Budgeting and management control

Budgeting involves setting targets that are commonly used as standards against which to
evaluate performance – results controls, Planning and budgeting processes involve formal
reviews of plans and include the actions that are felt to be good for the organization to take –

action controls

Planning and budgeting processes provide the needed information for decision-making to the
relevant managers – results controls

Planning and budgeting processes involve formal reviews of plans and include the actions that
are felt to be good for the organization to take – cultural controls

All the answers above are correct

57.In the PT ABC, Division A has a product that can be sold either to outside customers or to
Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $9 0 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. Which case should not be
transferred internally?

a. Both should be transferred internally.

b. Neither should be transferred internally.

c. Case 1

d. Case 2
58.Organizations can never avoid all their control problems, but they can often avoid some of
them by limiting exposure to certain types of problems and problem sources, or by reducing the
maximum potential loss if the problems occur. These prominent avoidance strategy are:

activity elimination, automation, decentralization, risk sharing

activity elimination, automation, centralization, risk default

activity elimination, automation, centralization, risk sharing

activity delimination, automation, centralization, risk sharing

59.Transfer prices are the prices charged

for distributing goods from one warehouse to another.

for the goods produced by one division to another division that needs these goods.

when delivering goods to the customer.

when transferring goods to international divisions.

60.Cultural controls

code of conduct, group based rewards

intra-organizational transfers and physical arrangement

tone at the top and norms

all the answers above are correct

61.Selection and placement can addressed

lack of budgeting, personal limitations

motivational problems, group limitations

lack of direction, personal limitations, motivational problems

all of the answers above are correct

62.Investment center focuses on:

Revenue, COGS, Proft Before Tax, Income Tax, Profit After Tax, Accounts Receivables,
Inventory, Fixed Assets, Accounts Payable, Debt

Revenue, COGS, Gross Margin, Advertising and promotion, Research and development, Proft
Before Tax, Income Tax, Profit After Tax, Accounts Receivables, Inventory, Fixed Assets,
Accounts Payable, Debt

Revenue, COGS, Gross Margin, Advertising and promotion, Research and development, Proft
Before Tax, Income Tax, Profit After Tax, Inventory, Fixed Assets,

Revenue, COGS, Proft Before Tax, Income Tax, Profit After Tax, Accounts Receivables,
Inventory, Fixed Assets.
63.Two major forms of gamesmanship:
Behavioural constraints and action accountability

Slack creation and data manipulation

Selection and placement

Provision of necessary resources and group-based rewards

64.The compentation package

Salary, Benefits (Pension and health benefits, Perquisites of various types), Incentive
compensation (Short-term incentive plans: based on the capital in the current year or less,
middle-term incentive plans: based on the performance measured over periods greater than 1
year and often related to the company’s stock price

Salary, Benefits (Pension and health benefits, Perquisites of various types), Incentive
compensation (Short-term incentive plans: based on the performance in the current year or less,
Long-term incentive plans: based on the performance measured over periods greater than 1
year and often related to the company’s stock price

Salary, Benefits (Pension and health benefits, Perquisites of various types), Incentive
compensation (Short-term incentive plans: based on the total assets in the current year or less,
Long-term incentive plans: based on the performance measured over periods greater than 1
year and often related to the company’s stock price

Salary, Benefits (Pension and health benefits, Perquisites of various types), Incentive
compensation (Short-term incentive plans: based on the working capital in the current year or
less, Long-term incentive plans: based on the performance measured over periods greater than
1 year and often related to the company’s stock price

65.The XXX Division provides frames for the Tractor Division of a company. The standard unit
costs for the XXX Division are as follows:

Direct materials $ 800

Direct labor 1,500
Variable overhead 400
Fixed overhead 350
Market price per unit 4,575

What is the transfer price based on full cost plus a markup of 20 percent?

$5,490

$4,575
$3,240

$3,660
66.Causes of management control problems:

tightly direction, motivational problems, personnel limitations

lack of direction, motivational problems, personnel limitations

loosly direction, motivational problems, personnel limitations

lack of direction, motivational problems, opportunity to conduct fraud

67.In the PT ABC, Division A has a product that can be sold either to outside customers or to
Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $91 $74

The company uses the opportunity cost approach to transfer pricing. What is the maximum
transfer price in Case 1?
a. $90
b. $91
c. $83
d. $73

68.Transfer pricing alternatives

a. Market-based transfer prices, marginal-cost transfer prices,
b. full cost transfer prices, negotiated transfer prices,
c. dual rate transfer prices
d. All the answers above are correct

69.The Jet Engine Division provides engines for the Jet Plane Division of a company. The
standard unit costs for the Jet Engine Division are as follows:
Direct materials $ 600
Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

The engine department has excess capacity. What is the best transfer price to avoid transfer
price problems?

a. $1,350
b. $900
c. $2,100
d. $300

70.Results controls provide several preventive-type benefits

a. alleviate a potential lack of direction ==> well-defined results informs employees as to
what is expected of them and encourage them to do what they can to produce the
desired results
b. induce employee alleviate a potential lack of direction ==> well-defined results inform
employees as to what is expected of them and encourage them to do what they can to
produce the desired results to behave so as to maximize their chances of producing the
results the organization desires
c. can mitigate personal limitations and encourage employees to develop their talents to
position themselves to earn the results dependent rewards
d. All of the answers above are correct

71.Preaction reviews involve:

a. the scrutiny of action plan
b. reviewers can approve or dissapprove the proposed actions, request modifications, or
ask for a more carefully considered plan before granting final approval
c. a common form: planning and budgeting processes
d. all of the answers above are correct

72.In results control system, behavioral displacement occurs when an organization defines sets
of results measures that are incongruent with the organization’s “true”objectives. For example

a. When companies give their sales people monthly sales quotas, the salespeople tend to
work on the easiest sales, which are not necessarily the most profitable sales or sales
with the highest priority
b. When brokerage firms reward their brokers through commissions on client trades, some
brokers respond by churning accounts, engaging in more transactions than are in the
customers’ best interests and that run the risk of client dissatisfaction and turnover
c. When companies reward their research scientist for the number of patents filed, they are
likely to see an increase in the number of patents filed. However, this incentive may lead
 to patent proliferation only and may not enhance, and may even erode, researcher’s
concerns for the eventual commercial success of their discoveries
d. When software testers are evaluated in terms of the number of “bugs” they find, the bug
count goes up. But more of the bugs found will be minor. Bug counts also create
incentive for superficial testing, penalizing testers to take the time either to look for the
harder to find but more important bugs or to document their findings thoroughly. Bug
counts also penalize tester who support other testers through coaching, helping, and
auditing.
e. All the answers above are correct

73.PT Milenial is a multinational company with divisions around the world. Division A in the
United States purchases a part from Division G in China. The part can be purchased externally
for $7 each. Transportation costs amount to $1 and the commission of $.50 will not need to be
paid.

What is the transfer price using the comparable uncontrolled price method?

a. $8.50
b. $8
c. $7
d. $7.50

74.Lower cutoff

a. To avoid paying bonuses for performance, which is considered mediocre or worse

b. To maintain vertical compensation equity
c. To keep total compensation somewhat smooth over time
d. To avoid the fact that managers will be “unduly” motivated to take actions to maximize
bonus payouts

75.Punishments
a. Monetary: No raise, no bonus, no perquisites; Non-monetary: interference in job from
superiors, loss of job, assignment to important tasks, no promotion, humiliation
b. Monetary: No raise, no bonus, no perquisites; Non-monetary: interference in job from
superiors, loss of job, assignment to unimportant tasks, no promotion, no humiliation
c. Monetary: No raise, little bonus, no perquisites; Non-monetary: interference in job from
superiors, loss of job, assignment to unimportant tasks, no promotion, no humiliation
d. Monetary: No raise, no bonus, no perquisites; Non-monetary: interference in job from
superiors, loss of job, assignment to unimportant tasks, no promotion, humiliation

76.Indirect cost of control caused by:

a. Behavioral placement, gamesmanship, operating delays, and netral attitudes
b. Behavioral displacement, gamesmanship, operating delays, and negative attitudes
c. Behavioral displacement, gamesmanship, operating cycles, and negative attitudes
 d. Behavioral displacement, gamesmanship, operating delays, and positif attitudes

77.Behavioral constraints
a. intangible constraints and administrative constraint
b. physical constraints and administrative constraint
c. Intangible constraints and general constraint
d. physical constraints and general constrant

78.The budgets that are concerned with the inflows and outflows of cash and with financial
position are called the:
a. Operating budgets
b. Master budgets
c. Financial budgets
d. Continuous budgets

79.PT Milenial, is a multinational company with divisions around the world. Division A in the
United States purchases a part from Division G in China. There is no outside market for the part.
The part is sold for $12 and normally receives a 20% markup on cost.

What is the transfer price using the resale price method?

a. $9.60
b. $10
c. $12
d. $14.40

80.Operating budgets are

a. a forecast of expected operating expenses.

b. a forecast of operating expenses and related revenues.
c. a forecast of units of production.
d. concerned with the income-generating activities of a firm.

81.Market-based performance

a. Stock options
b. Restricted stock
c. Stock appreciation rights
d. All the answers above are correct
e. ROA, EPS, ROE

82.Managers must be aware of such differences because

a. the effectiveness of the management controls used will vary depending on the reactions
of the employees involved.
 b. Implementation of MCSs particularly challenging and it is crucial to emphasize that no
one form of control is optimal in all circumstances.
c. What works best in one organizations, or area within an organization, may not work in
another.
d. It is still important to keep the focus on the people involved., because their responses will
determine the success or failure of the MCS.
e. All the answers above are correct

83.Purpose of incentives

a. Attraction/retention (Paying employees only guaranteed salaries tends to attract

risk-averse employees, Paying performance-dependent compensation tends to attract
employees who are more risk tolerant, more aggressive, more confident in their abilities,
unrestricted stock, for example, often are geared toward employee retention, Golden
handcuffs) and control purposes (Provide a competitive compensation package, make
compensation variable with firm performance, Tax considerations)
b. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to attract
employees who are more risk tolerant, more aggressive, more confident in their abilities,
Restricted stock, for example, often are geared toward employee retention, Golden
handcuffs) and control purposes (Provide a competitive compensation package, make
compensation variable with firm performance, Tax considerations)
c. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to attract
employees who are more risk tolerant, more aggressive, more confident in their abilities,
Restricted stock, for example, often are geared toward employee retention, Golden
handcuffs) and Non-control purposes (Provide a competitive compensation package,
make compensation variable with firm performance, Tax considerations)
d. Attraction/retention (Paying employees only guaranteed salaries tends to attract
risk-averse employees, Paying performance-dependent compensation tends to attract
employees who are more risk tolerant, more calm, more confident in their abilities,
Restricted stock, for example, often are geared toward employee reaction, Golden
handcuffs) and Non-control purposes (Provide a competitive compensation package,
make compensation variable with firm performance, Tax considerations)

84.Accounting performance

a. EPS
b. ROE
c. ROA
d. All the answers above are correct

85.The transfer price that would leave the selling division no worse off if the good is sold to an
internal division is(are) called:
 a. The maximum transfer price
b. The negotiated transfer price
c. The minimum transfer price
d. Both a and c

86.Question When there is an outside market for an intermediate product that is perfectly
competitive, the most equitable method of transfer pricing is

a. market price.
b. production cost pricing.
c. variable cost pricing.
d. cost plus markup pricing

87.Creation of a strong organizational culture can addressed control problem:

a. Lack of direction, motivational problems, personal limitations
b. Lack of direction and motivational problems
c. Motivational problems and personal limitations
d. Lack of direction, personal limitations

88.The “floor” in transfer pricing is

a. the transfer price that would leave the buying division no worse off if an input is
purchased from an internal division.
b. the transfer price that would leave the selling division no worse off if the good is
sold to an internal division.
c. the transfer price that would leave the buying division worse off if an input is purchased
from an internal division.
d. none of these.

89.Many manufacturing, marketing, and design problems require employees with multiple skills;
therefore, teams are used and the members have the added encouragement of ________.
a. individual incentives
b. management incentives
c. morale incentives
d. team incentives

90.Typical financial responsibility centers in a functional organization

IC = Investment center
RC = Revenue center
CC = Cost center
a. Top: President (IC), Lower: Manufacturing Vice President (RC), Sales and Marketing
Vice President (RC), Finance Vice President (CC), Administrative Vice President (CC)
b. Top: President (IC), Lower: Manufacturing Vice President (CC), Sales and Marketing
Vice President (RC), Finance Vice President (RC), Administrative Vice President (CC)
 c. Top: President (IC), Lower: Manufacturing Vice President (CC), Sales and Marketing
Vice President (RC), Finance Vice President (CC), Administrative Vice President (RC)
d. Top: President (IC), Lower: Manufacturing Vice President (CC), Sales and Marketing
Vice President (RC), Finance Vice President (CC), Administrative Vice President (CC)

91.PT Anugerah had the following historical accounting data per unit:

Direct materials $60

Direct labor 30
Variable overhead 15
Fixed overhead 24
Variable selling expenses 45
Fixed selling expenses 9

The units are normally transferred internally from Division A to Division B. The units also may be
sold externally for $210 per unit. The minimum profit level accepted by the company is a markup
of 30 percent. There were no beginning or ending inventories.

If variable manufacturing costs without a fixed fee are used as the transfer price, Division A's
transfer price would be
a. $60.
b. $105.
c. $90.
d. $144.

92.In the PT ABC, Division A has a product that can be sold either to outside customers or to
Division B. Information about these divisions is given below:

Case 1 Case 2
Division A:
Capacity in units 100,000 100,000
Number of units sold externally 100,000 60,000
Market selling price $90 $75
Variable costs per unit 73 58
Fixed costs per unit based on capacity 10 10

Division B:
Number of units needed for production 40,000 40,000
Purchase price per unit from external supplier $86 $74

The company uses the opportunity cost approach to transfer pricing. What is the minimum
transfer price in Case 1?
a. $90
 b. $73
c. $83
d. $86

93.When there is an outside market for an intermediate product that is perfectly competitive, the
most equitable method of transfer pricing is
a. market price.
b. production cost pricing.
c. variable cost pricing.
d. cost plus markup pricing.

94.Transfer prices have multiple organizational purposes:

a. To provide the proper economic signals so that the managers affected will make good
decision
b. To provide information that is useful for evaluating the performances of both the profit
centers and their managers.
c. Move profits between firm locations
d. All the answers above are correct

95..…………………...is a prerequisite for the design of any MCS and , indeed, for any
purposeful activities
a. Knowledge of objectives
b. Knowledge of strategy formulation
c. Knowledge of management control
d. All the answers above are correct

96.Controllable costs are those that a manager

a. has no authority over.
b. cannot avoid.
c. does not participate in authorizing.
d. can influence through decision making.

97.Gamesmanship
a. Actions that employees take to reduce their performance indicators without producing
any positive effects for the organization
b. Actions that employees take to improve their performance indicators with producing any
positive effects for the organization
c. Actions that employees take to improve their performance indicators without producing
any positive effects for the organization
d. Actions that employees take to decline their performance indicators with producing any
positive effects for the organization
98.The process of setting standards, receiving feedback on actual performance, and taking
corrective action whenever actual performance deviates significantly from planned performance.
a. Control
b. Monitoring
c. Eye balling
d. Comparing

99.The direct costs of a MCS include:

a. Out of pocket
b. Monetary cost required to design and implement the MCS
c. Cost of paying cash bonuses (arising from incentive compensation for results control)
d. The costs of maintaining an internal audit staff (needed to ensure compliance with action
control prescriptions)
e. All of the answers above are correct

100.The condition that exists when managers deliberately underestimate revenues or

overestimate costs to provide flexibility is called:
a. Realistic standards
b. Monetary incentives
c. Budgetary slack
d. Management by exception

101.Types of financial performance targets

a. Model-based (engineered)/historical/negotiated,
b. Internally/externally-derived (Target costing, Benchmarking),
c. Fixed/flexible (Should managers be held accountable for achieving their plans
regardless of the business conditions they face?, Relative performance targets)
d. All the answers above are correct

102.The XXX Division provides engines for the Final Assembly Division of a company. The
standard unit costs for the Engine Division are as follows:
Direct materials $ 600
Direct labor 1,200
Variable overhead 300
Fixed overhead 150
Market price per unit 2,730

What is the transfer price based on variable product costs plus a fixed fee of $210?

a. $210
b. $1,80
c. $2,100
d. $2,310