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ACCT 1212
Exam 3, Chapters 11, 10, 9, & 8
| Question | Answer |
|---|---|
| Capital Rationing | the process of ranking and choosing among alternative capital investments based on the availability of funds |
| Internal Rate of Return (IRR) | The rate of return, based on discounted cash flows, of a capital investment |
| Capital budgeting is the ______________ | process of planning for investments in long-term assets |
| Which two methods are typically used for initial screening of investments, rather than for detailed, in-depth analysis? | payback and accounting rate of return |
| What is the time value of money? | A dollar received today is worth more than a dollar to be received in the future |
| When comparing several investments with the same initial cost, the decision should be made on the basis of the _______ | highest NPV |
| Furniture would be an example of a long-term operational asset (T/F) | True |
| An example of a long-term operational asset is Merchandise Inventory (T/F) | False |
| The time value of money concept explains why we would rather receive cash later rather than sooner (T/F) | False |
| Sunk cost | a cost that was incurred in the past and cannot be changed regardless of future actions |
| relevant cost | a cost that is relevant to a particular decision because it is a future cost and differs between alternatives |
| relevant information | expected future data that differs among alternatives |
| irrelevant cost | a cost that does not affect the decision because it is not in the future or does not differ among alternatives |
| differential analysis | a method that looks at how operating income would differ under each decision alternative leaving out irrelevant information |
| special price order | occurs when a customer requests a one-time order at a reduced sales price |
| Costs that do not differ between alternatives are _______ | considered irrelevant to the decision |
| When replacing an old asset with a new one, the original purchase price of the old asset represents a(n) _________ cost | sunk |
| In short term decision making fixed costs and variable costs must be analyzed separately (T/F) | true |
| When should management consider dropping a business division? | The division's avoidable fixed costs are greater than its contribution margin |
| In deciding whether to drop its electronics product line, a company's manager should ignore _______ | the amount of unavoidable fixed costs |
| When considering whether to replace the building roof, the total amount paid for previous roof repairs is relevant to the business decision (T/F) | False |
| Price-setters emphasize a target-pricing approach while price-takers emphasize a cost-plus pricing approach (T/F) | False |
| centralized company | A company in which major planning, directing, and controlling decisions are made by top executives |
| decentralized company | a company that is divided into business segments, with segment managers making, planning, directing, and controlling decisions for their segments |
| A cost center management is responsible for ______ | controlling costs |
| A revenue center manager is responsible for ___________ | generating revenues |
| A profit center manager is responsible for _______________ and _____________ | generating revenues, controlling costs (profit) |
| An investment center manager is responsible for __________ and __________ | generating profits, efficiently managing the center's invested capital |
| performance evaluation system | a system that provides top management with a framework for maintaining control over the entire organization |
| lag indicator | a performance measure that indicates past performance (after the fact) |
| lead indicator | a performance measure that forecasts future performance (future predictions) |
| balanced score card | the performance evaluation system that requires management to consider both financial performance measures and operational performance measures when judging the performance of a company and its subunits |
| key performance indicator (KPI) | a summary performance measure that helps managers assess whether the company is achieving its goals |
| ______________ are performance reports that capture the financial performance of cost, revenue, and profit centers with a focus on responsibility and control | responsibility reports |
| _________________ is a cost that a manager has the power to influence by his or her decisions | controllable cost |
| cost center responsibility reports typically focus on the _____________, the difference between actual results and the flexible results | flexible budget variance |
| revenue center responsibility reports highlight both the ______________ and the ____________ | flexible budget variance, sales volume variance |
| transfer price | The transaction amount of one unit of goods when the transaction occurs between divisions within the same company |
| the transfer price should be an amount between the __________ and the ________ | market price, variable cost |
| The gift shop at the local zoo is a(n) _________ | profit center |
| The menswear department of a department store, which is responsible for buying and selling merchandise is a(n) _______ | profit center |
| A _____________ is any segment of the business whose manager is accountable for specific activities | responsibility center |
| The sales manager in charge of a shoe company responsible for a particular brand of soft drink is a(n) ____________ | revenue center |
| What is a disadvantage of decentralization? | certain costs might be duplicated |
| The level of employee satisfaction is a key performance indicator of the ________ perspective of a balanced scorecard. | learning and growth |
| What is a key performance indicator of the internal business perspective of the balance scorecard? | number of units produced per hour |
| What perspective of the balanced scorecard focuses on the increase of company profits through increasing revenue growth and productivity? | financial |
| In decentralized companies, performance evaluation systems provide upper management with the feedback it needs to maintain control over the entire organization (T/F) | True |
| flexible budget | a budget prepared for various levels of sales volume |
| flexible budget variance | The difference between actual results and the expected results in the flexible budget for the actual units sold |
| sales volume variance | the difference between the expected results in the flexible budget for the actual units sold and the static budget |
| static budget variance | the difference between actual results and the expected results in the static budget |
| budget performance report | a report that summarizes the actual results, budgeted amounts, and the differences |
| static budget | a budget prepared for only one level of sales volume |
| Setting standards required ________ and ________ among different divisions and functions | coordination, communication |
| management by exception | managers concentrate on results that are outside the accepted parameters |
| Which division manager is responsible for when workers were paid more than expected? | HR manager |
| Which division manager is responsible for when material purchases were at a higher cost than standards? | Purchasing department |
| Which division manager is responsible when inexperience workers caused a delay in unit production? | Production manager |
| What does the time value of money NOT depend on? | expected cash flows |
| What is the most reliable method for making capital budgeting decisions? | NPV method |
| Which part of the capital budgeting process identifies and analyzes capital investments? | plan |
| Managers usually use the __________ method as a screening device to eliminate investments that will take too long to recoup the initial investment. | payback |
| The comparison of the actual results of capital investments to the project results is referred to as __________ | post-audit |
| What is not a popular method for analyzing potential capital investments? | capital budgeting |
| In many cases, the transfer price __________. | does not affect the overall company profits |
| The primary objective in setting transfer prices is to ______________ | achieve goal congruence by selecting a price that will maximize overall company profits |
| A(n) _________ variance measures how well the business uses its materials or human resources | efficiency |
| If a Manufacturing Overhead is the debt journal entry, the credit entry would be to _____________ | variable overhead cost variance |
| When journalizing for an unfavorable direct materials cost variance _________ | direct materials cost variance is debited |
Created by:
haileyhoutenbrink