Exercise questions for Mid-term Test

1. An outline of the fundamental purpose of an organization is called its:

A. Mission statement
B. Objectives
C. Policy
D. All of the above

2. The situation that exists when groups and individuals work together to achieve a
particular goal is classified as
A. motivation
B. goal congruence
C. effort
D. autonomy
3. A marketing department that promises delivery quicker than the production
departments ability to produce is an example of a lack of understanding of the
A. Synergy of the business units
B. Need to maintain the reputation of the company
C. Organizational culture and leadership
D. Interrelationships among functional areas and firm strategies

4. What does SWOT stand for?

A. Strategies, Weaknesses, Opportunities, Threats
B. Strategies, Weaknesses, Options, Tactics
C. Strengths, Weaknesses, Options, Threats
D. Strengths, Weaknesses, Opportunities, Threats

5. Natalie works as a stylist cutting hair. She gets paid for each haircut. What type
of incentive pay is this?
A. Skills-based pay
B. Merit pay
C. Piecework
D. Commission
E. None of the above

6. Provision for cars, parking lots and memberships in country club are example of
A. Base salary of executives
B. Short-term incentive plans
C. Executive perks
D. None of the above

7. Performance-based annual bonuses are an example of

A. Base salary
B. Short-term incentive plan
C. Long-term incentive plan
D. All of the above

8. Sammons Corporation had a favorable direct-labor efficiency variance of $6,000

for the period just ended. The actual wage rate was $0.50 more than the
standard rate of $12.00. If the company's standard hours allowed for actual
production totaled 9,500, how many hours did the firm actually work?

A. 9,000.
B. 9,020.
C. 9,980.
D. 10,000

9. Taylor Enterprises purchased 56,000 pounds (cost = $420,000) of direct

material to be used in the manufacture of the company's sole product. According
the production specifications, each completed unit requires five pounds of direct
material at a standard cost of $7.80 per pound. Direct materials consumed by the
end of the period totaled 53,500 pounds in the manufacture of 10,900 finished
units.
Assume that the company computes variances at the earliest point in time.
1)
Taylor's direct-material price variance was:
A. $16,050F.
B. $16,050U.
C. $16,800F.
D. $16,800U.

2) Taylor's direct-material quantity variance was:

A. $7,800F.
B. $16,800F.
C. $7,800U.
D. $16,800U.

10. Which of the following journal entries definitely contains an error?

11. Rogillo, Inc. had an unfavorable labor efficiency variance and an unfavorable
materials quantity variance. Which department might be held accountable for these
variances?

A. Purchasing, because bad materials can harm labor efficiency.

B. Production, because inefficient workers may use more materials than allowed.
C. Marketing.
D. Shipping.
E. Both Purchasing, because bad materials can harm labor efficiency and Production,
because inefficient workers may use more materials than allowed.

12. Interspace Merchandising anticipated selling 29,000 units of a major product and
paying sales commissions of $6 per unit. Actual sales and sales commissions totaled
31,500 units and $182,700, respectively. If the company used a static budget for
performance evaluations, Interstate would report a cost variance of:
A.
B.
C.
D.

$6,300U.
$6,300F.
$8,700U.
$8,700F.

13. Gridiron Merchandising anticipated selling 27,000 units of a major product and
paying sales commissions of $6 per unit. Actual sales and sales commissions totaled
27,500 units and $171,400, respectively. If the company used a flexible budget for
performance evaluations, Gridiron would report a cost variance of:
A.
B.
C.
D.

$6,400U.
$6,400F.
$9,400U.
$9,400F.

14. Trois Elles Corporation recently prepared a manufacturing cost budget for an output
of 50,000 units, as follows:

Actual units produced amounted to 60,000. Actual costs incurred were: direct materials,
$110,000; direct labor, $60,000; variable overhead, $100,000; and fixed overhead,
$97,000. If Trois Elles evaluated performance by the use of a flexible budget, a
performance report would reveal a total variance of:

A. $3,000 favorable.
B. $23,000 favorable.
C. $27,000 unfavorable.
D. $42,000 unfavorable.

15.Darling Company, which applies overhead to production on the basis of machine

hours, reported the following data for the period just ended:
Actual units produced: 12,000
Actual fixed overhead incurred: $730,000
Actual machine hours worked: 60,000
Budgeted fixed overhead: $720,000
Planned level of machine-hour activity: 50,000
If Darling estimates four hours to manufacture a completed unit, the company's
standard fixed overhead rate per machine hour would be:
A. $12.00.
B. $14.40.
C.
$14.60.
D. $15.00.

16. Atlanta Enterprises incurred $828,000 of fixed overhead during the period. During
that same period, the company applied $845,000 of fixed overhead to production and
reported an unfavorable budget variance of $41,000. How much was Atlanta's budgeted
fixed overhead?
A.
B.
C.
D.

$787,000.
$804,000.
$869,000.
$886,000.

17. Draco, Inc. has the following overhead standards:

Variable overhead: 4 hours at $8 per hour
Fixed overhead: 4 hours at $10 per hour
The standards were based on a planned activity of 20,000 machine hours when 5,000
units were scheduled for production. Actual data follow.
Variable overhead incurred: $167,750
Fixed overhead incurred: $210,000
Machine hours worked: 19,800
Actual units produced: 5,100
Draco's fixed-overhead volume variance is:
A.
B.
C.
D.

$4,000 favorable.
$4,000 unfavorable.
$10,000 favorable.
$10,000 unfavorable.

18. An unfavorable production-volume variance of $20,000 indicates that the company

has:
A. unused fixed manufacturing overhead capacity
B. overallocated $20,000 of fixed manufacturing overhead costs
C. $20,000 more capacity than needed
D. an economic loss of $20,000 from selling fewer products than planned

19. Teddy Company uses a standard cost system. In May, $234,000 of variable
manufacturing overhead costs were incurred and the flexible-budget amount for the
month was $240,000. Which of the following variable manufacturing overhead entries
would have been recorded for May?
A. Accounts Payable Control and other accounts 240,000
Work-in-Process Control
240,000
B. Work-in-Process Control
240,000
Variable Manufacturing Overhead Allocated
240,000
C. Work-in-Process Control
234,000
Accounts Payable Control and other accounts
234,000
D. Accounts Payable Control and other accounts 234,000
Variable Manufacturing Overhead Control
234,000

20. Which of the following measures would reflect the fixed costs controllable by a
segment manager?

A.
B.
C.
D.
E.

Choice A.
Choice B.
Choice C.
Choice D.
Choice E.

21. Management of Children Are Precious (CAP), an operator of day-care facilities,

wants the company's profit to be subdivided by center. The firm's accountant has
provided the following data:

CAP's advertising, which is handled by the home office, is not reflected in the preceding
figures and amounted to $60,000.
If advertising expense were allocated to centers based on actual center profitability, the
amount of advertising expense allocated to the Irvine center would be closest to:

A.
B.
C.
D.

$19,800.
$21,000.
$30,000.
$40,543.