30. By convention, short-term financial control is accomplished by all the following except: (Points : 2)

[removed] Comparing actual to budgeted financial results.
[removed] Calculating a series of cost and revenue variances at the end of the period.
[removed] The use of flexible budgets and standard costs.
[removed] Explaining the total operating-income variance for a given period.
[removed] The use of productivity analysis.


31. Risk aversion is by: (Points : 2)

[removed] Lack of a strategic emphasis in decision making.
[removed] Use of non-strategic performance measurement systems.
[removed] Presence of uncertainty in a manager’s environment.
[removed] A manager’s inability to deal with stress.


32. Table Inc. planned and manufactured 250,000 units of its single product in 2010, its first year of operations. Variable manufacturing costs were $30 per unit of production. Planned and actual fixed manufacturing costs were $500,000. Marketing and administrative costs (all fixed) were $300,000 in 2010. Table Inc. sold 200,000 units of product in 2010 at $50 per unit. Variable costing operating income for 2010 is calculated to be: (Points : 2)

[removed] $1,000,000.
[removed] $3,200,000.
[removed] $3,300,000.
[removed] $4,200,000.


33. Which one of the following refers to the firm’s ability to pay its current operating expenses and maturing debt? (Points : 2)

[removed] Discounted cash flow.
[removed] Liquidity.
[removed] Earnings base.
[removed] Profitability.
[removed] Purchasing power.


34. Managers who are risk prone: (Points : 2)

[removed] Seek risky projects that promise some chance of a low benefit.
[removed] Seek risky projects that promise some chance of a high benefit, although the projects may have a risk of low benefit.
[removed] Seek risky projects.
[removed] Seek high risk projects that promise some chance of a high benefit, although the projects may have a very significant risk of no benefit.


35. Bonus payment options include all of the following except: (Points : 2)

[removed] Perks.
[removed] Current bonus.
[removed] Deferred bonus.
[removed] Stock options.
[removed] Performance shares.


36. Which one of the following develops the value of the firm as the discounted present value of the firm’s net free cash flows? (Points : 2)

[removed] Discounted cash flow method.
[removed] Liquidity method.
[removed] Multiples-based method.
[removed] Profitability method.


37. For production and support departments, a method of implementing cost centers that is output-oriented is the: (Points : 2)

[removed] Budget slack method.
[removed] Cost shifting approach.
[removed] Outsourcing approach.
[removed] Discretionary-cost method.
[removed] Engineered-cost approach.


38. The stock option form of bonus payments to managers usually: (Points : 2)

[removed] Motivates well even in extended market downturns.
[removed] Can lose some motivation because of the delay in reward.
[removed] Focuses on the short-term.
[removed] Is not consistent with shareholder interests.


39. Compensation plans for high-level managers and executives are usually explained in the firm’s: (Points : 2)

[removed] Management Discussion and Analysis (MD&A).
[removed] Income Statement.
[removed] Notes to the Financial Statements.
[removed] Proxy Statement.


40. In a formal management control system, top management sets expectations for desired manager performance. Which of the following is not one of the areas in which a formal individual management control system would be used? (Points : 2)

[removed] Hiring practices.
[removed] Promotion policies.
[removed] Operations.
[removed] Sales.
[removed] Organizational culture.


41. There is a current tax for the manager when which of the following types of compensation is received? (Points : 2)

[removed] Qualified stock options
[removed] Nonqualified stock options
[removed] Deferred bonus
[removed] Current bonus


42. SBUs that generate revenues and incur the major portion of the cost for producing those revenues are: (Points : 2)

[removed] Revenue centers.
[removed] Contribution centers.
[removed] Profit centers.
[removed] Cost centers.


43. Which one of the following computes value based on annual earnings? (Points : 2)

[removed] Discounted cash flow method.
[removed] Liquidity method.
[removed] Multiples-based method.
[removed] Profitability method.


44. Of most relevance in deciding how or which costs should be assigned to an SBU is the degree of: (Points : 2)

[removed] Avoidability.
[removed] Causality.
[removed] Controllability.
[removed] Reliability.


45. There is a current tax deduction for the firm for which of the following types of compensation? (Points : 2)

[removed] Qualified stock options.
[removed] Nonqualified stock options.
[removed] Deferred bonus.
[removed] Current bonus.
[removed] Performance shares.


46. Risk aversion by managers should be recognized when revising compensation plans because: (Points : 2)

[removed] Compensation mix (salary, bonus) can influence a manager’s risk aversion.
[removed] Most companies want risk averse managers.
[removed] Most companies want risk taking managers.
[removed] It costs less to pay risk averse managers.


47. A strategic business unit (SBU) consists of a well-defined set of controllable operating activities
over/about which the SBU manager is: (Points : 2)

[removed] Knowledgeable.
[removed] Responsible for strategy.
[removed] Responsible for strategy and execution.
[removed] Responsible for strategy, execution, and performance.


48. An increase in the market price of a company’s common stock will immediately affect its: (Points : 2)

[removed] Stock return.
[removed] Debt to equity ratio.
[removed] Earnings per share.
[removed] Economic value added.
[removed] Return on common stockholders’ equity.


49. There is a common concern today that executive compensation in the U. S. is: (Points : 2)

[removed] Not adequately linked to strategic performance measures
[removed] Ineffective as a performance incentive
[removed] Not properly disclosed to the IRS
[removed] Varies too greatly from industry to industry


50. Cost allocation of service department costs to production departments make the evaluation and control processes in the production departments: (Points : 2)

[removed] Simpler.
[removed] More complex.
[removed] Forthright and fair.
[removed] Less efficient.


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