Acct Quiz week 7

1. Which of the following might cause a materials variance?
Failing to take purchase discounts. Using a better grade of raw material. Changes in the market supply for the raw materials. All of the above.

2. What is the term that describes the rate companies frequently use to apply fixed overhead costs to units produced?
Predetermined overhead rate.

3. Activity-based costing is commonly used with standard costing. Using more activity drivers increases the potential for managers to get much more information from activity-based costing than from the traditional approach.

4. What is the result of substituting computerized equipment for direct labor?
Less direct labor and more manufacturing
20,000

SUPPORTING CALCULATIONS:
AP ́ AQ $19.00 ́ 11,000 = $209,000
SP ́ AQ $20.00 ́ 11,000 = $220,000
SP ́ SQ $20.00 ́ (0.05 ́ 200,000) = $200,000
|_____$11,000 F _____|________ $20,000 U_____|
Direct labor price variance = $11,000 F Direct labor variance = $20,000 U Total direct labor variance = $9,000 U

11. Which statement is true concerning decentralization?
 Decentralization divides large, complex problems into manageable pieces.

12. Which of the following is a disadvantage of decentralization?
 Decentralization may promote non-goal-congruent behavior.

13. The value assigned to a transaction where goods are bought by one unit of an organization from another unit of the same organization known as which of the following?
Transfer price

14. Which of the following is management’s challenge when setting transfer prices?
 Ensuring both the buyer and seller have goal congruence with respect to the organization’s goals.

15. What is generally considered the best transfer pricing basis when there is a competitive market for the product and market prices are readily available?
 Market price-based transfer pricing

16. Because tax rates are different in different countries, companies have incentives to set transfer prices that will
 increase revenues in low-tax countries.

17. A shortcoming of return on investment (ROI) is that it may not lead managers to accept good investment opportunities