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Management Accounting: Concepts,
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Chapter 8 Extra MC Questions

James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Chapter 8 | MAAW's Textbook Table of Contents

1. Which of the following statements is true? Both ABC and JIT

a. place emphasis on simplification.
b. provide more accurate product costs than traditional systems.
c. emphasize quality improvements.
d. all of the above.
e. none of the above.

2. Which of the following concepts or techniques is (are) consistent with the JIT philosophy?

a. Using statistical control charts at the process level.
b. Using a team approach to performance measurements.
c. Using overhead variance analysis at the process level.
d. a and b.
e. a and c.

3. Which of the actions stated below is not consistent with JIT purchasing?

a. Reduced inspection of incoming materials.
b. More frequent deliveries from vendors.
c. Long term agreements with vendors.
d. Vendor certification and education on quality requirements.
e. Increased number of vendors to obtain competitive prices.

4. The value chain concept refers to the linked set of value adding activities performed

a. within an organization.
b. within an organization, plus the capital added by stockholders.
c. from suppliers through an organization's production activities.
d. from suppliers through an organization's distribution activities.
e. from suppliers through an organization's customer service activities.

5. If the cells in a JIT system are considered departments, then departmental overhead rates are likely to be

a. more accurate in a just-in-time production system than in a traditional production system.
b. more accurate in a traditional production system than in a JIT system.
c. equally accurate or inaccurate in both systems.
d. used in a traditional system but not in a JIT system.
e. None of the above.

6. A JIT production system would not include an emphasis on

a. the quantity of individual output.
b. producing products as needed by the next stage.
c. decentralization of support services.
d. a and b.
e. a and c.

7. The language of JIT includes many terms. Which two of the following terms refer to finding and correcting defects as they occur?

kaizen and jidoka.
b. autonomation and kanban.
c. kaizen and kanban.
d. kanban and jidoka.
e. jidoka and autonomation.

8. The value added concept includes the value added

by the company’s vendors.
b. by the company’s production activities.
c. by the company’s distribution activities.
d. by the company’s vendors, production activities & distribution activities.
e. by the company’s vendors, production, distribution and customer service activities.

9. The value chain concept includes the value added

by the company’s vendors.
b. by the company’s production activities.
c. by the company’s distribution activities.
d. by the company’s vendors, production activities & distribution activities.
e. by the company’s vendors, production, distribution and customer service activities.

10. Which of the following charts or diagrams is the most applicable to the 80/20 rule?

pareto diagram.
b. x-bar chart.
c. range chart.
d. fishbone diagram.
e. histogram.

11. Which of the following concepts or techniques is (or are) consistent with a JIT production system?

Using production authorizations from upstream operations.
b. Empowering production line workers to stop production to fix problems.
c. Using specialized workers to perform a single task.
d. a and b.
e. all of the above.

12. A JIT production system would probably include an emphasis on

maximizing the quantity of output at each operation.
b. decentralizing support services.
c. production authorizations that pull products through the factory.
d. a and b.
e. b and c.

13. Which of the following concepts or techniques is not (are not) consistent with a JIT production system?

Using a computerized production scheduling and control system.
b. Using statistical process control at the operator level.
c. Using cross trained workers to perform multiple tasks.
d. a and b.
e. b and c.

14. Overhead allocations are likely to be

more accurate in a traditional production system than in a cellular production system.
b. more accurate in a cellular production system than in a traditional production system.
c. equally accurate or inaccurate in both systems.
d. used in a traditional system but not in a cellular system.
e. None of the above.

15. Which of the following statements is false? Both ABC and JIT

place emphasis on simplification.
b. provide more accurate product costs than traditional systems.
c. emphasize quality improvements.
d. a and c.
e. all of the above.

16. Which of the actions stated below is not consistent with JIT purchasing?

Acquiring a larger number of vendors than in traditional systems.
b. Obtaining fewer deliveries from vendors than in traditional systems.
c. Obtaining longer term agreements with vendors than in traditional systems.
d. a and b.
e. b and c.

17. In the theory of constraints, throughput refers to

sales dollars less direct materials and direct labor costs.
b. sales dollars less direct materials costs.
c. sales dollars less variable cost of goods sold.
d. the cost of total production output.
e. the cost of good production output.

18. In the theory of constraints, the pace of a non-bottleneck production operation is controlled by the pace of

the previous (upstream) operation.
b. the next (downstream) operation.
c. a bottleneck operation.
d. another non bottleneck operation.
e. the team leader.

19. One of the key ideas in Goldratt's theory of constraints is to maximize throughput by

balancing the production line, i.e., equal capacity at each operation.
b. balancing the flow of work in the plant.
c. maximizing production at each operation.
d. a and b.
e. all of these.

20. Producing more inventory than needed to meet customer demand can be used to increase net income in

Direct costing.
b. Absorption costing.
c. Throughput costing.
d. a and b.
e. None of the above.

21. The main difference between ABC and ABM is that

ABC emphasizes tracing costs to cost objects, while ABM emphasizes performance evaluation.
b. ABC emphasizes product costs, while ABM emphasizes managing processes and work.
c. ABC emphasizes tracing costs to cost objects, while ABM emphasizes tracing costs and managing processes and work.
d. ABC includes activity costing, while ABM excludes activity costing.
e. ABC includes activity management, while ABM excludes activity management

22. Let throughput costing net income = NIT, direct costing net income = NID, and absorption costing net income = NIA. Then, when production exceeds sales, the following will tend to occur.

NIT > NID > NIA.
b. NIT < NID > NIA.
c. NIT > NID < NIA.
d. NIT < NID < NIA.
e. None of the above.

23. An objective in the theory of constraints is to

balance the capacity of each operation in the plant so that all operations will produce at the same pace.
b. balance the flow of work by allowing the most binding constraint to set the pace for the plant.
c. balance the capacity of each operation by recognizing the variability within the system.
d. balance the flow of work by allowing each operation to produce at it’s own pace.
e. none of theabove.

24. Which of the following represent manual systems designed to support continuous flow manufacturing?

JIT’s kanban system.
b. TOC’s OPT system.
c. An ABC system.
d. a and b.
e. b and c.

25. Which of the following is not considered to be a tool useful in supporting continuous improvement by advocates of JIT?

Pareto diagrams.
b. Statistical control charts.
c. Plan-do-check-action cycles.
d. Fishbone diagrams.
e. Accounting variance analysis.

26. Which of the following represent characteristics of a JIT accounting system?

Batching vendor deliveries before recording in the accounting records.
b. Increasing the traceability of costs with fewer cost pools.
c. Using backflush cost systems.
d. a and c.
e. all of the above.

27. Which of the following represent pull systems as opposed to push systems?

JIT kanban systems.
b. TOC OPT systems.
c. ABC systems.
d. a and b.
e. b and c.

28. Assume the unit costs of Product X are: DM = $100, DL = $50 and Variable factory overhead = $60. If the company uses a backflush system based on throughput accounting, what amount would be backflushed when 1,000 units remain in finished goods at the end of a period?

zero.
b. 100,000.
c. 110,000.
d. 150,000.
e. 210,000.

29. Using the same unit costs and situation described in the previous question, what amount would be backflushed based on direct costing?

zero.
b. 100,000.
c. 110,000.
d. 150,000.
e. 210,000.

The MNX Company produces plywood. The budgeted costs for the product are given below.

Type of Input Unit Cost
Direct Material $10
Direct Labor 1
Variable Overhead 4
Fixed Overhead ($30,000 ÷ 10,000) 3
Variable Selling and Administrative 2
Fixed Selling and Administrative 3
Total 23

Assume that there were no beginning inventories and the actual costs of production are equal to budgeted costs. During year 1, MNX Company: Purchased $100,000 worth of direct materials, incurred selling and administrative costs of $48,000 ($18,000 variable & $30,000 fixed), produced 10,000 units of plywood, and sold 9,000 units of plywood at a price of $30 for each unit. Ending inventories of Direct Materials and Work in Process are zero.

30. The ending finished goods inventory under absorption costing is

$10,000.
b. $15,000.
c. $18,000.
d. $21,000.
e. $23,000.

31. The ending finished goods inventory under direct costing is

$10,000.
b. $15,000.
c. $18,000.
d. $21,000.
e. $23,000.

32. The ending finished goods inventory under throughput costing is

$10,000.
b. $15,000.
c. $18,000.
d. $21,000.
e. $23,000.

33. Gross profit for MNX Company is

$180,000.
b. $135,000.
c. $115,000.
d. $108,000.
e. $88,000.

34. Contribution margin for MNX Company is

$180,000.
b. $135,000.
c. $117,000.
d. $108,000.
e. $88,000.

35. Throughput for MNX Company is

$180,000.
b. $135,000.
c. $117,000.
d. $108,000.
e. $88,000.

36. Operating income on an absorption costing basis is

$40,000.
b. $52,000.
c. $57,000.
d. 60,000.
e. Some other amount.

37. Operation income on a direct costing basis is

$40,000.
b. $52,000.
c. $57,000.
d. 60,000.
e. Some other amount.

38. Operating income on a throughput costing basis is

$40,000.
b. $52,000.
c. $57,000.
d. 60,000.
e. Some other amount.

Now assume that during year 2, MNX Company purchased $90,000 worth of direct materials, incurred selling and administrative costs of $50,000 (20,000 variable and 30,000 fixed), produced 9,000 units of plywood and sold 10,000 units for $30 per unit. Actual production costs are equal to budgeted costs.

39. Operating income for year 2 based on an absorption costing is

$67,000.
b. $70,000.
c. $75,000.
d. $78,000.
e. Some other amount.

40. Operating income for year 2 based on direct costing is

$67,000.
b. $70,000.
c. $75,000.
d. $78,000.
e. Some other amount.

41. Operating income for year 2 based on throughput costing is

$67,000.
b. $70,000.
c. $75,000.
d. $78,000.
e. Some other amount.

42. The term kaizen is more closely related to which of the following terms?

jidoka.
b. autonomation.
c. plan-do-check-action.
d. throughput.
e. value chain.

43. The drum in a theory of constraints system

enforces the pace.
b. authorizes production.
c. protects the pace.
d. sets the pace.
e. none of these.

44. The rope in a theory of constraints system

enforces the pace.
b. authorizes production.
c. protects the pace.
d. sets the pace.
e. none of these.

45. The buffer in a theory of constraints system

enforces the pace.
b. authorizes production.
c. protects the pace.
d. sets the pace.
e. none of these.

46. In a theory of constraints system, throughput is

the money flowing into the system.
b. the money flowing out of the system.
c. the money in the system.
d. sales dollars.
e. none of these.

47. Which of the following charts or diagrams shows relationships to reveal problem causes?

pareto diagram.
b. x-bar chart.
c. range chart.
d. fishbone diagram.
e. histogram.

48. Which of the following terms is more closely related to identifying and correcting problems as they occur?

kaizen.
b. kanban.
c. statistical process control.
d. plan-do-check-action.
e. jidoka.

49. Which of the following terms is more closely related to traditional manufacturing concepts, as opposed to the lean enterprise concepts?

value added.
b. continuous improvement.
c. value chain.
d. quality at the source.
e. backflush system.

50. Which of the following terms is more closely related to the lean enterprise manufacturing concepts, as opposed to the traditional concepts?

value added concept.
b. produce to build inventory.
c. large work in process inventory buffers.
d. large number of competitive vendors.
e. demand pull system.

51. Which of the techniques below penalizes a company for building inventory beyond the current demand?

full absorption costing.
b. activity based costing.
c. job order costing.
d. throughput costing.
e. direct costing.

52. The distinction between managing costs and managing activities was developed by

W. Edwards Deming.
b. Robert Kaplan.
c. Robin Cooper.
d. H. Thomas Johnson.
e. Eli Goldratt.

53. Just-in-time techniques are applicable to

Purchasing.
b. Production.
c. Distribution.
d. all of the above.
e. none of the above.

54. When a company changes from a top down vertical organization to a bottom up just-in-time organization, the number of job classifications tends to

remain the same.
b. increase.
c. decrease.
d. increase and then decrease.
e. decrease and then increase.

55. Which of the following terms refers to all of a company’s value creating activities that are required to produce, distribute and service a product?

Value system.
b. Value chain.
c. Value added.
d. All of the above.
e. None of the above.

56. Which of the following terms refers to the value created during production?

Value system.
b. Value chain.
c. Value added.
d. All of the above.
e. None of the above.

57. The concept of quality at the source is inconsistent with

McGregor’s theory Y.
b. employee empowerment.
c. conformance quality.
d. statistical process control.
e. top down control.

58. Changing from a traditional factory layout to a just-in-time cellular layout would tend to create

more accurate product costs.
b. a larger proportion of indirect costs.
c. an increase in cycle time or lead time.
d. a greater need for activity based costing.
e. none of the above.

59. In a demand pull system, each worker performs activities or operations

as rapidly as he or she desires to achieve incentive pay.
b. at the pace authorized by workers or operations up stream.
c. at the pace authorized by workers or operations down stream.
d. at the pace established by the operating budget.
e. none of these.

60. Which of the following tends to be inconsistent, or promote behavior that is inconsistent, with the just-in-time philosophy?

producing inventory for the warehouse in case of future demand.
b. using the full absorption costing inventory valuation method.
c. using a piece rate system for determining employee pay.
d. a. and c.
e. all of the above.

61. Applying the concepts of just-in-time tends to reduce

the cost of handling incoming materials.
b. the cost of materials storage.
c. the cost of materials movement inside the plant.
d. a. and b.
e. all of the above.

62. Which of the following is not a tool applicable to just-in-time.

Pareto diagrams.
b. Overhead variances.
c. Control charts.
d. Fishbone diagrams.
e. Histograms.

63. Which of the following statements is, or are false? Both ABC and JIT

place emphasis on simplification.
b. provide more accurate product costs than traditional systems.
c. emphasize quality improvements.
d. a and b.
e. a and c.

64. Which of the following is, or are inconsistent with the JIT philosophy? An emphasis on

Statistical control charts.
b. Team oriented performance measurements.
c. Variance analysis.
d. a and b.
e. b and c.

65. Which of the actions stated below is consistent with JIT purchasing?

Reduced inspection of incoming materials.
b. Less frequent deliveries from vendors.
c. Short term agreements with vendors. d. Increased number of vendors to obtain competitive prices.
e. None of the above.

66. A JIT production system would include an emphasis on

maximizing the quantity of output at each stage of the production process.
b. producing products as needed by the next stage of the production process.
c. decentralization of support services.
d. a and b.
e. b and c.

67. In the language of JIT, which of the following terms refers to correcting defects as they occur?

Kaizen.
b. Fishbone.
c. Jidohka.
d. Kanban.
e. Pareto.

68. If JIT cells are considered to be departments, then departmental overhead rates are likely to

generate less accurate product cost in a just-in-time production system than in a traditional production system.
b. generate less accurate product cost in a traditional production system than in a JIT system.
c. be equally accurate or inaccurate in both systems.
d. be used in a traditional system but not in a JIT system.
e. None of the above.

69. The linked set of value adding activities performed from suppliers through an organization's customer service activities is referred to as

the value chain concept.
b. the value system concept.
c. value added concept.
d. the just-in-time concept.
e. None of the above.

70. Rearranging a factory from a traditional plant layout to a cellular plant layout tends to

increase the need for inventory buffers.
b. increase the number of machine operators needed.
c. increase the proportion of direct product costs to total product costs.
d. All of the above.
e. None of the above.

71. Which of the following is or are consistent with a JIT accounting system?

Batching vendor deliveries before recording in the accounting records.
b. Increasing the traceability of costs with fewer cost pools.
c. Increasing the number of inventory accounts in the general ledger.
d. a and b.
e. All of the above.

72. In the theory of constraints, throughput is

sales dollars less direct materials related to the units sold.
b. money flowing into the system.
c. all the money in the system.
d. a. and b.
e. a. and c.

73. In the theory of constraints, a constraint is

a policy that limits throughput.
b. an activity or operation that limits throughput.
c. a scarce resource that limits throughput.
d. a. and b.
e. a., b. and c.

74. A bottleneck is where

the demand on a resource is greater than the capacity of the resource.
b. the demand on a resource is equal to the capacity of the resource.
c. buffer inventory should be avoided.
d. a. and b.
e. a., b. and c.

75. In the theory of constraints, inventory includes

direct materials.
b. assets.
c. all the money in the system.
d. b. and c.
e. a., b. and c.

76. In comparing the return of investment calculations in throughput accounting and GAAP accounting, which of the following will be different when the amount of inventory changes?

Net income.
b. The capital turnover ratio.
c. The margin, or return on sales.
d. a. and c.
e. a., b. and c.

77. According to Goldratt, floating bottlenecks are created by

dependent events.
b. statistical fluctuations.
c. attempts to balance the plant.
d. the combination of a., b. and c.
e. none of the above.

78. According to the theory of constraints, a non-constraint is utilized when

it is producing at capacity.
b. when it is activated.
c. when it is producing throughput.
d. a. and b.
e. a. and c.

79. In the theory of constraints, balancing the flow of work requires

breaking the constraint.
b. working at the pace set by the constraint.
c. balancing the plant.
d. a. and b.
e. a., b. and c.

80. Using Goldratt’s "evaporating cloud" technique refers to

identifying a faulty assumption in a conflict or issue.
b. breaking the constraint in a system.
c. identifying the constraint in a system.
d. compromise.
e. none of the above.

81. Goldratt is opposed to

product costing.
b. financial measurements.
c. cost variances.
d. a. and c.
e. a., b. and c.

82. In the theory of constraints, the goal is

to maximize throughput.
b. to balance the flow of work.
c. to make money now and in the future.
d. to minimize inventory and operating expense.
e. none of the above.

83. Throughput is

money generated by the company.
b. Sales.
c. Sales - operating expense.
d. Sales - inventory.
e. None of these.

84. In TOC, operating expense excludes

direct labor cost.
b. direct material cost.
c. variable factory overhead cost.
d. fixed factory overhead cost.
e. selling and administrative cost.

85. In the theory of constraints, inventory is defined as

direct materials included in the products sold.
b. total assets.
c. assets - liabilities.
d. sales - throughput.
e. none of the above.

86. In the theory of constraints, decreasing inventory (as defined in TOC) without affecting throughput or operating expense, would automatically

increase net income.
b. decrease net income.
c. increase return on investment.
d. decrease return on investment.
e. produce none of the above.

87. When finished goods inventory decreases, (i.e., where the number of products sold is greater than the number of products produced) net income based on throughput costing

will be greater than net income based on either absorption costing or direct costing.
b. will be less than net income based on either absorption costing or direct costing.
c. will be greater than net income based on absorption costing, but equal to direct costing net income.
d. will be greater than net income based on direct costing, but equal to absorption costing net income.
e. none of the above.

88. According to Goldratt, floating bottlenecks are caused by the combination of

an unbalanced plant, constraints and dependent events.
b. a balanced plant, constraints and statistical fluctuations.
c. an unbalanced plant and statistical fluctuations.
d. a balanced plant, dependent events and statistical fluctuations.
e. an unbalanced plant, dependent events and statistical fluctuations.

89. In the theory of constraints, a non-bottleneck operation producing at it’s own pace would

always be activated and always be utilized.
b. always be activated, but not always utilized.
c. always be utilized, but not always activated.
d. always be producing throughput.
e. none of the above.

90. In the drum-buffer-rope method, material inventory buffers are placed

in the warehouse.
b. directly downstream from the drum.
c. directly upstream from the rope.
d. directly upstream from the drum.
e. directly downstream from the rope.

91. According to the theory of constraints, which of the following is, or are, global measurements

traditional product costs.
b. activity based product costs.
c. throughput.
d. all of the above.
e. none of the above.

92. In the theory of constraints, the goal is

to maximize throughput.
b. to balance the flow of work.
c. to exploit the constraints.
d. to minimize inventory and operating expense.
e. none of the above.

93. ROI in the theory of constraints is

money generated by the company divided by inventory.
b. (Sales - COGS)/Inventory.
c. (Sales - operating expense)/Inventory.
d. (Throughput - operating expense)/Inventory.
e. None of these.

94. In TOC, operating expense excludes

direct labor cost.
b. variable factory overhead cost.
c. fixed factory overhead cost.
d. selling and administrative cost.
e. None of these.

95. In the theory of constraints, product inventory (i.e., inventory in traditional accounting) includes

direct materials.
b. direct product costs.
c. assets.
d. sales - throughput.
e. none of the above.

96. In the theory of constraints, which of the following represent assets?

direct materials.
b. direct labor
c. factory overhead
d. selling costs
e. a, b and c.

97. In the theory of constraints, increasing inventory (as defined in TOC) without affecting throughput or operating expense, would automatically

increase net income.
b. decrease net income.
c. increase return on investment.
d. decrease return on investment.
e. produce none of the above.

98. When finished goods inventory increases, (i.e., where the number of products sold is less than the number of products produced) net income based on throughput costing

will be greater than net income based on either absorption costing or direct costing.
b. will be less than net income based on either absorption costing or direct costing.
c. will be greater than net income based on absorption costing, but equal to direct costing net income.
d. will be greater than net income based on direct costing, but equal to absorption costing net income.
e. none of the above.

99. According to the theory of constraints, which of the following is not, or are not global measurements?

traditional product costs.
b. activity based product costs.
c. throughput.
d. a and b.
e. b and c.

Chapter 8 Extra MC Solution