Management accounting and control system

1. When implementing a new management accounting and control system, it is BEST:
to allow management to implement their ideas.
for management to involve employees in the implementation.
to involve consultants and implement their experienced ideas.
to engage in benchmarking.

2. Knowledge-based pay for employees is a form of:
input-based reward.
output-based reward.
outcome-based reward.
None of these is correct.
3. When discussing the roles of budgets, a control role includes:
identifying organizational objectives and short-term goals.
developing long-term strategies and short-term plans.
measuring and assessing performance against budgeted amounts.
developing the master budget.
4. All of the following are true of flexible budgets EXCEPT that they:
use the same flexible (variable) cost per unit as the master budget.
result in higher total costs for greater levels of production.
allow comparison of actual results to targets based on the achieved level of production.
reflect the same level of production as the master budget.

5. The sales plan and inventory plan is compared to available productive capacity levels and ________ is determined.
an aggregate plan
a new sales plan
a materials purchasing plan
an administrative and discretionary spending plan

6. The numerator of the rate earned on total assets ratio is equal to
net income
net income plus tax expense
net income plus interest expense
net income minus preferred dividends

7. ________ provide(s) the starting point for developing the operating budget.
The demand forecast
Projected income statement
The production plan
Expected cash flows

8. ________ occur(s) when managers ask subordinates to discuss their ideas about the budget, but no joint decision-making occurs.
Authoritative budgeting
Stretch targets
Consultative budgeting
Budget slack
9. An analysis in which all the components of an income statement are expressed as a percentage of net sales is called
vertical analysis
horizontal analysis
liquidity analysis
common-size analysis
10. The MAJOR criticism of using return on investment (ROI) for financial control is that it:
gives managers an incentive to reject projects with an ROI greater than the company’s required rate of return but less than the department’s current ROI.
usually uses the blended rate of capital as the required rate of return.
encourages competition among segment managers.
is a measure of overall performance.

Solution: