M1 AND M2 QUIZ

Costs incurred to improve product quality by precluding product defects are known as:

• internal failure costs

• external failure costs

• appraisal costs

• prevention cost

The cost of downtime on machines while rework is being performed is a(n)

• appraisal cost.

• external failure cost.

• internal failure cost.

• prevention cost.

Sales returns and allowances due to a quality deficiency is an example of:

• external failure costs

• appraisal costs

• internal failure costs

• prevention cost

A repetitive action fulfilling a business function and increasing the worth of the product and the price that the customer is willing to pay for the product is referred to as a:

• non-value added activity

• value-added activity

• business value-added activity

• activity analysis

1. ALVIN, Inc. manufactures a product that experiences the following activities:

Processing (three departments) 40 hours

Moving (four moves) 18 hours

Waiting time 42 hours

Storage time (before delivery) 100 hours

The MCE for the product is

• 5%

• 25%

• 20%

• 40%

1. Alain, Inc. uses an accounting system that charges costs to the manager who has been

delegated the authority to make decisions incurring the costs. For example, if the sales

manager accepts a rush order that will result in higher-than-normal manufacturing costs,

these additional costs are charged to the sales manager because the authority to accept

or decline the rush order was given to the sales manager. This type of accounting system

is known as

• responsibility accounting.

• functional accounting.

• reciprocal allocation.

• transfer price accounting.

The basic purpose of a responsibility accounting system is

• Budgeting

• Motivation.

• authority.

• variance analysis.

1. Precy Joy Co. is a computer service center. For the month of May, Vicky had the following

operating statistics:

Sales P450,000

Operating income 25,000

Net profit after taxes 8,000

Total assets 500,000

Shareholders’ equity 200,000

Cost of capital 6%

Based on the above information, which one of the following statements is correct?Precy Joy has a

• return on investment of 4%.

• residual income of P(5,000).

• return on investment of 1.6%.

• residual income of P(22,000).

A management decision may be beneficial for a given profit center, but not for the entire company. From the overall company viewpoint, this decision would lead to

• goal congruence

• suboptimization

• centralization

• maximization

The sequence that reflects increasing breadth of responsibility is

• cost center, investment center, profit center

• cost center, profit center, investment center

• profit center, cost center, investment center

• investment center, cost center, profit center