Problem 1
1. Just-in-time processing
a. Is based on a just-in-case philosophy.
b. Results in a push approach.
c. Minimizes inventory storage and waiting time.
d. All of the above.
2. An element of just-in-time processing is
a. Dependable suppliers who are willing to deliver on short notice.
b. A multi-skilled workforce.
c. A total quality control system.
d. All of these apply.
3. Which one of the following is not a benefit of just-in-time processing?
a. Control of significant inventory balances.
b. Enhanced product quality.
c. Reduction of rework costs.
d. All of the above are benefits.
4. Which one of the following statements describes just-in-time (JIT) inventory management?
a. JIT is an effective approach for shifting inventory costs to vendors.
b. JIT is a customer service driven strategy that seeks to strategically produce some
excess inventory to guarantee that inventories are always available to customers in
a timely manner.
c. JIT is only used when a company’s vendors ship goods when they are ordered.
d. None of the above describes JIT inventory management.
5. Which one of the following is not a just-in-time inventory management approach?
a. Developing long-term relationships with vendors.
b. Accepting vendor deliveries directly to the ship floor.
c. Establishing procedures for production employees to order raw materials from
vendors.
d. Selecting only the vendors who can provide inventory at the lowest price.
6. Lowering cycle times reduces the need for
a. Raw materials.
b. Speculative inventories.
c. Inspection.
d. Materials handling.
7. The use of flexible manufacturing systems, properly sequencing jobs, and properly placing
tools will minimize
a. Setup time.
b. Processing time.
c. Moving time.

d. Inspection time.
8. Which one of the following is not a just-in-time supportive performance measure?
a. Inventory turnover.
b. Cycle time.
c. Unitized cost of goods sold.
d. Cycle efficiency.
9. Which lean manufacturing model assigns all manufacturing costs to Cost of Goods Sold and
then subtracts inventory costs from the Cost of Goods Sold account?
a. Absorption costing.
b. Backflush costing.
c. Value-added inventory accounting.
d. None of the above.
10. A goal of performance reporting in a lean accounting system is
a. To provide information to managers for constant improvement in cost efficiency
and quality.
b. To show which producing departments are using approximately the same or
different percentages of services.
c. Both of the above.
d. None of the above.
11. Which one of the following is not a drawback to cost-based pricing?
a. Cost-based pricing requires accurate cost assignments.
b. The greater the portion of unassigned costs, the greater the likelihood of
overpricing or underpricing individual products.
c. Cost-based pricing assumes goods or services are relatively scarce, and customers
who want a product or service are generally willing to pay the price.
d. In a competitive environment, cost-based approaches decrease the time and cost of
bringing new products to market.
12. Which one of the following statements is true?
a. Kaisen costing, a mutually exclusive alternative to target costing, was developed
by the Japanese.
b. Kaisen costing means continuous improvement costing.
c. Both a and b are true.
d. None of the above are true.
13. Harbor Company had sales of $12,000,000, asset turnover of 120%, and an ROI of 27%.
Harbor’s net assets equal
a. $ 2,160,000
b. $ 3,240,000
c. $10,000,000
d. $42,222,222

14. Under which one of the following circumstances is the return on investment performance
measure more likely to be misleading in comparing the performance of several divisions?
a. Long-term assets are stated at current fair market value.
b. Long-term assets are stated at book value.
c. A division manager is over-investing in assets that provide little contribution
toward earnings.
d. None of the above could be misleading.
15. If both the investment turnover and the return on sales ratio increased by 25%, the return on
investment would increase by
a. 0 %
b. 25 %
c. 50%
d. 56.25%
16. Information for Pipe division is as follows:
Net earnings for the division
Asset base for the division
Target rate of return
Operating income margin
Weighted average cost of capital
Pipe division’s residual income is
a. $26,000
b. $28,000
c. $32,000
d. $95,200

$ 40,000
$100,000
14%
12%
8%

17. Which one of the following changes would not change return on investment (ROI)?
a. The division decrease sales and expenses by the same percentage.
b. The division increases total assets.
c. The division increases sales dollars by the same amount that total assets increase.
d. The division decreases sales and expenses by the same dollar amount.

18. Which one of the following is not an advantage of ROI?
a. It encourages managers of departments with high ROIs to invest in average ROI
projects.
b. It encourages managers to pay careful attention to the relationships among sales,
expenses, and investment.
c. It encourages cost efficiency.
d. It discourages excessive investment in operating assets.
19. Which one of the following is a legitimate disadvantage of residual income?

a. It does not explicitly capture cost of capital in its computation.
b. It does not encourage managers to accept all projects above the minimum return.
c. It is not an effective basis for comparing divisions of substantially different sizes.
d. It does not provide any new information beyond that provided by ROI.
20. Which one of the following statements about a balances scorecard is true?
a. The advantage of a balanced scorecard approach is that it leads management to
focus exclusively on critical downstream issues such as consumer demand, and
away from lesser upstream issues such as design and production.
b. The advantage of a balanced scorecard approach is that it can best be used as a
single, comprehensive measure of corporate performance.
c. The advantage of a balanced scorecard approach is that it eliminates the need for
management accounting data.
d. The balanced scorecard gives managers a perspective of the organization’s
performance using a recurring set of criteria.
21. Which one of the following statements concerning segment reporting is true?
a. Segment reports are a feature of responsibility accounting systems and generally
are not applicable to other reporting criteria.
b. In the short run, the best profitability number for deciding the impact of
discontinuing a segment is segment contribution margin.
c. In the long run, the best profitability number for deciding the impact of
discontinuing a segment is segment income after subtracting allocated common
segment costs.
d. None of the above are true.