Question

1. Which of the following is true regarding a responsibility accounting system?
   1. It should not hold a manager responsible for costs over which the manager has no influence
   2. It assigns responsibility for costs to the appropriate managerial level that controls those costs
   3. It is designed to measure the performance of managers in terms of controllable costs
   4. It can be applied at any level of organization
   5. All of the above are true

2. Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the special order. The company is making 4,000 hammocks. Accepting the order will increase Outdoor Living’s variable manufacturing costs. Which type of cost is considered a relevant cost to Outdoor Living’s decision to accept or reject the special order?
   1. Depreciation on equipment that would be used to make the hammocks
   2. Raw materials to make the extra 500 hammocks
   3. Labor costs to make the current 4,000 hammocks
   4. Current materials handling cost

3. Consider the following statements about goal congruence:
   1. Goal congruence is obtained when managers of subunits throughout an organization strive to achieve the goals set by their own subunits.
   2. Managers are often more concerned about the performance of their own subunits rather than the performance of the entire organization.
   3. Achieving goal congruence in most organization is relatively straightforward and easy to accomplish.
      1. Which of the above statements is (are) true?

1. II only
2. I and II
3. I only
4. I, II, and III
5. II and III

4. Which of the following is not considered when using the net present value method?
   1. Future cash outflows
   2. Opportunity cost
   3. Future year-end cash flows
   4. Discount rate
   5. Future cash inflows

Answer 1

Which of the following is true regarding a responsibility accounting system?

e.All of the above are true

Outdoor Living Company has just received a special order for 500 hammocks. Outdoor Living has sufficient idle capacity to accept the special order. The company is making 4,000 hammocks. Accepting the order will increase Outdoor Living’s variable manufacturing costs. Which type of cost is considered a relevant cost to Outdoor Living’s decision to accept or reject the special order?

2. · Raw materials to make the extra 500 hammocks

Since there is spare capacity, fixed costs are not relevant

Consider the following statements about goal congruence:

3. · I only

Which of the following is not considered when using the net present value method?

2. · Opportunity cost

NPV = Present value of cash inflows – present value of cash outflows