Sample Questions
Question 1
Easy
Which of the following best describes an investment center?
Solution
B is correct. An investment center is a responsibility center whose manager is accountable for revenues, costs, and the capital (asset) investment used by the segment. Performance is typically evaluated using ROI, residual income, or EVA.
Question 2
Medium
Which of the following performance measures would most appropriately be classified under the internal business process perspective of a balanced scorecard?
Solution
C is correct. The internal business process perspective measures the efficiency and effectiveness of internal operations that create value for customers, including manufacturing cycle time, defect rates, on-time delivery, and order fulfillment time. Cycle time directly captures how quickly the firm converts inputs into finished output ready for the customer, making it a core internal-process metric.
Question 3
Hard
A company's standard cost for direct materials is 3 pounds per unit at $4.00 per pound. During the period, the company produced 5,000 units and used 16,000 pounds of material at a total cost of $62,400. What is the total direct materials variance (price plus quantity)?
Solution
A is correct. Actual price per pound = . Standard quantity allowed = pounds. Price variance = favorable. Quantity variance = unfavorable. Total variance = unfavorable. Equivalently, actual cost $62,400 minus standard cost allowed equals $2,400 unfavorable.
