ACC 213 FINAL
If the contribution margin is not sufficient to cover fixed expenses:
A loss occurs
The term differential cost refers to
An incremental cost from selecting one alternative instead of another
Which of the following may appear on a flexible budget performance report
An unfavorable activity variance, a favorable revenue variance, and unfavorable spending variance
The term relevant range means the range of activity over which
Assumptions about fixed and variable cost behavior are reasonably valid
Prime costs consist of which of the following
Both direct materials and direct labor cost
Mossfeet shoe corporation is a single product firm. The company is predicting that a price increase next year will not cause unit sales to decrease. What effect would this price increase have on the following items for next year
Contribution margin ratio increase break even point decrease
Which terms will make the following statements are true action overhead is under applied and manufacturing overhead account as a_______ balance and applied manufacturing overhead is less than______ manufacturing overhead
Debit actual
Manufacturing overhead applied to production is recorded with a
Debit to (increase) The work in process account
When using a flexible budget a decrease in activity within the relevant range
Decreases total cost
Which of the following would be the least appropriate overhead allocation base for a highly automated manufacture of automobile tires
Direct labor hours
Which of the following cost at a manufacturing company would be treated as a product cost under variable costing
Direct material cost
It is profitable to continue processing joint products after the split off point if the total revenue exceeds joint cost
FAlse
Opportunity cost represent costs can be reduced by effective management of operations
Fakse
A decrease in the number of units sold will decrease the break even point
False
A fixed production costs incurred before the split off point in a joint process is relevant in a sell or process further decision
False
A revenue variance is unfavorable in the revenue in the static planning budget is less than the revenue in the flexible budget
False
A spending variance is the difference between the amount of the cost in the static planning budget and the amount of the cost in the flexible budget
False
Actual costs are determined by plugging the actual level of activity for the period into the cost formula used in flexible budget
False
All fixed costs are sunk cost
False
Although a contribution margin income statement is useful for external reporting purposes it has serious limitations when used for managerial decisions
False
An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period
False
An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity a lot for the actual output of the period
False
Any decision to drop a product the product should be charged for rent in proportion to The space it occupies even if the space has no alternative you stand the rental payment is unavoidable
False
Any special order situation that involves using capacity that is not idle opportunity costs are zero
False
Comparing a static planning budget to actual cost is a good way to assess whether variable costs are under control
False
Flexible budget performance report contains activity variances but not revenue or spending variances
False
Future costs that do not differ between alternatives are relevant in a decision
False
If variable manufacturing overhead is applied based on direct labor hours it is impossible to have a favorable labor rate variance in an unfavorable variable overhead rate variance for the same period
False
In general the production manager is responsible for the materials price variance
False
Opportunity costs are rarely relevant when making managerial decisions
False
Period costs are expensed to the work in process account before being included in the income statement
False
Relevant costs in a make or buy decision of a part include stuff up overhead cost for the manufacture of the product using the outsourced part
False
Skilled workers with high hourly rates of pay are given duties that require a little skill and call for a lower hourly rate of pay result in a favorable labor rate variance
False
Sunk costs usually are relevant when making decisions
False
The book value of an old machine is always considered an opportunity cost in decision
False
The contribution margin generated by an alternative use of a production equipment should not be considered when evaluating a make or buy decision
False
The process of assigning overhead to cost object is known as cost segregation
False
The salary paid to a store manager is not a traceable fixed expense of the store
False
The total volume in sales dollars that would be required to attain a given target profit is determined by dividing the target profit by the contribution margin ratio
False
Variable costs are always relevant costs in decision
False
When combining activities in an activity-based costing system Batch level activities should be combined with unit level activities whenever possible
False
When the level of activity increases within the relevant range variable cost per unit will increase
False
When using segmented income statement or dollar sales for a company to break even traceable fixed expenses divided by the overall contribution margin ratio
False
While preparing a direct materials budget beginning inventory for Raw materials should be added to production needs and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased
False
The cost of leasing premises to operate a salad dressing factory can be Best described as a
Fixed cost
To obtain the dollar sales volume necessary to attain a given target profit which of the following formulas should be used
Fixed expenses target profit divided by contribution margin ratio
Which of the following statements is true when referring to the high low method of cost analysis
In essence Hight low method draws a straight line through two data points
Which of the following is an assumption underlying standard CVP analysis
In multi product companies the sales mix is constant
Which of the following statements is correct regarding the total cost equation Y=A+BX
In the high low method B equals the change in total cost divided by the change in activity
There are various budgets within the master budget one of these budgets is the production budget which of the following best describes the production budget
It is calculated based on the sales budget and the desired ending inventory.
Poorly trained workers could have an unfavorable effect on which of the following variances
Labor rate variance no materials quantity variance yes
Which of the following statements is correct concerning the manufacturing overhead budget
Manufacturing overhead budget by the schedule for all costs of production other than direct materials and labor cost The manufacturing overhead budget shows expected cash disbursements for manufacturing overhead The manufacturing overhead budget is prepared after the sales budget
If sales volume increases and all other factors remain constant then the
Margin of safety will increase
If the degree of operating leverage is four and a 1% change and quantity sold should result in a 4% change in
Net operating income
Departmental overhead rates may not correctly assign overhead costs due to
Overreliance on volume as a basis for allocating overhead cost where products differ regarding the number of units produced lot size or complexity of production
When preparing a direct materials budget the required purchases of raw materials in unit equals
Raw materials needed to meet the production schedule plus desired ending inventory of raw materials minus beginning inventory of raw materials
The production department should generally be responsible for materials price variance is that resulted from
Rush orders arising from poor scheduling
Which of the following statements is correct concerning the cash budget
The cash budget should be prepared before the budgeted income statement The cash budget should be prepared before the budgeted balance sheet The cash budget builds on earlier budgets and schedules as well as additional data
Which of the following is true regarding the contribution margin ratio of a company that produces only one single product
The contribution margin ratio multiplied by the selling price per unit equals the contribution margin per unit
Hayworth corporation has just segmented last year's income statement into its 10 product lines. The chief executive officer is curious as to what affect dropping one of the product lines at the beginning of last year would have had on overall company profit. What is the best number for the CEO to look at to determine the effect of this elimination on the net operating income of the company as a whole
The product line segment margin
The usual starting point for a master budget is
The sales forecast or sales budget
If variable manufacturing overhead is applied on the basis of direct labor hours and the variable overhead rate variance is favorable then
The standard variable overhead rate exceeded the actual rate
In a flexible budget what will happen to fix cost as low activity level increases
The total fixed cost will not change
When using data from a segmented income statement the dollar sales for a segment to break even is equal to
Traceable fixed expenses divided by segment CM ratio
A companies manufacturing overhead account should include a salary of a production supervisor
True
A continuous or perpetual budget is a 12 month budget the rolls forward one month or quarter as the current month or quarter is completed
True
A cost that can be avoided by choosing one alternative over another is relevant for decision purposes
True
A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service
True
A shift in the sales and mix from products with my contribution margin ratio's toward products with the contribution margin ratio's will raise the break even point for the company as a whole
True
An unfavorable activity variance for revenue indicates the actual activity was less than expected when the static planning budget was developed
True
Differences between the static planning budget and a flexible budget so what should have happened because the actual level of activity deferred from what had been planned
True
Direct material costs frequently are variable cost
True
For a capital intensive, automated company the break-even point will tend to be higher and the margin of safety will be lower than for a less capital intensive company with the same sales.
True
If manufacturing overhead is over applied then closing manufacturing overhead cost to cost of goods sold reduced cost of good sold
True
If the actual hourly rate is greater than the standard hourly rate the labor rate variance is labeled unfavorable
True
If the variable expense per unit decreases and all other factors remain the same the contribution margin ratio will increase
True
In the manufacturing overhead budget for non-cash charges such as depreciation are deducted from the total budgeted manufacturing overhead expense to determine the expected cash disbursements for manufacturing overhead
True
Managerial decision making should focus on the analysis of differential costs and benefits
True
Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.
True
Material price variances are often isolated at the time materials are purchased rather than when they are placed into production to facilitate earlier recognition of variances
True
Product whose revenue do not cover its variable cost and it's traceable fixed cost should usually be dropped
True
The direct labor budget begins with the required production in units from the production budget
True
The labor efficiency variance is labeled favorable if actual hours used or less than the standard hours allowed for the actual output
True
The number of units to be produced in a period can be determined by adding the expected sales to thedesired ending inventory and then deducting the beginning inventory
True
The use of a predetermined overhead rates in a job order cost system makes it possible to estimate the total cost of a given job as soon as production is completed
True
The variable overhead efficiency variance does not actually measure how efficiently variable manufacturing overhead resources were used
True
To help assess how well a manager has controlled cost actual cost should be compared to what the cost should have been for the actual level of activity
True
When a company has a production constraint total contribution margin will be maximized by emphasizing the products with the highest contribution margin per unit of the constrained resource
True
When more hours of labor time are necessary to complete a job then the standard allows the labor efficiency variance is unfavorable
True
When production exceeding sales for the period absorption costing that operating income will exceed variable costing net operating income
True
When the activity measure is the number of units sold the revenue variance is favorable and the average actual selling price is greater than expected
True
When the predetermined overhead rate is based on the level of activity at capacity an item called the cost of unused capacity may appear as an expense on income statement prepared for internal management use
True
Providing the power required to run production equipment is an example of
Unit level activity
An unfavorable materials quantity variance indicates that
actual usage of material exceeds the standard material allowed for output
Which of the following would be classified as a product level activity
advertising a product
Generally speaking net operating income under variable and absorption costing will
be equal only when production and sales are equal
Variable manufacturing overhead is applied to products on the basis of a standard direct labor hours if the labor efficiency variance is favorable the variable overhead efficiency variance will be
favorable
A budget that is based on the actual activity of a period is known as
flexible budget
The opportunity cost of making a component part in a factory with no excess capacity is the
net benefit foregone from the best alternative use of the capacity required
Favorable labor rate variance indicates that
the standard rate exceeds the actual rate