ACC 321 Exam 2 quiz questions

Dewitt Co. budgeted its activity for October 2004 from the following information: Sales are budgeted at $750,000. All sales are credit sales and a provision for doubtful accounts is made monthly at the rate of 2% of sales. Merchandise inventory was $120,000 at September 30, 2004, and an increase of $10,000 is planned for the month. All merchandise is marked up to sell at invoice cost plus 50%. Estimated cash disbursements for selling and administrative expenses for the month are $105,000. Depreciation for the month is projected at $25,000. Dewitt is projecting operating income for October 2004 in the amount of

$105,000

Information pertaining to Brenton Corporation's sales revenue is presented in the following table. February March April Cash sales $160,000 $150,000 $120,000 Credit sales 300,000 400,000 280,000 Total sales $460,000 $550,000 $400,000 Management estimates that 5% of credit sales are not collectible. Of the credit sales that are collectible, 60% are collected in the month of sale and the remainder in the month following the sale. Cost of purchases of inventory each month is 70% of the next month's projected total sales. All purchases of inventory are on account; 25% are paid in the month of purchase, and the remainder is paid in the month following the purchase. Brenton's budgeted total cash receipts in April are

$431,600

Hester Company budgets on an annual basis for its fiscal year. The following beginning and ending inventory levels (in units) are planned for the fiscal year of July 1, 2004 through June 30, 2005. July 1, 2004 June 30, 2005 Raw material1 40,000 10,000 Work-in-process 8,000 8,000 Finished goods 30,000 5,000 1 Three (3) units of raw material are needed to produce each unit of finished product. If 450,000 finished units were to be manufactured during the 2004-2005 fiscal year by Hester Company, the units of raw material needed to be purchased would be

1,320,000 units

Bartholomew Corporation's master budget calls for the production of 6,000 units of product monthly. The master budget includes indirect labor of $396,000 annually; Bartholomew considers indirect labor to be a variable cost. During the month of September, 5,600 units of product were produced, and indirect labor costs of $30,970 were incurred. A performance report utilizing flexible budgeting would report a flexible-budget variance for indirect labor of

170 unfavorable

Information on Pruitt Company's direct-material costs for the month of July 2005 was as follows: Actual quantity purchased 30,000 units Actual unit purchase price $2.75 Materials purchase-price variance —unfavorable (based on purchases) $1,500 Standard quantity allowed for actual production 24,000 units Actual quantity used 22,000 units For July 2005, there was a favorable direct-materials efficiency variance o

5400

The following information is available for the Gabriel Products Company for the month of July: Static Budget Actual Units 5,000 5,100 Sales revenue $60,000 $58,650 Variable manufacturing costs $15,000 $16,320 Fixed manufacturing costs $18,000 $17,000 Variable marketing and administrative expense $10,000 $10,500 Fixed marketing and administrative expense $12,000 $11,000 The total sales-volume variance for operating income for the month of July would be

700 unfavorable

Which of the following is not a major benefit of budgets?

Eliminates innovation

Which of the following does not pertain to financial planning models in software form?

Eliminates need to update budgets as uncertainty resolved

Which of the following statements does not describe responsibility accounting?

It identifies managers at fault for operating problems by reports for each responsibility center.

Which of the following is not an advantage for using standard costs for variance analysis?

Standards are developed using past costs and are available at a relatively low cost.

Which of the following is true of capacity costs?

Capacity costs are difficult to estimate.

The basic principles and concepts of variance analysis can be applied to activity-based costing

by application as to the levels of cost hierarchy.

_______ is the continuing reduction in the demand for a company's products that occurs when competitor prices are not met.

downward demand spiral

Performance evaluation using variance analysis should guard against

emphasis on a single performance measure.

The only difference between variable and absorption costing is the expensing of ________.

fixed manufacturing cost

Controllability

is the degree of influence a specific manager has over costs, revenues, and other items.

The higher the denominator level, the ________.

lower the amount of fixed manufacturing costs allocated to each unit produced

Benchmarking is

making comparisons to direct attention to why differences in costs exist across companies

if the unit level of inventory increases during an accounting period, then ________.

more operating income will be reported under absorption costing than variable costing

Which of the following measures capacity levels in terms of demand for the output of the plant?

normal capacity utilization and master-budget capacity utilization

Practical capacity is the denominator-level concept that ________.

reduces theoretical capacity for unavoidable operating interruptions

Budgeting is the common accounting tool companies' use for planning and controlling. Budgets

serve as the financial expression of management's plans for the upcoming period.

The contribution-margin format is used for ________.

variable costing income statement

Which of the following inventory costing methods shown below is required by GAAP (Generally Accepted Accounting Principles) for external financial reporting?

absorption costing

Flexible budgets

accommodate changes in activity levels

Under absorption costing, fixed manufacturing costs _______

are inventoriable costs