ACC 3365 FINAL

A "flexible" budget for Direct Materials would be calculated using the:

"budgeted" (standard) DM cost times the actual output in the budget period

Refining a cost system includes ________.

identifying the activites involved in a process

In a costing system

a cost-allocation base can be either financial or nonfinancial

A flexible budget contains

budgeted amounts for actual output

A ________ is a grouping of individual indirect cost items.

cost pool

When reports containing variance analysis are provided to factory managers, how should they use that information?

to identify the source of the variances and to determine if corrective action is needed

A favorable price variance for direct manufacturing labor might indicate that ________.

underskilled employees are being hired

When machine-hours are used as an overhead cost-allocation base and annual leasing costs for equipment unexpectedly increase, the most likely result would be to report a(n) ________.

unfavorable fixed overhead flexible-budget

are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

unit-level costs

Job costing is

used by businesses to price unique products for different jobs

The high-low method will likely produce an unreliable cost function because it:

uses only two data points (high and low)

While calculating the costs of products and services, a standard costing system ________.

uses standard costs to determine the cost of products

An unfavorable flexible-budget variance for variable costs may be the result of ________.

using more input quantities than were budgeted

Actual costing is a costing system that traces direct costs to a cost object by ________.

using the actual direct cost rates times the actual quantities of the direct-cost inputs

Each indirect-cost pool of a manufacturing firm ________.

utilized a separate cost-allocation rate

When is the best time to record Direct Materials price variances?

when DM are bought

Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

They are not based on realized benchmarks

To calculate the number of units that must be sold to achieve a "target profit" (before taxes), the formula is:

Total Fixed Cost plus Target Profit divided by Contribution Margin per unit

Contribution margin (total) is calculated as:

Total Revenues minus Total Variable Costs

The sales value at splitoff method

) allocates joint costs to joint products on the basis of the relative total sales value at the splitoff point

DM Price variance should be recorded when the items are purchased

(1) so that managers can identify as soon as possible whether they need to take corrective action.

Happy Pizza Co. is considering the purchase of a new pizza oven that is expected to generate cost savings of $1,000 per month. The original cost of the pizza oven currently in use was $5,000 and there is Accumulated Depreciation of $3,000 for that oven. Which of these items are relevant to the decision about buying the new oven?

$1,000 cost savings only

It is October of 2021 and OUR Mfg. Co. is preparing budgets for 2022 when they will open their new company on January 1. Their controller believes that 70% of their customers will buy on credit and 25% of those will pay their balance owed in the month after the sale, 60% will pay their balance owed in the 2nd month after the sale, 10% will pay in the 3rd month after the sale, and 5% will be bad debts. If the company makes sales (both cash and credit) that $100,000 in January of 2022...how much of the January credit sales should they estimate will be collected in February?

$17,500

SAME INFORMATION AS THE FIRST TWO PROBLEMS: It is October of 2021 and OUR Mfg. Co. is preparing budgets for 2022 when they will open their new company on January 1. Their controller believes that 70% of their customers will buy on credit and 25% of those will pay their balance owed in the month after the sale, 60% will pay their balance owed in the 2nd month after the sale, 10% will pay in the 3rd month after the sale, and 5% will be bad debts. If the company sells a total of $200,000 in the month of January, what will be the total amount of cash they will collect from January's customers in all months?

$193,000

Bonnie's Bakery uses a standard costing system. At the start of the year, the owner estimated they would spend $10 per hour for part-time workers (indirect labor) to clean up during the day and keep the kitchen ultra clean. This week they hired part-time workers and paid them $12 per hour. What will the effect be on calculating labor variances?

(1) There are no variances for Indirect Labor; these will be part of Variable OH Variances.

Ajax Manufacturing uses process costing and the FIFO method. They had -0- beginning inventory of Work in Process on November and began work on 120 units during the month. On November 30, they have 20 units that are 25% complete for all manufacturing costs. The equivalent units for the month to use in assigning the manufacturing costs are:

*105* 20*25% = 5 5 + 100 = 105

SAME INFORMATION AS ALL PREVIOUS PROBLEMS: It is October of 2021 and OUR Mfg. Co. is preparing budgets for 2022 when they will open their new company on January 1. Their controller believes that 70% of their customers will buy on credit and 25% of those will pay their balance owed in the month after the sale, 60% will pay their balance owed in the 2nd month after the sale, 10% will pay in the 3rd month after the sale, and 5% will be bad debts. What amount of cash inflow should the company expect to collect from AR balances as of Jan. 1, 2022?

0

When costs from a previous department are "transferred in" to a subsequent department (such as from Dept. #1 to #2)...in Dept. #2 the transferred-in costs (from #1) are similar to

1) direct materials that are all added on day 1 of the process.

Relevant information can be useful for:

1. special orders 2. keep or drop 3. make or buy

Stardust Mfg. is preparing their operating budget for the coming fiscal year that ends 12/31/2023. Their Controller projected 2023 sales to be 100,000 units, their EI of Finished Goods to be 10,000 units, BI of Finished Goods to be 8,000 units, EI of WIP to be 1,500 units, and BI of WIP to be 1,800 units. What is the number of units they should budget to produce in 2023?

102,000

SAME INFORMATION as the previous problem: It is October of 2021 and OUR Mfg. Co. is preparing budgets for 2022 when they will open their new company on January 1. Their controller believes that 70% of their customers will buy on credit and 25% of those will pay their balance owed in the month after the sale, 60% will pay their balance owed in the 2nd month after the sale, 10% will pay in the 3rd month after the sale, and 5% will be bad debts. In the month of March 2022, what will be the source(s) of cash from all customers based on their predicted payment pattern?

30% of March sales from cash customers; 60% from the credit customers from January and 25% from the credit customers from February

Bernard Company's budgeted manufacturing overhead is $3,300,000. Overhead is allocated on the basis of direct labor hours. The budgeted direct labor hours for the period are 60,000. What is the manufacturing overhead rate?

55

OUR Mfg. Company's customers all buy on credit. Their payment pattern is that 20% pay in the same month as the sale and do take the discount based on terms of 2/10, n/30; 60% pay in the next month after the sale, 15% pay in the second month after the sale, and 5% are bad debts. How much cash will be collected in December from $400,000 of December credit sales?

78,400

The budgeted indirect-cost rate is calculated ________. A) at the beginning of the year B) during the year C) at the end of each quarter D) at the end of the year

A

When evaluating a make-or-buy decision, which of the following needs to be considered? A) alternative uses of the production capacity B) the original cost of the production equipment C) pension costs to the current employees D) material-handling costs that cannot be eliminated

A

Which of the following can be a reason for a favorable price variance for direct materials? A) a decrease in the price of materials due to an oversupply of materials B) an unexpected increase in the price of materials C) less amount of material used during production than planned for actual output D) workers taking less time to produce the products

A

Which of the following companies will use a process costing system? A) an oil refining company B) a manufacturer of ships C) a custom watch manufacturer D) an advertising firm

A

Which of the following elements are used in calculating revenue in a flexible budget? A) budgeted selling price and actual quantity of output B) actual selling price and budgeted quantity of output C) budgeted selling price and budgeted quantity of output D) actual selling price and actual quantity of output

A

Which of the following is a relevant cost to be included in a make-or-buy decision? A) fixed salaries that will not be incurred if the part is outsourced B) pension costs to the current employees C) increase in the price of all equipment of the firm D) material-handling costs that cannot be eliminated

A

If breakeven point is 1,000 units, each unit sells for $30, and fixed costs are $10,000, then on a graph the ________. A) total revenue line and the total cost line will intersect at $30,000 of revenue B) total cost line will be zero at zero units sold C) revenue line will start at $10,000 D) total revenue line and the total cost line will intersect at $40,000 of revenue

A)

Which of the following is an assumption of CVP analysis? A) Total costs can be divided into a fixed component and a component that is variable with respect to the level of output. B) When graphed, total costs curve upward. C) The unit-selling price is variable as it is subject to demand and supply. D) Total costs can be divided into inventoriable and period costs with respect to the level of output.

A)

Which of the following is the mathematical expression of contribution margin ratio? A) Contribution margin ratio = Contribution margin percentage × Revenues (in dollars) B) Contribution margin ratio = Contribution margin percentage × Fixed costs (in dollars) C) Contribution margin ratio = Contribution margin percentage × Variable costs (in dollars) D) Contribution margin ratio = Contribution margin percentage × Operating leverage

A)

Stephanie's Bridal Shoppe sells wedding dresses. The average selling price of each dress is $1,000, variable costs are $400, and fixed costs are $90,000. How many dresses must the Bridal Shoppe sell to yield after-tax net income of $18,000, assuming the tax rate is 40%? A) 200 dresses B) 170 dresses C) 150 dresses D) 145 dresses

A) Explanation: A) $1,000N - $400N - $90,000 = $18,000 / (1 - 0.4); $600N - $90,000 = $30,000; N = 200 units

Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCT121, are as follows: Direct materials $ 70 Direct manufacturing labor 20 Variable manufacturing overhead 15 Fixed manufacturing overhead 32 Sales commissions (2% of sales) 5 Administrative salaries 16 Total $158 What are the inventoriable costs per unit associated with Product DCT121? A) $137 B) $140 C) $143 D) $88

A) $137 Explanation: A) $70 + $20 + $15 + $32 = $137 Zephyr Apparels is a clothing retailer. Unit costs associated with one of its products, Product DCT121, are as follows: Direct materials $ 70 Direct manufacturing labor 20 Variable manufacturing overhead 15

The contribution margin income statement ________.

A) can be used to predict future profits at different levels of activity

Management accounting ________.

A) focuses on estimating future revenues, costs, and other measures to forecast activities and their results

To calculate "target sales in units AFTER tax," an additional calculation is needed and that is determined by taking the target "after" tax profit and converting it to "before" tax profit. The calculation for doing this is:

After tax profit divided by 1 minus the tax rate

Some of the basic assumptions managers use when estimating cost functions include: Cost behavior occurs within a relevant range. All of these are correct. You Answered Variations in the level of a single activity (cost driver) explain variations in the related total costs. Total cost versus the single activity related to that cost is linear (i.e. a straight line).

All these are correct

If indirect-cost rates are calculated monthly, distortions might occur because of ________. A) rental costs paid monthly B) property tax payments made in July and December C) routine monthly preventive-maintenance costs that benefit future months D) salary hikes at the beginning of the financial year

B

Place the following steps in the order suggested by the seven steps used to assign costs to individual jobs: A. Identify indirect costs B. Compute the total cost of the job C. Select cost-allocation bases D. Compute the indirect cost rate A) ACDB B) CADB C) BACD D) DCAB

B

The variable overhead efficiency variance is computed ________ and interpreted ________ the direct-cost efficiency variance. A) the same as; the same as B) the same as; differently than C) differently than; the same as D) differently than; differently than

B

Which of the following costs is inventoried when using variable costing? A) rent on factory building B) electricity consumed in manufacturing process C) sales commission paid on each sale D) advertising costs incurred for the product

B

Which of the following items will be same for a flexible budget and a master budget? A) total variable cost B) total fixed costs C) total contribution margin D) total revenues

B

When fixed costs are $50,000 and variable costs are 60% of the selling price, then breakeven sales are ________. A) $115,000 B) $125,000 C) $175,000 D) $275,000

B) Explanation: B) $50,000 / (1 − 0.60) = $125,000 in BE sales

Winnz sells 8,000 units resulting in $100,000 of sales revenue, $35,000 of variable costs, and $45,000 of fixed costs. The contribution margin percentage is ________. A) 66.67% B) 65.0% C) 37.5% D) 75.0%

B) Explanation: B) ($100,000 − $35,000) / $100,000 = 65%

Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. Contribution margin per software is ________. A) $10.00 B) $30.00 C) $40.00 D) $36.00

B) Explanation: B) ($440,000 − $110,000) / 11,000 = $30 per software

Fixed costs equal $15,000, unit contribution margin equals $25, and the number of units sold equal 1,150. Operating income is ________. A) $28,750 B) $13,750 C) $15,000 D) $14,750

B) Explanation: B) (1,150 × $25) − $15,000 = $13,750

The general term used to identify both the tracing and the allocation of accumulated costs to a cost object is ________. A) cost accumulation B) cost assignment C) cost tracing D) conversion costing

B) cost assignment

Costs that are initially recorded as assets and expensed when goods sold are called ________.

B) inventoriable costs

Opportunity costs is defined as ________.

B) the contribution to operating income that is forgone by not using a limited resource in its next-best alternative use

Managers use cost-volume-profit (CVP) analysis to ________. A) forecast the cost of capital for a given period of time B) to study the behavior of and relationship among the elements such as total revenues, total costs, and income C) estimate the risks associated with a given job D) analyse a firm's profitability and help to decide wealth distribution among its stakeholders

B) to study the behavior of and relationship among the elements such as total revenues, total costs, and income

In CVP analysis, focusing on target net income rather than operating income ________. A) will increase the breakeven point B) will decrease the breakeven point C) will not change the breakeven point D) will help managers construct a better capital policy

B) will not change the break even point

Which of the following formulas determine cost of goods sold

Beginning inventory + Purchases - Ending inventory = Costs of goods sold

Which of the following cost and cost allocation base have a strong cause and effect relationship? A) administration costs and cubic feet B) setup costs and square feet C) machine depreciation and output units D) machine maintenance and setup hours

C

Which of the following costs is inventoried when using absorption costing? A) variable selling costs B) fixed administrative costs C) variable manufacturing costs D) fixed selling costs

C

Which of the following is true of absorption costing? A) It expenses marketing costs as cost of goods sold. B) It treats direct manufacturing costs as a period cost. C) It includes fixed manufacturing overhead as an inventoriable cost. D) It treats indirect manufacturing costs as a period cost.

C

Which of the following is true of refinement of a costing system? A) While refining a costing system, companies should identify as many indirect costs as is economically feasible. B) A homogeneous cost pool will use multiple cost drivers to allocate costs. C) It reduces the use of broad averages for assigning the cost of resources to cost objects. D) It is likely to yield the most decision-making benefits when direct costs are a high percentage of total costs.

C

Which of the following is true of theoretical capacity? A) It will be less than the real capacity available to a company. B) It provides the best perspective of actual long-run costs. C) It results in the lowest cost estimate of the four capacity options when used for product costing. D) It replicates the cost of capacity in a competitor's cost structure

C

Which of the following statements best define splitoff point in joint costing? A) It is the point at which managers decide to discontinue one or more of the products. B) It is the point at which the managers decide to outsource some of its production processes. C) It is the juncture in a joint production process when two or more products become separately identifiable. D) It is the juncture at which decisions determining joint costs of various products to be produced are taken.

C

Which of the following statements is true of activity-based costing? A) Activity-based costing ignores the allocation of marketing and distribution costs. B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. C) Activity-based costing classifies some of the indirect costs as direct costs. D) Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.

C

As per CVP, operating income calculations use ________. A) net income and dividends B) income tax expense and net income C) contribution margins and fixed costs D) nonoperating revenues and nonoperating expenses

C)

If the breakeven point is 1,000 units and each unit sells for $50, then ________. A) selling 1,040 units will result in a loss B) selling $60,000 will result in a loss C) selling $50,000 will result in zero profit D) selling $45,000 will result in profit

C)

The planned operating income is calculated by ________. A) dividing net income by tax rate B) dividing net income by 1 − tax rate C) multiplying net income by tax rate D) multiplying net income by 1 − tax rate

C)

How many units would have to be sold to yield a target operating income of $23,000, assuming variable costs are $25 per unit, total fixed costs are $2,000, and the unit selling price is $30? A) 4,800 units B) 4,400 units C) 5,000 units D) 5,200 units

C) Explanation: C) Desired sales = ($2,000 + $23,000) / ($30 − $25) = 5,000 units

Shine Jewelry sells 400 units resulting in $7,000 of sales revenue, $3,000 of variable costs, and $1,500 of fixed costs. Contribution margin per unit is ________. A) $4.00 B) $11.00 C) $10.00 D) $8.00

C) Explanation: C) ($7,000 − $3,000) / 400 units = $10 per unit .

Vision Enterprises manufactures digital video equipment. For each unit, $3,000 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $25 per direct manufacturing labor hour. Calculate the profit earned on 50 units if each unit sells for $9,000. A) $65,000 B) $80,000 C) $75,000 D) $2,500

C) $3,000 + $2,000 + (($2,000/20) × $25) = $7,500 Profit earned on 50 units = ($9,000 − $7,500) × 50 units = $75,000

Process costing is ________.

C) used by businesses to price identical products

Which of the following is true if the volume of sales increases? A) fixed cost increases B) variable cost decreases C) variable cost increases D) fixed cost decreases

C) variable cost increases

· How can you calculate the difference between Operating Income under absorption costing vs. variable costing? For example, you could be given the Operating Income figure, the change in Finished Goods inventory (from BI to EI) and the Fixed Mfg. OH rate and you should be able to calculate the Oper. Income under Variable Costing.

Changed in Finished Goods Inventory units times Fixed MFG OH rate Another way to calculate is to take the difference between the Fixed MOH in the beginning inventory of finished Good and the Fixed MOH in the Ending Inventory of Finished Goods

Michael McLaughlin uses the example of making a sandwich to talk about break even point. The difference between the Selling Price of making one sandwich and the cost of the ingredients (lettuce, tomatoes, pickles, etc.) for one sandwich is called:

Contribution margin per unit

is the process of distributing indirect costs to products

Cost allocation

When variance accounts are closed, it is similar to the way in which over- or under-applied Manufacturing Overhead is closed. Assuming the amount of the variance is not material, it would be acceptable under GAAP to close variances to:

Cost of goods son

CVP stands for:

Cost-Volume-Profit

Products with a relatively low sales value are known as: A) scrap B) main products C) joint products D) byproducts

D

Put the following ABC implementation steps in order ________. A Compute the allocation rates. B Compute the total cost of the products. C Identify the products that are the cost objects. D Select the cost allocation bases. A) DACB B) DBCA C) BADC D) CDAB

D

Which of the following is an advantage of a dual-rate method? A) It is the most widely used method in practice. B) It is less costly to implement. C) It avoids the expensive analysis for categorizing costs as either fixed or variable. D) It allocates fixed cost as per the budgeted usage that helps in short and long-run planning.

D

Which of the following is an appropriate step when identifying relevant costs to make a business decision? A) assuming all variable costs are relevant B) assuming all fixed costs are irrelevant C) separating total costs into business function costs and full costs D) separating total costs into variable and fixed components

D

Which of the following statements about normal costing is true? A) Direct costs and indirect costs are traced using an actual rate. B) Direct costs and indirect costs are traced using budgeted rates. C) Direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate. D) Direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate.

D

Which of the following statements is true of variable overhead costs? A) All the decisions determining the level of variable overhead costs are made at the start of a budget period. B) Planning of variable overhead costs includes choosing the appropriate level of capacity. C) Activities which add value are of least relevance while planning variable overhead costs. D) The level of variable overhead costs incurred in a period is mainly determined by day-to-day operating decisions.

D

If selling price per unit is $40, variable costs per unit are $25, total fixed costs are $20,000, the tax rate is 30%, and the company sells 5,000 units, net income is ________. A) $32,158 B) $26,548 C) $28,500 D) $38,500

D) D) Net income = [(($40 − $25) × 5,000) − $20,000] × (1.0 − 0.3) = $38,500

Tally Corp. sells softwares during the recruiting seasons. During the current year, 11,000 softwares were sold resulting in $440,000 of sales revenue, $110,000 of variable costs, and $48,000 of fixed costs. If sales increase by $60,000, operating income will increase by ________. A) $10,000 B) $40,000 C) $45,000 D) $60,000

D) Explanation: D) Price = $440,000 / 11,000 = $40.00

Manufacturing costs that are included in inventoriable (product) costs under "Variable" costing are:

DM, DL, and Variable MOH

The method called "Variable" costing assigns manufacturing costs to products in a somewhat different way than under absorption costing. Under "Variable" costing, the product costs are:

DM, DL, and Variable MOH

Conversion cost = ______ + __________

Direct Labor + MOH

Prime cost = _____ + _______

Direct Materials + Direct Labor

(1) When DL actual cost, standard cost and variances are recorded the entry should be:

Dr. WIP [Std Q x Std Rate] $xx,xxx DL Rate Variance can be either a debit or a credit. Cr. DL Efficiency Variance can be either a debit or a credit. Cr. Salaries/Wages Payable [Act Q x Actual Rate] $xx,,xxx

Tony Manufacturing produces a single product that sells for $80. Variable costs per unit equal $30. The company expects total fixed costs to be $78,000 for the next month at the projected sales level of 2,500 units. In an attempt to improve performance, management is considering a number of alternative actions. Each situation is to be evaluated separately.Suppose management believes that a $75,000 increase in the monthly advertising expense will result in a considerable increase in sales. Sales must increase by ________ to justify this additional expenditure?

Explanation: B) $80X − $30X − $75,000 = 0; X = 1,500 units to cover the expenditures

With a constraining resource, managers should choose the product with the ________.

Highest contribution margin per unit of the constraining resource

What is the meaning of a company having an UNF Quantity variance for Direct Materials?

It indicates whether or not the material has been property utilized. A favorable materials quantity variance indicates savings in the use of direct materials. An unfavorable variance on the other hand, indicates the amount of materials used exceed the standard requirement.

Assume that the red label on the back of each pair of Levi's jeans costs 2 cents each. We could say that "technically" this could be accounted for as a direct cost. However, because of the likelihood that it would not be cost-beneficial to account for the labels as direct costs, they probably would be accounted for as:

MOH (an indirect cost)

Activity Based Costing (ABC) is a way to assign the manufacturing cost known as:

Manufacturing Overhead

Sonic has recently started adding ketchup to their hamburgers. The hamburger meat patty would likely be accounted for as "Direct Materials." What would be the most cost-effective way to account for the ketchup?

Manufacturing overhead (an indirect cost)

Assume you are the new Budget Director for Happy Mfg. Co. You are reviewing budgets that were prepared for the coming quarter by your predecessor and you noticed in the Cash Flow Budget under "Cash Outflows" an amount of $40,000 for Bad Debt Expense. Is it likely that such an item is correct?

No

When calculating a cost function, should outliers always be included in the calculations?

No

Generally, when a Manufacturing Overhead rate is estimated, the cost allocation base (aka, "cost driver") should have a cause and effect relationship with the numerator (estimated OH). Would it be logical to calculate a Mfg. OH rate for a company factory using the "number of acres of land" around the factory as the denominator?

No, there is no logical cause and effect relationship

Which of the following statements is true of main products and byproducts? A) A byproduct will never become a main product. B) A main product will never become a byproduct. C) Product classifications may change over time. D) Product classifications remains constant over time.

Product classifications may change over time

Based on the following Summary Output from a linear regression analysis, what is the total cost function assuming the independent variable is # of D.L. hours? Intercept = $161.680001 X Variable = 3.0800142

TC = $161.68 + $3.08 (#DL hours)

OUR Manufacturing Company uses only one predetermined Mfg. OH rate (that includes both fixed & variable OH). The company calculated that rate to be $5 per machine hour for this year. It is time to apply the overhead and the company's total actual machine hours equal 10,000. This contrasts with budgeted level of 9,500 machine hours. The journal entry to apply the OH should be:

WIP $50,000 MOH $50,000

CVP analysis can be used to identify the number of units that must be sold to break-even. CVP analysis can also be used to identify the number of units that must be sold to achieve a certain "target NET income." When calculating units to achieve "target NET income," must you consider the income taxes?

Yes

In some situations, is it correct to say that qualitative factors may be more important for decision making than the quantitative analysis?

Yes

When using a traditional (simple) Mfg. OH method to calculate a rate(s), is it acceptable to apply OH based on departmental rates?

Yes

Is it possible that a favorable Direct Materials price variance could actually cause other variances to be unfavorable ?

Yes, because the reason the DM was so cheap might be because it was such poor quality that extra DL was required.

The budgeted indirect-cost rate for each cost pool is computed as ________.

a budgeted annual indirect costs divided by budgeted annual quantity of cost allocation

Cost tracing is

a function of cost allocation

Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.

a standard input allowed for one output unit by standard price per input unit

Cost accumulation is ________. A) the collection of cost data in some organized way by means of an accounting system B) anything for which a cost measurement is desired C) anything for which a profit measurement is desired D) the collection of profit data in some organized way by means of an accounting system

a) collection of cost data in some organized way by means of an accounting system

When variable overhead spending variance is unfavorable, it can be safely assumed that ________.

actual rate per unit of cost-allocation base is higher than budgeted rate

A favorable variance indicates that

actual revenues exceed budgeted revenues

Effective planning of variable overhead costs means that a company performs those variable overhead costs that primarily ________.

add value for the customer using the products or sevices

Our Company has been making all the components for their best-selling product. A vendor has offered to make one of the key components for us at a cost that will save $.10 per item and our sales volume is usually 5,000,000 items per year...so, the total amount of the savings is significant. Our current cost to make that part is $.90 per item. Which of the following would be an important qualitative factor to consider as to whether to buy the component from this new vendor? a. reliability of the vendor b. quantity discounts if we buy a larger number of components c. $0.10 per item savings d. $0.90 per item cost savings

a. reliability of the vendor

In ________, fixed manufacturing costs are included as inventoriable costs.

absorption costing

________ is a method of inventory costing in which all variable manufacturing costs and all fixed manufacturing costs are included as inventoriable costs.

absorption costing

When variable overhead efficiency variance is favorable, it can be safely assumed that the ________.

actual quantity of the cost-allocation base used is lower than the budgeted quantity

Full costs of a product are the sum of ________.

all variable and fixed costs in all the business functions of the value chain

Process costing ________.

allocated all product costs, including materials and labor

The direct allocation method

allocates each support-department's costs to operating departments only

The physical-measure method ________.

allocates joint costs to joint products produced during the accounting period on the basis of a comparable physical measure, such as the relative weight, quantity, or volume at the splitoff point

The net realizable value method ________.

allocates joint costs to joint products produced during the accounting period on the basis of their relative NRV (final sales value minus separable costs)

Favorable direct manufacturing labor efficiency variances are ________.

always credits

Unfavorable direct material price variances are ________.

always debits

In product-mix decisions, managers should ________.

always focus on maximizing total contribution margin

Fixed costs depend on the ________.

amount of resources required

A price variance reflects the difference between ________.

an actual input price and a budgeted input price

An efficiency variance reflects the difference between ________.

an actual input quantity and a budgeted input quantity

Dr. Conn has noted multiple times throughout the semester that allocating common costs is always:

arbitrary

Direct costs ________.

are costs related to a particular cost object that can be traced to that cost object in a cost-effective manner

Inventoriable costs ________. A) include administrative and marketing costs B) are expensed in the accounting period in which the products are sold C) are expensed in the accounting period in which the products are manufactured D) are also referred to as nonmanufacturing costs

are expensed in the accounting period in which the products are sold

Smaller cost distortions occur when the traditional systems' single indirect-cost rate and the activity-cost-driver rates ________.

are similar in proportion to each other

Period costs ________. A) are treated as expenses in the period they are incurred B) are directly traceable to products C) are treated as expenses in the following period they are incurred D) are also referred to as manufacturing overhead costs

are treated as expenses in the period they are incurred

management by exception is a practice whereby managers focus more closely on

areas that are not operating as anticipated

The amount reported for fixed overhead on the static budget is also reported

as flexible budget costs

The cost of cleaning up after making a "batch" of fudge is a ______________ cost.

batch-level

The flexible budget enables to highlight the differences ________.

between budgeted costs and budgeted quantities versus actual costs and budgeted quantities for the budgeted output level

Which of the following products would most likely be accounted for with "process" costing?

breakfast cereal (such as frosted flakes)

YOUR Company has estimated that next year's cash inflow will be $150,000 and cash outflow will be $130,000. You want to budget for the cash balance to be a minimum of $25,000. What additional information should you include on your budget?

budget to borrow 5,000 cash

Lower-level managers sometimes do play "budgeting games" in order to assure they can reach their budgets. Another name for "budgeting games" is:

budgetary slack

The margin of safety is the difference between ________.

budgeted revenues and breakeven revenues

When using the dual-rate method, the fixed cost allocation is based on ________.

budgeted usage

When using a normal costing system, manufacturing overhead is allocated using the ________ manufacturing overhead rate and the ________ quantity of the allocation base.

budgeted; actual

The products of a joint production process that have low total sales values compared with the total sales value of the main product are called ________.

byproducts

Outside the relevant range, variable costs, such as direct material costs ________. A) will decrease proportionately with changes in sales volumes B) will remain the same with changes in production volumes C) will not change proportionately with changes in production volumes D) will increase proportionately with changes in sales volumes

c) will not change proportionately with changes in production volume

Effective planning of fixed overhead costs includes ________.

choosing the appropriate level of capacity

Compared to variable overhead costs planning, fixed overhead costs planning have an additional strategic issue of ________.

choosing the appropriate level of investment

Costs of operating a facility, activity of cost object that are shared by two or more users are referred to as:

common costs

Demand for refinements to the costing system has accelerated due to ________.

competition in product markets

Budgets are frequently built on an annual basis. If an annual budget built for January through December of 2022 is modified such that January of 2023 is added to be the 12th month after January of 2022 has ended, this would be called a:

continuous budget

The selling price per unit less the variable cost per unit is the ________. A) fixed cost per unit B) gross margin C) margin of safety D) contribution margin per unit

contribution margin

Comparing budgeted costs to actual costs helps managers to improve ________.

control

Which of the following includes both traced direct costs and allocated indirect costs?

cost assignments

When preparing cost estimates, one of the most important factors is the cause-and-effect relationship between the cost and the __________.

cost driver

A mathematical description of how a cost changes relative to changes in the activity level related to that cost is known as a:

cost function

Assigning direct costs to a cost object is called ________.

cost tracing

A ____ links an indirect cost to a cost object

cost-allocation base

OUR Company's controller calculated this month's Fixed Overhead Spending Variance as $2,000 unfavorable (assumed to be NOT material). The journal entry to close this account would be:

credit Fixed OH Spending Variance for $2,000 and debit CGS for $2,000

The primary user of financial accounting information is a ________.

current shareholder

Inventoriable costs are expensed on the income statement ________. A) when direct materials for the product are purchased B) after the products are manufactured C) when the products are sold D) when the goods move from work-in process to finished goods account

d) when the products are sold

Acceptable methods that can be used to allocate the cost of joint products to the individual products include: a. physical measure method b. Net realizable value method c. sales value at split-off method d. All of the above

d. All of the above

CVP relationships can be modeled (analyzed) using more than one method and these include: a. equation method b. contribution margin method c. graph method d. All of the above.

d. All of the above

When using ABC to apply Mfg. OH: a. there are multiple cost pools and cost drivers b. it may help eliminate cross-subsidization c. may provide more accurate cost information if products use inputs/resources at different rates d. All of these are correct

d. All of these are correct

For a company which produce its products in batches, the CEO's salary is a(n) ________ cost.

facility sustaining

OUR Company just wrote a check to pay the lease on our factory for a total of $10,000. Assume they use a single Fixed Mfg. Overhead account for both actual and applied. The journal entry to record this transaction should be:

debit Fixed Mfg OH for $10,000 and credit cash for $10,000

OUR Company has a favorable Variable Mfg. Overhead Efficiency variance for this month and this amount will be closed to Cost of Goods Sold. To close the Variable Mfg. Overhead Efficiency variance, it must be:

debited

A master budget is

developed for a period for a planned output

The Variable OH Flexible-Budget Variance measures:

difference between actual variable OH incurred & flexible-budget variable OH

A cost that is directly related to a specific cost object is known as a(an):

direct cost

The method of assigning support department costs that does NOT assign such costs to other support departments is:

direct method

The step down method

does not recognize the total services that support departments provide to each other

CVP assumptions include: a. Changes in revenues (total) and costs (total) result solely from changes in the total # of product (or service) units sold b. Total Costs can be separated into FC and VC c. Behaviors of Total Revenues and Total Costs are linear d. SP, VC per unit, and fixed costs (within a relevant range and time period) are known and constant. e. All of these are correct

e. All of these are correct

Departmental OH rates are helpful when...

each department has significantly different processing times

For fixed manufacturing overhead, there is no ________.

efficiency variance

In the computation of the cost per equivalent unit, the weighted-average method of process costing considers all the costs ________.

entering work in process from the units in beginning inventory plus the costs for the work completed during the current accounting period

If there was no beginning work in process and no ending work in process under the weighted-average process costing method, the number of equivalent units for direct materials, if direct materials were added at the start of the process, would be ________.

equal to the units completed during the period

A metric that is commonly used in a process costing system to obtain (calculate) a total measure of the work done is:

equivalent units

Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.

establish a cause- and- effect relationship with the activities performed

"Normal costing" assigns manufacturing overhead costs to jobs based on:

estimated OH rate

In flexible budgets, costs that remain the same regardless of the output levels within the relevant range are ________.

fixed costs

In a flexible budget

fixed costs are kept at the same level of static budget

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

fixed manufacturing costs

Which of the following costs is irrelevant in the decision making of a special order when there is idle production capacity?

fixed manufacturing costs

A budget that presents variable and fixed costs at different activity levels is referred to as a:

flexible budget

When fixed overhead spending variance is unfavorable, it can be safely assumed that ________.

flexible budget amount is lower than actual costs incurred

Job costing information is used ________.

for internal financial reporting

The physical measure method allocates joint costs to joint products produced during the accounting period on the basis of comparable physical measures. For which of the following joint products would it be appropriate to utilize the physical measure method?

gallons of cream and gallons of skim milk

Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into ________.

greater overhead costs for each product line

When a company has an increase in Ending Inventory of Finished Goods (as compared to Beg. Inventory), the Operating Income under absorption costing will be ____________________ than under variable costing.

higher

ABC systems ___

highlight the different levels of activities

The reciprocal allocation methood

highlights the complete reciprocated costs of support departments and how these costs differ from budgeted or actual costs of the departments

ABC systems create ________.

homogenous activity-related cost pools

Cost behavior refers to ________.

how costs react to a change in the level of activity

The margin of safety can tell you:

how much projected sales can decline before you hit break-even

One of the first steps to take when using CVP analysis to help make decisions is ________. A) calculating the break-even point B) identifying the variable and fixed costs C) calculation of the degree of operating leverage for the company D) estimating the volume of sales to make a good profit

identifying the variable and fixed costs

For revenues or costs to be "relevant" for the types of decisions discussed in this chapter, these must be:

in the future and different among alternatives

Problems with costing occur when ________.

incorrect job numbers are recorded on source documents

Activity based costing system differs from traditional costing systems in the treatment of ________.

indirect costs

The cost allocation base ________.

is a systematic way to link an indirect cost or group of indirect costs to cost objects

A flexible budget

is developed at the end of the period

Under the weighted-average method, the stage of completion of beginning work in process ________.

is irrelevant in determining the equivalent unit calculation

An actual cost is ________.

is the cost incurred

OUR Company applies Variable Manufacturing Overhead on the basis of Direct Labor hours. The controller recently determined that the firm had an unfavorable Direct Labor Efficiency variance. Based on this, what can be concluded about the Variable Manufacturing Overhead Efficiency Variance?

it is also unfavorable

Which of the following is true of variable costing? A) It expenses administrative costs as cost of goods sold. B) It treats direct manufacturing costs as a product cost. C) It includes fixed manufacturing overhead as an inventoriable cost. D) It is required for external reporting to shareholders.

it treats direct manufacturing costs as a product cost

"Job costing" is different from other types of costing systems (such as process costing) in that the product costs are accounted for by:

job

What type of cost is the result of an event that results in more than one product or service simultaneously?

joint cost

Assume that Chevron produces both regular gasoline and diesel fuel from a single process (up to a split-off point). The gasoline and diesel fuel would be regarded as:

joint products

A favorable efficiency variance for direct manufacturing labor indicates that ________.

less direct manufacturing labor-hours were used during production than planned for actual output

The most accurate method for estimating a cost function is:

linear regression

Overcosting a particular product may result in ________.

loss of market share

A favorable efficiency variance for direct materials might indicate that ________.

lower-quality materials were purchased

In joint costing, which of the following changes may lead to a change in product classification? A) main product sales price increases due to a new application B) byproduct sales price decreases due to a new government regulation C) main product becomes technologically obsolete D) byproduct loses its market due to a new invention

main product becomes technologically obsolete

For a manufacturing company, a decision about whether to continuing making a component (part) of one of their products or "outsource" it from an external vendor is commonly referred to as a _____________ decision.

make or buy

In a job-costing system, a manufacturing firm typically uses an indirect-cost rate to estimate the ________ allocated to a job.

manufactured overhead costs

Lean Accounting is much simpler than other product costing methods because:

manufacturing costs are recorded straight to CGS when incurred

The single-rate cost-allocation method may base the denominator choice on ________.

master budget capacity utilization

Product-cost cross-subsidization ________. A) exists when one overcosted product results in more than one other product being overcosted B) means that if a company undercosts more than one of its products, it will overcost more than one of its other products C) means that if a company undercosts one of its products, it will overcost at least one of its other products D) exists only when one overcosted product results in all other products being overcosted

means that if a company undercosts one its products, it will overcost at least one of its other products

For a company with diverse products, undercosting overhead of a product will lead to ________.

misallocating indirect costs of another product

Financial accounting ________. A) focuses on the future and includes activities such as preparing next year's operating budget B) must comply with GAAP (generally accepted accounting principles) C) is the process of measuring, analyzing, and reporting financial and nonfinancial information related to the costs of acquiring or using resources in an organization D) is prepared for the use of department heads and other employees

must comply with GAAP

In joint costing, which of the following is a market-based approach to allocating costs?

net realizable value

If a company manufactures only one product in one size, would it be smart for them to implement an ABC system?

no

The difference between actual costing and normal costing is ________.

normal costing uses budgeted indirect costs

"Throughoutput" costing (also known as "super-variable" costing) assigns which manufacturing costs as product (aka, inventoriable) costs?

only DM

When DM and Conversion costs are added evenly (at the same rate),

only one calculation of equivalent units is needed. The only reason to calculate equivalent units separately for DM that is different from equivalent units for conversion costs is because the cost are added differently

Assume only the specified parameters change in a cost-volume-profit analysis. If the contribution margin increases by $6 per unit, then ________.

operating profits increases by $6 per unit

Traditional (plant-wide) average Overhead Costing has the nickname of:

peanut butter costing

Variable costing regards fixed manufacturing overhead as a(n) ________.

period cost

Costs expensed on the income statement in the accounting period incurred are called ________. A) direct costs B) indirect costs C) period costs D) inventoriable costs

period costs

Theoretical capacity minus allowances for normal down time (such as for maintaining equipment or for holidays) is called:

practical capacity

The flexible-budget variance for direct cost inputs can be further subdivided into a ________.

price variance and an efficiency variance

Costing systems that are used for the costing of like or similar units of products in mass production are called ________.

process-costing systems

Fixed overhead costs include ________.

property taxes paid on plant facilities

For a given job the direct costs associated with the job are ________.

raw materials

The simplest method of accounting for byproducts is the "Sales Method" which:

records byproduct revenues for the Income Statement as either other income or a deduction from CGS

Effective planning of variable overhead costs includes ________.

redesigning products to use fewer resources

Sensitivity Analysis involves:

reexamining assumptions used in CVP analysis (such as SP, VC, FC)

Which cost estimation method is the most accurate?

regression analysis method

A band of normal activity or volume in which specific cost-volume relationships are maintained is referred to as the ________.

relevant range

Which of the following costs will be treated as period costs under absorption costing?

sales commission paid on sale of product

Which of the following is a step in developing budgeted variable overhead rates?

selecting the cost-allocation base to use in allocating machine-handling costs

A process costing system is more likely to be utilized for products that are:

similar

The method that allocates costs in each cost pool using the same rate per unit is known as the ________.

single-rate cost allocation method

Managers and accountants collect most of the cost information that goes into their systems through ________.

source documents

A joint production process may result in two (ore more) end products (such as cream and skim milk). The point at which the products can be seen as individual, separate products is referred to as the:

split-off point

Acceptable methods for allocating common costs are:

stand-alone method and the incremental method

Under which allocation method are one-way reciprocal support services recognized?

step-down method

When allocating common costs, accountants try to utilize a method that is:

systematic and rational

An unfavorable price variance for direct materials might indicate ________.

that the purchasing manager purchased in smaller quantities due to a change to just-in-time inventory methods

An unfavorable variance indicated that

the actual units sold are less than the budgeted units

Cost allocation is

the assignment of indirect costs to chosen cost object

Materiality is defined as:

the deciding factor of whether to close over- or under-applied OH all to CGS or whether to prorate it among WIP, FG & CGS

A variance is

the difference between an actual result and a budgeted performance

Assuming Variable OH is applied on the basis of Direct Labor hours, the Variable OH Efficiency Variance reflects:

the efficiency of direct labor

An unfavorable fixed overhead spending variance indicates that ________.

the price of fixed overhead items cost more than budgeted

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when ________.

there are several homogeneous pools

A single indirect-cost rate distort product costs because ________.

there is assumption that all support activities affect all products

ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

variable

is a method of inventory costing in which all variable manufacturing costs (direct and indirect) are included as inventoriable costs and all fixed manufacturing costs are excluded.

variable costing

The dual-rate cost-allocation method classifies costs in each cost pool into a ________.

variable-cost pool and a fixed-cost pool

An example of allocating joint costs using physical measures is allocating joint costs based on ________.

volume of the products

For a process costing system, the method that calculates the cost of all work done to-date (regardless of the fiscal period when it was done) is:

weighted-average method

What happens to operating income when contribution margin increases

when increasing the CM of the products you sell, you are decreasing the costs and expenses associated with each product and increasing the amount of revenue each product generates, resulting in decrease of break-even point.

For a manufacturing company that uses process costing, is it likely that there will be multiple Work in Process accounts, each of which reflects the costs of a specific process?

yes

Is it correct to say that a cost item could be variable when associated with one cost object...but, fixed for another cost object?

yes

When a company utilizes a "standard" costing system and wants to be able to prepare reports for "variances," do they need to record the variances in journal entries?

yes

If you have only 1 product, do you need ABC?

you do NOT need ABC. The purpose of ABC is to assign OH to your various products because they use inputs of OH differently. (One product uses more OH than the other such as the example of cleaning up after fudge vs. cookies.)