accounting 2 exam
the three sections of the cash budget are ____ ____, and financing
collections disbursements
budgets
communicate management's plan throughout the organization
which of the following is a limitation of some type that restricts a company's ability to satisfy demand?
constrained resource
when a constraint exists, companies need to focus on maximizing
contribution margin per unit of constraint
how much contribution margin is generated per dollar of sales revenue is the ____ ____ ____
contribution margin ratio
the contribution margin stated as a percentage of sales dollars is the
contribution margin ratio
the weighted average ______ _____ _____ is based on the relative percentage of total sales
contribution margin ratio
degree of operating leverage equals
contribution margin/Net operating income
degree of operating leverage equals
contribution margin/net operating income
contribution margin
covers fixed cost and profit
the cash budget is one of the primary _____ budgets that is prepared
financial
which of the following cannot be added together when computing the yearly totals for a production budget prepared by quarter
finished goods inventory
the ____ step in the decision making process is to identify the decision problem
first
when performing a keep or drop decision analysis _____ fixed costs should be excluded from the analysis
irrelevant
when performing a keep or drop decision analysis, _____ fixed costs should be excluded from the analysis
irrelevant
when planning a trip and making a decision to drive or take the train, the cost of boarding your dog while you are away is an ______ cost
irrelevant
determining decision alternatives
is a critical step in the decision making process
the process of making a decision
is basically the same for all decisions
determining decision alternatives
is the critical step in the decision making process
continue or discontinue decisions are commonly known as _____ or _____ decisions
keep or drop
managers must prioritize how products are produced when faced with a _____ resource
limited
deciding to carry out an activity internally or buy externally from a supplier is called a ____ decision
make or buy
All costs of production other than direct materials and direct labor are shown on the _____ _____ budget:
manufacturing overhead
which of the following budgets are needed to calculate unit production cost
manufacturing overhead budget DL budget DM budget
the excess of the budgeted (or actual) sales dollars over break even sales is called the ____ of ____
margin of safety
a comprehensive set of budgets that covers all phases of planned activities for a specific period is called the _____ budget
master
incremental analysis
may be referred to as relevant costing is also called differential analysis
opportunity costs are
only relevant when capacity is limited
decisions about whether to use fixed or variable costs to run a business affects a company's _____ leverage
operating
the sales, production, and purchases budgets are all ______ budgets
operating
decisions about whether to use fixed or variable costs to run a business impacts a company's
operating leverage
the budgeted income statement is formed from the combined _____ budgets
opperating
the forgone benefit of choosing one decision alternative over another is its ______ _____
opportunity cost
employees throughout the organization have input into the budget setting process when _______ budgeting is used
participative
budgeting is an important part of the ______ and _____
planning and controlling
budgets are used for two distinct purposes: _____ and _____. the first of these purposes relates to developing goals and preparing various budgets, while the second involves comparing actual results to the budget
planning and controlling
according to the assumption of CVP, ______ will not change as the volume of a product increases or decreases
price
when multiple products are sold, the break-even point depends on the _____ mix
product
the direct materials budget directly relies on the _____ budget
production
the number of units that must be made to satisfy sales needs and to provide for the desired ending inventory is shown an the
production budget
which of the following is not included on a budgeted cash payment budget
production in units
which of the following is needed to prepare a sales budget
the budgeted number of units to be sold
Corp sells tires for $90 each. per-unit costs associated with production and selling the tires are: direct materials $35, Direct labor $10, Factory overhead $20. the variable portion of the factory overhead is $8 per unit. a foreign company wants to purchase 1000 tires for $65 each. assuming that corp has excess capacity
the incremental profit from the special order will be $12000 (65-53) x 1000
the manager of inc is trying to decide whether to make or buy a component of the product it sells. which of the following costs and benefits is not relevant to the decision
the selling price of the product
budgetary slack occurs when a manager submits a budget that is
too easy to attain
the weighted average contribution margin ratio is calculated using the
total sales mix
The equation for the profit equation method is
total sales revenue - total variable costs = profit
T or F: using a participative approach to budgeting is less likely to motivate employees than using a top down approach
False
corp expecting beginning cash balance is $35,000. cash collections are budgeted at $50,000 and cash disbursements are estimated to be $80,000 the minimum required cash balance is $20,000 and the company can borrow as much as needed in increments of $10,000. calculate the expected ending cash balance for the month
$25,000 $35,000+$50,000-$80,000=$5,000 since they can borrow in increments of $10,000, they must borrow $20,000 to meet or exceed the minimum cash balance, making the ending balance $25,000
Jewels sells 10,000 necklace and earring sets per year. Fixed costs are $80,000 and variable costs are $20 per set. Jewels is planning to increase the quality of the stones, which will increase variable cost by $8 per set and increase sales by 25%. If Jewels increases the quality of the stones, what price will she need to charge to attain her target profit of $60,000 per year ?
$39.20 ($28 x 12,500 + $80,000 + $60,000) = $490,000/12,500
company master budget shows expected sales of 10,000 units and expected production of 11,000 units for the month of march. each unit requires 1/2 hr of DL. the DL rate is $15/hr. calculate the expected total direct labor cost for the month of march.
$82,500 11,000 x 1/2 x $15 =
given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ____ units
13,000
given sales of $110,000, a contribution margin of $75,000 and net operating income of $30,000, operating leverage is
2.5 75,000/30,000
desks by daisy sells a student desk for 100 per unit. the variable cost per desk is 40 and daisy's fixed costs of producing the desks equals 15,000 per month. daisy needs to sell _____ desks per month in order to break even
250
which tool can be used to easily calculate the change in profit resulting form a change in sales price, sales volume, variable cost or fixed costs?
CVP analysis
T or F: an important consideration in a keep or drop decision is the impact on the costs and revenues of other segements
True
T or F: the incremental analysis is a decision-making approach that compares the relevant costs and benefits of decision alternatives
True
in deciding whether to sell a product or continue to process it, costs incurred to get the product into its current condition ______ relevant to the decision
are not
budgets that are most likely to motivate employees
are tight but attainable
to calculate the cash balance before financing on the cash budget, add the
beginning cash balance to the budgeted cash receipts and deduct budgeted cash payments
a _______ limits a system's overall outut
bottleneck
Solving for the sales level needed to achieve a profit of zero is ______ analysis
break-even
which of the following is NOT a method used for basic CVP analysis
break-even analysis
which of the following budgets shows the company's planned profit
budgeted income statement
what number does the raw materials budget take directly from the production budget
budgeted production
assume a company is preparing an annual production budget by quarter. which of the columns can be added together when computing the yearly total column
budgeted production in units budgeted unit sales
total sales on the sales budget equal budget unit sales multiplied by
budgeted sales price per unit
CVP
can be used to make many different decisions can be used for what if analysis allows managers to see how changing variable can impact another
the operating budgets feed directly into the _____ _____ which then feeds directly into the budgeted balance sheet
cash budget
Collections on credit sales made to customers in prior periods plus collections on sales made in the current budget period equals
cash receipts
when a company increases the selling price of a product with no change in variable cost per unit or total costs, the break even point for that product will _____
decrease
when a company increases the selling price of a product with no change in variable cost per unit or total fixed costs, the break even point for that product will
decrease
multi product target profit analysis
depends upon the sales mix is calculated the same way as single product analysis
a fixed cost that can be traced to a specific business segment is called a _____ fixed cost
direct
which of the following statements are true
direct fixed costs are avoidable if a segment is eliminated advertising for a specific product line is a direct line is a direct fixed cost
when constructing a CVP graph, the vertical axis represents
dollars
when the total amount of the cost will be the same regardless of the alternatives selected in a decision, the cost should be _____ when doing decision analysis
excluded
when there is excess capacity, an analysis of a special order
excludes fixed costs
T or F: CVP analysis is only used for break even and target profit analysis
false
managers must try to find the just right level of difficulty in setting budgetary goals so they
have motivating effects on employee behavior
financial budgets
include the capital expenditures budget include the cash budget impact the budgeted balance sheet
the budgeted ____ _____ shows a company's planned profit
income statement
comparing the relevant costs and benefits of alternative decision choices is called _____ analysis
incremental
the manufacturing overhead budget includes
indirect manufacturing cost depreciation on production equipment
when making decisions, managers should ignore _____ costs
irrelevant
advantages of budgeting include
promoting cooperation and and coordination among areas within the organization forcing managers to think about and plan for the future. providing benchmarks for evaluating performance providing lead time to solve potential problems
when evaluating a make or buy decision, managers should consider
qualitative factors opportunity costs all variable production costs
costs and benefits that always differ between alternatives are called _____ costs and benefits
relevant
when planning a trip and making a decision to drive or take the train, the cost of car repairs and maintenance is a _____ cost
relevant
when making a decision a company should consider
relevant costs and benefits
the ____ budget is prepared first when creating the master budget
sales
in the profit equation, total _______ is a function of the number of units sold (Q)
sales revenue variable costs
sales revenue minus all fixed and variable costs attributable to a particular division is called
segment margin
deciding what to do with a product that is salable or could be enhanced is a _____ decision
sell or process further
budgeted expenses for costs related to selling the product and managing the business are shown on the ____ budget
selling and administrative
the budget that shows the budgeted expenses for areas other than manufacturing is the ____ and ____ expense budget
selling and administrative
when constructing a CVP graph, the _______ of the line represents variable cost per unit
slope
a one time order that is not considered part of the company's normal business is called a ______ order
special
deciding to accept a sales request that is outside the scope of normal sales is called ____ ____ decision
special order
the amount that each unit sold contributes to fixed costs and profit is
unit contribution margin
methods that can be used to model the relationship between revenues, costs, profit an volume include the _____ contribution margin method and the contribution _____ ______ method
unit, margin ratio
the weighted average unit contribution margin is the average unit contribution margin of multiple products weighted according to
units sold
When preparing a CVP graph, the slope of the total cost line represents
variable cost per unit
the term cost structure refers to how a company uses ______ costs versus ______ costs in operations
variable, fixed
the goal of break even analysis is to find the level of sales where profit is equal to
zero