Accounting 211 Final Exam
the required sales in units to achieve a target net income is
(fixed cost+target net income) divided by CM per unit
what is the proper sequencing for the master budget
1. sales budget 2. selling and administrative budget 3. budgeted income statement 4. budgeted balance sheet
Why is determination of a relevant range important?
Cost behavior outside the relevant range may be distorted
format of the CVP income statement
Sales - Variable costs - Fixed costs = Net income.
on a CVP income statement
Sales - Variable costs = Contribution margin.
why are budgets useful in the planning process
They help communicate goals and provide a basis for evaluation.
a standard cost is
a predetermined cost.
the linens department of a large department store is
a profit center
1. In incremental analysis, a. all costs are relevant if they change between alternatives. b. costs are not relevant if they change between alternatives. c. only variable costs are relevant. d. only fixed costs are relevant.
a. all costs are relevant if they change between alternatives
The perspectives included in the balanced scorecard approach include all of the following except the a. internal process perspective. b. capacity utilization perspective. c. learning and growth perspective. d.customer perspective
a. capacity utilization perspective
1. Which of the following is not an operating budget? a. cash budget b. production budget c. sales budget d. direct labor budget
a. cash budget
1. What is the key factor in determining sales mix if a company has limited resources? a. Contribution margin per unit of limited resource b. The amount of fixed costs per unit c. Total contribution margin d. The cost of limited resources
a. contribution margin per unit of a limited resource
1. All of the following are relevant in deciding whether to eliminate an unprofitable segment except the segment's a. fixed expenses. b. sales. c. variable expenses. d. contribution margin.
a. fixed expenses
1. All of the following are distinguishing features of managerial accounting except: a. independent audits b. internal users c. reports pertain to subunits of the entity d. to provide special-purpose information
a. independent audits
1. Reducing reliance on human workers and instead investing heavily in computers and online technology will a. reduce variable costs and increase fixed costs. b. have no effect on the relative proportion of fixed and variable costs. c. make the company less susceptible to economic swings. d. reduce fixed costs and increase variable costs.
a. reduce variable costs and increase fixed costs
1. Product costs include each of the following except: a. selling and administrative expenses b. direct labor c. direct materials d. manufacturing overhead
a. selling and administrative costs
A cost is considered controllable at a given level of managerial responsibility if a. the manager has the power to incur the cost within a given time period. b. the cost has not exceeded the budget amount in the master budget. c. it is a variable cost, but it is uncontrollable if it is a fixed cost. d. it changes in magnitude in a flexible budget.
a. the manager has the power to incur the cost within a given time period
Which one of the following will not increase return on investment? a. Variable costs are increased b. An increase in sales c. Average operating assets are decreased d. Variable costs are decreased
a. variable costs are increased
Which of the following statements is true? a. Variances are the differences between total actual costs and total standard costs. b. When actual costs exceed standard costs, the variance is favorable. c. An unfavorable variance results when actual costs are decreasing but standards are not changed. d. All of the above are true.
a. variances are the differences between total actual costs and total standard costs
A static budget is appropriate in evaluating a manager's performance if
actual activity closely approximates the master budget activity
total overhead variance is the difference between
actual overhead costs and overhead costs applied based on standard hours allowed.
the manufacturing cost per unit for absorption costing is
always higher than manufacturing cost per unit for variable costing
relevant costs are always
avoidable costs
1. When a company assigns the costs of direct materials, direct labor, and both variable and fixed manufacturing overhead to products, that company is using a. product costing. b. absorption costing. c. variable costing. operations costing
b. absorption costing
1. The opportunity cost of an alternate course of action that is relevant to a make-or-buy decision is a. subtracted from the "Make" costs. b. added to the "Make" costs. c. added to the "Buy" costs. d. none of these answers are correct.
b. added to the make costs
1. Manufacturing overhead includes all of the following except a. depreciation b. direct materials c. indirect labor d. maintenance
b. direct materials
1. Which of the following is done to improve the reliability of the sales forecast? a. Use the sales forecasts from the previous year. b. Employ financial planning models. c. Lengthen the planning horizon to more than a year. d. Rely solely on outside consultants.
b. employ financial planning models
1. The increased use of automation and less use of the work force in companies has caused a trend towards an increase in a. both variable and fixed costs. b. fixed costs and a decrease in variable costs. c. variable costs and a decrease in fixed costs. d. variable costs and no change in fixed costs.
b. fixed costs and a decrease in variable costs
In developing a flexible budget within a relevant range of activity, a. only fixed costs are included. b. it is necessary to relate variable cost data to the activity index chosen. c. it is necessary to prepare a budget at 1,000 unit increments. d. variable and fixed costs are combined and are reported as a total cost.
b. it is necessary to relate variable cost data to the activity index chosen
1. Which of the following steps in the management decision-making process does not generally involve the managerial accountant? a. Determine possible courses of action. b. Make the appropriate decision based on relevant data. c. Prepare internal reports that review the impact of decisions. d. None of these answers are correct.
b. make the appropriate decision based on relevant data
1. Each of the following is a disadvantage of buying rather than making a component of a company's product except that a. the supplier may not deliver on time. b. profitable product lines may be dropped. c. quality control specifications may not be met. d. the outside supplier could increase prices significantly in the future.
b. profitable product lines may be dropped
A major element in budgetary control is a. the preparation of long-term plans. b. the comparison of actual results with planned objectives. c. the valuation of inventories. d. approval of the budget by the stockholders.
b. the comparison of actual results with planned objectives
1. Which of the following statements is false regarding budgeting? a. Many companies use continuous 12-month budgets. b. The length of the budget period is the same for all organizations. c. The most common budget is one-year. d. A budget may be prepared for any length of time.
b. the length of the budget period is the same for all organizations
1. Which of the following costs are classified as a period cost? a. Wages paid to a production department supervisor b. Wages paid to a cost accounting department supervisor c. Wages paid to an assembly worker d. Wages paid to a factory custodian
b. wages paid to a cost accounting department supervisor
the formula to determine the cost of goods manufactured is
beginning work in process inventory+total manufacturing costs-ending work in process inventory
fixed selling expenses are period costs under what type of costing
both absorption and variable costing
the difference between a standard and a budget is
budget is in total, standard is per unit
1. Cost behavior analysis applies to a. manufacturers b. retailers c. all entities d. wholesalers
c. all entities
1. If budgets are to be effective, there must be a. Excess plant capacity. b. A history of successful operations. c. An organizational structure with clearly defined lines of authority and responsibility. d. Independent verification of budget goals.
c. an organizational structure with clearly defined lines of authority and responsibility
1. A company is deciding whether or not to replace some old equipment with new equipment. Which of the following is not considered in the incremental analysis? a. Annual operating cost of the new equipment. b. Annual operating cost of the old equipment. c. Book value of the old equipment. d. Cost of the new equipment.
c. book value of the old equipment
1. Fixed costs normally will not include a. property taxes b. depreciation on buildings and equipment c. direct labor d. supervisory salaries
c. direct labor
1. Each of the following is a period cost except: a. selling expenses b. nonmanufacturing costs c. indirect labor d. administrative expenses
c. indirect labor
1. The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than a. the industry average. b. the prior years. c. management's minimum required balance. d. the amount needed to avoid a service charge at the bank.
c. managements minimum required balance
1. Which of the following will always be a relevant cost? a. Fixed cost b. Variable cost c. Opportunity cost Sunk cost
c. opportunity cost
1. Outsourcing production will a. make the company more susceptible to economic swings. b. have no effect on the relative proportion of fixed and variable costs. c. reduce fixed costs and increase variable costs. d. reduce variable costs and increase fixed costs.
c. reduce fixed costs and increase variable costs
1. Which of the following is not an element of manufacturing overhead? a. Factory repairman's wages b. Product inspector's salary c. Sales manager's salary d. Plant manager's salary
c. sales manager's salary
1. Which of the following is an irrelevant cost? a. an avoidable cost b. an incremental cost c. a sunk cost d. an opportunity cost
c. sunk cost
1. If actual direct materials costs are greater than standard direct materials costs, it means that a. actual costs were calculated incorrectly. b. the actual unit price of direct materials was greater than the standard unit price of direct materials. c. the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected. d. the purchasing agent or the production foreman is inefficient.
c. the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected
1. Hyde Corp.'s cash budget showed total available cash less cash disbursements. What does this amount equal? a. Total cash receipts. b. The amount of financing required. c. The excess of available cash over cash disbursements. d. Ending cash balance.
c. the excess of available cash over cash disbursements
1. Budgeting in not-for-profit organizations a. consists entirely of budgeted contributions. b. is not important because they are not profit-oriented. c. usually starts with budgeting expenditures, rather than receipts. d. is necessary only if some product is produced and sold.
c. usually starts with budgeting expenditures, rather than receipts
the direct materials and direct labor budgets provide info for preparing the
cash budget
the most important output in preparing the financial budgets is the
cash budget
return on investment is calculated by
controllable margin divided by average operating assets
a critical factor in budgeting for a service firm is to
coordinate professional staff needs with anticipated services
the maintenance department of a manufacturing company is a
cost center
1. Which of the following stages of the management decision-making process is improperly sequenced? a. Assign responsibility for decision -> Determine possible courses of action. b. Evaluate possible courses of action. -> Make decision. c. Identify the problem. -> Determine possible courses of action. d. Assign responsibility for the decision. -> Identify the problem.
d. assign responsibility for the decision-->identify the problem
1. An appropriate activity index for a college or university for budgeting faculty positions would be the a. Faculty hours worked. b. Number of administrators. c. Number of days in the school term. d. Credit hours taught by a department.
d. credit hours taught by a department
1. Which one of the following does not affect a make-or-buy decision? a. Direct labor b. Variable manufacturing costs c. Opportunity costs d. Incremental revenue
d. incremental revenue
Which one of the following is a correct statement about residual income? a. Its goal is to maximize profits of an investment center. b. It is less effective for evaluating investment centers than ROI. c. It is the ratio of controllable margin to the minimum rate of return on average operating assets. d. It evaluates performance by comparing the return of an investment center with the company's minimum rate of return.
d. it evaluates performance by comparing the return of an investment center with the company's minimum rate of return
which of the following is true about managerial accounting? a. it pertains to a business as a whole b. it must be prepared using GAAP c. it is primarily for internal users such as stockholders and creditors d. it provides more detailed info than financial accounting does
d. it provides more detailed info than financial accounting does
1. Cost structure refers to the relative proportion of a. selling expenses versus administrative expenses. b. selling and administrative expenses versus cost of goods sold. c. contribution margin versus sales. d. none of the above.
d. none of the above
managerial accounting a. is governed by generally accepted accounting principles. b. is limited to cost data. c. pertains to the entity as a whole and is highly aggregated. d. places emphasis on special-purpose information.
d. places emphasis on special-purpose info
1. The total materials variance is equal to the a. materials price variance. b. difference between the materials price variance and materials quantity variance. c. product of the materials price variance and the materials quantity variance. d. sum of the materials price variance and the materials quantity variance.
d. sum of the materials price variance and the materials quantity variance
in a production budget, total required production units are the budgeted sales units plus
desired ending finished goods units minus beginning finished goods
a variance is a
difference between a standard and actual value
examples of product costs
direct labor, indirect labor, factory utilities, raw materials
How is the degree of operating leverage computed
divide total contribution margin by net income
If an unprofitable segment is eliminated variable expenses of the eliminated segment will be
eliminated
An overly optimistic sales budget may result in
excessive inventories
1. True or false: At the break-even point, contribution margin equals total variable costs. ________________
false
True or false: Indirect material costs are costs that are easily traced to products because of their physical association with the finished product
false
the balanced scorecard approach incorporates
financial and nonfinancial measures
the break even point in dollars is computed by dividing
fixed costs by CM ratio
accounting has the responsibility for expressing the budget
in financial terms
the process of evaluating financial data that change under alternative courses of action is called
incremental analysis
a revenue that differs between alternatives and makes a difference in decision-making is called
incremental revenue
which responsibility centers generate both revenues and costs
investment and profit centers
The decision rule on whether to sell or process further
is process further if incremental revenue from such processing exceeds the incremental processing costs
an ideal standard
is the optimal level of operation under perfect conditions
labor efficiency is measured by the
labor quantity variance
internal reports that review the actual impact of decisions are prepared by
management accountants
a shift from low margin sales, to high margin sales
may increase net income, even though there is a decline in total units sold
Instead of a production budget, a merchandiser will prepare a
merchandise purchases budget
costs that change in total but not proportionately with changes in the activity level are
mixed costs
a cost structure which relies more heavily on fixed costs makes the company
more sensitive to changes in sales revenue
When comparing a traditional income statement to a CVP income statement,
net income will always be identical on both
A common starting point in the budgeting process is
past performance
Budgeting is most closely associated with which management function?
planning
Unfavorable materials price and quantity variances are generally the responsibility of the
price-purchasing department quantity-production department
cost accounting involves the measuring, recording, and reporting of
product and service costs
direct materials are a...
product cost
If the labor quantity variance is unfavorable and the cause is inefficient use of direct labor, the responsibility rests with the
production department
the investigation of materials quantity variance usually begins in the
production department
using standard costs
promotes greater economy
budgets are good for:
promoting efficiency deterring waste evaluating future performance
The investigation of materials price variance usually begins in the
purchasing department
A cost of goods sold manufactured schedule shows beginning and ending inventories for
raw materials and work in process
Costs that will differ between alternatives and influence the outcome of a decision are
relevant costs
a fixed cost is a cost which...
remains constant in total with changes in the level of activity
The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called
responsibility accounting
for a merchandiser, the starting point in the development of the master budget is the
sales budget
what is the measure of the relative percentage in which a company's products are sold?
sales mix
1. If a firm increases its activity level, a. some costs will change, others will remain the same. b. costs should remain the same. c. most costs will rise. d. no costs will remain the same.
some costs will change, others will remain the same
management by exception means
that material differences will be investigated
contribution margin is
the amount available to cover fixed costs and contribute to income for the company
what is the difference between a merchandising and manufacturing income statement
the costs of goods sold section
in order to maximize profits when limited resources are available a company should concentrate on the producing products with
the highest CM per unit of limited resource
a distinguishing characteristic of an investment center is that
the profitability of the center is related to the funds invested in the center
a measure used frequently to evaluate the performance of the manager in the investment center is
the rate of return on funds invested in the center
the first budget to be prepared of the master budget is
the sales budget
True or false: Cost structure refers to the relative proportion of fixed versus variable costs that a company incurs.
true
True or false: Cost-volume-profit analysis assumes that changes in activity are the only factors that affect cost.
true
True or false: From a quantitative standpoint, a segment should be eliminated if its contribution margin is less than the fixed costs that can be eliminated.
true
True or false: Product costs are costs that are a necessary and integral part of producing the finished product
true
True or false: The formula for computing the break-even point in sales dollars for a company with multiple products or multiple divisions is fixed costs divided by weighted average contribution margin ratio.
true
True or false: margin of safety is the difference between actual sales and sales at the break-even point.
true
true or false Managerial accounting applies to all types of businesses including service, merchandising, and manufacturing, as well as to all forms of business organizations
true
Net income under absorption costing is higher than net income under variable costing when
units produced exceeds units sold
example of a mixed cost
utility costs
what type of cost remains the same per unit at every level of activity
variable cost
companies recognize fixed manufacturing overhead costs as period costs when incurred using
variable costing
the cost applicable to units that have been started into production but not completed is shown as
work in process inventory
Unfavorable labor rate variances may occur as a result of:
worker fatigue or carelessness