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