Accounting 2 test 3

received from suppliers and transported to raw materials inventory

most companies compute the materials price variance when raw materials are _____________.

revenue variance

the difference between the actual total revenue and budgeted total revenue at the actual level of activity is called _____________.

activity variance

Paradise company's planning budget for 10,000 units showed sales of $500,000. the flexible budget for 12,000 units showed sales of $600,000. what is the variance of $100,000 called if this variance was due only to an increase in unit sales?

a 25% increase in sales resulting in a 30% increase in net operating income

Which of the following scenarios demonstrates the leverage effect on net operating income due to the existence of fixed costs? -a 25% increase in sales resulting in a 30% decrease in net operating income -a 15% increase in sales resulting in a 15% increase in cost of goods sold -a 25% increase in sales resulting in a 30% increase in net operating income -a 25% increase in sales resulting in a 30% increase in fixed costs

total budgeted variable selling and administrative expenses

a company determines that the number of units sold is the cost driver for its variable and selling administrative expense budget. the product of its variable and selling and administrative rate and budgeted unit sales will be __________.

both the activity variances and the spending variances

a flexible budget performance report for variable manufacturing costs shows __________.

sales

the budgeting process begins with the preparation of the _________ budget.

it eliminates the need for performing variance analysis

all of the following are reasons for preparing a flexible budget with multiple cost drivers EXCEPT? -multiple cost drivers can lead to more accurate variances -cost formulas are likely to be more accurate -an expense may be expected to vary for more than one reason -it eliminates the need for performing variance analysis

spending variance

an unfavorable variance of $5000 in cost of goods sold is determined by comparing the actual results (10,000 units) and the flexible budget (10,000 units). what type of variance is described?

activity variance

an unfavorable variance of $5000 in sales is determined by comparing the flexible budget (9000 units) and the planning budget (10,000 units). what type of variance is described?

will be unfavorable

assume that direct labor hours are used as the overhead allocation base. if the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance _______________.

avoid labor shortages

companies prepare direct labor budgets to ___________.

beginning inventory for the first quarter

for a production budget, the ___________ is the beginning inventory for the year.

cost of goods sold

in a budgeted income statement, _________ is subtracted from sales to arrive at gross margin.

desired ending raw materials inventory for the last period

in a direct materials budget, the desired ending raw materials inventory for the year is equal to the ___________.

spending variance

the difference between the actual cost and the budgeted cost at the actual level of activity is called _______________.

estimate the quantity of raw materials to be purchased

the purpose of preparing a direct materials budget is to ____________.

the direct labor hours that should have been used to complete the actual output for the period

the standard hours allowed is ____________.

the amount of an input that should have been used to complete the actual output for the period

the standard quantity allowed is _____________.

amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage

the standard quantity per unit defines the _____________.

responsibility accounting

the system of accountability in which managers are held responsible for those items of revenue and costs- and only those items- over which they can exert significant control is referred to as __________.

unit product cost

the value of the ending inventory is calculated by multiplying the number of units in ending inventory by _________.

costs of carrying inventory

what is a major factor that should be taken into consideration while planning the desired level of inventories?

variable portion of the predetermined overhead rate

when computing variable manufacturing overhead variances, the standard rate represents the __________.

companies choose a span of one year to correspond to their fiscal year

which of the following explains why operating budgets generally span a period of one year?

net operating income

which of the following is NOT a column on a flexible budget performance report? -actual results -planning budget -net operating income -activity variances

depreciation expense

which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

lower level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations

which of the following is not a benefit of self imposed budgets? -lower level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations -a manager who is not able to meet a budget that has been imposed from above can always say that the budget was unrealistic and impossible to meet -budget estimates prepared by front-line managers are often more accurate and reliable -motivation is generally higher

the budgeting process enables managers to uncover bottlenecks as they occur

which of the following is not an advantage of budgeting? -the budgeting process enables managers to uncover bottlenecks as they occur -budgets communicate management's plans throughout the organization -budgets define goals and objectives that can serve as benchmarks for evaluating subsequent performance

self imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process

which of the following is true of self imposed (participative) budgets? -self-imposed budgets are prepared without consulting lower-level managers -self-imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process -the estimates used in self-imposed budgets rely primarily on the inputs and insights of top managers -managers who create self-imposed budgets do not have an opportunity to embed budgetary slack within their estimates

comparing static budget planning costs to actual costs only makes sense if the cost is variable

which of the following statements is not correct? -a flexible budget allows managers to isolate activity variances and revenue and spending variances -one of the common errors in preparing performance reports is to implicitly assume that all costs are fixed -comparing static planning budget costs to actual costs only makes sense if the cost is variable -one of the common errors in preparing performance reports is to implicitly assume that all costs are variable