Accounting 2023 Exam 3

Pataasin ang iyong marka sa homework at exams ngayon gamit ang Quizwiz!

favorable variances vs. unfavorable variances

Favorable variances increase operating income; unfavorable variances decrease operating income

What two budgets are compared to calculate an activity variance?

Flexible budget - static planning budget

beginning inventory for the first quarter

For a production budget, the ______ is the beginning inventory for the year. beginning inventory for the first quarter beginning inventory for the last quarter ending inventory for the last quarter sum of beginning inventories for the four quarters

cost of goods sold

In a budgeted income statement, _________ is subtracted from sales to arrive at gross margin. cost of goods sold interest expense selling and administrative expense depreciation expense

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 ________. beginning balance of accounts payable desired ending raw materials inventory for the last period total merchandise purchased during the year value of raw material used during the year

advantages of self-imposed budgets

Individuals at all levels of the organization are viewed as members of the team whose judgments are valued by top managers Budget estimates are often more accurate Motivation is generally higher Eliminates excuses of unrealistic targets

planning

Involves developing objectives and preparing various budgets to achieve those objectives

How is the Sales Budget determined?

Estimated quantity to be sold x price

How are expected cash collections calculated?

(Sales x % cash sales) + (sales x % of credit sales to be collected)

total budgeted variable selling and administrative expenses

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be ________. budgeted sales revenue total budgeted cash disbursements for selling and administrative expenses total budgeted fixed selling and administrative expenses total budgeted variable selling and administrative expenses

both the activity variances and the spending variances.

A flexible budget performance report for variable manufacturing costs shows _______. only the activity variances. both the activity variances and the spending variances. both the revenue variances and the spending variances. both the quantity variances and the price variances.

What two budgets are compared to calculate revenue and spending variances?

Actual results - flexible 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 $5,000 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 Spending variance Revenue variance

Activity variance

An unfavorable variance of $5,000 in sales is determined by comparing the flexible budget (9,000 units) and the planning budget (10,000 units). What type of variance is described? Activity variance Spending variance Revenue variance

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 ________. will be favorable. will be unfavorable. cannot be determined without additional information.convert materials into the finished product. will be equal to zero.

avoid labor shortages

Companies prepare direct labor budgets to ________. avoid labor shortages determine the direct labor-hours per unit ensure timely supply of raw materials reduce inventories

How are the required production in units calculated for the Production Budget?

Desired units in ending inventory of Finished Goods + Sales quantity - units in beginning inventory of Finished Goods

How are purchases of raw materials calculated for the Direct Materials Budget?

Desired units in ending inventory of Raw Materials + Raw Materials to be used in production this period - units in beginning inventory of Raw Materials

How is the accounts receivable balance calculated?

It is the remaining percentage of credit sales to be collected AFTER the last month of the period.

received from suppliers and transported to raw materials inventory.

Most companies compute the materials price variance when raw materials are _______. received from suppliers and transported to raw materials inventory. withdrawn from raw materials inventory and used in production. ordered from suppliers. moved from work in process inventory to finished goods inventory.

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? Spending variance Activity variance Unfavorable variance Revenue variance

How is the unit product cost calculated and applied to the Ending Finished Goods inventory budget?

Per unit direct materials cost and direct labor cost are added to units as incurred. Overhead cost is allocated to units produced based on the predetermined overhead allocation rate and quantity of .

Cash Budget Calculations

Planned cash receipts - planned cash payments (including interest expense) + borrowing and/or - paying back principal borrowed

master budget

Sales budget first; Budgeted income statement and balance sheet last

disadvantage of self-imposed budget

Self-imposed budgets should be reviewed by higher management to prevent budgetary slack

What is the difference between a static planning budget and a flexible budget?

Static planning budget is for one level of sales forecast by management; flexible is for actual sales level or what-if analysis

budgeting

The act of preparing a budget is called

How are flexible budget amounts calculated?

The budgeted selling price and variable costs are multiplied by the actual level of sales

sales

The budgeting process begins with the preparation of the ______ budget. cash direct materials production sales

spending variance

The difference between the actual cost and budgeted cost at the actual level of activity is called a(n) ________. spending variance activity variance unfavorable variance revenue variance

revenue variance

The difference between the actual total revenue and budgeted total revenue at the actual level of activity is called a(n) ________. spending variance activity variance unfavorable variance revenue variance

estimate the quantity of raw materials to be purchased

The purpose of preparing a direct materials budget is to ________. allocate the cost of raw materials to production departments estimate the manufacturing overhead estimate the quantity of raw materials to be purchased estimate the unit cost of direct materials to be purchased

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

The standard hours allowed is ________. the direct labor-hours that should have been used to complete the planned output for the period. the direct labor-hours that should have been used to complete the actual output for the period. computed by multiplying the standard labor-hours allowed per unit by the planned output for the period. computed by multiplying the actual labor-hours per unit by the planned output for the period.

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

The standard quantity allowed is _______. the amount of an input that should have been used to complete the planned output for the period. the actual amount of input that was used to complete the planned output for the period. the amount of an input that should have been used to complete the actual output for the period. the actual amount of input that was used to complete the actual output for the period.

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 ________. price that should be paid for each unit of direct materials. total cost of direct materials that should be used for each unit of finished product. 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. amount of direct labor-hours that should be used to produce one unit of finished goods.

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 ________. budgeting control responsibility accounting self-imposed accounting

budgetary control

The use of budgets to control an organization's activities is known as

unit product cost

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ________. unit product cost variable overhead cost per unit total overhead cost per unit the sum of the direct materials and direct labor cost per unit

25,000 bottles

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What is the desired ending inventory for the second quarter? 15,000 bottles 20,000 bottles 25,000 bottles 40,000 bottles

variable portion of the predetermined overhead rate.

When computing variable manufacturing overhead variances, the standard rate represents the ________. predetermined overhead rate. variable portion of the predetermined overhead rate. standard hourly pay rate for direct laborers. the amount of hours allowed for the actual output.

Companies choose a span of one year to correspond to their fiscal years.

Which of the following explains why operating budgets generally span a period of one year? Accounting regulations mandate that all operating budgets be prepared for one year. Operating budgets, by definition, are prepared for one-year periods. Companies choose a span of one year to correspond to their fiscal years. Operating budgets need to correspond with the calendar 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

Costs of carrying inventory.

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories? Costs of carrying inventory. General administrative policy of the company. Selling price of the finished product. Statutory requirements.

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? Advertising expense Depreciation expense Selling commissions Utilities expense

The budgeting process enables managers to uncover bottlenecks as they occur.

Which of the following is not a benefit 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.

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? 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. Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations. Motivation is generally higher.

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 give managers at all levels of an organization an opportunity to provide input into the budgeting process. Self-imposed budgets are prepared without consulting lower-level managers. 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.

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.

Comparing static planning budget 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.

self-imposed budget

a budget that is prepared with the full cooperation and participation of managers at all levels

budget

a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period.

control

involves the steps taken by management to increase the likelihood that the objectives set down while planning are attained and that all parts of the organization are working together towards that goal

Responsibility Accounting

managers should be held responsible for those items - and only those items - that they can actually control to a significant extent. Responsibility accounting enables organizations to react quickly to deviations from their plans and learn from feedback

Selling & Administrative expenses are

period costs, and are not part of product cost, thus are not included in the WIP, FG, or COGS costs.


Kaugnay na mga set ng pag-aaral

Cognitive Neuroscience - Chapter 12

View Set

Practice Exam #5 (220-1102) - Incorrect

View Set

Patho Exam 3 (Endocrine, Reproductive, & GI Disorders)

View Set

NUR1305 Test #3 Study QUESTIONS Neuromuscular and Special Senses Pediatrics

View Set

Ameritech High Acuity Immune and MS

View Set