Accounting Final
some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of
return on investment
true or false: a quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service
true
true or false: an unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed
true
labor rate variance=
(actual hours*standard rate)-(actual hours*actual rate)
price variance=
(actual quantity*standard price)-(actual quantity*actual price)
labor efficiency variance=
(standard hours-actual hours)*standard price
quantity variance=
(standard quantity-actual quantity)*standard price
a segment of a business responsible for both revenues and expenses would be called
a profit center
to calculate revenue variance:
actual-flexible
which of the following would be considered an operating asset in return on investment computations
accounts receivable
which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same
an increase in operating assets
all other things equal, which of the following would increase a division's residual income
decrease in average operating assets
when tying compensation to the balanced scorecard, management must ensure that the performance measures have all the following characteristics except
easily manipulated
true or false: a favorable spending variance occurs when the actual cost is less than the amount of the cost in the static planning budget
false
true or false: a flexible budget performance report with more than one cost driver can contain activity variances but not revenue or spending variances due to the increased complexity
false
true or false: a flexible budget performance report with more than one cost driver will always have more unfavorable revenue and spending variances than a performance report with only one cost driver
false
true or false: a revenue variance is favorable if the actual revenue is greater than the revenue in the static planning budget
false
true or false: an unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period
false
true or false: if activity is higher than expected, total fixed costs should be higher than expected. if activity is lower than expected, total fixed costs should be lower than expected
false
true or false: if skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in a favorable labor rate variance
false
true or false: in general, the production manager is responsible for the materials price variance
false
true or false: inspection time is generally considered to be value-added time
false
true or false: one disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers
false
true or false: one of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks
false
true or false: the standard labor rate per hour should not include any employment taxes
false
a budget that is based on the actual activity of a period is known as a
flexible budget
to calculate spending variance:
flexible-actual
when it does not say cash disbursements, should depreciation be included or not
included
which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment (ROI) computations
it eliminates the age of equipment as a factor in return on investment (ROI) computations
there are various budgets within the master budget. one of these budgets is the production budget. which of the following best describes the production budget
it is calculated based on the sales budget and the desired ending inventory
ROI secondary calculation=
margin*turnover
residual income=
net operating income-(average operating assets*required rate of return)
ROI=
net operating income/average operating assets
margin=
net operating income/sales
which of the following segment performance measures will decrease if there is an increase in the interest expense for that segment
no return on investment, no residual income
when it says cash disbursements, should depreciation be included or not
not included
to calculate activity variance:
planning-flexible
manufacturing cycle efficiency=
process or value-added time/throughput time
throughput time=
process time+inspection time+move time+queue time
when preparing a direct materials budget, the required purchases of raw materials in units equal:
raw materials needed to meet the production schedule+desired ending inventory of raw materials-beginning inventory of raw materials
the production department should generally be responsible for materials price variances that resulted from
rush order arising from poor scheduling
turnover=
sales/average operating assets
in a flexible budget, what will happen to fixed costs as the activity level increases
the fixed cost per unit will decrease
which of the following statements is not correct concerning the manufacturing overhead budget
the manufacturing overhead budget shows only the variable portion of manufacturing overhead
the usual starting point for a master budget is
the sales forecast or sales budget
a favorable labor rate variance indicates that
the standard rate exceeds the actual rate
if variable manufacturing overhead is applied on the basis of direct labor hours and the variable overhead rate variance is favorable, then
the standard variable overhead rate exceeded the actual rate
true or false: a balanced scorecard contains both customer and internal business process performance measures because improvements in internal business process should result in improvements in customer satisfaction
true
true or false: a benefit from budgeting is that it forces managers to think about and plan for the future
true
true or false: a manager would generally like to see a trend indicating a decrease in setup time
true
true or false: cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period
true
true or false: comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control
true
true or false: differences between the static planning budget and the flexible budget shows what should have happened because the actual level of activity differed from what had been planned
true
true or false: financial measures such as ROI and residual income as well as operating measures may be included in a balanced scorecard
true
true or false: fixed costs should usually be included in performance reports because fixed costs are generally controllable
true
true or false: flexible budgets can be used when there is more than one cost driver (i.e., measure of activity)
true
true or false: if the MCE is equal to 0.6, then 60% of the time a unit is in process is spent on activities that add value to the product
true
true or false: in a flexible budget, when the activity declines, the total variable cost also declines
true
true or false: move time is considered non-value-added time
true
true or false: performance reports with more than one cost driver typically have more accurate variances than those based on one cost driver
true
true or false: queue time is considered non-value-added time
true
true or false: the activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget
true
true or false: the direct labor budget begins with the required production in units from the production budget
true
true or false: the direct labor budget shows the direct labor-hours required to satisfy the production budget
true
true or false: the main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity
true
true or false: the materials price variance is computed based on the amount of materials purchased during the period
true
true or false: the number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory
true
true or false: the performance measures on a balanced scorecard tend to fall into four groups: financial measures, customer measures, internal business process measures, and learning and growth measures
true
true or false: the standard price per unit for direct materials should reflect the final, delivered cost of the materials
true
true or false: the standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period
true
true or false: to help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity
true
true or false: when more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable
true
true or false: when the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected
true
delivery cycle time=
wait time+throughput time
