Accounting Final

Variable costing is more appropriate than absorption costing when the decision ________. A) relates to production planning within the capacity limits in the short run B) involves reducing fixed costs that are controllable by the upper management C) does not involve analysis of profitability based on sales mix D) does not involve analysis of contribution margin

a. relates to production planning within the capacity limits in the short run

Standard Overhead Rate

budgeted overhead at predicted activity level / standard allocation base at predicted activity level

COGS budget

budgeted sales unit x product cost per unit

units to purchase

budgeted sales units + desired ending merchandise inventory units - beginning merchandise inventory

A disadvantage of static budgets (or fixed budgets) is that they: a) are dependent on previous year's actual results b) cannot be used by service companies c) do not show possible changes in underlying activity levels d) show the expected results of a responsibility center for several levels of activity

c. do not show possible changes

Principal components of a master budget include which of the following? a) Production budget b) Sales budget c) Capital expenditures budget d)All of the above

d. all of the above

target cost

expected selling price - target profit

actual cost is less than standard cost

favorable

residual income

income - target income

return on investment

income / average assets

Income under absorption costing

income under variable costing+fixed overhead+fixed overhead in ending inventory - fixed overhead in beginning inventory

cash paid for interest

interest rate % x beginning loan balance

A company is planning to replace an old machine with a new one. Which of the following is a sunk cost? A) cost of the new machine B) sales price of the old machine C) future maintenance costs of the old machine D) original cost of the old machine

original cost of the old machine

John Smith, one of the managers of a multi-national company, is responsible for generating revenues and controlling costs in order to increase the operating income of his division. However, he is not concerned about investment-related decisions. Brad is most likely to be the manager of a(n) ________. A) cost center B) investment center C) profit center D) revenue center

profit center

Days' Sales in Receivables

receivable net/ net sales x 365

The budget that needs to be completed first when preparing the master budget is the: a) Production Budget b)Sales Budget c)Cash Budget d)Capital Expenditures Budget

sales budget

product cost per unit under variable costing

sum of direct materials. direct labor. variable overhead.

Total Budgeted Costs

total fixed costs + (total variable cost per unit x units of activity)

if actual cost is more than standard cost

unfavorable

cost of direct labor

units to produce x direct labor hours required per unit x direct labor cost per hour

Materials to be purchased

units to produce x materials required per unit +desired ending materials inventory-beginning materials inventory

selling price per unit

variable cost per unit + markup per unit

markup per unit formula

variable cost per unit x markup percentage

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost? a. Absorption costing b. Differential costing c. Standard costing d. Variable costing

variable costing

fixed overhead is in period expenses

variable costing

product cost per unit absorption costing

variable costs + (fixed overhead/fixed selling and administrative)

controllable variance

Actual total overhead incurred - budgeted total overhead at actual units produced

What does a favorable direct materials cost variance (or price variance) indicate? A) The actual quantity of direct materials used was less than the standard quantity. B) The actual cost of direct materials purchased was less than the standard cost of direct materials purchased. C) The actual cost of direct materials purchased was greater than the standard cost of direct materials purchased. D) The actual quantity of direct materials used was greater than the standard quantity.

B the actual cost of direct materials was less than the standard quantity

The target cost approach assumes that: a) markup is added to total cost b) the selling price is set by the marketplace c) markup is added to variable cost d) markup is added to product cost

B. the selling price is set by the marketplace

Contribution Margin Ratio

Contribution Margin / Sales

Which of the following is a disadvantage of decentralization? A) It results in increased customer response time. B) It allows only the top management to make decisions. C) It does not motivate employees because the decision-making powers are not delegated. D) It results in problems with achieving goal congruence.

D it results in problems with achieving goal congruence

Which of the following four perspectives of the balanced scorecard enables management to answer the question, "How can we continue to improve and create value?" A) financial B) customer C) internal business D) learning and growth

D. learning and growth

32. The operating budgets of a company include: a) the cash budget b) the capital expenditures budget c) the financing budget d) the production budget

D. the production budget

units to produce =

budgeted ending inventory units+ budgeted sales units - beginning finished goods inventory units

Volume Variance

budgeted overhead - standard overhead applied

Overhead Variance

Actual Overhead - Standard Applied Overhead

standard overhead applied

Actual Production X Standard amount of allocation base X Standard overhead rate

Days Payable Outstanding

(Accounts Payable / COGS) x 365

Days' Sales in Inventory

(Inventory/COGS) x 365

ROI

(income/sales) x (sales/average assets)

Markup Percentage

(target profit + total fixed costs ) / total variable cost

Which of the following is an advantage of decentralization? A) Managers' motivation and retention can be increased by empowering segment managers to make decisions. B) Certain costs of activities may be duplicated. C) Customer response time is generally decreased. D) Top management can concentrate on decisions that relate to day-to-day operations of segments.

A managers motivation and retention can be increased by empowering segment managers to make decisions

fixed overhead is in product cost

absorption costing

when production exceeds sales, which of the following is true

absorption price is greater than the use of variable costing

price variance

actual price - standard price x actual quantity

Quantity Variance

actual quantity - standard quantity x standard price

The sales volume variance is the difference between the ________.A) actual results and the expected results in the flexible budget for the actual units sold B) expected results in the flexible budget for the actual units sold and the static budget C) static budget and actual amounts due to differences in sales price D) flexible budget and static budget due to differences in fixed costs

b. expected results in the flexible budget for the actual units sold and the static budget

budgeted direct labor cost

budgeted direct labor hours x direct labor cost per hour

A company is analyzing its month-end results by comparing it to both static and flexible budgets. During the previous month, the actual fixed costs were lower than the expected fixed costs as per the static budget. This difference results in a(n) ________. A) unfavorable flexible budget variance for fixed costs B) favorable sales volume variance for fixed costs C) favorable flexible budget variance for fixed costs D) unfavorable sales volume variance for fixed costs

c. favorable flexible budget variance for fixed costs

Which of the following is considered a period cost under variable costing but not under absorption costing? A) fixed selling and administrative costs B) variable manufacturing costs C) fixed manufacturing overhead D) variable selling and administrative costs

c. fixed manufacturing overhead

Which of the following statements is true of absorption and variable costing methods? A) Both costing methods consider selling and administrative costs to be period costs. B) Variable costing considers variable selling and administrative costs to be product costs. C) Absorption costing considers fixed manufacturing overhead to be period costs. D) Both costing methods consider fixed manufacturing overhead to be product costs.

d. both costing methods consider fixed manufacturing overhead to be product costs

Cash Conversion Cycle

days sales in AR + days in inventory - days payable outstanding

departmental income

depart sales - depart expenses - allocated indirect depart expenses

Unit product cost under absorption costing

direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead