Accounting test 2
Vivian has been asked to determine the standard cost for each shirt produced by her company that customizes T-shirts by adding names, logos, and artwork. Each customized shirt requires one shirt, 2 ounces of ink, 15 minutes of direct labor (processing, folding, packaging), and one plastic bag for packaging. She receives the following cost information: No alt text provided for this image The company applies overhead at a rate of $9.40 per direct labor hour, and fringe benefits for workers are an additional 20% of wages. What is the total standard cost per short-sleeved T-shirt? A $11.73 B $10.73 C $12.23 D $10.65
A $11.73
RLR Company manufactures handmade blown-glass figurines. The company anticipates $2,610,000 of manufacturing overhead in the coming year. Because it is a labor-intensive organization, RLR bases overhead allocation on direct labor cost. The direct labor quantity standard is 1.5 hours per figurine, and the standard direct labor rate is $18 per hour. The anticipated direct labor cost for the year is $2,175,000. Variable overhead is expected to be $1,631,250. What is the standard fixed overhead cost per figurine? A $12.15 B $20.25 C $18.25 D $20.00
A $12.15
Commencement Experts expected total manufacturing overhead for the year to be $3,331,125 and total direct labor hours for the year to be 235,000. The company uses direct labor hours to apply manufacturing overhead. Actual overhead for the year was $4,000,000 and actual direct labor hours for the year were 200,000. Standard direct labor hours per product are: 5.75 hours per gown; 8.25 hours per hat and tassel; and 3 hours per honor cord. What is the predetermined manufacturing overhead rate? A $14.18 B $20.00 C $116.94 D $16.66
A $14.18
National Pottery makes handmade clay pots. The company anticipates $3,187,219 of manufacturing overhead in the coming year. Because it is a labor-intensive organization, National Pottery bases overhead allocation on direct labor cost. The direct labor quantity standard is 2.7 hours per pot, and the standard direct labor rate is $22.50 per hour. The anticipated direct labor cost for the year is $3,375,000. Variable overhead is expected to be $2,162,350. What is the standard fixed overhead cost per pot? A $18.45 B $38.92 C $23.11 D $6.83
A $18.45
The CanaanEli Corporation manufactures baseball hats. The major material in each hat is nylon fabric, and the standard price for the fabric is $4.75 per yard. Each hat contains 0.4 yards of fabric. CanaanEli allows 0.05 yards for scrap and 0.03 yards for waste. What is the standard direct materials cost per hat? A $2.28 B $1.90 C $2.07 D $1.87
A $2.28
Future Ways Manufacturing has the following direct materials price list for gadgets: Motor, 1 per gadget: $84.79 Casing, 1 per gadget: $34.95 Miscellaneous nuts and bolts: $0.52 per gadget Quantity discount on motors: $1.10 per motor Freight: $4.25 per motor Labor is provided primarily by robots. Direct labor production time is 25 hours per gadget. Machine downtime is estimated at 0.05 hours per gadget. The standard direct labor rate is $25 per hour. Total manufacturing overhead for the year is estimated to be $752,000 and is allocated based on machine hours, which are expected to be 800,000 hours for the year. Variable manufacturing overhead is expected to be $600,000 for the year. The standard machine hours per gadget is 15. What is the standard fixed manufacturing overhead cost per gadget? A $2.85 B $4.25 C $7.50 D $5.75
A $2.85
Heidi makes rag quilts. Each child-sized quilt contains 4.25 yards of flannel priced at $4.80 per yard and thread costing $0.24 per quilt. Heidi also allows 0.10 yards of fabric for waste per quilt. Direct labor for each quilt requires 2 hours of cutting and 4 hours of sewing. Cutters' direct labor rate is $7.25 per hour, and sewers' direct labor rate is $8.50 per hour. Rest periods of 0.01 hours per quilt are allowed for both sewers and cutters, with an additional 0.02 hours per quilt allowed for machine downtime. What is the standard direct materials cost per quilt? A $21.12 B $21.95 C $19.50 D $17.80
A $21.12
Sam Montana manufactures bookcases for colleges and universities to use in dorm rooms. Sam's accountant is developing a standard cost for each bookcase based in part on the following information: No alt text provided for this image Each bookcase contains 1.40 board feet of lumber, which is shipped at a cost of $2.10 per board foot. Sam regularly purchases 500 board feet of lumber per order and receives a quantity discount of 15% per board foot. Production results in 0.50 board feet of waste and spoilage per bookcase. What is the standard direct materials cost of lumber per bookcase? A $24.02 B $17.36 C $14.04 D $23.56
A $24.02
Sports Outfitters manufactures athletic shoes. The direct materials price list for each shoe is as follows: 0.25 pounds of rubber for sole, $14.00 per pound 0.4 yards of cloth for outer shoe, $4.75 per yard 0.3 yards of cloth for inner lining, $2.18 per yard Thread, $0.15 Laces, $0.34 Allowance for waste, $0.07 Direct labor includes molders, cutters, and sewers. Standard direct labor hours per shoe are 0.3 hours for molding, 0.2 hours for cutting, and 0.75 hours for sewing. The standard direct labor rate per hour is $9.25 for all employees. Manufacturing overhead at Sports Outfitters is expected to be $2,684,291 per year based on an estimated annual direct labor cost of $2,418,367. The company applies overhead based upon direct labor cost. What is the standard manufacturing overhead cost per pair of shoes? A $25.67 B $12.84 C $14.67 D $7.34
A $25.67
We Heart Cows makes leather-like jackets containing no animal products. Each jacket requires 2.5 yards of outer fabric and an equal amount of lining, as well as thread and buttons. The direct material price list for each jacket is as follows: 2.5 yards of outer fabric, $8.00 per yard 2.5 yards of lining fabric, $4.50 per yard Thread, $0.25 5 buttons, $0.75 each Allowance for waste, $0.70 Direct labor includes cutters and sewers. Standard direct labor hours consist of 1.5 hours of cutting time per jacket and 2.5 hours of sewing time per jacket. The standard direct labor rates per hour are $7.75 for cutters and $8.75 for sewers. Manufacturing overhead at We Heart Cows is expected to be $1,250,000 per year and direct labor cost is anticipated to be $1,375,000 for the year. The company applies overhead based upon direct labor cost. What is the standard direct labor cost per jacket? A $33.50 B $35.95 C $36.85 D $37.50
A $33.50
We Heart Cows makes leather-like jackets containing no animal products. Each jacket contains 2.5 yards of outer fabric and an equal amount of lining, as well as thread and buttons. The direct materials price list for each jacket is as follows: 2.5 yards of outer fabric, $8.00 per yard 2.5yards of lining fabric, $4.50 per yard Thread, $0.25 5 buttons, $0.75 each Allowance for waste, $0.70 Direct labor includes cutters and sewers. The direct labor quantity standards are 1.5 hours for cutting and 2.5 hours for sewing. The direct labor price standards are $7.75 per hour for cutters and $8.75 per hour for sewers. Annual manufacturing overhead cost is estimated to be $1,375,000 and annual direct labor costs are expected to be $1,250,000. We Heart Cows applies manufacturing overhead using direct labor costs. What is the standard manufacturing overhead cost per jacket? A $36.85 B $33.50 C $35.95 D $37.50
A $36.85
Carol Ellen is the cost accountant for CC Candy Manufacturers. For the current year, Carol expects to incur a total of $768,420 in manufacturing overhead costs and $465,710 in direct labor costs. CC Candy's variable overhead rate has been 80% of direct labor cost, and that rate is not expected to change. The standard direct labor cost per pound of candy is $5.60. What is CC Candy's standard fixed overhead cost per pound of candy? A $4.76 B $4.48 C $9.24 D $10.08
A $4.76
Home Decorations makes handmade wreaths. Each wreath contains 1.75 yards of greenery priced at $3.82 per yard and one ribbon costing $1.22 per wreath. Home Decorations also allows 0.05 yards of greenery for waste. Direct labor for each wreath consists of 1 hour of cutting and 2 hours of weaving. Cutters' direct labor rate is $8.25 per hour and weavers' direct labor rate is $8.35 per hour. Rest periods of 0.08 hours are allowed for both cutters and weavers per wreath, with an additional 0.05 hours per wreath allowed for machine downtime. What is the standard direct materials cost per wreath? A $8.10 B $33.05 C $24.70 D $7.91
A $8.10
Maya Co.'s standard quantities per widget are 4 pounds of plastic and 3 direct labor hours. The standard direct labor rate per hour is $14 and the predetermined overhead rate is $8 per direct labor hour. If the total standard cost per widget is $103.00, what is the standard direct materials price per pound of plastic? A $9.25 B $13.25 C $20.25 D $37.00
A $9.25
Clair's Jams and Jellies manufactures gourmet products. The company is developing a standard direct materials cost per jar of peach jam it produces. The following information is available: No alt text provided for this image The peaches are shipped overnight at a cost of $2.40 per pound. The company regularly purchases 100 pounds of peaches per order and receives a quantity discount of 10% per pound. Each jar of peach jam contains 0.70 pounds of peaches. The waste and spoilage associated with each jar of jam is 0.50 pounds of peaches. What is the standard direct materials cost of peaches per jar of jam? A $9.90 B $9.61 C $10.68 D $4.55
A $9.90
Rose Park Manufacturing makes satellite and other space hardware. The majority of the company's employees are engineers and specialized technicians. The company has the following information for one of its products: No alt text provided for this image What is the standard direct materials quantity per unit? A 12.0 pounds B 10.4 pounds C 10.8 pounds D 11.6 pounds
A 12.0 pounds
ABC Corporation allocates manufacturing overhead based on direct labor cost. ABC expected to incur a total of $1,025,000 of overhead costs and $820,000 of direct labor costs last year. Actual overhead costs incurred totaled $1,050,000, and actual direct labor costs totaled $800,100. What was ABC's predetermined overhead rate last year? A 125% of direct labor cost. B 128% of direct labor cost. C 100% of direct labor cost. D 98% of direct labor cost
A 125% of direct labor cost.
The type of standard adopted can have a behavioral impact on workers. A True B False
A True
Last quarter, RP Enterprises earned $220,000 in sales revenue and had $90,000 cost of goods sold (at standard). RP also experienced these variances: Materials price: $2,400 F Materials quantity: $1,400 U Labor price: $2,000 U Labor quantity: $1,000 F Overhead: $1,500 F What was RP's actual gross profit? : A $130,800 B $131,500 C $124,000 D $128,500
B $131,500
Paul Steel manufactures sweatshirts, T-shirts, and shorts with the logo of the local State University. The following activities relate to producing each sweatshirt: No alt text provided for this image Sweatshirt employees are paid $10.40 per hour. Fringe benefits are an additional 25% of the hourly rate and employer payroll taxes are an additional 10% of the hourly rate. What is the direct labor quantity standard? A 14.04 B 0.55 C 7.72 D 0.45
B 0.55
Monique Co.'s standard quantities per widget are 4 pounds of plastic and 3 direct labor hours. The standard direct labor rate per hour is $14 and the predetermined overhead rate is $8 per direct labor hour. If the total standard cost per widget is $103.00, what is the standard direct materials cost per widget? A $9.25 B $13.25 C $20.25 D $37.00
D $37.00
Which of the following statements is correct? A Service companies prepare budget data using an expected input approach while manufacturers prepare budget data using an expected output approach. B The production budget is derived from the direct materials and direct labor budget. C The budgets of service companies are approved by voters. D In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses.
D In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses.
When ROI is used to evaluate a unit within an organization, the income measure used needs to be one that includes only items that are under the ________ control. A unit manager's B auditor's C division accountant's D CEO's
A unit manager's
Which of the following will cause the ROI to increase? A An increase in sales. B An increase in variable costs. C An increase in average operating assets. D An increase in controllable fixed costs.
A An increase in sales.
In the Proctor Company, indirect labor is budgeted for $24,000 and factory supervision is budgeted for $8,000 at normal capacity of 80,000 direct labor hours. If 90,000 direct labor hours are worked, flexible budget total for these costs is A $32,000. B $35,000. C $33,000. D $36,000.
B $35,000.
In order to assure better management acceptance, the flow of input data for budgeting should begin with the A top management. B accounting department. C lower levels of management. D budget committee.
C lower levels of management.
A purchases budget is used instead of a production budget by A not-for-profit organizations. B manufacturing companies. C merchandising companies. D service enterprises.
C merchandising companies.
The labor price variance is the difference between the A standard and actual hours multiplied by actual rate. B standard and actual rate multiplied by standard hours. C standard and actual rate multiplied by actual hours. D standard and actual hours multiplied by the difference between standard and actual rate.
C standard and actual rate multiplied by actual hours.
When using a static budget, A only budgeted variable costs are compared with actual variable costs. B it is important to select an activity index and a relevant range of activity. C the actual results are always compared with budgeted data at the original budgeted activity level. D data are modified and adjusted according to changes in activity during the year
C the actual results are always compared with budgeted data at the original budgeted activity level.
A company reports operating assets of $350,000 on January 1, 2014 and $500,000 on December 31, 2014. Compute the average operating assets for the year. A $425,000 B $350,000 C $500,000 D $150,000
A $425,000
Pretzel Company used 20,000 direct labor hours when standard hours were 21,000. The actual pay rate was $6.30 when the standard rate was $6.50. The labor quantity variance is A $6,300 favorable. B $6,500 unfavorable. C $6,500 favorable. D $6,300 unfavorable.
C $6,500 favorable
The Crawford Company has 3,000 units in beginning finished goods. The sales budget shows expected sales to be 12,000 units. If the production budget shows that 14,000 units are required for production, what was the desired ending finished goods? A 1,000 B 3,000 C 5,000 D 9,000
C 5,000
The assets used to calculate average operating assets should include all assets of the organization. A True B False
B False
On January 1, Scarlett Company has a beginning cash balance of $21,000. During the year, the company expects cash disbursements of $170,000 and cash receipts of $145,000. If Scarlett requires an ending cash balance of $20,000, the Scarlett Company must borrow: A $16,000 B $46,000 C $20,000 D $24,000
D $24,000
Haden Company has determined that the standard material cost for the silk used in making a dress is $27.00 based on three square feet of silk at a cost of $9.00 per square foot. The production of 1,000 dresses resulted in the use of 3,400 square feet of silk at a cost of $9.20 per square foot. What is the direct materials quantity variance? A $3,680 unfavorable. B $680 unfavorable. C $600 unfavorable. D $3,600 unfavorable.
D $3,600 unfavorable.
Which of the following is a characteristic of long-range planning? A It focuses on achieving goals such as meeting annual profit objectives. B More detail is presented than in a budget. C It is prepared for periods not exceeding one year. D It is used to review progress rather than as a basis for control.
D It is used to review progress rather than as a basis for control
Which of the following departments is generally responsible for an UNFAVORABLE materials price variance? A Quality control. B Production. C Engineering. D Purchasing.
D Purchasing.
The following explanations appeared on last week's variance report for JT Engineering's purchasing department. Which of these explanations would relate to an unfavorable materials price variance? A Untrained production workers. B Repeat customer credit. C Quantity discount. : D Rush order
D Rush order
City Mission is a not-for-profit organization that provides hot meals, living quarters, and showers for homeless people. Based on their yearly budget, they expect to spend $450,000 on food expenses, $350,000 on housing expenses, $280,000 on staff salaries, $90,000 on utilities, and $118,000 on other expenses. How much will City Mission need to raise in donations? A more than $1,562,000 B less than $1,225,000 C at least $1,253,000 D at least $1,288,000
D at least $1,288,000
Coordinating the preparation of the budget is the responsibility assigned to the A top management. B accounting department. C lower levels of management. D budget committee.
D budget committee.
Budgets are more closely associated with the management function of
planning
Joan King, a manager with Steel Works, Inc., would love to "beat the budget" this year. She believes that revenues for the coming year will be $200,000 and expenses will be $120,000. To build in budgetary slack, Joan is most likely to budget for A $130,000 of expenses. B $110,000 of expenses. C $210,000 of revenue. D $80,000 of income.
130,000 of Expenses
Hunter Accessories' investment center records sales of $12,700,000, variable costs of $8,200,000, controllable fixed costs of $2,100,000, and an ROI of 16%. What are the average operating assets of Hunter? A $15,000,000 B $28,125,000 C $384,000 D $1,696,000
A $15,000,000
Blossom Company's Seed Division had sales of $1,000,000 for the year and average operating assets of $800,000. The division's contribution margin was $400,000, and the division's return on investment was 27.5%. What were the Seed Division's controllable fixed costs for the year? A $180,000 B $380,000 C $220,000 D $580,000
A $180,000
Diving Unlimited manufactures and sells diving boards and other pool accessories. Last month, Diving Unlimited had a controllable margin of $580,000, which was higher than the budgeted $550,000. If average operating assets were valued at $3 million, what was the change in ROI? A 1% favorable B 2% unfavorable C 0.5% unfavorable D 2.5% favorable
A 1% favorable
Management considers anticipated trends in the economic and political environment when A doing long-range planning. B preparing the master budget. C deciding whether to switch to participative budgeting. D selecting members of the budget committee.
A doing long-range planning.
When calculating average operating assets, ________ would NOT be included. A equipment no longer in use B physical property such as buildings C equipment used in production D factory machinery
A equipment no longer in use
A responsibility reporting system A involves the preparation of a report for each level of responsibility shown in the company's organization chart. B begins with the highest level of responsibility and moves downward to the lowest level. C does not permit comparative evaluations of responsibility centers. D does not permit management by exception at each level of responsibility.
A involves the preparation of a report for each level of responsibility shown in the company's organization chart.
A company that uses the top-down approach rather than a participative process will feel the impact of its budgeting process mostly in which form? A lack of commitment of operating managers to the final budget B greater commitment of operating managers to the final budget C longer time cycle required to prepare the budget D greater flow of information from the bottom to the top
A lack of commitment of operating managers to the final budget
A country's political environment will likely affect A long-range planning but not budgeting. B budgeting but not long-range planning. C both budgeting and long-range planning. D neither budgeting nor long-range planning.
A long-range planning but not budgeting.
One way in which budgetary planning benefits a firm is by A providing definite objectives for evaluating performance at each level of responsibility. B making it easier for the firm to meet its projected monthly financial goals. C allowing the firm to more easily obtain funding from banks and outside investors. D making it harder for managers to "pad" their department's financial projections.
A providing definite objectives for evaluating performance at each level of responsibility.
When using a static budget, A the actual results are always compared with budgeted data at the original budgeted activity level. B only budgeted fixed costs are compared with actual fixed costs. C if actual results differ from planned results, the difference must be investigated by management. D budget reports comparing actual results to planned objectives are only prepared once per year.
A the actual results are always compared with budgeted data at the original budgeted activity level
Return on investment measures A the rate of return generated by an investment in assets. B actual costs against budgeted costs. C liquidity. D the excess of controllable margin over operating income.
A the rate of return generated by an investment in assets.
Jensen Automotive produces alternators for American-made cars. They generally use a static budget with the following costs based on 8,000 units per month: indirect materials, $22,000; indirect labor, $25,000; utilities, $12,000; supervision, $4,000; depreciation, $18,000. If Jensen wanted to create a flexible budget for 9,000 units, what value would they record for variable costs? A $52,875 B $66,375 C $91,125 D $70,87
B $66,375
An investment center manager's performance is typically measured based on the unit's overall profit compared to the flexible budget. A True B Fals
B Fals
Itty Bitty Airline has implemented a balanced scorecard approach to ensure that all of its stakeholders are satisfied with its performance. Based on the company's vision and mission, it has identified the following initiatives: ● To be responsive to customer complaints ● To achieve consistent revenue growth ● To increase employee cross-training ● To increase customer loyalty Which of these initiatives is most closely aligned to the learning and growth perspective of the balanced scorecard? A To increase customer loyalty. B To increase employee cross-training. C To be responsive to customer complaints. D To achieve consistent revenue growth.
B To increase employee cross-training.
Which line items of the budgeted balance sheet are calculated based on operating budgets? You got it wrong : A Accounts receivable, accounts payable, retained earnings, and accumulated depreciation. B Finished goods inventory, raw materials inventory, buildings and equipment, and retained earnings. C Finished goods inventory, raw materials inventory, and retained earnings. D Cash, accounts receivable, accounts payable, and buildings and equipment.
Finished goods inventory, raw materials inventory, and retained earnings.
In a(n) __________ center, all fixed costs are controllable by its manager
Investment
The president and CEO of Duisburg Industries is considering the purchase of new equipment. The company president expects the equipment to generate $224,000 in additional controllable margin. Currently, Duisburg has a $880,000 contribution margin, a $640,000 controllable margin, and $5,000,000 in average operating assets. If the new equipment is purchased, average operating assets will increase by 40%. If the investment is made, what will be Duisburg's return on investment? A 12.3% B 10.8% C 15.8% D 6.6%
A 12.3%
Place the following four budgets into their correct sequence of preparation: 1. Capital expenditure budget 2. Selling and administrative expense budget 3. Sales budget 4. Direct materials budget A 3., 4., 2., 1. B 3., 2., 4., 1. C 3., 2., 1., 4. D 4., 3., 2., 1.
A 3., 4., 2., 1.
What is the return on investment if controllable margin is $300,000 and the average investment center operating assets are $1,000,000? A 30% B 33% C 3.33% D 10%
A 30%
The Burlington Company has 12,000 units in beginning finished goods. If sales are expected to be 60,000 units for the year and Burlington desires ending finished goods of 15,000 units, how many units must Burlington produce? A 63,000 B 75,000 C 57,000 D 60,000
A 63,000
Controllable costs for responsibility accounting purposes are those costs that are directly influenced by which of the following? A A given manager within a given period of time B Sales volume C A change in activity D Production volume
A A given manager within a given period of time
As an accountant, you were asked to collect financial data for the past three years from the sales, production, research, and marketing departments. Based on this information, at what point is the company in its budgeting process? A At the beginning. B In the middle. C At the end. D At the comparative stage.
A At the beginning.
The company that is most likely to use a budget committee when developing a company-wide budget is : A Bruner Electronics, an international electronics manufacturer. B Rendon Hospitality, a regional company of small bed and breakfasts. C Huntington Lumber Co., a local lumber and hardware store. D Nancy's Noodles, an online company run by one family that sells homemade noodles.
A Bruner Electronics, an international electronics manufacturer
Which of the following would increase return on investment? A Decrease in variable costs B Increase in average operating assets C Decrease in sales D Increase in variable costs
A Decrease in variable costs
Which of the following will not impact ROI? A Decreasing indirect fixed costs. B Increasing average operating assets. C Decreasing contribution margin. D Increasing direct fixed costs.
A Decreasing indirect fixed costs.
Of the following, which is not a direct fixed cost of a profit center? : A General office administrative costs. B Timekeeping for center's employees. C Depreciation on center's equipment. D Profit center manager's salary.
A General office administrative costs.
A manager at which of the following centers will have the highest number of assets to manage in order to have a positive performance evaluation? A Investment center B Profit center C Cost center D Sales center
A Investment center
Of the following, which would not be considered an aspect of budgetary control? A It provides a guarantee for favorable results. B It provides feedback value needed by management to see whether actual operations are on course. C It assists management in controlling operations. D It assists in the determination of differences between actual and planned results.
A It provides a guarantee for favorable results.
JT Engineering's normal capacity is 20,000 direct labor hours. JT estimated its variable manufacturing overhead costs to be $26,400 and its fixed manufacturing overhead costs to be $14,900 when the company runs at normal capacity. If JT incurs $28,000 of manufacturing overhead costs, what is its standard predetermined manufacturing overhead rate per direct labor hour? A $1.40 B $2.07 C $1.32 D $0.75
B $2.07
JT Engineering has determined that it should cost $14,000 in direct materials, $12,600 in direct labor, and $6,200 in total overhead to produce 1,000 widgets. During the most recent period, JT actually spent $13,860 in direct materials, $12,420 in direct labor, and $6,500 in total overhead to produce 1,000 widgets. What is JT's total variance? Is it favorable or unfavorable? A $40 unfavorable. B $20 favorable. C $32 unfavorable. D $180 favorable.
B $20 favorable.
Katie's Cleaning Service has cleaning contracts for 15 apartments, 45 family homes, and 25 office buildings. She estimates that an apartment takes 4 hours to clean, a home takes 6 hours to clean, and an office building takes 10 hours to clean. Katie pays her cleaning staff $12.50/hour. If each location is cleaned once per week, how much does Katie need to budget for direct labor each month? Assume there are four weeks per month. A $7,083 B $29,000 C $7,250 D $28,333
B $29,000
The Eccleston Company has the following budgeted sales: January $40,000, February $60,000, and March $50,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% of the amount is collected in the month of sale, and 50% in the next month. The total expected cash receipts during March are A $52,500 B $53,000 C $56,000 D $50,000
B $53,000
Information on Smith's direct labor costs for the month of August are as follows: No alt text provided for this image What was the standard rate for August? A $8.00 B $7.00 C $8.05 D $6.95
B $7.00
When they produce 20,000 units per month, Sanders Incorporated has variable costs of $392,000 and fixed costs of $242,000. If Sanders increases their production to 25,000 units, by how much will they have to increase their budget? A $490,000 B $98,000 C $158,500 D $792,50
B $98,000
It was nearing the end of the budgetary quarter, and the sales manager realized that his sales team had only reached 90% of the company's projected sales for the quarter. He met with his sales staff to brainstorm ideas to boost sales over the next few days, and with the cooperation of his team they met their sales goals. In this situation, the budget served as a(n) A way to coordinate activities. B early warning sign of problems. C way to plan ahead for sales promotions. D way to coordinate activities between departments.
B early warning sign of problems
Responsibility accounting cannot be used effectively A for costs that can be directly associated with the specific level of responsibility. B for costs allocated to the responsibility level. C when budget data can be developed for evaluating the manager's effectiveness in controlling costs. D for costs controllable at the level of responsibility with which they are associated.
B for costs allocated to the responsibility level.
When reporting variances, A management normally investigates all variances. B the reports should facilitate management by exception. C the reports are not departmentalized. D promptness is relatively unimportant.
B the reports should facilitate management by exception.
Of the following, which is not part of a formalized reporting system? A Indicate the primary recipient(s) of the report. B Specify the purpose of the report. : C State the corrective action that should be taken. D Identify the name of the budget report.
C State the corrective action that should be taken.
A standard that represents the optimum level of performance under perfect operating conditions is called a(n) A controllable standard. B normal standard. C materials price standard. D ideal standard.
D ideal standard.
_________ fixed costs are controllable by an investment center manager
ALL
Garrett and Liam manage two different divisions of the same company. Garrett uses ideal standards to gauge his employees' performance, while Liam uses normal standards to gauge his employees' performance. Whose employees are likely to perform better? Why? A Garrett's employees, because ideal standards are accompanied by pay-for-performance bonuses. B Liam's employees, because normal standards are better for morale, as they are rigorous but attainable. C Liam's employees, because normal standards allow employees the opportunity to set their own performance levels. D Garrett's employees, because ideal standards stimulate workers to ever-increasing improvement
B Liam's employees, because normal standards are better for morale, as they are rigorous but attainable.
: Identifying an exception under management by exception uses these criteria: A Controllability and frequency. B Materiality and controllability. C Materiality and frequency. D Controllable only.
B Materiality and controllability.
Which of the following most accurately describes the relationship between a direct materials price standard and a direct materials quantity standard? A The standards are additive: the price standard is added to the materials standard to determine the standard cost per unit. B The standards are multiplicative; the price standard is multiplied by the materials standard to determine the standard cost per unit. C The standards are subtractive: the price standard is subtracted from the materials standard to determine the standard cost per unit. D The standards are divisible: the price standard is divided by the materials standard to determine the standard cost per unit.
B The standards are multiplicative; the price standard is multiplied by the materials standard to determine the standard cost per unit.
Which of the following is the difference between the actual labor rate multiplied by the actual labor hours worked and the standard labor rate multiplied by the standard labor hours? A Labor price variance. B Total labor variance. C Labor quantity variance. D Labor efficiency variance.
B Total labor variance.
The Brenneman Company's direct materials budget shows total cost of direct materials purchases for January $125,000, February $150,000 and March $175,000. Cash payments are 60% in the month of purchase and 40% in the following month. The budgeted cash payments for March are A $150,000. B $160,000. C $165,000. D $130,000
C $165,000
Rose Company is preparing its direct labor budget for May. Projections for the month are that 8,350 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $9, what is the total budgeted direct labor cost for May? A $243,000 B $221,400 C $225,450 D $217,350
C $225,450
JT Engineering expects to pay $21 per pound of copper and use 300 pounds of copper per 1,000 widgets. Due to the current high demand for copper, JT is currently paying $32 per pound of copper. What is JT's materials price variance for a purchase of 300 pounds of copper? A $2,100 unfavorable. B $1,300 unfavorable. C $3,300 unfavorable. D $3,200 favorable.
C $3,300 unfavorable.
Dobbins Resources pays sales commissions of $2 per unit and shipping costs of $0.75 per unit. If Dobbins expects to sell 12,000 units in the third quarter, what will their total variable expenses be? A $24,000 B $42,000 C $33,000 D $9,000
C $33,000
Return on investment is the primary basis used to evaluate the manager of an _________ center.
Investment
When they made their master budget, Vann Enterprises had direct material per unit costs of $12.43, direct labor per unit costs of $8.46, and manufacturing overhead per unit costs of $14.29. They planned to sell 16,000 units in the first quarter. However, in the first week of the first quarter, the direct material per unit costs rose to $16.12, which increased the selling price of the finished product. Therefore, Vann Enterprises only sold 15,500 units. What would the difference in cost of goods sold be between the budgeted income statement and the actual income statement? A $59,040 increase B $39,605 decrease : C $39,605 increase D $59,040 decrease
C $39,605 increase
In the Progressa Company required production for June is 44,000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 100,000 and 110,000 pounds, respectively. How many pounds of direct material Z must be purchased? A 126,000 B 136,000 C 142,000 D 132,000
C 142,000
JT Engineering uses copper in its widgets. Demand for copper in the widget industry is greater than the available supply. As a result, JT is unable to secure its typical discount with suppliers. Assuming that JT orders the same quantity as usual and that no changes are made to any of JT's materials standards, what is the most likely end-of-quarter result? A An unfavorable materials quantity variance. B A favorable materials quantity variance. C An unfavorable materials price variance. D A favorable materials price variance
C An unfavorable materials price variance.
Which of the following represents the flow of budget data under participative budgeting? A President to Plant Manager to Department Manager B Vice President of Production to Plant Manager to Department Manager C Department Manager to Plant Manager to Vice President of Production D Department Manager to Vice President of Production to Plant Manager
C Department Manager to Plant Manager to Vice President of Production
For the past three years, Apex Industries has employed top-down budgeting. Throughout that entire period, the firm's budgeted costs and revenues have differed significantly from its actual numbers. Apex's CEO believes the best way to remedy this issue is to switch to bottom-to-top budgeting, and he asks your opinion of his idea. What is your best response? A "Bottom-to-top budgeting will likely produce more accurate numbers, but only if you take care to ensure that the firm's lower-level managers are not manipulating their forecasts to make their performance look better than it really is. Also, it's important to remember that bottom-up budgeting is usually more time consuming than top-down budgeting." B "I'm not sure if that's a good idea. Bottom-to-top budgeting actually decreases the likelihood of a budget's accuracy in that it encourages managers to pad their estimates. Furthermore, bottom-up budgeting is usually more time consuming than top-down budgeting." C "Bottom-to-top budgeting offers several benefits in that it takes less time than top-down budgeting and is more likely to ensure that lower-level managers are committed to meeting their budgeted numbers. However, there is no evidence indicating that bottom-up budgets are any more accurate than top-down budgets." D "That sounds like a great plan. As compared to top-down budgeting, bottom-to-top budgeting is more accurate, more likely to produce high levels of managerial commitment, and far less time consuming."
A "Bottom-to-top budgeting will likely produce more accurate numbers, but only if you take care to ensure that the firm's lower-level managers are not manipulating their forecasts to make their performance look better than it really is. Also, it's important to remember that bottom-up budgeting is usually more time consuming than top-down budgeting."
Toledo Manufacturing has the following variable overhead costs: Indirect materials: $2.18/hour Indirect labor: $3.26/hour Utilities: $0.90/hour Maintenance: $0.33/hour Direct labor hours: 14,500 If Toledo decides that they need to increase their indirect materials to $2.25 per hour, how much will this increase their total variable costs? A $1,015 B $1,150 C $980 D $730
A $1,015
Last year, Flip Flop Shoe Company had contribution margin of $600,000 on $1,000,000 of sales revenue and had controllable fixed costs of $250,000. The company started the year with $1,500,000 of operating assets and ended the year with $1,300,000 of operating assets. Compute the company's average operating assets. A $1,400,000 B $1,500,000 C $1,300,000 D $2,800,000
A $1,400,000
: Windell Company uses flexible budgets. At normal capacity of 8,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Windell had actual overhead costs of $250,000 for 9,000 units produced, what is the difference between actual and budgeted costs? A $2,000 favorable B $2,000 unfavorable C $8,000 favorable D $6,000 unfavorable
A $2,000 favorable
Fisher Steel produces steel plates for manufacturing and construction. They generally use a static budget with the following costs based on 50,000 units per month: indirect materials, $105,000; indirect labor, $98,000; utilities, $14,000; supervision, $5,000; depreciation, $22,000. If Fisher wanted to create a flexible budget for 60,000 units, what value would they record for fixed costs? A $27,000 B $41,000 C $49,200 D $32,400
A $27,000
McCaffee Company has established the following standards: direct materials quantity standard of 1 pound per widget and direct materials price standard of $2 per pound.. In producing 50,000 widgets, 45,000 pounds of materials were used at a cost of $2.10 per pound. What is the materials price variance? A $4,500 unfavorable. B $5,000 favorable. C $10,000 favorable. D $5,000 unfavorable.
A $4,500 unfavorable.
James Company determines that 13,500 pounds of direct materials are needed for production in July. There are 800 pounds of direct materials on hand at July 1 and the desired ending inventory is 700 pounds. If the cost per pound of direct materials is $3, what is the budgeted total cost of direct materials purchases? You got it correct : A $40,200 B $39,600 C $40,800 D $41,400
A $40,200
The average assets for a company reporting operating assets of $32,000 on January 1, 2014 and $63,000 on December 31, 2014 would be A $47,500 B $32,000 C $63,000 D $31,000
A $47,500
JT Engineering plans to spend $1.30 per pound purchasing raw materials, $0.30 per pound of freight charges from the raw materials supplier, and $0.13 per pound receiving the materials. JT expects to use 2.75 pounds of raw materials making widgets and allows 0.25 pounds of waste per widget. What is JT's standard direct materials cost per widget? : A $5.19 B $4.80 C $4.33 D $4.73
A $5.19
Operating budgets include the 1. Production budget 2. Cash budget A 1. only B 2. only C Both 1. and 2. D Neither 1. nor 2.
A 1. only
Madison is the CEO of a large company. He has always produced the master budget with the help of the CFO. As his company has grown, his employees and managers seem more resistant to adhering to the budget. What would you suggest to help Madison's company have an effective budget? A Madison should employ a bottom-to-top approach in planning the budget. B Madison should use research and analysis to help plan the budget. C Madison should prepare a continuous budget rather than a static budget. D Madison should begin his budget planning with the most recent sales forecasts.
A Madison should employ a bottom-to-top approach in planning the budget.
Philip is a manager who oversees raw materials ordering, inventory levels, employee efficiency and productivity, and assembly line maintenance. Which of the following budgets would Philip MOST likely help develop? A Manufacturing overhead budget. B Selling and administrative expense budget. C Sales budget. D Capital expenditure budget.
A Manufacturing overhead budget
Which of the following terms is correctly paired with its description? A Operating budgets - result in preparation of the budgeted income statement. B Budgetary slack - intentional overstatement of budgeted revenues. C Budget committee - includes the participation of the company's external auditor and board of directors. D Financial budgets - establish goals for the company's sales and production personnel.
A Operating budgets - result in preparation of the budgeted income statement.
Which performance tool measures the rate of return generated by an investment in assets? A Return on investment B Economic value added C Residual income D Accounting rate of return
A Return on investment
All but which one of the following is involved in budgetary control? A Take disciplinary action. B Develop the budget. C Modify future plans, if necessary. D Analyze differences between actual and planned results.
A Take disciplinary action.
Of the following, which is incorrect about average operating assets? A The assets are valued at fair market values. B Both current assets and plant assets are included. C Nonoperating assets are excluded. D The average may be based on beginning and ending recorded balances.
A The assets are valued at fair market values.
Why is a company's sales budget developed before the production budget? A The company only wants to produce as many units as it expects to sell. B The company needs to find ways to sell as many units as it can maximally produce. C The company's sales managers have more control over the company's finances than the production managers. D The sales budget is more important than the production budget, so it receives a larger portion of the company's financial reserves.
A The company only wants to produce as many units as it expects to sell.
Jeremy is the CFO of a growing company. When the company was smaller, Jeremy developed the master budget on his own with input from the CEO. Now that the company is larger, he feels that both he and the CEO are too far removed from the day-to-day operations to accurately develop a budget. What would you suggest to help Jeremy develop an effective budget? A The company should develop a budget committee to receive input from department managers for their own portion of the budget. B The company should allow lower-level managers to develop the budget without input from the CFO and CEO. C The CFO and CEO should develop a budget with budgetary slack so they are more likely to reach their goals even if they do not keep up with day-to-day activities. D The CFO and CEO should use long-range planning rather than budgeting to develop company goals because that is more effective for larger companies.
A The company should develop a budget committee to receive input from department managers for their own portion of the budget.
Fabian is calculating the controllable margin and return on investment for his company's investment center. For what reason is Fabian likely making these calculations? : A To evaluate the investment center manager's performance. B To determine where to best cut costs. C To evaluate the investment center's efficiency. D To determine if a new asset should be purchased.
A To evaluate the investment center manager's performance.
When ROI is used to evaluate a unit within an organization, the income measure used needs to be one that includes only items that are under the unit manager's control. A True B False
A True
Budgets are: A a motivator to meet planned objectives. B closely associated with the management function of directing. C voted on and approved by shareholders. D a guarantee for accomplishing the profit objective.
A a motivator to meet planned objectives.
An UNFAVORABLE labor quantity variance means that A actual hours exceeded standard hours. B actual hours were less than standard hours. C the actual rate was higher than the standard rate. D the total labor variance must also be unfavorable.
A actual hours exceeded standard hours.
When a firm makes adjustments to its strategic plan, the firm will A also need to make adjustments to its budget, because the budget shows how the firm's resources will be operationalized in an attempt to implement the strategic plan. B not need to make adjustments to its budget, because the budget is essentially an operating plan and therefore unrelated to the strategic plan. C also need to make adjustments to its budget, because the strategic plan affects a firm's cash flows even though it has no direct bearing on the firm's operations. D not need to make adjustments to its budget, because the strategic plan affects only a firm's operations and not its cash flows.
A also need to make adjustments to its budget, because the budget shows how the firm's resources will be operationalized in an attempt to implement the strategic plan.
Naylor Industries produced a master budget that was strictly followed by all departments. At the end of the period, the actual numbers were off by less than 1% of the budgeted numbers. It is likely that Naylor Industries had a : A budget accepted by all levels of management. B top-down budget. C budget identical to the previous period. D continuous budget.
A budget accepted by all levels of management.
When using the return on investment (ROI) formula, A controllable margin is divided by average investment center operating assets. B sales are divided by average investment center operating assets. C controllable margin is divided by sales. D sales are divided by net income.
A controllable margin is divided by average investment center operating assets.