Accounting Test #3

The moving activity has an expected cost of $160,000. Expected direct labor hours are 40,000, and the expected number of moves is 80,000. The best activity rate for moving is: a. $4 per move b. $1.33 per hour-move c. $4 per hour d. $2 per move $

$2 per move $160,000/80,000 = $2

Refer to Figure above. Calculate the activity rate for selling goods. a. $2,400 per sales call b. $375 per sales call c. $1,200 per sales call d. $4,800 per sales call e. $9,400 per sales call

$2,400 per sales call Selling rate: $120,000/50 = $2,400 per sales call

Receiving provides 2,000 receiving hours and costs $40,000 per year. What is the activity rate for receiving? a. $10 per receiving hour b. $20 per receiving hour c. $40 per receiving hour d. $5 per receiving hour e. cannot be determined from this information

$20 per receiving hour Rate: $40,000/2,000 = $20 per receiving hour

Refer to Figure above. Calculate the total customer cost for the JIT distributor. a. $187,500 b. $347,550 c. $60,000 d. $100,050 e. $548,791

$347,550 Ordering $625 300 = $187,500 Selling $2,400 25 = $60,000 Servicing $667 150 = $100,050 Total $347,550

Producing 10,000 units of a cell phone requires $300,000 of prime costs, uses 2,000 machine hours, and takes 1,200 setup hours. The activity rates are $40 per machine hour and $100 per setup hour. What is the unit cost of a cell phone? a. $60 b. $40 c. $50 d. $100 e. $30

$50 Unit cost: [$300,000 +($40 x 2,000) +($100 x 1,200)]/10,000 = $50

A company spends $25,000 a year for inspecting, $20,000 for purchasing, and $30,000 for reworking products. A good estimate of nonvalue-added costs would be: a. $55,000 b. $45,000 c. $50,000 d. $60,000 e. $75,000

$55,000 Thus: $25,000 + $30,000 = $55,000

Practice Question #32 in Chapter 7

$625 per order Ordering rate: $200,000/320 = $625 per sales order

Refer to Figure above. Calculate the activity rate for servicing goods. a. $2,089 per service call b. $650 per service call c. $675 per service call d. $2,000 per service call e. $667 per service call

$667 per service call Service rate: $150,000/225 = $667 per service call

A company has two inspectors, each earning a salary of $75,000. One inspector works exclusively on inspecting parts received from outside suppliers, while the other spends 30 percent of her time inspecting parts and 70 percent of her time inspecting final products. How much labor cost should be assigned to the activity, inspecting parts? a. $100,000 b. $95,000 c. $97,500 d. $96,275 e. $75,000

$97,500 Cost assigned: $75,000 + (0.3 x $75,000) = $97,500

Assume that a company takes 5,000 hours to produce 10,000 units of a product. What is the cycle time? a. 0.5 units per hour b. 1 hour c. 0.75 hour d. 2 hours e. 0.5 hour Cycle time: 5,000/10,000 = 1/2 hour

0.5 hour Cycle time: 5,000/10,000 = 1/2 hour

Do Question 19 in Chapter 8

A Above

Do question 28 in Chapter 8

A) $42,000 41000 + 114000 - 113000 = 42000 Deficiency

Match the following terms with their definitions: 1. Standard price A. A carefully determined cost of a unit of output. 2. Standard cost B. A carefully determined quantity of input. 3. Standard input C. A carefully determined price a company pays per unit of input. A) 1-C; 2-A; 3-B B) 1-A; 2-B; 3-C C) 1-B; 2-A; 3-C D) 1-C; 2-B, 3-A E) 1-A; 2-C; 3-B

A) 1-C; 2-A; 3-B

Do question 23 in Chapter 8

A) 13,500 15000 + 5000 - 6500

Do question 24 in Chapter 8

A) 14,500 15000 + 2000 - 2500

In what important way is the planning of fixed overhead costs different from the planning of variable overhead costs? A) Timing. B) Return on assets. C) Peak consumption periods. D) Imposed limits on customers. E) Choosing the appropriate level of capacity.

A) Timing.

A flexible budget allows management to highlight the differences between actual costs and ________; and, management uses budgeted costs; and, ________ for the actual output level. A) actual quantities; budgeted quantities B) expected costs; actual quantities C) expected quantities; expected costs D) cost variances; output variances E) fixed overhead; overhead variances

A) actual quantities; budgeted quantities

Managers find it useful to subdivide the flexible-budget variance for direct cost variance into a ________ variance and an efficiency variance. A) price B) input C) price recovery D) productivity E) sales-volume

A) price

The difference between actual results and expected performances is referred to as the ________. A) variance B) critical area C) target numerate D) cardinal denominator E) parameter of importance

A) variance

Do question 9 in Chapter 9

A. $18,860 Cost = Fixed cost + (Variable cost per unit × q) = $2,800 + ($7.30 × 2,200) = $18,860

Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true? A. Variable costs would show favorable variances. B. Variable costs would show unfavorable variances. C. Fixed costs would show favorable variances. D. Fixed costs would show unfavorable variances.

B. Variable costs would show unfavorable variances.

_____________ are the quantitative expressions of plans stated in either physical or financial term or both. a. Budgets b. Financial statements c. Cost of goods sold statements d. Cost of goods manufactured statements

Budgets

Do Question #15 on Chapter 8

C Above

Do question 26 in Chapter 8

C) $62,230 9.80X.50 = 4.90 X (6300 + 6400 ) = 62230

A major weakness of flexible budgets is that: A. they are valid for only a single level of activity. B. they ignore fixed costs. C. they compare actual costs at one level of activity to budgeted costs at a different level of activity. D. none of these is a major weakness of flexible budgets.

D. none of these is a major weakness of flexible budgets.

____ is concerned with identifying the root causes of activity costs. a. Direct analysis b. Activity analysis c. Driver analysis d. Causal analysis e. None of these

Driver analysis

Managers use detailed variance analysis for which of the following reasons? A) To better plan for the next budget period. B) Detailed variance analysis minimizes the invoice error rate. C) Detailed variance analysis better predicts the earnings per share. D) Detailed variance analysis better illustrates the data trends of the prior cycle. E) To understand why actual results differ from the static-budget developed for that period.

E) To understand why actual results differ from the static-budget developed for that period.

The expected performance is also referred to as the ________. A) variance B) target output C) critical value set D) financial objective E) budgeted performance

E) budgeted performance

Variances assist managers in implementing their strategies by enabling ________. A) variant budgeting B) directed functioning C) divisional awareness D) deviational sentience E) management by exception

E) management by exception

_______________ are concerned with the inflows and outflows of cash and with financial position. a. Master budgets b. Operating budgets c. Financial budgets d. Continuous budgets

Financial budgets

Which of the following is NOT an advantage of budgeting? a. It forces managers to plan. b. It provides resource information that can be used to improve decision making. c. It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance. d. It provides organizational independence.

It provides organizational independence.

Which of the following factors is NOT an advantage of preparing operating budgets? a. It provides resource information that can be used to improve decision making. b. It improves communication and coordination. c. It aids in the use of resources and employees by setting a benchmark that can be used for the subsequent evaluation of performance. d. It saves time and resources.

It saves time and resources.

_______________ are comprehensive financial plans made up of various individual departmental and activity budgets. a. Master budgets b. Operating budgets c. Financial budgets d. Continuous budgets

Master budgets

____ activities are unnecessary activities. a. Frivolous b. Nonvalue-added c. Expensive d. Under-performing e. none of these

Nonvalue-added

_______________ are concerned with the income-generating activities of a firm. a. Master budgets b. Operating budgets c. Financial budgets d. Continuous budgets

Operating budgets

____ is present whenever products have different consumption ratios for different overhead activities. a. Volume costing b. Activity based costing c. Product diversity d. Allocable costing e. None of these

Product diversity

Which of the following represents the normal sequence in which the below budgets are prepared? A) Sales, Balance Sheet, Income Statement B) Balance Sheet, Sales, Income Statement C) Sales, Income Statement, Balance Sheet D) Income Statement, Sales, Balance Sheet

Sales, Income Statement, Balance Sheet

A company spends $25,000 a year for inspecting, $20,000 for purchasing, and $30,000 for reworking products. A good estimate of nonvalue-added costs would be: a. $55,000 b. $45,000 c. $50,000 d. $60,000 e. $75,000

a. $55,000 Thus: $25,000 + $30,000 = $55,000

The budget committee a. has the responsibility to review the budget. b. resolves differences that may arise as the budget is prepared. c. prepares financial statements for the auditor. d. both a and b

both a and b

The _______________ has the responsibility to review the budget, provide policy guidelines and budgetary goals, resolve differences that may arise as the budget is prepared, approve the final budget, and monitor the actual performance of the organization as the year unfolds. a. president b. budget director c. controller d. budget committee

budget committee

The _______________ is responsible for directing and coordinating the overall budgeting process. a. budget committee b. president c. budget director d. Treasurer

budget director

Which of the following is an operating budget? a. budgeted statement of cash flows b. capital expenditures budget c. budgeted income statement d. cash budget

budgeted income statement

Operating budgets are a. a forecast of expected operating expenses. b. a forecast of operating expenses and related revenues. c. a forecast of units of production. d. concerned with the income-generating activities of a firm.

concerned with the income-generating activities of a firm.

A ____ ratio measures the proportion of an activity consumed by a product. a. production b. consumption c. efficiency d. quality e. usage

consumption

A _______________ is a moving twelve-month budget. a. continuous budget b. flexible budget c. zero-based budget d. both a and b

continuous budget

The moving activity has an expected cost of $160,000. Expected direct labor hours are 40,000, and the expected number of moves is 80,000. The best activity rate for moving is: a. $4 per move b. $1.33 per hour-move c. $4 per hour d. $2 per move

d. $2 per move $160,000/80,000 = $2

A ____ is derived from the interview process (or written survey). a. work distribution matrix b. activity explanation matrix c. driver consumption matrix d. value analysis matrix e. tracing matrix

work distribution matrix

Setups, material handling, and inspection are all possible examples of: a. non-unit level overhead activities b. unit level overhead activities c. product diversity d. sustainable development e. none of these

non-unit level overhead activities

To calculate an activity rate, the ____ of each activity must be determined. a. value b. expenditure level c. processing ratio d. practical capacity

practical capacity

Which of the following is NOT a responsibility of the budget committee? a. prepare actual financial statements b. provide policy guidelines c. provide budgeting goals d. resolve differences that may arise as the budget is prepared

prepare actual financial statements

Which of the following is not a possible source of customer diversity? a. sales support b. order frequency c. delivery frequency d. geographic distance e. pricing

pricing

In preparing a master budget, top management is generally best able to: A) prepare detailed departmental-level budget figures. B) provide a perspective on the company as a whole. C) point out the particular persons who are to blame for inability to meet budget goals. D) responses a, b, and c are all correct.

provide a perspective on the company as a whole.

Complying with the filing requirements of the IRS is an example of a: a. recreational activity b. discretionary activity c. recommended activity d. required activity

required activity

Which of the following is NOT an example of a nonvalue-added activity? a. inspecting b. scheduling c. moving d. waiting e. supervising

supervising

Which of the following is not one of the three conditions necessary to be classified as a discretionary activity? a. the activity produces a change of state b. the change of state was not achievable by preceding activities c. the activity enables other activities to be performed d. the activity increases efficiency

the activity increases efficiency

The direct labor budget is based on: A) the desired ending inventory of finished goods. B) the beginning inventory of finished goods. C) the required production for the period. D) the required materials purchases for the period.

the required production for the period.

Activity drivers can be classified as either ____ or ____. a. unit-level; non-unit-level b. exact; inexact c. inputs; outputs d. right; wrong

unit-level; non-unit-level

Which is NOT a component of process value analysis? a. driver analysis b. velocity c. activity analysis d. performance measurement e. none of these

velocity

The activity driver for the shipping activity is the number of orders shipped. Product A uses 20 orders, and Product B uses 60 orders. Calculate the consumption ratios for each product. a. 0.3; 0.7 b. 0.625; 0.375 c. 0.25; 0.75 d. 0.215; 0.785

0.25; 0.75 Product A: 20/80 = 0.25 Product B: 60/80 = 0.75

Assume that a company takes 5,000 hours to produce 10,000 units of a product. What is the cycle time? a. 0.5 units per hour b. 1 hour c. 0.75 hour d. 2 hours e. 0.5 hour

0.5 hour Cycle time: 5,000/10,000 = 1/2 hour

A static planning budget is: A. a budget for a single level of activity. B. a budget that ignores inflation. C. used only for fixed costs. D. used when the mix of products does not change.

A. a budget for a single level of activity.

Do question 25 in Chapter 8

B) $2,500 7500 + 48000 - 6000= 3500 the company has to borrow 2500

Do question 22 in Chapter 8

B) $76,500 (75000X30%) + (60000X60%) + (60000X30%) = 76,500

Do question 27 in Chapter 8

B) $95,850 7100X1.80 = 12780 +102,950 - 19,880 = 95,850

To indicate revenues, an F indicates ________. A) actual costs are less than budgeted costs. B) actual revenues exceed budgeted revenues. C) operating income is decreasing relative to the budgeted amount. D) actual costs are decreasing relative to the budgeted amount. E) variable costs are decreasing relative to operating income.

B) actual revenues exceed budgeted revenues.

Unfavorable variances are also referred to as ________. A) favorable variances B) adverse variances C) bottom-out variances D) substandard variances E) dissatisfactory variances

B) adverse variances

Do question 5 in Chapter 9

B. $174 F

Do question 6 in Chapter 9

B. $27,260 Cost = Fixed cost + (Variable cost per unit × q) = $3,500 + ($7.20 × 3,300) = $27,260

Do question 4 in Chapter 9

B. $550 F *See calculations on answer sheet*

A favorable variance indicates which of the following outcomes? A) A favorable variance has the effect of increasing the static budget variance. B) A favorable variance has the effect of decreasing operating income relative to the budgeted amount. C) A favorable variance has the effect of increasing operating income relative to the budgeted amount. D) A favorable variance has the effect of increasing output relative to the previous budget cycle. E) A favorable variance has the effect of decreasing individual variable costs.

C) A favorable variance has the effect of increasing operating income relative to the budgeted amount.

What period do managers make the most of the decisions that determine levels of fixed overhead costs to be incurred? A) The prior fiscal year. B) After the budget period. C) At the start of the budget period. D) By the end of the prior budget period. E) Within the first half of the budget period.

C) At the start of the budget period.

Do Question 21 in Chapter 8

C) C Above

All of the following qualify as a standard except ________. A) costs B) prices C) actual costs D) input quantities E) output quantities

C) actual costs

Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance? A. static planning budget and flexible budget B. static planning budget and actual results C. flexible budget and actual results D. master budget and static planning budget

C. flexible budget and actual results

Comparing actual results to a budget based on the actual activity for the period is possible with the use of a: A. monthly budget. B. master budget. C. flexible budget. D. rolling budget.

C. flexible budget.

_______________ is the process of setting standards, receiving feedback on actual performance, and taking corrective action whenever actual performance deviates significantly from planned performance. a. Monitoring b. Control c. Eye balling d. Comparing

Control

____ are assigned using direct tracing and resource drivers. a. Resources b. Costs c. Profits d. Materials e. Products

Costs

____ is the length of time required to produce one product; ____ is the number of units that can be produced in a given period of time. a. Cycle time; velocity b. Velocity; cycle time c. Activity time; cycle production d. Cycle time; activity output e. Velocity; cycle production

Cycle time; velocity

Do question 25 in Chapter 9

D) $96 [(3 × $32)] = $96

The fixed overhead flexible-budget variance is the difference between ________ and fixed overhead costs in the flexible budget. A) the actual results B) the static budget C) fixed overhead costs D) actual fixed overhead costs E) budgeted fixed overhead costs

D) actual fixed overhead costs

Management can get further insight in the reason of flexible-budget variance for direct-cost input variances when they subdivide them into ________ and spending variances. A) defect rates B) post-sales affect flexible-budget variance for direct-cost input C) revenue variances D) efficiency variances E) gross margin percentage

D) efficiency variances

Do question 1 in Chapter 9

D. $432 F *See calculations on answer sheet*

Do question 7 in Chapter 9

D. $8,120 Cost = Fixed cost + (Variable cost per unit × q) = $6,800 + ($0.40 × 3,300) = $8,120

In an activity dictionary, types of resources consumed is an example of a(n) a. activity sharing b. quality c. activity attribute d. Allocation

activity attribute

A costing system that first assigns costs to activities and then to products is: a. activity based costing b. kaizen costing c. production costing d. volume based costing e. unit-level costing

activity based costing

The identification and elimination of activities that fail to add value refers to: a. activity selection b. activity sharing c. activity reduction d. activity elimination

activity elimination

The process of decreasing the time and resources required by an activity is known as: a. activity reduction b. activity sharing c. activity elimination d. activity selection

activity reduction

The process of choosing among different sets of activities caused by competing strategies refers to: a. activity elimination b. activity reduction c. activity selection d. activity sharing

activity selection

Increasing the efficiency of necessary activities by using economies of scale is known as: a. activity elimination b. activity sharing c. activity reduction d. activity selection

activity sharing

Do question 3 in Chapter 9

b. $347,550 Ordering $625 x 300 = $187,500 Selling $2,400 x 25 = $60,000 Servicing $667 x 150 = $100,050 Total $347,550

A list of activities accompanied by information that describes each activity is an activity ____. a. manifesto b. diary c. journal d. dictionary e. note

dictionary

Using only unit-based activity drivers to assign non-unit-related overhead costs can cause: a. distorted product costs b. product diversity c. efficiency d. activity sharing e. none of these

distorted product costs

Do question 2 in Chapter 9

e. $667 per service call Service rate: $150,000/225 = $667 per service call

All of the following are supplier-driven activities except: a. receiving b. purchasing c. efficiency d. inspection of incoming components

efficiency