ACCT 311 Exam 2

Flexible Budget Variance

(static budget costs/ static budget units x actual results units) - actual results costs

To Facilitate the Budget Process, use the 5-step Decision-making Process

1) Identify the problem and uncertainties 2) Obtain information 3) Make predictions about the future 4) Make decisions by choosing among alternatives 5) Implement the decision, evaluate performance, and learn

Variances provide managers with:

1. early warning of problems 2. a basis for performance evaluation 3. a basis for strategy evaluation

DM price variance JE (Purchases)

Materials Control (right column) Accounts Payable (left column)

DM Efficiency Variance JE

WIP (right column) Materials Control (left column)

DL price/efficiency JE

WIP (right column) Wages Payable (left column)

Assigning different costs to a cost object is called a) cost pooling b) cost assignment c) cost allocation d) cost tracing

d) cost tracing

closing JE

debit favorable JE's credit unfavorable JE's the difference goes in COGS

A Static budget variance is

the difference between the actual result and the corresponding static budget amount

direct material price variance

Actual Quantity x (Actual Price - budgeted Price)

sales-volume variance

The difference between the static-budget and the flexible-budget amounts

Which of the following statements is true of activity based costing? a) activity based costing is more suited to companies with high product diversity than companies with single product line b) activity based costing broadly averages or spreads the cost of resources uniformly to cost objects such as products or services c) in ABC costing, direct labor hours is always the best allocation base to allocate all non manufacturing indirect costs d) the main advantage of ABC costing over peanut butter costing is the accurate distribution of all direct costs to the products

a) activity based costing is more suited to companies with high product diversity than companies with single product line

The formula for the predetermined indirect cost rate is a) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base b) budgeted annual indirect costs divided by actual quantity of cost allocation base c) actual annual indirect costs divided by actual annual quantity of cost allocation base d) actual annual indirect costs divided by budgeted annual quantity of cost allocation base

a) budgeted annual indirect costs divided by budgeted annual quantity of cost allocation base

Which of the following increases ( are debited) to the WIP Control Account? a) direct manufacturing labor costs b) customer service costs c) actual plant insurance costs d) marketing expenses

a) direct manufacturing labor costs

Product cost cross subsidization means that a) when a company undercosts one of its products , it will overcost at least one of its other products b) when one product is overcosted it results in all other products being overcosted c) when a company undercosts more than one of its products, it will overcost more than one of its other products d) when one product is overcosted, it results in more than one other product being overcosted

a) when a company undercosts one of its products , it will overcost at least one of its other products

direct manufacturing labor price variance

actual hours x (budgeted rate - actual rate)

Which of the following statements about normal costing is true? a) direct costs are traced using a budgeted rate, and indirect costs are allocated using an actual rate b) direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate c) direct costs and indirect costs are traced using budgeted rates d) direct costs and indirect costs are traced using an actual rate

b) direct costs are traced using an actual rate, and indirect costs are allocated using a budgeted rate

A Static (master) budget is

based on the level of output planned at the start of the budget period

direct material efficiency variance

budgeted price x ( actual quantity - budgeted quantity)

direct manufacturing labor efficiency variance

budgeted rate x (budgeted hours - actual hours)

A favorable variance indicates that a) budgeted costs are less than actual costs b) actual operating income is less than the budgeted amount c) actual revenues exceed budgeted revenues d) budgeted contribution margin is more than the actual amount

c) actual revenues exceed budgeted revenues

An efficiency variance reflects the difference between a) a standard input quantity in a company and its main competitors b) actual input quantities used last period and current period c) an actual input quantity and a budgeted input quantity d) an actual input quantity used in a company and its main competitors

c) an actual input quantity and a budgeted input quantity

The flexible budget contains a) actual costs for planned output b) static budget amounts for planned output c) budgeted amounts for actual output d) actual costs for actual output

c) budgeted amounts for actual output (prepared at end of period)

A manufacturer utilizes three separate indirect cost pools. Which of the following is true? a) each indirect cost pool is a subset of total direct costs b) each indirect cost pool relates to multiple cost centers c) each indirect cost pool utilizes a separate cost allocation rate d) each indirect cost pool utilizes the same cost allocation rate for all costs incurred

c) each indirect cost pool utilizes a separate cost allocation rate

ABC costing can eliminate cost distortions because ABC systems a) use single cost pool for all overhead costs, thereby enabling simplicity b) never consider interactions between different departments in assigning support costs c) establish a cause and effect relationship with the activities performed d) use a broad average to allocate all overhead costs

c) establish a cause and effect relationship with the activities performed

Which of the following differentiates job costing from process costing? a) job costing is used when each unit of output is identical and not produced in batches, and process costing deals with unique products produced on a large scale b) job costing is used by manufacturing industries, and process costing is used by service industries c) process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches d) job costing is used when each unit of output is identical, and process costing deals with unique products

c) process costing is used when each unit of output is identical, and job costing deals with unique products not produced in batches

Job costing is a) used by businesses to price identical products b) used to calculate the percentage of work completed c) used by businesses to price unique products for different jobs d) used to calculate equivalent units

c) used by businesses to price unique products for different jobs

The fundamental cost objects of ABC are a) products b) cost drivers c) services d) activities

d) activities