ACCT 5210 Exam 3

A

The difference between the actual cost and budgeted cost at the actual level of activity is called a(n) ____. a) Spending variance b) Activity variance c) Unfavorable variance d) Revenue variance

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.

Cost objects

Activity-based costing estimates the costs of the resources consumed by ____.

Product-level

Advertising is an example of a ____ activity.

D

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be ____. a) Budgeted sales revenue. b) Total budgeted cash disbursements for selling and administrative expenses. c) Total budgeted fixed selling and administrative expenses. d) Total budgeted variable selling and administrative expenses.

Activity

Activity-based costing accumulates costs for each ____.

B

All of the following are differences between activity-based costing (ABC) and traditional absorption costing except ____. a) ABC may assign non-manufacturing costs to products. b) ABC allocates all manufacturing costs to products. c) ABC uses many cost pools. d) ABC may exclude some manufacturing costs, such as organization-sustaining costs.

D

All of the following are reasons for preparing a flexible budget with multiple cost drivers EXCEPT ____. a) Multiple cost drivers can lead to more accurate variances. b) Cost formulas are likely to be more accurate. c) An expense may be expected to vary for more than one reason. d) It eliminates the need for performing variance analysis.

B

All of the following are reasons for revenue variances EXCEPT ____. a) A change in discount structure b) A change in input prices c) A change in product mix d) A change in selling price

C

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because: a) Activity-based costing has not been approved by the United Nation's International Accounting Board. b) Under activity-based costing the sum of all product costs does not equal the total costs of the company. c) Under activity-based costing some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products. d) Activity-based costing results in less accurate costs than more traditional costing methods based on direct labor-hours or machine-hours.

B

An unfavorable variance of $5,000 in cost of goods sold is determined by comparing the actual results (10,000 units) and the flexible budget (10,000 units). What type of variance is described? a) Activity variance b) Spending variance c) Revenue variance

A

An unfavorable variance of $5,000 in sales is determined by comparing the flexible budget (9,000 units) and the planning budget (10,000 units). What type of variance is described? a) Activity variance b) Spending variance c) Revenue variance

A

Companies prepare direct labor budgets to ____. a) Avoid shortages b) Determine the direct labor-hours per unit c) Ensure timely supply of raw materials d) Reduce inventories

B

First-stage allocation of overhead costs to each cost pool is accomplished using all of the following except ____. a) Employee interviews b) Grouping batch and unit level activities c) Percentages

A

For a production budget, the ____ is the beginning inventory for the year. a) Beginning inventory for the first quarter. b) Beginning inventory for the last quarter. c) Ending inventory for the last quarter. d) Sum of beginning inventories for the four quarters.

A

Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measure of activity to use for allocating the costs of inspecting the finished products at Guerra? a) Inspection time b) Direct labor-hours c) Number of inspections d) Machine-hours

A

In a budgeted income statement, ____ is subtracted from sales to arrive at gross margin. a) Cost of goods sold b) Interest expense c) Selling and administrative expense d) Depreciation expense

B

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ____. a) Beginning balance of accounts payable. b) Desired ending raw materials inventory for the last period. c) Total merchandise purchased during the year. d) Value of raw material used during the year.

C

In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by: a) The machine-hours required by the product. b) The direct-labor hours required by the product. c) The total activity for the activity cost pool. d) The total direct labor-hours for the activity cost pool.

B

In the second-stage allocation of overhead costs, we use ____ to assign costs to cost objects. a) Activity levels b) Activity rates c) Units d) Cost pools

B

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget? a) Advertising expense b) Depreciation expense c) Selling commissions d) Utilities expense

B

Ordering materials, setting up machines, assembling products, and inspecting products are examples of ____. a) Cost drivers b) Cost pools c) Cost activity levels

B

Paradise Company's planning budget for 10,000 units showed sales of $500,000. The flexible budget for 12,000 units showed sales of $600,000. What is the variance of $100,000 called if this variance was due only to an increase in unit sales? a) Spending variance b) Activity variance c) Unfavorable variance d) Revenue variance

B

Shipping orders to a grocery store would be considered a(n) ____. a) Unit-level activity b) Batch-level activity c) Product-level activity d) Customer-level activity e) Organization-sustaining activity

D

The budgeting process begins with the preparation of the ____ budget. a) Cash b) Direct materials c) Production d) Sales

D

The difference between the actual revenue and budgeted total revenue at the actual level of activity is called a(n) ____. a) Spending variance b) Activity variance c) Unfavorable variance d) Revenue variance

C

The purpose of preparing a direct materials budget is to ____. a) Allocate the cost of raw materials to production departments. b) Estimate the manufacturing overhead. c) Estimate the quantity of raw materials to be purchased. d) Estimate the unit cost of direct materials to be purchased.

B

The usual starting point for a master budget is: a) The budgeted income statement. b) The sales forecast or sales budget. c) The direct materials purchase budget. d) The production budget.

A

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ____. a) Unit product cost b) Variable overhead cost per unit c) Total overhead cost per unit d) The sum of the direct materials and direct labor cost per unit

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.

True

True or False: Performance reports with more than one cost driver typically have more accurate variances than those based on one cost driver.

D

When preparing a direct materials budget, the required purchases of raw materials in units equals: a) Raw materials needed to meet the production schedule - desired ending inventory of raw materials + beginning inventory of raw materials. b) Raw materials needed to meet the production schedule - desired ending inventory of raw materials - beginning inventory of raw materials. c) Raw materials needed to meet the production schedule + desired ending inventory of raw materials + beginning inventory of raw materials. d) Raw materials needed to meet the production schedule + desired ending inventory of raw materials - beginning inventory of raw materials.

A

When using a flexible budget, a decrease in activity within the relevant range: a) Decreases total costs. b) Increases total costs. c) Decreases variable cost per unit. d) Increases variable cost per unit.

B

Which of the following costs would not be allocated to products or customers? a) Customer service b) Other c) Machine setup d) Product design

C

Which of the following costs would not be allocated using ABC? a) Marketing b) Factory equipment depreciation c) Direct labor d) Factory utilities

C

Which of the following explains why operating budgets generally span a period of one year? a) Accounting regulations mandate that all operating budgets be prepared for one year. b) Operating budgets, by definition, are prepared for one-year periods. c) Companies choose a span of one year to correspond to their fiscal years. d) Operating budgets need to correspond with the calendar year.

C

Which of the following is NOT a column on a flexible budget performance report? a) Actual results b) Planning budget c) Net operating income d) Activity variances

A

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories? a) Costs of carrying inventory b) General administrative policy of the company c) Selling price of the finished product d) Statutory requirements

B

Which of the following is an allocation base commonly used under the traditional methods for allocation of overhead costs? a) Number of batches b) Direct labor-hours c) Indirect materials d) Number of customer orders

C

Which of the following is not a benefit of self-imposed budgets? a) A manager who is not able to meet a budget that has been imposed from above can always say that the budget was unrealistic and impossible to meet. b) Budget estimates prepared by front-line managers are often more accurate and reliable. c) Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations. d) Motivation is generally higher.

B

Which of the following is not a management report that is normally prepared with ABC date? a) Product profitability b) Customer margins c) Customer profitability

A

Which of the following is not one of the reasons that organizations use budgets? a) The budgeting process enables managers to uncover bottlenecks as they occur. b) Budgets communicate financial goals throughout the organization. c) Budgets evaluate and reward employees.

B

Which of the following is true when a company determines that its costs should be explained by more than one cost driver? a) The flexible budget performance report should be prepared using only a single cost driver. b) A flexible budget performance report that is based on more than one cost driver will be more accurate than a flexible budget performance report that is based on just one cost driver. c) A flexible budget performance report that is based on just one cost driver will be more accurate than a flexible budget performance report that is based on more than one cost driver. d) A flexible budget performance report cannot be prepared.

A

Which of the following would be classified as a product-level activity? a) Advertising a product. b) Running the Human Resource department. c) Setting up a machine for a batch of a standard product. d) Operating a cafeteria for employees.