CA EXAM 3

Measuring the firm's performance against established objectives is part of which of the following functions? Select one: a. Controlling b. Planning c. Organizing d. Staffing

a. Controlling

Standard costs Select one: a. can, if properly used, help motivate employees. b. are difficult to use with a process costing system. c. are estimates of costs attainable only under the most ideal conditions. d. require that significant unfavorable variances be investigated, but do not require that significant favorable variances be investigated.

a. can, if properly used, help motivate employees.

Which of the following is a basic element of effective budgetary control? Select one: a. cost behavior patterns b. cost-volume-profit analysis c. standard costing d. all of the above

a. cost behavior patterns

The margin of safety is a key concept of CVP analysis. The margin of safety is the Select one: a. difference between budgeted sales and break- even sales. b. difference between budgeted contributionmargin and break-even contribution margin. c. difference between budgeted contribution margin and actual contribution margin. d. contribution margin rate.

a. difference between budgeted sales and break- even sales.

CVP analysis is based on concepts from Select one: a. process costing. b. job order costing. c. standard costing. d. variable costing.

a. process costing.

Strategic planning is Select one: a. stating and establishing long-term plans b. planning activities for promoting products for the future c. setting standards for the use of important but hard-to-find materials d. planning for appropriate assignments of resources

a. stating and establishing long-term plans

Consider the equation X = Sales - [(CM/Sales) × (Sales)]. What is X? Select one: a. variable costs b. fixed costs c. net income d. contribution margin

a. variable costs

External factors that cause the achievement of company goals are the Select one: a. talents possessed by its managers b. industry price and cost structure c. annual budget d. board of directors

b. industry price and cost structure

Tactical planning usually involves which level of management? Select one: a. operational b. middle and top c. top d. middle

b. middle and top

Chronologically, the first part of the master budget to be prepared would be the Select one: a. production budget b. sales budget c. cash budget d. pro forma financial statements

b. sales budget

When actual performance varies from the budgeted performance, managers will be more likely to revise future budgets if the variances were Select one: a. small b. uncontrollable rather than controllable c. controllable rather than uncontrollable d. favorable rather than unfavorable

b. uncontrollable rather than controllable

The margin of safety would be negative if a company('s) Select one: a. degree of operating leverage is greater than 100. b. was presently operating at a volume that is below the break-even point. c. variable costs exceeded its fixed costs. d. present fixed costs were less than its contribution margin.

b. was presently operating at a volume that is below the break-even point.

Cost-volume-profit analysis is a technique available to management to understand better the interrelationships of several factors that affect a firm's profit. As with many such techniques, the accountant oversimplifies the real world by making assumptions. Which of the following is not a major assumption underlying CVP analysis? Select one: a. All costs incurred by a firm can be separated into their fixed and variable components. b. Operating efficiency and employee productivity are constant at all volume levels. c. For multi-product situations, the sales mix can vary at all volume levels. d. The product selling price per unit is constant at all volume levels.

c. For multi-product situations, the sales mix can vary at all volume levels.

The term "standard hours allowed" measures Select one: a. budgeted output at standard hours. b. actual output at actual hours. c. actual output at standard hours. d. budgeted output at actual hours.

c. actual output at standard hours.

Ineffective budgets and/or control systems are characterized by the use of Select one: a. the budget for communication b. budgets for motivation c. budgets as a planning tool only and disregarding them for control purposes d. budgets for coordination

c. budgets as a planning tool only and disregarding them for control purposes

Which of the following is not an "operating" budget? Select one: a. sales budget b. production budget c. capital budget d. purchases budget

c. capital budget

CVP analysis requires costs to be categorized as Select one: a. product or period. b. standard or actual. c. either fixed or variable. d. direct or indirect.

c. either fixed or variable.

A company would most likely have an unfavorable labor rate variance and a favorable labor efficiency variance if Select one: a. the mix of workers used in the production process was less experienced than the normal mix. b. the purchasing agent acquired very high quality material that resulted in less spoilage. c. the mix of workers used in the production process was more experienced than the normal mix. d. workers from another part of the plant were used due to an extra heavy production schedule.

c. the mix of workers used in the production process was more experienced than the normal mix.

Which of the following statements is true? Select one: a. All organizations have the same set of budgets b. Budgets should never be used to evaluate performance c. All organizations are required to budget d. Budgets are a quantitative expression of an organization's goals and objectives

d. Budgets are a quantitative expression of an organization's goals and objectives

Given the following notation, what is the break-even sales level in units? SP = selling price per unit, FC = total fixed cost, VC = variable cost per unit Select one: a. FC/(VC/SP) b. SP/(FC/VC) c. VC/(SP - FC) d. FC/(SP - VC)

d. FC/(SP - VC)

Which of the following statements regarding standard cost systems is true? Select one: a. Managers will investigate all variances from standard. b. The production supervisor is generally responsible for material price variances. c. Standard costs cannot be used for planning purposes since costs normally change in the future. d. Favorable variances are not necessarily good variances.

d. Favorable variances are not necessarily good variances.

Which of the following represents a proper sequencing in which the budgets below are prepared? Select one: a. Sales, Balance Sheet, Direct Labor b. Direct Material Purchases, Cash, Sales c. Production, Sales, Income Statement d. Sales, Production, Manufacturing Overhead

d. Sales, Production, Manufacturing Overhead

A budget aids in Select one: a. communication b. motivation c. coordination d. all of the above

d. all of the above

A budget is Select one: a. a planning tool b. a control tool c. a means of communicating goals to the firm's divisions d. all of the above

d. all of the above

The master budget usually includes Select one: a. an operating budget b. a capital budget c. pro forma financial statements d. all of the above

d. all of the above

The preparation of an organization's budget Select one: a. forces management to look ahead and try to see the future of the organization b. requires that the entire management team work together to make and carry out the yearly plan c. makes performance review possible at all levels of management d. all of the above

d. all of the above

At the break-even point, fixed costs are always Select one: a. less than the contribution margin. b. more than the contribution margin. c. more than the variable cost. d. equal to the contribution margin.

d. equal to the contribution margin.

Which of the following capacity levels has traditionally been used to compute the fixed overhead application rate? Select one: a. normal b. theoretical c. prior year d. expected annual

d. expected annual

The variance most useful in evaluating plant utilization is the Select one: a. variable overhead efficiency variance. b. variable overhead spending variance. c. fixed overhead spending variance. d. fixed overhead volume variance.

d. fixed overhead volume variance.

In a multiple-product firm, the product that has the highest contribution margin per unit will Select one: a. have the lowest variable costs per unit. b. generate more profit for each $1 of sales than the other products. c. have the highest contribution margin ratio. d. generate the most profit for each unit sold.

d. generate the most profit for each unit sold.

The master budget is a static budget because it Select one: a. never changes from one year to the next b. always contains the same operating and financial budgets c. covers a preset period of time d. is geared to only one level of production and sales

d. is geared to only one level of production and sales

The use of separate variable and fixed overhead rates is better than a combined rate because such a system Select one: a. is less expensive to operate and maintain. b. is easier to develop. c. does not result in underapplied or overapplied overhead. d. is more effective in assigning overhead costs to products.

d. is more effective in assigning overhead costs to products.

Key variables that are identified in strategic planning are Select one: a. normally controllable if they occur in a domestic market b. normally uncontrollable if they are internal c. seldom if ever controllable d. normally controllable if they are internal

d. normally controllable if they are internal

When computing variances from standard costs, the difference between actual and standard price multiplied by actual quantity used yields a Select one: a. combined price-quantity variance. b. mix variance. c. quantity variance. d. price variance.

d. price variance.

A standard cost system may be used in a. job order costing, but not process costing. b. either job order costing or process costing. c. neither job order costing nor process costing. d. process costing, but not job order costing.

d. process costing, but not job order costing.

The most useful information derived from a cost-volume-profit chart is the Select one: a. amount of sales revenue needed to cover enterprise variable costs. b. amount of sales revenue needed to cover enterprise fixed costs. c. volume or output level at which the enterprise breaks even. d. relationship among revenues, variable costs, and fixed costs at various levels of activity.

d. relationship among revenues, variable costs, and fixed costs at various levels of activity.

A purpose of standard costing is to Select one: a. eliminate the need to account for year-end underapplied or overapplied manufacturing overhead. b. replace budgets and budgeting. c. eliminate the need for actual costing for external reporting purposes. d. simplify costing procedures.

d. simplify costing procedures.

Budgeted production for a period is equal to Select one: a. sales - the beginning inventory + purchases b. the beginning inventory + sales - the ending inventory c. the ending inventory + the beginning inventory - sales d. the ending inventory + sales - the beginning inventory

d. the ending inventory + sales - the beginning inventory

The sum of the material mix and material yield variances equals a. the material purchase price variance. b. none of these are correct c. the total material variance. d. the material quantity variance.

d. the material quantity variance.

The method of cost accounting that lends itself to break-even analysis is Select one: a. standard. b. absorption. c. absolute. d. variable.

d. variable.

Which of the following factors should not be considered when deciding whether to investigate a variance? Select one: a. trend of the variances over time b. magnitude of the variance c. likelihood that an investigation will reduce or eliminate future occurrences of the variance d. whether the variance is favorable or unfavorable

d. whether the variance is favorable or unfavorable.

Which of the following standards can commonly be reached or slightly exceeded by workers in a motivated work environment? Select one: Ideal-Practical-Expected Annual A: Yes, Yes, No B: No, Yes, Yes C: No No No D: No Yes No

B: No, Yes, Yes