exam 3

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories?

costs of carrying inventories

The standard hours allowed is ________.

the direct labor-hours that should have been used to complete the actual output for the period.

In a budgeted income statement, _________ is subtracted from sales to arrive at gross margin

cost of goods sold

Which of the following scenarios demonstrates the leverage effect on net operating income due to the existence of fixed costs?

A 25% increase in sales resulting in a 30% increase in net operating income.

Which of the following explains why operating budgets generally span a period of one year?

Companies choose a span of one year to correspond to their fiscal years.

Which of the following statements is not correct?

Comparing static planning budget costs to actual costs only makes sense if the cost is variable.

Which of the following is not a benefit of self-imposed budgets?

Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations.

Which of the following is true of self-imposed (participative) budgets?

Self-imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process.

For a production budget, the ______ is the beginning inventory for the year.

beginning inventory for the first quarter

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?

activity variance

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?

activity variance

The standard quantity per unit defines the ________.

amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage.

Companies prepare direct labor budgets to ________.

avoid labor shortages

A flexible budget performance report for variable manufacturing costs shows _______.

both spending and activity variances

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?

depreciation expense

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________.

desired ending raw materials inventory for the last period

the purpose of preparing a direct materials budget is to ________.

estimate the quantity of raw materials to be purchased

All of the following are reasons for preparing a flexible budget with multiple cost drivers EXCEPT ________.

it eliminates the need for performing variance analysis

Which of the following is NOT a column on a flexible budget performance report?

net operating income

Most companies compute the materials price variance when raw materials are _______.

received from suppliers and transported to raw materials inventory.

The system of accountability in which managers are held responsible for those items of revenue and costs—and only those items—over which they can exert significant control is referred to as ________.

responsibility accounting

The difference between the actual total revenue and budgeted total revenue at the actual level of activity is called a(n) ________.

revenue variance

The budgeting process begins with the preparation of the ______ budget.

sales

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?

spending variance

The difference between the actual cost and budgeted cost at the actual level of activity is called a(n) ________.

spending variance

The standard quantity allowed is _______.

the amount of an input that should have been used to complete the actual output for the period

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 ________.

total budgeted variable selling and administrative expenses

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ________.

unit production cost