Final T/F MangA
58. Given the actual results of $120,000 and the flexible budget of $140,000, the revenue variance comes out to be $20,000. Therefore, it is favorable.
F
38. Financial accounting and managerial accounting are similar in that they are both concerned with reporting information to external parties.
F
41. Sales minus fixed costs equal contribution margin.
F
42. Sales plus ending inventory minus beginning inventory equals the units to be produced in the given period.
F
47. Manufacturing inventories are listed in this order: raw materials, work in process, finished goods
F
48. Fixed Cost vary in total but are constant per unit.
F
49. Transferred out costs are similar to cost included in the beginning inventory
F
5. Job order costing is used in situations where many of the same products are produced each period.
F
50. When calculating the units accounted for, add completed and transferred out units to beginning inventory and the units started during the period.
F
51. Favorable and unfavorable variances do imply good and bad performances within a company.
F
52. Total fixed costs change in direct proportion to changes in activity.
F
53. A variance occurs if there is a difference between actual costs and the budgeted figures.
F
55. EUP analysis is applied to material costs only
F
56. A budget is a detailed qualitative plan for acquiring and using financial and other resources over a specified forthcoming time period
F
59. Job-Order Costing and Process Costing are similar in that a single product is produced, and costs are accumulated by the department.
F
78. If the actual overhead cost is $80,000 and the applied overhead is $75,000, then the overhead is considered under-applied.
T
79. Once the breakeven point has been reached, the net operating income increases by the amount of the unit contribution margin for each additional unit sold.
T
8. Common costs cannot be traced to any individual cost object.
T
82. The contribution margin is the amount remaining from sales revenue after all variable expenses have been deducted.
T
83. The weighted average method calculates unit costs by combining costs and outputs from the current and prior periods.
T
85. Selling and administrative expenses and cost of goods sold are part of the income statement.
T
88. Over-applied overhead exists when the amount of overhead applied to jobs during the period using the predetermined overhead rate (POHR) is greater than the total amount of overhead actually incurred during the period.
T
89. Conversion costs would include wages of production workers, depreciation on factory equipment and factory utilities.
T
90. The wages of plant workers would be classified as a production cost.
T
92. Predetermined overhead rate is calculated by dividing estimated OH cost by estimated activity
T
93. Equivalent units is the product of the number of partially completed units and the percentage completion of those units with respect to the processing in the department.
T
94. A budget is a detailed plan that can show the direct labor-hours required to fulfill the production budget.
T
95. The difference between a planning budget and a flexible budget is that a planning budget is prepared before the period and a flexible budget is an estimate of what revenues and costs should have been, given the actual level of activity for the period.
T
99. Job-order costing would be the appropriate costing method for a company that builds unique houses.
T
32.The amount of cost of goods manufactured during a period is credited to the finished goods inventory account.
F
33. Manufacturing overhead includes direct materials, indirect labor costs, and all other manufacturing costs.
F
14. Job-order costing is a single product produced for a long time period or on a continuous basis where identical units are produced.
F
17. Manufacturing costs are material and labor costs only.
F
2. A flexible budget adjusts to show what costs should be for the budgeted level of activity
F
20. On a cost-volume-profit graph, the revenue line will be shown below the total expense line for any activity level above the break-even point.
F
35. Manufacturing costs equals direct materials + direct labor + manufacturing overhead applied when using actual costing.
F
22. The following statement is an assumption of cost-volume-profit analysis: The selling price of the product must be constant, while the mix of products sold can vary.
F
24. Inventoriable costs are categorized as period costs.
F
26. The choice of using job order costing vs. process costing is based on the number of units produced.
F
36. The first step in budgeting is to prepare the production budget.
F
27. The planning budget is prepared at the end of the period, while the flexible budget is prepared at the beginning of the period.
F
28. A fixed cost varies, in total, in direct proportion to changes in the level of activity.
F
29. Finished Goods consist of completed units of product that have been sold to customers.
F
31. When using cost volume profit managers assume that cost is linear and are divided into variable and manufacturing cost.
F
12. Variable costs are constant in total while fixed costs change in total.
F
62. Selling and administrative expenses are period costs, so they are accounted for on the balance sheet before they are recorded on the income statement.
F
63. With job-order costing many identical products are produced with manufacturing overhead being allocated to all jobs.
F
64. When a job is completed, the finished output is transferred from work in process to cost of goods sold.
F
7. In process costing, costs are accumulated by individual jobs.
F
73. A flexible budget is a budget prepared at the beginning of the period that is prepared for one level of activity.
F
74. An indirect cost is easily traceable.
F
77. To calculate conversion cost you add Direct Materials plus Manufacturing Overhead.
F
80. The first budget prepared in the master budgeting process is the production budget.
F
81. A flexible budget is prepared before the period begins and is only valid for the planned level of activity whereas a planned budget is an estimate of what revenues and costs should have been, given the actual level of activity for the period.
F
84. The contribution format income statement can be expressed in an equation as follows: Profit = (Sales - Variable expenses) + Fixed expenses
F
86.Selling costs and administrative costs are classified as manufacturing costs.
F
87. An allocation base is used to assign manufacturing overhead to individual jobs.
F
9. Work in process only consists of units of product that are completed and ready for sale to customers.
F
91. Cost objects can include jobs and products but not customers or geographic areas.
F
96. The contribution ratio is equal to your variable expenses divided by your sales.
F
97. An opportunity cost is a cost that has already been incurred and cannot be changed regardless of what a manager decides to do.
F
98. Conversion costs include direct materials and direct labor.
F
61. In a flexible budget, total variable costs change in direct proportion to changes in activity, while total fixed costs remain unchanged within the relevant range.
T
65. When cash disbursements exceed total cash available the company faces a cash deficiency.
T
66. Direct material, direct labor, and manufacturing overhead flow into a work in process account which then flows into finished goods.
T
67. CVP analysis assumes that over the relevant range total cost are linear.
T
68. The first step in the master budgeting process is to estimate the sales volume.
T
69. Opportunity cost is the benefit incurred when choosing one alternative over another.
T
70. A direct cost is a cost that can be easily and conveniently traced to a specified cost object.
T
71. A specialty printing company would most likely use a job order cost system.
T
72. The starting point for the master budgeting process in a merchandiser always begins with an estimate of how many units expected to be sold.
T
75. A job cost sheet shows direct materials, direct labor, and manufacturing overhead cost charged to a job.
T
76. To calculate sales, multiply the selling price per unit times quantity sold.
T
1. In process costing the output of the processing departments represents homogenous goods.
T
10. Once the breakeven point has been reached, net operating income will increase by the amount of the unit contribution margin for each additional unit sold.
T
100. When computing the equivalent units of production using the weighted-average method, we will ignore any completion percentages pertaining to the beginning work in process inventory and assume 100% of the work on the units is done during the current period.
T
11. The equation for predetermined overhead rate (POR) is estimated cost divided by estimated activity.
T
13. An operating budget typically covers a period of one year corresponding to the fiscal year of the company.
T
15. Unfavorable variances occur when variances decrease operating profit.
T
16. A master budget is called a static budget because it is developed around a single planned output level.
T
18. A cost reconciliation schedule is prepared to assign total costs to units transferred out and in ending work in process.
T
19. Direct costs can be identified specifically and exclusively with given cost object in an economically feasible way.
T
21. A flexible budget is prepared after the static budget and is a reflection of the activity variance that a company expects within a certain period of time.
T
23. In the cost flow for a normal costing system; Direct Materials Used is debited from the direct materials t-account and credited to the work-in-process account.
T
25. If there is a debit balance in manufactured overhead, OH has been underapplied.
T
3.In process costing, costs and unit costs are accumulated by department.
T
30.The budgeted income statement is important in the budget process, and it shows planned profit and measures the company's expected performance.
T
34. Predetermined overhead rate is used to apply overhead once the period begins.
T
37. The weighted average method makes no distinction between work done in prior and current periods.
T
39. The predetermined overhead rate is used because actual overhead for the period is not known until the end of the period.
T
4. A processing department is an organizational unit where work is performed on a product and where materials, labor, or overhead costs are added to the product.
T
40. Any remaining balance in the manufacturing overhead account (overapplied OH) can be disposed by closing the amount to cost of goods sold.
T
43. Advertising and office rent are considered period costs for a manufacturing enterprise.
T
44. The difference between overhead cost applied to work in process and actual overhead costs of a period is referred to as either under-applied or over-applied overhead.
T
45. Conversion costs are equal to direct labor plus manufacturing overhead.
T
46. When actual overhead costs incurred are larger than the amount of overhead costs applied to production, manufacturing overhead is underapplied.
T
54. Future costs and benefits that do not differ among alternatives are irrelevant to the decision-making process.
T
57. Favorable Variances increase operating profit, and unfavorable variances decrease operating profit
T
6. A contribution income statement distinguishes between fixed and variable expenses.
T
60. Sunk costs are always IRRELEVANT when choosing among alternatives.
T
