accounting exam #2

Which of the following is not one of the sections within a cash budget? a) the financing section b) the investing section c) the cash receipts section d) the cash disbursements section

b) the investing section

Which of the following does not describe a difference between activity-based costing (ABC) and traditional absorption costing? a) ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it. b) ABC may assign nonmanufacturing and manufacturing costs to products whereas traditional absorption costing does not assign nonmanufacturing costs to products. c) ABC may exclude some manufacturing costs from its product costs whereas traditional absorption costing includes all manufacturing costs in its product cost calculations. d) ABC uses numerous cost pools to allocate costs to products whereas traditional absorption costing usually uses fewer cost pools.

a) ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it.

Which of the following is an example of a unit-level activity? a) assembling products b) setting up machines c) advertising products d) heating a manufacturing facility

a) assembling products

A spending variance is calculated by comparing the: a) flexible budget to the actual results b) planning budget to the flexible budget c) planning budget to the actual results d) static budget to the actual results

a) flexible budget to the actual results

Which of the following statements is true? a) in absorption costing, variable manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as art of cost of goods sold on the income statement b) in absorption costing, variable manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as part of selling and administrative expenses on the income statement. c) in absorption costing, variable manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as sales revenue on the income statement. d) in absorption costing, variable manufacturing overhead costs are recorded as period expenses on the income statement as incurred.

a) in absorption costing, variable manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as part of cost of goods sold on the income statement.

Which of the following statements is false with respect to a budgeted income statement? a) its net income should equal the net cash flows from the cash budget b) its net income will impact the ending retained earning balance shown on the balance sheet c) its interest expense flows from the financing section of the cash budget d) its selling and administrative expenses may include depreciation expense

a) its net income should equal the net cash flow from the cash budget

When the units produced are less than the units sold, which of the following equations explains the difference between absorption costing and variable costing net operating income? a) number of units released from ending inventory × fixed manufacturing overhead cost per unit b) number of units deferred in ending inventory × fixed manufacturing overhead cost per unit c) number of units deferred in ending inventory × variable manufacturing overhead cost per unit d) number of units released from ending inventory × variable manufacturing overhead cost per unit

a) number of units released from ending inventory × fixed manufacturing overhead cost per unit

Relying exclusively in unit-level overhead allocation is most likely to: a) overcast high-volume products b) overcost low-volume products c) overcost all products d) undercost all products

a) overcost high-volume products

Which of the following statements is true? a) planning involves developing goals and preparing various budgets to achieve those goals. b) planning involves gathering feedback that enables organizations to make modifications as circumstances change. c) the definition of planning states that managers should be held responsible for those items—and only those items—that the manager can actually control. d) planning is usually done independent from the budgeting process

a) planning involves developing goals and preparing various budgets to achieve those goals

The standard direct labor cost per unit of finished goods is computed in which of the following ways? a) standard hours per unit of finished goods × standard rate per hour b) standard hours per unit of finished goods − standard rate per hour c) standard hours per unit of finished goods ÷ standard rate per hour d) standard hours per unit of finished goods × (standard rate per hour − actual rate per hour)

a) standard hours per unit of finished goods × standard rate per hour

Which of the followings statements is true? a) the activity variance for a fixed expense will equal zero. b) the activity variance for a fixed expense will usually be favorable. c) the activity variance for a fixed expense will usually be unfavorable. d) the activity variance for a fixed expense can be favorable or unfavorable depending on the actual level of activity.

a) the activity variance for a fixed expense will equal zero.

Which of the following statements is true? a) when the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement. b) when the units produced are greater than the units sold, absorption costing income will be less than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement. c) when the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some variable manufacturing overhead cost in ending inventory whereas variable costing expenses each period's variable manufacturing overhead on the income statement. d) when the units produced are greater than the units sold, absorption costing income will be less than variable costing income because absorption costing defers some variable manufacturing overhead cost in ending inventory whereas variable costing expenses each period's variable manufacturing overhead on the income statement.

a) when the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement.

Which of the following statements is true with respect to the labor spending variance? a) It encompasses the labor rate variance, but excludes the labor efficiency variance. b) It encompasses the labor rate and efficiency variances. c) It encompasses the labor efficiency variance, but excludes the labor rate variance. d) It is separate and independent from the labor rate and efficiency variances.

b) It encompasses the labor rate and efficiency variances.

Assume (1) the quantity of materials purchased equals the quantity used in production, (2) the materials spending variance is unfavorable, and (3) the materials quantity variance is favorable. Given these assumptions, which of the following statements is true? a) The materials price variance must be favorable. b) The materials price variance must be unfavorable. c) The materials price variance must be equal in amount to the materials quantity variance but unfavorable instead of favorable. d) The materials price variance could be favorable or possibly unfavorable depending on the standard quantity of material allowed for the actual level of output.

b) The materials price variance must be unfavorable.

Which of the following equations can be used to compute a labor rate variance (where AH = actual hours; SH = standard hours allowed; AR = actual rate; SR = standard rate)? a) [SH ÷ (AR − SR)] b) [AH × (AR − SR)] c) [AH ÷ (AR − SR)] d) [SH × (AR − SR)]

b) [AH × (AR − SR)]

Assume that a company's planned level of activity is 1,100 hours and its actual level of activity is 1,000 hours. Based on this information, the company's activity variances for its variable expenses will: a) all be zero b) all be favorable c) all be unfavorable d) be favorable or unfavorable depending on each expense's cost behavior pattern.

b) all be favorable

Which of the following equations is used to prepare a production budget a) budgeted unit sales − Desired units of ending finished goods inventory + Units of beginning finished goods inventory = Required production in units b) budgeted unit sales + Desired units of ending finished goods inventory − Units of beginning finished goods inventory = Required production in units c) budgeted unit sales + Desired units of beginning finished goods inventory − Units of ending finished goods inventory = Required production in units d) budgeted unit sales − Desired units of beginning finished goods inventory + Units of ending finished goods inventory = Required production in units

b) budgeted unit sales + Desired units of ending finished goods inventory - Units of beginning finished goods inventory = Required production in units

Which of the following equations is true? a) dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall segment margin ratio. b) dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall contribution margin (CM) ratio. c) dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall contribution margin (CM) per unit. d) dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall variable expense ratio.

b) dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall contribution margin (CM) ratio.

Assume that a company's planned level of activity is 1,000 hours and its actual level of activity is 1,100 hours. Based on this information, the company's activity variance for revenue will be: a) zero b) favorable c) unfavorable d) either favorable or unfavorable depending on the cost formula

b) favorable

Which of the following statements is true with respect to the materials price variance? a) it is computed using the actual quantity of materials used in production. b) it is computed using the actual quantity of materials purchased. c) it is computed using the standard quantity of materials used in production. d) it is computed using the standard quantity of materials purchased.

b) it is computed using the actual quantity of materials purchased.

An activity variance is calculated by comparing the: a) planning budget to the actual results b) planning budget to the flexible budget c) flexible budget to the actual results d) static budget to the actual results

b) planning budget to the flexible budget

Which of the following is an example of a batch-level activity? a) assembling products b) setting up machines c) advertising products d) heating a manufacturing facility

b) setting up machines

A standard cost card does not explicitly mention which of the following? a) standard direct materials cost per unit b) standard indirect materials cost per unit c) standard direct labor cost per unit d) standard variable manufacturing overhead cost per unit

b) standard indirect materials cost per unit

Activity-based costing (ABC) is costing method that provides managers with cost information for a) preparing financial reports for external parties b) strategic and other decisions that potentially affect capacity and therefore "fixed" as well as variable costs c) identifying relevant costs when choosing between alternatives d) identifying the net present value of future cash flows associated with investment opportunities

b) strategic and other decisions that potentially affect capacity and therefore "fixed" as well as variable costs

Which of the following statements is true? a) the activity variance for a variable expense will usually equal zero. b) the activity variance for a variable expense will be unfavorable if the actual level of activity is greater than the planned level of activity. c) the activity variance for a variable expense will be unfavorable if the actual level of activity is less than the planned level of activity. d) the activity variance for a variable expense can be favorable or unfavorable depending on whether the actual expense incurred is greater than or less than the planned expense.

b) the activity variance for a variable expense will be unfavorable if the actual level of activity is greater than the planned level of activity.

Which of the following statements is true? a) the activity variance for revenue will usually equal zero. b) the activity variance for revenue will be favorable if the actual level of activity is greater than the planned level of activity. c) the activity variance for revenue will be favorable if the actual level of activity is less than the planned level of activity. d) the activity variance for revenue can be favorable or unfavorable depending on whether the actual revenue earned is greater than or less than the planned revenue.

b) the activity variance for revenue will be favorable if the actual level of activity is greater than the planned level of activity.

Which of the following statements is true? a) the spending variance for a fixed expense will equal zero when the planned level of activity equals the actual level of activity. b) the spending variance for a fixed expense will be favorable if the amount of the expense contained in the flexible budget is greater than the actual amount of the expense c) the spending variance for a fixed expense will be favorable if the amount of the expense contained in the flexible budget is less than the actual amount of the expense. d) the spending variance for a fixed expense can be favorable or unfavorable depending on whether the actual expense is greater than or less than the planned expense.

b) the spending variance for a fixed expense will be favorable if the amount of the expense contained in the flexible budget is greater than the actual amount of the expense

Which of the following statements is true? a) traditional cost systems usually allocate too much nonmanufacturing costs to products whereas activity-based costing systems usually do not allocate enough nonmanufacturing costs to products. b) traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems. c) traditional cost systems usually undercost high volume products and overcost low volume products when compared to activity-based costing systems. d) traditional cost systems may use different allocation bases than activity-based costing systems, but ultimately both approaches result in the same amount of total cost being allocated to each product.

b) traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems.

Which of the following statements is false? a) variable costing treats direct materials as a product cost b) variable costing treats fixed manufacturing overhead as a product cost c) variable costing treats variable manufacturing overhead as a product cost d) variable costing treats direct labor as a product cost

b) variable costing treats fixed manufacturing overhead as a product cost

Which of the following statements is true? a) when the units produced are less than the units sold, absorption costing income will be greater than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement. b) when the units produced are less than the units sold, absorption costing income will be less than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement. c) when the units produced are less than the units sold, absorption costing income will be greater than variable costing income because absorption costing releases some variable manufacturing overhead cost from ending inventory whereas variable costing expenses each period's variable manufacturing overhead on the income statement. d) when the units produced are less than the units sold, absorption costing income will be less than variable costing income because absorption costing releases some variable manufacturing overhead cost from ending inventory whereas variable costing expenses each period's variable manufacturing overhead on the income statement.

b) when the units produced are less than the units sold, absorption costing income will be less than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement.

Which of the following statements is true for a manufacturing company that uses standard costing and allocates its manufacturing overhead to production based on direct labor-hours? a) If the company's labor spending variance is unfavorable and its actual hourly labor rate is less than the standard hourly rate, then its labor efficiency variance must be favorable. b) If the company's labor spending variance is unfavorable and its actual hourly labor rate is less than the standard hourly rate, then its standard quantity of labor hours allowed must be greater than actual labor-hours worked. c) If the company's labor spending variance is unfavorable and its actual hourly labor rate is less than the standard hourly rate, then its variable overhead efficiency variance must be unfavorable. d) If the company's labor spending variance is unfavorable and its actual hourly labor rate is less than the standard hourly rate, then its labor rate variance must be unfavorable.

c) If the company's labor spending variance is unfavorable and its actual hourly labor rate is less than the standard hourly rate, then its variable overhead efficiency variance must be unfavorable.

The flexible budget for direct materials is computed in which of the following ways? a) Actual quantity used (AQ) × standard price (SP) b) Actual quantity used (AQ) × actual price (AP) c) Standard quantity allowed (SQ) × standard price (SP) d) Standard quantity allowed (SQ) × actual price (AP)

c) Standard quantity allowed (SQ) × standard price (SP)

Which of the following equations can be used to compute a materials price variance (where AQ = actual quantity; SQ = standard quantity allowed; AP = actual price; SP = standard price)? a) [SQ ÷ (AP − SP)] b) [AQ ÷ (AP − SP)] c) [AQ × (AP − SP)] d) [SQ × (AP − SP)]

c) [AQ × (AP − SP)]

Which of the following statements is true? a) a batch-level activity cost will decrease as the number of units in the batch increases b) a bath-level activity cost will increase as the number of units in the batch increases c) a bath-level activity cost is unaffected by the number of units in the batch d) batch-level activity costs are often used in traditional absorption costing systems to allocate batch-level costs.

c) a batch-level activity cost is unaffected by the number of units in the batch

which of the following statements is true? a) a planning budget is prepared before the period begins and is valid for only the actual level of activity. b) a planning budget is prepared after the period ends and is valid for only the planned level of activity. c) a planning budget is prepared before the period begins and is valid for only the planned level of activity. d) a planning budget is prepared after the period ends and is valid for only the actual level of activity.

c) a planning budget is prepared before the period begins and is valid for only the planned level of activity.

Which of the following statements is false? a) absorption costing treats fixed administrative expense as a period cost b) absorption costing treats sales commissions as a period cost c) absorption costing treats fixed manufacturing overhead as a period cost d) absorption costing treats variable manufacturing overhead as a product cost

c) absorption costing treats fixed manufacturing overhead as a period cost

Which of the following is an example of a product-level activity? a) assembling products b) setting up machines c) advertising products d) heating a manufacturing facility

c) advertising products

Assume that a company's planned level of activity is 1,000 hours and its actual level of activity is 1,100 hours. Based on this information, the company's activity variances for its variable expenses will: a) all be zero b) all be favorable c) all be unfavorable d) be favorable or unfavorable depending on each expense's cost behavior pattern.

c) all be unfavorable

Which of the following is an example of a duration driver? a) number of machine-setups b) quantity of customer orders received c) direct labor-hours d) dollars spent on advertising

c) direct labor-hours

In absorption costing, a complete definition of unit product cost includes: a) direct materials, direct labor, and variable manufacturing overhead. b) direct materials, direct labor, variable manufacturing overhead, and variable selling and administrative expenses. c) direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead. d) direct materials and direct labor.

c) direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead

Which of the following statements is true? a) the activity variance for revenue will usually equal zero. b) the activity variance for revenue will be unfavorable if the actual level of activity is greater than the planned level of activity. c) the activity variance for revenue will be unfavorable if the actual level of activity is less than the planned level of activity. d) the activity variance for revenue can be favorable or unfavorable depending on whether the actual revenue earned is greater than or less than the planned revenue.

c) the activity variance for revenue will be unfavorable if the actual level of activity is less than the planned level of activity.

Which of the following estimates is not used in preparing a sales budget including a schedule of expected cash collections? a) the number of units sold b) the selling price per unit c) the percent of the net quarters unit sales in ending inventory d) the credit sales collection pattern

c) the percent of next quarters unit sales in ending inventory

Which of the following statements is true? a) when the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's variable manufacturing overhead on the income statement. b) when the units produced are greater than the units sold, absorption costing income will be less than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement. c) when the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement. d) when the units produced are greater than the units sold, absorption costing income will be less than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's variable manufacturing overhead on the income statement.

c) when the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement.

Which of the following statements is true with respect to the materials quantity variance? a) It is computed using the actual price. b) It is computed using the actual quantity of materials purchased. c) It is computed using the difference between the actual and standard prices. d) It is computed using the standard price.

d) It is computed using the standard price.

The flexible budget for variable manufacturing overhead is computed in which of the following ways? a) Actual hours used (AH) × standard rate (SR) b) Actual hours used (AH) × actual rate (AR) c) Standard hours allowed (SH) × actual rate (AR) d) Standard hours allowed (SH) × standard rate (SR

d) Standard hours allowed (SH) × standard rate (SR

The flexible budget for direct labor is computed in which of the following ways? a) Actual hours used (AH) × standard rate (SR) b) Actual hours used (AH) × actual rate (AR) c) Standard hours allowed (SH) × actual rate (AR) d) Standard hours allowed (SH) × standard rate (SR)

d) Standard hours allowed (SH) × standard rate (SR)

Which of the following equations can be used to compute a materials quantity variance (where AQ = actual quantity; SQ = standard quantity allowed; AP = actual price; SP = standard price)? a) [SP ÷ (AQ − SQ)] b) [AP ÷ (AQ − SQ)] c) [AP × (AQ − SQ)] d) [SP × (AQ − SQ)]

d) [SP × (AQ − SQ)]

Which of the following statements is true? a) a flexible budget is a comparison of actual revenues and costs at the actual level of activity to the actual revenues and costs incurred at the planned level of activity. b) a flexible budget is a comparison of actual revenues and costs to what they should have been given the planned level of activity. c) a flexible budget is an estimate of what revenues and costs should have been given the planned level of activity for the period. d) a flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.

d) a flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.

Which of the following equations is false with respect to the direct materials budget? a) units of raw materials to be purchased × unit cost of raw materials = cost of raw material purchases b) units of raw materials needed to meet production + desired units of ending raw materials inventory − units of beginning raw materials inventory = units of raw materials to be purchased c) required production in units of finished goods × units of raw materials needed per unit of finished goods = units of raw materials needed to meet production d) estimated sales in units of finished goods × units of raw materials needed per unit of finished goods = units of raw materials needed to meet production

d) estimated sales in unit of finished goods × units of raw materials needed per unit of finished goods = units of raw materials needed meet production

Which of the following is an example of an organization-sustaining activity? a) assembling products b) setting up machines c) advertising products d) heating a manufacturing facility

d) heating a manufacturing facility

The standard direct material cost per unit of finished goods is computed in which of the following ways? a) standard quantity per unit of direct material × standard price per unit of direct material b) standard quantity per unit of finished goods × standard price per unit of finished goods c) standard quantity per unit of direct material × standard price per unit of finished goods d) standard quantity per unit of finished goods × standard price per unit of direct material

d) standard quantity per unit of finished goods × standard price per unit of direct material

Which of the following statements is true? a) variable costing treats direct materials as a period cost b) variable costing treats direct labor as a period cost c) variable costing treats variable manufacturing overhead as a period cost d) variable costing treats fixed manufacturing overhead as a period cost

d) variable costing treats fixed manufacturing overhead as a period cost