Accounting Final

CH 11 Return on income

Net operating income - (average operating assets x minimum required rate of return) Disadvantage: cannot be used to compare the performance of divisions of different size.

CH 11 ROI

Net operating income / Average operating assets Margin x Turnover

CH 8. Budgets should...

Not be so rigid that if conditions change , adjustments in spending can be made

CH 9. A company budgets 10,000 units of sales based on a projected selling price of $13. The actual units sold were 15,000 at a price of $10. What is the flexible budget for sales?

$195,000. The flexible budget would be (# of units actually sold)*(projected selling price).

CH 12. Costs that can be eliminated in whole or in part if a particular business segment is discontinued are called: A) sunk costs B) opportunity costs. C) avoidable costs D) irrelevant costs.

C

CH 10 Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours. If the labor efficiency variance is favorable, the variable overhead efficiency variance will be: A) favorable. B) unfavorable. C) zero. D) either favorable or unfavorable

A

CH 10. An unfavorable materials quantity variance indicates that: A) actual usage of material exceeds the standard material allowed for output. B) standard material allowed for output exceeds the actual usage of material. C) actual material price exceeds standard price. D) standard material price exceeds actual price.

A

CH 11 Manufacturing cycle efficiency is an example of a Balanced Scorecard's measure of the: A) process perspective. B) customer perspective. C) learning and growth perspective. D) financial perspective.

A

CH 11. Some investment opportunities that should be accepted from the viewpoint of the entire company may be rejected by a manager who is evaluated on the basis of: A) return on investment. B) residual income. C) contribution margin. D) segment margin.

A

CH 12 In a sell or process further decision, consider the following costs: I. A variable production cost incurred prior to splitoff. II.A variable production cost incurred after split-off. III.An avoidable fixed production cost incurred after split-off. Which of the above costs is (are) not relevant in a decision regarding whether the product should be processed further? A) Only I B) Only III C) Only I and II D) Only I and III

A

CH 9. Which of the following information is needed to prepare a flexible budget? A) actual units sold B) actual variable cost C) actual selling price per unit D) actual fixed cost

A

CH 9. In a flexible budget ________. A) variable costs are calculated proportionately for the budgeted level of sales B) fixed costs are calculated proportionately for the actual level of sales C) fixed costs are kept at the same level of static budget D) variable costs are kept at the same level of static budget

A.

CH 9. Which of the following is true of flexible budget? A) It calculates total variable cost by multiplying actual units by budgeted variable cost per unit. B) It calculates total fixed cost by multiplying actual units by budgeted fixed cost per unit. C) It calculates revenues by multiplying budgeted units by actual selling price per unit. D) It calculates contribution margin by multiplying budgeted units by actual contribution margin per unit

A.

Actual results vs flexible budget vs planning budget

Actual results = AQ x AP Price variance Flexible budget = AQ x SP Quantity variance Planning budget = SQ x SP

CH 10 Dori Castings is a job order shop that uses a standard cost system. Manufacturing overhead costs are applied on the basis of standard direct labor-hours. The amount of fixed manufacturing overhead that Dori would apply to finished production would be: A) the actual direct labor-hours times the standard fixed manufacturing overhead rate per direct labor-hour. B) the standard hours allowed for the actual units of finished output times the standard fixed manufacturing overhead rate per direct labor-hour. C) the standard units of output for the actual direct laborhours worked times the standard fixed manufacturing overhead rate per unit of output. D) the actual fixed manufacturing overhead cost per direct labor-hour times the standard hours allowed.

B

CH 10 If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then: A) the actual variable overhead rate exceeded the standard rate. B) the standard variable overhead rate exceeded the actual rate. C) the actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output. D) the standard direct labor-hours allowed for the actual output exceeded the actual hours

B

CH 10 The fixed manufacturing overhead budget variance equals: A) Actual fixed manufacturing overhead cost − Applied fixed manufacturing overhead cost. B) Actual fixed manufacturing overhead cost − Budgeted fixed manufacturing overhead cost. C) Budgeted fixed manufacturing overhead cost −Applied fixed manufacturing overhead cost. D) Actual fixed manufacturing overhead cost − (Actual hours × Standard fixed manufacturing overhead rate)

B

CH 10 The general model for calculating a quantity variance is: A) Actual quantity of inputs used × (Actual price − Standard price). B) Standard price × (Actual quantity of inputs used − Standard quantity allowed for output). C) (Actual quantity of inputs used × Actual price) − (Standard quantity allowed for output × Standard price). D) Actual price × (Actual quantity of inputs used − Standard quantity allowed for output)

B

CH 10 The production department should generally be responsible for materials price variances that resulted from: A) purchases made in uneconomical lot-sizes. B) rush orders arising from poor scheduling. C) purchase of the wrong grade of materials. D) changes in the market prices of raw materials.

B

CH 11 The Balanced Scorecard is said to be "balanced" because it measures: A) short-term and long-term objectives. B) financial and nonfinancial objectives. C) internal and external objectives. D) All of the above are correct.

B

CH 11. All other things equal, which of the following would increase a division's residual income? A) Increase in expenses. B) Decrease in average operating assets. C) Increase in minimum required return. D) Decrease in net operating income.

B

CH 12 Holding all other things constant, if the expected unit sales increase, then the markup under absorption costing will: A) increase. B) decrease. C) remain the same. D) The effect cannot be determined

B

CH 12. Accepting a special order will improve overall net operating income if the revenue from the special order exceeds: A) the contribution margin on the order. B) the incremental costs associated with the order. C) the variable costs associated with the order. D) the sunk costs associated with the order

B

CH 12. Product X-547 is one of the joint products in a joint manufacturing process. Management is considering whether to sell X-547 at the split-off point or to process X-547 further into Xylene. The following data have been gathered: I. Selling price of X-547 II. Variable cost of processing X-547 into Xylene. III. The avoidable fixed costs of processing X-547 into Xylene. IV.The selling price of Xylene. V. The joint cost of the process from which X-547 is produced. Which of the above items are relevant in a decision of whether to sell the X-547 as is or process it further into Xylene? A) I, II, and IV. B) I, II, III, and IV. C) II, III, and V. D) I, II, III, and V.

B

CH 12. Which of the following costs are always irrelevant in decision making? A) avoidable costs B) sunk costs C) opportunity costs D) fixed costs

B

CH 8. To prepare the direct materials labor costs budget, which of the following budget must be prepared first? A) direct material purchase budget B) production budget C) direct material usage budget D) budgeted manufacturing overhead

B

CH 7 Which of the following statements is true of ABC systems? A) ABC system will always result in higher product costs. B) ABC system employs multiple activity-cost drivers. C) ABC system is least suited for service companies. D) ABC system is simpler compared to traditional systems.

B.

CH 7. Which of the following statements about ABC is not true? A) A byproduct of ABC implementation can improve the efficiency of operations B) ABC should be implemented solely by the accountants as they are the guardians of the accounting information system C) ABC may empower employees to also implement cost saving projects D) Although implementation of ABC can be a refinement of a cost system, it has its limitations

B. It is important for the whole company to focus on ABC

CH 10. Which of the following best defines standard costing? A) It is the same as actual costing but done in real time. B) It is a system that traces direct cost to output by multiplying actual process or rates by actual quantities of inputs + allocates overhead by on the basis of actual quantities of the allocation base used. C) It is a system that traces direct costs to output produced by multiplying the standard prices or rates by the standard quantities of inputs allowed for the actual output produced. D) It is a system that allocates overhead costs on the basis of standard overhead cost rates times the actual quantities of the allocation based used

C

CH 11 The ________ perspective of the Balanced Scorecard asks, "How is success measured by our shareholders?" A) learning and growth B) customer C) financial D) shareholder

C

CH 11. A segment of a business responsible for both revenues and expenses would be called: A) a cost center. B) an investment center. C) a profit center. D) residual income.

C

CH 11. Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same? A) A reduction in expenses. B) An increase in net operating income. C) An increase in operating assets. D) An increase in sales.

C

CH 11. Which of the following would be an argument for using the gross cost of plant and equipment as part of operating assets in return on investment computations? A) It is consistent with the computation of net operating income, which includes depreciation as an operating expense. B) It is consistent with the balance sheet presentation of plant and equipment. C) It eliminates the age of equipment as a factor in ROI computations. D) It discourages the replacement of old, worn-out equipment because of the dramatic, adverse effect on ROI.

C

CH 11. Which of the following would be considered an operating asset in return on investment computations? A) Land being held for plant expansion. B) Treasury stock. C) Accounts receivable. D) Common stock.

C

CH 8. Which of the following information is required by a company's manager while preparing a manufacturing overhead costs budget? A) estimated incentives to be paid to marketing personnel B) estimated expense for office supplies C) estimated expense for maintenance of factory building D) rent expense for lease of office building

C

CH7. Organization sustaining activities

Carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made. Ex. heating a factory and cleaning exec offices

CH 10 A favorable labor rate variance indicates that A) actual hours exceed standard hours. B) standard hours exceed actual hours. C) the actual rate exceeds the standard rate. D) the standard rate exceeds the actual rate.

D

CH 11 ________ translate(s) an organization's mission, vision, and strategy into a comprehensive set of performance measures that provide the framework for implementing its strategy. A) Critical success factors B) The value proposition C) Objectives D) The Balanced Scorecard

D

CH 11. Which of the following would not be included in operating assets in return on investment calculations? A) Cash. B) Accounts Receivable. C) Equipment D) Factory building rented to (and occupied by) another company.

D

CH 12. A joint product is: A) any product which consists of several parts. B) any product produced by a company with more than one product line. C) any product involved in a make or buy decision. D) one of several products produced from a common input.

D

CH 12. Kinsi Corporation manufactures five different products. All five of these products must pass through a stamping machine in its fabrication department. This machine is Kinsi's constrained resource. Kinsi would make the most profit if it produces the product that: A) uses the least amount of stamping time. B) generates the highest contribution margin per unit. C) generates the highest contribution margin ratio. D) generates the highest contribution margin per stamping machine hour.

D

CH 12. The opportunity cost of making a component part in a factory with excess capacity for which there is no alternative use is: A) the variable manufacturing cost of the component. B) the total manufacturing cost of the component. C) the fixed manufacturing cost of the component. D) zero.

D

CH 12. United Industries manufactures a number of products at its highly automated factory. The products are very popular, with demand far exceeding the factory's capacity. To maximize profit, management should rank products based on their: A) gross margin B) contribution margin C) selling price D) contribution

D

CH 7 Which of the following would be classified as a productlevel activity? A) Setting up a machine for a batch of a standard product. B) Operating a cafeteria for employees. C) Running the Human Resource department. D) Advertising a product.

D

CH 8. Which of the following is referred to as the bottom-up aspect of the budgeting process? A) lower-level managers setting their individual targets that aggregate to be the company-wide target B) senior managers consulting middle- and lower-level managers to investigate any deviations from the budget C) lower-level managers implementing the budgets with senior managers monitoring progress and investigating deviations D) lower-level managers providing inputs to the budgeting process based on their specialize

D

CH 9. Which of the following may appear on a flexible budget performance report? A) An unfavorable activity variance. B) A favorable revenue variance. C) An unfavorable spending variance. D) All of the above may appear on a flexible budget performance report.

D all of the above

CH 7 ABC systems create...

Homogenous activity-related cost pools

CH 7. Batch level activities

Performed each time a batch is handled or processed, regardless of how many units are in the batch ex. Setting up equipment and shipping customer orders

CH 7. Product level activities

Relate to specific products and must be carried out regardless of how man batches or units there are. Ex. designing or advertising a product

CH 8. In which order are the following developed? First to last: A = Production budget B = Direct materials costs budget C = Budgeted income statement D = Revenues budget

Revenues budget 1st Production budget 2nd Direct materials cost budget 3rd Budgeting income statement 4th

CH 11. Turnover =

Sales/ average operating assets

CH 8. A budget is an end product of negotiations among senior and subordinate managers becasuse

Senior managers want very challenging targets while subordinates may want targets that are relatively easier to achieve.

CH 8. The preparation of all the budgets in the master budget forces managers to think about their business operations and to formulate plans, while ...

Setting expectations against which actual results can be compared

CH 9. In a flexible budget, what will happen to fixed costs as the activity level rises

The fixed cost per unit will decrease

CH 7. 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...

The total units of activity for the activity cost pool.

CH 7. When switching from traditional costing system to an ABC system that contains some batch-level costs:

The unit product costs of high volume products typically decrease and the unit product costs of low volume products typically increase

CH 7. An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because...

Under activity-based costing some manufacturing costs will not be assigned to products.

CH 8. To reduce budgetary slack management may

Use external benchmark performance measures

CH 9. A budget that is based on the actual activity of a period is known as

a flexible budget

CH 7. The fundamental cost objects of ABC are...

activities

CH 9. a favorable variance indicates that...

actual revenues exceed budgeted revenues

CH 9. Flexible budget vs Static budget

flexible budget takes level of activity into account by including "Q"

CH 10 Most of the decisions determining the level of fixed overhead costs to be incurred will be made...

at the start of the budget period

CH 8. Managers who feel that top management does not believe in the budget are most likely to...

be less engaged participants in the budgeting process and less committed to achieving budgeting targets

CH 8. The number of units in the sales budget and the production budget may differ because of a change in

ending finished goods inventory levels

CH7. Activity based costing system differs from traditional costing systems in the treatment of...

indirect costs

CH 9. A flexible budget...

is based on the budgeted level of output

CH 11. Margin =

net operating income / sales

CH 7. Unit level activities

performed each time a unit produced. Ex. providing power to run processing equipment

CH 7. Customer- level activities

relate to specific customers and are not tied to any specific product. Ex. sales calls and catalog mail

CH 9. An unfavorable variance indicates that...

the actual units sold are less than the budgeted units

CH 7. ABC and traditional systems are quite similar in...

the treatment of DIRECT costs. They treat indirect costs differently.