Accounting Final

The wyeth corporation produces 3 products, A,B,C from a single raw material input. Product A can be sold at the split off point for $40,000 , or it can be purchased further at a total cost of $15,000 and then sold for $58,000. Joint costs total $60,000 annually. Product A should be

processed further and then sold

The production department should generally be responsible for materials price variances that resulted fromm

rush orders arising from poor scheduling

The ATK Division of Picatinny Aresenal has had an annual contribution margin of $38,000 along with $76,000 in annual fixed costs. Of the fixed costs of the ATK division , $19,000 cannot be avoided. What would be the annual financial advantage (disadvantage) for Picatinny if the ATK division was closed down

$19,000

Which of the following costs are always irrelevant in decision making

sunk costs

Accepting a special order will improve overall net operating income if the revenue from the special order exceeds

the incremental costs associated with the order

A favorable labor rate variance indicates that

the standard rate exceeds the actual rate

A disadvantage of vertical integration is that by pooling demand for parts from a number of companies, a supplier may be able to enjoy economies of scale that result in higher quality and lower cost than if every company makes its own parts.

true

Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets

False

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period

False

Fixed costs are sunk costs

False

Future costs that do differ among the alternatives are not relevant in a decision

False

If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected

False

If demand is insufficient to keep everyone busy and workers are not laid off, a favorable labor effiency variance often will be a result

False

In general, the production manager is responsible for the materials price variance

False

The cash budget is the starting point in preparing the master budget

False

If a strategy is not working, it should become evident on the balanced scorecard when some of the predicted effects don't occur

True

If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable variable overhead efficiency variance will be a result unless managers build excessive inventories

True

If the actual level of activity differs from what was planned, it would be misleading to compare actual costs to the static, unchanged planning budget

True

In essence, a balanced scorecard lays out a theory of how the company can take concrete actions to attain its desired outcomes. The strategy should seem plausible, but it should be regarded as only a theory.

True

Material price variances are often isolated at the time materials are purchased, rather than when they are placed into productions, to facilitate earlier recognition of variances

True

Net operating income is income before interest and taxes

True

ROI and residual income are tools used to evaluate managerial performance in investment centers

True

The basic idea underlying responsibility accounting is that a manager should be help responsible for those items - and only those items - that the manager can actually control to a significant extent

True

The basic objective of responsibility accounting is to charge each manager with those costs and/or revenues over which he has control

True

The direct labor budget shows the direct labor hours required to satisfy the production budget

True

The labor efficiency variance is labeled favorable if the actual hours used is less than the standard hours allowed for the actual output

True

The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity

True

The manufacturing overhead budget lists all of the costs of production other than direct materials and direct labor

True

The use of ROI as a performance measure may lead managers to reject a project that would be favorable for the company as a whole

True

The variable costs of a product are relevant in a decision concerning whether to eliminate the product

True

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate

True

To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity

True

When the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected

True

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost

True

queue time is considered non-value added time

True

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

favorable

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

flexible budget

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:

generates the highest contribution margin per stamping machine hour

A joint product is:

one of several products produced from a common input

Which of the following may appear on a flexible budget performance sheet

All of the above

A change in sales has no effect on margin or turnover

False

A benefit from budgeting is that it forces managers to think about and plan for the future

True

A continuous or perpetual budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed

True

A cost that can be avoided by choosing one alternative over another is relevant for decision purposes

True

A cost that will be incurred regardless of which alternative is selected is not relevant when choosing between the alternatives

True

A manager would generally like to see a trend indicating a decrease in setup time

True

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service

True

A revenue variance is the difference between what the total sales revenue should be, given the actual level of activity of the period, and the actual total sales revenue

True

An advantage of using ROI to evaluate performance is that it encourages the manager to reduce the investment in operating assets as well as increase net operating income

True

An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed

True

Financial measures such as ROI and residual income as well as operating measures may be included on a balanced scorecard

True

Financial measures tend to be lag indicators that report on the results of past actions

True

Fixed costs should not be ignored when evaluating how well a manager has controlled costs

True

If a company contains a number of investment centers of differing sizes, ROI should be used rather than residual income to rank the financial performance of the divisions.

True

When using a flexible budget, a decrease in activity within the relevant range

decreases total costs