Accounting Final
Variable costing is more appropriate than absorption costing when the decision ________. A) relates to production planning within the capacity limits in the short run B) involves reducing fixed costs that are controllable by the upper management C) does not involve analysis of profitability based on sales mix D) does not involve analysis of contribution margin
a. relates to production planning within the capacity limits in the short run
Standard Overhead Rate
budgeted overhead at predicted activity level / standard allocation base at predicted activity level
COGS budget
budgeted sales unit x product cost per unit
units to purchase
budgeted sales units + desired ending merchandise inventory units - beginning merchandise inventory
A disadvantage of static budgets (or fixed budgets) is that they: a) are dependent on previous year's actual results b) cannot be used by service companies c) do not show possible changes in underlying activity levels d) show the expected results of a responsibility center for several levels of activity
c. do not show possible changes
Principal components of a master budget include which of the following? a) Production budget b) Sales budget c) Capital expenditures budget d)All of the above
d. all of the above
target cost
expected selling price - target profit
actual cost is less than standard cost
favorable
residual income
income - target income
return on investment
income / average assets
Income under absorption costing
income under variable costing+fixed overhead+fixed overhead in ending inventory - fixed overhead in beginning inventory
cash paid for interest
interest rate % x beginning loan balance
A company is planning to replace an old machine with a new one. Which of the following is a sunk cost? A) cost of the new machine B) sales price of the old machine C) future maintenance costs of the old machine D) original cost of the old machine
original cost of the old machine
John Smith, one of the managers of a multi-national company, is responsible for generating revenues and controlling costs in order to increase the operating income of his division. However, he is not concerned about investment-related decisions. Brad is most likely to be the manager of a(n) ________. A) cost center B) investment center C) profit center D) revenue center
profit center
Days' Sales in Receivables
receivable net/ net sales x 365
The budget that needs to be completed first when preparing the master budget is the: a) Production Budget b)Sales Budget c)Cash Budget d)Capital Expenditures Budget
sales budget
product cost per unit under variable costing
sum of direct materials. direct labor. variable overhead.
Total Budgeted Costs
total fixed costs + (total variable cost per unit x units of activity)
if actual cost is more than standard cost
unfavorable
cost of direct labor
units to produce x direct labor hours required per unit x direct labor cost per hour
Materials to be purchased
units to produce x materials required per unit +desired ending materials inventory-beginning materials inventory
selling price per unit
variable cost per unit + markup per unit
markup per unit formula
variable cost per unit x markup percentage
What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost? a. Absorption costing b. Differential costing c. Standard costing d. Variable costing
variable costing
fixed overhead is in period expenses
variable costing
product cost per unit absorption costing
variable costs + (fixed overhead/fixed selling and administrative)
controllable variance
Actual total overhead incurred - budgeted total overhead at actual units produced
What does a favorable direct materials cost variance (or price variance) indicate? A) The actual quantity of direct materials used was less than the standard quantity. B) The actual cost of direct materials purchased was less than the standard cost of direct materials purchased. C) The actual cost of direct materials purchased was greater than the standard cost of direct materials purchased. D) The actual quantity of direct materials used was greater than the standard quantity.
B the actual cost of direct materials was less than the standard quantity
The target cost approach assumes that: a) markup is added to total cost b) the selling price is set by the marketplace c) markup is added to variable cost d) markup is added to product cost
B. the selling price is set by the marketplace
Contribution Margin Ratio
Contribution Margin / Sales
Which of the following is a disadvantage of decentralization? A) It results in increased customer response time. B) It allows only the top management to make decisions. C) It does not motivate employees because the decision-making powers are not delegated. D) It results in problems with achieving goal congruence.
D it results in problems with achieving goal congruence
Which of the following four perspectives of the balanced scorecard enables management to answer the question, "How can we continue to improve and create value?" A) financial B) customer C) internal business D) learning and growth
D. learning and growth
32. The operating budgets of a company include: a) the cash budget b) the capital expenditures budget c) the financing budget d) the production budget
D. the production budget
units to produce =
budgeted ending inventory units+ budgeted sales units - beginning finished goods inventory units
Volume Variance
budgeted overhead - standard overhead applied
Overhead Variance
Actual Overhead - Standard Applied Overhead
standard overhead applied
Actual Production X Standard amount of allocation base X Standard overhead rate
Days Payable Outstanding
(Accounts Payable / COGS) x 365
Days' Sales in Inventory
(Inventory/COGS) x 365
ROI
(income/sales) x (sales/average assets)
Markup Percentage
(target profit + total fixed costs ) / total variable cost
Which of the following is an advantage of decentralization? A) Managers' motivation and retention can be increased by empowering segment managers to make decisions. B) Certain costs of activities may be duplicated. C) Customer response time is generally decreased. D) Top management can concentrate on decisions that relate to day-to-day operations of segments.
A managers motivation and retention can be increased by empowering segment managers to make decisions
fixed overhead is in product cost
absorption costing
when production exceeds sales, which of the following is true
absorption price is greater than the use of variable costing
price variance
actual price - standard price x actual quantity
Quantity Variance
actual quantity - standard quantity x standard price
The sales volume variance is the difference between the ________.A) actual results and the expected results in the flexible budget for the actual units sold B) expected results in the flexible budget for the actual units sold and the static budget C) static budget and actual amounts due to differences in sales price D) flexible budget and static budget due to differences in fixed costs
b. expected results in the flexible budget for the actual units sold and the static budget
budgeted direct labor cost
budgeted direct labor hours x direct labor cost per hour
A company is analyzing its month-end results by comparing it to both static and flexible budgets. During the previous month, the actual fixed costs were lower than the expected fixed costs as per the static budget. This difference results in a(n) ________. A) unfavorable flexible budget variance for fixed costs B) favorable sales volume variance for fixed costs C) favorable flexible budget variance for fixed costs D) unfavorable sales volume variance for fixed costs
c. favorable flexible budget variance for fixed costs
Which of the following is considered a period cost under variable costing but not under absorption costing? A) fixed selling and administrative costs B) variable manufacturing costs C) fixed manufacturing overhead D) variable selling and administrative costs
c. fixed manufacturing overhead
Which of the following statements is true of absorption and variable costing methods? A) Both costing methods consider selling and administrative costs to be period costs. B) Variable costing considers variable selling and administrative costs to be product costs. C) Absorption costing considers fixed manufacturing overhead to be period costs. D) Both costing methods consider fixed manufacturing overhead to be product costs.
d. both costing methods consider fixed manufacturing overhead to be product costs
Cash Conversion Cycle
days sales in AR + days in inventory - days payable outstanding
departmental income
depart sales - depart expenses - allocated indirect depart expenses
Unit product cost under absorption costing
direct materials + direct labor + variable manufacturing overhead + fixed manufacturing overhead