ACCT 317 - FINAL EXAM

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Burton Company uses a normal costing system. The company uses direct labor-hours as the cost-allocation base. The following info is available for the company: Budgeted manuf. OH costs $2,000 Budgeted labor hrs 800 Actual manuf OH costs $1,500 Actual labor hours 500 Calculate the allocated direct manuf. OH costs of Job 56 if 10 direct-labor hours were used for this job.

$2,000 / 800 hours = $2.5 per hour 10 hrs x $2.5 = $25.00

Gamers Company develops gaming software. Software programmers are paid $32 per hour for straight-time, and time and a half for overtime. Last week, Mary Johnson, a programmer worked 47 hours including 7 overtime hours. For 3 of the 47 hours, she was unproductive because of technical delays. Calculate the total earrings of Mary Johnson for the week.

$32 x 44 hours = $1,408 $32 x 3 hours = $96 $16 x 7 hours = $112 Total = $1,616

The manager at Jerome Mobility, Inc. reported the following info for 2017: Actual Results Units sold 1,700 units Revenues $221,000 Variable costs Direct materials 70,000 Direct manuf. labor 36,500 V manuf. OH 16,000 Total variable costs 122,500 Contribution margin 98,500 Fixed costs 51,000 Operating income $47,500 Static Budget Units sold 1,500 units Revenues $195,000 Variable costs Direct materials 60,000 Direct manuf. labor 31,500 V manuf. OH 13,500 Total variable costs 105,000 Contribution margin 90,000 Fixed costs 50,000 Operating income $40,000 What is the static-budget variance for operating income for Jerome Mobility Inc. for 2017?

$7,500 F The static-budget variance for operating income for Jerome Mobility Inc for 2017 is $7,500 F. Static budgeted variance for operating income = Actual result - Static budget amount = $47,500 - $40,000 = $7,500 F The static budget, or master budget, is based on the level of output planned at the start of the budget period. The master budget is called the static budget because the budget for the period is developed around a single (static) planned output level. The static-budget variance is the difference between the actuals result and the corresponding budgeted amount in the static budget. A favorable variance - denoted F - has the effect, when considered in isolation, of increasing operating income relative to the budgeted amount. For revenue items, F means actual revenues exceeded budgeted revenues. For cost items, F means actual costs are less than budgeted costs. An unfavorable variance -denoted U - has the effect, when viewed in isolation, of decreasing operating income relative to the budgeted amount. Unfavorable variances are also called adverse variances in some countries, such as the UK.

Baltimore Automotive Corp. provided the following info for the year: Budgeted prod. for the year 15,000 units Est. machine hrs req'd 18,000 hrs Est. labor hrs red'q 5,000 labor hrs Variable OH costs $150,000 If Baltimore Automative Corp believes that machine-hours is the only cost driver of variable overhead, what will be the budgeted variable overhead cost rate per unit? a. $30.00 b. $10.00 c. $8.00 d. $50.00

18,000 hours / 15,000 units =1.2 hours per unit $150,000 / 18,000 hours = $8.33 per hour 1.2 hours x $8.33 per hour =$9.99 round up to $10

The following info relates to Green Force Inc for 2017: DM used $30,000 Direct manuf. labor 18,000 Tot manuf. costs incurred 75,000 End FG inv 7,000 Beg FG inv 3,000 End WIP inv 2,000 Beg WIP inv 6,000 What is cost of goods sold in 2017?

2,000 beg WIP + 75,000 tot manuf costs incurred - 6,000 end WIP = 71,000 cost of goods manuf. 3,000 beg FG + 71,000 cost of goods manuf. - 7,000 end FG = 75,000 COGS

Rachel Apparels had budgeted fixed overhead of $300,000 for budgeted production of 1,000 units for the year. During the year it produced 1,100 units and the fixed cost were as originally budgeted. Which of the following is true? a. Rachel Apparels will have a favorable production-volume variance of $27,273 b. Rachel Apparels will have an unfavorable production-volume variance of $30,000 c. Rachel Apparels will have a favorable production-volume variance of $30,000 d. Rachel Apparels will have an unfavorable production-volume variance of $26,273

300,000 / 1,000 = 300 300 x 1,100 = 330,000 Budgeted fixed overhead 300,000 - 330,000 = 30,000 F

The following information relates to Ridley Company for 2017: DM used $28,000 Direct manuf. labor 17,000 Tot manuf costs incurred 59,000 End finished goods inv 4,000 Beg finished goods inv 9,000 End WIP inv 3,000 Beg WIP 5,000 What is cost of goods sold for 2017?

COGS for 2017 is $66,000 Step 1: Cost of goods manuf. = 5,000 beg WIP + 59,000 tot manuf costs incurred - 3,000 end WIP = $61,000 cost of goods manuf. Step 2: Cost of goods sold 9,000 beg finished goods inv + 61,000 cost of goods manuf. - 4,000 end finished goods inv = 66,000 [Manuf. OH costs incurred = Tot. manuf costs incurred - DM used - Direct manuf labor] [59,000 - 28,000 - 17,000 = 14,000]

The following info relates to Nickel Company for 2017: DM used $50,000 Direct manuf labor $21,000 Tot. manuf costs incurred 83,000 Cost of goods manuf. 110,000 Calculate the manufacturing overhead costs incurred during 2017.

Manuf OH costs = Tot manuf costs incurred - DM used - Direct manuf labor 83,000 - 50,000 - 21,000 = 12,000

The manager at Jerome Mobility, Inc. reported the following info for 2017: Actual Results Units sold 1,500 units Revenues $221,000 Variable costs Direct materials 50,000 Direct manuf. labor 36,500 V manuf. OH 16,000 Total variable costs 102,500 Contribution margin 118,500 Fixed costs 75,000 Operating income $43,500 Static Budget Units sold 1,800 units Revenues $250,000 Variable costs Direct materials 55,000 Direct manuf. labor 41,500 V manuf. OH 18,500 Total variable costs 115,000 Contribution margin 135,000 Fixed costs 75,000 Operating income $60,000 What is the static-budget variance for operating income for Jerome Mobility Inc. for 2017?

Static budget variance Static operating income - Actual operating income = 60,000 - 43,500 =16,500 U

Ralph Electronics had the following budgeted cost per unit of each category: Actual Results Units sold 15,000 Revenues $3,975,000 Variable costs Direct materials 1,000,000 D manuf. labor 1,500,000 V manuf. OH 250,000 Tot variable costs 2,750,000 Contribution margin 1,225,000 Fixed costs 450,000 Operating income $775,000 Flexible Budget Units sold 15,000 Revenues $3,600,000 Variable costs Direct materials 900,000 D manuf. labor 1,275,000 V manuf. OH 225,000 Total variable costs 2,400,000 Contribution margin 1,200,000 Fixed costs 1,000,000 Operating income $200,000 What is the flexible-budget variance for operating income for Ralph Electronics for the year ?

The flexible-budget variance for operating income for Ralph Electronics for the year is $575,000 F Flexible-budget variance = Actual result - Flexible-budget amount $775,000 - $200,000 = $575,000 F

Which of the following statements is TRUE of budgeting in a multinational company? a. The manager at a multinational company plans budgets with stretch targets to evaluate regional managers' performance b. The manager at a multinational company can ignore the political, legal, and economic environment of a foreign country when planning, preparing, and implementing budgets c. The manager at a multinational company may enhance exchange-rate volatility by implementing forward, future, and option contracts d. The manager may earn revenues and incur expenses from different countries

The manager may earn revenues and incur expenses from different countries is TRUE of budgeting in multinational companies. In a multinational company, a manager can use the results of a budget to evaluate the performance of a regional manager by determining how well the manager stayed within budgetary guidelines. The manager at a multinational company may use sophisticated techniques such as forward, future, and option contracts to minimize the risk exposure of foreign currency fluctuations instead of exchange-rate volatility. The manager at a multinational company should NOT ignore the political, legal, and economic environment of a foreign country when planning, preparing, and implementing budgets Budgeting is a valuable tool for multinational companies but is challenging because of the uncertainties posed by operating in multiple countries. Multinational companies need to budget for foreign exchange rates and consider the political, legal, and economic environments of the different countries in which they operate. In times of high uncertainty, senior managers may evaluate performance more subjectively, based on how well subordinate managers have managed in the constantly changing and volatile environments.

Worldnet Inc. is a software company focused on developing statistical apps. Developers are paid $36 per hour for straight-time, and time and a half for overtime. Last week, John Smith, a developer, worked 45 hours including 5 overtime hours. For 2 of the 45 hours, he was unproductive because of technical delays. Calculate the total earnings of John Smith for the week.

The total earnings of John Smith for the week was $1,710 Direct development labor: 43 hours x $36 per hour $1,548 Idle time: 2 hours x $36 per hour 72 Overtime premium: 5 hours x $18 per hour 90

The manager provided the following info: Direct manuf. labor hrs 1,200 hours Actual units produced .12 hour/unit Budgeted direct manuf. labor hrs 12,000 units Budgeted direct manuf. labor rate $25 per hour Actual direct manuf. labor rate $24 per hour Compute the direct manuf. labor efficiency variance a. $5,760 U b. $6,000 U c. $5,760 F d. $6,000 F

[1,200 - (.12 X 12,000)] X 25 =6,000 F

A company is deciding whether to continue making a product or to buy the product from an outside vendor instead. (Assume that if the decision is to buy the product from an outside vendor, the plant would remain idle.) Which of the following costs irrelevant to the company's decision? a. Plant lease costs paid under an existing lease contract b. Direct materials costs c. Variable production costs d. Indirect manufacturing costs

Budgeted annual indirect costs / Budgeted annual quantity of the cost allocation base is the formula to compute the ___________________ a. Budgeted indirect cost rate b. Actual manufacturing overhead rate c. Underallocated indirect costs d. Actual indirect cost rate

Improved pricing decisions is least likely a benefit of ABC systems to managers in __________________________. a. Public service institutions such as the U.S. Portal Service b. Manufacturing companies such as Ford Motor Company c. Service companies such as KPMG d. Merchandising companies such as Nordstrom

The following information relates to Boron Holdings: Beg inv of DM (1/1/17) $20,000 End inv of DM (12/31/17) $17,000 Purchases of DM in 2017 $83,000 What is the direct materials used by Boron in 2017? a. $86,000 b. $80,000 c. $66,000 d. $103,000

The practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve is _______________________ a. budgetary slack b. Kaizen budgeting c. variances d. stretch target

What transaction does the following journal entry represent? WIP Control 50,000 Manuf OH Alloc. 50,000 a. The application of $50,000 of manuf. OH b. The use of $50,000 of indirect materials c. The write-off of $50,000 of over-applied overhead to WIP d. The use of $50,000 of indirect labor

Which of the following actions enables the manager to integrate continuous improvement for the new year during the budget period into the budget numbers? a. Kaizen budgeting b. Budgetary slack c. Variances d. Stretch targets

Which of the following budgets allows managers to update info to accommodate changes in cost and revenue by adding a month, quarter, or year after the end of a period? a. The rolling budget b. The cash budget c. The operating budget d. The financial budget

Which of the following is FALSE regarding the downward demand spiral? a. It results in progressively higher per unit variable costs being allocated to products b. It is typically found when a company uses master-budget capacity utilization as a denominator level c. It is not usually seen when practical capacity is used as a denominator level d. It occurs when competitors prices are not met, causing a drop in demand, and in turn causing a higher per unit cost

Which of the following is NOT one of the three guidelines for refining costing systems? a. Identify fixed and variable costs b. Increase direct-cost tracing c. Create homogenous indirect-cost pools d. Identify cost-allocation bases that have cause-and-effect relationships

Which of the following is NOT true? a. The term tracing is used to describe the assignment of both direct and indirect costs to a particular cost object b. The term cost tracing is used to describe the assignment of direct costs to a number of particular cost object c. The term cost allocation is used to describe the assignment of indirect costs to a particular cost object d. The term cost assignment is a general term that encompasses both (1) tracing direct objects to a cost object and (2) allocating indirect costs to a cost object

Which of the following is TRUE of recording plant depreciation cost? a. Manufacturing OH control account is debited for the amount of depreciation on plant b. Cash control account is credited for the amount of depreciation on plant c. Accumulated depreciation control account is debited for the amount of depreciation on plant d. Materials control account is debited for the amount of depreciation plant

Which of the following is a numerator reason for using longer periods to calculate indirect cost rates? a. The shorter the period, the greater is the influence of seasonal patterns on the amount of costs b. Quantity of the cost-allocation base changes in proportion to the change in the production level c. Longer periods help to avoid spreading monthly fixed indirect costs over fluctuating levels of monthly output and fluctuating quantities of the cost-allocation base d. Pooling all indirect costs together over the course of a full year and calculating a single amount of indirect-cost rate helps smooth some of the erratic bumps in costs associated with shorter periods

Which of the following is one of the three guidelines for refining costing systems? a. Identify cost-allocation bases that have cause-and-effect relationships b. Create heterogenous indirect-cost pools c. Identify fixed and variable costs d. Decrease direct-cost tracing

Which of the following journal entries is made to write-off of the variance accounts to the cost of goods sold? Assume both variable overhead spending variance and variable overhead efficiency variance are favorable a. V-OH spending variance V-OH efficiency variance COGS b. COGS V-OH efficiency variance c. COGS V-OH spending variance d. COGS V-OH spending variance V-OH efficiency variance

Which of the following statement is NOT true about period costs for a manufacturing-sector company? a. Direct materials costs are period costs b. Utilities costs for corporate headquarters are period costs c. Marketing costs are period costs d. Distribution costs are period costs

Which of the following statements if FALSE in relation to fixed overhead cost? a. There is an efficiency variance for fixed overhead costs b. Fixed overhead costs unlike variable costs are unaffected by changes in the output levels within the relevant range c. The flexible-budget amount for a fixed-cost item is the same as the amount included in the static budget prepared at the start of the period d. A company can be efficient or inefficient in its use of fixed-overhead-cost resources

Which of the following statements is true of activity-based costing? a. ABC systems focus on individual activities as the fundamental cost objects b. ABC systems classify costs into only unit-level costs and batch-level costs c. ABC systems do not facilitate variance analysis d. ABC systems cannot be used profitability by companies having batch-level

____________________ is the difference between a flexible-budget amount and the corresponding static-budget amount a. The sales-volume variance b. The flexible-budget variance c. The efficiency variance d. The price variance

The manager reported the following info: Budgeted total direct-labor costs $14,000,000 Budgeted total indirect-labor costs $8,000,000 Budgeted total direct-labor hours 200,000 Compute the budgeted direct-labor cost rate per direct-labor hour. a. $70 b. $110 c. $30 d. $40

a. $14,000,000 / 200,00 direct-labor hours = $70 per direct-labor hour

The following info is available for Tunic Pipes for the year: Budgeted sales during the year 5,000 units Actual sales during the year 4,500 units Budgeted machine hours required for the year 10,000 hours Actual machine-hours during the year 9,000 hours Budgeted variable overhead costs $5,000,000 Actual variable overhead costs $4,750,000 What is the variable overhead flexible-budget variance for the year? Assume machine-hours as the only cost-allocation base. a. $250,000 U b. $250,000 F c. $500,000 U d. $500,000 F

a. $5,000,000 / 10,000 hours= 500 units 500 units x 9,000 hours = 4,500,000 budgeted variable overhead cost Actual 4,750,000 Budgeted - 4,500,000 = 250,000 U

The following budgeted info relates to Green Power Inc.: Cost of goods manuf. $3,000 Cost of goods avail. $3,150 Beg FG inv $125 End FG inv $200 What amount of cost of goods sold will be reported on the budgeted income statement by Green? a. $2,925 b. $15.63 c. $3,325 d. $200.04

a. 3,000 cost of goods manuf. + 125 beg FG inv - 200 eng FC inv = 2,925 COGS

Preston Product provides the following data for the year: Actual prod & sales for the year 195 units Budgeted prod and sales for the year 200 units Budgeted fixed cost $540,000 Actual fixed costs $600,000 What is the fixed overhead flexible-budget variance for Preston Products? a. $60,000 U b. $60,000 F c. $73,500 F d. $73,500 U

a. 600,000 - 540,000 = $60,000 U

Herba Spice, Inc. uses an actual costing system. The company uses direct labor-hours as the cost-allocation base. The following info is available for Herbal Spice Inc.: Actual indirect manuf. costs $4,200 Actual qty. of direct manuf. labor hrs 1,200 Budgeted manuf. OH costs $3,900 Budgeted labor hrs 1,300 Calculate the actual manuf. OH costs of Job WMN 123 if the company uses 22 direct manuf. labor hours on Job WMN 123 a. $77.00 b. $71.50 c. $71.06 d. $66.00

a. Actual 4,200 / 1,200 = $3.50 $3.50 x 22 direct manuf. labor hours = $77.00

Consider the following info: Budgeted indirect costs $3,600 Budgeted customer orders 1,200 Budgeted production units 1,800 Budgeted direct manuf. labor hrs 400 Budgeted set ups 450 Using broad averaging what is the budgeted indirect-cost rate per direct manufacturing labor hour? a. $9 b. $8 c. $3,200 d. $2

a. Budgeted $3,600 / 400 hrs =$9

Which of the following costs will have the weakest cause-and effect relationship with its cost allocation based in an ABC system? a. General administration costs b. Indirect material costs c. Setup costs d. Product design costs

a. General administration costs have the weakest cause-and-effect relationship with its cost allocation based in an ABC system. Typically, facility-sustaining costs have the weakest relationships to the allocation based. The other answers are incorrect because they have stronger cause-and-effect relationships

Mega Metal Corp. has provided the following info for the year: Budgeted prod. for the year 10,000 units Est. machine hrs req'd 8,000 hours Est. labor hrs req'd 12,000 labor-hrs Variable OH costs $75,000 If Mega Metal Corp believes that machine hours is the only cost driver of variable overhead, what will be the budgeted variable overhead cost rate per unit? a. $7.50 b. $6.25 c. $37.50 d. $9.38

a. If Mega Metal Corp. believes that machine hours is the only cost driver of variable overhead, the budgeted variable overhead cost rate per output unit is $7.50. Budgeted variable overhead cost rate per output unit = Budgeted input allowed per output unit x Budgeted variable overhead cost rate per input unit Budgeted variable overhead cost rate per output unit = (8,000 / 10,000) x ($75,000 / 8,000) = $7.50

The manager's budget in the responsibility center is based on investments, revenues, and costs of a department. Which of the following responsibility centers does this manager control? a. Investment center b. Revenue center c. Cost center d. Profit center

a. If the budget is based on investments, revenues, and costs of a department, the manager controls an investment center. The manager controls revenues and costs in a profit center The manger controls revenues only in a revenue center The manager controls costs only in a cost center

Identify the statement that best defines the sales-volume variances a. It is the difference between the flexible-budget amount and the corresponding static budget amount b. It is the actual price and budgeted price, multiplied by the actual input quantity, such as direct materials purchased c. It is the difference between the actual result and the corresponding flexible-budget amount d. It is the difference between the actual quantity used (such as square yards of cloth) and the budgeted input quantity allowed for actual output, multiplied by budgeted price

a. It is the difference between a flexible-budget amount and the corresponding static-budget amount is the statement that best defines the sales-volume variance The flexible-budget variance is the difference between an actual result and the corresponding flexible-budget amount Efficiency variance is the difference between the actual input quantity used (such as square yards of cloth) and the budgeted input quantity allowed for actual output, multiplied by budgeted price Price variance is the difference between actual price and budgeted price, multiplied by the actual input quantity, such as direct materials purchased

Which of the following statements is true about cost behavior patterns (within the relevant range)? a. A variable cost changes in total in proportion to changes in the related level of total activity or volume of output produced b. The cost behavior of fixed costs in total is sometimes described as strictly variable or proportionately variable c. A variable cost decreases on a per-unit basis as the number of production units increases d. Fixed cost per unit remain unchanged for a given period, despite changes in the related level of total activity or volume of output produced

a. It is true that a variable cost changes in total in proportion to changes in the related level of total activity or volume of output produced. It is not true that fixed costs per unit remain unchanged for a given time period, despite changes in the related level of total activity or volume of output produced. Rather, fixed cost remains unchanged in total for a given time period, despite changes in the related level of total activity or volume of output produced. It is not true that the cost behavior of fixed costs in total is sometimes described as strictly variable or proportionately variable. Rather, the cost behavior of variable costs in total is sometimes described as strictly variable or proportionately variable. It is not true that a variable cost decreases on a per-unit basis as the number of production unit increases. Rather, a variable cost remains unchanged on a per-unit basis as the number of production units increases

Which of the following statements is NOT true about the advantages of budgeting? a. Managers eliminate frameworks for judging performance and facilitating learning because the actions are too time consuming b. Managers motivate employees by using budgets c. Budgets promote coordination and communication among subunits within a company d. Managers include all employees in the budgeting process

a. Managers eliminate frameworks for judging performance and facilitating learning because the actions are too time consuming is NOT true about the benefits of budgeting. Managers do use frameworks for judging performance and facilitating learning. The other answers are incorrect because they represent facts about the benefits of budgeting.

Rachel Apparels had budgeted fixed overhead of $300,000 for budgeted production of 1,000 units for the year. During the year it produced 1,100 units and fixed costs were as originally budgeted. Which of the following statements is true? a. Rachel Apparels will have a favorable production-volume variance of $30,000 b. Rachel Apparels will have an unfavorable production-volume variance of $30,000 c. Rachel Apparels will have a favorable production-volume variance of $27,273 d. Rachel Apparels will have an unfavorable production-volume variance of $27,273

a. Rachel Apparels will have a favorable production-volume variance of $30,000: Production-volume variance = Budgeted fixed overhead - Fixed overhead allocated using budgeted cost per unit overhead allowed for actual output produced Fixed overhead allocated = $300,000 / 1,000 x 1,100 = $330,000 Production-volume variance = $300,000 - $330,000 = $30,000 favorable

The following budgeted info relates to Green Power Inc.: Cost of goods manuf. $3,200 Cost of goods avail. $3,350 Beg FG inv $150 End FG inv $250 What amount of cost of goods sold will be reported on the budgeted income statement by Green? a. $3,100 b. $3,300 c. $3,600 d. $3,250

a. The amount of cost of goods sold will be reported on the budgeted income statement by Green is $3,100 Cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured - Ending finished goods inventory 3,200 cost of goods manuf. + 150 beg FG inv - 250 end FG inv = $3,100 COGS

The manager reported the following information: Total direct-labor costs 10,000,000 Total indirect costs 9,000,000 Total direct-labor hours 250,000 Calculate the budgeted direct-labor cost rate per direct-labor hour. a. $40 b. $36 c. $76 d. $4

a. The budgeted direct-labor cost rate is $40 per direct-labor hour Budgeted direct-labor cost rate = Budgeted total direct-labor costs / Budgeted total direct-labor hours = $10,000,000 / 250,000 = $40 per direct-labor hour

Which of the following would NOT indicate a favorable direct materials price variance? a. The manager budgeted the purchase prices of direct materials too low as a result of neglecting to appropriately analyze market conditions b. The direct materials prices decreased unexpected from an oversupply of materials in a particular industry c. The manager changed from a high-price supplier to a low-price supplier d. The manager ordered larger quantities than the quantities budgeted which resulted in quantity discounts

a. The manager budgeted the purchase prices of direct materials too low as a result of neglecting to appropriately analyze market conditions would NOT indicate a favorable direct materials price variance. A favorable direct materials price variance would occur when the manager budgeted purchase prices of direct materials too high. The other answers are incorrect and represent scenarios that would result in a favorable direct materials price variance.

Vinton Inc. provides the following details for the year: Type of variance / Amount V-manuf. OH spending $30,600 F V-manuf. OH efficiency $102,000 U F-OH spending $61,200 U Operating inc. volume $122,400 U F-OH prod. volume $312,800 U What will be the sales-volume variance for operating income of Vinton Inc. for the year? a. $435,200 U b. $190,400 U c. $71,400 U d. $132,500 U

a. The sales volume variance for operating income of Vinton Inc. for the year is $435,200 U. Sales-volume variance for operating income = Operating income volume variance + Fixed overhead production volume variance Sales-volume variance for operating income = $122,400 + $312,800 = $435,200 U

A "what-if" technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes is the specific definition of ___________________ a. financial planning model b. sensitivity analysis c. budget d. organizational structure

A ___________________ is used to record and accumulate all costs assigned to a specific job, starting when work begins a. Source document b. Job-cost sheet c. Labor-time sheet d. Materials-requisition record

Static budgets are prepared _________________; whereas, flexible budgets are prepared __________________ a. based on actual fixed costs; by using actual fixed costs b. on planned output at the beginning of the period; on actual output at the end of the period c. using the budgeted selling price; using the actual selling price d. using the basis of budgeted unit variable cost; based on the actual unit variable cost

The manager is responsible for which of the following at an investment center? a. Revenues only b. Investment, revenues, and costs c. Revenues and costs d. Investments only

The purpose of the budget is ____________________ consideration to a manager when choosing the period of a budget a. the least important b. the most important c. the second most important d. the third most important

Tyler Inc. manufactures bikes and skateboards in a single factory. Assuming bikes as the cost object, which of the following would NOT be true? a. The cost of leasing the factory would be an indirect cost b. The cost of the wages of employees who assemble the bikes would be an indirect cost c. The cost of aluminum in the bike frames would be a direct cost d. The cost of the wheels on the bikes would be a direct cost

Undercosting a particular product or service may result in ___________________ a. overpricing of that product b. higher market share c. higher costs per unit d. loss of market shares to consumers using similar products

Which of the following costs will have the weakest cause-and-effect relationship with its cost allocation based in an ABC system? a. Setup costs b. General administration costs c. Indirect material costs d. Product design costs

Which of the following is NOT true about using cost-volume-profit (CVP) analysis in the decision-making process? a. CVP analysis enables managers to make product decisions by estimating expected profitability of products and services b. Managers cannot use CVP analysis to make decisions about selling prices c. Managers typically use CVP analysis to make strategic decisions

Which of the following is the practice whereby managers focus more closely on areas that are not operating as expected and less closely on those areas that are? a. Financial measures b. Management by exception c. Performance evaluation d. Benchmarketing

Which of the following is true? a. Companies in the manufacturing sector of the economy typically hold one type of inventory b. Companies in the manufacturing sector of the economy typically have direct materials inventory, work-in-process inventory, and finished goods inventory c. Companies in the merchandising sector of the economy typically do not hold inventories of tangible products d. Companies in the service sector of the economy typically have one type of inventory which is comprised of products in their original purchased form

Which of the following statements is true of absorption costing? a. It always results in higher net operating income being reported as compared to variable costing method of costing inventories b. It enables a manager to increase margins and operating income by producing more ending inventory c. It ensure that no part of fixed manufacturing cost is inventoried d. It is the preferred method for short-run pricing decisions

Which of the following statements is true? a. The term cost allocation is used to describe the assignment of both indirect and direct costs to a particular cost object b. The term cost tracing is used to describe the assignment of direct costs to a particular cost object c. The term cost tracing is used to describe the assignment of both indirect and direct costs to a particular cost object d. The term cost assignment is a general term that encompasses both (1) tracing indirect costs to a cost object and (2) allocating direct costs to a cost object

_______________ is the difference between a flexible-budget amount and the corresponding static-budget amount a. The price variance b. The sales-volume variance c. The efficiency variance d. The flexible-budget variance

b. The sales-volume variance is the difference between a flexible-budget amount and the corresponding static-budget amount The flexible-budget variance is the difference between an actual result and the corresponding flexible-budget amount Efficiency variance is the difference between the actual input quantity used (such as square yards of cloth) and the budgeted input quantity allowed for actual output, multiplied by budgeted price. Efficiency variance is sometimes called usage variance Price variance is the difference between actual price and budgeted price, multiplied by the actual input quantity, such as direct materials purchased. Price variance is sometimes called a rate variance .

Consider the following info: Budgeted indirect cost $3,000 Budgeted production units 800 Budgeted direct manuf. labor hrs 550 Budgeted customer orders 400 Actual number of setups 1,000 Using broad averaging, what is the budgeted indirect-cost rate per direct manuf. labor-hour? a. $1,650,000 b. $5.45 c. $3,550 d. $2,450

b. $3,000 budgeted indirect cost / 550 direct manuf. labor hrs =$5.45

Sherman Shoe Company provides the following particulars for the current year: Actual selling price $70 Budgeted selling price $75 Actual units sold 1,200 units Budgeted sales 1,000 units What is the selling-price variance for the year for Sherman Shoe Company? a. $5,000 U b. $6,000 U c. $6,000 F d. $5 U

b. $75 x 1,200 = 90,000 (B) $70 x 1,200 =84,000 (A) 90,000 - 84,000 = 6,000 U $6,000 U is the selling-price variance for the year for Sherman Shoe Company. The other answers are incorrect Selling-price variance = (Actual selling price - Budgeted selling price) x (Actual units sold) Selling-price variance = ($70 - $75) x 1,200 = $6,000 U Selling price - higher budgeted means lower revenue actually received; translates to unfavorable

Fischer Inc. provides the following info for the year: Actual variable OH cost per unit of cost-alloc. base $186 Budgeted V-OH cost per unit of cost-alloc. base $190 Actual qty of variable OH cost-alloc base used 5,000 MH Budgeted qty of variable OH cost-alloc base used 4,850 MH Budgeted prod. during the year 2,000 units Actual production during he year 2,100 units What is the variable overhead spending variance of Jelid Inc. for the year? a. $8,400 F b. $20,000 F c. $19,400 F d. $8,000 F

b. ( Actual variable overhead cost - Budgeted variable over cost ) x Actual qty of variable overhead = (186 - 190) x 5,000 = 20,000

The following info is available for Touchwood Corporation company: Budgeted manuf OH $25,000 Actual manuf OH 22,000 Budgeted direct labor hours 6,000 Actual direct labor hours 10,000 Calculate the budgeted manuf. OH rate if OH is allocate don the basis of direct labor hours. a. $2.20 b. $4.17 c. $3.67 d. $2.50

b. 25,000 / 6,000 = $4.17

________________ is a method of management decision making that uses activity-based costing information to improve satisfaction and profitability a. Cost hierarchy b. Activity-based management (ABM) c. Activity-based costing (ABC) d. Total quality management (TQM)

b. Activity-based management (ABM) is a method of management decision making that uses activity-based costing info to improve satisfaction and profitability. Total quality management (TQM) is a management of quality improvement. Activity-based costing (ABC) refines a costing system by identifying individual activities Cost hierarchy categorizes costs into different cost pools on the basis of the different types of cost-allocation bases

What is the difference between actual costing systems and normal costing systems? a. Actual costing systems use actual quantities of inputs for tracing direct costs and normal costing systems use budgeted quantities of inputs for allocating direct costs b. Actual costing systems use actual rates for allocating indirect costs and normal costing systems use budgeted rates for allocating indirect costs c. Actual costing systems use actual rates for tracing direct costs and normal costing systems use budgeted rates for tracing direct costs d. Actual costing systems use actual quantities of inputs for tracing indirect costs and normal costing systems use budgeted quantities of inputs for tracing indirect costs

b. Actual costing systems use actual rates for allocating indirect costs and normal costing systems use budgeted rates for allocating indirect costs is the difference between actual costing systems and normal costing systems. The other answers are incorrect. Normal costing systems use budgeted indirect cost rates whereas actual costing uses actual indirect-cost rates calculated annually at the end of each year

Actual costing systems use _______________ a. Actual direct cost rates b. Actual indirect cost rates c. Normal direct cost rates d. Normal indirect cost rates

b. Actual costing uses actual indirect-cost rates. The other answers are incorrect. The only difference between normal and actual costing is normal costing uses budgeted indirect-cost rates whereas actual costing uses actual indirect-cost rates computed annually at the end for each year

Consider the following info: Budgeted indirect costs $7,200 Budgeted customer orders 1,200 Budgeted production units 1,800 Budgeted direct manuf. labor hours 400 Budgeted set ups 450 Using broad averaging what is the budgeted indirect-cost rate per direct manuf. labor hour? a. $4 b. $18 c. $6,800 d. $16

b. Budgeted $7,200 / 400 = $18

Danville Industries had budgeted fixed overhead of $400,000 for budgeted production of 2,500 units for the year. During the year it produced 2,400 units and the fixed costs were as originally budgeted. Which of the following statements is true? a. Danville Industries will have a favorable production-volume variance of $16,667 b. Danville Industries will have an unfavorable production-volume variance of $16,000 c. Danville Industries will have a favorable production-volume variance of $16,000 d. Danville Industries will have a production-volume variance of $0

b. Budgeted $400,000 / 2,500 units = $160 per unit Actual 2,400 units $160 x 2,400 units = $384,000 actual fixed overhead Budgeted fixed overhead - Actual fixed overhead 400,000 - 384,000 = 16,000 U

Cahya, financial manager of Citra Garments Exports, is trying to calculate budgeted fixed overhead cost per output unit. The following details are available: Est. machine hrs req'd 16,000 hours Est. labor hr req'd 24,000 labor-hrs Budgeted tot. costs in F-OH cost pool $5,600,000 Budgeted tot. prod. 20,000 units What is the budgeted fixed overhead cost per unit of cost-allocation base? a. $233 b. $350 c. $700 d. $280

b. Budgeted fixed overhead cost per unit of cost-allocation base = Budgeted total costs in fixed overhead cost pool / Budgeted total quantity of cost-allocation base (machine hours) Budgeted fixed overhead cost per unit of cost-allocation base = $5,600,000 / 16,000 = $350

The following budgeted information relates to Global Comfort Company: Budgeted unit sales 3,500 units Units of FG to be produced 3,200 units Beg FG inv 450 units Selling price per unit $10 What amount of sales revenue will be reported on the budgeted income statement by Global Comfort? a. $32,000 b. $35,000 c. $3,500 d. $27,500

b. Budgeted sales revenue = Budgeted unit sales x Selling price [er unit 3,500 units x $10 = $35,000

The manager provided the following information: Direct manuf. labor hrs 1,200 hours Actual units produced 0.12hr/unit Budgeted direct manuf. labor hrs 12,000 units Budgeted direct manuf. labor rate: $25 per hour Actual direct manuf. labor rate: $24 per hour Compute the direct manuf. labor efficiency variance a. $5,760 U b. $6,000 F c. $5,760 F d. $6,000 U

b. Efficiency variance = [(Direct manuf. labor hours - (Actual quantity of input used x Budgeted quantity of input allowed)] x Budgeted price of input [1,200 - (0.12 x 12,000)] x $25 = (1,200 - 1,440) x 25 = (240) x 25 = 6,000 F

Which of the following represent the main costs and limitations of an ABC costing system? a. Tracing more costs as direct costs b. Implementation measurements c. Benefits exceed the system's implementation costs d. Production process is labor-intensive

b. Implementation measurements represent the main costs and limitations of an ABC system. In many ABC implementations, measuring costs and activities is challenging and expensive.

Alphite Corporation produces bricks and cinder blocks based on customer orders. The manager has considered adopting activity-based costing; however, she has decided that it would be more cost-effective to use a single allocation base. In which step of the decision-making process would a manager make a decision to group all budgeted indirect costs in a signal cost pool? a. Step 4 b. Step 3 c. Step 2 d. Step 1

b. In Step 3 of the decision-making process, a manager would make a decision to group all budgeted indirect costs in a single cost pool. The other answers are incorrect. In Step 1 of the decision-making process, a manager would identify products that are the chosen cost object In Step 4 of the decision-making process, a manager would identify the indirect costs of each cost-allocation base In Step 2 of the decision-making process, a manager would identify the direct costs associated with each product or service

The U.S. Postal Service is a public service institution and does not charge consumers in rural areas higher prices to deliver mail. Which of the following is LEAST likely a benefit of ABC systems to managers in public service institutions such as the U.S. Postal Service? a. Enhanced management of activities b. Improved pricing decisions c. Assistance with reducing costs d. Better understanding of costs

b. In public service institutions such as the U.S. Postal Service, ABC is valuable to managers for each of the following choices EXCEPT improved pricing decisions. The other answers are incorrect. Better understanding of costs, enhanced management of activities, and assistance with reducing costs are each valuable to managers in public service institutions

Which of the following statements is true? a. The term cost tracing is used to describe the assignment of both indirect and direct costs to a particular cost object b. The term cost tracing is used to describe the assignment of direct costs to a particular cost object c. The term cost assignment is a general term that encompasses both (1) tracing indirect costs to a cost object and (2) allocating direct costs to a cost object d. The term cost is used to describe the assignment of both indirect and direct costs to a particular cost object

b. It is true that the term cost tracing is used to describe the assignment of direct costs to a particular cost object. The term cost assignment is a general term that encompasses both (1) tracing direct costs to a cost object and (2) allocating indirect costs to a cost object The term cost allocation is used to describe the assignment of indirect costs to a particular cost object. Cost allocation does not assign direct costs The term cost tracing is used to describe the assignment of direct costs to a particular cost object. Cost tracing does not assign indirect costs.

Which of the following costs have a strong cause-and-effect relationship with its cost allocation based in an ABC system? a. General administrative costs b. Setup costs c. Top level management compensation d. Building security

b. Setup costs have a strong cause-and-effect relationship with its cost allocation base in an ABC system. The other answers are incorrect. All other costs are facility-sustaining costs. It is usually difficult to find a good cause-and-effect relationship between facility-sustaining costs and the cost-allocation base

Preston Products provides the following data for the year: Actual prod. & sales for the year 195 units Budgeted prod. & sales for the year 200 units Budgeted fixed costs $540,000 Actual fixed costs $600,000 What is the fixed overhead flexible-budget variance for Preston Products? a. $60,000 F b. $60,000 U c. $73,500 U d. $73,500 F

b. The fixed overhead flexible-budget variance for Preston Products if $60,000 U Fixed overhead flexible-budget variance = Actual costs incurred - Flexible budget amount Fixed overhead flexible-budget variance = $600,000 - $540,000 = $60,000 U The flexible-budget amount for a fixed cost item is also the amount included in the static budget prepared at the start of period. No adjustment is required for differences between actual output and budgeted output for fixed costs because fixed costs are unaffected by changes in the output level within the relevant range. The fixed overhead flexible-budget variance is the difference between actual fixed overhead costs and fixed overhead costs in the flexible budget. Fixed overhead flexible-budget variance = Actual costs incurred - Flexible-budget amount

Argon Spice Ltd. manufactured 800 biscuit packets during its first month of operations. The total manufacturing costs were $2,000. The selling price was $4.60 per packet and 290 packets remained unsold at month end. What is the unit cost of the biscuit packets? (rounded to two decimal places) a. $3.92 b. $2.50 c. $2.93 d. $6.90

b. The unit cost of the biscuit packets is $2.50 Unit cost = Total manufacturing costs / Units manufactured = $2,000 / 800 units = $2.50

A manager is deciding whether to use activity-based costing or a single cost pool. In Step 3 of the decision-making process, that manager may __________________________. a. Identify products that are the chosen cost object b. Identify the direct costs associated with each product or service c. Decide to group all budgeted indirect costs in a single cost pool d. Identify the indirect costs of each cost-allocation base

Activity-based costing (ABC) _______________ a. uses a single indirect-cost pool b. always results in lower product costs c. refines the assignment of indirect costs to departments, processes, products or other cost objects d. is simplistic and inexpensive

Activity-based management (ABM) _____________________________ a. is defined as events, tasks, or units of work with a predetermined purpose or outcome b. refines a costing system by identifying individuals activities c. is a method of management decision making that uses activity-based costing info to improve satisfaction and profitability d. categorizes costs into different cost pools on the basis of the different types of cost-allocation bases

Free Rider Inc. manufactures motorcycles and scooters in a single factory. Assuming motorcycles as the cost object, which of the following statements is NOT true for Free Rider? a. The cost of wages paid to the factory maintenance staff is an indirect manufacturing cost b. The cost of steel used to make the motorcycles is a direct materials cost c. The cost of wages paid to the motorcycles production-line machine operators is an indirect manufacturing cost d. The cost of factory insurance is an indirect manufacturing cost

Identify the criterion used when indirect costs are assigned using cost drivers a. The size of production of cost objects b. The cost object's ability to bear costs allocated to it c. The cause-and-effect relationship between a cost-allocation base and indirect costs d. The benefits received from cost objects

Identify the journal entry to record and isolate the direct materials price variance at the time the direct materials were purchased, assuming the direct materials price variance is unfavorable a. DM Control DM Price Variance AP Control b. AP Control DM Price Variance DM Materials Control c. DM Control DM Price Variance AP Control d. DM Materials Control AP Control

Identify the journal entry to record the allocation of $50,000 of manufacturing overhead to jobs in a normal costing system a. Manuf OH Alloc. 50,000 A/P Control 50,000 b. Manuf OH Control 50,000 Manuf OH Alloc. 50,000 c. WIP Control 50,000 Manuf OH Alloc. 50,000 d. Manuf. OH Alloc. 50,000 WIP control 50,000

Identify the scenario that would NOT result in an unfavorable direct materials price variance a. The direct materials prices increased unexpectedly from a shortage of materials in a particular industry b. The manager budgeted the purchase prices of direct materials too low as a result of neglecting to appropriately analyze market conditions c. The manager ordered smaller quantities than the quantities budgeted which resulted in lower quantity discounts d. The manager changes from a high-price supplier to a low-price supplier

Identify the scenario that would NOT result in an unfavorable direct materials price variance a. The manager budgeted the purchase prices of direct materials too low as a result of neglecting to appropriately analyze market conditions b. The manager ordered smaller quantities than the quantities budgeted which resulted in lower discounts c. The manager changed from a high-price supplier to a low-price supplier d. The direct materials prices increased unexpectedly from a shortage of materials in a particular industry

Implementation measurements ____________________ a. Exclude cost estimations of activity pools b. Are only used in ABM rather than ABC systems c. Represent the main costs and limitations of an ABC system d. Are minimal in an ABC system

Inventoriable costs _________________ a. Do not include indirect manufacturing costs b. Are all costs in the income statement other than cost of goods sold c. Are expensed as cost of goods sold only when the product is sold d. Are all the costs of purchasing goods that are resold in their same form by a manufacturing company

Managers use historical data to represent quantities and prices and provide realistic benchmarks for measuring improvements in performance best describes which of the following? a. It is an advantage of standards developed by the firm itself b. It is a disadvantage of using actual input data from past periods c. It is an advantage of using actual input data from past periods d. It is an advantage of using data from other companies that have similar processes

The manager at Ralph Electronics reported actual operating income of $600,000 and a flexible budget of $300,000. What is the flexible-budget variance for operating income for the year? a. $302,000 b. $300,000 U c. $300,000 F d. $900,000 U

What transaction does the following journal entry represent? WIP Control 50,000 Manuf OH 50,000 a. The use of $50,000 of indirect materials b. The use of $50,000 of indirect labor c. The application of $50,000 of manuf. OH d. The write-off of $50,000 of over-applied OH to WIP

Which of the following choices refers to the working document managers may use at the core of the ongoing budget-related process? a. The rolling budget b. The financial budget c. The master budget d. The operating budget

Which of the following companies is most likely to have an unfavorable production-volume variance? a. Smith Apparels, which manufactures garments in Bangladesh and sells in Europe and U.S. The company is looking at expanding capacity to fulfill ever-increasing orders from the west b. Luxury Stay, which operates a hotel in Rio de Janeiro. It is experiencing a surge in demand because of an upcoming interational event in the city. It is not able to match demand c. Remart Inc., which sells its products in Nigeria and Sudan. Due to sudden internal strive, the exports to these countries have substantially fallen d. Hihn Gin Corporation, which sells Chinese toys in European markets. Their government has provided a 50% subsidy on direct materials to promote exports

Which of the following is NOT a characteristic of overcosting? a. Overpricing products or services b. Higher cost per unit c. Higher market share d. Loss of market shares to consumers and groups in the marketplace

Which of the following journal entries is made to write-off the variance accounts to the cost of goods sold? Assume both variable overhead spending variance and variable overhead efficiency variance are unfavorable. a. V-OH spending variance V-OH efficiency variance COGS b. COGS V-OH spending variance c. COGS V-OH spending variance V-OH spending variance d. COGS V-OH efficiency variance

Which of the following organization is most likely to use job costing? a. An oil refining company b. A beverage manufacturer c. A law firm d. A paint manufacturer

Which of the following statements best describes underallocated indirect costs? a. Underallocated indirect costs occur when the budgeted amount of indirect costs is greater than the budgeted amount b. Underallocated indirect costs occur when the allocated amount of indirect costs in an accounting period is greater than the budgeted amount c. Underallocated indirect costs occur when the allocated amount of indirect costs is less than the actual or incurred amount d. Underallocated indirect costs occur when the budgeted amount of indirect costs is less than the budgeted amount

Which of the following statements is TRUE of overhead allocation? a. Underallocated indirect costs occur when the budgeted amount of indirect costs is less than the allocated amount b. Overallocated indirect costs occur when the budgeted amount of indirect costs in an accounting period is less than the budgeted amount c. Overallocated indirect costs occur when the allocated amount of indirect costs is greater than the actual, incurred amount d. Underallocated indirect costs occur when the actual amount of indirect costs is less than the allocated amount

_____________ is the continuous process of comparing your firm's performance levels against the best levels of performance in competing companies or in companies having similar processes a. Management by exception b. Financial measures c. Benchmarking d. Performance evaluation

Robing Machine Company provides the following particulars for the current year: Actual selling price $1,500 Budgeted selling price $1,750 Actual units sold 1,000 units Budgeted sales 800 units What is the selling-price variance at Robin Machine Company for the current year? a. $200,000 U b. $250 U c. $250,000 U d. $250,000 F

c. $1,500 x 1,000 = 1,500,000 (A) $1,750 X 1,000 = 1,750,000 (B) 1,750,000 - 1,500,000 = 250,000 U

Kole Snax Inc. manufactured 1,200 cookie packets during its first month of operations. The total manufacturing costs were $2,700. The selling price was $3.95 per packet and 460 packets remained unsold at month end. What is the unit cost of the cookie packets? (rounded to two decimal places) a. $3.65 b. $5.87 c. $2.25 d. $2.44

c. 2,700 / 1,200 = $2.25

The following budgeted info relates to Mckenzie Spice Corporation: Budgeted unit sales 2,200 units Target end FG inv 300 units Beg FG inv 220 units Calculate the number of finished goods in units to be produced by Mckenzie. a. 2,720 units b. 80 units c. 2,280 units d. 1,680 units

c. 220 Beg FG inv + ? # of FG to be produced 2,500 - 2,200 Budgeted unit sales 300 Target end FG = 2,280 units

The manager at Chair Outlet reported the standard direct material cost per chair was 4 yards of cloth of input allowed per each chair (output unit) manufactured, at $40 standard price per yard. What is the standard direct material cost chair? a. $44 b. $40 c. $160 d. $10

c. 4 yes of cloth of input allowed per each chair x $40 standard price per yard = $160

Which of the following statements is NOT true of an ABC system? a. An ABC system may breakdown single indirect-cost pools of costs related to other activities b. An ABC system refines the assignment of indirect costs to departments, processes, products, or other cost objects c. An ABC system in simplistic and inexpensive d. An ABC system may NOT always result in lower product costs

c. An ABC system is simplistic and inexpensive is NOT true of an ABC system

Each of the following organizations would most likely use job costing EXCEPT ________________________ a. An auditing firm b. A movie production company c. An oil refinery d. A law firm

c. An oil refinery is an organization that would most likely NOT use job-costing systems. The other answers are incorrect. A law firm, an auditing firm, and a move production company would most likely use job-costing systems.

A ski jacket manufacturer reported a budgeted selling price of $80 per ski jacket and budgeted sales of 350 ski jackets. In December, the company produced and sold 300 ski jackets for $82. What is the flexible budget for revenues in December? a. $28,000 b. $28,700 c. $24,000 d. $24,600

c. Budgeted price x Actual qty $80 x 300 ski jackets = 24,000

The following budgeted information relates to Global Comfort Company: Budgeted unit sales 2,500 units Units of FG to be produced 2,200 units Beg FG inv 400 units Selling price per unit $12 What amount of sales revenue will be reported on the budgeted income statement by Global Comfort? a. $2,488 b. $208.33 c. $30,000 d. $2,512

c. Budgeted sales revenue = Budgeted units x Selling price per unit 2,500 units x $12 = $30,000

Mega Metal Corp. provided the following info for the year: Budgeted prod. for the year 10,000 units Est. machine hrs req'd 8,000 hrs Est. labor hrs red'q 12,000 labor hrs Variable OH costs $75,000 If Mega Metal Corp believes that machine-hours is the only cost driver of variable overhead, what will be the budgeted variable overhead cost rate per unit? a. $37.50 b. $9.38 c. $7.50 d. $6.25

c. Budgeted variable overhead cost rate per unit 8,000 hrs / 10,000 units = 0.8 hours per unit $75,000 / 8,000 hours = $9.375 per hour 0.8 hours per unit x $9.375 per hour = $7.5 per unit

Neelam Electronics provides the following data for the year: Actual prod. & sales for the year 495 units Budgeted prod. & sales for the year 500 units Budgeted fixed costs $450,000 Actual fixed costs $500,000 What is the fixed overhead flexible-budget variance for Neelam Electronics? a. $54,500 F b. $54,500 U c. $50,000 U d. $50,000 F

c. Fixed overhead flexible-budget variance = Actual costs incurred - Flexible-budget amount $500,000 - $450,000 = $50,000 U

For a company engaged in mass production, machine depreciation is a(n) ______________________ cost. a. Facility-sustaining b. Product-sustaining c. Output unit-level d. Batch-level

c. For a company engaged in mass production, machine depreciation is an output unit-level cost. The other answers are incorrect. Batch-level cost is the category of the cost hierarchy representing material handling and quality-inspection costs associated with batches rather than quantities, purchase order placement costs, and materials receiving costs. Facility-sustaining is the cost category of the cost hierarchy representing top management compensation Product sustaining cost is the cost category of the cost hierarchy representing costs of research and design, setup, engineering changes, and marketing costs to make new products.

Which of the following is NOT a true statement about inventoriable cost? a. They include indirect manufacturing costs b. They are expensed as cost of goods sold only when the product is sold c. They are all costs in the income statement other than cost of goods sold d. They are all the costs of purchasing goods that are resold in their same form by a merchandising company

c. It is NOT true that inventoriable costs are al costs in the income statement other than cost of goods sold. Rather, all costs in the income statement other than cost of goods sold are period costs. The other answer choices are not correct responses because the statements provided are true

__________________ is debited when recording plant depreciation a. Manufacturing overhead allocated b. Accumulated depreciation c. Manufacturing overhead control d. Depreciation expense

c. Manufacturing Overhead Control is debited and Accumulated Depreciation is credited when recording plant depreciation

Which of the following statements is TRUE of overhead allocation? a. Underallocated indirect costs incurred when the actual amount of indirect costs is less than the allocated amount b. Overallocated indirect costs occur when the budget amount of indirect costs in an accounting period is less than the budgeted income c. Overallocated indirect costs occur when the allocated amount of indirect costs is greater than the actual, incurred amount d. Underallocated indirect costs occur when the budgeted amount of indirect costs is less than the allocated amount

c. Overallocated indirect costs occur when the allocated amount of indirect costs is greater than the actual, incurred amount is TRUE of overhead allocation. The other answers are incorrect. Underallocated indirect costs occur when the allocated amount of indirect costs in an accounting period is less than the actual or incurred amount. The typical procedure for allocating overhead is to accumulate all manufacturing overhead costs into one or more homogenous cost pools, and then use an activity measure to allocate the overhead costs in the cost pools to various jobs or processes

A company uses an actual costing system. The company uses direct labor-hours as the cost-allocation base. The managerial accountant reported the following cost information: Actual indirect manuf. costs $6,000 Actual qty of direct manuf. labor hrs 1,000 Budgeted manuf. OH costs 6,500 Budgeted labor hours 1,200 Calculate the actual manufacturing overhead costs of Job WMN 456 if the company uses 30 direct labor hours on Job WMN 456. a. $162.60 b. $150.00 c. $180.00 d. $195.00

c. The actual manuf. OH costs of Job WMN 456 if the company uses 30 direct labor hours on Job WMN 456 is $180,00 First, compute the actual manuf. OH rate. Actual manuf. OH rate = Actual annual manuf. OH costs / Actual annual qty of the cost-allocation base (6,000/1,000) = $6.00 Next, compute the manuf OH costs allocated to Job WMN 456: Actual manufacturing OH rate x Actual qty of direct manuf labor hours: ($6.00 x 40) = $180.00

The production budget is prepared after the ___________________ a. financial budget b. operating budget c. revenues budget d. capital expenditures budget

c. The production budget is prepared after the revenues budget

The following info is available for Patrick Products for the year: Budgeted sales during the year 5,000 units Actual sales during the year 4,500 units Budgeted machine hours required for the year 10,000 hours Actual machine-hours during the year 9,000 hours Budgeted variable overhead costs $2,500,000 Actual variable overhead costs $2,375,000 What is the variable overhead flexible-budget variance for the year? Assume machine-hours as the only cost-allocation base. a. $250,000 F b. $125,000 F c. $125,000 U d. $250,000 U

c. The variable overhead flexible budget variance for the year is $125,000 U. Variable overhead flexible-budget variance = Actual costs incurred minus flexible-budget amount Flexible budget variable overhead = $2,500,000 / 10,000 machine hours x 9,000 machine hours = $2,250,000 Variable overhead flexible-budget variance = $2,375,000 - $2,250,000 = $125,000 U The variable overhead flexible-budget variance measures the difference between actual variable overhead costs incurred and flexible-budget variable overhead amounts.

Undercosting a particular product or service may result in ______________ a. Overpricing of that product b. Higher costs per unit c. Higher market share d. Loss of market shares to consumers using similar products

c. Undercosting a particular product or service may result in higher market share. The other answers are incorrect and represent the effects of overcasting instead of undercoating. Higher cost per unit, loss of market shares to consumers using similar products or services, and overpricing of products or services are effects of overcasting.

The manager provided the following information: Direct manuf. labor hrs 2,400 hours Actual units produced 12,000 units Budgeted direct manuf. labor hrs 0.22 hour/unit Budgeted direct manuf. labor rate: $24 per hour Actual direct manuf. labor rate: $25 per hour Compute the direct manuf. labor efficiency variance a. $6,000 U b. $6,000 F c. $5,760 F d. $5,760 U

c. [ 2,400 - (12,000 x 0.22) ] x 24 = 5,760 F

Below is a graphical representation of a specific cost in total at different production levels for a company that manufactures various garments, including shirts, pants, and dresses. The X-axis shows production levels (within the relevant range) and the Y-axis shows the total cost. $750 cost for production levels between 0 - 20,000 Which of the following could be the cost shown in the graph, assuming shirts as the cost object? a. The total power cost to run the sewing machines in the factory b. The total cost of fabric used to make the shirts c. The total amount paid to garment workers that is calculated on a per-shirt-sewed basis d. The total rental cost of the factory

Controllability ________________________. a. is the difference between actual results and budgeted amounts b. is an arrangement of lines of responsibility within an organization c. is more expanded and focuses on gaining info and knowledge in addition to control d. is the degree of influence a specific manager has over costs, revenues, or related items for which he or she is responsible

Facility-Sustaining costs _____________. a. include costs of activities performed on each individual unit of a product or service b. include costs of activities undertaken to support individual products or services regardless of the number of units or batches in which units are produced, or services provided c. Include costs of activities related to a group of units of a product or service d. Have the least cause-and-effect relationship with a cost allocation base

Identify the formula to calculate a budgeted indirect cost rate a. Actual indirect costs / Budgeted total quantity of the cost allocation base b. Actual total indirect costs / Actual totally quantity of the cost allocation base c. Budgeted annual indirect costs / Actual total quantity of the cost allocation base d. Budgeted annual indirect costs / Budgeted annual quantity of the cost allocation base

Identify the journal entry to record usage of direct materials of $18,000 and indirect materials of $2,000 by a job in a normal costing system a. A/P control 20,000 WIP control 18,000 Manuf. OH control 2,000 b. WIP control 18,000 Manuf. OH control 2,000 Cash control 20,000 c. WIP control 18,000 Manuf. OH control 2,000 A/P control 20,000 d. WIP control 18,000 Manuf. OH control 2,000 Materials control 20,000

Identify the journal entry to record usage of direct materials of $18,000 and indirect materials of $2,000 by a job in a normal costing system. a. WIP control 18,000 Manuf. OH control 2,000 A/P control 20,000 b. A/P control 20,000 WIP control 18,000 Manuf. OH control 2,000 c. WIP control 18,000 Manuf. OH control 2,000 Cash control 20,000 d. WIP control 18,000 Manuf. OH control 2,000 Materials control 20,000

Identify the most significant factor when choosing the period of a budget. a. The shareholder expectations b. The uploaded data in the budget c. The operating cycle of the business d. The purpose of the budget

Music Corporation manufactures various models of pianos, one of which is the P52 model. The polishing department supervisor oversees polishing of the P52 model as well as other models. The supervisor was paid a $4,000 salary for the month of August. For the P52 model of piano, the cost of the polishing department supervisor's salary is ___________________ a. both a direct cost and a fixed cost b. both a direct cost and a variable cost c. both an indirect cost and a variable cost d. both an indirect cost and a fixed cost

Normally, product design costs are product-sustaining costs. However, when customized goods are produced in groups, product design can be a(n) __________________________. a. Output unit-level cost b. Irrelevant cost c. Facility-sustaining cost d. Batch-level cost

Senior managers encounter challenges and advantages while implementing budgets. Which of the following is a challenge of the budgeting process? a. Managers can promote coordination and communication among subunits b. Senior managers can motivate managers and employees c. Managers can develop a framework for judging organization performance d. Senior managers spend 10-20% of time on budget-related issues

Which of the following budgets is prepared directly after the revenues budget? a. The manufacturing overhead budget b. The budgeted income statement c. The direct materials costs budget d. The production budget

Which of the following costs is most likely to be a batch-level cost in the cost hierarchy? a. Top management compensation expense b. Building rent expense c. Machinery depreciation cost d. Setup cost

Which of the following is NOT true about the use of variances for performance measurement? a. Two commonly evaluated attributes of performance are effectiveness and efficiency b. If any single performance measure is overemphasized, managers will tend to make decisions that will cause the particular performance measure to look good c. Managers cannot assume that positive variances are "goods news" and that their subordinates performed well d. It is not important to understand the causes of a variance before using it for performance evaluation

Which of the following statements is NOT true about multinational companies? a. The manager at a multinational company may use sophisticated techniques such as forward, future, and option contracts are used to minimize risk exposure to foreign currency fluctuations instead of enhancing exchange-rate volatility b. The manager at a multinational company should never ignore the political, legal, and economic environment of a foreign country when planning, preparing and implementing budgets c. In a multinational company, a manager can use the results of a budget to evaluate the performance of a regional manager by determining how well the manager stayed within budgetary guidelines d. The manager at a multinational company earns revenues and incurs expenses from one currency in one currency

Which of the following statements is NOT true about performance measurement and variances? a. Top managers should design a performance evaluation and reward system that emphasizes company objectives b. Managers should understand the cause of a variance before using it in a performance evaluation c. Managers use variance analysis to reveal individual aspects of performance d. Managers always believe that all favorable variances are good and assume subordinates performed well

Which of the following statements is TRUE of budgeting benefits? a. Past results incorporate past miscues and substandard performance b. Managers use past performance because future conditions may differ from past experiences c. Budgets eliminate the need for unnecessary management interventions during the production process d. Budgets provide a framework for judging performance and facilitating learning

Which of the following subsidiary ledgers is used to enable managers to view specific details of categories such as overhead costs of direct materials, indirect manuf. labor, supervision and engineering, plant insurance & utilities, and plant depreciation? a. Materials records b. Labor records c. Finished goods inventory by jobs d. Manuf. department OH records

Which of the following subsidiary ledgers is used to record the quantity of materials received, issued to jobs, and the inventory balances for all materials on a continuous basis? a. Manufacturing department overhead records b. Labor records c. Finished goods inventory by jobs d. Materials records

Which of the following would NOT indicate a favorable direct materials price variance? a. The manager changed from a high-price supplier to a low-price supplier b. The direct materials prices decreased unexpectedly from an oversupply of materials in a particular industry c. The manager ordered larger quantities than quantities budgeted which resulted in quantity discounts d. The manager budgeted the purchase prices of direct materials too low as a result of neglecting to appropriately analyze market conditions

_____________________ are the costs of activities managers cannot trace to individual products or services but support the organization as a whole. a. Product-Sustaining costs b. Batch-level costs c. Output unit-level costs d. Facility-sustaining costs

Which of the following companies is most likely to have a favorable production-volume variance? a. Crystal Resorts, which operates a hotel in South Florida. It is a experience a slump in demand because of a slowdown in international tourist traffic b. Fordham Inc., which sells its products in Nigeria and Sudan. Due to sudden internal strife, the exports to these countries have substantially fallen c. Grand Industries, which manufactures electronic instruments in the U.S. and sells in Europe. The company is experiencing shrinking sales due to the weak Euro d. Wei Corporation, which sells Chinese toys in the European market. Their government has provided a 50% subsidy on direct materials to promote exports

d. A decline production would lead an unfavorable production-volume variance

Which of the following statements is true of activity-based costing? a. ABC systems focus on departments as the fundamental cost objects b. ABC systems cannot be used profitably by companies having batch-level costs c. ABC systems do not facilitate variance analysis d. ABC systems classify costs into unit-level, batch-level, product-sustaining, and facility-sustaining costs

d. ABC systems classify costs into unit-level, batch-level, product-sustaining, and facility-sustaining costs is a true statement. The other answers are incorrect. ABC systems focus on individual activities, not department, as the fundamental cost objects. ABC systems, when paired with standard costing, can facilitate variance analysis. A company that has an ABC system and batch-level costs can benefit greatly from variance analysis that ABC systems enable.

A company uses an actual costing system. The company uses direct labor-hours as the cost-allocation base. The managerial accountant reported the following cost info: Actual indirect manuf. costs $6,000 Actual qty of direct manuf. labor hours 1,000 Budgeted manuf. OH costs $6,500 Budgeted labor hours 1,200 Calculate the actual manuf. OH costs of Job WMN 456 if the company uses 30 direct labor hours on Job WMN 456. a. $195.00 b. $162.60 c. $150.00 d. $180.00

d. Actual 6,000 / 1,000 = $6.00 per direct labor hours $6 x 30 direct labor hours = $180.00

Which of the following statements is TRUE about static and flexible budgets? a. Flexible budgets are prepared using budgeted selling price and static budgets are prepared using actual selling price b. Flexible budgets are only prepared using budgeted total fixed costs; whereas static budgets are only prepared by using actual fixed costs c. Static budgets are always prepared using budgeted unit variable cost; whereas flexible budgets are always prepared using the actual unit variable costs d. Static budgets are prepared on planned output at the beginning of the period' whereas flexible budgets are prepared on actual output at the end of the period

d. Both flexible budgets and static budgets can use the same budgeted selling price, unit variable costs, total fixed costs.

Budgetary slack _______________________ a. refers to the continuous improvement the manager anticipates during the budgeted period into budgeted numbers b. refers to differences between budgeted and actual results c. is used to achieve higher levels of performance through psychological motivation d. is the practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve

d. Budgetary slack is the practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve Kaizen budgeting refers to the continuous improvement the manager anticipates during the budgeted period In budgeting, variances refer to differences between budgeted and actual results The manager uses stretch targets to achieve higher levels of performance through psychological motivation Budgetary slack refers to the deliberate adjustment to revenues or costs accommodate uncertainties. As a result, budgetary slack provides managers with an increase in reaching targets. Managers strive to reach goals because performance evaluation is typically based on achieving budget goals. Ethical considerations result when managers intentionally add slack to budget figures to achieve a predetermined accounting objectives

d. Budgeted $3,600 / 400 hrs = $9 per direct manuf. labor hr

Hernandez Manufacturing is trying to calculated budgeted fixed overhead cost per output unit. The following details are available: Est. machine hrs req'd 16,000 hours Est. labor hrs req'd 24,000 hours Budgeted tot costs in F-OH cost pool $2,800,000 Budgeted tot. production 20,000 units What is the budgeted fixed OH cost per unit of cost-allocation base? a. $350 b. $140 c. $117 d. $175

d. Budgeted total production / Estimated machine hours required = 2,800,000 / 16,000 =$175

A flower manufacturer reported a budgeted unit selling price of $25 for holiday ceramic flower containers and budgeted sales of 520 units. In December, the company produced and sold 500 holiday ceramic flower containers for $24. What is the flexible budget for revenues? a. $13,000 b. $12,000 c.$12,480 d. $12,500

d. Flexible-budget revenues = Budgeted selling price x Actual quantity of output = $25 x 500 = $12,500

Which of the following is NOT true about the use of variances for performance measurement? a. Two commonly evaluated attributes of performance are effectiveness and efficiency b. It is important to understand the causes of a variance before using it for performance evaluation c. If any single performance measure is overemphasized, managers will tend to make decisions that will cause the particular performance measure to look good d. Managers can assume that positive variances are "good news" and that their subordinates performed well

d. Managers can assume that positive variances are "good news" and that their subordinates performed well is NOT true regarding the use of variances for performance measurement. Managers cannot make that assumption because positive variances can be the result of factors outside of the control of employees, and one positive variance can lead to costlier unfavorable variances in other areas. The other answers are incorrect because they are true statements

Which of the following subsidiary ledgers is used to enable managers to view specific details of categories such as overhead cost of direct materials, indirect manufacturing labor, supervision and engineering, plan insurance and utilities, and plant depreciation? a. Finished goods inventory by job b. Materials records c. Labor records d. Manufacturing department overhead records`

d. Manufacturing Department Overhead Records enable managers to view specific details of categories such as overhead costs of direct materials, indirect manufacturing labor, supervision and engineering, plant insurance and utilities, and plant depreciation The other answers are incorrect. Materials Records are used to record the quantity of materials received, issued to jobs, and the inventory balances for all materials on a continuous basis. Labor Records trace the costs of direct manufacturing labor to individual jobs and to accumulate the costs of indirect manufacturing labor in the Manufacturing Department overhead records. Finished Goods Inventory by Jobs shows the total costs of all jobs completed and transferred to finished goods.

The manager at Lampshades Limited reported the standard direct material cost per lampshade was 1.2 yards of cloth of input allowed per each lampshade (output unit) manufactured, at $20 standard price per yard. What is the standard direct material cost per lampshade? a. $20 b. $16.67 c. $22.20 d. $24

d. Standard DM cost per lampshade for each variable direct cost per unit= Standard input allowed for one input unit x Standard price per input unit = 1.2 yds of cloth of input x $20 standard price per yard = $24

The following info is available for Touchwood Corporation: Budgeted manuf OH $20,000 Actual manuf OH 22,000 Budgeted direct labor hrs 8,000 Actual direct labor hrs 10,000 Calculate the budgeted manufacturing OH if OH is allocated on the basis of direct labor hours. a. $2.20 b. $2.00 c. $2.75 d. $2.50

d. The budgeted manufacturing overhead rate if overhead is allocated on the basis of direct labor hours is $2.50. Manufacturing overhead rate = Budgeted manufacturing overhead / Budgeted direct manufacturing labor hours = $20,000 / 8,000 = $2.50

Salam Inc. provides the following details for the year Type of variance/Amount V-manuf. OH spending $15,300 F V-manuf. OH efficiency $51,000 U F-OH spending $30,600 U Operating inc. volume $61,200 U F-OH prod. volume $156,400 U What will be the sales-volume variance for operating income of Sulam Inc. for the year? a. $95,200 U b. $35,700 U c. $66,300 U d. $217,600 U

d. The sales volume variance for operating income of Sulam Inc. for the year is $217,600 U. Sales-volume variance for operating income = Operating income volume variance + Fixed overhead production volume variance Sales-volume variance for operating income = $61,200 + $156,400 = $217,600 U

Jelid Inc. provides the following info for the year: Actual variable OH cost per unit of cost-alloc. base $176 Budgeted V-OH cost per unit of cost-alloc. base $190 Actual qty of variable OH cost-alloc base used 5,000 MH Budgeted qty of variable OH cost-alloc base used 4,750 MH Budgeted prod. during the year 2,000 units Actual production during he year 2,050 units What is the variable overhead spending variance of Jelid Inc. for the year? a. $28,000 F b. $66,500 F c. $28,700 F d. $70,000 F

d. The variable overhead spending variance of Jelid Inc. for the year is $70,000 F. Variable overhead spending variance = (Actual variable overhead cost per unit of cost-allocation base - Budgeted variable overhead cost per unit of cost-allocation base) x Actual quantity of variable overhead cost-allocation base used Variable overhead spending variance = ($176 - $190) x 5,000 = $70,000 F

Which of the following is true of operating leverage? a. At any given level of sales, degree of operating leverage equals operating income divided by contribution margin b. Operating leverage measures the risk-return tradeoff of variable costs across alternative cost structures c. When the fixed costs increases, operating leverage will decrease d. There is a higher possibility of net loss with high operating leverage than a lower-leveraged firm

d. There is a higher possibility of net loss in a company with high operating leverage than a lower-leveraged firm is TRUE of operating leverage. The other answers are incorrect. Degree of operating leverage equals the contribution margin divided by operating income. Operating leverage = Contribution / Operating income Operating leverage measures the risk-return tradeoff of fixed costs across alternative cost structures. When fixed costs increase, operating leverage increases. If a business firm has a lot of fixed costs as compared to variable costs, then the firm is having high operating leverage

Which of the following statements is true in relation to fixed overhead cost? a. The flexible-budget amount for a fixed-cost item is different from the amount included in the static budget prepared at the start of the period b. A company cannot be efficient or inefficient in its use of fixed-over-head-cost resources c. Fixed overhead costs like other costs are affected by changes in the output levels within the relevant range d. There is no efficiency variance for fixed overhead costs

d. There is no efficiency variance for fixed overhead costs is true in relation to fixed overhead cost. That's because a given sum of fixed overhead costs will be unaffected by how efficiently machine-hours are used to produce output in a given budget period. The flexible-budget amount for a fixed cost item is also the amount included in the static budget prepared at the start of the period Fixed costs are unaffected by changes in the output level within the relevant range A company can be efficient or inefficient in its use of fixed-overhead-cost resources

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