Chapter 7&8 Accounting 2402
When a flexible budget is used in performance evaluation, actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period
false
When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased.
true
The manufacturing overhead budget is typically prepared before the production budget.
false
The sales budget is usually prepared before the production budget
true
The sales budget often includes a schedule of expected cash collections
true
The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together.
false
The cash budget is usually prepared after the budgeted income statement.
false
A continuous or perpetual budget is a budget that almost never needs to be revised.
false
A favorable spending variance occurs when the actual cost exceeds the amount of the cost in the static planning budget.
false
A flexible budget cannot be used to estimate what costs should have been at a given level of activity
false
A flexible budget should not be used when making comparisons to actual results such as actual expenses
false
A revenue variance is unfavorable if the actual revenue is less than the revenue in the static planning budget.
false
A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period
false
Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget
false
Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control
false
Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled
false
Fixed costs should be ignored when evaluating how well a manager has controlled costs.
false
A direct materials quantity standard generally includes an allowance for waste
true
A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period
true
A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period
true
A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels
true
An unfavorable spending variance may reflect waste as well as paying too much for inputs
true
Budgets are used to plan and to control operations.
true
Controllability has little to do with whether a cost is fixed or variable
true
Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes
true
In companies that do not have "no lay-off" policies, the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate
true
On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment.
true
Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management.
true
The revenue and spending variances are the differences between the flexible budget and the actual results for the period.
true
