CHAPTERS 11, 7, & 8 EXAM 2 REVIEW

Orlando Company placed $142 of raw materials into production. How would this transaction affect the company's financial statements? Assets = Liabilities + Equity Revenue - Expenses = Net Income Raw Materials Inventory + Work in Process Inventory

(142) + 142 = NA + NA NA - NA = NA

Which of the following equations can be used to compute the total materials variance? (A = Actual; S = Standard; Q = Quantity; P = Price)

(AQ x AP) - (SQ x SP)

Which of the following is a true statement?

A. All of the answers are correct

Select the response that best illustrates the point that product cost flows are cyclical and occur in a specific sequence.

Acquire raw materials, convert raw materials, sell finished goods, collect cash

Purchasing production supplies for cash is a(n):

Asset exchange transaction

The budgeting technique that provides for employee input into the planning process is known as:

B. Participative budgeting

Select the incorrect statement about the planning process.

B. The longer the time period, the more specific the plans.

Select the incorrect statement regarding the cash budget.

B. The total cash available is calculated by adding cash receipts and the ending cash balance

Select the incorrect statement regarding the cash budget.

B. The total cash available is calculated by adding cash receipts and the ending cash balance.

Which of the following correctly computes cost of goods manufactured?

Beginning work in process + Direct materials used + Direct labor + Overhead - Ending work in process

Chapter 8 Review Questions: Which of the following would not be included in a selling and administrative expenses budget?

Budgeted interest expense

Argus Company experienced accounting event that affected its financial statements as indicated below: Assets = Liabilities + Equity Revenue - Expenses = Net Income + - NA NA NA NA NA Which of the following accounting events could have caused the indicated effects on the company's accounting equation? A. Applied manufacturing overhead to work in process B. Purchased raw materials for cash C. All of these answers are correct D. Paid cash wages of production workers

C. All of these answers are correct

Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?

Cash payments schedule

Grimes Company sold 2,500 units that had cost $12,000 to produce. The recording of the sale would include an increase to:

Cost of Goods Sold

Select the correct equation format for the purchases budget.

Cost of budgeted sales + Desired ending inventory - Beginning inventory = Required purchases

Which of the following costs would not increase the work in process inventory account?

Cost of selling supplies

The bash budget is based on which budget?

D. All of the answers are correct.

Which of the following factors should be considered in establishing standards for use with a standard costing system?

D. All of these answers are correct.

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

D. Both administrative and advertising expense are correct

Sometimes employees will deliberately overstate the amount of materials and/or labor that should be required to complete a job. The difference between inflated and realistic standards is known as:

D. Budget slack

Jared expects to charge $60 per hour for his industrial maintenance business during the following year. He expects to reach 50,000 hours at that price. Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?

D. Create a flexible budget showing a range of outcomes between 40,000 hours and 50,000 hours

Which of the following would appear on a selling and administrative expense budget, but would not appear on a schedule of cash payments for selling and administrative expenses?

D. Depreciation expense

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

D. Expected unit selling price

Which of the following income statement formats is most commonly used with flexible budgeting?

D. Sales - Variable costs = Contribution margin; Contribution margin - Fixed costs = Net income

Select the correct statement about budgeting and human behavior.

D. The attitudes of upper managers significantly impact budget effectiveness

All of the following costs are accumulated in the Work in Process Inventory account except:

Depreciation on factory equipment

Which of the following items will not appear on a cash budget?

Expected credit sales

Which of the following items is not needed to prepare a sales budget by product line?

Expected purchase price of each product

The cost of direct materials purchased on account is expensed at the time the:

Goods made in the manufacturing process are sold

Which of the following statement(s) is/are correct? I. A predetermined overhead rate is used to assign estimated overhead costs to work in process inventory. II. The predetermined overhead rate is calculated by dividing estimated overhead cost by the estimated volume or level of activity. III. The most common means of allocating overhead costs is to calculate a predetermined overhead rate at the end of the period.

I and II

Chapter 7 Review Questions: Sometimes the sales staff will deliberately underestimate the amount of expected sales. This practice is known as:

Lowballing

Standard cost systems facilitate the management practice known as:

Management by exception

In which account is the actual amount of costs such as factory utilities and maintenance initially recorded?

Manufacturing Overhead

The cost of indirect labor will initially be charged to:

Manufacturing Overhead

Which manager is generally held responsible for the sales volume variance?

Marketing manager

Herald Company paid $2,800 cash for production supplies. The recognition of this event will:

Not impact total assets

Which manager is usually held responsible for labor price variances?

Production supervisor

A credit to the Raw Materials Inventory account represents:

Raw materials added to production

Select the response that indicates the correct sequence of product cost flows from production to sale.

Raw materials, work in process, finished goods, and cost of goods sold

The inventory purchases budget is based on which budget?

Sales budget

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

Sales budget

Which of the following is not considered a pro forma financial statement?

Sales budget

Select the incorrect statement regarding service companies.

Service companies accumulate their service costs in a Work in Process Inventory account similar to manufacturers.

A budget prepared at a single volume of activity is referred to as a:

Static budget

The sales volume variance is the difference between the:

Static budget (based on planned volume) and the flexible budget (based on actual volume)

The type of planning that involves long - term decisions, such as defining the scope of the business and deciding what products to make, is known as:

Strategic planning

Items to Classify Standard Actual Sales Revenue 820,000 835,000 Wages 125,000 128,000 S&A Expenses 400,000 408,000 Cost of Goods Sold 608,000 600,000 Which of the following statements is incorrect?

The S&A expense variance is favorable

Chapter 11 Review Questions: Which of the following statements regarding the schedule of cost of goods manufactured and sold is correct?

The schedule of is an internal document that is not presented with the company's financial statements, and, in addition, the schedule of cost of goods manufactured and sold reports the amount of direct raw materials used during the period.

Static and flexible budgets are similar in that:

They both are based on the same per unit variable amounts and the same fixed costs.

Virginia Company paid $7,500 cash for various manufacturing overhead costs. As a result of this transaction:

Total assets, total equity, and net income are not affected

When would a cost variance be listed as unfavorable?

When actual costs exceed budgeted costs.

When would a sales price variance be listed as unfavorable?

When the actual sales price is less than the standard sales price.