Cost Exam 2

Under variable costing, if a manager's bonus is tied to operating income, then increasing inventory levels compared to last year would result in ________.

A

Which of the following mathematical expression is used to calculate budgeted variable overhead cost rate per output unit?

Budgeted input allowed per output unit × Budgeted variable overhead cost rate per input unit

Which of the following would not lead to a build up inventory as a strategy to increase operating income?

Cutting overhead costs as year-end approaches.

Which of the following assumes that capacity will be decreased because of slowdowns due to plant maintenance or other interruptions of the production lines?

Practical capacity

Which of the following statements is true of fixed overhead cost variances?

The difference between flexible budget costs and allocated overhead costs will give the production volume variance.

On a traditional income statement, all manufacturing-related costs, whether fixed or variable, are listed

above the gross profit line.

In ________, fixed manufacturing costs are included as inventoriable costs.

absorption costing

For fixed manufacturing overhead, there is no ________.

efficiency variance

Which of the following costs is inventoried when using variable costing?

electricity consumed in manufacturing process

To discourage producing for inventory, management can ________.

evaluate nonfinancial measures such as units in ending inventory compared to units in sales evaluate performance over a three- to five-year period rather than a single year

One possible reason for unfavorable variable overhead efficiency variance for materials handling is ________.

experienced but unmotivated employees

Absorption costing is required to be used for

external reporting including income tax

Fixed overhead costs ________.

have no efficiency variance

A(n) ________ "arises because the number of units actually sold differs from the static budget units."

n- flex bud v

Which of the following measures capacity levels in terms of demand for the output of the plant?

normal capacity utilization and master-budget capacity utilization

It is most difficult to estimate ________ because of the need to predict demand for the next few years.

normal-capacity utilization

Which of the following capacity levels should a company choose, from a long-run product costing perspective, to allocate budgeted fixed manufacturing costs to products?

practical capacity for pricing decisions

Operating income reported on the end-of-period financial statements is changed when ________ is used to handle the production-volume variance at the end of the accounting period.

the write-off variances to cost of goods sold approach

The budgeted fixed manufacturing cost rate is the lowest for ________.

theoretical capacity

If 1,000 units are produced and only 700 units are sold, ________ results in the greatest amount of expense reported on the income statement.

throughput costing

Disadvantages of using standard costs and variances include all of the following except

traditional standards can promote unfavorable employee behavior.

The contribution-margin format is used for ________.

variable costing income statement

Which of the following statements is true of contribution-margin format of the income statement?

It distinguishes between variable and fixed costs in its format.

Which of the following best describes practical capacity?

It is the level of capacity that reduces theoretical capacity by considering unavoidable operating interruptions, such as scheduled maintenance time and shutdowns for holidays.

Which of the following is the operating income an investment center generates before subtracting common fixed costs that are allocated to the center?

Segment margin