Managerial Accounting Exam 2

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The formula for calculating the variable overhead efficiency variance is

(AH-SH) x SVOR

Tina invested in a project with a payback period of 4 years. The project brings $20,000 per year for a period of 10 years. What was the initial investment?

4 years x $20,000 = $80,000 initial investment

The total fixed overhead variance is calculated by the following formula:

Actual Fixed Overhead - (Standard Fixed Overhead Rate X Standard Hours Allowed)

Which of the following is used to calculate the fixed overhead spending variance?

Actual Fixed Overhead-Budgeted Fixed Overhead

Managers may use the accounting rate of return to evaluate potential investment projects because

All of these: -Debt contracts require that a firm maintain certain ratios -bonuses to managers may be based on accounting income -it serves as a screening measure

This is the person responsible for directing and coordinating the organization's overall budget process.

Budget Director

Which of the following is an operating budget?

Budgeted income statement

Which of the following is a use of budgets for control?

Budgets set a standard against which results can be compared.

Which of the following is true of participative budgeting?

It gives an opportunity to build slack into the budgets.

Which of the following is true of a normal costing system?

It predetermines the overhead costs for product costing.

During April, a small roofing company purchased 400 bundles of a certain type of shingle at a price of $40 per bundle, $5 more than the standard price. The standard quantity of this type of shingle is 440 bundles. What is the journal entry to record the purchase of materials?

Materials: 14,000 Materials Price Variance: 2,000 Accounts Payable: 16,000

Direct materials needed for production is calculated by:

Multiplying units to be produced by direct materials per unit

Which of the following refers to a follow-up analysis of a capital project once it is implemented?

Postaudit

The two variances for variable overhead are

Spending and efficiency variances

Which of the following refers to the minimum acceptable rate of return?

The cost of capital

Which capital investment decision model is based on the time required for a firm to recover its original investment?

The payback period

Which of the following is not true?

The production budget is prepared in units and dollars

Which of the following is true if net present value (NPV) is negative?

The return on the investment is less than the discount rate.

Which of the following is true if net present value (NPV) is negative?

The return on the investment will be less than the discount rate.

In preparing the overhead budget, many companies use

a unit-based driver such as direct labor hours

Standard cost systems can enhance operational control through the use of:

efficiency variances which indicate the need for corrective action

Which budget is used to assess managerial efficiency?

flexible budget

One disadvantage of the payback period is that

managers may choose investments with quick payback periods

Looking ahead to see what actions should be take to realize particular goals is:

planning

The ______ shows the quantity of each input that should be used to produce one unit of output

standard cost sheet

The variable overhead spending variance is expressed as the difference between:

the actual variable overhead and the budgeted variable overhead based on actual hours used to produce the actual output

Responsibility for the variable overhead spending variance is usually assigned to

the production department


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