Managerial Accounting Exam 3

A revenue variance is unfavorable if the revenue in the static planning budget is less than the revenue in the flexible budget.

False

Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets.

False

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

False

Control involves developing goals and preparing various budgets to achieve those goals.

False

If demand is insufficient to keep everyone busy and workers are not laid off, a favorable (F) labor efficiency variance often will be a result.

False

If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor rate variance and unfavorable variable overhead rate variance for the same period.

False

In general, the production manager is responsible for the materials price variance.

False

The disbursements section of a cash budget consists of all cash payments for the period except cash payments for dividends.

False

The labor rate variance measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the standard hours allowed for the actual output.

False

The production budget is typically prepared prior to the sales budget.

False

The selling and administrative expense budget lists all costs of production other than direct materials and direct labor.

False

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the fixed part of the predetermined overhead rate.

False

When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased.

False

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

It is calculated based on the sales budget and the desired ending inventory.

Which of the following statements is NOT correct concerning the Cash Budget?

It is not necessary to prepare any other budgets before preparing the Cash Budget.

Which of the following budgets are prepared before the sales budget? Budgeted Income Direct Labor Statement Budget A) Yes Yes B) Yes No C) No Yes D) No No

Choice D

When using a flexible budget, a decrease in activity within the relevant range: Multiple Choice A.) decreases variable cost per unit. B.) increases variable cost per unit. C.) decreases total costs. D.) increases total costs.

D.) decrease total costs

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service.

True

Cash collections in a schedule of cash collections typically consist of collections on sales made to customers in prior periods plus collections on sales made in the current budget period.

True

Flexible budgets can be used when there is more than one cost driver (i.e., measure of activity).

True

If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is labeled unfavorable (U).

True

In the manufacturing overhead budget, the non-cash charges (such as depreciation) are deducted from the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead.

True

In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units).

True

The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period.

True

Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances.

True

The budgeted variable selling and administrative expense is calculated by multiplying the budgeted unit sales by the variable selling and administrative expense per unit.

True

The master budget consists of a number of separate but interdependent budgets.

True

The number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory.

True

The production budget is typically prepared before the direct materials budget.

True

The standard price per unit for direct materials should reflect the final, delivered cost of the materials.

True

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate.

True

To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity.

True

When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable.

True

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost.

True

When preparing a direct materials budget, the required purchases of raw materials in units equals:

raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.

The usual starting point for a master budget is:

the sales forecast or sales budget.

In a production budget, if the number of units in finished goods inventory at the end of the period is less than the number of units in finished goods inventory at the beginning of the period, then the expected number of units sold is less than the number of units to be produced during the period.

False

One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks.

False

The production department should generally be responsible for materials price variances that resulted from: Multiple Choice purchases made in uneconomical lot-sizes. rush orders arising from poor scheduling. purchase of the wrong grade of materials. changes in the market prices of raw materials.

Rush orders arising from poor scheduling.