Managerial Accounting Test #3

The present value of money is always:

less than its future amount

How do you find the labor rate variance?

(Actual X Actual) - (Actual X Standard)

How do you find the materials price variance?

(Actual X Actual) - (Actual X Standard)

How do you find the total direct materials variance?

(Actual X Actual) - (Standard X Standard)

How do you find the labor efficiency variance?

(Actual X Standard) - (Standard X Standard)

How do you find the materials quantity variance?

(Actual X Standard) - (Standard X Standard)

List 3 ways to evaluate a capital investment:

1. Discounted cash flow method 2. The payback period method 3. The return on investment method

2 important advantages of standard costs systems is that standard costs:

1. focus attention on trouble spots and facilitate prompt corrective action 2. hundreds of companies have discovered the importance of cost control as a means of survival in fiercely competitive markets

List 3 capital budgeting techniques

1. payback period 2. discounted future cash flows 3. return on average investment

Cash payback does not consider what 3 things?

1. the timing of the cash flows 2. total profitability of an investment 3. the cash flows over the entire life of an investment.

The average carrying value (or average investment) of an asset with no salvage value is equal to: a. the original cost of the asset divided by its estimated useful life b. the original cost of the asset divided by two c. the average annual net cash flow of the asset multiplied by the asset's estimated useful life. d. the average annual net income of the asset multiplied by the asset's estimated useful life

A

Which of the following is not an advantage of using a standard cost system? a. it eliminates the need for analysis of variances b. it facilitates establishing an effective system of responsibility accounting c. it requires an analysis of all aspects of operations. d. it helps management control costs

A

Which statement is true regarding a standard cost system? a. both actual and standard costs are used b. only standard costs are used c. if variances occur, then something negative in the operations has occurred d. standards are used only when actual amounts are not available

A

If the actual cost per pound of direct material is less than the standard cost per pound there is:

A favorable materials price variance

If the actual amount of direct materials used in production was less than the standard amount allowed for units produced, there was:

A favorable materials quantity variance

In computing the return on average investment of a particular asset, the asset's annual depreciation expense may be viewed as:

A recovery of the time amount originally invested in the asset

A large favorable variance from standard costs at the end of the year should be:

Allocated between ending inventories and cost of goods sold

If the hourly wage rate actually paid during January is higher than the standard rate, the result is:

An unfavorable labor rate variance

The use of inexpensive, low quality, materials often results in:

An unfavorable materials quantity variance

An investment's annual net cash flow will always be equal to its:

Annual cash receipts less its annual cash disbursements

Capital budgeting proposals often require input from which stakeholders? a. managers b. employees c. shareholders d. directors

C

In computing the return on average investment of a particular asset, the asset's annual depreciation expense may be viewed as: a. an increase in the average amount invested over the life of an asset b. an increase in the asset's carrying value each year. c. a recovery of the amount originally invested in the asset d. a decrease in the asset's net cash flows

C

Of the following techniques of capital budgeting, which one explicitly incorporates an estimate of interest rate into the basic computation? a. payback method b. average rate of return c. discounted cash flows method d. accounting book value method

C

In establishing standard costs for labor, management must look at all of the following except: a. time allowed to produce each product b. direct labor requirements for each product. c. the wage rate of a direct laborer d. the quantity of materials for each product. Standard costs for materials

D

When standard costs are used in a cost accounting system: a. a favorable variance results when standard amounts are less than actual costs b. cost variances are shown in the year-end balance sheet as assets, if favorable, or as liabilities, if unfavorable. c. costs charged to the work in process inventory, finished goods inventory, and cost of goods sold accounts are actual costs. d. costs charged to the work in process inventory, finished goods inventory, and cost of goods sold accounts are at standard costs.

D

Which method of project selection gives consideration to the time value of money in a capital budgeting decision?

Discounted cash flows method

Which technique of capital budgeting explicitly incorporates an estimate of an interest rate into the basic computation?

Discounted cash flows method

The length of time necessary to recover the entire cost of an investment from its resulting annual net cash flow

Payback period

When management considers an investment, they look for the payback period to be:

Short

A cost that has been incurred irrevocably by past actions is a:

Sunk cost

The minimum rate of return used by an investor to bring future cash flows to their present value is called?

The discount rate

To compute a future amount from a present value, we need to know what?

The interest rate and length of time

The average carrying value (or average investment) of an asset with no salvage value is equal to:

The original cost of the asset divided by two

Controlling the materials quantity variance is usually the responsibility of:

The production supervisor

Controlling the materials price variance is usually the responsibility of:

The purchasing agent

There will be a favorable materials price variance if:

The standard price per unit is greater than the actual price per unit.

There is an unfavorable labor efficiency variance when:

actual hours are greater than standard hours

A standard cost is the per-unit cost incurred under:

normal, but efficient operating conditions

Are the costs that should be incurred to produce a product under normal conditions

standard costs