test #3 managerial accounting

an adaption of residual income that has been adopted by many companies is called

economic value added

A budget that takes into account how costs are affected by changes in level of activity is a _____ budget.

flexible

Estimates of what revenues & costs should have been based on the actual level of activity are shown on the _____ budget.

flexible

the net operating income that an investment center earns about the minimum required return on its average operating assets is its _____ income

residual

ROI can be calculated as:

margin x turnover & net operating income/average operating assets

Unfavorable variance

Actual revenue is less than budgeted revenue

Favorable variance

Actual revenue is more than budgeted revenue

When considering ROI, excessive operating expenses is always a greater concern to managers than excessive operating assets. (true/false)

False

when making a decision, only relevant items are included in the analysis of the alternatives when using:

the differential cost approach only

A cost that has already been incurred & cannot be avoided regardless of what a manager decides to do is referred to as a(n) _____ cost.

sunk

When preparing a flexible budget, the level of activity

affects variable costs only

If the planned budget revenue for 5,000 units is $120,000, what is the flexible budget revenue if the actual activity is 4,500 units?

$120,000/5,000 = $24 per unit x 4,5000 = $108,000

The planning budget calls for total variable costs for supplies to be $6,250 based on 1,000 units with planned revenue at $24,000. A total of 1,200 units were actually produced & sold. What amounts should appear on the flexible budget?

$7,500 for supplies & $28,000 revenue.

A planning budget called for 500 units to be produced & total direct labor cost of $7,500. Actual production was 600 units & actual direct labor cost was $9,300. The spending variance is

$7,500/500 = $15 standard rate per hour x 600 = $9,000 flexible budget - $9,300 actual budget = $300 U

In order to increase margin, a company must (1) sales, and/or (2) operating expenses and/or (3) selling price. (increase/decrease)

1) increase 2) decrease 3) increase

Given a margin of 12%, sales of $150,000, & average operating assets of $90,000, the ROI is ___%

12% x $150,000/$90,000 = 20%

Given sales of $250,000, NOI of $25,000 & Average Operating Assets of $125,000.

Margin= $25,000/$200,000 (NOI/sales) = 10% Turnover= $250,000/125,000 (sales/average operating assets) = 2.

What ratios are part of the ROI formula?

NOI/sales & sales/average operating assets

The calculation of the budget variance uses

budgeted fixed overhead & actual fixed overhead.

when a constraint exists, companies need to focus on maximizing

contribution margin per unit of constraint

When making a decision to either buy a movie ticket or rent a DVD, the cost of the movie ticket is an example of a(n) ______ cost

incremental & avoidable

Poor supervision is one possible cause of an unfavorable ______ variance.

labor efficiency

A static budget is suitable for

planning only

SP(AQ-SQ) is the formula for the materials ______ variance.

quantity