ACC 213 Exam 2

T/F: A self-imposed budget is one prepared by top management and passed downward through an organization.

False

T/F: Absorption costing net operating income is closer to the net cash flow of a period than is variable costing net operating income.

False

T/F: Absorption costing treats fixed manufacturing overhead as a period cost.

False

T/F: Activity-based costing involves a two-stage allocation in which overhead costs are first assigned to departments and then to jobs on the basis of direct labor hours.

False

T/F: Direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system.

False

T/F: Net operating income computed using absorption costing will always be greater than net operating income computed using variable costing.

False

T/F: The direct labor budget begins with sales in units from the sales budget.

False

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

False

T/F: The usual starting point in budgeting is to make a forecast of net income.

False

T/F: Under variable costing, variable selling and administrative costs are included in product costs.

False

T/F: Variable costing is not permitted for income tax purposes, but it is widely accepted for external financial reports.

False

T/F: When using the self-imposed budget approach, it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioral responses from employees.

False

T/F: A continuous or perpetual budget is one which covers a 12-month period but which is constantly adding a new month on the end as the current month is completed.

True

T/F: A segment is any part or activity of an organization about which a manager seeks cost, revenue, or profit data.

True

T/F: Absorption costing treats all manufacturing costs as product costs.

True

T/F: Allocating common fixed costs to segments on segmented income statements reduces the usefulness of such statements.

True

T/F: Batch-level activities are performed each time a batch of goods is handled or processed.

True

T/F: If a manufacturing company is using activity-based costing for internal purposes only, then organization-sustaining overhead costs should not be allocated to any of the products.

True

T/F: In activity-based costing, some costs may be broken down and assigned to two activity cost pools. For example, part of a supervisor's salary may be classified as a product-level activity and part of it may be classified as a batch-level activity.

True

T/F: 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

T/F: In the preparation of financial statements using variable costing, fixed manufacturing overhead is treated as a period cost.

True

T/F: In traditional costing systems, all manufacturing costs are assigned to products -- even manufacturing costs that are not caused by the products.

True

T/F: Organization-sustaining activities are carried out regardless of how many units are made, how many batches are run, or how many different products are made.

True

T/F: The selling and administrative expense budget lists the budgeted expenses for areas other than manufacturing.

True

T/F: Under variable costing, only variable production costs are treated as product costs.

True

T/F: Variable costing is better suited to cost-volume-profit calculations than absorption costing.

True

T/F: When a company shifts from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system in which there are batch-level and product-level costs, the unit product costs of high volume products typically decrease whereas the unit product costs of low volume products typically increase.

True

T/F: When lean production is introduced, the difference in net operating income computed under the absorption and variable costing methods is reduced.

True

T/F: When production exceeds sales for the period, absorption costing net operating income will exceed variable costing net operating income.

True

T/F: When the number of units in work in process and finished goods inventories increase, absorption costing net operating income will typically be greater than variable costing net operating income.

True