ACC 230 Exam 2

Distinctive objects

strategic objectives that distinguish an organization from its competitors, based on the organization's strategy

Comfort Corporation manufactures two models of office chairs. Chair A requires 18 setups, 265 direct labor hours, and $61,100 of overhead. The Chair B requires 29 setups, 200 direct labor hours, and $64,800 of overhead. Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to Chair A? (Do not round interim calculations.) -A) $62,950 -B) $54,151 -C) $71,749 -D) $36,929

$71,749

Strategy

-Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives. -Strategy describes how an organization can create value for its customers while differentiating itself from its competitors.

4 levels of cost hierarchy

1. Output unit-level costs 2. Batch-level costs 3. Product-sustaining costs 4. Facility-sustaining costs

Focal points

A focal point is a strategic objective that has many other links funneling INTO it

Overhead Allocation Rate

A measure of overhead cost divided by a measure of the overhead allocation base.

Trigger points

A trigger point is a strategic objective where many ties spur OUT from it, resulting in the achievement of many strategic objectives

Orphan objectives

An orphan objective has only weak ties leading out of it to other strategic objectives

COGS Budget

Beg. Inv. FG +Cost of goods manufactured =Cost of goods available for sale -Ending inv, FG =COGS

Production Budget

Budgeted Sales + Target End. Inv. FG =Required -Beg. Inv. FG =To be produced

Unit Cost-Ending Inventory budget

Cost per unit of input x input

Financial budget

Financial decisions on how to obtain the funds to acquire those resources made up of the Capital Expenditure budget, the Cash budget, the Budgeted Balance Sheet, and the Budgeted Statement of Cash Flows

4 perspectives of balanced scorecard

Financial—profits and value created for shareholders Customer—the success of the company in its target market Internal business perspective—the internal operations that create value for customers Learning and growth—the people and systems capabilities that support operations

Which of the following describes a rolling budget? -A) It is a budget that continually outlines the amount required to roll over debt in a future period. -B) It is created continually by adding a month, quarter, or year to the period just ended. -C) It is a budget that outlines budgeted expenses while utilizing a moving average. -D) It is a budget that is submitted to a bank at the beginning of every month as per a loan covenant.

It is created continually by adding a month, quarter, or year to the period just ended.

Successful balanced scorecard

Must have commitment and leadership from top management. Must be communicated to all employees. For the balanced scorecard to be effective, managers must view it as a fair way to assess and reward all important aspects of a manager's performance and promotion prospects.

operating budget

Operating decisions on how to best use the limited resources of an organization begins with the Revenues budget, includes multiple schedules, and concludes with the Budgeted Income Statement

Strength of ties

Ties are the causal links between strategic objectives and can be qualified as strong, moderate, or weak

Direct Labor Budget

Units to be produced x DL hours per unit = total DL hours required x DL cost per hour = total direct labor cost

Allocation base

a measure such as direct labor hours or machine hours that is used to assign overhead costs to products and services

Master budget

a presentation of an organization's operational and financial budgets that represents the firm's overall plan of action for a specified time period

Static budget

based on the level of output planned at the start of the budget period

Cost Hierarchy

categorizes various activity cost pools on the basis of the different types of cost drivers, cost-allocation bases, or different degrees of difficulty in determining cause-and-effect relationships

ABC System

commonly use a cost hierarchy with four levels to identify cost-allocation bases that are cost drivers of the activity cost pools

Static budget variance

difference between the actual result and the corresponding static budget amount

Activity-based costing can eliminate distortions because ABC systems: -A) establish a cause-and-effect relationship with activities performed -B) use single cost pool for all overhead costs, thereby enabling simplicity -C) use a broad average to allocate all overhead costs -D) never consider interactions between different departments in assignment support costs

establish a cause-and-effect relationship with activities performed

Budgets incorporate management goals and: -A) are a strategic long range plan -B) are both a short range and long rage profit plan -C) includes only financial aspects of an operation as those are the only items than can be quantified in a profit plan -D) express management's operating and financial plan for a specified period - usually a fiscal year

express management's operating and financial plan for a specified period - usually a fiscal year

Sales Volume Variance

flexible budget - static budget It arises solely from the difference between the actual volume and the budgeted volume (from the static budget).

favorable variance

has the effect, when considered in isolation, of increasing operating income relative to the budget amount

unfavorable variance

has the effect, when viewed in isolation, of decreasing operating income relative to the budget amount

Activity based costing system differs from traditional costing systems in the treatment of: -A) direct labor costs -B) direct materials costs -C) prime costs -D) indirect costs

indirect costs

Overcosting

occurs when the cost measurement system reports a cost for a product that is above the cost of the resources the product consumes

Undercosting

occurs when the cost measurement system reports a cost for a product that is below the cost of the resources the product consumes

Activity-based costing can eliminate distortions because ABC systems: -A) unit-level cost -B) batch-level cost -C) product-sustaining cost -D) facility-sustaining cost

product-sustaining cost

For variable manufacturing overhead, there is no

production volume variance

Budgetary slack

the practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve

Budget

the quantitative expression of a proposed plan of action by management for a specified period both financial and non-financial aspects, acts like a roadmap

Balanced scorecard

translates an organization's mission and strategy into a set of performance measures that serves as the framework for implementing the organization's strategy

Revenues Budget

units x selling price = total