Accounting 526 Final

Which of the following methods do managers use to estimate the fixed and variable components of mixed costs by analyzing past records of cost and activity data?

least-squares regression

A negative net present value indicates that the project's return is _________.

less than the minimum required rate of return

The _________ requires that the costs incurred to generate a particular revenue should be recognized as expenses in the same period that the revenue is recognized.

matching principle

Companies can improve job cost accuracy by using _________.

multiple predetermined overhead rates

What is NOT a column on a flexible budget performance report?

net operating income

The measure of how sensitive net operating income is to a given percentage change in volume sales is called _________.

operating leverage

What cost would not be allocated to products or customers?

other

What ignores the time value of money?

payback period

How should the wages of a sheet metal worker in a fabrication plant be classified?

product cost

Advertising is an example of a _________ activity.

product-level

Design new products.

product-level

Manage parts inventories.

product-level

High Roller Incorporated is trying to decide whether to buy a private jet or to lease one. The finder's fee is incurred only if the private jet is bought. The finder's fee is what type of cost for this decision?

relevant cost

Differential costs are always _________.

relevant in making business decisions

The difference between the actual total revenue and budgeted total revenue at the actual level of activity is called a(n) _________.

revenue variance

The budgeting process begins with the preparation of the _________ budget.

sales

An unfavorable variance of $5,000 in cost of goods sold is determined by comparing the actual results (10,000 units) and the flexible budget (10,000 units). What type of variance is described?

spending variance

The difference between the actual cost and budgeted cost at the actual level of activity is called a(n) _________.

spending variance

When all of a company's job cost sheets are viewed collectively they form what is known as a _________.

subsidiary ledger

What is always an irrelevant cost?

sunk cost

Costs that have been incurred and cannot be eliminated regardless of the alternative chosen are _________.

sunk costs

The standard quantity allowed is _________.

the amount of an input that should have been used to complete the actual output for the period

The standard hours allowed is _________.

the direct labor-hours that should have been used to complete the actual output for the period

When using least-squares regression, R^2 represents _________b.

the measure of goodness of fit

When computing variable manufacturing overhead variances, the standard rate represents the _________.

variable portion of the predetermined overhead rate

When a company does not have enough capacity to produce all of the products and sales volume demanded by their customers, this leads to _________.

volume trade-off decisions

Assume that direct labor-hours are used as the overhead allocation base. If the direct labor efficiency variance is unfavorable, the variable overhead efficiency variance _________.

will be unfavorable

The management of Blue Ocean Company estimates that 50,000 machine-hours will be required to support the production planned for the year. It also estimates $300,000 of total fixed manufacturing overhead cost for the coming year and $4 of variable manufacturing overhead cost per machine-hour. What is the predetermined overhead rate?

$10.00 per machine hour

Activity-based costing accumulates costs for each _____.

activity

In the second-stage allocation of overhead costs, we use _________ to assign costs to cost objects.

activity rates

An unfavorable variance of $5,000 in sales is determined by comparing the flexible budget (9,000 units) and the planning budget (10,000 units). What type of variance is described?

activity variance

Paradise Company's planning budget for 10,000 units showed sales of $500,000. The flexible budget for 12,000 units showed sales of $600,000. What is the variance of $100,000 called if this variance was due only to an increase in unit sales?

activity variance

Manufacturing costs include all of the following categories except _________.

administrative costs

The standard quantity per unit defines the _________.

amount of direct materials that should be used for each unit of finished product including an allowance for normal inefficiencies, such as scrap and spoilage

For a production budget, the _________ is the beginning inventory for the year.

beginning inventory for the first quarter

The direct materials required to manufacture each unit of product are listed on a _________.

bill of materials

A flexible budget performance report for variable manufacturing costs shows _________.

both the activity variances and the spending variances

A normal cost system applies overhead to jobs _________.

by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the job

All of the following are relevant to the sell or process further decision except _________. a) costs incurred beyond the split-off point b) revenues at the split-off point c) joint costs incurred before the split-off point d) revenues beyond the split-off point

c

Which of the following is a major factor that should be taken into consideration while planning the desired level of inventories?

costs of carrying inventory

What is not a management report that is normally prepared with ABC data?

customer margins

What is usually plotted as a horizontal line on the cost-volume-profit (CVP) graph?

fixed expenses

First-stage allocation of overhead costs to each cost pool is accomplished using all of the following except _________. a) employee interviews b) grouping batch and unit level activities c) percentages

grouping batch and unit level activities

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of selling a tour package.

indirect cost

Atlas Corporation sells 100 bicycles during a month. The contribution margin per bicycle is $200. The monthly fixed expenses are $8,000. What is the profit from the sale of 100 bicycles?

$12,000

A new investment project currently under consideration has a negative net present value of $85,000. The project has a life of 10 years and the minimum required rate of return is 8%. The present value factor for an annuity at 8% for 10 periods is 6.71. What is the amount of annual additional cash flow that is required to make this investment attractive?

$12,668

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours to produce 50 audio controllers, what is this job's unit product cost (per audio controller)?

$124

Khan Corporation has budgeted the unit sales for April to be 5,000 units. The sales price is $25 per unit, and production costs are $10 per unit. Monthly utility expenses are estimated to be $2,000 plus $2 per unit, whereas selling expenses are estimated to be $12,000. The company pays a monthly rent of $2,000. What would be the utility expenses on the company's flexible budget if actual unit sales for April were 6,000 units?

$14,000

Atlas Corporation sells 100 bicycles during a month at a price of $500 per unit. The variable expenses amount to $300 per bicycle. How much does profit increase if it sells one more bicycle?

$200

Superware, Incorporated produces multiple products out of a common input. Geratin is one such product, which has a sales value of $15,000 at the split-off point. Joint costs allocated to Geratin are $12,000. Sales value of Geratin increases to $25,000 after further processing, and this processing will cost $7,000. What is the net profit or loss if Superware processes the product further?

$3,000 profit

Budget Solutions has determined from its flexible budget that selling costs for actual level activity for a period should have been $25,000. Actual selling costs incurred during the period were $28,000. What is the amount and direction of variance in selling costs?

$3,000 unfavorable

Pro Clean Company, a manufacturer of hand sanitizers, intends to produce 40,000 units in the third quarter and 35,000 units in the fourth quarter. Each unit requires 0.50 direct labor-hours (DLHs) and the cost of direct labor per hour is $18. What would be the total direct labor cost for the fourth quarter?

$315,000

Spartan Corporation estimates that it will incur $200,000 of total manufacturing overhead cost at an estimated activity level of 10,000 direct labor-hours. What is the amount of manufacturing overhead that would be applied to a job that required 200 direct labor-hours?

$4,000

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. What is the budgeted variable manufacturing overhead for the year?

$400,000

William Corporation has a contract with the labor union which guarantees its workers pay for at least 40,000 hours every quarter. Based on its direct labor budget for the current year, the company estimated it will need 39,000 direct labor-hours during the fourth quarter to produce 13,000 units of finished goods. Each unit requires 3 direct labor-hours (DLHs) and the cost of direct labor per hour is $12 per hour. What is the total direct labor cost for the fourth quarter?

$480,000

Khan Corporation has budgeted the unit sales for April to be 5,000 units. The sales price is $25 per unit, and production costs are $10 per unit. Monthly utility expenses are estimated to be $2,000 plus $2 per unit, whereas selling expenses are estimated to be $12,000. The company pays a monthly rent of $2,000. What is the net operating income in the company's planning budget?

$49,000

Project Marvel is a five-year project. The project has a total cash inflow of $350,000. The present value of such inflows is $275,000. The project requires an initial investment of $200,000 and additional working capital of $25,000. What is the net present value of the project?

$50,000

Precision Company estimates its machine-hour requirements for the four quarters to be 35,000 hours, 20,000 hours, 15,000 hours, and 30,000 hours respectively. The variable manufacturing overhead rate is $4 per machine-hour. The fixed manufacturing overhead is $50,000 per quarter, which includes $20,000 of depreciation expense. What is the predetermined overhead rate for the year?

$6 per machine hour

Wilson Products uses a plantwide predetermined overhead rate of $10 per direct labor-hour. Direct material and direct labor associated with Job X23 are $4,000 and $1,200, respectively. If Job X23 used 100 direct labor-hours, what is the total cost assigned to this job?

$6,200

Addison Corporation is considering the purchase of equipment that would increase sales revenues by $250,000 per year and cash operating expenses by $100,000 per year. The equipment would cost $400,000 and have a 5-year life with no salvage value. The simple rate of return on the investment is closest to _________.

17.5%

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What are the production needs for the first quarter?

195,000 bottles

Vineyard Corporation, a manufacturer of fine wines, began the year with 20,000 bottles in inventory. The company estimated the budgeted sales for the four quarters of the current year to be 200,000 bottles, 150,000 bottles, 250,000 bottles, and 400,000 bottles, respectively. The management feels that an ending inventory of 10% of the subsequent quarter's sales is appropriate. What is the desired ending inventory for the second quarter?

25,000 bottles

An investment proposal with an initial investment of $100,000 generates annual net cash inflow of $20,000 for a period of 10 years. The project has a net present value of $10,000. What is this investment proposal's payback period?

5 years

All of the following are differences between activity-based costing (ABC) and traditional absorption costing except _________.

ABC allocates all manufacturing costs to products

With regards to interpretation, what are the important areas that appear on a CVP graph?

Break-even point, loss area, and profit area

Which of the following is the term used to describe the discount rate at which the present value of a project's cash inflows will equal the present value of its cash outflows?

Internal Rate of Return

In situations where no revenues are involved, which of the following is the most desirable alternative?

Least-cost decisions

Interview and process new employees in the personnel department.

Organization-sustaining

Perform periodic preventive maintenance on general-use equipment.

Organization-sustaining

Use the general factory building.

Organization-sustaining

The profit graph is based on the following linear equation:

Profit = Unit CM × Q - Fixed Expenses

What of the following forms the basis for a financial advantage when making a business decision?

Whether the dfferential benefits exceed the differential costs

The simple rate of return is also called all of the following except _______. a) annual rate of return b) unadjusted rate of return c) accounting rate of return

a

Which of the following statements about using different approaches to analyze alternatives is NOT true? a) Considering only the relevant costs gives results a different answer than that obtained when all costs are considered. b) Differential analysis focuses on the future costs and benefits that differ between any two alternatives. c) Mixing irrelevant costs with relevant costs may cause confusion and distract attention from the information that is critical. d) Costs and revenues that do not differ between alternatives are irrelevant to decision making.

a

Companies prepare direct labor budgets to _________.

avoid labor shortages

All of the following are reasons for revenue variances EXCEPT _________. a) A change in discount structure b) A change in input prices c) A change in product mix d) A change in selling price

b

Which of the following statements about opportunity costs is not correct? a) An opportunity cost is the potential benefit that is given up when one alternative is selected over another. b) An opportunity cost cannot be changed by any decision made now or in the future. c) Opportunity costs are not usually found in accounting records. d) Opportunity costs are costs that must be explicitly considered in every decision a manager makes.

b

Issue purchase orders for a job.

batch-level

Receive raw materials from suppliers.

batch-level

Shipping orders to a grocery store would be considered a(n) _________.

batch-level activity

Do rough milling work on products.

unit-level

Which of the following scenarios demonstrates the leverage effect on net operating income due to the existence of fixed costs? a) A 25% increase in sales resulting in a 30% decrease in net operating income. b) A 15% increase in sales resulting in a 15% increase in cost of goods sold. c) A 25% increase in sales resulting in a 30% increase in net operating income. d) A 25% increase in sales resulting in a 30% increase in fixed costs.

c

A ___________ is a cost that is incurred to support a number of cost objects but cannot be traced to them individually.

common cost

Activity-based costing estimates the costs of the resources consumed by _____.

cost objects

A shift in the sales mix from high-margin items to low-margin items can cause total profit to _________.

decrease

The adjustment for overapplied overhead _________.

decreases cost of goods sold and increases net operating income

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

depreciation expense

Adventure Holiday sells thousands of tour packages each month through its various branches. A branch manager's salary would be a(n) _________ of the branch.

direct cost

What is a cost that would not be allocated using ABC?

direct labor

_______ is sometimes called "touch labor."

direct labor

Which of the following is an allocation base commonly used under the traditional methods for allocation of overhead costs?

direct labor hours

Materials that become an integral part of the finished product and whose costs can be conveniently traced to the finished product are called _________.

direct materials

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be _________.

total budgeted variable selling and administrative expenses

In the cost formula (Y = a + bX) that is used to estimate the total manufacturing overhead cost for a given period, the letter "a" refers to the estimated _________.

total fixed manufacturing overhead cost

What is the term used when a company applies less overhead to production than it actually incurs?

underapplied

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the _________.

unit product cost

What is represented on the X axis of a cost-volume-profit (CVP) graph?

unit volume