Accounting: Chap 8,9 (7,8)
Good planning without effective control is a waste of time and effort. True or False?
True
Pleiss Corporation applies manufacturing overhead to products on the basis of standard machine-hours. The company's standard variable manufacturing overhead rate is $2.40 per machine-hour. The actual variable manufacturing overhead cost for the month was $5,240. The original budget for the month was based on 2,100 machine-hours. The company actually worked 2,270 machine-hours during the month. The standard hours allowed for the actual output of the month totaled 2,280 machine-hours. What was the variable overhead efficiency variance for the month?
(2,270 hours - 2,280 hours) x 2.40 per hour (-10 hours) x 2.40 per hour = $24
Piper Corporation's standards call for 1,000 direct labor-hours to produce 250 units of product. During October the company worked 1,250 direct labor-hours and produced 300 units. The standard hours allowed for October would be:
1,000 direct labor hours / 250 units = 4 direct labor hour per unit 300 units x 4 direct labor hours = 1,200 hours
Elliott Corporation makes and sells a single product. Last period the company's labor rate variance was $14,400 U. During the period, the company worked 36,000 actual direct labor-hours at an actual cost of $338,400. The standard labor rate for the product in dollars per hour is:
338,400-14,400 = 324,000 324,000/36,000 = 9.00
A favorable spending variance occurs when the actual cost is less than the amount of the cost in the static planning budget. True or False?
False
A revenue variance is favorable if the actual revenue is greater than the revenue in the static planning budget. True of False?
False
A revenue variance is unfavorable if the revenue in the static planning budget is less than the revenue in the flexible budget. True or False?
False
In general, the production manager is responsible for the materials price variance. True or False?
False
The disbursements section of a cash budget consists of all cash payments for the period except cash payments for dividends. True or False?
False
The selling and administrative expense budget lists all costs of production other than direct materials and direct labor. True or False?
False
Waste on the production line will result in an unfavorable materials price variance. True or False?
False
When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased. True or False?
False
Flexible budgets can be used when there is more than one cost driver (i.e., measure of activity). True or False?
True
A benefit from budgeting is that it forces managers to think about and plan for the future. True or False?
True
A revenue variance is the difference between what the total sales revenue should be, given the actual level of activity of the period, and the actual total sales revenue. True or False?
True
Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control. True or False?
True
If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is labeled unfavorable (U). True or False?
True
In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units) and desired ending merchandise inventory (in units). True or False?
True
Operating budgets cover a one-year period corresponding to the company's fiscal year. True or False?
True
The basic idea underlying responsibility accounting is that a manager should be held responsible for those items—and only those items—that the manager can actually control to a significant extent. True or False?
True
The budgeted income statement is typically prepared before the budgeted balance sheet. True or False?
True
The direct labor budget begins with the required production in units from the production budget. True or False?
True
The direct labor budget shows the direct labor-hours required to satisfy the production budget. True or False?
True
The labor efficiency variance is labeled favorable (F) if the actual hours used is less than the standard hours allowed for the actual output. True or False?
True
The manufacturing overhead budget lists all costs of production other than direct materials and direct labor. True or False?
True
The materials price variance is computed based on the amount of materials purchased during the period. True or False?
True
The standard price per unit for direct materials should reflect the final, delivered cost of the materials. True or False?
True
When the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected. True or False?
True
self imposed budget creates commitment. True or False?
True
The success of a budget depends on what?
Whether top management uses the budget to pressure or blame employees.
detailed plan for the future that is usually expressed in formal quantitative terms
budget
detailed plan showing how cash resources will be acquired and used
cash budget
12 month budget that rolls forward one month (or quarter) as the current month is completed
continuous budget
involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change
control
estimate of what revenues and costs should have been given the actual level of activity for the period
flexible budget
management system that compares actual results to a budget so significant deviations can be flagged as exceptions and investigated further
management by exception
number of separate but interdependent budgerts that formally lay out the company's sales, production, and financial goals.
master budget
developing goals and preparing budgets to achieve those goals.
planning
What are budgets used for?
planning and controlling
prepared before the period begins and is valid for only the planned level of activity
planning budget
When preparing a direct materials budget, the required purchases of raw materials in units equals:
raw materials needed to meet the production schedule + desired ending inventory of raw materials − beginning inventory of raw materials.
detailed schedule showing the expected sales for the budget period.
sales budget
budget that is prepared with the full cooperation of managers at all levels.
self imposed budget
what is the starting budget for a master budget?
the sales forecast/sales budget
