Accounting review

If employees are given bonuses for exceeding normal standards, the standards may be very effective in motivating employees. T/F

True

Property taxes on a factory building would be included as part of the cost of products manufactured under the absorption costing concept. T/F

True

What term is commonly used to describe the concept whereby the cost of manufactured products is composed of direct materials cost, direct labor cost, and variable factory overhead cost? Variable costing Differential costing Standard costing Absorption costing

Variable Costing

The controllable variance measures: -operating results at more than normal capacity -the efficiency of using variable overhead resources -operating results at less than normal capacity -control over fixed overhead costs

the efficiency of using variable overhead resources

The Lucy Corporation purchased and used 129,000 board feet of lumber in production, at a total cost of $1,548,000. Original production had been budgeted for 22,000 units with a standard material quantity of 5.7 board feet per unit and a standard price of $12 per board foot. Actual production was 23,500 units. The materials price variance is a. $59,400 favorable b. $0 c. $59,400 unfavorable d. $6,000 unfavorable

b. $0

A responsibility center in which the department manager has responsibility for and authority over costs and revenues is called a(n) -volume center -investment center -cost center -profit center

profit center

The first budget customarily prepared as part of an entity's master budget is the: sales budget direct materials purchases production budget cash budget

sales budget

The investment turnover is the ratio of: sales to invested assets income from operations to invested assets income from operations to sales assets to liabilities

sales to invested assets

Assume that Division Blue has achieved a yearly income from operations of $110,000 using $900,000 of invested assets. If management has set a minimum acceptable rate of return of 11%, the residual income is a. $11,000 b. $99,000 c. $691,000 d. $209,000

$11,000

The unfavorable volume variance may be due to all of the following factors except: -machine breakdowns -failure to maintain an even flow of work -unexpected increases in the cost of utilities -failure to obtain enough sales orders

unexpected increases in the cost of utilities

Standard costs are used in companies for a variety of reasons. Which of the following is not one of the benefits for using standard costs? -used to control costs -used to plan direct materials, direct labor, and variable factory overhead -used to indicate where changes in technology and machinery need to be made -used to estimate cost of inventory

used to indicate where changes in technology and machinery need to be made

The underlying principle of allocating direct operating expenses to departments is to assign to each department an amount of expense proportional to the revenues of that department. T/F

False

A business operated at 100% of capacity during its first month, with the following results: Sales (90 units) $90,000 Production costs (100 units): Direct materials $40,000 Direct labor 20,000 Variable factory overhead 2,000 Fixed factory overhead 7,000 69,000 Operating expenses: Variable operating expenses $ 8,000 Fixed operating expenses 1,000 9,000 What is the amount of the gross profit that would be reported on the absorption costing income statement? $21,000 $27,900 $18,900 $18,000

$27900

Income from operations for Division L is $250,000, total service department charges are $400,000 and operating expenses are $2,750,000. What are the revenues for Division L? a. $650,000 b. $2,750,000 c. $3,400,000 d. $3,000,000

$3,400,000

The following financial information was summarized from the accounting records of Train Corporation for the current year ended December 31: Rails Division - Locomotive Division - Corporate Total Cost of goods sold $ 47,200 $30,720 Direct operating expenses 27,200 20,040 Sales 108,000 78,000 Interest expense $ 2,040 General overhead 18,160 Income tax 4,700 The income from operations for the Rails Division is a. $21,150 b. $33,600 c. $60,800 d. $8,700

$33,600

A business operated at 100% of capacity during its first month and incurred the following costs: Production costs (20,000 units): Direct materials $180,000 Direct labor 240,000 Variable factory overhead 280,000 Fixed factory overhead 100,000 $800,000 Operating expenses: Variable operating expenses $130,000 Fixed operating expenses 50,000 180,000 If 1,600 units remain unsold at the end of the month, what is the amount of inventory that would be reported on the variable costing balance sheet? $56,000 $66,400 $64,000 $78,400

$56,000

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 What would be the effect on income from operations if variable costing is used rather than absorption costing? $104,000 increase $80,000 decrease $80,000 increase $104,000 decrease

$80,000 decrease

Woodpecker Co. has $296,000 in accounts receivable on January 1. Budgeted sales for January are $860,000. Woodpecker Co. expects to sell 20% of its merchandise for cash. Of the remaining 80% of sales on account, 75% are expected to be collected in the month of sale and the remainder the following month. The January cash collections from sales are: $984,000 $468,000 $688,000 $812,000

$984,000

Under absorption costing, the cost of finished goods includes only direct materials, direct labor, and variable factory overhead. T/F

False

Blaser Corporation had $275,000 in invested assets, sales of $330,000, income from operations amounting to $33,000 and a desired minimum rate of return of 7.5%. The rate of return on investment for Blaser Corporation is a. 7.5% b. 10% c. 8.3% d. 12%

12%

While setting standards, managers should never allow for spoilage or machine breakdowns in their calculations. T/F

False

Contribution margin reporting can be beneficial for analyzing which of the following? products sales territory sales personnel

All of these choices are correct.

The amount of income under absorption costing will be less than the amount of income under variable costing when units manufactured: are less than units sold exceed units sold equal units sold are equal to or greater than units sold

Are less than units sold

A decentralized business organization is one in which all major planning and operating decisions are made by top management. T/F

False

Because accountants have financial expertise, they are the only ones that are able to set standard costs for the production area.

False

The budget procedure that requires all levels of management to start from zero in estimating sales, production, and other operating data is called continuous budgeting. T/F

False

The contribution margin and the manufacturing margin are usually equal. T/F

False

Which of the following statements is correct using the direct costing concept? -All manufacturing costs are considered period costs. -Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs. -Only fixed costs are included in the calculation of cost of goods manufactured while variable costs are considered period costs. -All manufacturing costs are included in the calculation of cost of goods manufactured.

Only variable manufacturing costs are included in the calculation of cost of goods manufactured while fixed costs are considered period costs.

Budgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem? -allowing goals to be so low that employees develop a "spend it or lose it" attitude -setting goals too tightly making it difficult to meet performance expectation -setting goals among managers that conflict with one another -allowing employees the opportunity to be a part of the budget process

allowing employees the opportunity to be a part of the budget process

Chelsa Manufacturing Co.'s static budget at 5,000 units of production includes $40,000 for direct labor and $5,000 for variable electric power. Total fixed costs are $23,000. At 8,000 units of production, a flexible budget would show: a. variable and fixed costs totaling $107,000 b. variable costs of $72,000, and $23,000 of fixed costs c. variable costs of $64,000, and $23,000 of fixed costs d. variable costs of $64,000, and $28,000 of fixed costs

b. variable costs of $72,000, and $23,000 of fixed costs

The following data relate to direct labor costs for the current period: Standard costs 7,500 hours at $11.70 Actual costs 6,000 hours at $12.00 What is the direct labor time variance? a. $18,000 unfavorable b. $18,000 favorable c. $17,550 unfavorable d. $17,550 favorable

d. $17,550 favorable

Below is budgeted production and sales information for Flushing Company for the month of December: Product XXX Product ZZZ Estimated beginning inventory 32,000 units 20,000 units Desired ending inventory 34,000 units 17,000 units Region I, anticipated sales 320,000 units 260,000 units Region II, anticipated sales 180,000 units 140,000 units The unit selling price for product XXX is $5 and for product ZZZ is $15.Budgeted production for product XXX during the month is: a. 566,000 units b. 534,000 units c. 498,000 units d. 502,000 units

d. 502,000 units

The benefits of comparing actual performance of the operations against planned goals include all of the following except: -preventing unplanned expenditures -helping to establish spending priorities -providing prompt feedback to employees about their performance relative to the goal -determining how managers are performing against prior years' actual operating results

determining how managers are performing against prior years' actual operating results

Standards that represent levels of operation that can be attained with reasonable effort are called: -variable standards -ideal standards -normal standards -theoretical standards

normal standards

The absorption costing income statement does not distinguish between variable and fixed costs. T/F

True

The cash budget is affected by the sales budget, the various budgets for manufacturing costs and operating expenses, and the capital expenditures budget. T/F

True

The objectives of budgeting are (1) establishing specific goals for future operations, (2) executing plans to achieve the goals, and (3) periodically comparing actual results with these goals. T/F

True

Three measures of investment center performance are income from operations, rate of return on investment, and residual income. T/F

True

For March, sales revenue is $1,000,000; sales commissions are 5% of sales; the sales manager's salary is $80,000; advertising expenses are $65,000; shipping expenses total 1% of sales; and miscellaneous selling expenses are $2,100 plus 1% of sales. Total selling expenses for the month of March are: a. $142,100 b. $207,100 c. $217,100 d. $205,000

c. $217,100

One reason not to depend solely on historical records to set standards is that there may be inefficiencies contained in past costs. T/F

True

The amount of detail presented in a budget performance report for a cost center depends upon the level of management to which the report is directed. T/F

True

The capital expenditures budget details future plans for acquisition of fixed assets. T/F

True