Accounting Test 3

The variable overhead rate variance may be caused by variances in the following production inputs except a. fixed manufacturing overhead b. indirect materials c. indirect labor d. none of the above impacts variable overhead rate variance

fixed manufacturing overhead

the variance overhead rate variance may be used by variance in the following production input except

fixed manufacturing overhead

The ________ is a budget based on multiple levels of projected sales or production.

flexible budget

The ________ is the optimum budget to managers that plan revenues and expenses at different sales volumes.

flexible budget

a budget prepared for a different level of volume than the one originally anticipated

flexible budget

the _____ is the optimum budget to managers that plan revenues and expense at different sales volumes

flexible budget

the _____ is the optimum budget to managers that plan revenues and expenses at different sales volumes

flexible budget

the difference between the actual revenues and costs (based on actual sales and volume) and the master budget flexed revenues and costs (based on actual sales volume)

flexible budget variance

the master budget flexed to different levels of activity for what if scenarios

flexible budgets

Decentralization advantages

gathering and using local information and management specialization, focusing of central management, training and motivating manager, enhanced competition between mangers

the manager's personal goals are congruent or consistent or aligned with the firm's goals

goal congruence

Benefits of balance scorecard

good for communicating what is important to firm's long term success, supplements measures of performance with non financial measures

a favorable variance causes operating income to be _____ the budgeted operating income

great than

the type of standard that expects no waste and no inefficiencies in the production process is referred to as a(n)

ideal standard

the types of standard the expects no waste and no inefficiencies in the process is referred to as a(n)

ideal standard

optimum levels of performance under perfect operating conditions (doesn't allow for poor-quality, raw materials, was it int he production process, machine breakdown, or other inefficiencies)

ideal standards (perfection standards)

Which of the following is a true statement regarding fixed overhead volume variance? a. if production volume is less than anticipated, then fixed overhead has been under allocated and the fixed overhead volume variance is favorable b. if production volume is less than anticipated, then fixed overhead has been under allocated, and the fixed overhead volume variance is unfavorable c. if production volume is greater than anticipated then fixed overhead has been under allocated and the fixed overhead volume variance is favorable d. if production volume is greater than anticipated then fixed overhead has been overallocated and the fixed overhead volume variance is unfavorable

if production volume is less than anticipated, then fixed overhead has been under allocated, and the fixed overhead volume variance is unfavorable

A company should ________ when projecting cash receipts for a given month. a. include cash to be collected in that month regardless of when the sale was made b. only list COD sales made in that month c. include only cash collections from sales made in that month d. only list credit sales made in that month

include cash to be collected in that month regardless of when the sale was made

An unfavorable variance causes operating income to be _______________ the budgeted operating income?

lower than

an unfavorable variance causes operating income to be ________ the budgeted operating income

lower than

With ________, managers look at the size of the variances between actual results and budgeted amounts to determine which variances a manager should investigate.

management by exception

only investigate those variances that are material (relatively large)

management by exception

with ________, managers look at the size of the variances between actual results and budgeted amount to determine which variances a manger should investigate

management by exception

A comprehensive financial plan of action consisting of interrelated budgets (operating and financial budgets) for a specified time period

master budget

Which of the following budgets is the comprehensive planning document for the entire organization? a. sales budget b. capital expenditure c. master budget d. budgeted income statement

master budget

a budget prepared for one level of activity

master budget

In which of the following company types would the manager combine cost of good sold, inventory and purchases into one budget a. manufacturing b. merchandising c. service d. all of the above

merchandising

In which of the following company types would the manager combine cost of goods sold, inventory, and purchases into one budget? manufacturing merchandising service all of the above

merchandising

a favorable volume variance for sales revenue would indicate that:

more units were actually sold than the company had originally budgeted to sell

A favorable volume variance for sales revenue would indicate that: a. more units were actually sold than the company had originally budgeted to sell. b. actual sales revenue was higher than the flexible budget sales revenue. c. fewer units were actually sold than the company had anticipated. d. the expenses of the company were less than what they had planned.

more units were actually sold than the company had originally budgeted to sell.

The standard cost of direct labor per unit is calculated by

multiplying the standard quantity of direct labor by the standard price of direct labor.

the standard cost of direct materials per unit is calculated by

multiplying the standard quantity of direct materials by the standard price of direct materials

if the purchasing manager purchased a greater quantity of raw materials than budgeted but the standard price (SP), which variance may be affected

neither of the variances may be affected

costs incurred indirectly which are allocated to a responsibility level

non controllable costs

problems with balanced scorecard

not balanced: most managers are still compensated on the short term financial metrics, not a scorecard: nor comparison is made between firms and the competition

which of the following is a major part of the master budget and it focuses on the income stamens and its supporting schedules? capital expenditures cash operating financial

operating

budgets concerned with income-generating activities

operating budgets

The ______ is the difference between the actual machine hour run and the standard machine hours allowed for the actual production volume

overhead flexible budget variance

most companies use ________ when the lower level management develops budgets each year

participative budget

Most companies use ________ when the lower level management develops budgets each year. A) a top-down approach B) slack-based budgets C) zero-based budgets D) participative budgeting

participative budgeting

which type of budgeting involves the participation of many level of management? a. zero-based budgeting b. participative budgeting c. group budgeting d. department budgeting

participative budgeting

decentralization disadvantages

potential to duplicate resources, opens the door for managers to make decisions that are good for themselves or their division but which are not in the best interests of the firm as a whole

efficient levels of performance attainable under expected operating conditions (allowances for normal amounts of waste and inefficiencies)

practical standards (normal or attainable standards)

which of the following examples may lead directly to a favorable fixed overhead volume variance

producing more units than anticipated

the ____ budget is the only budget stated only in units not dollars

production

which of the following would NOT be prepared by a service company? a. operating expense budget b. production budget c. budgeted income statement d. capital expenditures budget

production budget

In a ______ center, managers are accountable to both revenues and costs

profit

division that generates revenues and incurs costs

profit center

The entire product line at PepsiCo (such as the Pepsi Max product line) may be classified as a(n)

profit center.

On the direct materials budget, the total quantity of direct materials to purchase is computed as a. quantity needed for production - desired end inventory of DM + beginning inventory DM. b. quantity needed for production + desired end inventory of DM - beginning inventory of DM. c. units to be produced + desired end inventory of DM - beginning inventory of DM. d. units to be produced - desired end inventory of DM + beginning inventory of DM.

quantity needed for production + desired end inventory of DM - beginning inventory of DM.

The ________ "tells managers how much of the total direct materials variance is due to using more or less materials than anticipated the by standards."

quantity variance

which of the following would appear on both the budgeted income statement and the cash budget? a. depreciation expense b. capital expenditures c. rent expense d. equipment

rent expense

the difference between operating income and the minimum dollar return required on a firm's operating assets

residual income

a system for evaluating the performance of each responsibility center and its manager

responsibility accounting

a segment/division/unit manager assigned a set activities for which they are responsible and will be held accountable

responsibility center

compares actual revenues and costs against the budgeted revenues and costs with difference referred as variances

responsibility center performance report

measures the amount of income an investment center earns relative to the size of its assets

return on investment

A performance report of a ________ will only include revenues generated by the center. investment center cost center revenue center All of the above

revenue center

division that generates revenues

revenue center

The manager of the Northeast sales region at General Mills may be in charge of a(n)

revenue center.

a moving twelve-month budget

rolling budget ( continuous budget)

extra inventory of finished goods that is kept on hand incase demand is higher than predicted or problems in the factory slow down production

safety stock

Which of the following budgets is the cornerstone of the master budget? A) sales B) cash C) operating expense D) budgeted balance sheet

sales

Usually, the first step in the budgetary process is the preparation of the a. budgeted balance sheet b. budgeted income statement c. combined cash budget d. sales budget

sales budget

Which of the following budgets is the cornerstone of the master budget?

sales budget

which of the following budgets or financial stamens is part of the operating budget? budgeted balance sheet cash budget capital expenditures sales budget

sales budget

In preparing the operating budget, the first step is preparing the budgeted income statement. cash budget. purchases budget. sales budget.

sales budget.

the amount of each dollar of net sales that is profit

sales margin

the performance evaluation of a profit center is typically based on its

segment margin

the operating income for a segment BEFORE subtracting common fixed costs; the operating income that is controllable by that responsibility center

segment margin (controllable margin)

The performance evaluation of a profit center is typically based on its a. segment margin. b. static budget variance. c. return on assets. d. return on investment.

segment margin.

A(n) ________ is a carefully predetermined cost that is usually expressed on a per unit basis.

standard cost

A method of accounting in which product costs are entered into the general ledger inventory accounts at standard costs rather than actual costs

standard costing

costs that should be incurred under efficient operation

standard costs

firm build budgets form scratch and must justify each budget line item

zero-based budgeting

In which of the following company types does a manager use a sales budget? a. Manufacturing b. Merchandising c. Service d. All of the above

All of the above

In which of the following company types does a manager use a sales budget? A) Manufacturing B) Merchandising C) Service D) All of the above

All of the above

In which of the following company types does a manager use an operating expenses budget? A) Manufacturing B) Merchandising C) Service D) All of the above

All of the above

In which of the following company types does a manager use an operating expenses budget? Manufacturing Merchandising Service All of the above

All of the above

Managers may intentionally build slack into the budget a. because they are uncertain about the future b. to acquire the resources they need in the event the organization implements a budget cut c. to make their performance appear better d. because all of the above are true

because all of the above are true

What will happen to return on investment (ROI) if current assets decrease while everything else remains the same (assumer the current assets decrease is part of operating current assets)

ROI will increase over time

If selling and administrative expenses decrease while other expenses remain constant, what will happen to return on investment (ROI)?

ROI will increase.

Formula to find cash disbursements, receipts, borrow, ending balance

beginning cash balance+receipts-payment+borrow= ending cash balance

a formal written statement of management's realistic plan for the future expressed in financial terms

budget

two fixed overhead variances are

budget and volume variances

committee that review submitted budgets, make revisions, and approve the final budgets

budget committees

which of the following budgets project cash inflows, cash outflows, and the budgeted balance sheet?

financial budgets

Capital expenditures budget is best described by which of the following concepts?

a company's pan to purchase property, plant and equipment and other long-term assets

which of the following formulas is used to compute variable overhead rate (or spending) variance? a.. actual hours X (actual rate-standard rate) b. standard hours allowed X ( actual rate- standard rate) c. actual rate X ( actual hours - standard hours allowed) d. standard rate X (actual hors- standard hours allowed)

actual hours X (actual rate-standard rate)

Which of the following is a benefit to an organization that implements a budget? planning controlling motivate all of the above

all of the above

in which of the following company types does a manager use a sales budget? service merchandisers manufacturers all of the above

all of the above

in which of the following company types does a manager use an operating expenses budget? service manufacturing merchandisers all of the above

all of the above

a combined cash budget includes all of the following except a. projected borrowings and repayments b. projected cash collections and cash payments c. projected cash balance at the end of the month d. all of the above are shown on the combined cash budget

all of the above are shown on the combined cash budget

a comprehensive performance measurement system that translates the organization's vision and strategy into a set of operational performance measures using four key dimensions

balanced scorecard

a lag indicator that reflects prior performance that focuses on firm's ability to increase profits through 3 ways: increasing revenues, controlling costs, increasing productivity

financial perspective

Capital expenditures budget" is best described by which of the following concepts? A) A company's plan to purchase property, plant and equipment, and other long-term assets B) Details that reveal how the company expects to move out of the beginning cash balance and into the desired ending cash balance C) A budget that projects cash inflows, cash outflows, and the end of period budgeted balance sheet D) A system to evaluate the performance of each responsibility center and its manager

A company's plan to purchase property, plant and equipment, and other long-term assets

Which of the following is a benefit to an organization that implements a budget? A) Budgets help the manager improve the motivation of employees in the workplace. B) Budgets help managers focus their attention on the future needs in an organization . C) Budgets help managers improve their decision-making processes in an organization . D) All of the above

All of the above

As managers use less and different types of direct materials, which of the following standards do managers focus on to enhance sustainability in the workplace? Quantity/Efficiency standard Price standard Flexible standard Both A and B

Both A and B

Which of the following types of cash outlays contains its own budget? Dividends Income taxes Capital expenditures All of the above

Capital expenditures

jointly shared by tow or more centers and NOT controllable by any one center manager

Common (indirect) fixed costs

A company uses sugar in producing its product. If the price of sugar doubles, which variance is directly impacted?

Direct materials price variance

A potential disadvantage of decentralization is which of the following?

Duplication of costs

Which type of variance causes operating income to be greater than the budgeted operating income? Favorable variance Unfavorable variance Neutral variance Reverse variance

Favorable variance

Which of the following budgets project cash inflows,cash outflows,and the budgeted balance sheet? A) Financial budget B) Purchases budget C) Cash budget D) Capital expenditures budget

Financial budget

Which of the following statements may be true if actual units produced exceed the budgeted units to be produced? a. Overhead flexible budget variance is expected to be unfavorable. b. Fixed overhead volume variance is expected to be favorable. c. Overhead flexible budget variance is expected to be favorable. d. Production volume variance is expected to be unfavorable.

Fixed overhead volume variance is expected to be favorable.

Using _____ may cause a manager to reject a project that may be profitable to the company as a whole

ROI

Using ________ may cause a manager to reject a project that may be profitable to the company as a whole.

ROI

Which of the following financial performance measures can be used to compare potential projects of different sizes? ROI Sales revenue Operating income Residual income

ROI

Which of the following financial performance measures can be used to compare potential projects of different sizes? Residual income Operating income ROI Sales revenue

ROI

If a company must decrease its sales price of a product while all of the company's expenses remain constant, what will happen to return on investment (ROI)?

ROI will decrease

Which term below best fits "a part, segment, or subunit of a company whose manager is accountable for specified activities"? a. Master budget b. Responsibility center c. Sensitivity analysis d.Operating budget

Responsibility center

Which of the following is the operating income an investment center generates before subtracting common fixed costs that are allocated to the center?

Segment margin

How is the variable overhead rate variance calculated? a. The difference between the actual overhead rate and the standard overhead rate multiplied by the actual hours b. The difference between the standard hours allowed and the actual hours used multiplied by the standard overhead rate c. The difference between the actual overhead rate and the standard overhead rate multiplied by the standard hours allowed d. The difference between the standard hours allowed and the actual hours used multiplied by the actual overhead rate

The difference between the actual overhead rate and the standard overhead rate multiplied by the actual hours

How is the variable overhead efficiency variance calculated? a. The difference between the actual overhead rate and the standard overhead rate multiplied by the actual hours b. The difference between the standard hours allowed and the actual hours used multiplied by the actual overhead rate c. The difference between the actual overhead rate and the standard overhead rate multiplied by the standard hours allowed d. The difference between the standard hours allowed and the actual hours used multiplied by the standard overhead rate

The difference between the standard hours allowed and the actual hours used multiplied by the standard overhead rate

Which of the following statements is NOT true?

The flexible budget variance for fixed costs will always be zero. 0 out of 1 points

Management by exception would dictate that the manager investigate which of the following variances?

Variances which are greater than a budget and actual dollar amount or percentage

financial budgets is best described by which of the following

a budget that project Chas inflows, cash outflows and the end

separating a business into divisions or operating units and delegating responsibilities to lower levels of management

decentralized operations

"Financial budget" is best described by which of the following? A) A budget that projects cash inflows, cash outflows, and the end of period budgeted balance sheet B) A system for evaluating the performance of each responsibility center and its manager C) A company's plan to purchase property, plant and equipment, and other long-term assets D) A budget that shows projected sales, purchases, and operating expenses

budget that projects cash inflows, cash outflows, and the end of period budgeted balance sheet

the padding of the budget that is done by a manger who deliberately underestimates revenues or overestimates costs

budgetary slack

a performance report compares actual revenue and expense with _____ revenues and expenses

budgeted

The ________ budget is a component in a financial budget. direct labor budgeted income statement capital expenditures manufacturing overhead

capital expenditures

Which of the following types of cash outlays contain its own budget? dividends income taxes capital expenditures all of the above

capital expenditures

compares a division's investment in operating assets with the ability of those assets to generate revenues

capital turnover

The ________ budget is a component in a financial budget. a. sales b. direct materials c. operating expense d. cash

cash

all major planning and operating decisions are made by top management

centralized operations

a lead indicator that predicts future performance that focuses on the customer's satisfaction on 4 product or service attributes: price, quality, sales service, delivery time

consumer perspective

costs incurred directly by a level of responsibility that are controllable at that level

controllable costs

Division that incurs costs but does not directly generate revenue

cost center

The security department that is evaluated on its ability to control costs when the company compares actual costs to budget costs at a department store chain may be classifies as a(n)

cost center

The human resources department for Kohl's Department Stores may be classified as a(n) revenue center. cost center. profit center. investment center.

cost center.

all of the following budgets are prepared by service companies except cost of goods sold, inventory and purchases cash sales operating expense

cost of goods sold, inventory and purchases

directly traceable to one center and therefore controllable by center manager

direct fixed costs

The ________ variance "measures whether the quantity of direct labor used to make the actual number of outputs is within the standard allowed for that number of outputs."

direct labor efficiency

The ________ variance "measures how well the business keeps prices of direct labor inputs within standards."

direct labor rate

The unemployment rate is high in the city in which a company has a factory. the company finds that they are able to pay new employees a lower wage per hour than when the unemployment rate was lower a year ago. which of the following variance may be directly impacted

direct labor rate variance

all of the following budgets are prepared by merchandising companies except

direct materials

All of the following budgets are prepared by merchandising companies except A) sales. B) cost of goods sold, inventory and purchases. C) operating expense. D) direct materials.

direct materials.

When deciding whether or not to adopt standard costs and perform variance analysis, management should do which of the following? a. update inaccurate standard costs b. examine the costs and benefits of a standard costing c. adopt lean thinking d. increase automation of assembly line

examine the costs and benefits of a standard costing

when deicing whether or not to adopt standard costs and perform variance analysis, management should do which of the following? a. adopt lean thinking b. update inaccurate standard costs c. increase automation of assembly d. examine the costs and benefits of standard costing system

examine the costs and benefits of standard costing system

difference that causes operating income to be higher than budgeted

favorable variance

which fo the following budgets project cash inflows, cash outflows, and the budgeted balance sheet? cash budget purchases budget capital expenditures budget financial budget

financial budget

budgets concerned with has flows and financial position at the end of the period

financial budgets

a lead indicator that predicts future performance that focuses on the internal processes required to meet customer needs through 3 factors: innovation, operation and post-sales support

internal business process

to evaluate the performance of a(n) ________ , a top manager is responsible for revenues, costs and the efficient use of the assets invested in the division

investment center

The manager of the corporate division of Anthropologie, a large retail clothing chain, may be in charge of a(n)

investment center.

division that generates revenues, incurs costs, and controls the investment of assets

investment centers

a rolling budget is a budget that

is continuously updated, so that the next 12 months of operations are always budgeted

A cost benchmark is valid only if the standards are practical and attainable. reviewed by salaried assembly-line workers. based on historical costs. kept up to date.

kept up to date.

summary performance metrics that asses how well firms are achieving their goals

key performance indicators

a lead indicator that predicts future performance that focuses on the firm's ability to change and improve through 3 factors: employee capabilities, information system capabilities, firm's climate for action

learning and growth perspective

which of the following is an advantage of using standard costs and variances a. standard costs are benchmarks that managers use to judge actual costs b. Price and efficiency variances motivate front-line employees more than operational performance measures. c. Maintaining updated standards is inexpensive. d.The timeliness that occurs when computing standards monthly.

standard costs are benchmarks that managers use to judge actual costs

long-term goals, strategies, and policies set for 5-10 years

strategic planning

How is the variable overhead efficiency variance calculated

the difference between standard hours allowed and the actual hours used multiple by the standard overhead rate

Which of the following is NOT true of the budgeting process? a. budgeting provides feedback to management to aid in assessing how well they are reaching their goals b. budgets force managers to plan for the future c. budgets force managers to consider relations among operations across the entire value chain d. the performance report is prepared as part of the master budget

the performance report is prepared as part of the master budget

The fixed overhead volume variance is the difference between the budgeted fixed and ___

the standard fixed overhead cost allocated to production

The fixed overhead volume variance is the difference between the budgeted fixed overhead and the actual overhead. the budgeted variable overhead. the budgeted fixed overhead in the static budget. the standard fixed overhead cost allocated to production.

the standard fixed overhead cost allocated to production.

What does a linear trend line indicate? a. there is a strong relationship between x and y b. the actual data points do not fall in a linear pattern c. the R-squared value reported from regression analysis would be close to 0% d. the actual data points cannot be graphed on a scatterplot

there is a strong relationship between x and y

Disadvantages of using standard costs and variances include all of the following except a. traditional standards can promote unfavorable employee behavior. b. the excessive cost to keep standards up-to-date. c. companies that pay employees a salary because direct labor is a fixed cost rather than a variable cost. d. those manufacturing costs that enter Work in Process Inventory are recorded at standard cost, rather than actual cost.

those manufacturing costs that enter Work in Process Inventory are recorded at standard cost, rather than actual cost.

Manager may intentionally build slack into the budget

to gain the resources they need in the event of budget cuts

Managers may intentionally build slack into the budget A) to make their performance look worse. B) because they are certain about the future. C) to gain the resources they need in the event of budget cuts. D) to accomplish all of the above.

to gain the resources they need in the event of budget cuts.

What type of variance results when the actual fixed overhead costs incurred are greater than the budgeted fixed overhead costs

unfavorable fixed overhead budget variance

what type of variance results when the actual fixed overhead costs incurred are greater than the budgeted fixed overhead costs

unfavorable fixed ovheradm budget variance

difference that causes operating income to be lower than budgeted

unfavorable variance

a manager purchased better quality materials for a slightly higher cost than anticipated. however as a result, spoilage was less than normal. what was the effect on price and quantity variances respectively?

unfavorable, favorable

the variable overhead rate variance is also known as which of the following? a. variable overhead efficiency variance b. variable overhead spending variance c. variable overhead usage variance d. variable overhead price variance

variable overhead spending variance

the difference between actual and budgeted figures that is used to evaluate how well the manager controlled operations during the period

variance