ACCT 2000 Exam 3
Compared to budgeting, long-range planning generally has the...
Longer time period
A sales budget is...
Management's best estimate of sales revenue for the year
When the information being presented is very detailed and relevant to the decision at hand, it has most likely been prepared by a?
Managerial accountant
What is represented by the difference between current sales and break-even sales?
Margin of safety
What type of cost are delivery costs?
Mixed
How many categories of inventory does a balance sheet for a merchandising company contain?
One
What would be reported on the income statement as expenses when they are incurred?
Period costs
How is the cost of goods manufactured schedule related to the income statement?
Placed under the cost of goods sold section
The management function that requires management to look ahead and establish objectives is?
Planning
The budgeted income statement is...
The end-product of the operating budgets
Which statement describes the contribution margin?
The revenue that remains to cover fixed costs and provide a profit
The most common budget period is a?
Year
The cost of placing the ads on local TV and in the local newspaper would be classified as?
A period cost, but not overhead
Net income = (Contribution margin x Volume) - Fixed expenses
A version of the profit equation containing the definition of contribution margin
Margin of safety is computed as...
Actual sales - break even sales
Which of the following is not a manufacturing cost?
Advertising cost
Mixed costs...
Are costs that vary as activity level changes, but do not stay the same per unit like variable cost
Long-range planning usually encompases a period of...
At least five years
Eliciting information from lower-level operating managers and their subordinates with the help of a bottom-up budgeting process...
Is a costly but beneficial exercise
Which of the following is not a benefit of budgeting?
It enables disciplinary action to be taken at every level of responsibility
Which one of the following is necessary if a company expects its budget to be effective?
The company must have a sound organizational structure
The contribution margin ratio for Cuts Inc. hair salon is 15%. For each $1 of sales, how much is generated in contribution margin?
$0.15
The office rent is an example of which type of cost?
Fixed
The _____ in a break-even graph would remain constant across all sales volumes
Fixed cost line
The break-even point in dollars is computed by dividing...
Fixed costs by a contribution margin ratio
One of the following is not involved in cvp analysis. The factor is...
Fixed costs per unit
The direct labor budget...
Includes both quantity and cost of direct labor necessary to meet production
The main purpose of an enterprise resource planning (ERP) system is to?
Integrate information available throughout the organization into a single, shared platform
Which one of the following is correct concerning contribution margin?
It is helpful in determining the effect of changes in sales on net income
A company that uses the top-down approach rather than a participative process will feel the impact of its budgeting process mostly in which form?
Lack of commitment of operating managers to the final budget
How is the margin of safety ratio computed?
Margin of safety in dollars / Actual (expected) sales
The margin of safety ratio is computed by dividing?
Margin of safety in dollars by actual sales
Costs of goods available for sale is reported on the income statement of?
Merchandising company and manufacturing company
Costs that change in total but not proportionately with changes in the activity level are...
Mixed costs
Lopner Corporation is interested in evaluating all aspects of the company's operating in an integrated fashion. Which management tool would best choice to use?
Balanced scorecard
Cost of goods manufactured:
Beg. work in process inventory + total manufacturing cost - end. work in process inventory
The format of a cash budget is...
Beginning cash balance + Cash receipts - Cash disbursements +/- Financing = Ending cash balance.
Which of the following lists includes only financial budgets?
Budgeted balance sheet, cash budget, and the capital expenditures budget
Financial budgets consist of all of the following except the...
Budgeted income statement
The _____ is the end-product of the operating budgets
Budgeted income statement
Budgeted production can be computed as...
Budgeted sales + budgeted ending inventory - budgeted beginning inventory
The company that is most likely to use a budget committee when developing a company-wide budget is...
Burner Electronics, an international electronics manufacturer
Each of the following budgets is used in preparing the budgeted income statement except the...
Capital expenditure budget
Operating budgets include all of the following except the...
Capital expenditure budget
Sequencing of budgets:
Capital expenditure budget, cash budget, budgeted balance sheet
The cash budget containing sections for each of the following except...
Capital expenditures
Which one of the following budgets is considered to be the most important financial budget?
Cash budget
Which one of the following is not an assumption of cost-volume-profit analysis?
Changes in activity and sales mix are the only factors that affect costs
At the break-even point...
Contribution margin equals total fixed costs
Why is determination of a relevant range important?
Cost behavior outside the relevant range may be distorted
The costs of goods manufactured schedule reports only the?
Cost elements used in calculating the cost of goods manufactured
Cost of goods manufactured is to a manufacturing enterprise as _____ is to a merchandising enterprise
Cost of goods purchased
Which of the following costs would a computer manufacturer include in manufacturing overhead?
Depreciation on testing equipment
Which would be a characteristic of managerial accounting reports?
Designed to provide the decision maker with the appropriate information
Which of the following best represents an example of the process of controlling?
Determining whether planned goals are met
The budgeted balance sheet...
Developed from the budgeted balance sheet for the preceding year and the budgets for the current year.
Using the high-low method, you can determine a product's variable cost per unit by dividing the change in total cost by the _____ and low activity levels
Difference between the high
Studies have shown that the smallest component of total manufacturing cost is?
Direct labor
Product costs:
Direct labor, indirect labor, factory utilities
Manufacturing costs:
Direct materials, direct labor, manufacturing overhead
When a company selects executives and appoints managers and supervisors, this is an example of?
Directing
The manufacturing overhead budget and the selling and administrative expense budget both...
Distinguish between fixed and variable costs
A company would determine its break even quantity in the following manner...
Divide fixed cost by contribution margin per unit
Balance sheet:
Finished goods, work in process, raw materials
The direct labor budget and the manufacturing overhead budget are prepared directly from the...
Production budget
Which one of the following in not an assumption of the CVP analysis?
Profit for the period is constant
A cost of goods manufactured schedule shows beginning and ending inventories for?
Raw materials and work in process only
A just-in-time inventory system focuses on?
Reducing warehouse costs and inventory held
In a break-even graph, the fixed cost line...
Remains constant across all sales volumes
What is the mathematical equation for computing required sales to obtain target net income?
Required sales = variable costs + fixed costs + target net income
Contribution margin
Sales - Variable Costs
On a CVP income statement...
Sales - Variable costs = Contribution margin
Each of the other budgets in the master budget depends on the...
Sales budget
Ellen is a manager who helps develop sales promotions, targets customers for upselling, and searches for potential new customers. Which of the following budgets would Ellen most likely help develop?
Sales budget
Which of the following is not an element of manufacturing overhead?
Sales manager's salary
On a CVP graph, the horizontal axis is used to record.....
Sales volume
Company employees who work line positions and staff positions are ultimately responsible to the?
Stockholders
What is contribution margin?
The amount available to cover fixed costs and contribute to profits
Cost-volume-profit analysis includes all of the following except...
The behavior of costs is curvilinear throughout the relevant range
How are a company's direct materials budget and direct labor budget related to each other?
They are both calculated based on the number of units to be produced
How do the direct materials budget, direct labor budget, and manufacturing overhead budget relate to the budgeted income statement?
They are incorporated into the unit cost that is used to calculate the cost of goods sold of the income statement
Villani foods recently implemented activity-based costing. What could have been a motivating factor for this change?
They changed from a manual production process to an automated production process
The essentials of effective budgeting do not include...
Top-down budgeting
Another way to state the target profit formula is to set the units required to meet the target net income equal to...
Total fixed cost plus target net income divided by contribution margin per unit
At the break-even point, the total contribution margin equals?
Total fixed costs
Describe how you would calculate the sales in dollars required to meet a target net income.
Total fixed costs plus target net income divided by contribution margin ratio
In order to calculate the total cost of work in process, you should add the beginning balance of the work in process to the?
Total manufacturing costs for the current period
An example of a mixed cost is?
Utility costs
What type of cost remains the same per unit at every level of activity?
Variable cost
Mixed costs consist of...
Variable cost element and a fixed cost element
Variable costs are costs that...
Vary in total directly and proportionately with changes in the activity level and remain the same per unit
When a graph is prepared with total activity on the horizontal axis and total cost on the vertical axis, what will the line depicting a fixed cost look like?
A horizontal line beginning at the vertical axis
All business processes associated with providing a product or performing a service is referred to as?
The value chain
Which of the following costs are classified as a period cost?
Wages paid to a cost account department supervisor
Which statement describes a fixed cost?
When activity declines, its cost per unit increases