ACCT 206 - CH 8-10 - EXAM 4

In a manufacturing company, the _____ budget is prepared right after the sales budget.

production

In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the _____ budget.

production

How much input should be used to produce a product or provide a service is a(n) _______ standard.

quantity

Standards are ______. a. compared to actual results with significant differences investigated b. generally, only used in managerial accounting

a. compared to actual results with significant differences investigated

The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show ______. a. $28,800 revenue and $7,500 for supplies b. $24,000 revenue and $6,250 for supplies

a. $28,800 revenue and $7,500 supplies

Which of the following are used to calculate the standard quantity per unit of direct materials? a. Allowance for normal scrap and spoilage. b. Freight and transportation costs.

a. Allowance for normal scrap and spoilage.

On the cash budget, what is subtracted from total cash available to find the cash excess or deficiency? a. Cash disbursements b. Cash inflows c. Selling and administrative expenses d. Noncash items

a. Cash disbursements

Which of the following are used to calculate the standard quantity per unit of direct materials? a. Direct materials requirements per unit of finished product. b. Freight and transportation costs.

a. Direct materials requirements per unit of finished product.

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget? a. Production b. Selling and administrative c. Direct labor d. Sales

a. Production

Which of the following budgets are directly based on information from the sales budget? a. Production b. Direct materials c. Manufacturing overhead

a. Production

What number does the direct materials budget take directly from the production budget? a. Required production b. Beginning raw materials inventory c. Ending inventory of finished goods d. Budgeted sales

a. Required production

What is usually the major source of receipts in the receipts section of the cash budget? a. Sales b. Interest received c. Insurance proceeds d. Gains

a. Sales

Budgets ______. a. and the budgeting process can uncover potential bottlenecks before they occur b. provide each department with the same amount of money to spend, so that all departments are treated fairly

a. and the budgeting process can uncover potential bottlenecks before they occur

Limitations of self-imposed budgeting include ______. a. budgetary slack b. unrealistic profit targets c. a broad strategic perspective

a. budgetary slack

Budgets ______. a. communicate management's plan throughout the organization b. focus on what has happened in the past c. primarily help managers with day-to-day emergencies

a. communicate management's plan throughout the organization

Budgets ______. a. define goals and objectives that can serve as benchmarks for evaluating subsequent performance b. provide each department with the same amount of money to spend, so that all departments are treated fairly

a. define goals and objectives that can serve as benchmarks for evaluating subsequent performance

A revenue variance is the ______. a. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period. b. difference between total revenue in the planning budget and actual total revenue c. actual total revenue earned d. difference between what a cost should have been at the actual level of activity and the actual amount of the cost

a. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period.

The standard rate per hour includes ______. a. employment taxes b. employee-paid union dues

a. employment taxes

The percentage change in net income in the flexible budget is generally greater than the percentage change in activity due to ______. a. fixed costs b. variable costs c. revenue

a. fixed costs

Unfavorable activity variances may not indicate bad performance because ______. a. increased activity should result in higher variable costs b. increased activity should result in higher fixed costs c. costs should not change as activity changes

a. increased activity should result in higher variable costs

Challenging but highly achievable budget targets ______. a. may help build manager confidence b. may increase the likelihood that managers will engage in undesirable behavior c. allow top-managers to pressure lower-mangers to meet the budget

a. may help build manager confidence

Challenging but highly achievable budget targets ______. a. may increase commitment to the budget b. may increase the likelihood that managers will engage in undesirable behavior c. allow top-managers to pressure lower-mangers to meet the budget

a. may increase commitment to the budget

When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by ______ 15%. a. more than b. exactly c. less than

a. more than

Involving lower-level managers increases ______ in the budgeting process. a. motivation b. strategic vision

a. motivation

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______. a. net income is higher than expected but all or most expense variances are unfavorable b. net income is lower than expected but all or most expense variances are favorable c. there are no revenue or expense variances

a. net income is higher than expected but all or most expense variances are unfavorable

A budget that is prepared before the beginning of the period for a specific level of activity is called a ______ budget. a. planning b. strategic c. flexible

a. planning

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget? a. Production b. Sales c. Finished goods inventory d. Cash

a. production

The direct materials budget directly relies on the ______ budget. a. production b. merchandise purchases c. direct labor d. sales

a. production

The calculation of a standard price per unit of direct materials includes ______. a. purchase discounts b. allowance for unavoidable waste

a. purchase discounts

The standard hours per unit of an output includes ______. a. the estimated time to complete the unit b. an allowance for spoilage and waste c. an allowance for vacation time

a. the estimated time to complete the unit

A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______. a. variable cost b. fixed cost

a. variable cost

A spending variance is the difference between ______. a. what a cost should have been at the actual level of activity and the actual amount of the cost b. the budgeted cost on the planning budget and the actual amount of the cost c. the budgeted cost on the planning budget and the budgeted cost on the flexible budget

a. what a cost should have been at the actual level of activity and the actual amount of the cost

The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______ variance.

activity

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of March. a. $176,000 b. $156,000 c. $160,000 d. $154,000

b. $156,000

Which of the following is NOT included on the sales budget? a. Expected cash collections b. Desired ending inventory of units c. Selling price per unit d. Budgeted number of units to be sold

b. Desired ending inventory of units

Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation. a. True b. False

b. False

Most companies rely solely on self-imposed budgeting when creating budgets. a. True b. False

b. False

The standard hours per unit includes both direct and indirect labor hours. a. True b. False

b. False

Total sales for the year reported on the Sales Budget will always be equal to expected cash collections for the year. a. True b. False

b. False

A detailed plan for the future that is usually expressed in formal quantitative terms is ______. a. the budget period b. a budget c. profit planning d. responsibility accounting

b. a budget

Involving lower-level managers increases ______ in the budgeting process. a. strategic vision b. accountability

b. accountability

Involving lower-level managers increases ______ in the budgeting process. a. strategic vision b. accuracy

b. accuracy

Standards are ______. a. generally, only used in managerial accounting b. benchmarks for measuring performance

b. benchmarks for measuring performance

Budgets ______. a. provide each department with the same amount of money to spend, so that all departments are treated fairly b. coordinate the activities of the entire organization by integrating the plans of its various parts

b. coordinate the activities of the entire organization by integrating the plans of its various parts

Budgets ______. a. provide each department with the same amount of money to spend, so that all departments are treated fairly b. encourage managers to think about and plan for the future

b. encourage managers to think about and plan for the future

The standard rate per hour includes ______. a. employee-paid union dues b. fringe benefits

b. fringe benefits

A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was ______ budgeted activity. a. lower than b. higher than c. equal to

b. higher than

The cash budget ______. a. is the first budget prepared in the master budget process b. is prepared near the end of the master budget process c. uses information from the budgeted balance sheet and income statement

b. is prepared near the end of the master budget process

When profit targets are set by top managers, ______ a. strategic direction may be insufficient b. lower-level managers use them to prepare budgets c. cooperation and commitment should increase

b. lower-level managers use them to prepare budgets

The concept that focuses on important variances and ignores trivial ones is ______. a. flexible budgeting b. management by exception c. static budgeting d. the variance analysis cycle

b. management by exception

With a top-down approach to budgeting, lower-level managers ______. a. input their knowledge and opinions b. may feel demoralized and resentful c. tend to be more cooperative and committed d. are not involved in the budgeting process

b. may feel demoralized and resentful

The percentage change in net income in the flexible budget is generally greater than the percentage change in activity due to ______. a. revenue b. mixed costs c. variable costs

b. mixed costs

Developing goals and preparing various budgets to achieve those goals is part of ______, a. control b. planning c. the budget period d. responsibility accounting

b. planning

Standards are ______. a. generally, only used in managerial accounting b. related to the price and quantity of inputs

b. related to the price and quantity of inputs

A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total ______. a. fixed cost b. revenue

b. revenue

Planning budgets are sometimes called ______ budgets. a. flexible b. static

b. static

The standard rate per hour includes ______. a. employee-paid union dues b. the direct labor rate per hour

b. the direct labor rate per hour

A detailed plan for the future that is usually expressed in formal quantitative terms is a(n) _____.

budget

If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ______. a. $120,000 b. $180,000 c. $108,000 d. $118,000

c. $108,000

Fancy Nails has an estimated cost for supplies of $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. The actual cost of supplies in June was $2,000. Calculate the spending variance for June. a. $125 F b. $200 F c. $125 U d. $200 U

c. $125 U

ABC, Inc.'s expected sales for the first six month of the year are as follows. Month Expected Sales January $120,000 February $150,000 March $160,000 April $200,000 May $220,000 June $250,000 Experience has shown that 60% of sales are collected in the month of sale and 40% are collected the month after sale. Calculate expected cash collections for the month of April. a. $208,000 b. $200,000 c. $184,000 d. $176,000

c. $184,000

A company's budgeted cost of supplies when 5,000 units are sold is $7,500 of fixed costs plus $1.25 variable cost per unit. What is the increase in the total cost of supplies if 350 more units are sold than expected? a. $962.50 b. The cost remains the same. c. $437.50

c. $437.50

ABC, Inc.'s expected sales for the first six month of the year are: Month Expected Unit Sales January 12,000 February 15,000 March 16,000 April 20,000 May 22,000 June 25,000 If desired ending inventory is 25% of next month's sales, the number of units to be produced in March is ______. Multiple choice question. a. 21,000 b. 17,250 c. 17,000 d. 16,000

c. 17,000

Revenue on the planning budget is expected to be $380,000 for 1,900 client visits. The revenue on the flexible budget is $410,000, showing that there were actually ______ client visits. a. 1,950 b. 2,000 c. 2,050

c. 2,050

Which of the following budgets are directly based on information from the sales budget? a. Direct materials b. Manufacturing overhead c. Selling & administrative expense

c. Selling & administrative expense

The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______ variance. a. revenue b. spending c. activity

c. activity

When preparing a flexible budget, the level of activity ______. a. affects both fixed and variable costs b. affects fixed costs only c. affects variable costs only d. has no effect on costs

c. affects variable costs only

The standard hours per unit of an output includes ______. a. an allowance for spoilage and waste b. an allowance for vacation time c. an allowance for cleanup and downtime

c. an allowance for cleanup and downtime

The variance analysis cycle ______. a. begins with the preparation of the budget b. is used to assign blame for poor performance c. begins with the preparation of performance reports d. includes the investigation of all variances

c. begins with the preparation of performance reports

In a manufacturing company, the ______ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories a. sales b. merchandise purchases c. direct materials d. production

c. direct materials

A favorable activity variance may not indicate good performance because a favorable activity variance ______. a. may occur simply because the purchasing department acquired low quality supplies at a discount b. for a fixed cost will occur simply because the actual level of activity is less than the budgeted level of activity c. for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity

c. for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity

When profit targets are set by top managers, ______ a. strategic direction may be insufficient b. cooperation and commitment should increase c. goals may be too high or low

c. goals may be too high or low

When a change in sales mix causes the average selling price to be ______ the amount expected, the revenue variance is labeled favorable. a. equal to b. lower than c. higher than

c. higher than

The spending variance is labeled as favorable when the actual cost is ______ level of activity. a. more than what the cost should have been at the planned b. less than what the cost should have been at the planned c. less than what the cost should have been at the actual d. more than what the cost should have been at the actual

c. less than what the cost should have been at the actual

More accurate estimates are generally the result of having profit targets set by ______. a. front-line employees b. top-level managers c. lower-level managers

c. lower-level managers

An integrated business plan that formally lays out the company's goals is called the ______ budget. a. self-imposed b. profit planning c. master d. sales

c. master

In a manufacturing company, the ______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory. a. cash b. sales c. production d. direct materials

c. production

Because all other parts of the budget depend on it, if the ______ budget is inaccurate, the rest of the budget will be inaccurate. a. direct materials b. cash c. sales d. production

c. sales

Limitations of self-imposed budgeting include ______. a. unrealistic profit targets b. a broad strategic perspective c. suboptimal budget recommendations

c. suboptimal budget recommendations

Gathering feedback to ensure that the plan is being followed is referred to as _____.

control

Commission expense is budgeted to be $16,000 at a planned sales level of 4,000 units. If only 2,900 units are sold, how much commission expense will appear on the flexible budget, and is the activity variance favorable or unfavorable? a. $4,400 and favorable b. $87,000 and unfavorable c. $11,600 and unfavorable d. $11,600 and favorable

d. $11,600 and favorable

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units. a. 15,000 b. 10,000 c. 7,000 d. 13,000

d. 13,000

When a manager creates a budget that is too easy to attain, ______ occurs. a. participative budgeting b. self-imposed budgeting c. perpetual budgeting d. budgetary slack

d. budgetary slack

A perpetual budget keeps managers focused at least one year ahead by adding one ______. a. year to the end of the budget as each month or quarter comes to a close b. month or quarter to the end of the budget as each year comes to a close c. year to the end of the budget as each year comes to a close d. month or quarter to the end of the budget as each month or quarter comes to a close

d. month or quarter to the end of the budget as each month or quarter comes to a close

The first step in the budgeting process is preparing the ______ budget. a. direct materials b. production c. cash d. sales

d. sales

With a top-down approach to budgeting, profit targets are issued by ______. a. lower-level managers b. the board of directors c. employees d. top-level managers

d. top-level managers

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n) _____ activity variance.

favorable

A budget that takes into account how costs are affected by changes in level of activity is a(n) _____ budget.

flexible

Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) _____ budget.

flexible

The system that compares actual results to a budget so that significant deviations can be flagged and investigated further is called _____ ______ ______.

management by exception

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the ______ budget.

master

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or _____ budget.

participative

A 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed is called a(n) ____ or continuous budget.

perpetual

The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) ________ variance.

revenue

Both the production and selling and administrative expense budgets are prepared using information directly from the _____ budget.

sales

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) _______ variance.

spending

The final, delivered price that should be paid for each unit of direct materials is the _____ price per unit of materials.

standard

Material requirements plus an allowance for normal inefficiencies are added together to determine the _____ _____ per unit of output for direct materials.

standard quantity

If the actual cost is greater than what the cost should have been, the variance is labeled as _______.

unfavorable

Companies use the _____ _____ cycle to evaluate and improve performance.

variance analysis