Acct Exam II

The general model for calculating a price variance is:

actual quantity of inputs x (actual price-standard price)

Budgeted production needs are determined by:

adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total.

The budgeted amount of raw materials to be purchased is determined by:

adding the desired ending inventory of raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials.

Materials quantity variances should be computed:

based upon the amount of materials used in production. Explanation: Materials quantity variance=(AQ-SQ)SP where AQ is actual quantity used

Duration Driver

A measure of the amount of time required to perform and activity

Transaction Driver

A simple count of the number of times an activity occurs

Personnel administration is an example of (an):

Organization-sustaining activity. Explanation: Organization-sustaining activities are carried out regardless of which customers are served, which products and produced, how many batches are run, or how many units are made.

Property taxes are an example of a cost that would be considered to be:

Organization-sustaining.

The practice of assigning the costs of idle capacity to products can result in usable unit product costs

True

The standard cost per unit is computed by multiplying the standard quantity or hours by the standard price or rate.

True

Unit-level activities are performed each time a unit is produced

True

A materials price variance is favorable if the actual price exceeds the standard price.

False

Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports

False

An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy

False

Ideal standards should be used for forecasting and planning.

False

In the selling and administrative budget, the non-cash charges are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses.

False

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of DLH.

False

One difficulty with self-imposed budgets is that they are not subject to any type of review.

False

Organization-sustaining activities are activities or the general organization that support specific products

False

Planning and control are essentially the same thing

False

Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known.

False

Standard costs greatly increase the complexity of the bookkeeping process.

False

Standard costs should generally be based on the actual costs of prior periods.

False

The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

False

The costs of a particular department should not be split up among activity cost pools in an activity-based costing system

False

The materials price variance is computed by multiplying the difference between the actual price and the standard price by the actual quantity of materials used in production.

False

The production budget is typically prepared prior to the sales budget.

False

The standard quantity per unit for direct materials should not include an allowance for waste.

False

Transaction drivers usually take more effort to record than duration drivers

False

When more hours of labor time are necessary to complete a job than the standard allows, the labor rate variance is unfavorable.

False

Which of the following steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system?

Implementing the change quickly.

Which of the following is not a benefit of budgeting?

It reduces the need for tracking actual cost activity.

Which of the following is not a limitation of activity-based costing?

More accurate product costs may result in increasing the selling prices of some products. Explanation: Activity based costing is more costly to maintain than traditional costing system.

Designing a new product is an example of (an)

Product-level activity. Explanation: Product-level activities relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.

Which of the following represents the normal sequence in which the indicated budgets are prepared?

Production, Cash, Income Statement

Which department should usually be held responsible for an unfavorable materials price variance?

Purchasing

Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared?

Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet.

Which of the following activities would be a batch-level activity?

Setting up equipment. Explanation: Batch-level activities are performed each time a batch of goods is handled or processed, regardless of how many units are in the batch. Amount of resource consumed depends on the number of batches run.

Which of the following is not correct regarding the manufacturing overhead budget?

Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead.

A sales budget is a detailed schedule showing the expected sales for the budget period; typically it is expressed in both dollars and units of product.

True

Both planning and control are needed for an effective budgeting system.

True

Both variable and fixed manufacturing overhead costs are included in the manufacturing overhead budget.

True

Costs classified as batch-level costs should depend on the number of batches processed rather than the number of units produced, sold, or other measures of volume

True

Customer-level activities relate to specific customers and are not tied to any specific products

True

Even departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production.

True

Generally speaking, it is the responsibility of the production department to see that material usage is kept in line with standards.

True

In activity-based costing, some manufacturing costs may be excluded from product costs.

True

In activity-based costing, there are a number of activity cost pools, each of which is allocated to products and other costing objects using its own unique measure of activity

True

In general, duration drivers are more accurate measures of the consumption of resources that transaction drivers

True

In general, the purchasing agent is responsible for the materials price variance.

True

One benefit of budgeting is that it coordinates the activities of the entire organization.

True

The master budget is a network consisting of many separate budgets that are interdependent.

True

A continuous (or perpetual) budget:

is a plan that is updated monthly or quarterly, dropping one period and adding another.

When computing standard cost variances, the difference between actual and standard price multiplied by actual quantity yields a(n):

price variance. Explanation: Materials price variance=AQ(AP-SP)

An activity-based costing system that is designed for internal decision making will not conform to generally accepted accounting principles because:

some manufacturing costs will not be assigned to products; some non-manufacturing costs are assigned to products; first-stage allocations allocations may be based on subjective interview data

Self-imposed budgets typically are:

subject to review by higher levels of management in order to prevent the budgets from becoming too loose.