Exam 2 accounting
Assume that a company's planned level of activity is 1,100 hours and its actual level of activity is 1,000 hours. Based on this information, the company's activity variances for its variable expenses will:
all be favorable.
Assume that a company's planned level of activity is 1,000 hours and its actual level of activity is 1,100 hours. Based on this information, the company's activity variance for revenue will be:
favorable.
A spending variance is calculated by comparing the:
flexible budget to the actual results.
An activity variance is calculated by comparing the:
planning budget to the flexible budget.
Which of the following statements is true?
A planning budget is prepared before the period begins and is valid for only the planned level of activity.
Which of the following is an example of a unit-level activity?
Assembling products
Which of the following is an example of a duration driver?
Direct labor-hours.
In absorption costing, a complete definition of unit product cost includes:
Direct materials, direct labor, variable manufacturing overhead, and fixed manufacturing overhead.
Which of the following statements is true with respect to the materials price variance?
It is computed using the actual quantity of materials purchased.
Which of the following statements is true with respect to the materials quantity variance?
It is computed using the standard price.
When the units produced are less than the units sold, which of the following equations explains the difference between absorption costing and variable costing net operating income?
Number of units released from ending inventory × fixed manufacturing overhead cost per unit
Relying exclusively on unit-level overhead allocation is most likely to:
Overcost high-volume products.
Which of the following is not one of the sections within a cash budget?
The investing section
Which of the following estimates is not used in preparing a sales budget including a schedule of expected cash collections?
The percent of next quarter's unit sales in ending inventory
Which of the following statements is true?
In absorption costing, variable manufacturing overhead costs flows through the inventory accounts on the balance sheet before being recorded as part of cost of goods sold on the income statement.
Which of the following statements is true with respect to the labor spending variance?
It encompasses the labor rate and efficiency variances.
Which of the following statements is false with respect to a budgeted income statement?
Its net income should equal the net cash flows from the cash budget.
Which of the following statements is true?
Planning involves developing goals and preparing various budgets to achieve those goals.
Which of the following is an example of a batch-level activity?
Setting up machines
The flexible budget for direct labor is computed in which of the following ways
Standard hours allowed (SH) × standard rate (SR)
The flexible budget for variable manufacturing overhead is computed in which of the following ways?
Standard hours allowed (SH) × standard rate (SR)
The standard direct labor cost per unit of finished goods is computed in which of the following ways?
Standard hours per unit of finished goods × standard rate per hour
A standard cost card does not explicitly mention which of the following?
Standard indirect materials cost per unit
The flexible budget for direct materials is computed in which of the following ways?
Standard quantity allowed (SQ) × standard price (SP)
The standard direct material cost per unit of finished goods is computed in which of the following ways?
Standard quantity per unit of finished goods × standard price per unit of direct material
Which of the following statements is true?
When the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement.
Which of the following statements is false?
Variable costing treats fixed manufacturing overhead as a product cost.
Activity-based costing (ABC) is a costing method that provides managers with cost information for
strategic and other decisions that potentially affect capacity and therefore "fixed" as well as variable costs.
Which of the following statements is true?
A batch-level activity cost is unaffected by the number of units in the batch.
Which of the following statements is true?
A flexible budget is an estimate of what revenues and costs should have been given the actual level of activity for the period.
Which of the following does not describe a difference between activity-based costing (ABC) and traditional absorption costing?
ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it.
Which of the following statements is false?
Absorption costing treats fixed manufacturing overhead as a period cost.
Which of the following is an example of a product-level activity?
Advertising products
Which of the following equations is used to prepare a production budget?
Budgeted unit sales + Desired units of ending finished goods inventory − Units of beginning finished goods inventory = Required production in units
Which of the following statements is false?
Budgets enable each department to function independently from other departments.
Which of the following equations is true?
Dollar sales for company to break even = (Traceable fixed expenses + Common fixed expenses) ÷ Overall contribution margin (CM) ratio.
Which of the following equations is false with respect to the direct materials budget?
Estimated sales in units of finished goods × units of raw materials needed per unit of finished goods = units of raw materials needed to meet production
Which of the following is an example of an organization-sustaining activity?
Heating a manufacturing facility
Which of the following statements is true?
Variable costing treats fixed manufacturing overhead as a period cost.
Which of the following statements is true?
The activity variance for a variable expense will be unfavorable if the actual level of activity is greater than the planned level of activity.
Which of the following statements is true?
The activity variance for revenue will be favorable if the actual level of activity is greater than the planned level of activity.
Which of the following statements is true?
The activity variance for revenue will be unfavorable if the actual level of activity is less than the planned level of activity.
Assume (1) the quantity of materials purchased equals the quantity used in production, (2) the materials spending variance is $400 unfavorable, and (3) the materials quantity variance is $200 favorable. Given these assumptions, which of the following statements is true?
The materials price variance must be $600 unfavorable.
Assume (1) the quantity of materials purchased equals the quantity used in production, (2) the materials spending variance is unfavorable, and (3) the materials quantity variance is favorable. Given these assumptions, which of the following statements is true?
The materials price variance must be unfavorable.
Which of the following statements is true?
The spending variance for a fixed expense will be favorable if the amount of the expense contained in the flexible budget is greater than the actual amount of the expense
Which of the following statements is true?
Traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems.
Which of the following statements is true?
When the units produced are greater than the units sold, absorption costing income will be greater than variable costing income because absorption costing defers some fixed manufacturing overhead cost in ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement.Correct
Which of the following statements is true?
When the units produced are less than the units sold, absorption costing income will be less than variable costing income because absorption costing releases some fixed manufacturing overhead cost from ending inventory whereas variable costing expenses each period's fixed manufacturing overhead on the income statement.
Which of the following equations can be used to compute a labor rate variance (where AH = actual hours; SH = standard hours allowed; AR = actual rate; SR = standard rate)?
[AH × (AR − SR)]
Which of the following equations can be used to compute a materials price variance (where AQ = actual quantity; SQ = standard quantity allowed; AP = actual price; SP = standard price)?
[AQ × (AP − SP)]
Which of the following equations can be used to compute a materials quantity variance (where AQ = actual quantity; SQ = standard quantity allowed; AP = actual price; SP = standard price)?
[SP × (AQ − SQ)]
Assume that a company's planned level of activity is 1,000 hours and its actual level of activity is 1,100 hours. Based on this information, the company's activity variances for its variable expenses will:
all be unfavorable.