Exam like 5000 Accounting 2 Houke TNU

Standard costs have all of the following characteristics EXCEPT:

Useful for manufacturing companies, but not service companies.

Flexible budget

A budget prepared based on predicted amounts of revenues and expenses corresponding to the actual level of output.

Management by exception

A management process to focus on significant variances and give less attention to areas where performance is close to the standard.

Fixed budget

A planning budget based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume.

Variance analysis

A process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amounts that resulted from price and quantity differences.

Avoidable costs

Another term for relevant costs

A student is deciding whether to take an additional class or work extra hours. Which amounts are NOT relevant to this decision?

Apartment rent

The decision rule for segment elimination is to consider eliminating a segment if the segment revenues are less than the segment _____ expenses.

Avoidable

The difference between the actual cost incurred and the standard cost is called the:

Cost variance.

A sunk cost will change with a future course of action

False

Relevant costs are also known as avoidable costs

False

A fixed budget performance report not only compares results, but also indicates if the variances are:

Favorable or unfavorable

decision making process:

First- Define the decision or task Second- Identify alternative courses of action Third- Collect relevant information Fourth- Select the preferred course of action Fifth- Analyze and assess decision

Sunk cost

It arises from a past decision and cannot be avoided or changed; it is irrelevant to future decisions.

Management by exception

Managing by focusing on large differences from standard costs.

Helix company: Administrative expenses of $0.60 per unit

Not Relevant

Helix company: Fixed manufacturing overhead $0.75 per unit

Not Relevant

Helix company: Regular selling expenses of $1.25 per unit

Not relevant

When deciding whether to keep or replace equipment managers should consider:

Operating cost of the new equipment, Trade-in allowance of the old equipment, and Operating cost of the old equipment

When making decisions, managers should consider all relevant costs which include:

Opportunity costs, Out-of-pocket costs, and Incremental costs

Standard cost

Preset cost for delivering a product or service under normal conditions.

Standard costs

Preset costs for delivering a product, component, or service under normal conditions.

The difference between actual price per unit of input and the standard price per unit of input results in a:

Price variance.

Ideal standard

Quantity of input required if a production process is 100% efficient.

Practical standard

Quantity of input required under normal conditions.

The difference between actual quantity of input used and the standard quantity of input used results in a:

Quantity variance.

Standard cost card

Record that accumulates standard cost information.

Helix company: Additional selling expenses of $0.50 per unit

Relevant

Helix company: Selling price of $6.00 per unit

Relevant

Helix company: Variable manufacturing costs of $1.00 per unit

Relevant

In a make or buy decision, management should consider all of the following EXCEPT:

Sunk costs

Actual price

The amount paid to acquire input

Controllable variance

The combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance.

Quantity varience

The difference between actual and budgeted cost caused by the difference between the actual quantity and the budgeted quantity.

Price varience

The difference between actual and budgeted sales or cost caused by the difference between the actual price per unit and the budgeted price per unit.

Cost variance

The difference between actual cost and standard cost, made up of a price variance and a quantity variance

Volume variance

The difference between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate.

Standard quantity

The expected input for the quantity of output

Standard price

The expected price

Actual quantity

The input used to manufacture the quantity of output

Opportunity costs

These are the potential benefit lost by taking a specific action when two or more alternative choices are available.

Out-of-pocket costs

These require a future outlay of cash and are relevant for current and future decision making

Relevant benefits

This refers to the incremental revenue generated from taking one particular action over another.

The main factors that can cause a cost variance include the following.

Time variance and Price variance

An opportunity cost is the potential benefit that is lost by taking a specific action when two or more alternative choices are available.

True

An out-of-pocket requires a current and/or future outlay of cash

True