Exam Review

A

If the contribution margin per unit decreases, the break-even point in units a. will increase. b. will decrease. c. will remain the same. d. Cannot be determined from the information given.

Segment Operating income (contribution margin - direct fixed costs)

Segment Margin

A

sales are expected to increase by at least 50%. Assuming that the company maintains its policy for desired ending inventories of finished product and direct materials purchases, what will be the likely effect on the desired ending inventory of finished product? a. It will increase b. It will be twice the size of the desired ending inventory of raw materials c. It will decrease d. It will stay the same e. None of these choices are correct.

D

Budgets are prepared in which of the following orders? a. production budget, sales budget, direct labor budget b. production budget, cost of goods sold budget, direct labor budget c. sales budget, cash budget, production budget d. sales budget, production budget, direct materials purchases budget e. production budget, cash budget, direct materials purchases budget

(Total Fixed Cost + Target Income)/Unit Contribution Margin

Number of units to earn a target income

A

On a cost-volume-profit graph, the break-even point is where: a. the total revenue line intersects the total cost line. b. the total revenue line intersects the contribution margin line. c. the total revenue line intersects the operating income line. d. the total revenue line intersects the total fixed cost line. e. All of these choices are correct.

D

Qualitative factors that should be considered when evaluating a make-or-buy decision are a. the quality of the outside supplier's product. b. whether the outside supplier can provide the product when it is needed. c. whether the outside supplier can provide the needed quantities. d. All of these choices are correct.

D

Qualitative factors that should be considered when evaluating a make-or-buy decision are a. the quality of the outside supplier's product. b. whether the outside supplier can provide the needed quantities. c. whether the outside supplier can provide the product when it is needed. d. All of these choices are correct.

D

Qualitative factors that should be considered when evaluating a make-or-buy decision are a. the quality of the outside supplier's product. b. whether the outside supplier can provide the needed quantities. c. whether the outside supplier can provide the product when it is needed. d. All of these.

E

A "what-if" technique used to see what impact a change in an underlying variable has on the answer is a: a. break-even point. b. degree of operating leverage. c. indifference point. d. cost-volume-profit analysis. e. sensitivity analysis.

A

A company anticipates selling $200,000 of goods, of which $15,000 will probably be uncollectible. Which of the following statements is true? a. $15,000 does not appear on the cash budget. b. $215,000 is added to the cash budget. c. $15,000 is subtracted from the cash budget. d. $185,000 appears as a disbursement on the cash budget. e. None of these.

C

A graph that depicts the relationships among cost, volume and profits (operating income) is the a. Cost graph. b. Volume graph. c. Cost-volume-profit graph. d. Profit-volume graph. e. break-even graph.

C

All of the following are true regarding variance investigation except: a. it is difficult to assess the costs and benefits of variance analysis on a case-by-case basis. b. variances are not investigated unless they are large enough to be of a concern. c. every variance is investigated. d. managers must consider whether a variance will recur. e. the investigation should be undertaken only if the anticipated benefits are greater than the expected costs.

Markup Percentage

Always has to do with figuring out somethings cost that is unknown, not calculating a target cost. Percentages are always involved. Price = Cost + (Markup Percent X Cost)

D

An after-the-fact flexible budget: a. is used to provide the expected cost for a range of activity levels. b. is the key to receiving frequent feedback from customers. c. is used only when the actual level of activity is the same as the static budget level of activity. d. is useful for control. e. All of these choices are correct

Yes

Are variable overhead and variable Marketing/Selling costs different?

C

At the break-even point a. total revenue equals variable cost. b. total fixed cost equals variable cost. c. total contribution margin equals total fixed cost. d. total sales equals total fixed cost. e. total margin of safety equals variable cost.

Contribution Margin/Sales

Contribution Margin Ratio

Segment margin + direct fixed

Contribution Margin from Segment Margin

DM + DL + MOH

Cost of Goods Sold

Contribution margin/operating income

Degree of operating leverage

Target Cost

Does not use percentages. Always have a fixed dollar amount of profit. Deals with selling price in dollars, cost in dollars, and profit in dollars. TC = Selling price - desired profit

Yes

Does the contribution margin equation include all variable costs? (variable selling, variable overhead, etc.)

Beginning cash balance + AR Collected + cash collected from this months sales - disbursements

Ending Cash Balance

Segment Margin

Equals operating income of the segment, everything is included but common cost

D

In budgeting direct labor hours for the coming year, it is important to a. multiply production in units by the labor wage rate. b. divide production in units by the direct labor hours per unit. c. subtract production in units from the direct labor hours per unit. d. multiply production in units by the direct labor hours per unit. e. subtract direct labor hours per unit from production in units.

D

In going from the sales budget to the production budget, adjustments to the sales budget need to be made for a.cash receipts. b.selling expenses. c.factory overhead costs. d.finished goods inventories.

A

In order for the break-even computation to be meaningful to management, sales mix should be computed using the a. expected mix. b. traditional mix. c. least desirable mix. d. most desirable mix. e. average mix over the past 5 years

Yes

In special order decisions, is the purchase price per unit of special order product RELEVANT?

No

Is Fixed Overhead Per Unit that is non avoidable included in Special Order decisions calculations? Costs per Product are as follows: Direct materials $6 Direct labor $2 Variable overhead $2 Fixed overhead $3

Effectiveness

Measures how well the manager achieved organizational goals. The extent to which something is successful in providing the desired result.

Budgeted Fixed Overhead

The amount of overhead budgeted when setting the overhead rate prior to the start of the period. IT IS NOT APPLIED TO DIRECT LABOR HOURS.

D

The margin of safety in dollars is calculated by: a. deducting the contribution margin from expected sales. b. deducting total fixed costs from sales. c. deducting total variable cost from sales revenue. d. deducting break-even sales from expected sales. e. deducting actual profit from expected profit.

B

The planned ending cash balance for the year appears on which of the following statements? a. Production budget b. Budgeted balance sheet c. Budgeted cash disbursements d. Budgeted cash receipts e. Budgeted income statement

B

The sources of quantitative standards include a. engineering studies. b. historical experience, engineering studies, and input from operating personnel. c. input from operating personnel. d. historical experience.

Efficiency

The state of attaining the maximum productivity. The proportion of total organization resources that contribute to productivity during the manufacturing process.

E

To create a meaningful performance report, a. actual costs are calculated as a percentage of sales. b. actual costs are compared with the expected costs found in the static budget. c. expected costs of the static budget are compared with the expected costs of the flexible budget. d. actual costs are compared with the prior year's actual costs. e. actual costs are compared with the expected costs at the same level of activity.

Both variances added together

Total variance is...

600,000

What Number is BFOH? Crawford Company's standard fixed overhead cost is $6 per direct labor hour based on budgeted fixed costs of $600,000. The standard allows one direct labor hour per unit. Last year, Crawford produced 110,000 units of product, incurred $630,000 of fixed overhead costs, and recorded 212,000 actual hours of direct labor.

It does not appear on the cash budget

What happens to cash that is expected to be probably uncollectible?

C

Which budget is used to assess managerial efficiency? a. cash budget b. static budget c. flexible budget d. sales budget e. production budget

E

Which budget should be used to determine managerial effectiveness? a. after-the-fact flexible budget b. before-the-fact flexible budget c. financial budget d. cash budget e. static budget

E

Which of the following decisions determines whether a product line or segment should be continued or eliminated? a. Re-engineering b. Special-order c. Restructuring d. Make-or-buy e. Keep-or-drop

D

Which of the following equations is true? a. Contribution margin = Sales revenue ×Variable cost ratio b. Contribution margin ratio = Contribution margin / Variable costs c. Contribution margin = Fixed costs d. Contribution margin ratio = 1 −Variable cost ratio

C

Which of the following is a key point considered in a special order decision? a. Avoidable sunk costs associated with the special order b. The preparation of segmented income statements of the special order c. The estimated benefits associated with the special order d. Additional irrelevant costs associated with the special order

D

Which of the following is a use of budgets for control? a. Plans can be made for the future. b. Communication is improved. c. If conditions change between the formation of the budget and the current time, budgets can be quickly adapted. d. Budgets set a standard against which results can be compared. e. All of these choices are correct.

D

Which of the following is not true? a. One approach to forecasting sales is the bottom-up approach. b. In creating the sales forecast, outside factors such as the state of the economy, should be considered. c. The sales forecast is done before the sales budget. d. The production budget is prepared in units and dollars. e. The master budget is the comprehensive plan for the organization as a whole.

A

Which of the following is true of a continuous budget? a. It forces managers to plan ahead constantly. b. It is broken down into quarterly and monthly budgets. c. It rules out the comparison of actual data with budgeted data. d. It is a quarterly budget used only by manufacturing firms. e. It is a moving 6-month budget.

D

Which of the following is true of budgetary slack? a. It occurs when top management simply obtains formal acceptance of the budget from subordinate managers without seeking real input. b. Budgetary slack occurs when top management has total control of the budgeting process, allowing only superficial participation from lower-level managers. c. It reflects operating realities such as actual level of activity, seasonal variations, and general economic trends. d. Budgetary slack occurs when a manager deliberately underestimates revenues or overestimates costs in order to make budgeted expectations more easily achievable in the future. e. None of these choices are correct.

C

Which of the following is true of participative budgeting? a. It can only be used by small firms. b. It results in achieving maximum organizational efficiency. c. It gives an opportunity to build slack into the budgets. d. It always reflects operating realities such as actual levels of activity and seasonal variances. e. It is only in use by large firms that need to prepare cash budgets.

D

Which of the following is true regarding currently attainable standards? a. They are can be achieved only if everything operates perfectly. b. They demand the maximum efficiency of all the producing factors. c. They do not provide any allowance for any lack of skill. d. They provide allowance for normal breakdowns, interruptions, etc. e. All of these choices are correct.

E

Which statement is true about cost-volume profit (CVP) analysis? a. CVP analysis allows managers to do sensitivity analysis by examining the impact of various prices or cost levels on profit. b. CVP analysis can be used in both single-product and multi-product firms. c. CVP analysis shows how revenues, expenses, and profits behave as volume changes. d. CVP analysis is a powerful tool for planning and decision making. e. All of these statements are true.

Flexible Resources

are supplied as needed, so their costs appear to be variable with demand