Managerial Accounting Test #3 Review

A cost center incurs costs

Which of the following correctly indicates the responsibilities of the respective center?

It assures the accounting records comply with generally accepted accounting principles

Which of the following is not a benefit of budgeting?

That the variances between actual and budget on a static budget result from comparing actual costs at one level of activity to budgeted costs at a different level of activity

A major disadvantage of the static budgets is:

The formula for the materials price variance is

(AQ * AP) - (AQ * SQ)

Which of the following statement is false?

A standard cost is more accurate than a budgeted cost

For which of the budgets in the master budget will a company prepare a flexible budget?

All of the budgets

If the actual cost is greater than what the should have been at the actual level of activity, the variance is labeled as

An unfavorable spending variance

How often should a company prepare budget reports?

As often as deemed necessary

The cash budget must be prepared before you can complete the:

Budgeted balance sheet

Which statement about the cash budget is correct?

It can show managers when additional financing will be necessary.

Which one of the following best describes a master budget?

It includes interrelated financial budgets and operating budgets

Which one of the following is correct concerning a budget?

It is a written statement managements' plans for a specified future time period

Which one of the following is true of a flexible budget?

It is useful in controlling variable and fixed costs

Which of the following is not a benefit of budgeting?

It reduces the need for tracking actual cost activity

Which one of the following is an advantage of using participative budgeting?

Lower level managers are more likely to perceive budgets as fair

Management by exception

Means that material differences will be investigated

Which time period is most common for budget periods?

One year

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n)

Practical standard

A flexible budget:

Projects budget data for various levels of activity

The starting point in preparing a master budget is the preparation of the

Sales budget

Which of the following statements about standard costs is false?

Standards should not be used in "management by exception".

A budget of 19,000 units of activity

Surf N Waves planned to sell 18,000 surfboards, however the actual number sold totaled 19,000. Which one of the following provides the best comparison of the cost data associated with the sales?

An activity variance is due solely to

The difference between the level of activity assumed in the planning budget and the actual level of activity used in the flexible budget

In reporting variances

The reports should facilitate management by exception

What is the primary difference between a static budget and a flexible budget?

The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels

It is calculated based on the sales budget and the desired ending inventory

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget?

Fixed manufacturing overhead

Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?

Planning

With which management function is budgeting most closely related?