acct 404 exam 2
Under variable costing, an increase in fixed manufacturing overhead will affect the unit product cost.
False
A duration driver provides a simple count of the number of times that an activity occurs.
False
Organization-sustaining activities relate to specific customers and are not tied to any specific products.
False
One disadvantage of budgeting is that budgeting makes it more difficult to coordinate the plans and activities of departmental managers.
False
One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks.
False
The cash budget is the starting point in preparing the master budget.
False
The labor rate variance measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the standard hours allowed for the actual output.
False
The production budget is typically prepared prior to the sales budget.
False
The salary paid to a store manager is not a traceable fixed expense of the store.
False
The standard labor rate per hour should not include any employment taxes.
False
An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.
False
A benefit from budgeting is that it forces managers to think about and plan for the future.
True
A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products.
True
A continuous or perpetual budget is a 12-month budget that rolls forward one month (or quarter) as the current month (or quarter) is completed.
True
A traditional cost system is generally easier to set up and run than an activity-based costing system.
True
Absorption costing treats all manufacturing costs as product costs.
True
Activity-based costing is a costing method that is designed to provide managers with product cost information for internal decision-making.
True
An activity rate of $512 per product design means that on average a product design consumes resources that cost $512.
True
An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed.
True
Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control.
True
Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned.
True
Direct materials costs are usually excluded from the costs that are allocated to activity cost pools in an activity-based costing system.
True
Fixed costs should not be ignored when evaluating how well a manager has controlled costs.
True
Fixed costs should usually be included in performance reports because fixed costs are generally controllable.
True
If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should be considered a common cost.
True
In a flexible budget, when the activity declines, the total variable cost also declines.
True
In an ABC system, departmental managers are typically interviewed to determine how the departmental non-personnel costs should be distributed across the activity cost pools.
True
Lean production should result in reduced inventories. If lean production is successfully implemented, the difference in net operating income computed under the absorption and variable costing methods should be reduced.
True
Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances.
True
Segment margin is sales less variable expenses less traceable fixed expenses.
True
The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget.
True
The budgeted income statement is typically prepared before the budgeted balance sheet.
True
The first-stage allocation in an ABC system is the process of assigning functionally organized overhead costs derived from the company's general ledger to activity cost pools.
True
The labor efficiency variance is labeled favorable (F) if the actual hours used is less than the standard hours allowed for the actual output.
True
The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity.
True
The master budget consists of a number of separate but interdependent budgets.
True
The materials price variance is computed based on the amount of materials purchased during the period.
True
The production budget is typically prepared before the direct materials budget.
True
The selling and administrative budget is typically prepared before the cash budget.
True
The standard price per unit for direct materials should reflect the final, delivered cost of the materials.
True
The variable overhead efficiency variance does not actually measure how efficiently variable manufacturing overhead resources were used.
True
To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity.
True
Under the absorption costing method, a company can increase profits simply by increasing the number of units produced.
True
Using a flexible budget, actual results can be compared to what costs should have been at the actual level of activity.
True
Variable costing net operating income is usually closer to the net cash flow of a period than is absorption costing net operating income.
True
Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing.
True
When a company shifts from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system with batch-level and product-level costs, the unit product costs of high volume products typically decrease whereas the unit product costs of low volume products typically increase.
True
When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable.
True
When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost.
True
Providing the power required to run production equipment is an example of a:
Unit Level activity