Accy 309 Final

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A flexible budget​ ________.

is developed at the end of the period

Electronic Data Interchange​ (EDI) is helpful to managers because

it ensures that a purchase order is transmitted quickly and accurately to suppliers with minimum paperwork and costs.

A company might use budgeted costs rather than actual costs to compute​ direct-labor rates because

it may be difficult to trace direct labor costs to jobs as they are completed.

Identify three major source documents used in​ job-costing systems.

job cost record​ (sheet), materials requisition​ record, and labor time record

Select examples of two cost objects in companies using job costing.

product such as a specialized machine and a service such as a repair job

A management accountant can help formulate a strategy by

providing information about the sources of competitive​ advantage, such as the​ cost, productivity, or efficiency advantage of their company relative to competitors.

Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van​ follow: Existing van New van Original cost ​$50,000 ​$92,000 Annual operating cost ​$19,500 ​$14,000 Accumulated depreciation ​$34,000 — Current salvage value of the existing van ​$25,500 — Remaining life 9 years 9 years Salvage value in 9 years ​$ 0 ​$ 0 Annual depreciation ​$1,778 ​$10,222 Sunk costs include​ ________

the accumulated depreciation of the existing van

The following information was extracted from the accounting records of

$120,000

Manufacturing Co. assembled the following cost data for job ​#23​: LOADING... ​(Click the icon to view the cost​ data.) What are the total manufacturing costs for job ​#23 if the company uses normal job​ costing?

$195,500

Company has a manufacturing facility in Brooklyn that manufactures robotic equipment for the auto industry. For Year​ 1, Atlantic collected the following information from its main production​ line: LOADING... ​(Click the icon to view the​ data.) Atlantic isolates price variances at the time of purchase. What is the materials price variance for Year​ 1?

$400 favorable

ABC Company uses job costing and has assembled the following cost data for the production and assembly of item​ X: LOADING... ​(Click the icon to view the cost​ data.) Based on the above cost​ data, the manufacturing overhead for item X is

$500 underallocated.

Under Stanford ​Corporation's job-costing​ system, manufacturing overhead is applied to work in process using a predetermined annual overhead rate. During November​, Year​ 1, Stanford​'s transactions included the​ following: LOADING... ​(Click the icon to view the​ transactions.) Stanford had neither beginning nor ending​ workinprocess inventory. What was the cost of jobs completed and transferred to finished goods in November ​20X1?

$620,000

List the six steps in estimating a cost function on the basis of an analysis of a past cost relationship in the correct order. Which step is typically the most difficult for the cost​ analyst?

1. Choose the dependent variable. 2. Identify the independent variable or cost driver. 3. Collect data on the dependent variable and driver. 4. Plot the data. 5. Estimate the cost function. 6. Evaluate the cost driver of the estimated cost function. Part 2 Which step is typically the most difficult for the cost​ analyst? Step 3

What are the four elements of the budgeting​ cycle?

1. Planning the performance of the company as a whole and of its subunits 2. Providing subordinate managers with a frame of reference 3. Investigation into variations from the plan 4. Use of​ feedback, new conditions and experience to develop a plan for the next period

​Industries' sales budget shows quarterly sales for the next year as​ follows: Quarter​ 1, 12,000​; Quarter​ 2, 10,000​; Quarter​ 3, 14,000​; Quarter​ 4, 16,000. Company policy is to have a target​ finished-goods inventory at the end of each quarter equal to 5% of the next​ quarter's sales. What would be the budgeted production for the second quarter of next​ year?

10,200 units

A firm uses simple linear regression to forecast the costs for its main product line. If fixed costs are equal to $235,000 and variable costs are $10 per​ unit, how many units does it need to sell at $15 per unit to make a $300,000 ​profit?

107k

Goddard Inc. planned to use $152 of material per unit but actually used $140 of material per​ unit, and planned to make 1,180 units but actually made 930 units. The​ flexible-budget amount for materials is​ ________.

141,360

Co. uses the​ high-low method to derive a total cost formula. Using a range of units produced from 1,500 to 7,500​, and a range of total costs from $21,000 to $45,000​, producing 2,000 units will cost HL​:

23k

Year 1 financial data for the ABC Company is as​ follows: LOADING... ​(Click the icon to view the Year 1 financial​ data.) Under the absorption​ method, Year 1 cost of goods sold will be

3.7m

What is a cost​ driver? Give one example.

A cost driver is a​ variable, such as the level of activity or​ volume, which causally affects total costs over a given time span. A change in the cost driver results in a change in the level of total costs. For​ example, the number of vehicles assembled is a driver of the costs of steering wheels on a​ motor-vehicle assembly line.

Define cost object and give three examples.

A cost object is anything for which a separate measurement of costs is desired. Examples include a​ product, a​ service, and a customer.

What is the difference between a linear and a nonlinear cost​ function? Give an example of each type of cost function.

A linear cost function is a cost function​ where, within the relevant​ range, the graph of total costs versus the level of a single activity related to that cost is a straight line. An example of a linear cost function is a cost function for use of a videoconferencing line where the terms are a fixed charge of​ $10,000 per year plus a​ $0.20 per minute charge for line use. A nonlinear cost function is a cost function​ where, within the relevant​ range, the graph of total costs versus the level of a single activity related to that cost is not a straight line. Examples include economies of scale in advertising where an agency can double the number of advertisements for less than twice the​ costs, step-cost​ functions, and​ learning-curve-based costs.

What is the definition of a master​ budget?

A master budget is a budget that expresses​ management's operating and financial plans for a specified period and includes a set of budgeted financial statements.

Define product cost. Describe three different purposes for computing product costs.

A product cost is the sum of the costs assigned to a product for a specific purpose. Purposes for computing a product cost include​ (1) pricing and product mix​ decisions, (2) contracting with government​ agencies, and​ (3) preparing financial statements for external reporting under GAAP.

Choose the definition and example for a rolling budget.

A rolling budget is a budget or plan that is always available for a specified future​ period, by continually adding a period​ (month, quarter, or​ year) to the period that just ended. A​ four-quarter rolling budget for 2020 is superseded by a​ four-quarter rolling budget for April 2020 to March 2021​, and so on.

Choose the correct description of variable and fixed costs.

A variable cost changes in total in proportion to changes in the related level of total activity or​ volume, such as a sales commission that is a percentage of each sales revenue dollar. A fixed cost remains unchanged in total for a given time​ period, despite wide changes in the related level of total activity or​ volume, such as a fixed annual leasing cost of a machine.

Distinguish between actual costing and normal costing.

Actual costing and normal costing differ in their use of actual or budgeted​ indirect-cost rates.

What is the difference between the Wa and FIFO methods of calculating equivalent units?

According to the Accounting for Management website, the main difference between the FIFO and weighted average method is in the treatment of beginning work-in-process or unfinished goods inventory. The weighted average method includes this inventory in computing process costs, while the FIFO method keeps it separate.

​"Knowledge of technical issues such as computer technology is a necessary but not sufficient condition to becoming a successful management​ accountant." Do you​ agree? Why?

Agree. A successful management accountant requires general business skills and people skills as well as technical skills.

​"Budgeted performance is a better criterion than past performance for judging​ managers." Do you​ agree? Explain.

Agree—because inefficiencies included in past results can be detected and eliminated in budgeting.​Also, future conditions may be expected to differ from the​past, and these can also be factored into budgets.

Why do managers consider direct costs to be more accurate than indirect​ costs? When costs are​ allocated, managers are less certain whether the cost allocation base accurately measures the resources demanded by a cost​ object, and​ therefore, direct costs are considered to be more accurate. B. Cost​ tracing, which is used when assigning direct costs to a particular cost​ object, is more accurate than cost​ allocation, which is used to assign indirect costs to the same cost object. C. Allocating indirect costs is more subjective and generally more difficult to assign to a cost object than are direct costs.​ Therefore, direct costs are deemed by managers to be more accurate costs than indirect costs.

All of the above.

How does a​ job-costing system differ from a​ process-costing system?

A​ job-costing system assigns costs to distinct​ units; a​ process-costing system assigns costs to masses of similar units.

Which of the following is not a primary function of the management​ accountant?

Communicates financial results and position to external parties.

​"The sales forecast is the cornerstone for​ budgeting." Do you​ agree? Explain.

Because production​ (and, hence,​ costs) and inventory levels generally depend on the forecasted level of sales.

Identify the​ reason(s) why most organizations use an annual period rather than a weekly or monthly period to compute budgeted​ indirect-cost rates. The numerator reason—the longer time​ period, the less influence of seasonal patterns in indirect​ (overhead) costs. B. The denominator reason—the longer the time​ period, the less the effect of variations in output levels or quantities of the​ cost-allocation bases on the allocation of fixed costs. C. Time is needed to collect data on all of the costs and a weekly or monthly period is not long enough to gather the information needed.

Both A and B.

What​ assumption(s) are frequently made when estimating a cost​ function? Cost behavior is approximated by a linear function within the relevant range. B. Variations in the level of a single activity explain the variations in the related total costs. C. Both of the above. Your answer is correct. D. Neither of the above.

Both of the above.

For which of the following industries would job costing most likely not be​ appropriate?

Cereal production.

When using the​ high-low method, should you base the high and low observations on the dependent variable or on the cost​ driver?

Cost driver

Define cost​ pool, cost​ tracing, cost​ allocation, and​ cost-allocation base.

Cost pool a grouping of individual indirect cost items Cost tracing the assigning of direct costs to the chosen cost object Cost allocation the assigning of indirect costs to the chosen cost object. Cost-allocation base a factor that links in a systematic way an indirect cost or group of indirect costs to a cost object.

Distinguish direct costs from indirect costs.

Direct costs are related to the particular cost object and can be traced to that cost object in a​ cost-effective way while indirect costs are related to the particular cost object but cannot be traced to that cost object in a​ cost-effective way.

Select the correct definition for the following costs.

Direct material costs Costs of all materials that can be traced to the cost object. Direct manufacturing-labor costs Compensation of all manufacturing labor that can be traced to the cost object. Manufacturing overhead costs All manufacturing costs related to the cost object but cannot be traced to the cost object. Prime costs All direct manufacturing costs. Conversion costs All manufacturing costs other than direct material costs

What are three different types of inventory that manufacturing companies​ hold?

Direct​ materials, work-in-process, and finished goods

Three criteria for evaluating cost functions and choosing cost drivers​ are:

Economic​ plausibility, goodness of​ fit, slope of regression line

Chade Corp. is considering a special order brought to it by a new client. If Chade determines the variable cost to be​ $9 per​ unit, and the contribution margin of the next best alternative of the facility to be​ $5 per​ unit, then if Chade​ has:

Excess​ capacity, the selling price must be greater than​ $9 per unit.

Choose the definition for Kaizen budgeting.

Explicitly incorporates continuous improvement anticipated during the budget period into the budget numbers.

Determine whether this statement is true or false.​ "In a​ normal-costing system, the amounts in the Manufacturing Overhead Control account will always equal the amounts in the Manufacturing Overhead Allocated​ account."

False

Nursing Home is required by statute and regulation to maintain a minimum​ 3:1 ratio of direct service staff to residents to maintain the licensure associated with nursing home beds. The salary expense associated with direct service staff for the Comprehensive Care Nursing Home would most likely be classified as

Fixed cost.

Corporation is analyzing its fixed and variable costs within its current relevant range. As its cost driver activity changes within the relevant​ range, which of the following statements​ is/are correct? I. As the cost driver level​ increases, total fixed cost remains unchanged. II. As the cost driver level​ increases, unit fixed cost increases. III. As the cost driver level​ decreases, unit variable cost decreases.

I only is correct.

​Corporation, a manufacturing​ company, is analyzing its cost structure in a project to achieve some cost savings. Which of the following statements​ is/are correct? I. The cost of the direct materials in Applewhite​'s products is considered a variable cost. II. The cost of the depreciation of Applewhite​'s plant machinery is considered a variable cost because Applewhite uses an accelerated depreciation method for both book and income tax purposes. III. The cost of electricity for Applewhite​'s manufacturing facility is considered a fixed​ cost, even if the cost of the electricity has both variable and fixed components.

I only is correct.

Elmhurst Corporation is considering changes to its responsibility accounting system. Which of the following statements​ is/are correct for a responsibility accounting​ system? I. In a cost​ center, managers are responsible for controlling costs but not revenue. II. The idea behind responsibility accounting is that a manager should be held responsible for those items that the manager can control to a significant extent. III. To be​ effective, a good responsibility accounting system must help managers to plan and to control. IV. Costs that are allocated to a responsibility center are normally controllable by the responsibility center manager.

I, II, and III are correct

All of the following statements regarding standards are accurate​ except: Standards allow management to budget at a​ per-unit level. B. Ideal standards account for a minimal amount of normal spoilage. Your answer is correct. C. Participative standards usually take longer to implement than authoritative standards. D. Currently attainable standards take into account the level of training available to employees.

Ideal standards account for a minimal amount of normal spoilage.

Distinguish between inventoriable costs and period costs.

Inventoriable costs are all costs of a product that are considered as assets in the balance sheet when they are incurred and that become cost of goods sold when the product is sold. Period costs are all costs in the income statement other than cost of goods sold. Period costs are treated as expenses of the accounting period in which they are incurred because they are expected to not benefit future periods.

What role does a trade−in allowance on old equipment play in a decision to retain or replace​ equipment?

It is relevant since it reduces the cost of the new equipment.

Why might an advertising agency use job costing for an advertising campaign by​ PepsiCo, whereas a bank might use process costing to determine the cost of checking account​ deposits?

Job costing enables all the specific aspects of each job to be​ identified, whereas process costing can be used to compute the cost of numerous identical or similar services.

How can management accountants help improve quality and achieve timely product​ deliveries?

Management accountants can help improve quality and achieve timely product deliveries by recording and reporting an​ organization's current quality and timeliness levels and by analyzing and evaluating the costs and benefits of both financial and​ non-financial information, to suggest new quality initiatives such as TQM or providing faster customer service.

​"Management accounting should not fit the straitjacket of financial​ accounting." Explain and give an example.

Management accounting does not have to comply with the same standards of financial accounting such as generally accepted accounting principles.

How does management accounting differ from financial​ accounting?

Management accounting measures and reports financial and nonfinancial information that helps managers make decisions to fulfill the goals of an organization. Financial accounting measures and records business transactions and provides financial statements that are based on generally accepted accounting principles​ (GAAP).

Which of the following does not accurately describe the application of job​ costing?

Manufacturing overhead costs incurred is used to determine total manufacturing costs.

​"Management accounting deals only with​ costs." Do you​ agree? Explain.

No. Management accounting​ measures, analyzes, and reports financial and​ non-financial information that helps managers define the​ organization's goals, and make decisions to fulfill them.

Distinguish planning decisions from control decisions.

Planning decisions focus on selecting organization​ goals, predicting results under various alternative ways of achieving those​ goals, deciding how to attain the desired​ goals, and communicating the goals and how to attain them to the entire organization.Control decisions focus on taking actions that implement the planning​ decisions, deciding how to evaluate​ performance, and what related feedback to provide that will help future decision making.

Manipulation​ Manufacturing's (AMM) standards anticipate that there will be 3 pounds of raw material used for every unit of finished goods produced. AMM began the month of May with 5,000 pounds of raw​ material, purchased 15,000 pounds for $19,500 and ended the month with 4,000 pounds on hand. The company produced 5,000 units of finished goods. The company estimates standard costs at $1.50 per pound. The materials price and efficiency variances for the month of May were as​ follows:

Price Variance Efficiency Variance $3,000 F $1,500 U

Process costing

Process costing is an accounting methodology that traces and accumulates direct costs, and allocates indirect costs of a manufacturing process. Costs are assigned to products, usually in a large batch, which might include an entire month's production.

The business functions in the value chain​ include:

Research and​ development, Design of products and​ processes, Production,​ Marketing, Distribution, and Customer service.

As a new​ controller, reply to this comment by a plant​ manager: "As I see​ it, our accountants may be needed to keep records for shareholders and Uncle​ Sam, but I​ don't want them sticking their noses in my​ day-to-day operations. I do the best I know how. No bean counter knows enough about my responsibilities to be of any use to​ me."

Respond by demonstrating to the plant manager a good knowledge of the technical aspects of the plant and spend some time on the plant floor speaking to plant personnel to get a better understanding of the facility.

How can sensitivity analysis be used to increase the benefits of​ budgeting?

Sensitivity analysis adds an extra dimension to budgeting. It enables managers to examine how budgeted amounts change with changes in the underlying assumptions. This assists managers in monitoring those assumptions that are most critical to a company in attaining its budget and allows them to make timely adjustments to plans when appropriate.

Identify the seven steps in job costing.

Step 1 Identify the job that is the chosen cost object. Step 2 Identify the direct costs of the job. Step 3 Select the cost-allocation bases to use for allocating indirect costs to the job. Step 4 Identify the indirect costs associated with each cost-allocation base. Step 5 Compute the rate per unit of each cost-allocation base used to allocate indirect costs to the job. Step 6 Compute the indirect costs allocated to the job. Step 7 Compute the total cost of the job by adding all direct and indirect costs assigned to the job.

​Ace Cleaning Service is considering expanding into one or more new market areas. Which costs are relevant to Ace's decision on​ whether to expand?

Sunk Costs Variable Costs Opportunity Costs No Yes Yes

Explain the term supply chain and its importance to cost management.

Supply chain describes the flow of​ goods, services, and information from the initial sources of materials and services to the delivery of products to​ consumers, regardless of whether those activities occur in the same organization or in other organizations. Cost management is most effective when it integrates and coordinates activities across all companies in the supply chain as well as across each business function in an individual​ company's value chain.

Where does the management accounting function fit into an​ organization's structure?

The controller is the chief management accounting executive. The corporate controller reports to the chief financial​ officer, a staff function. Companies also have business unit controllers who support business unit managers or regional controllers who support regional managers in major geographic regions.

Basix Inc. calculates direct manufacturing labor variances and has the following​ information: 1. Actual hours​ worked: 200 2. Standard hours allowed for actual​ output: 250 3. Actual rate per​ hour: $12 4. Standard rate per​ hour: $10 Given the information​ above, which of the following is correct regarding direct manufacturing labor​ variances?

The price variance is​ unfavorable, while the efficiency variance is favorable.

​Company's standard cost for raw materials is $4.00 per pound and it is expected that each metal shelf uses two pounds of material. During October Year​ 2, 25,000 pounds of materials are purchased from a new supplier for $97,000 and 13,000 shelves are produced using 27,000 pounds of materials. Which statement is a possible explanation concerning the direct materials​ variances?

The production department had to use more materials since the quality of the materials was inferior.

What is the relevant​ range? What role does the​ relevant-range concept play in explaining how costs​ behave?

The relevant range is the band of normal activity level or volume in which there is a specific relationship between the level of activity or volume and the cost in question. Costs are described as variable or fixed with respect to a particular relevant range.

Choose the explanation that tells how the choice of the type of responsibility center​ (cost, revenue,​ profit, or​ investment) affects behavior.

The type of responsibility center determines what the manager is accountable for and thereby affects the​ manager's behavior. The choice of a responsibility center type guides the variables to be included in the budgeting exercise.

Explain why unit costs must often be interpreted with caution.

Unit costs are computed by dividing some amount of total costs by the related number of units. In many​ cases, the total costs include a fixed cost that will not change despite changes in the number of units.​ Therefore, it can be misleading to multiply the unit cost by activity or volume change to predict changes in total costs at different activity or volume levels.

In order to determine whether a special order should be accepted at full​ capacity, the sales price of the special order must be compared to the per​ unit:

Variable cost of current production and the contribution margin of the next best alternative.

Which of the following​ is not a qualitative factor that Atlas Manufacturing should consider when deciding whether to buy or make a part used in manufacturing their​ product?

Variable cost per unit of the product.

What is the advantage of using computerized source documents to prepare​ job-cost records?

accuracy of the records and the ability to provide managers with instantaneous feedback to help control job costs

Match the alternative linear cost function with the definition given.

cost function in which total costs change in proportion to the changes in the level of activity in the relevant range. Variable cost function A cost function in which total costs do not change with changes in the level of activity in the relevant range. Fixed cost function A cost function that has both fixed and variable elements. Total costs change but not in the proportion to the changes in the level of activity in the relevant range. Mixed cost function

Identify three different debit entries to the​ Work-in-Process Control​ T-account under normal costing.

direct materials​ used, direct manufacturing labor billed to a​ job, manufacturing overhead allocated to a job

Hartley's Meat Pies is considering replacing its existing delivery van with a new one. The new van can offer considerable savings in operating costs. Information about the existing van and the new van​ follow: Existing van New van Original cost ​$50,000 ​$98,000 Annual operating cost ​$20,500 ​$13,000 Accumulated depreciation ​$33,000 — Current salvage value of the existing van ​$27,500 — Remaining life 10 years 10 years Salvage value in 10 years ​$ 0 ​$ 0 Annual depreciation ​$1,700 ​$9,800 Relevant costs for this decision include​ ________.

the annual operating cost

A company decided to replace an old machine with a new machine. Which of the following is considered a relevant​ cost?

the setup cost of the new equipment

Which of the following items will be same for a flexible budget and a master​ budget?

total expected fixed costs

A company budgets​ 11,000 units of sales based on a projected selling price of​ $14. The actual units sold were​ 18,000 at a price of​ $9. What is the flexible budget for​ sales?

​$252,000

A​ flexible-budget variance is​ $600 favorable for​ unit-related costs. This indicates that costs were​ ________.

​$600 less than standard for the achieved level of activity

Name the four areas in which standards of ethical conduct exist for management accountants in the United States. What organization sets these​ standards?

​(1) Competence,​ (2) Confidentiality,​ (3) Integrity, and​ (4) Credibility. These standards are set by the Institute of Management Accountants​ (IMA).

The​ five-step decision-making process​ includes:

​(1) Identifying the problem and​ uncertainties, (2) Obtaining​ information, (3) Making predictions about the​ future, (4) Making decisions by choosing among​ alternatives, and​ (5) Implementing the​ decision, evaluating performance and learning.

Identify the alternative​ way(s) to adjust for​ under- or overallocated overhead costs.

​(1) Proration to work in​ process, finished goods and cost of good​ sold, (2)​ Year-end write-off to cost of goods​ sold, (3) Restatement of all overhead entries using actual indirect cost rates rather than budgeted indirect cost rates.

What steps should a management accountant take if established written policies provide insufficient guidance on how to handle an ethical​ conflict?

​(a) Discuss the problem with the immediate superior​ (except when it appears that the superior is​ involved). (b) Clarify relevant ethical issues by confidential discussion with an IMA Ethics Counselor or other impartial advisor.​ (c) Consult your own attorney as to legal obligations and rights concerning the ethical conflicts.

Identify the ways in which a​ house-construction company may use​ job-cost information.

​(a) to determine the profitability of individual​ jobs, (b) to assist in bidding on future​ jobs, and​ (c) to evaluate professionals who are in charge of managing individual jobs

Place the following steps from the five−step decision process in​ order: A​ = Obtain information including historical costs B​ = Evaluate performance to provide feedback C​ = Make decisions choosing among alternatives D​ = Make predictions about the future E​ = Identify the problem and uncertainties

​E, A,​ D, C, B

Identify how​ manufacturing-, merchandising-, and​ service-sector companies differ from each other.

​Manufacturing-sector companies purchase materials and components and convert them into various finished​ goods, for example automotive companies and textile companies. ​Merchandising-sector companies purchase and then sell tangible products without changing their basic​ form, for example retail stores and distribution companies. S​ervice-sector companies provide services or intangible products to their​ customers, for example legal advice or audits.

​"High correlation between two variables means that one is the cause and the other is the​ effect." Do you​ agree? Explain.

​No, you must also consider economic plausability before determining there is a cause and effect relationship.

​"Strategy, plans, and budgets are unrelated to one​ another." Do you​ agree? Why?

​Strategy, plans, and budgets are interrelated and affect one another. Strategic analysis underlies both​ long-run and​ short-run planning. In​ turn, these plans lead to the formulation of budgets. Budgets provide feedback to managers about the likely effects of their strategic plans. Managers use this feedback to revise their strategic plans.


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