Exam 2 Cost and Managerial accounting

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Which of the following statements best defines sensitivity analysis?

A "what-if" technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes

1. Which of the following organizations is most likely to use job costing?

A law firm Expect/Not: Oil refinary

________ is a method of management decision making that uses activity-based costing information to improve satisfaction and profitability.

Activity-based management (ABM)

14. Calculate the actual manufacturing overhead costs of Job?

Actual annual manufacturing overhead costs / Actual annual quantity of the cost-allocation base

8. What is the difference between actual costing systems and normal costing systems?

Actual costing systems use actual rates for allocating indirect costs and normal costing systems use budgeted rates for allocating indirect costs.

Which of the following statements is NOT true of an ABC system?

An ABC system is simplistic and inexpensive.

4. Calculate the budgeted manufacturing overhead rate if overhead is allocated on the basis of direct labor hours.

Budgeted manufacturing overhead/ Budgeted direct labor hours

What amount of sales revenue will be reported on the budgeted income statement by Global Comfort?

Budgeted sales revenue = Budgeted units × Selling price per unit

Using broad averaging, what is the budgeted indirect-cost rate per direct manufacturing labor-hour?

Budgeted total costs in indirect-cost pool / Budgeted total quantity of cost-allocation base

18. Compute the budgeted direct-labor cost rate per direct-labor hour.

Budgeted total direct-labor costs / Budgeted total direct-labor hours.

Which of the following statements is TRUE of budgeting benefits?

Budgets provide a framework for judging performance and facilitating learning.

Which of the following choices is referred to as the degree of influence a manager has over costs, revenues, or related items for which he or she is responsible?

Controllability

What amount of cost of goods sold will be reported on the budgeted income statement by Green?

Cost of goods sold = Beginning finished goods inventory + Cost of goods manufactured − Ending finished goods inventory

15. Allocating costs using the cause-and-effect criterion is used when a cost driver cannot be identified.

FALSE

________ are the costs of activities managers cannot trace to individual products or services but support the organization as a whole.

Facility-sustaining costs

Which of the following costs will have the weakest cause-and-effect relationship with its cost allocation base in an ABC system?

General administration costs

Which of the following is NOT a characteristic of overcosting?

Higher market share

Which of the following is one of the three guidelines for refining costing systems?

Identify cost-allocation bases that have cause-and-effect relationships.

Which of the following is NOT one of the three guidelines for refining costing systems?

Identify fixed and variable costs

Which of the following represent the main costs and limitations of an ABC costing system?

Implementation measurements

The U.S. Postal Service is a public service institution and does not charge consumers in rural areas higher prices to deliver mail. Which of the following is LEAST likely a benefit of ABC systems to managers in public service institutions such as the U.S. Postal Service?

Improved pricing decisions

The manager's budget in the responsibility center is based on investments, revenues, and costs of a department. Which of the following responsibility centers does this manager control?

Investment center

The manager is responsible for which of the following at an investment center?

Investments, revenues, and costs

Which of the following is TRUE of Kaizen budgeting?

Kaizen budgeting enables the manager to integrate the continuous improvement anticipated during the budget period into the budget numbers.

5. Which of the following is a denominator reason for using longer periods to calculate the indirect-cost rate?

Longer periods avoid dissemination of monthly fixed indirect costs over fluctuating levels of monthly output and fluctuating quantities of the cost-allocation base.

2. Which of the following subsidiary ledgers is used to enable managers to view specific details of categories such as overhead costs of direct materials, indirect manufacturing labor, supervision and engineering, plant insurance and utilities, and plant depreciation?

Manufacturing Department Overhead Records

11. Which of the following subsidiary ledgers is used to record the quantity of materials received, issued to jobs, and the inventory balances for all materials on a continuous basis?

Materials Records

Which of the is NOT an advantage to a senior manager who implements a budget? Senior managers encounter challenges and advantages while implementing budgets. Which of the following is a challenge of the budgeting process?

Senior managers spend 10-20% of time developing budgets.

Which of the following costs is most likely to be a batch-level cost in the cost hierarchy?

Setup Cost

Which of the following costs will have a strong cause-and-effect relationship with its cost allocation base in an ABC system?

Setup Cost

In which step of the decision-making process would a manager make a decision to group all budgeted indirect costs in a single cost pool?

Step 3

12. Overallocated indirect costs occur when the allocated amount of indirect costs is greater than the actual, incurred amount.

TRUE

13. A job-cost sheet is used to record and accumulate all the costs assigned to a specific job, starting when work begins.

TRUE

17. A job-cost sheet is used to record and accumulate all the costs assigned to a particular job, starting when work begins.

TRUE

7. What transaction does the following journal entry represent? Work-in-Process Control $50,000 Manufacturing Overhead Allocated $50,000

The application of $50,000 of manufacturing overhead

Which of the following statements is NOT true about multinational companies?

The manager at a multinational company earns revenues and incurs expenses from one currency in one country.

Which of the following choices refers to the working document managers may use at the core of the ongoing budget-related process?

The master budget

Which of the following budgets is prepared directly after the revenues budget?

The production budget

Identify the most significant factor when choosing the period of a budget.

The purpose of the budget

3. Which of the following is a numerator reason for using longer periods to calculate indirect cost rates?

The shorter the period, the greater is the influence of seasonal patturns on the amount of costs.

6. Which of the following statements best describes underallocated indirect costs?

Underallocated indirect costs occur when the allocated amount of indirect costs is less than the actual or incurred amount.

10. Identify the journal entry to record usage of direct materials of $48,000 and indirect materials of $1,200 by a job in a normal costing system.

Work-in-Process Control 48,000 Manufacturing Overhead Control 1,200 Materials Control 49,200

16. Actual costing systems use

actual indirect cost rates.

The rolling budget ________.

allows managers to update information to accommodate changes to cost and revenue by adding a month, quarter, or year after the end of a period

Algo Point, Inc. produces notebooks in bulk based on customer specifications. The product design cost of Algo could be a(n) ________ cost.

batch-level

9. Manufacturing Overhead Control is ?

debited when recording plant depreciation.

A manager is deciding whether to use activity-based costing or a single cost pool. In Step 3 of the decision-making process, that manager may ___________.

decide to group all budgeted indirect costs in a single cost pool

Facility-sustaining costs ________.

have the least cause-and-effect relationship with a cost allocation base

Undercosting a particular product or service may result in ________.

higher market share

Budgetary slack ________.

is the practice of underestimating budgeted revenues or overestimating budgeted costs to make budgeted targets easier to achieve

For a company engaged in mass production, machine depreciation is a(n) ________ cost.

output unit-level

Improved pricing decisions is least likely a benefit of ABC systems to managers in __________.

public service institutions such as the U.S. Postal Service

The master budget ________.

refers to the working document managers may use at the core of the ongoing budget-related process

Implementation measurements ________.

represent the main costs and limitations of an ABC system.

The production budget is prepared after the ________.

revenues budget


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