Survey of Accounting: Chapter 12-14

12500 Reason: Production = Ending inventory + Quantity sold - Beginning inventory = (14,000 units × 0.25) + 12,000 units - (12,000 units × 0.25) = 3,500 units + 12,000 units - 3,000 units = 12,500 units

A firm's budgeted sales for the month of September is 10,000 units, for the month of October is 12,000 units, and for the month of November is 14,000 units. The budgeted ending inventory must equal 25 percent of the next month's sales. Based on the given information, the production budget for the month of October is Blank______ units.

committed cost

A fixed cost that has been incurred to provide the capacity resources necessary to carry out the long-range plans of an organization is known as a:

assign indirect costs to the units produced.

A predetermined manufacturing overhead rate is used to

work in process

A predetermined overhead application rate is established to apply manufacturing overhead to Blank______.

assign indirect costs to units produced.

A predetermined overhead rate is used to:

production

A raw materials purchases budget is completed immediately after preparing the Blank______ budget.

margin of safety

A relative measure of risk that describes a company's current sales performance in relation to its breakeven sales is called the Blank______.

cost driver.

An activity-based costing system involves identifying the activity that causes the incurrence of a cost; this activity is known as a:

electricity costs for packaging equipment.

An example of a cost likely to have an indirect relationship with products being manufactured is:

operating budget

An organization's master budget is also referred to as its

cost object

Any sub-part (reference point) of an organization for which managers are interested in having cost measurement information is known as a(n)

When the cash budget is complete

At what point is the development of the budgeted balance sheet possible?

variable expenses

Contribution margin is defined as revenues minus:

product costs

Costs accounted for initially as inventory when produced and later as expense when sold are:

cost objects

Drilling down to varying levels of an organization for the purpose of observing separate and specific cost measurement information is a process for describing:

activity

For a cost formula to forecast the total of fixed costs and variable costs expected to be incurred, it must be based on a specific level of

By having a similar contribution margin ratio for all of its products

How can a company eliminate the need to be concerned about changes in the sales mix?

It is expressed in terms of physical measure, such as machine hour, that reflects the causes of overhead expenditures.

Identify a true statement about variable overhead.

Sales forecast Cost of goods sold budget Operating expense data

Identify the budgets that must be complete before the preparation of a budgeted income statement. Select all that apply.

The inventory policy The quantity of ending inventory The sales budget The quantity of beginning inventory

Identify the elements used to prepare a production budget.

Sales commissions Delivery expense Advertising expense Depreciation of office equipment

Identify the expense items that would be included in the operating expense budget.

Sale of common stock Payment of dividends Collection of sales

Identify the items that would be included in a cash budget.

It is expressed as a total cost per accounting period for planning and control purposes. Its per unit rate is used only to allocate fixed overhead to individual products for product costing.

Identify the true statements about fixed overhead.

For a merchandising firm, the cost of goods sold budget is dependent on the purchases budget. For a manufacturing firm, the cost of goods sold budget is dependent on the raw materials budget, the direct labor budget, and the manufacturing overhead budget.

Identify the true statements about the cost of goods sold budget.

remain the same The contribution margin remains the same and hence no change in breakeven point.

If the selling price and variable expense per unit were to drop $2 and fixed expenses remain the same, the breakeven point would Blank______.

are more likely to motivate employees

In comparison to ideal standards, attainable standards Blank______.

supports internal planning decisions is focused on the future

Managerial accounting in contrast to financial accounting:

assess the impact of fixed versus variable costs in a firm's cost structure.

Measuring operating leverage helps assess

total manufacturing costs

On the Statement of Cost of Goods Manufactured, the sum of raw materials used + direct labor incurred + manufacturing overhead applied is known as:

cost behavior patterns

Operating expense budgets are organized by:

contribution margin

Revenues minus variable expenses equals:

anticipate a need to secure a short-term bank loan

The cash budget is especially important to an organization in order to:

Purchases/production budget Ending inventory levels Sales budget

The cost of goods sold budget summarizes changes in the Finished Goods Inventory account for a manufacturing firm as indicated by which results?

Purchases/production budget Sales budget Ending inventory levels

The cost of goods sold budget summarizes changes in the Finished Goods Inventory account for a manufacturing firm as indicated by which results?

the operating expense budget is complete

The development of the budgeted income statement is possible when:

leverage

The higher a firm's contribution margin ratio, the greater its operating:

sales/revenue forecast

The key budgeting element on which the entire operating budget is based is the:

planning, managing, controlling

The logical sequence of the activities performed in the management planning and control cycle is:

the planning and control cycle

The management process is illustrated through a series of key management activities referred to as:

planning

The management process of identifying and quantifying the goals of the organization is known as:

includes all manufacturing costs except those for raw materials and direct labor.

The manufacturing overhead component of a product's cost:

activity-based costing

The process of accumulating manufacturing overhead costs by production support activity and then applying manufacturing overhead to production based on the activity required for each product is known as Blank______ costing.

job costing system

The product cost accounting system used when discrete products are manufactured is known as a

process costing system

The product cost accounting system used when homogeneous products are manufactured in a relatively continuous production flow is known as a

the value chain.

The sequence of functions and related activities that, over the life of a product or service, can ultimately make a difference to the customer are:

cost behavior

The term to describe the concept that costs increase or decrease with changes in the volume of activity is known as:

activity-based costing

To achieve a more refined cost application for the assignment of overhead costs to products manufactured, the use of a single predetermined overhead rate is being replaced by:

cost of raw material used + direct labor cost incurred + manufacturing overhead applied.

Total manufacturing costs for the month on the statement of costs of goods manufactured equals:

False Committed fixed costs are long-term commitments.

True or false: Managers have the option to reduce committed fixed costs during the annual budget planning process.

True Measuring operating leverage helps assess the impact of fixed versus variable costs in a firm's cost structure.

True or false: Operating leverage should inform management's decisions about whether to incur variable costs or fixed costs in its cost structure.

a cost

What is incurred when an organization acquires the resources used to fund the activities in its value chain?

variable costs

What type of costs increase or decrease in total with the budgeted volume of activity but remain constant when expressed on a per unit basis?

Higher contribution margin ratios

When a firm's sales mix includes products that range in quality, the highest quality products will have which of the following?

differently

When classifying costs for managerial accounting purposes, it is important to recognize that each cost must be viewed Blank______ for each planning, control, or decision-making situation.

below the breakeven point, loss equals each unit unsold below the breakeven point multiplied by the contribution margin per unit above the breakeven point, profit equals units sold above the breakeven point multiplied by the contribution margin per unit

When the number of units sold is Blank______.

Direct labor Manufacturing overhead Raw materials

Which are cost elements reported on the statement of cost of goods manufactured?

It is a subset of both financial and managerial accounting. It reports the cost of goods manufactured and sold, as well as the cost of goods manufactured and not sold.

Which are true statements about cost accounting?

Cash budget Operating expense budget Production and purchases budget

Which budgets must be completed before the budgeted balance sheet can be prepared?

Mixed cost Variable cost

Which of the following are associated with the cost behavior classification?

Supervisory salaries

Which of the following are considered fixed costs? (Check all that apply.)

Sales commissions Maintenance materials

Which of the following are considered variable costs? (Check all that apply.)

The process of steering an organization's activities to best support its goals

Which of the following best describes the management process?

Breadth of concern is on individual units of the organization plans and activities. Time frame involved is present and future for planning and control.

Which of the following characteristics apply to managerial accounting as opposed to financial accounting?

Production order preparation Machine setup for production runs Raw material handling Quality inspection

Which of the following could represent cost drivers in an activity-based costing system?

Raw materials, work-in-process, finished goods, cost of goods sold

Which of the following describes the correct sequence of flow of costs for a manufacturing firm?

Variable expenses Fixed expenses Operating income Revenues

Which of the following elements are included in the contribution margin income statement format?

Manufacturing overhead

Which of the following is NOT an inventory account for a manufacturing company?

Fixed expenses

Which of the following is responsible for the fact that operating income changes to a greater degree than revenue when there is a change in the volume of activity?

Fixed expenses

Which of the following is responsible for the fact that operating income changes to a greater degree than revenue when there is a change in the volume of activity? Multiple choice question. Variable expenses

coal mining

Which of the following manufacturing environments would use a process costing system?

cost accumulation

Which of the following process steps occurs first for managers to observe costs for different organizational reference points?

Purchases or production = Ending inventory + Quantity sold - Beginning inventory

Which of these is the correct equation used to calculate the quantity of merchandise to be purchased or manufactured?

Drilling down to varying levels of an organization for the purpose of observing separate and specific cost measurement information is a process for describing:

cost objects

The difference between absorption costing and direct (or variable) costing is in the accounting for:

fixed manufacturing overhead