AC 642 exam 2

A static budget is appropriate for a. variable overhead costs. b. direct materials costs. c. fixed overhead costs. d. None of these.

c. fixed overhead costs.

A standard differs from a budget because a standard a. is a predetermined cost. b. contributes to management planning and control. c. is a unit amount. d. none of the above; a standard does not differ from a budget.

c. is a unit amount.

Ideal standards a. are rigorous but attainable. b. are the standards generally used in a master budget. c. reflect optimal performance under perfect operating conditions. d. will always motivate employees to achieve the maximum output.

c. reflect optimal performance under perfect operating conditions.

Strand Company is planning to sell 400 buckets and produce 380 buckets during March. Each bucket requires 500 grams of plastic and one-half hour of direct labor. Plastic costs $10 per 500 grams and employees of the company are paid $15.00 per hour. Manufacturing overhead is applied at a rate of 110% of direct labor costs. Strand has 300 kilos of plastic in beginning inventory and wants to have 200 kilos in ending inventory. How much is the total amount of budgeted direct labor for March? $6,000 $3,000 $2,850 $5,700

$2,850 .5hr x $15 hour = 7.5 7.5 X 380 units = $2850

A segment has the following data: Sales $350,000 Variable expenses $150,000 Fixed expenses $285,000 What will be the incremental effect on net income if this segment is eliminated, assuming the fixed expenses will be allocated to profitable segments? $200,000 decrease $200,000 increase Cannot be determined from the data provided. $275,000 decrease

$200,000 decrease $350,000 - $150,000 - $285,000 + $285,000 = $200,000

A company developed the following per-unit standards for its product: 2 pounds of direct materials at $4 per pound. Last month, 1,500 pounds of direct materials were purchased for $5,700. The direct materials price variance for last month was $150 favorable. $300 unfavorable. $300 favorable. $5,700 favorable.

$300 favorable. (4*1,500=6,000 standard; 6,000 standard - 6,700 actual=300F)

Costs per unit for Maker Company in producing Panini presses include $22 of variable and $15 of fixed costs. Each press normally sells for $57. A foreign wholesaler offers to purchase 1,000 Panini presses at $40 each. Maker would incur special shipping costs of $5 per press if the order were accepted, which are not incurred on normal "everyday" sales to others. Maker has sufficient unused capacity to produce the 1,000 Panini presses. If the special order is accepted, what will be the effect on net income? $13,000 increase $22,000 decrease $13,000 decrease $7,000 increase

13,000 increase (1,000 × $40) - ($22 × 1,000) - ($5 × 1,000) = $13,000 increase.

A company sells one product for $60 each. Variable costs are $40 per unit, and fixed costs total $120,000. How many units must the company sell to earn before-tax net income of $280,000? 20,000. 7,000. 5,000. 6,000.

20,000 (280,000 + 120,000)/(60-40)=20,000

Piedmont, Inc.estimates it will break even if it sells 900,000 units for $1.50 per unit. The contribution margin ratio is 20%. What are the fixed costs? $1,020,000. $630,000. $900,000. $270,000.

270,000 Break even point = 900,000 units Selling price per unit = $1.50 Contribution margin ratio = 20% 1.50 x 20% = $0.30 900,000 x 0.30 = $270,000

If the required direct materials purchases are 24,000 pounds, the direct materials required for production is three times the direct materials purchases, and the beginning direct materials are three and a half times the direct materials purchases, what are the desired ending direct materials in pounds? 60,000 12,000 24,000 36,000

36,000 begin material = (24,000 x 3.5) = 84,000 purchased = 24,000 required= (24,000 x 3 ) = 72,000 84,000 + 24,000 - 72,000 = 36,000

Kramer company expect Sales next year of 50,000 units totalling $1,000,000, direct materials and direct labor totalling $500,000, other variable costs $50,000, and fixed costs $360,000. What is the break-even point in units? 32,728. 40,000. 56,250. 51,112.

40,000 selling price = $1,000,000/50,000 =$20 variable cost = ($500,000+ $50,000)/50,000 =11 Breakeven point =$360,000/(20-11) =40,000 units

A company desires to sell a sufficient quantity of products to earn a profit of $400,000. If the unit sales price is $20, unit variable cost is $12, and total fixed costs are $800,000, how many units must be sold to earn a net income of $400,000?

400,000=profit+total fixed costs/sales price - unit variable costs=400,000+800,000/20-12=$150,000

If a company had a contribution margin of $1,000,000 and a contribution margin ratio of 40%, total variable costs must have been $1,500,000. $600,000. $400,000. $2,500,000.

Contribution margin /Sales = Contribution margin ratio 1,000,000/Sales = 40% Sales = 1,000,000/40% = 2,500,000 Variable cost = Sales - Contribution margin = 2,500,000 - 1,000,000 = 1,500, 000

The purchasing agent of the Poplin, Inc. ordered materials of lower quality in an effort to economize on price. What variance will most likely result? Favorable materials quantity variance Unfavorable labor quantity variance Favorable total materials variance Unfavorable materials price variance

Unfavorable labor quantity variance

If a company has adopted continuous budgeting, the budget will show plans for a full year ahead. at least five years. the current year and the next year. every day.

a full year ahead

The purpose of the sales budget report is to a. control selling expenses. b. determine whether income objectives are being met. c. determine whether sales goals are being met. d. control sales commissions.

c. determine whether sales goals are being met.

A static budget a. should not be prepared in a company. b. is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs. c. shows planned results at the original budgeted activity level. d. is changed only if the actual level of activity is different than originally budgeted

c. shows planned results at the original budgeted activity level.

A static budget a. should not be prepared in a company. b. is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs. c. shows planned results at the original budgeted activity level. d. is changed only if the actual level of activity is different than originally budgeted.

c. shows planned results at the original budgeted activity level.

If Company A has a higher proportion of fixed costs relative to variable costs than Company B: a) Company A has a higher break-even point than Company B. b) Company A is more sensitive to changes in sales than Company B. c) Company A has greater risk compared to Company B. d) All of the above are true.

d) All of the above are true.

Which one of the following is an important assumption that is made when considering the decision to accept an order at a special price?a) There are no mixed costs. b) Overall economic growth will continue at historical rates. c) The firm will continue to receive similar orders in the future. d) The firm is not currently operating at full capacity.

d) The firm is not currently operating at full capacity.

Sales mix is: a) a measure of the relative percentage of a company's variable costs to its fixed costs b) important to sales managers but not to accountants c) easier to analyze on absorption costing income statements d) a measure of the relative percentage in which a company's products are sold

d) a measure of the relative percentage in which a company's products are sold

The degree of operating leverage: a) can be computed by dividing total contribution margin by net income b) provides a measure of the company's earnings volatility c) affects a company's break-even point d) all of the above

d) all of the above

A high degree of operating leverage: a) indicates that a company has a larger percentage of variable costs relative to its fixed costs. b) exposes a company to greater earnings volatility risk. c) is computed by dividing fixed costs by contribution margin. d) exposes a company to less earnings volatility risk.

d) exposes a company to less earnings volatility risk.

Net income will be: a) greater if more lower-contribution margin units are sold than higher-contribution margin units b) unaffected by changes in the mix of products sold c) equal as long as total sales remain equal, regardless of which products are sold d) greater if more higher-contribution margin units are sold than lower-contribution margin units

d) greater if more higher-contribution margin units are sold than lower-contribution margin units

A company with high operating leverage: a) is less sensitive to changes in sales. b) has a greater proportion of variable costs to fixed costs. c) has an equal proportion of fixed and variable costs. d) has a greater proportion of fixed costs to variable costs.

d) has a greater proportion of fixed costs to variable costs.

The basic rule in a sell or process further decision is to process further as long as the incremental revenue is: a) less than the incremental processing costs. b)equal to the incremental processing costs. c) more than the manufacturing cost per unit. d) more than the incremental processing costs

d) more than the incremental processing costs

Lion Industries required production for June is 132,000 units. To make one unit of finished product, three pounds of direct material Z are required. Actual beginning and desired ending inventories of direct material Z are 300,000 and 330,000 pounds, respectively. How many pounds of direct material Z must be purchased? a. 378,000. b. 396,000. c. 408,000. d. 426,000.

d. 426,000.

A flexible budget can be prepared for which of the following budgets comprising the master budget? a. Sales b. Overhead c. Direct materials d. All of these.

d. All of these.

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? a. Direct materials cost b. Direct labor cost c. Variable manufacturing overhead d. Fixed manufacturing overhead

d. Fixed manufacturing overhead

Which of the following is not considered an advantage of using standard costs? a. Standard costs can reduce clerical costs. b. Standard costs can be useful in setting prices for finished goods. c. Standard costs can be used as a means of finding fault with performance. d. Standard costs can make employees "cost-conscious."

d. Standard costs can make employees "cost-conscious."

Standard costs a. may show past cost experience. b. help establish expected future costs. c. are the budgeted cost per unit in the present. d. all of these.

d. all of these.

Budget reports should be prepared a. daily. b. monthly. c. weekly. d. as frequently as needed.

d. as frequently as needed.

The purpose of the departmental overhead cost report is to a. control indirect labor costs. b. control selling expense. c. determine the efficient use of materials. d. control overhead costs

d. control overhead costs

A flexible budget depicted graphically a. is identical to a CVP graph. b. differs from a CVP graph in the way that fixed costs are shown. c. differs from a CVP graph in the way that variable costs are shown. d. differs from a CVP graph in that sales revenue is not shown.

d. differs from a CVP graph in that sales revenue is not shown.

If costs are not responsive to changes in activity level, then these costs can be best described as a. mixed. b. flexible. c. variable. d. fixed.

d. fixed.

The flexible budget a. is prepared before the master budget. b. is relevant both within and outside the relevant range. c. eliminates the need for a master budget. d. is a series of static budgets at different levels of activity.

d. is a series of static budgets at different levels of activity.

The final decision as to what standard costs should be is the responsibility of a. the quality control engineer. b. the managerial accountants. c. the purchasing agent. d. management.

d. management.

A static budget report a. shows costs at only 2 or 3 different levels of activity. b. is appropriate in evaluating a manager's effectiveness in controlling variable costs. c. should be used when the actual level of activity is materially different from the master budget activity level. d. may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

d. may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

A standard which represents an efficient level of performance that is attainable under expected operating conditions is called a(n) a. ideal standard. b. loose standard. c. tight standard. d. normal standard.

d. normal standard.

The activity index used in preparing the flexible budget a. is prescribed by generally accepted accounting principles. b. is only applicable to fixed manufacturing costs. c. is the same for all departments. d. should significantly influence the costs that are being budgeted

d. should significantly influence the costs that are being budgeted

Book value of old equipment is considered to be a cost that can be changed by a present or future decision. relevant cost. sunk cost. semi-relevant cost.

sunk cost.

If actual costs are greater than standard costs, there is a(n) error in the accounting system. normal variance. unfavorable variance. favorable variance.

unfavorable variance.

Flamingo Music produces 60,000 CDs on which to record music. The CDs have the following costs: Direct Materials $11,000 Direct Labor $15,000 Variable overhead $3,000 Fixed overhead $7,000 None of Flamingo's fixed overhead costs can be reduced, but another product could be made that would increase profit contribution by $4,000 if the CDs were acquired externally. If cost minimization is the major consideration and the company would prefer to buy the CDs, what is the maximum external price that Flamingo would be willing to accept to acquire the 60,000 units externally? $33,000 $40,000 $32,000 $36,000

$33,000 ($11,000 + $15,000 + $3,000) + $4,000 = $33,000

Renee Company has old inventory on hand that cost $12,000. Its scrap value is $16,000. The inventory could be sold for $40,000 if manufactured further at an additional cost of $12,000. What should Renee do? Dispose of the inventory to avoid any further decline in value Sell the inventory for $16,000 scrap value Hold the inventory at its $12,000 cost Manufacture further and sell it for $40,000

$40,000 - $12,000 = $28,000; $28,000 > $16,000 Manufacture further and sell it for $40,000

Petal Co. reported the following information: How much is the budgeted Accounts Receivable for the end of November? Budgeted Sales November $870,000 $900,000 $465,000 $540,000 $435,000

$435,000

Dolce Co. estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.Cash collections for the third quarter are budgeted at $4,428,000. $5,319,000. $6,156,000. $3,051,000.

$5,319,000.

Headstrong Industries has a contribution margin of $240,000 and variable costs are 70% of sales. How much are total variable costs? $72,000 $800,000 $560,000 $168,000

$560,000 ($240,000 / .30) = $800,000; $800,000 - $240,000 = $560,000)

Lagusta Company incurred the following costs for 50,000 units: Variable Costs $180,000 Fixed Cost $240,000 Lagusta has received a special order from a foreign company for 5,000 units. There is sufficient capacity to fill the order without jeopardizing regular sales. Filling the order will require spending an additional $8,500 for shipping. If Lagusta wants to earn $9,000 on the order, what should the unit price be? $3.60 $5.30 $11.90 $7.10

$7.10 =(9,000/5,000) + (8,500/5,000) + (180,000/50,000) =1.8 + 1.7 + 3.6

Sardine Kitchen Company produces three sizes of crock pots: small, medium, and large. A condensed segmented income statement for a recent period follows: Large Net income $20,000 Medium Net income $35,000 Small Fixed Expenses $47,000 Assume none of the fixed expenses for the small size crock pot are avoidable. What will be total net income if the line is dropped? $8,000 $47,000 $55,000 $13,000

$8,000 $20,000 + $35,000 - $47,000 = $8,000

The standard number of hours that should have been worked for the output attained is 6,000 direct labor hours and the actual number of direct labor hours worked was 6,300. If the direct labor price variance was $3,150 unfavorable, and the standard rate of pay was $9 per direct labor hour, what was the actual rate of pay for direct labor? $9.50 per direct labor hour $8.50 per direct labor hour $9.00 per direct labor hour $7.50 per direct labor hour

$9.50 per direct labor hour direct labor price variance = (SR-AR)*AH (9 - AR)*6300 = - 3150 AR = 3150/6300 + 9 = 9.50

The standard rate of pay is $10 per direct labor hour. If the actual direct labor payroll was $58,800 for 6,000 direct labor hours worked, the direct labor price (rate) variance is

1,200 unfavorable. (58,800 x 10) - 6,000 x 10=1200

If there were 60,000 pounds of raw materials on hand on January 1, 120,000 pounds are desired for inventory at January 31, and 410,000 pounds are required for January production, how many pounds of raw materials should be purchased in January? 530,000 pounds 470,000 pounds 290,000 pounds 350,000 pounds

470,000. Raw material used in production=Beg inv+purchased-end invpurchased=410000-60000+120000=470,000

Information on Jayhawk's direct labor costs for the month of August is as follows:What was the standard rate for August? Actual rate $10 hr Standard hours 11,000 actual labor hours 10,000 direct labor variance 4,000 $10.04 $10.40 $9.60 $9.96

9.60 4,000/10,000=0.40 10hr - 0.40 = 9.60

Which is the last step in developing the master budget?

Preparing the budgeted balance sheet

Pascal inc. is planning to sell 900,000 units for $1.50 per unit. The contribution margin ratio is 20%. If pascal will break even at this level of sales, what are the fixed costs?

Fixed costs=contribution margin (900,000)(1.50)(0.20)=270,000

Montoya Manufacturing has fixed costs of $3,000,000 and variable costs are 40% of sales. What are the required sales if Montoya desires net income of $300,000?

Fixed cost+target net income/cm ratio3,000,000+300,000/0.6 (100%-40%)=0.6

In which steps of the management decision-making process does accounting make its primary contribution? a) Evaluating possible courses of action and reviewing the results of the decision. b) Making a decision and reviewing the results of the decision. c) Identifying the problem and making a decision. d) Identifying the problem and evaluating possible courses of action.

a) Evaluating possible courses of action and reviewing the results of the decision.

The decision rule in a sell-or-process-further decision is: process further as long as the incremental revenue from processing exceeds: a) incremental processing costs. b) variable processing costs. c) fixed processing costs. d) no correct answer is given.

a) incremental processing costs.

Dolce Co. estimates its sales at 180,000 units in the first quarter and that sales will increase by 18,000 units each quarter over the year. They have, and desire, a 25% ending inventory of finished goods. Each unit sells for $25. 40% of the sales are for cash. 70% of the credit customers pay within the quarter. The remainder is received in the quarter following sale.Production in units for the third quarter should be budgeted at a. 220,500. b. 207,000. c. 274,500. d. 216,000.

a. 220,500.

Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? a. Direct labor budget b. Cash budget c. Sales budget d. Budgeted income statement

a. Direct labor budget

What is the primary difference between a static budget and a flexible budget? a. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. b. The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. c. The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold. d. The static budget contains only fixed costs, while the flexible budget contains only variable costs.

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

Assume that actual sales results exceed the planned results for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true? a. The year-to-date results will show a favorable difference b. The year-to-date results will show an unfavorable difference. c. The difference for the first quarter can be ignored. d. The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.

a. The year-to-date results will show a favorable difference

Assume that actual sales results exceed the planned results for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true? a. The year-to-date results will show a favorable difference. b. The year-to-date results will show an unfavorable difference. c. The difference for the first quarter can be ignored. d. The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.

a. The year-to-date results will show a favorable difference.

A budget is most likely to be effective if a. it has top management support. b. it is used to assess blame when things do not occur according to plans. c. it is not used to evaluate a manager's performance. d. employees and managers at the lower levels do not get involved in the budgeting process.

a. it has top management support.

If standard costs are incorporated into the accounting system, a. it may simplify the costing of inventories and reduce clerical costs. b. it can eliminate the need for the budgeting process. c. the accounting system will produce information which is less relevant than the historical cost accounting system. d. approval of the shareholders is required.

a. it may simplify the costing of inventories and reduce clerical costs.

Within the relevant range of activity, the behavior of total costs is assumed to be a. linear and upward sloping. b. linear and downward sloping. c. curvilinear and upward sloping. d. linear to a point and then level off.

a. linear and upward sloping.

Another name for the static budget is a. master budget. b. overhead budget c. permanent budget. d. flexible budget

a. master budget.

A static budget is appropriate in evaluating a manager's performance if: actual activity is less than the master budget activity. the company is a not-for-profit organization. actual activity closely approximates the master budget activity. the company prepares reports on an annual basis.

actual activity closely approximates the master budget activity.

A master budget consists of interrelated financial budgets and operating budgets. all the accounting journals and ledgers used by a company. financial budgets and a long-term plan. an interrelated long-term plan and operating budgets.

an interrelated financial budgets and operating budgets.

Incremental analysis is the process of identifying the financial data that: a) do not change under alternative courses of action. b) change under alternative courses of action. c) are mixed under alternative courses of action. d) No correct answer is given

b) change under alternative courses of action.

In incremental analysis, the only costs to be considered are: a) manufacturing costs. b) relevant costs. c) variable costs. d) sunk costs.

b) relevant costs.

Astor Manufacturing has the following budgeted sales: January $120,000, February $180,000, and March $150,000. 40% of the sales are for cash and 60% are on credit. For the credit sales, 50% are collected in the month of sale, and 50% the next month. The total expected cash receipts during March are: a. $168,000. b. $159,000. c. $157,500. d. $150,000.

b. $159,000.

A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was a. 528,000 direct labor hours. b. 168,000 direct labor hours. c. 348,000 direct labor hours. d. Cannot be determined from the information provided.

b. 168,000 direct labor hours. 1,044,000 - 540,000 / 3

What is a standard cost? a. The total number of units times the budgeted amount expected b. The amount management thinks should be incurred to produce a good or service c. The total amount that appears on the budget for product costs d. Any amount that appears on a budget

b. The amount management thinks should be incurred to produce a good or service

What is the primary difference between a static budget and a flexible budget? a. The static budget contains only fixed costs, while the flexible budget contains only variable costs. b. The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. c. The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. d. The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.

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

When budgeted and actual results are not the same amount, there is a budget a. error. b. difference. c. anomaly. d. by-product.

b. difference.

In developing a flexible budget within a relevant range of activity, a. only fixed costs are included. b. it is necessary to relate variable cost data to the activity index chosen. c. it is necessary to prepare a budget at 1,000 unit increments. d. variable and fixed costs are combined and are reported as a total cost.

b. it is necessary to relate variable cost data to the activity index chosen.

The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than a. the prior years. b. management's minimum required balance. c. the amount needed to avoid a service charge at the bank. d. the industry average.

b. management's minimum required balance.

The two levels that standards may be set at are a. normal and fully efficient. b. normal and ideal. c. ideal and less efficient. d. fully efficient and fully effective.

b. normal and ideal.

A flexible budget a. is prepared when management cannot agree on objectives for the company. b. projects budget data for various levels of activity. c. is only useful in controlling fixed costs. d. cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.

b. projects budget data for various levels of activity.

Using standard costs a. makes employees less "cost-conscious." b. provides a basis for evaluating cost control. c. makes management by exception more difficult. d. increases clerical costs.

b. provides a basis for evaluating cost control.

A static budget is not appropriate in evaluating a manager's effectiveness if a company has a. substantial fixed costs. b. substantial variable costs. c. planned activity levels that match actual activity levels. d. no variable costs.

b. substantial variable costs.

The margin of safety ratio is: a) lower for a company with lower operating leverage. b) is not affected by operating leverage. c) higher for a company with lower operating leverage d) is increased by a greater proportion of variable to fixed cost

c) higher for a company with lower operating leverage

What is the proper preparation sequencing of the following budgets?1. Budgeted Balance Sheet2. Sales Budget3. Selling and Administrative Budget4. Budgeted Income Statement a. 1, 2, 3, 4 b. 2, 3, 1, 4 c. 2, 3, 4, 1 d. 2, 4, 1, 3

c. 2, 3, 4, 1

If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on a. the original planned level of activity. b. 54,000 units of activity. c. 60,000 units of activity. d. 48,000 units of activity.

c. 60,000 units of activity.

What budgeted amounts appear on the flexible budget? a. Original budgeted amounts at the static budget activity level b. Actual costs for the budgeted activity level c. Budgeted amounts for the actual activity level achieved d. Actual costs for the estimated activity level

c. Budgeted amounts for the actual activity level achieved

Under management by exception, which differences between planned and actual results should be investigated? a. Material and noncontrollable b. Controllable and noncontrollable c. Material and controllable d. All differences should be investigated

c. Material and controllable

Which of the following statements about standard costs is false? a. Properly set standards should promote efficiency. b. Standard costs facilitate management planning. c. Standards should not be used in "management by exception." d. Standard costs can simplify the costing of inventories

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

What is budgetary control? a. Another name for a flexible budget b. The degree to which the CFO controls the budget c. The use of budgets in controlling operations d. The process of providing information on budget differences to lower level managers

c. The use of budgets in controlling operations

The single most important output in preparing financial budgets is the a. sales forecast. b. determination of the unit cost of the product. c. cash budget. d. budgeted income statement.

c. cash budget.

If actual direct materials costs are greater than standard direct materials costs, it means that a. the actual unit price of direct materials was greater than the standard unit price of direct materials. b. actual costs were calculated incorrectly. c. the purchasing agent or the production foreman is inefficient. d. the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected.

d. the actual unit price of raw materials or the actual quantities of raw materials used was greater than the standard unit price or standard quantities of raw materials expected.

Green Company has a very high degree of operating leverage, which indicates that Green has a high net income. is operating close to its break-even point. has high variable costs. has high fixed costs.

has high fixed costs.

The most rigorous of all standards is the normal standard. realistic standard. ideal standard. conceivable standard.

ideal standard.

An opportunity cost is the potential benefit that may be obtained by following an alternative course of action. is classified as manufacturing overhead. is the cost of a new product proposal. should be initially recorded as an asset.

is the potential benefit that may be obtained by following an alternative course of action.

Management by exception means that all differences will be investigated. means that only unfavorable differences will be investigated. causes managers to be buried under voluminous paperwork. means that material differences will be investigated.

means that material differences will be investigated.

The total direct labor hours required in preparing a direct labor budget are calculated using the sales budget. direct materials budget. production budget. sales forecast.

production budget.

The investigation of a materials quantity variance usually begins in the sales department. purchasing department. production department. controller's department.

production department.

Using standard costs does not help in setting prices. can make management planning more difficult. promotes greater economy. weakens management control.

promotes greater economy.

A major accounting contribution to the managerial decision-making process in evaluating possible courses of action is to decide which actions that management should consider. assign responsibility for the decision. determine the amount of money that should be spent on a project. provide relevant revenue and cost data about each course of action

provide relevant revenue and cost data about each course of action